Yahoo Finance Should You Consider Regeneron (REGN) Ahead of Q1 Earnings?
Biotech giant Regeneron Pharmaceuticals, Inc. REGN is slated to report first-quarter results on May 2, 2024.
Once a rock-solid biotech stock to invest in, Regeneron is currently facing challenges for its lead drug, Eylea, which is its primary growth engine. These challenges are likely to have negatively impacted the upcoming results.
The Zacks Consensus Estimate for REGN’s first-quarter revenues is pegged at $3.2 billion, while the same for earnings is pinned at $10.20 per share.
Decline in Eylea Sales
A significant chunk of Regeneron’s revenues come from the sales of its lead drug, Eylea, which is approved for various ophthalmology indications (neovascular age-related macular degeneration, diabetic macular edema [“DME”] and macular edema, among others). Eylea was developed in collaboration with Bayer AG.
While Regeneron records net product sales of Eylea in the United States, Bayer does the same outside the country. The company also records its share of profits/losses in connection with Eylea sales outside the United States.
Eylea’s sales have been under pressure in the last few quarters due to competition from Roche’s RHHBY Vabysmo.
The uptake of Vabysmo has been phenomenal, eating into Eylea’s market share and resulting in lower net selling price and volumes. Vabysmo has become one of the top drugs for Roche.
The Zacks Consensus Estimate of Eylea sales in the United States is currently pegged at $1.33 billion. REGN had reported sales of $1.34 billion in the previous quarter and $1.4 billion in the year-ago quarter.
Given the fact that Eylea is the prime growth engine for Regeneron, a decline in Eylea sales does not bode well for the company.
Nevertheless, Regeneron is not a one-trick pony and a single quarter’s results should not drive the decision to invest or sell a stock. Moreover, these bigwigs are mostly considered safe havens for investors, having braved the inherent volatility of the biotech sector over a long time.
Hence, a deeper understanding of the other factors impacting the company’s growth prospects is imperative.
Dupixent Boosts Growth
Apart from Eylea, profits from asthma drug Dupixent’s sales act as a primary growth driver for REGN. Hence, investors should also focus on Dupixent’s performance, sales of which are recorded by Sanofi SNY. Regeneron has a collaboration agreement with Sanofi for drugs like Dupixent and Kevzara. While Sanofi records sales, Regeneron records its share of profits/losses in connection with the global sales of the aforementioned drugs.
Dupixent sales increased 24.9% year over year to €2.84 billion in the first quarter. Sanofi expects approximately €13 billion of Dupixent sales in 2024.
Dupixent has maintained its stellar performance, driven by continued strong demand in the approved indications, including atopic dermatitis, asthma, chronic rhinosinusitis with nasal polyposis, eosinophilic esophagitis and prurigo nodularis. The label expansion of the drug in the past few months has boosted sales further. Hence, Regeneron is expected to have recorded incremental profits in the to-be-reported quarter.
Efforts to Diversify Portfolio
Meanwhile, Regeneron is also looking to diversify its revenue base to reduce its dependence on Eylea for top-line growth and build an oncology franchise, which currently comprises Libtayo.
Growth in Libtayo’s sales has also boosted the top line in recent quarters. Libtayo sales are being driven by growth in demand for non-melanoma skin indications, coupled with increased utilization in both monotherapy and chemotherapy combination settings in lung cancer.
REGN is working to expand the drug’s label, in combination with other compounds, in additional indications. The company expects annual Libtayo net sales to exceed $1 billion in 2024, driven by continued growth across all indications.
This apart, to counter the decline in Eylea sales, Regeneron developed a higher dose of the drug. In August 2023, the FDA finally approved aflibercept 8 mg for the treatment of patients with wet age-related macular degeneration, DME and diabetic retinopathy under the brand name Eylea HD. The approval came after a few setbacks.
The initial uptake of Eylea HD is encouraging as Eylea patients transition to the higher dose.
What Our Model Predicts
Our proven model does not conclusively predict an earnings beat for Regeneron this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: Earnings ESP for REGN is -1.50%, as the Zacks Consensus Estimate is currently pinned at $10.20 per share and the Most Accurate Estimate is pegged at $10.05 per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #2.
Earnings Surprise History
The company’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 8.33%. In the last reported quarter, it beat on earnings by 13.71%.
Regeneron Pharmaceuticals, Inc. Price, Consensus and EPS Surprise
Regeneron Pharmaceuticals, Inc. price-consensus-eps-surprise-chart | Regeneron Pharmaceuticals, Inc. Quote
Share Price Performance
Regeneron’s shares have gained 1.6% year to date against the industry’s decline of 10.9%.
Image Source: Zacks Investment Research
Bottom Line
An additional headwind is the recent complaint against the company, alleging fraudulent drug pricing practices related to Eylea. The complaint was filed by the U.S. Department of Justice, alleging that Regeneron fraudulently raised Medicare reimbursement rates for Eylea by knowingly submitting false average sales price reports to the Centers for Medicare and Medicaid Services, excluding certain price concessions.
The lawsuit definitely puts Regeneron in the back seat. If Regeneron is found guilty, the government is eligible to recover three times the amount of its losses from the company, plus fines under the FCA. The mammoth litigation costs are likely to be a drag on the company’s bottom line. Shares of the company declined on the same.
Despite the current headwinds, Regeneron is a good stock to invest in the long term. In fact, the current dip (and any further potential fall) in the stock price can be a good entry point for investors. Hence, it might be wise to wait and watch how the results unfold and where the litigation heads. While the recent setback with odronextamab was disappointing, it should not bother a company of the size of Regeneron, as it has many other arrows in its quiver.
Pipeline candidates like linvoseltamab (for relapsed/refractory multiple myeloma) look promising and a potential approval should strengthen its portfolio. Additional label expansion of Dupixent (in in patients with uncontrolled COPD) is likely to further boost the top line.
REGN currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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