On November 5, 2020 Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) reported financial results for the third quarter of 2020 and provided a business update (Press release, Regeneron, NOV 5, 2020, View Source [SID1234570154]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
"Last week, Regeneron achieved an important milestone in the fight against COVID-19 with prospective Phase 2/3 results showing REGN-COV2 significantly reduced virus levels and the need for further medical attention in non-hospitalized patients; we have shared these important data with regulatory authorities," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron. "Even with our intense commitment to fighting COVID-19, Regeneron continues to deliver across all aspects of our business. This quarter we had robust top- and bottom-line growth driven by EYLEA in retinal diseases and Dupixent in atopic dermatitis and asthma. In 2021, we look forward to important potential launches including for our PD-1 inhibitor Libtayo in non-small cell lung cancer and advanced basal cell carcinoma. Lastly, we are proud that our novel antibody cocktail REGN-EB3 recently became the first FDA-approved treatment for Ebola, underscoring the potential of antibody therapies to address deadly infectious diseases."
"We continue to invest in our promising pipeline while delivering meaningful revenue and earnings growth. Our revenue base is becoming more diversified with increasing contribution from Dupixent and Libtayo," said Robert E. Landry, Executive Vice President, Finance and Chief Financial Officer of Regeneron. "This is evidenced by Dupixent achieving in excess of $1 billion in global net sales this quarter."
Key Pipeline Progress
Regeneron has more than 20 product candidates in clinical development, including five marketed products for which it is investigating additional indications. Updates from the clinical pipeline include:
Dupixent (dupilumab)
•In October 2020, the Company and Sanofi announced that a Phase 3 trial met its primary and all key secondary endpoints in children aged 6 to 11 years with uncontrolled moderate-to-severe asthma. Regulatory submissions in the United States and European Union (EU) are planned by the first quarter of 2021.
•The European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for Dupixent, recommending to extend the approval in the EU to include children aged 6 to 11 years with severe atopic dermatitis who are candidates for systemic therapy.
•The U.S. Food and Drug Administration (FDA) granted Breakthrough Therapy designation for the treatment of patients 12 years and older with eosinophilic esophagitis (EoE).
REGN-COV2, a dual antibody therapy to SARS-CoV-2 virus
•In October 2020, the Company submitted a request to the FDA for an Emergency Use Authorization (EUA) for REGN-COV2 in patients with mild-to-moderate COVID-19 who are at risk for poor outcomes.
•In October 2020, the Company announced positive results from an ongoing Phase 2/3 seamless trial in the COVID-19 outpatient setting showing REGN-COV2 met the primary and key secondary endpoints. REGN-COV2 significantly reduced viral load and patient medical visits (hospitalizations, emergency room, urgent care visits, and/or physician office/telemedicine visits). In September 2020, the Company also reported the first data from a descriptive analysis in this trial.
•In October 2020, the Independent Data Monitoring Committee (IDMC) for the REGN-COV2 treatment trials for COVID-19 recommended that the current hospitalized patient trial be modified. Specifically, based on a potential safety signal and an unfavorable risk/benefit profile at this time, the IDMC recommended that further enrollment of patients requiring high-flow oxygen or mechanical ventilation be placed on hold pending collection and analysis of further data on patients already enrolled. The IDMC also recommended continuing enrollment of hospitalized patients requiring either no or low-flow oxygen as the risk/benefit remains acceptable in these cohorts. Finally, the IDMC recommended continuation of the outpatient trial (described further above) without modification.
2
•In September 2020, the Company and the University of Oxford announced that the RECOVERY Phase 3 open-label trial in the United Kingdom will evaluate REGN-COV2. This trial, which is being coordinated by researchers at the University of Oxford, is in patients hospitalized with COVID-19 and will compare the effects of adding REGN-COV2 to the usual standard-of-care versus standard-of-care on its own. The RECOVERY IDMC is aware of the IDMC recommendations made in connection with the REGN-COV2 treatment trials (described above), and will be discussing the impact, if any, on the RECOVERY trial.
Oncology Program
•The FDA accepted for priority review, with a target action date of February 28, 2021, the supplemental Biologics License Application (sBLA) for Libtayo (cemiplimab) as monotherapy to treat patients with first-line locally advanced or metastatic non-small cell lung cancer (NSCLC) with ≥50% PD-L1 expression. A regulatory application for Libtayo as monotherapy in first-line NSCLC was also submitted in the EU.
•The FDA accepted for priority review, with a target action date of March 3, 2021, the sBLA for Libtayo for the treatment of patients with locally advanced or metastatic basal cell carcinoma (BCC). A regulatory application for Libtayo in advanced BCC was also submitted in the EU.
•Patient enrollment in the Libtayo Phase 3 first-line NSCLC chemotherapy combination study was completed.
•The Company and Sanofi presented positive data from pivotal trials for Libtayo monotherapy in first-line NSCLC and Libtayo monotherapy in BCC at the European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) Virtual Congress 2020.
•A Phase 2 study of REGN5458, a bispecific antibody targeting BCMA and CD3, was initiated in multiple myeloma.
