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Is Regeneron Pharmaceuticals Too Cautious?


Some analysts think the company is overly conservative with sales forecast as CEO Leonard Schleifer manages expectations. They still see big potential with eye drug Eylea.

MINYANVILLE ORIGINAL As it does with every quarterly earnings report, Regeneron Pharmaceuticals (NASDAQ:REGN) raised its forecast this week for its full-year sales of Eylea, a treatment aimed at preventing blindness in seniors.

Introduced in late 2011, Eylea annual sales are expected to be as much as $815 million in 2012 -- the drug's first full-year on the market. That estimate is up from a projected high of $550 million, the company's forecast made in April. In January, the company's high estimate was $160 million.

Despite the vastly better-than-expected momentum of Eylea, CEO Leonard Schleifer cautioned investors that the fourth quarter will have its challenges for this blockbuster drug. Is Schleifer being too conservative managing expectations? Some analysts are beginning to expect that warnings of headwinds and cautionary guidance is just part of Schleifer's boilerplate presentation each quarter.

"While we appreciate the cautious commentary, we've seen this movie before, with similar cautionary language," Robert W. Baird analyst Christopher Raymond says in a note to clients.

RBC Capital Markets analyst Adnan Butt called Regeneron's new sales forecast conservative. Raymond raised his 12-month price target on Regeneron's stock to $176.

After rising a day earlier, shares of Regeneron dipped 2% to $159.47 in midday trading Thursday. The stock is up almost 190% this year.

As for the sales challenges: Schleifer warned that the fourth quarter has a reduced number of days to sell Eylea because of the holidays, and dosing frequency of some patients may decline as some have been on the treatment for a while. In an industry known for its hype, it's actually refreshing to hear a CEO willing to tap down expectations a little.

But analysts, including Leerink Swann's Joseph Schwartz, see continued strong demand for the drug, which is approved for age-related macular degeneration, the leading cause of blindness in the elderly, and another use, central retinal vein occlusion.

Age-related macular degeneration, or AMD, is the biggest market opportunity for Eylea and Schwartz predicts more growth based on doctor surveys his firm conducts. While Eylea is still taking share from rival drug Lucentis, which is sold in the US by Roche's (PINK:RHHBY) Genentech, there is another opportunity for Regeneron. Schwartz sees future Eylea growth from doctors switching their patients from an unapproved treatment, Avastin, to Eylea. Avastin, an older cancer drug also sold by Roche, is prescribed "off label" by many doctors because it has shown to work treating AMD for a fraction of the cost of Eylea or Lucentis.

The US Food and Drug Administration has issued warnings about the safety concerns of Avastin as an eye treatment. The drug is prepared at compounding pharmacies, which have been at the center of attention after a national outbreak of meningitis deaths linked to a pain drug. Schwartz says a doctor survey noted possible switches from Avastin to Eylea even before safety of compound pharmacies were called into question from the meningitis outbreak. This is a story line investors will want to follow.

Twitter: @brettchase

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