Regeneron Pharmaceuticals Inc.’s (REGN) second-quarter 2010 net loss of $25.5 million, or 31 cents per share, was narrower than the Zacks Consensus Estimate of a net loss of 38 cents. The company suffered a loss of $14.9 million, or 19 cents per share in the year-ago quarter. The wider year-over-year loss in the reported quarter despite higher revenues was attributable to higher research and development expenses.
Total revenue in the reported quarter climbed 28.7% year-over-year to $115.9 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 34% year over year to $98.6 million in the second quarter of 2010. Out of that, $84.9 million came from Regeneron’s aflibercept and antibody collaborations with Sanofi-Aventis (SNY) and $13.7 million from its VEGF Trap-Eye collaboration with Bayer HealthCare.
Revenues from technology licensing, arising out of the license agreements with AstraZeneca (AZN) and Astellas, remained flat at approximately $10 million. Net product sales from the company’s only marketed product, Arcalyst, approved for treating cryopyrin-associated periodic syndromes, came in at $5.2 million in the second quarter of 2010, up 15.6% year-over-year. Revenues from contract research and others accounted for the balance in the reported quarter.
Total operating expenses in the quarter climbed 31% year-over-year to $139.6 million. Research and development (R&D) expenditure for the quarter jumped 32% year-over-year to $124.5 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 $11.0 million in the year-ago quarter. The rise was attributable to higher compensation expense, higher recruitment costs and facility-related costs.
Regeneron Extends Deal
Regeneron Pharmaceuticals and Japanese company Astellas Pharma Inc. have extended the agreement that permits Astellas to make use of Regeneron’s antibody development technology to discover new drug candidates. The deal was originally signed in 2007. However, the current amendment supersedes the original agreement.
Under the new deal, the Japanese company has to make an upfront payment of $165 million to Regeneron and a further $130 million in June 2018 unless the deal is terminated before that date.
Our Recommendation
Regeneron is a Zacks #3 Rank (Hold) stock. This implies that the company is expected to perform in line with the broader US equity market over the next 1-3 months. We are also Neutral on Regeneron in the long-term. Our long-term Neutral stance on the company indicates that the stock is expected to replicate its short-term performance, but over the next 6+ months. Consequently, we advise investors to retain the stock over the time-period.
ASTRAZENECA PLC (AZN): Free Stock Analysis Report
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SANOFI-AVENTIS (SNY): Free Stock Analysis Report
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