Analyst Conference Summary


Regeneron Pharmaceuticals

conference date: August 5, 2014 @ 5:30 AM Pacific Time
for quarter ending: June 30, 2014 (Q2, second quarter 2014)

Forward-looking statements

Overview: Good revenue ramp.

Basic data (GAAP):

Revenue was $665.7 million, up 6% sequentially from $625.7 million and 45% from $457.6 million in the year-earlier quarter.

Net income was $92.7 million, up 42% sequentially from $65.4 million, and up 6% from $87.4 million year-earlier.

Diluted Earnings Per Share (EPS) was $0.82, % sequentially from $0.58 and % from $0.79 year-earlier.


Updated full year 2014 guidance to reflect planned increase R&D spend.

Full year Eylea net product sales between $1.7 and $1.8 billion. Non-GAAP unreimbursed R&D up to $470 to $510 million. Non-GAAP SG&A down to $310 to $350 million. Capital expenditures $350 to $425 million.

Conference Highlights:

There was a $10.8 million charge in other income for the loss on extinguishment of debt.

Non-GAAP numbers: net income $289 million, up 10 % sequentially from $263 million and up 46% from $198 million year earlier. Diluted EPS $2.47, up 9% sequentially from $2.26 and up 43% from $1.73 year-earlier. Excludes the usual GAAP items and the $10.8 debt extinguishment charge.

Total revenue of $665.7 million consisted of: product sales $418.0 million; Sanofi collaboration revenue $142.6 million; Bayer collaboration revenue (Eylea outside the U.S.) $97.3 million; licensing and other, $7.8 million.

Eylea (aflibercept) U.S. revenue was $415 million, up 16% sequentially from $359 million and up 26% from $330 million year-earlier. Bayer sales of Eylea outside the U.S. were $247 million, more than doubling the $102 million achieved year-earlier. Regeneron booked $67 million revenue after expenses from ex-U.S. sales. There were no significant inventory changes in Q2 2014 in the U.S. It does not appear to have been a market share change vs. off-label therapies.

The FDA approved Eylea for DME (diabetic macular edema) in July, 2014. Applications have also been submitted in Europe and Japan. The CHMP recommended approval in Europe, with a final decision expected before the end of 2014.For macular edema following branch retinal vein occlusion the target date is October 23. The Phae 3 VIVID-DME trial reported in July that Eylea showed sustained improvement in vision over a two year period. Regeneron believes there are 600,000 DME patients in the U.S., only about 40% of them already being treated with a VEGF inhibitor.

Zaltrap for metastatic colorectal cancer is in collaboration with Sanofi, which recorded sales of $21 million, sequentially from $22 million, but for which Regeneron had a net loss from R&D reimbursements of $0.7 million.

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

A Phase 2b study of dupilumab for atopic dermatitis had positive results, and a Phase 3 study is planned for later this year. A Phase 2b trial for asthma, and a Phase 2a trial for nasal polyposis, are underway.

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 3 studies reported positive data last week. In cooperation with Sanofi. Target is 22 million global patients at high risk for heart attacks and strokes. Planning for marketing upon approval. Launch expected second half of 2015, but sharing pre-commercialization expenses with Sanofi. These will be recorded in the SG&A line, and then balanced with Sanofi's expenses within the Sanofi revenue line.

Sarilumab for rheumatoid arthritis in enrolling a Phase 3 trial. Positive data was presented from the previous Phase 3 trial.

Regeneron has a total of 14 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 $1.37 billion, up sequentially from $1.18 billion. Debt in convertible senior notes was $282 million.

GAAP expenses of $443.3 million consisted of: cost of goods sold $29.9 million; research and development $294.5 million; selling, general and administrative $102.4 million; collaboration manufacturing costs $15.4 million. Leaving income from operations of $222.4 million. Interest and other expense was $19.2 million. Income tax expense was $110.4 million.

After 25 years in business, Regeneron reported its first retained earnings.

While profitability will be hurt short term by preparation for commercializing the late-stage pipeline, Eylea revenue should ramp with little increase in sales expense because the physicians treating DME are largely the same as those already prescribing Eylea.


Is the guidance for expense a run rate, or might it step down? Unreimbursed R&D will be higher in the second half of this year. It will remain up in 2015 mainly due to our unreimbursed, unpartnered programs.

DME market? If you look at measures, DME has a lot more retinal wetness. We anticipate there are a large number of potential switch candidates, but in the long run we believe more patients will come from new patients.

Voucher strategy for priority review? There is a precedent for purchasing a voucher and plan to use it to obtain a priority review.

Our alirocumab PCSK9 antibody program is differentiated from similar antibody program by the design of the clinical program, including the ability to match doses to patients. There are differences in how the competing antibodies bind to PCSK9.

Will alirocumab be a primary care product? It is too early to talk about the exact label or what our commercialization strategy would be.

Details of the alirocumab data will be presented at an appropriate medical conference.

Eylea DME reimbursement environment, Medicare? DME is a bit different than AMD. DME is about 50-50 Medicare vs commercial pay, is it affects a younger population. 35% of overall population is traditional Medicare and the rest of the Medicare population is Advantage. We do not need a new J code, we are waiting for them to load the price into their system. Our current focus is on the medicare population.

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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