On May 7, 2019 Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) reported financial results for the first quarter of 2019 and provided a business update (Press release, Regeneron, MAY 7, 2019, View Source [SID1234535804]).
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"In the first quarter, aggregate sales of all Regeneron-invented products, recorded by the Company and its collaborators, were $2.27 billion, an increase of 23% over the same period last year. This was driven by an 8% increase in EYLEA net sales, 185% increase in Dupixent net sales, and a strong initial launch for Libtayo in advanced cutaneous squamous cell carcinoma," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron. "We continue to unlock the full potential of Dupixent, which is now FDA-approved in atopic dermatitis and asthma in both adults and adolescents and is currently under Priority Review by the FDA for chronic rhinosinusitis with nasal polyps. Regeneron also continues to invest in a broad immuno-oncology portfolio. At the June European Hematology Association (EHA) (Free EHA Whitepaper) meeting, we look forward to presenting updated promising results of the Phase 1 study of REGN1979 in relapsed or refractory B-cell non-hodgkin lymphoma, including in patients who have failed previous CAR-T therapy."
Business Highlights
Key Pipeline Progress
Regeneron has twenty product candidates in clinical development, including five of the Company’s U.S. Food and Drug Administration (FDA) approved products for which it is investigating additional indications. Updates from the clinical pipeline include:
EYLEA (aflibercept) Injection
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In April 2019, the Company resubmitted a supplemental Biologics License Application (sBLA) for EYLEA in a pre-filled syringe.
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The EYLEA sBLA for the treatment of diabetic retinopathy has a target action date of May 13, 2019.
Dupixent (dupilumab)
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In March 2019, the FDA approved Dupixent for adolescent patients 12 to 17 years of age with moderate-to-severe atopic dermatitis whose disease is not adequately controlled with topical prescription therapies or when those therapies are not advisable.
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The FDA accepted for priority review the sBLA for Dupixent as an add-on maintenance treatment for adults with inadequately controlled severe chronic rhinosinusitis with nasal polyps (CRSwNP), with a target action date of June 26, 2019. The Company and Sanofi have also submitted a European Marketing Authorization Application (MAA) for CRSwNP.
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The European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for Dupixent, recommending it be approved for use in adults and adolescents 12 years and older as add-on maintenance treatment for severe asthma.
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Initiated a Phase 3 study in chronic obstructive pulmonary disease (COPD).
Libtayo (cemiplimab)
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The European Medicines Agency’s CHMP recommended conditional approval for Libtayo for the treatment of adult patients with metastatic or locally advanced cutaneous squamous cell carcinoma (CSCC) who are not candidates for curative surgery or curative radiation.
REGN1979, a bispecific antibody against CD20 and CD3
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The Company expects to begin a potentially pivotal Phase 2 study in advanced follicular lymphoma this quarter, and a potentially pivotal Phase 2 study in diffuse large B-cell lymphoma (DLBCL) later this year.
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At the June European Hematology Association (EHA) (Free EHA Whitepaper) meeting, the Company plans to present updated results of the Phase 1 study in relapsed or refractory B-cell non-hodgkin lymphoma, including in patients who have failed previous CAR-T therapy.
Praluent (alirocumab)
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In March 2019, the European Commission approved a new indication for Praluent to reduce cardiovascular risk in adults with established atherosclerotic cardiovascular disease (ASCVD) by lowering low-density lipoprotein cholesterol (LDL-C) levels as an adjunct to correction of other risk factors.
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In April 2019, the FDA approved a new indication for Praluent to reduce the risk of heart attack, stroke, and unstable angina requiring hospitalization in adults with established cardiovascular disease.
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Beginning in March 2019, Praluent was made available for both the 75 mg and 150 mg doses at a U.S. list price of $5,850 annually, a 60% reduction from the original price.
Business Development Update
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In April 2019, the Company entered into a collaboration with Alnylam Pharmaceuticals, Inc. to discover, develop, and commercialize new RNA interference (RNAi) therapeutics for diseases of the eye and central nervous system, in addition to a select number of targets expressed in the liver. Under the terms of the agreement, the Company is obligated to make an up-front payment of $400 million and purchase $400 million of Alnylam common stock. In addition, the Company will provide Alnylam with a specified amount of funding at program initiation and at lead candidate designation, and Alnylam is eligible to receive up to $200 million in clinical proof-of-principle milestones.
First Quarter 2019 Financial Results
Product Revenues: Net product sales were $1.104 billion in the first quarter of 2019, compared to $988 million in the first quarter of 2018. EYLEA net product sales in the United States were $1.074 billion in the first quarter of 2019, compared to $984 million in the first quarter of 2018. Overall distributor inventory levels for EYLEA in the United States remained within the Company’s one-to-two-week targeted range.
Total Revenues: Total revenues, which include product revenues described above, increased by 13% to $1.712 billion in the first quarter of 2019, compared to $1.512 billion in the first quarter of 2018. Total revenues include Sanofi and Bayer collaboration revenues(6) of $523 million in the first quarter of 2019, compared to $437 million in the first quarter of 2018. The increase in Sanofi collaboration revenue in the first quarter of 2019 was primarily due to the Company’s share of lower losses of collaboration antibodies, primarily driven by higher net product sales of Dupixent. This increase was partly offset by a decrease in reimbursement of research and development costs under the Immuno-oncology Discovery and Development Agreement with Sanofi, as the amended agreement narrowed the scope of reimbursable activities to the BCMAxCD3 and MUC16xCD3 programs.
Refer to Table 4 for a summary of collaboration and other revenue.
