Regenron Loss Narrower - Analyst Blog

Regeneron Pharmaceuticals Inc.’s (REGN) first-quarter loss of $30.5 million, or 38 cents per share, was narrower than the Zacks Consensus Estimate of a loss of 49 cents. The company suffered a loss of $15.4 million, or 19 cents per share in the year-ago quarter. This was due to higher research and development expenses although revenues climbed higher.
 
Total revenue in the reported quarter climbed 38% year over year to $103.5 million. Total revenue included collaboration revenue, technology licensing revenue, net product sales, and contract research and other revenue. The increase in total revenue was mainly attributable to higher collaboration revenues in the quarter.
 
Collaboration revenues climbed approximately 37% year over year to $81.8 million in the first quarter of 2010. Out of that, $68.7 million came from Regeneron’s aflibercept and antibody collaborations with Sanofi-Aventis (SNY) and $13.1 million from its VEGF (vascular endothelial growth factor) Trap-Eye collaboration with Bayer HealthCare.
 
Revenues from technology licensing, arising out of the license agreements with AstraZeneca (AZN) and Astellas, came in flat year over year at $10 million. Arcalyst, approved for treating Cryopyrin-Associated Periodic Syndromes (CAPS), generated revenue of $9.9 million in the first quarter of 2010, up 153.2% year-over-year. Regeneron reported $5.1 million in Arcalyst sales during the reported quarter. The balance came through deferred revenue. Revenues from contract research and others accounted for the remaining in the reported quarter.
 
Total operating expenses in the quarter climbed 44% year over year to $132.2 million. Research and development (R&D) expenditure for the quarter jumped 46% year over year to $117.5 million primarily because of the additional R&D headcount, clinical and pre-clinical development costs for the company’s pipeline candidates.
 
Selling, general, and administrative (SG&A) expenses increased to $14 million in the reported quarter from $11.4 million in the year-ago quarter. The rise was attributable to higher compensation expense, higher recruitment costs and facility-related costs.
 
Regeneron exited the quarter with cash, restricted cash, and marketable securities of $413.5 million compared with $390 million at the end of 2009.  Furthermore, the company received $47.5 million from its landlord in the reported quarter. The payment from the landlord was related to tenant improvement costs for new laboratory and office facilities that Regeneron leases in Tarrytown, New York.
 
Our Take
 
Currently, we have a Neutral outlook on Regeneron. We are pleased with the approval of Arcalyst by the US Food and Drug Administration (FDA) and the European Union (EU) for CAPS, and the extension and expansion of the antibody agreement with Sanofi in late 2009.
 
However, we are concerned about the potential competition awaiting Regeneron’s pipeline candidates.  Furthermore, the company faced a pipeline setback when the development of late-stage pipeline candidate, aflibercept, used for pancreatic cancer, was halted in 2009. The study showed that patients on aflibercept were not surviving significantly longer than those in the placebo group.

Our Neutral long-term outlook on the stock indicates that it will perform in line with the overall US equity market over the next six to twelve months. We advise investors to retain the stock over this time period.

Read the full analyst report on "REGN"
Read the full analyst report on "SNY"
Read the full analyst report on "AZN"
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