Regeneron Pharmaceuticals Inc.'s Q2 Earnings -- It's Still All About Eylea, but Not for Too Much Longer

By Markets Fool.com

Image source: Regeneron Pharmaceuticals.

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Biotech giantRegeneron Pharmaceuticals (NASDAQ: REGN)released its second-quarter earnings on Thursday, August 4th, before trading started for the day. The company's shares wound up falling by around 3.5% in the trading sessions that followed the release. Let's dig into the company's results to figure out what spooked the market, and check in to make sure the company's long-term growth story is still on track.

Regeneron Pharmaceuticals' Q2 -- The raw numbers

Q2 2016

Q2 2015

Change %

Eylea U.S. sales

$831 million

$655 million

27%

Total revenue

$1.2 billion

$999 million

21%

Non-GAAP net income

$329 million

$265 million

24%

Non-GAAP EPS

$2.82

$2.27

24%

Data source: Regeneron.

Regeneron's top-selling eye disease drug, Eylea, continues to grow like wildfire. Revenue in the U.S. was up 27% year over year, which is slightly above management's full-year growth guidance range of 20% to 25%. Bayer, the company's international sales partner, reported that sales of Eylea grew by an impressive 44% in markets outside the U.S. Regeneron's portion of the international profits came in at $167 million for the period, up 56% from the $107 million that it recorded in the same period last year.

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Praluent, the company's cholesterol-busting drug that it launched last year in partnership with Sanofi, continues to muddle along. Sanofi reported that second quarter sales of the drug were only $24 million, which was up sharply on a percentage basis from the $13 million that was recorded in the first quarter, but it's still just a drop in the bucket when compared to Eylea. Praluent is likely to continue to struggle until long-term cardiovascular outcomes data finally becomes available.

Total revenue jumped by 21% for the quarter and landed at $1.21 billion. That was slightly less than the market's expectation of $1.25 billion, which appears to be the primary reason that shares sold-off in the wake of the release. However, despite the lower-than-hoped-for revenue, Regeneronwas still able to grow its Non-GAAP EPS by 24% for the quarter, coming in at $2.82. That's an impressive result given that spending to support the company's pipeline and recent product launches continues to grow rapidly. That results also bested the $2.65 that Wall Street had expected.

What management had to say

Leonard Schleifer, Regeneron's CEO, offered up a lot of positive commentary on the progress that the company made during the quarter, stating:

"In the first half of this year, EYLEA continued to demonstrate strong sales growth, and Praluent sales made steady progress as healthcare providers become more familiar with this new therapeutic class and learn to navigate payer utilization management criteria.In the second half of the year, for sarilumab in rheumatoid arthritis, we look forward to the upcomingU.S.regulatory decision and potential launch. We also recently completed aU.S.regulatory submission for dupilumab for the treatment of atopic dermatitis and are working to bring this breakthrough therapyto patients as soon as possible."

Looking ahead

Management made a few tweaks to its spending guidance range for the full year. The company raised its spending guidance for R&G and SG&A, but lowered its estimates for capital expenditures. It also reaffirmed the 20% to 25% U.S. growth rate for Eylea's sales, even though the company beat that number in both the first and second quarters.

Regeneron's future prospects continues to look healthy even if you look beyond the numbers. Sarilumab, the company's potential treatment for rheumatoid arthritis, is currently pending FDA approval with a target decision date of October 30th. The drug was also officially accepted for review by the EU in July. With peak sales estimates running as high as $1 billion, this drug could go a long way toward helping to diversify the company's revenue.

The other drug that investors should watch like a hawk isDupilumab, Regeneron's potential treatment for atopic dermatitis. The drug has already been submitted for FDA review, which puts it on pace for a go/no go decision in the first half of 2017. Peaks sales for this drugs are running as high as $4 billion, so seeing it advance toward regulatory review is a great sign.

Given that Regeneron continues to offer fast growth via Praluent,sarilumab, anddupilumab, I continue to think that this stock is a great choice for any investor with an above average tolerance for risk.

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Brian Feroldi owns shares of Regeneron Pharmaceuticals. The Motley Fool owns shares of Regeneron Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.