Analyst Conference Summary


Regeneron Pharmaceuticals

conference date: November 4, 2015 @ 5:30 AM Pacific Time
for quarter ending: September 30, 2015 (Q3, third quarter 2015)

Forward-looking statements

Overview: No bump from Praluent sales yet, but Eylea U.S. sales were up 65% y/y. First quarter with revenue over $1 billion. Increased revenue guidance.

Basic data (GAAP):

Revenue was $1.137 billion, up 13% sequentially from $998.6 million and up 57% from $725.8 million in the year-earlier quarter.

Net income was $210.4 million, up 8% sequentially from $194.6 million, and up 152% from $83.4 million year-earlier.

Diluted Earnings Per Share (EPS) was $1.82, up 8% sequentially from $1.69 and up 149% from $0.73 year-earlier.


Increased full year 2015 revenue guidance for Eylea in the U.S. to 50% to 55% y/y, up from prior guidance of 45% to 50% growth. But also increased guidance for non-GAAP expenses to R&D $540 to $560 milion and SG&A $630 to $650 million. Tax range expected between 16% and 20%. However, cap ex guidance was lowered to $625 to $675 million.

In 2016 will make significant increases in R&D investment. Will invest in sales forces for the new drug approvals.

Conference Highlights:

Praluent (Alirocumab) for LDL cholesterol control (hypercholesterolemia) was approved by the FDA in July and then in the EU in September. Sanofi recorded Q3 sales in the U.S. of $4 million. Regeneron shares in any profits or losses from Praluent. A Phase 3 outcome study is still enrolling. Sanofi and Regeneron are in active discussions with payers. They expect a gradual ramp.

Eylea (aflibercept) revenue from U.S. sales increased to $734 million, up 12% sequentially from $655 million and up 65% y/y from $445 million. Outside the U.S. Bayer had sales of $371 million, up 34% from $277 million year-earlier. Regeneron recognized $131 million in revenue from Bayer.

Non-GAAP results: net income $403 million, up 19% sequentially from $338 million and up 37% from $295 million year earlier. Diluted EPS $3.47, up 20% sequentially from $2.89 and 38% from $2.52 year-earlier. Excludes the usual GAAP items, in particular non-cash taxes of about $89.6 million and $103 million in share-based compensation expense.

Total revenue of $ million consisted of: product sales $737.7 million; Sanofi collaboration revenue $224.7 million; Bayer collaboration revenue (Eylea outside the U.S.) $157.6 million; licensing and other, $17.5 million.

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

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 was recently submitted to the FDA. Could get approval in 2H 2016.

Dupilumab is being studied for atopic dermatitis, asthma, and chronic sinusitis. The Phase 3 trial in atopic dermatitis is fully enrolled, with others enrolling, with data due in first half o 2016 and regulatory filing in second half. A mid-stage, Phase 2 trial for eosinophilic esophagitis is ongoing. A second phase 3 study for persistent asthma continues to enroll patients. Believes sales could begin in 2017.

Fasinumab for pain due to osteoarthritis is in a 16 week Phase 2b/3 study. Rights to Japan and other Asian countries were sold to Mitsubishi Tanabe Pharma Corporation. A $10 million payment was received from Mitsubishi, but will be recognized over time.

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

REGN1500, another dyslipidemia treatment, is in Phase 2 trials.

REGN2222 targeting RSV (respiratory syncytial virus) is in Phase 3 clinical development. A second, separate Phase 3 study will begin in 2016.

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

Regeneron discovered the cause of FOP (fibrodysplasia ossificans progressiva) and is developing a therapy for this very rare disease. 800 patients have been confirmed globally. The pathway has potential for further study.

Regeneron is developing a monoclonal antibody for Ebola. This is seen as a test to rapidly respond to emerging diseases.

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 $1.577 billion, up sequentially from $1.19 billion. Has been opportunistically repurchasing warrants, $400 million in the quarter.

GAAP expenses of $745.0 million consisted of: cost of goods sold $67.2 million; research and development $425.9 million; selling, general and administrative $210.0 million; collaboration manufacturing costs $41.9 million. Leaving income from operations of $392.4 million. Interest and other expense was $0.9 million. Income tax expense was $182.9 million.

Expenses are rising as the R&D pipeline is expanded and sales forces are being assembled for Sarilumab and Dupilumab in advance of likely FDA approvals.


Formulary access for Praluent, same as ExpressScripts? We believe patients and doctors should have a choice and make a decision. We cannot predict how things will actually turn out.

Is Eylea still gaining share? We continued to gain share, particularly with DME. But we cannot predict the future.

Combinations with Eylea, decision? We will base our decision on the data we receive.

Praluent, % of prescriptions fit the label? We don't have that level of detail yet, and would probably not share that data due to competitive pressures.

Interim Praluent range of outcomes? Details were published. It is an event driven trial. Interim analysis is gated to 50% of the events for futility, then another at 75% for futility and efficacy.

CART therapies vs. bispecifics MABs in cancer? Our goal is to have bispecifics achieve the sort of efficacies of engineered T-cells, but to be able to manufacture ours efficiently. It may require combinations of bispecifics. Dose titration is an advantage of bispecifics.

Eylea headwinds in Q4? We give the best guidance we can. Factors included that last year we saw a Q4 slowdown. It is a quarter with holidays where patients don't want to go for doctor visits. Storms may affect visits.

Presciption data for Praluent and its PCSK9 competitor is too scant at this time to provide a meaningful analysis. Medicare patients are subject to a six month delay.

Drug pricing environment? It is a long discussion. We need pricing power from patents in this industry. To get capital invested, you need to provide a good return. But in some respects the pharmaceutical industry is reviled for lots of different reasons, some of them good. If you are an innovative company, you need to create value for the system.

Praluent compliance? It is preventative for a silent killer, so compliance can be a problem. The only data is from the clinical trials, where compliance was high. It is an injectible specialty product that must be refilled by mail each month. Hopefully constant contact with patients will help with compliance. Being late by a day or a week is not a big problem because Praluent is long-acting. Patients generally don't have negative reactions, so that cuts down on reluctance to dose.

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Disclaimer: My analyst call summaries may include both 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