Analyst Conference Summary


Regeneron Pharmaceuticals

conference date: November 4, 2016 @ 5:30 AM Pacific Time
for quarter ending: September 30, 2016 (Q3, third quarter)

Forward-looking statements

Overview: Modest revenue increase with strong EPS gain, while waiting for new drug approvals. Praluent sales are growing rapidly as a % on a small base.

Basic data (GAAP):

Revenue was $1.22 billion, up 1% sequentially from $1.21 billion and up 7% from $1.14 billion in the year-earlier quarter.

Net income was $265 million, up 35% sequentially from $196 million, and up 26% from $210 million year-earlier.

Diluted Earnings Per Share (EPS) was $2.27, up 34% sequentially from $1.69 and up 25% from $1.82 year-earlier.


Updated revenue upward a bit to 23% to 25% y/y Eylea U.S. sales growth. Sanofi expense reimbursement $310 to $335 million, non-GAAP R&D $945 to $975 million, SG&A $965 to $995 million. Effective tax rate 29% to 33%. Cap ex $480 to $510 million.

Conference Highlights:

Leonard S. Schleifer, President and CEO, said "We are preparing for a potential approval and launch for Dupixent in atopic dermatitis and continuing to advance our pipeline at all stages." Believe Regeneron is in a unique position to succeed even in a difficult pricing environment. Regeneron has never raised prices on any of it drugs, preferring to extend use and advance new therapies.

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

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 $38 million ($32 million in U.S.), up 58% sequentially from $24 million. The FDA will decide on extending marketing authorization to monthly dosing by January 24, 2017. Still major reimbursement hurdles for patients, but there is some loosening.

Eylea (aflibercept) revenue from U.S. sales increased to $854 million, up 3% sequentially from $831 million and up 16% y/y from $734 million. Outside the U.S. Bayer had sales of $471 million, down 3% sequentially from $486 million, and up 27% from $371 million year-earlier. Regeneron recognized $171 million in revenue from Bayer, up from $131 million year-earlier.

Non-GAAP results: net income $365 million, up 11% sequentially from $329 million and up 32% from $276 million year earlier. Diluted EPS $3.13, up 11% sequentially from $2.82 and up 32% from $2.38 year-earlier. Excludes the usual GAAP items, in particular an upfront payment of about $25 million and $130 million in share-based compensation expense.

Total revenue of $1.22 billion consisted of: product sales $857 million; Sanofi collaboration revenue $144 million; Bayer collaboration revenue (Eylea outside the U.S.) $191 million; licensing and other, $27 million.

Sarilumab for rheumatoid arthritis is on FDA hold (complete response letter) due to a manufacturing problem at Sanofi, which should be fixed promptly.

Dupilumab (Dupixent) is being studied for atopic dermatitis, asthma, and chronic sinusitis. Atopic dermatitis Phase 3 data regulatory filing was submitted to the FDA with a decision due on or before March 29 (PDUFA date). A mid-stage, Phase 2 trial for eosinophilic esophagitis is ongoing. A phase 3 study for persistent asthma completed enrollment. Believes sales could begin in 2017. Data was presented last month showing average reduction in skin scores of 70% and 40% of patients having full clearing of lesions, and it also helped with itch. European and Japanese regulatory submissions should be in before the end of 2016.

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. Reached an agreement with Teva to commercialize outside the United States. A $200 million milestone payment will be recognized gradually.

REGN2810 antibody for PD-1 for cutaneous squamous cell carcinoma started a potentially pivotal Phase 2 trial in collaboration with Sanofi. Additional studies will be announced in the near future.

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) continued a Phase 1 study in healthy volunteers.

REGN3470-3471-3479 for Ebola continued a Phase 1 study in healthy volunteers.

REGN3767 will be advanced to Phase 1 before the end of the year.

Identified antibody candidates for Zika and are doing preclinical tests.

Nesvacumab/aflibercept continued 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 is ongoing.

See also the Regeneron Pipeline.

"In July 2016, the Company and Adicet Bio, Inc. entered into a license and collaboration agreement to develop next-generation engineered immune-cell therapeutics with fully human chimeric antigen receptors and T-cell receptors directed to disease-specific cell surface antigens in order to enable the precise engagement and killing of tumor cells."

Cash and equivalents balance ended at $2.19 billion, up sequentially from $1.64 billion. Received $200 million milestone payment from Teva. Debt consisted of $0.25 million in convertible senior warrants.

GAAP expenses of $857.3 million consisted of: cost of goods sold $29.9 million; research and development $543.0 million; selling, general and administrative $270.0 million; collaboration manufacturing costs $14.3 million. Leaving income from operations of $362.8 million. Interest and other income was $3.1 million. Income tax expense was $101.1 million.


With SG&A, we need to be ready to launch Dupixent, and we are still supporting Praluent.

Odessy outcome study (Praluent) details, hurdles for all components of primary endpoint? This decision is out of our hands, by independent monitoring board, and is somewhat subjective. They might want to look closer at a subgroup. Their decision is very hard to predict.

Sarilumab and talk of pricing runway with new biologics, your view of the landscape? It is a tough environment. Bill payers have seen outrageous increases for RA drugs, which suggests tone deafness. We need to compete with a very good drug, the class is doing well. We have to compete with an offering payers will find attractive. The market has been characterized by TNF inhibitor cycling. IL6 plays a central role in RA. We are anxious to get the product approved so we can get our message out there.

Manufacturing issue, could the fill facility be changed? Is the inventory good? Good questions, but can't give details from ongoing discussions. We can say Sanofi believes they can quickly remedy the deficiencies, which are not specific to Sarilumab.

Is Eylea growth tempering? We have done well in DME, the main driver of growth the last couple of years. But many DME patients never get to a specialist because they are pushed to laser therapy, which is a $ generator for opthomologists. A diabetic retinopathy registration would be a further driver.

Eylea gross to net? Flat sequentially in last two quarters.

The hepatitis C market has shown payers are not paying much of a premium for convenience. Same would be expected with Praluent.

Working with payers to define the severity of dermatitis in the U.S. In Europe the standard is established. A lot of patients have more than 50% of their body surfaces covered. Dupixent is a life-changing drug.

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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