Analyst Conference Summary


Regeneron Pharmaceuticals

conference date: February 9, 2016 @ 5:30 AM Pacific Time
for quarter ending: December 31, 2015 (Q4, fourth quarter 2015)

Forward-looking statements

Overview: Revenue was down slightly sequentially, but up strongly y/y. Almost no Praluent revenue yet. Not a great quarter. Not great guidance, either, but still expecting a 20% growth rate for Eylea, and could still get a boost from Praluent ramp.

Basic data (GAAP):

Revenue was $1.098 billion, down 3% sequentially from $1.137 billion and up 37% from $802 million in the year-earlier quarter.

Net income was $155 million, down 26% sequentially from $210 million, and up 72% from $90 million year-earlier.

Diluted Earnings Per Share (EPS) was $1.34, down 26% sequentially from $1.82 and up 72% from $0.78 year-earlier.


For the full year 2016 Regeneron currently expects Eylea sales in the U.S. to grow about 20%. Non-GAAP non-reimbursed R&D expense is expected between $875 and $950 million, with SG&A expense of $925 to $1,000 million. The cash tax rate as a % of non-GAAP income expected between 35% and 45%, including a non-recurring payment of $222 million due to an upfront payment from Sanofi. Capital expense expected between $580 and $680 million. No estimate of Praluent sales.

Conference Highlights:

"Regeneron had a successful 2015, with strong growth in Eylea sales for retinal diseases, the approval of Praluent for hypercholesterolemia, and important advances across all stages of our pipeline," said Leonard S. Schleifer, CEO of Regeneron. "In 2016, we look forward to driving increased physician education, patient access, and reimbursement for Praluent in the United States and to launching this important medicine in other countries around the world. We also anticipate significant pipeline progress including the U.S. FDA action on the sarilumab application for rheumatoid arthritis, the Phase 3 results and potential U.S. regulatory submission for dupilumab in atopic dermatitis, and the continued progress of our development programs for retinal diseases, asthma, pain, infectious diseases, and cancer." This "will require significant investments."

Regeneron expects at least one new drug approval each year for the foreseeable future.

Praluent (Alirocumab) a PCSK9 inhibitor for LDL cholesterol control (hypercholesterolemia) had been approved by the FDA in July and then in the EU in September. Sanofi recorded Q4 sales in the U.S. of $4 million. Regeneron shares in any profits or losses from Praluent. A Phase 3 outcome study finished enrolling. Sanofi and Regeneron are in active discussions with payers. They expect a gradual ramp.In the quarter Sanofi sold $7 million of Praluent, so given the cost-sharing agreement, Regeneron lost money on it. A long-term outcomes trial should release an interim analysis in 2016. The ramp is being slowed by payers, not doctor or patient demand. Regeneron is giving the drug free to people who are waiting reimbursement decisions. Actively engaged in discussions with payers. Coverage should roll out over the next few months.

"Overall, for approximately 50% of the covered lives, a single PCSK-9 antibody has been chosen in an exclusive or preferred position. In these exclusive or preferred cases, we estimate that Praluent was chosen for about 60% of the lives. The preference for Praluent was particularly evident in the Medicare Part D decision." For Medicare Part D 85% of patients were covered by an exclusive or preferred drug agreement, and "Praluent was selected approximately 95% of the time."

Eylea (aflibercept) revenue from U.S. sales increased to $746 million, up 2% sequentially from $734 million and up 44% y/y from $518 million. Outside the U.S. Bayer had sales of $413 million, up 39% from $297 million year-earlier. Regeneron recognized $140 million in revenue from Bayer, up from $88 million year-earlier. The EU authorized sales of Eylea for myopic choroidal neovascularization in October. $2.68 billion full-year U.S. Eylea sales, up 54% y/y.

Non-GAAP results: net income $327 million, down 19% sequentially from $403 million and down 0% from $328 million year earlier. Diluted EPS $2.83, down 18% sequentially from $3.47 and down 1% from $2.79 year-earlier. Excludes the usual GAAP items, in particular non-cash taxes of about $11 million and $159 million in share-based compensation expense.

Total revenue of $1,098 million consisted of: product sales $750 million; Sanofi collaboration revenue $166 million; Bayer collaboration revenue (Eylea outside the U.S.) $165 million; licensing and other, $18 million.

Sarilumab for rheumatoid arthritis should have a decision from the FDA in 2016, and a submission in the EU should be made in the second half of 2016. Hiring a sales team in the U.S.

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 of 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 that should report results in 2016. A large Phase 3 study will start this year.

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 that should report data in 2016.

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.

Nesvacumab/aflibercept will initiate a Phase 2 study in 2016. A PD-1 antibody candidate should report Phase 1 data for cancer patients.

Regeneron also hope to continue to expand the label for Eylea. A phase 3 study for diabetic retinopathy in patients not having DME should start this year.

Regeneron has a total of 13 antibodies in clinical development, all of which were developed in-house, but five of which are in collaboration with Sanofi. More therapies could start clinical trials this year. See also the Regeneron Pipeline.

Cash and equivalents balance ended at $1.68 billion, up sequentially from $1.58 billion. Has been opportunistically repurchasing warrants, $50 million in the quarter. Debt consisted of $11 million in convertible senior warrants.

GAAP expenses of $867 million consisted of: cost of goods sold $71 million; research and development $461 million; selling, general and administrative $295 million; collaboration manufacturing costs $40 million. Leaving income from operations of $231 million. Interest and other expense was $4 million. Income tax expense was $72 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.


Amgen's PCSK9 trial for long-term outcomes will read out earlier than yours? We want to meet both the primary endpoint and key secondary end points. We believe if Amgen has positive data it will be good for the overall class.

Cost increases going forward? We are investing a sizeable Sarilumab launch against a formidable opponent. Then future launches. These are necessary investments. Unreimbursed R&D is also a big driver as we do more clinical trials. It is better to have a close spacing of new drug introductions, with the expenses involved, than wide gaps between new introductions.

Praluent patient types? We don't have meaningful metrics to share yet. As private payer Medicare coverage decisions are implemented we will see a ramp, more Q2 than Q1.

Our guidance is not conservative, we give our best guess, but there is variability including seasonality.

For our PD-1 inhibitor, we have just been trying to see where it would fit against competitors and what the target cancers would be. We will share actual data at the upcoming, appropriate cancer meetings.

Eylea 2016 headwinds? Other than weather in Q1, it is hard to predict. We are in the 5th year, so 20% growth is still strong. We believe there are additional, potential growth drivers. We are doing well against competitive drugs. Our growth in 2015 was purely do to volume, we did not take a price increase. We expect campaign year rhetoric about prices, but no actual changes as our drug saves people's sight.

A lot of the 2015 growth was in the DME part of the market. We believe many people with diabetes are failing to get diagnosed early for DME. We also see growth in demographics. We can also grow significantly outside the United States, where are market share is not as good as in the U.S.

Medicare uptake for Praluent, what are the drivers? We don't know what Amgen is offering. We believe our low dose option might be something of value for physicians to choose.



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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 2016 William P. Meyers