Research and Development (R&D) Expenses: GAAP R&D expenses were $642 million in the first quarter of 2019, compared to $499 million in the first quarter of 2018. The higher R&D expenses in the first quarter of 2019 were principally due to additional costs incurred in connection with our earlier-stage pipeline, an increase in Libtayo development expenses, higher clinical manufacturing costs, and higher headcount and headcount-related costs. In the first quarter of 2019, R&D-related non-cash share-based compensation expense was $59 million, compared to $41 million in the first quarter of 2018.
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Selling, General, and Administrative (SG&A) Expenses: GAAP SG&A expenses were $411 million in the first quarter of 2019, compared to $331 million in the first quarter of 2018. The higher SG&A expenses in the first quarter of 2019 were primarily due to higher headcount and headcount-related costs, higher contributions to independent not-for-profit patient assistance organizations, and an increase in commercialization-related expenses for Dupixent. In the first quarter of 2019, SG&A-related non-cash share-based compensation expense was $44 million, compared to $35 million in the first quarter of 2018.
Cost of Collaboration and Contract Manufacturing (COCM): GAAP COCM expenses were $108 million in the first quarter of 2019, compared to $46 million in the first quarter of 2018. The increase in COCM was primarily due to higher expenses in connection with process validation at our Limerick manufacturing facility, higher inventory write-offs and reserves, and the recognition of manufacturing costs associated with higher sales of Dupixent.
Other Income (Expense): GAAP other income (expense), net, in the first quarter of 2019 and 2018 includes the recognition of $43 million and $9 million, respectively, of net gains on equity securities.
Income Taxes: In the first quarter of 2019, GAAP income tax expense was $85 million and the effective tax rate was 15.6%, compared to $107 million and 18.3% in the first quarter of 2018. The effective tax rate for the first quarter of 2019 was positively impacted, compared to the U.S. federal statutory rate, primarily by the federal tax credit for research activities, stock-based compensation, the foreign-derived intangible income deduction, and income earned in foreign jurisdictions with tax rates lower than the U.S. federal statutory rate.
GAAP and Non-GAAP Net Income(2): GAAP net income was $461 million, or $4.23 per basic share and $3.99 per diluted share, in the first quarter of 2019, compared to GAAP net income of $478 million, or $4.44 per basic share and $4.16 per diluted share, in the first quarter of 2018.
Non-GAAP net income was $518 million, or $4.75 per basic share and $4.45 per diluted share, in the first quarter of 2019, compared to non-GAAP net income of $537 million, or $4.99 per basic share and $4.67 per diluted share, in the first quarter of 2018.
A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.
Regeneron records net product sales of EYLEA in the United States. Outside the United States, EYLEA net product sales comprise sales by Bayer in countries other than Japan and sales by Santen Pharmaceutical Co., Ltd. in Japan under a co-promotion agreement with an affiliate of Bayer. The Company recognizes its share of the profits (including a percentage on sales in Japan) from EYLEA sales outside the United States within "Bayer collaboration revenue" in its Statements of Operations.
This press release uses non-GAAP net income, non-GAAP net income per share, non-GAAP unreimbursed R&D, and non-GAAP SG&A, which are financial measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). These non-GAAP financial measures are computed by excluding certain non-cash and other items from the related GAAP financial measure. Non-GAAP adjustments also include the estimated income tax effect of reconciling items.
The Company makes such adjustments for items the Company does not view as useful in evaluating its operating performance. For example, adjustments may be made for items that fluctuate from period to period based on factors that are not within the Company’s control (such as the Company’s stock price on the dates share-based grants are issued or changes in the fair value of the Company’s equity investments) or items that are not associated with normal, recurring operations (such as changes in applicable laws and regulations). Management uses these non-GAAP measures for planning, budgeting, forecasting, assessing historical performance, and making financial and operational decisions, and also provides forecasts to investors on this basis. Additionally, such non-GAAP measures provide investors with an enhanced understanding of the financial performance of the Company’s core business operations. However, there are limitations in the use of these and other non-GAAP financial measures as they exclude certain expenses that are recurring in nature. Furthermore, the Company’s non-GAAP financial measures may not be comparable with non-GAAP information provided by other companies. Any non-GAAP financial measure presented by Regeneron should be considered supplemental to, and not a substitute for, measures of financial performance prepared in accordance with GAAP. A reconciliation of the Company’s historical GAAP to non-GAAP results is included in Table 3 of this press release.
The Company’s 2019 financial guidance does not assume the completion of any significant business development transactions not completed as of the date of this press release (other than the collaboration with Alnylam Pharmaceuticals, Inc. discussed above).
Unreimbursed R&D represents R&D expenses reduced by R&D expense reimbursements from the Company’s collaborators and/or customers.
The Company’s collaborators provide it with estimates of the collaborators’ respective sales and the Company’s share of the profits or losses from commercialization of products for the most recent fiscal quarter. The Company’s estimates for such quarter are reconciled to actual results in the subsequent fiscal quarter, and the Company’s share of the profit or loss is adjusted on a prospective basis accordingly, if necessary.
Conference Call Information
Regeneron will host a conference call and simultaneous webcast to discuss its first quarter 2019 financial and operating results on Tuesday, May 7, 2019, at 8:30 AM. To access this call, dial (800) 708-4539 (U.S.) or (847) 619-6396 (International). A link to the webcast may be accessed from the "Investors and Media" page of Regeneron’s website at www.regeneron.com. A replay of the conference call and webcast will be archived on the Company’s website and will be available for 30 days.