Will Regeneron’s Earnings Continue to Impress Investors?



Regeneron’s growth prospects

According to the news release by Regeneron Pharmaceuticals (REGN), it will announce its earnings for 4Q15 and fiscal 2015 on February 9, 2016.
According to Wall Street analysts’ estimates, Regeneron’s sales would be $1.18 billion and $1.23 billion for 4Q15 and 1Q16.

The above graph shows the revenue and net profit estimates for Regeneron Pharmaceuticals for 4Q15 and 1Q16. For 2015, Wall Street analysts expected the company’s revenue to be ~$4.2 billion. This would reflect year-over-year growth of ~48% in 2015.

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Margin volatility

Regeneron’s net margin during 3Q15 was ~18.5%. Historically, the net margin has been very volatile. It fluctuated from 8% to 24% for the last ten quarters. Higher research and development expenses led to squeezed margins compared to its peers. For global Eylea sales, Regeneron shares its profits with Bayer HealthCare—a collaboration partner for the drug’s development and commercialization outside the US.

For the upcoming period, Wall Street analysts expect the net margin to jump to 34.13%. They expect the net margin to remain at ~33.06% during 1Q16. Eylea’s increasing sales and label expansion might lead to margin expansion for Regeneron. Since more drugs would be launched, the company would have scope for margin expansion.

On July 24, 2015, Regeneron received approval from the U.S. Food and Drug Administration for Praluent. The drug is approved for lowering cholesterol. It’s the first approved drug from the class of proprotein convertase subtilisin kexin type 9 inhibitors. Compared to competitors’ drugs like Pfizer’s (PFE) Lipitor, AstraZeneca’s (AZN) Crestor, and Merck’s (MRK) Mevacor, Praluent is more efficient in reducing cholesterol levels.

To avoid volatility and direct risk associated with the stock, investors can look for options like the First Trust NYSE Arca Biotechnology Index Fund (FBT). FBT has 3.50% weight in Regeneron Pharmaceuticals.


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