Analyst Conference Summary


Regeneron Pharmaceuticals

conference date: August 4, 2015 @ 5:30 AM Pacific Time
for quarter ending: June 30, 2015 (Q2, second quarter 2015)

Forward-looking statements

Overview: Good quarter, raised 2015 guidance, Praluent now for sale, but expects a slow ramp.

Basic data (GAAP):

Revenue was $998.6 million, up 15% sequentially from $869.6 million and up 50% from $665.7 million in the year-earlier quarter.

Net income was $194.6 million, up 156% sequentially from $76.0 million, and up 104% from $96.4 million year-earlier.

Diluted Earnings Per Share (EPS) was $1.69, up 156% sequentially from $0.66 and up 99% from $0.85 year-earlier.


Full year 2015 guidance was updated, but revenue guidance for Praluent was not included. Eylea net product sales raised to 45% to 50% growth over 2015 from previous 30% to 35% growth. Non-GAAP unreimbursed R&D expense lowered to $510 to $550 million. Non-GAAP SG&A expense lowered to $610 to $650 million. Cash tax rate raised to 15% to 22%. Capital expense narrowed to $675 to $750 million.

Conference Highlights:

Praluent (Alirocumab) for LDL cholesterol control (hypercholesterolemia) was approved by the FDA in July. However, the sales ramp may be slow due to: giving out free samples; doctor reluctance to recommend a injectable biological therapies; patient reluctance to inject themselves; doctor reluctance to file the paperwork necessary for reimbursement; and lack of concern over high cholesterol levels.

A major new collaboration with Sanofi for Immuno-Oncology was announced. See Regeneron Immuno-Oncology press release for details. The collaboration includes extending Regeneron's work with bi-specific antibodies, which allows for binding two distinct targets, like a cancer cell and an immune cell.

Non-GAAP results: net income $338 million, up 0.6 % sequentially from $336 million and up 17% from $289 million year earlier. Diluted EPS $2.89, up 0.3% sequentially from $2.88 and 17% from $2.47 year-earlier. Excludes the usual GAAP items, in particular non-cash taxes of about $33 million and $94 million in share-based compensation expense and a $16 million loss on extinguishment of debt.

Total revenue of $999 million consisted of: product sales $655 million; Sanofi collaboration revenue $195 million; Bayer collaboration revenue (Eylea outside the U.S.) $134 million; licensing and other, $11 million.

Eylea (aflibercept) U.S. revenue was $655 million, up 20% sequentially from $544.6 million and up 58% from $415 million year-earlier. $388 million international revenue (split with Bayer), where geographic expansion continues.

Zaltrap for metastatic colorectal cancer is included in collaboration revenue from Sanofi (but is likely minimal).

Approval for Praluent (Alirocumab) for LDL cholesterol was recommended in Europe by the CHMP.

Sarilumab for rheumatoid arthritis in enrolling a Phase 3 trial, with another Phase 3 trial comparing it as a monotherapy against adalimumab also enrolling. Data should be out in 2015 and a BLA submitted to the FDA.

Dupilumab is being studied for atopic dermatitis, asthma, and chronic sinusitis. The Phase 3 trial in atopic dermatitis is fully enrolled. A mid-stage, Phase 2 trial for eosinophilic esophagitis is ongoing. A phase 3 study for persistent asthma was initiated in Q2 and Phase 2b data will be presented this month.

Fasinumab for pain due to osteoarthritis started a 16 week Phase 2b/3 study in the quarter.

REGN2810 antibody for PD-1 for cancer is in a Phase 1 trial.

REGN1500, another dyslipidemia treatment, started Phase 2 trials.

REGN2222 targeting RSV (respiratory syncytial virus) entered Phase 3 clinical development.

REGN2176-3 for neovascular age-related macular degeneration, or wet AMD, started a Phase 2 trial in the quarter.

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

Cash and equivalents balance ended at $1.19 billion, down sequentially from $1.23 billion. Has been opportunistically repurchasing warrants.

GAAP expenses of $653.8 million consisted of: cost of goods sold $60.9 million; research and development $390.3 million; selling, general and administrative $174.6 million; collaboration manufacturing costs $28.0 million. Leaving income from operations of $344.9 million. Interest and other expense was $16.9 million. Income tax expense was $133.4 million.


AMD vs. DME penetration by Eylea? Bulk of the growth is coming in DME. Taking market share from Lucentis and Avastin in DME.

Praluent payer strategy? We know payers want patients to step through maximally tolerated statin therapy.

IMS data for Praluent will be in audits.

New DME prescriber types? Generally smaller ophthalmology practices that had been using Avastin.

PD1 patient responses? We are waiting for the appropriate medical conference to release the data.

RSV pivotal trials? The trials are considered to be pivotal. We have discussed the infant population with the FDA.

Immuno-oncology deal, PD1 vs. PDL1 merits? The science suggests PD1 should be the more effective, but some patients may tolerate PDL1 better.

RSV program antibody dosing regimen? We are exploring less frequent dosing in the pivotal study, and have reason to hope they might work.

Praluent distribution? It will take time to get reliable IMS data due to giving out free samples, etc. We are distributing through a network of specialty pharmacies.

IP issues with immuno-oncology, given the "land grab" that is going on? We look at IP very carefully.

IO antibody basis for enthusiasm? What is required for success is a comprehensive approach bringing the right antibodies in the right settings. We have innovative and novel targets. It requires a lot of science. We believe it is early in the game and complexity plays to our advantage.

Eylea dosing? We are seeing dosing every 8 weeks, which is what is in the prescribing information. There was no y/y change in that. Sales were not driven by more dosing per year.

Atopic dermatitis? Filing would require 16 week data from 2 trials and 1 year data too. For pediatric program, that is ongoing.

For Praluent, when it terms profitable we pay a 10% royalty to Sanofi.

High Eylea growth in quarter, vs. lower growth in guidance? Factors include seasonality, pent up demand from protocol T. We are confident in our guidance. We get some vacations in Q3 and snow in Q4.

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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 2015 William P. Meyers