Analyst Conference Summary


Regeneron Pharmaceuticals

conference date: May 5, 2016 @ 5:30 AM Pacific Time
for quarter ending: March 31, 2016 (Q1, first quarter 2016)

Forward-looking statements

Overview: Impressive sequential and y/y revenue growth. But non-GAAP EPS down y/y.

Basic data (GAAP):

Revenue was $1.201 billion, up 9% sequentially from $1.098 billion and up 38% from $870 million in the year-earlier quarter.

Net income was $166 million, up 7% sequentially from $155 million, and up 118% from $76 million year-earlier.

Diluted Earnings Per Share (EPS) was $1.45, down % sequentially from $1.34 and up 120% from $0.66 year-earlier.


2016 Eylea U.S. sales growth rate was updated to 20% to 25% over 2015, was previously 20%. $550 to 625 million capital expense plan.

Conference Highlights:

Leonard S. Schleifer, M.D., Ph.D., President and CEO, said "Our innovative new therapy dupilumab showed positive results across two Phase 3 trials in moderate-to-severe atopic dermatitis, a debilitating disease with very limited treatment options, and we look forward to submitting a Biologics License Application to the U.S. FDA in the third quarter."

Regeneron expects at least one new drug approval each year for the foreseeable future. Prepared to launch sarilumab.

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. "Made additional launch progress," but Sanofi sales were just $13 million this generated a $99 million loss to Regeneron. Believes appropriate patients are having problems getting reimbursements. Studies continue. Will file for more dosing options. As of April 1 there was a notable increase in the number of presciptions that were being filled. But many doctors and patients have been discouraged from even trying.

Eylea (aflibercept) revenue from U.S. sales increased to $781 million, up 5% sequentially from $746 million and up 44% y/y from $541 million. Outside the U.S. Bayer had sales of $419 million, up 2% sequentially from $413 million, up 43% from $292 million year-earlier. Regeneron recognized $146 million in revenue from Bayer, up from $89 million year-earlier. Data released showed Eylea was statistically more effective at one year than Avastin or Lucentis for DME, and at 2 years as well. Genentech royalty expense will end in two days.

Non-GAAP results: net income $293 million, down 10% sequentially from $327 million and down 13% from $336 million year earlier. Diluted EPS $2.57, down 9% sequentially from $2.83 and down 11% from $2.88 year-earlier. Excludes the usual GAAP items, in particular non-cash tax benefit of about $15 million and $142 million in share-based compensation expense.

Total revenue of $1.20 billion consisted of: product sales $784 million; Sanofi collaboration revenue $220 million; Bayer collaboration revenue (Eylea outside the U.S.) $180 million; licensing and other, $17 million.

Sarilumab for rheumatoid arthritis should have a decision from the FDA by October 30, 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. Atopic dermatitis Phase 3 data met its primary endpoints, so a 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 reported results that met the primary endpoint. A large Phase 3 study started to test long-term safety and efficacy. Also a Phase 2b/3 study for chronic lower back pain was initiated.

REGN2810 antibody for PD-1 for cutaneous squamous cell carcinoma started a potentially pivotal Phase 2 trial in collaboration with Sanofi. At ASCO the Phase 1 data will be presented.

REGN1500, another dyslipidemia treatment, is in Phase 2 trials. Initial data from a smaller study will be presented soon.

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.

Nesvacumab/aflibercept will initiated a Phase 2 study. In March entered a collaboration agreement with Bayer to try it as a therapy for eye diseases.

Evinacumab for homozygous familial hypercholesterolemia and severe forms of hyperlipidemia was granted orphan drug status.

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 $1.40 billion, down sequentially from $1.68 billion. Has been opportunistically repurchasing warrants, $242 million in the quarter. Debt consisted of $10 million in convertible senior warrants.

GAAP expenses of $871 million consisted of: cost of goods sold $79 million; research and development $470 million; selling, general and administrative $290 million; collaboration manufacturing costs $33 million. Leaving income from operations of $329 million. Interest and other income was $1 million. Income tax expense was $164 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.


Dupilumab results and plans? We confirmed efficacy in atopic dermatitis, across a number of readouts. We will also move to the pediatric populuation.

Medicare Part B? We agree that healthcare costs must be controlled in this country. But the new proposal would limit options for doctors to give less than optimal therapies to patients. Like off-label repackaged Avastin instead of Eylea. Many in Congress and even patient advocacy groups recognize the need to maintain physician choice. "Hundreds of congressmen have said this should not be done."

PD-1 pivotal trial despite Phase 2? It is part of our integrated immunotherapy effort, which is a very competitive area. So would prefer not to share our competitive strategy.

Launch of Dupilumab? We've been wrong about past launches. There are a lot of patients, presuming we get the label. We suspect the launch will be patient-driven.

Context of fasinumab safety data? We extensively screened patients before the test. It showed the prevalenced of factors that might have been attributed to the drug otherwise. The FDA had concerns about the class of drugs effect on sympathetic nerves; we saw none of that at all. But a small study can miss things, that is why the Phase 3 study will be much larger. The context is that opioids are a big problem, so a new pain medication could be a big benefit.

The long term trials show that to save patients' vision they should use the best drug, Eylea. Long-term patients tend to be undertreated with bad consequences.

Sarilumab opportunity, given competition and street's skepticism? The market was TNF inhibitors. IL-6 inhibitors have been available since the Genentech launch. We believe physicians are learning about the importance of IL-6 class therapies. Methotrexate is effective but has side effects many patients don't like. It may not make sense to start patients with TNF, or to just move from one TNF to another. Irreversible bone loss is a big problem that sarilumab may offer an advantage for.

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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