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Will Regeneron Pharma (REGN) Disappoint in Q3 Earnings?

Regeneron Pharmaceuticals, Inc. REGN is scheduled to release third-quarter 2017 results on Nov 8, before the opening bell.

Last quarter, Regeneron Pharma beat earnings expectations by 30.3%. The company’s performance has been mixed so far. In the last four quarters, it surpassed earnings estimates on two occasions and missed in two. Overall, the company has recorded an average positive earnings surprise of 10.1%. Let’s see how things are shaping up for this quarter.

 

 

Regeneron’s stock has lost 2.3% year to date compared to the industry’s decline of 1.2%.

Factors Influencing This Quarter

Regeneron Pharma’s key growth driver, Eylea, is likely to continue to contribute to the company’s top-line growth.  Based on a strong first half, the company raised its sales guidance for Eylea.  In 2017, Regeneron Pharma expects Eylea net sales to grow around 10% (earlier guidance: growth in single digits) in the United States. The Zacks Consensus Estimate for the drug’s sales (worldwide basis) is currently $1.4 billion for the quarter.

We note that Regeneron Pharma has a global development and commercialization agreement with Bayer AG BAYRY outside the United States for Eylea. Product revenues from ex-U.S. Eylea sales are recorded by Bayer.

Meanwhile, Regeneron Pharma is working on expanding Eylea label into additional indications. While a phase III study (PANORAMA) is evaluating Eylea for the treatment of moderately severe to severe non-proliferative diabetic retinopathy in patients without DME, another phase III study (in Japan) is evaluating it for neovascular glaucoma.

Apart from Eylea, investors will remain focused on the uptake of new drugs — Kevzara and Dupixent. Kevzara (sarilumab), an anti interleukin (IL)-6 receptor monoclonal antibody was approved in Canada for the treatment of adult patients with moderately to severely active rheumatoid arthritis who have an inadequate response to or intolerance to one or more biologic or non-biologic Disease-Modifying Anti-Rheumatic Drugs and was approved by the FDA in May 2017. 

The FDA also approved Dupixent (dupilumab) Injection for the treatment of adults with moderate-to-severe atopic dermatitis (AD).  The initial uptake of the drug is encouraging. The drug was approved in Europe also. The company is also evaluating the drug for treating asthma in adults (LIBERTY ASTHMA QUEST study).  A phase III study of Dupixent in pediatric patients (6-11 years of age) with uncontrolled persistent asthma was initiated in second-quarter 2017.

Hence, focus will be on the company’s performance, particularly Eylea and Dupixient uptake during the third-quarter earnings call. Investors are also expected to await updates on the company’s pipeline.

Meanwhile, Regeneron Pharma and partner Sanofi SNY are allowed to continue to sell their PCSK9 inhibitor, Praluent, in the United States by the Court of Appeals for the Federal Circuit following a favorable ruling. This bodes well and we expect the management to throw more light on the upside if any. However, sales of the drug have failed to impress so far.

Earnings Whispers

Our proven model does not conclusively show that Regeneron Pharma is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.6%. This is because both the Most Accurate estimate is $3.99 while the Zacks Consensus Estimate is $3.93. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Regeneron Pharma currently carries a Zacks Rank #4 (Sell). Note that, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) before going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock That Warrants a Look

Here is a health care stock that you may want to consider instead, as our model shows that it has the right combination of elements to post an earnings beat this quarter.

Mylan N.V. MYL has an Earnings ESP of +3.6% and currently carries a Zacks Rank #2. The company is expected to release third-quarter results on Nov 6.  You can see the complete list of today’s Zacks #1 Rank stocks here.

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Sanofi (SNY): Free Stock Analysis Report
 
Bayer AG (BAYRY): Free Stock Analysis Report
 
Regeneron Pharmaceuticals, Inc. (REGN): Free Stock Analysis Report
 
Mylan N.V. (MYL): Free Stock Analysis Report
 
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