Regeneron Pharmaceuticals Inc. 's ( REGN ) fourth quarter 2011 net loss (excluding special items but including stock-based compensation) of 54 cents per share was narrower than the Zacks Consensus Estimate of a net loss of 63 cents. The company suffered a loss of 17 cents per share in the year-ago quarter. The wider year over year loss was attributable to higher operating expenses and lower revenues.

The Fourth Quarter in Details

Total revenue in the reported quarter declined 8% to $123.0 million. Revenues fell short of the Zacks Consensus Estimate of $128 million. Total revenue included collaboration revenue, technology licensing revenue, net product sales and contract research and other revenue.

The decline in revenues was mainly attributable to the reduction in collaboration revenues. While collaboration revenues from Regeneron's antibody collaboration with Sanofi ( SNY ) declined 6.2% to $77.0 million, collaboration revenues from other partners plummeted 73.1% to $9.4 million in the final quarter of 2011.

Revenues from technology licensing plummeted 41.1% to $5.9 million.  Net product sales climbed to $29.8 million from $5.3 million in the year-ago quarter. Product sales were boosted by the US launch of eye drug Eylea on November 21, 2011. The drug, co-developed with the HealthCare unit of Bayer ( BAYRY ), is marketed for treating patients suffering from the neovascular form of age-related macular degeneration (wet AMD).

While Eylea sales came in at $24.8 million in the final quarter of 2011, Arcalyst, Regeneron's other marketed product for treating cryopyrin-associated periodic syndromes, contributed $5.0 million to product sales in the reported quarter. Revenues from contract research and others accounted for the balance in the reported quarter.

Both research and development (R&D) expenses (up 3.1%) and selling, general and administrative (SG&A) expenses (up 76.1%) were on the upswing during the reported quarter.

The rise was primarily attributable to the higher R&D expenses incurred in connection with the efforts to develop the pipeline at Regeneron and the higher employee headcount in connection with the antibody collaboration with Sanofi. Higher costs related to the US launch and marketing of Eylea were primarily responsible for pushing the SG&A costs up.

Annual Results

For the full year 2011, Regeneron suffered an adjusted loss (excluding special items but including stock-based compensation) of $2.40 per share, which was 11 cents narrower than the loss projected by the Zacks Consensus Estimate. Regeneron suffered a loss of $1.26 per share in 2010. The wider year-over-year loss was attributable to higher operating expenses and lower revenues.

2011 revenues at Regeneron declined 2.9% to $445.8 million primarily due to lower collaboration revenues. Annual revenues fell short of the Zacks Consensus Estimate of $451 million. Operating expenses climbed 17.0% to $651.0 million in 2011. Both R&D expenses and SG&A expenses contributed to the increase. The company expects SG&A expenses to increase further in 2012.

Bright Outlook for Eylea

Apart from announcing financial results, Regeneron provided guidance for Eylea sales in 2012. Encouraged by the strong initial sales ramp of the drug, the company nearly doubled its 2012 projected Eylea sales to $250-$300 million from $140-$160 million provided at the global healthcare conference of JPMorgan ( JPM ) last month. The bright outlook for Eylea had a positive impact on Regeneron's shares.

Our Take

2012 is expected to be a key year for Regeneron with a couple of action dates coming up. The companies are seeking to expand Eylea's label. The US Food and Drug Administration (FDA) is expected to decide regarding Regeneron's application seeking approval to market Eylea for another eye disorder, central retinal vein occlusion by September 23, 2012.

Partner Bayer intends to seek approval for the same indication in ex-US markets by 2012/2013. Bayer and Regeneron are studying Eylea for other eye-disorders also.

Regeneron is also seeking to expand the label of Arcalyst into the gout indication in the US. The FDA is expected to give its decision by July 30, 2012. Positive news from the FDA will boost the stock.  We are encouraged by Regeneron's efforts to develop its pipeline.

We prefer to adopt a wait and watch approach until Eylea realizes its commercial potential. Consequently, we have a Neutral stance on Regeneron in the long run. The company carries a Zacks #3 Rank (Hold rating) for the short run.