What happened

Shares of Regeneron Pharmaceuticals (REGN 1.69%) fell 12.1% in May, according to data provided by S&P Global Market Intelligence, after the company posted first-quarter earnings that disappointed investors and brought up concerns about future growth.

So what

Regeneron Pharmaceuticals' revenue was up 13% year over year to $1.7 billion, but analysts were expecting another $50 million or so. While the top-line miss is in the area of a rounding error, biotechs valued for growth don't have much leeway for missing expectations.

Much of the growth came from eczema treatment Dupixent, which more than doubled sales. The drug, which Regeneron sells with Sanofi (SNY 2.03%), is well on its way to becoming a blockbuster -- defined as selling $1 billion annually -- but it's still a relatively small contributor to the overall revenue, with Regeneron's top-selling macular degeneration drug Eylea bringing in nearly $1.7 billion each quarter.

On the bottom line, adjusted earnings per share fell 4.7%. Some of that was due to an increase in research and development expenses that can be seen as an investment in the future, but selling, general, and administrative expenses grew 24% year over year, substantially faster than revenue, which impacts the company's operating margin.

Doctor examining a man's eye

Image source: Getty Images.

Now what

With growth in Eylea sales slowing down, investors are looking for the next growth driver. Dupixent will certainly help, but another blockbuster or two would really spark Regeneron's growth in the years ahead.

Unfortunately, during the conference call, management disclosed two deaths in a clinical trial for one of its drugs, REGN-1979, a non-Hodgkin lymphoma drug that had shown impressive efficacy in an early stage trial. The deaths may have been due to cytokine release syndrome (CRS), in which the patient's immune system is stimulated to the point that it overreacts. CRS is a common problem for immuno-oncology drugs such as REGN-1979, so the deaths probably won't derail development completely because there aren't many good options for patients with non-Hodgkin lymphoma. But the side effect could reduce the peak sales of the drug substantially.