Analyst Conference Summary


Regeneron Pharmaceuticals

conference date: November 5, 2103 @ 5:30 AM Pacific Time
for quarter ending: September 30, 2013 (third quarter 2013)

Forward-looking statements

Overview: Ongoing rapid expansion of revenue and profits.

Basic data (GAAP):

Revenue was $597.0 million, up 30% sequentially from $457.6 million, and up 40% from $427.7 million in the year-earlier quarter.

Net income was $141.3 million, up 62% sequentially from $87.4 million but down 26% from $191.5 million year-earlier.

Diluted Earnings Per Share (EPS) was $1.44, up 82% sequentially from $0.79, but down 20% from $2.02 million year-earlier.


Raised revenue forecast to between $1.35 and $1.375 billion for the full year. Expects to be at the high end of 2013 SG&A expense of $225 to $250 million. Unreimbursed R&D full year guidance range lowered to $225 to $250 million.

Conference Highlights:

Revenue growth was mainly driven by Eylea sales.

Announced (today) the submission of a supplemental application to the FDA to market Eylea for diabetic macular edema (DME), one year ahead of plan.

Non-GAAP numbers: net income $277 million, up 40% sequentially from $198 million, up 28% from $217 million year-earlier. EPS $2.40, up 39% sequentially from $1.73 per share, and up 27% from $1.89 year-earlier. Non-GAAP earnings exclude income taxes because they do not, at this time, require cash payments, but are for GAAP accounting purposes.

Aside from the increased revenue, the main difference between Q3 2013 and Q2 2012 GAAP results was that no income tax expense was recorded in Q3 2012, but $84.4 million was paid in Q3 2013.

Total revenue of $597.0 million consisted of: product sales $367.1 million; Sanofi collaboration revenue $134.4 million; Bayer collaboration revenue $88.6 million; licensing $5.9 million; and other, $1.1 million.

Eylea U.S. revenue was $363 million, up 10% sequentially from $330 million, and up 49% from $244 million year-earlier. Outside the U.S., Bayer had $125 Eylea revenue, up23% sequentially, of which Regeneron received $32 million in revenue, plus milestone payments. The global rollout continues. Estimated 26% of wet AMD market, with about one-half of patients ongoing, one-quarter new to treatment, and one-quarter switching from another therapy.

Zaltrap for metastatic colorectal cancer is in collaboration with Sanofi, which recorded sales of $18 million. Ex-U.S. launches will continue this year. Zaltrap is not expected to be profitable in the near term due to the need to repay Sanofi for Regeneron's share of expenses.

Arcalyst for Cryopyrin-Associated Periodic Syndromes (CAPS) revenue was $4 million.

Sanofi collaboration revenue includes reimbursement for R&D expenses (the complex accounting with Sanofi was explained).

Results of a Phase 3 trials for Eylea were reported in the quarter. The Vibrant trial for macular edema following branch retinal vein occlusion had positive results.

The Odyssey Mono Phase 3 trial for alirocumab for LDL cholesterol reported positive results. This is a collaboration with Sanofi, and is one of multiple trials, with more readouts in 2014 and, if approved, global rollout in 2015..

Results of Phase 3 trial of sarilumab for Rheumatoid Arthritis is expected before year-end.

A Phase 2b study of dupilumab for atopic dermatitis is currently enrolling patients, and another trial for asthma, and a Phase 2 trial for nasal polyposis; all in collaboration with Sanofi.

Has a total of 13 antibodies in clinical development, all of which were developed in-house. See also the Regeneron Pipeline.

Cash and equivalents balance ended at $775 million. Debt in convertible senior notes was $314 million.

Expenses of $360.2 million consisted of: cost of goods sold $28.3 million; research and development $224.0 million; selling, general and administrative $97.6 million; collaboration manufacturing costs $10.3 million. Leaving income from operations of $236.8 million. Interest and other expense was $11.1 million. Income tax expense was $84.4 million.


Alirocumab, will Outcome study be required, label, etc.? We have had extensive discussions with the FDA. Assuming the data is robust and safety data is clear cut, all we will need to do is be substantially involved in executing our Outcome study, to be submitted for approval. We won't need the Outcome results for the submission. Re the label, we have a broad testing program, so we hope for a broad approval.

Inventory impact in quarter? We had just a slight increase in sales into inventory.

Alirocumab LDL goal? Physicians like options for patient treatment. We examined fix doses and up titration for patient needs.

Lucentis discount program? The reason for the lower dose of Lucentis is the safety question around deaths. We don't have a death problem with Eylea at high doses. We have no comment on their rebate program. In DME we have every eight week dosing in the study, whereas the competition has 4 week dosing on their label, which should offset any cost concerns.

We favor the repackaging and compounding bill in Congress as currently written.

Sequester impact on sales, particularly Avastin segment? We have seen a stabilization in Avastin share. We think there is room to grow in Wet AMD.

DME BLA, what specifically? It is premature to ask about the ask and the label, but we did study fixed dosing and then went on to every eight week dosing.

IL6 space competition? We think it is an exciting opportunity for patient benefit. We believe our product will have a convenient subcutaneous administration. We believe we can be second in class in a very large opportunity space.

We think our cholesterol program is as robust and deep as any competitor's program at this time.

Shelf registration logic? It is good, every day housekeeping, it just replaces an expiring plan. We have no plans to access the capital markets at this time.

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Disclaimer: My analyst call summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2013 William P. Meyers