conference date: August 4, 2016 @ 5:30 AM Pacific Time
for quarter ending: June 30, 2016 (Q2, second quarter 2016)
Overview: Revenue up 22% y/y, but increased R&D spend held earnings nearly flat. Praluent sales remain minimal. Guided to higher expenses for full year 2016.
Basic data (GAAP):
Revenue was $1.21 billion, up 1% sequentially from $1.201 billion and up 22% from $999 million in the year-earlier quarter.
Net income was $196 million, up 18% sequentially from $166 million, and up 0.5% from $195 million year-earlier.
Diluted Earnings Per Share (EPS) was $1.69, up 17% sequentially from $1.45 and flat from $1.69 year-earlier.
Updated full year 2016 to: Eyelea U.S. net product sales reaffirmed at 20% to 25% over 2015. Sanofi reimbursement of expenses decreased to $310 to $340 million. Non-GAAP unreimbursed R&D expense increased to $970 to $1,010 million. Non-GAAP SG&A up to $980 million to $1.02 billion. Capital expenditures decreased to $480 to $530 million.
Leonard S. Schleifer, President and CEO, said "In the first half of this year, EYLEA continued to demonstrate strong sales growth, and Praluent sales made steady progress as healthcare providers become more familiar with this new therapeutic class and learn to navigate payer utilization management criteria."In the second half of the year, for sarilumab in rheumatoid arthritis, we look forward to the upcoming U.S. regulatory decision and potential launch. We also recently completed a U.S. regulatory submission for dupilumab for the treatment of atopic dermatitis and are working to bring this breakthrough therapy to patients as soon as possible."
Regeneron expects at least one new drug approval each year for the foreseeable future. Preparing to launch sarilumab upon regulatory approval. Mentioned Zika as a potential target for a therapy.
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. Global net sales were $24 million, including $21 million from the U.S., recorded by Sanofi. The FDA will decide on extending marketing authorization to monthly dosing by January 24, 2017. Japan granted marketing authorization. The number of written prescriptions is increasing, but only about 25% of those get dispensed because of payer hurdles.
Eylea (aflibercept) revenue from U.S. sales increased to $831 million, up 6% sequentially from $781 million and up 27% y/y from $655 million. Outside the U.S. Bayer had sales of $486 million, up 16% sequentially from $419 million, and up 44% from $338 million year-earlier. Regeneron recognized $167 million in revenue from Bayer, up from $107 million year-earlier. Believes is growing market share of the VEGF eye market. But Medicare/Medicaid have proposals that, if passed, would favor rival therapies. Regeneron's position is that patients should not be denied access to the best therapy, Eylea.
Non-GAAP results: net income $329 million, up 12% sequentially from $293 million and up 24% from $265 million year earlier. Diluted EPS $2.82, up 10% sequentially from $2.57 and up 24% from $2.27 year-earlier. Excludes the usual GAAP items, in particular an upfront payment of about $75 million and $131.6 million in share-based compensation expense.
Total revenue of $1.21 billion consisted of: product sales $834.2 million; Sanofi collaboration revenue $163.4 million; Bayer collaboration revenue (Eylea outside the U.S.) $191.9 million; licensing and other, $23.1 million.
Sarilumab for rheumatoid arthritis should have a decision from the FDA by October 30, 2016, and a submission in the EU was made in July. Hiring a sales team in the U.S.
Dupilumab is being studied for atopic dermatitis, asthma, and chronic sinusitis. Atopic dermatitis Phase 3 data from three separate trials met their primary endpoints, and a regulatory filing was submitted to the FDA. A mid-stage, Phase 2 trial for eosinophilic esophagitis is ongoing. A 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. A Phase 2/3 study of hip or knee osteoarthritis met its primary endpoint.
REGN2810 antibody for PD-1 for cutaneous squamous cell carcinoma started a potentially pivotal Phase 2 trial in collaboration with Sanofi.
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.
REGN 2477 for FOP (fibrodysplasia ossificans progressiva) started a Phase 1 study in healthy volunteers.
REGN3470-3471-3479 for Ebola began a Phase 1 study in healthy volunteers.
Identified antibody candidates for Zika and are doing preclinical tests.
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. In May positive Phase 2 results were reported showing a 55% reduction in LDL over standard of care.
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 $1.64 billion, up sequentially from $1.40 billion. Debt consisted of $0.5 million in convertible senior warrants. $139 million capital expense.
GAAP expenses of $921.0 million consisted of: cost of goods sold $41.2 million; research and development $559.9 million; selling, general and administrative $292.0 million; collaboration manufacturing costs $27.8 million. Leaving income from operations of $291.6 million. Interest and other income was $0.6 million. Income tax expense was $96.0 million.
Tax accounting standard ASU 2016-09 was adopted re stock based compensation tax effects. Also "The effective tax rate for the second quarter of 2016 was positively impacted, compared to the U.S. federal statutory rate, by the tax benefit associated with stock-based compensation, the domestic manufacturing deduction, and the federal tax credit for increased research activities, partly offset by the negative impact of losses incurred in foreign jurisdictions with rates lower than the federal statutory rate and the non-tax deductible Branded Prescription Drug Fee."
Royalty payments for Eylea to Genentech stopped in May.
Eylea + PGEF blocker efficacy hurdle? We will have the usual comparison plus a second stage of data. It is a single injection. The hurdle to move forward is a benefit, but does not have to be that great.
Praluent access color? Some payers took the FDA non-approval of azetamide for the condition to mean that it did not have to be tried before a PCSK9 therapy. That has happened in a few plans. Some payer had prior authorization paperwork requiring 40 questions for physicians. Outcomes data should be the catalyst for change. Patients should accumulate over time. Cardiologists are not as used to having to file a lot of paperwork.
Dupilumab conjunctivitis issue? We have seen it in atopic dermatitis studies, but not in asthma studies. May depend on topical steroids. The patients tend to have a lot of history of conjunctivitis. Most cases are mild, and few lead to discontinuation. The unmet need is huge, and the efficacy is huge. Moderate to severe patients number over 1 million in the U.S. alone. People really suffer from this disease. Dupilumab appears to correct an immune issue without causing more infections.
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