On November 4, 2015 Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN)reported financial results for the third quarter of 2015 and provided an update on development programs (Filing, 8-K, Regeneron, NOV 4, 2015, View Source [SID:1234507951]).
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Financial Highlights
"Our commercial business continues to advance with increased demand for EYLEA, our marketed medicine for serious retinal diseases, and continued launch progress with Praluent, our new therapy for hypercholesterolemia," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron. "Regeneron also continues to progress the next wave of candidates from our strong pipeline, including sarilumab for rheumatoid arthritis, the BLA for which was recently submitted to the U.S. FDA, and dupilumab, which is in Phase 3 trials for atopic dermatitis and asthma."
Business Highlights
EYLEA (aflibercept) Injection for Intravitreal Injection
• In the third quarter of 2015, net sales of EYLEA in the United States increased 65% to $734 million from $445 million in the third quarter of 2014. Overall distributor inventory levels remained within the Company’s one- to two-week targeted range.
• Bayer HealthCare commercializes EYLEA outside the United States. In the third quarter of 2015, net sales of EYLEA outside of the United States(1) were $371 million, compared to $277 million in the third quarter of 2014. In the third quarter of 2015, Regeneron recognized $131 million from its share of net profit from EYLEA sales outside the United States, compared to $85 million in the third quarter of 2014.
• In October 2015, the European Commission granted marketing authorization of EYLEA for the treatment of visual impairment due to myopic choroidal neovascularization.
Praluent (alirocumab) Injection for the Treatment of High Low-Density Lipoprotein (LDL) Cholesterol
• In July 2015, following the U.S. Food and Drug Administration (FDA) approval of Praluent for the treatment of adults with heterozygous familial hypercholesterolemia (HeFH) or clinical atherosclerotic cardiovascular disease (ASCVD), who require additional lowering of LDL cholesterol, the Company and Sanofi commenced their launch of Praluent. The effect of Praluent on cardiovascular morbidity and mortality has not been determined.
• In the third quarter of 2015, net sales of Praluent in the United States were $4 million. Product sales for Praluent are recorded by Sanofi, and the Company shares in any profits or losses from the commercialization of Praluent.
• In October 2015, Praluent was included in the Express Scripts National Preferred Formulary, the nation’s largest formulary covering approximately 25 million Americans.
• In September 2015, the European Commission granted marketing authorization of Praluent for the treatment of adult patients with primary hypercholesterolemia (HeFH and non-familial) or mixed dyslipidemia as an adjunct to diet (a) in combination with a statin, or statin with other lipid-lowering therapies in patients unable to reach their LDL-cholesterol goals with the maximally-tolerated statin, or (b) alone or in combination with other lipid-lowering therapies for patients who are statin intolerant, or for whom a statin is contraindicated.
• In July 2015, the Company and Sanofi reported that the Phase 3 ODYSSEY JAPAN trial met its primary endpoint.
• The Phase 3 ODYSSEY program remains ongoing.
Pipeline Progress
Regeneron has thirteen fully human monoclonal antibodies generated using the Company’s VelocImmune technology in clinical development, including five in collaboration with Sanofi(5). In addition to Praluent, highlights from the antibody pipeline include:
Sarilumab, the Company’s antibody targeting IL-6R for rheumatoid arthritis, is currently being studied in the global Phase 3 SARIL-RA program. A Biologics License Application (BLA) in the United States was recently submitted to the FDA.
Dupilumab, the Company’s antibody that blocks signaling of IL-4 and IL-13, is currently being studied in atopic dermatitis, asthma, nasal polyps, and eosinophilic esophagitis.
• Multiple Phase 3 studies of dupilumab in atopic dermatitis are currently underway. Phase 3 pivotal trials in atopic dermatitis are fully enrolled.
• The Phase 2 study in atopic dermatitis in adolescents and children completed enrollment.
• The second pivotal study of dupilumab in patients with uncontrolled persistent asthma continues to enroll patients.
Fasinumab, an antibody targeting Nerve Growth Factor (NGF), entered Phase 2b/3 clinical development (sixteen-week study) for pain due to osteoarthritis in the second quarter of 2015. In September 2015, the Company and Mitsubishi Tanabe Pharma Corporation (MTPC) entered into a strategic collaboration providing MTPC with exclusive development and commercial rights to fasinumab in Japan and certain other countries in Asia.
REGN2222, an antibody targeting the respiratory syncytial virus (RSV), entered Phase 3 clinical development in the third quarter of 2015.
Third Quarter 2015 Financial Results
Product Revenues: Net product sales were $738 million in the third quarter of 2015, compared to $449 million in the third quarter of 2014. EYLEA net product sales in the United States were $734 million in the third quarter of 2015, compared to $445 million in the third quarter of 2014.
Total Revenues: Total revenues, which include product revenues described above, increased by 57% to $1,137 million in the third quarter of 2015, compared to $726 million in the third quarter of 2014. Total revenues also include collaboration revenues of $382 million in the third quarter of 2015, compared to $269 million in the third quarter of 2014. Collaboration revenues in the third quarter of 2015 increased primarily due to higher reimbursement of the Company’s research and development expenses under its antibody collaboration with Sanofi and an increase in the Company’s net profit from commercialization of EYLEA outside the United States. Refer to Table 4 for a summary of collaboration revenue.
Research and Development (R&D) Expenses: GAAP R&D expenses were $426 million in the third quarter of 2015, compared to $338 million in the third quarter of 2014. The higher R&D expenses in the third quarter of 2015 were principally due to higher development costs related to dupilumab and higher headcount to support the Company’s increased R&D activities. In addition, in the third quarter of 2015, R&D-related non-cash share-based compensation expense was $64 million, compared to $46 million in the third quarter of 2014.
Selling, General, and Administrative (SG&A) Expenses: GAAP SG&A expenses were $210 million in the third quarter of 2015, compared to $144 million in the third quarter of 2014. The increase in SG&A expenses was primarily due to higher headcount and headcount-related costs and higher commercialization expenses related to Praluent. These increases were partly offset by a third quarter 2014 incremental charge related to the Branded Prescription Drug Fee, based on final regulations issued by the Internal Revenue Service (IRS) in July 2014. In addition, in the third quarter of 2015, SG&A-related non-cash share-based compensation expense was $36 million, compared to $21 million in the third quarter of 2014.
Cost of Goods Sold (COGS): GAAP COGS was $67 million in the third quarter of 2015, compared to $34 million in the third quarter of 2014. COGS primarily consists of royalties as well as costs in connection with producing U.S. EYLEA commercial supplies, and various start-up costs in connection with the Company’s Limerick, Ireland commercial manufacturing facility. COGS increased principally due to the increase in U.S. EYLEA net product sales.
Income Tax Expense: GAAP income tax expense was $183 million in the third quarter of 2015, compared to $98 million in the third quarter of 2014. The effective tax rate was 46.5% for the third quarter of 2015, compared to 54.1% for the third quarter of 2014.
Non-GAAP and GAAP Net Income: The Company reported non-GAAP net income of $403 million, or $3.90 per basic share and $3.47 per diluted share, in the third quarter of 2015, compared to non-GAAP net income of $295 million, or $2.93 per basic share and $2.52 per diluted share, in the third quarter of 2014.
The Company reported GAAP net income of $210 million, or $2.04 per basic share and $1.82 per diluted share, in the third quarter of 2015, compared to GAAP net income of $83 million, or $0.83 per basic share and $0.73 per diluted share, in the third quarter of 2014.
A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.