Analyst Conference Summary


Regeneron Pharmaceuticals

conference date: May 8, 2014 @ 5:30 AM Pacific Time
for quarter ending: March 31, 2014 (Q1, first quarter 2014)

at the time this is written, but may buy shares at any time.
Forward-looking statements

Overview: Continued rapid revenue growth.

Basic data (GAAP):

Revenue was $625.7 million, up 2.5% sequentially from $610.4 million and 42% from $439.7 million in the year-earlier quarter.

Net income was $65.4 million, down 34% sequentially from $98.6 million, and down 34% from $98.9 million year-earlier.

Diluted Earnings Per Share (EPS) was $0.58, down 33% sequentially from $0.86 and down 36% from $0.90 year-earlier.


Reaffirmed full 2014 Eylea sales of $1.7 to $1.8 billion.

Conference Highlights:

Now has 15 antibodies in clinical development and Regeneron strengthened its finances while taking new initiatives.

Non-GAAP numbers: net income $263 million, up 1.5% sequentially from $259 million and up 31% from $201 million year earlier. EPS $2.26, up 1% sequentially from $2.24 and up 27% from $1.78 year-earlier.

Total revenue of $626 million consisted of: product sales $362.4 million; Sanofi collaboration revenue $130.5 million; Bayer collaboration revenue (Eylea outside the U.S.) $125.3 million; licensing and other, $7.5 million.

Eylea (aflibercept) U.S. revenue was $359 million, down 11% sequentially from $402 million and up 14% from $314 million year-earlier. Worldwide sales were $577 million (of which Regeneron recognized $61 million) up 54% y/y as worldwide launch continues. There was an inventory correction in the quarter accounting for the sequential decrease, partly driven by tightening of terms by Regeneron. Underlying demand for Eylea in the U.S. increased 25% y/y, despite impact of weather.

The FDA target date for Eylea for DME (diabetic macular edema) is August 18, 2014; applications have also been submitted in Europe and Japen. For macular edema following branch retinal vein occlusion the target date is October 23.

Zaltrap for metastatic colorectal cancer is in collaboration with Sanofi, which recorded sales of $22 million, up sequentially from $20 million, but for which Regeneron had a net loss from R&D reimbursements.

Arcalyst for Cryopyrin-Associated Periodic Syndromes (CAPS) revenue was $3 million, down sequentially from $4 million.

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. Reported positive data from the Phase 2a study for atopic dermatosis. A Phase III program should be started shortly. Dupilumab is in collaboration with Sanofi.

REGN2176 antibody with Eylea combination Phase I trial was initiated in Febraury. In January Regeneron agreed to have Bayer as a development and commercialization partner outside the U.S.

In May entered into a research and license agreement with Avalanche Biotechnologies for discovering and commercializing gene therapies for ophthalmologic diseases.

Expects applications for approval for Alirocumab for LDL to be submitted by end of 2014. Nine Phase III studies should report data beginning in June.

Regeneron has a total of 15 antibodies in clinical development, all of which were developed in-house, but seven of which are in collaboration with Sanofi. See also the Regeneron Pipeline.

Cash and equivalents balance ended at $1.18 billion, up sequentially from $1.08 billion. Debt in convertible senior notes was $327 million.

Expenses of $439.8 million consisted of: cost of goods sold $27.5 million; research and development $287.4 million; selling, general and administrative $108.9 million; collaboration manufacturing costs $16.1 million. Leaving income from operations of $185.9 million. Interest and other expense was $10.7 million. Income tax expense was $109.8 million.

Regeneron does not currently pay cash income taxes. The GAAP $110 million included a one-time item.


Seasonality components? It is difficult to distinguish between weather and inventory impacts. We are just beginning to understand seasonality as we are past the fast, launch-stage growth.

Avalanche colaboration specific goals? We get to work on some very specific targets and the right to negotiate for what they have in the clinic. We are not announcing what the targets are, but we could address some interesting diseases. It is a long-term investment.

PDGF program data? It is in Phase I. No time frame yet.

Market opportunity for Alirocumab, before and after outcomes data? It is all speculation because the drug is not approved and we don't know the label yet. When you look at high-risk, uncontrolled LDLC there is a large population, including those who have had an event and those who can't take statins. Physicians have shown interest after seeing the product profile.

Thoughts on comparison trial Eylea, Lucentis, Avastin? We don't know when the data will be available, it might be late this year.

DME market dynamics? It is not a very mature market. We believe the long-term market opportunity is good, with 240,000 patients treated with an anti-Vegf. But most patients are being treated with lasers. Our phase III data was a head-to-head comparison against laser.

Is 3% sequential Eylea demand growth about what you can expect before the new indication? I don't think your calculations are wildly off. Growth will come later this year. There are a lot of issues with compounding, revelations of Medicare spends for eye doctors, etc.

We have a world-wide epidemic with allergic diseases, not just dermatitis. They may have unrelated causes. We believe they are variation of the same disease, the same drivers of the immune system. Different people just manifest differently. It is possible IL4 and IL13 are the critical pathway drivers for these diseases. Our data shows very interesting effects in this type of disease with dupilumab.

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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 2014 William P. Meyers