This Biotech Keeps on Winning

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Another quarterly update, another increase in sales guidance. The strong launch of Regeneron Pharmaceuticals' (Nasdaq: REGN  ) Eylea continues.

After sales increased 57% between the first and second quarter, the biotech increased its 2012 sales guidance for the macular degeneration treatment by $200 million to a range of $700 million to $750 million. That's the third increase this year.

Based on the $318 million Regeneron has sold so far this year, its guidance only implies around $200 million in sales for each of the next two quarters, which is not much of an increase from the $194 million Regeneron registered in the second quarter.

Fortunately, there's a simple explanation. While the sales number might not increase much, the number of patients treated should continue to grow. The label recommends doctors give a dose every month for the first three months and then transition to every-other-month dosing. As those initial patients make the dosing change, the base that Regeneron has to work from will shrink.

Even taking that into account, don't be surprised if Regeneron beats its latest estimate. I kind of get the feeling that the biotech might be sandbagging its estimates. Eylea might have trouble hitting the numbers Vertex Pharmaceuticals' (Nasdaq: VRTX  ) Incivek hit during its first four quarters on the market, but Eylea sales aren't likely to stagnate like Incivek did. That's the joy of treating rather than curing a disease -- the sales just keep coming and coming.

Regeneron trades at 17 times expected 2012 sales of Eylea, which is a bit excessive (even for a biotech). Investors are clearly expecting not only a further increase in sales of Eylea but additional sales from drugs still in its pipeline. The biotech's next approval could come next week when the Food and Drug Administration is expected to rule on its Zaltrap treatment for colorectal cancer.

Beyond Zaltrap, Eylea is up for approval in another indication and there are two phase 3 drug candidates and quite a few early stage assets in the pipeline. Regeneron's deal with Sanofi (NYSE: SNY  ) should help move things along quickly since the pharma giant foots much of the research and development bills, but it won't capture all of the sales from the drugs developed through the collaboration like it does for U.S. sales of Eylea.

Regeneron should be congratulated for its awesome launch, but investors should be cautious about buying in at these levels. There's an awful lot of growth already priced into the stock.

The macular degeneration market may be large, but Fool analysts have found a larger one. Find out what it is and how to profit from it in our free report, "The Next Trillion-Dollar Revolution." Get your free copy by clicking here.

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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