Non-GAAP earnings of $20.07 a share beat estimates by 22% to 24%, helped by a step-up in Regeneron's share of Dupixent profits after a development balance owed to Sanofi was repaid. Eylea HD sales rose 62% while the original Eylea fell 41%.
Regeneron's quarter beat estimates by a wide margin. How much of it was a surprise is a harder question.
Third-quarter revenue rose 36% to $5.1 billion. Non-GAAP earnings rose 70% to $20.07 a share, against estimates of $16.25 to $16.42, depending on the provider. GAAP earnings rose 35% to $18.45. Shares were up about 10.8% at $907.45 in early afternoon, after touching a 52-week high of $934.79.
The Sanofi step-up
The largest driver was Regeneron's collaboration with Sanofi. Revenue from that partnership rose 68% to $2.72 billion. Regeneron had been paying down a development balance owed to Sanofi under the partnership. That balance was fully repaid at the end of the second quarter, lifting Regeneron's share from the third quarter on. Dupixent, the partnership's main drug, had global sales of $6.5 billion, up 35%, recorded by Sanofi.
That change was known in advance. How fully analysts had built it into their estimates is unclear, which makes the size of the beat harder to read.
Regeneron also expects a $1.0 billion upfront payment in the fourth quarter from an expanded Sanofi agreement, and it raised its full-year research and development spending guidance to $6.60 billion to $6.735 billion on a GAAP basis.
The results "marked our third consecutive quarter of double-digit growth in both revenue and non-GAAP EPS," said Christopher Fenimore, the chief financial officer.
The eye-drug handoff
Regeneron's older franchise is shrinking fast. U.S. sales of the original Eylea fell 41% to $400 million. The higher-dose Eylea HD rose 62% to $699 million. Together the two brought in about $1.1 billion in the U.S.
Two other beats
AstraZeneca rose about 7.4% after reporting third-quarter revenue of $16.2 billion, up 7%, and core earnings of $2.79 a share, up 17%, above a $2.60 estimate compiled by Financial Modeling Prep whose share basis could not be confirmed. It reaffirmed its full-year guidance.
AbbVie rose about 1.7% to a 52-week high after lifting its full-year adjusted earnings forecast to $13.95 to $13.99 a share. Revenue rose 10.3% to $17.4 billion, led by immunology drugs Skyrizi, at $5.78 billion, and Rinvoq, at $2.71 billion. It raised its 2027 dividend by 5.2%.
Health care was among the few S&P 500 sectors in positive territory on Friday.
Recurring or one-time?
For Regeneron, the bull case is that the Sanofi step-up is permanent, Dupixent keeps growing, and Eylea HD is replacing the original drug. The bear case is that this quarter's jump in profit share will not repeat as growth, and the Eylea franchise is still shrinking in total.
What to watch
Revised analyst estimates that fully include the Sanofi change, Eylea HD's growth rate against the original drug's decline, and the fourth-quarter Sanofi payment.