InmazebTM (atoltivimab, maftivimab, and odesivimab-ebgn)
•In October 2020, the FDA approved Inmazeb (REGN-EB3) for the treatment of infection caused by Zaire ebolavirus in adult and pediatric patients, including newborns of mothers who have tested positive for the infection.
Praluent (alirocumab)
•The FDA accepted for review the sBLA for homozygous familial hypercholesterolemia (HoFH) in adults, with a target action date of April 4, 2021.
Evinacumab, an antibody to ANGPTL3
•The FDA accepted for priority review the BLA for HoFH, with a target action date of February 11, 2021. An MAA for HoFH has also been submitted in the EU.
•The New England Journal of Medicine (NEJM) published positive results from the Phase 3 trial in HoFH, showing that adding evinacumab to other lipid-lowering therapies cut bad cholesterol levels in half in patients with HoFH, including the most difficult to treat patients who had nearly non-existent LDL-receptor activity.
3
Corporate and Business Development Update
•In July 2020, the Company announced an agreement whereby the Company was awarded a $450 million contract to manufacture and supply REGN-COV2 to the U.S. government. The Company commenced delivery of REGN-COV2 drug product under the agreement during the third quarter of 2020. The Company continues to ramp up production for REGN-COV2 and now expects to have approximately 80,000 doses available by the end of November, approximately 200,000 total doses ready by the first week of January 2021, and approximately 300,000 total doses ready by the end of January 2021.
•In August 2020, the Company entered into a collaboration agreement with Roche to develop, manufacture, and distribute REGN-COV2. Each company has committed to dedicate a certain amount of manufacturing capacity to REGN-COV2 each year, and the collaboration is expected to substantially increase supply of REGN-COV2. Under the terms of the agreement, Regeneron will distribute and record sales for REGN-COV2 in the United States and Roche will be responsible for distribution outside the United States.
•In July 2020, the U.S. Department of Health and Human Services (HHS) exercised its option under the existing agreement for the treatment of Ebola virus infection to provide additional funding for the manufacture and supply of Inmazeb, pursuant to which Regeneron expects to deliver a pre-specified number of treatment doses over the course of approximately six years.
•In August 2020, the Company issued and sold $2.0 billion aggregate principal amount of senior unsecured notes. See further details in the "Other Financial Information" section below.
Third Quarter 2020 Financial Results
Effective January 1, 2020, Regeneron implemented changes in the presentation of its financial statements related to certain reimbursements and other payments for products developed and commercialized with collaborators. The Company made these changes in presentation to better reflect the nature of the Company’s costs incurred and revenues earned pursuant to arrangements with collaborators and to enhance the comparability of Regeneron’s financial statements with industry peers. The change in presentation has been applied retrospectively. See note (4) below for further information.
Revenues
Total revenues increased by 32% to $2.294 billion in the third quarter of 2020, compared to $1.744 billion in the third quarter of 2019.
EYLEA net product sales in the United States increased to $1.318 billion in the third quarter of 2020, compared to $1.188 billion in the third quarter of 2019. Overall distributor inventory levels for EYLEA in the United States remained within the Company’s one-to-two-week targeted range.
Total revenues also include Sanofi and Bayer collaboration revenues(2) of $653 million in the third quarter of 2020, compared to $469 million in the third quarter of 2019. Sanofi collaboration revenue increased primarily due to the Company’s share of profits from commercialization of antibodies, which increased to $213 million in the third quarter of 2020 from $94 million in the third quarter of 2019. The change in the Company’s share of profits from commercialization of antibodies was primarily driven by higher Dupixent profits. In addition, in the third quarter of 2020, the Company earned the first $50 million sales-based milestone from Sanofi, upon annual sales of antibodies outside the United States exceeding $1.0 billion on a rolling twelve-month basis.
4
Refer to Table 4 for a summary of collaboration revenue.
Other revenues in the third quarter of 2020 include recognition of revenue in connection with the Company’s agreements with BARDA related to funding of certain REGN-COV2 and Inmazeb development activities.
•The higher GAAP and non-GAAP R&D expenses in the third quarter of 2020 were primarily due to additional costs incurred in connection with COVID-19 related development activities, higher headcount and headcount-related costs, and an increase in clinical manufacturing activities.
•The higher GAAP and non-GAAP SG&A expenses in the third quarter of 2020 were primarily due to commercialization-related costs for EYLEA and Praluent, and higher headcount-related costs.
•The increase in cost of collaboration and contract manufacturing in the third quarter of 2020 was primarily due to the recognition of manufacturing costs associated with higher sales of Dupixent and recognition of costs in connection with manufacturing ex-U.S. commercial supplies of Praluent for Sanofi.
•Other operating (income) expense, net, includes recognition of a portion of amounts previously deferred in connection with up-front and development milestone payments, as applicable, received in connection with the Company’s collaborative arrangements.
Other Financial Information
GAAP other income (expense), net, includes the recognition of net losses on equity securities of $37 million in the third quarter of 2020, compared to net gains of $3 million in the third quarter of 2019.
In the third quarter of 2020, the Company’s GAAP effective tax rate was 15.6%, compared to 12.9% in the third quarter of 2019. The GAAP effective tax rate for the third quarter of 2020 was positively impacted, compared to the U.S. federal statutory rate, primarily by stock-based compensation, and, to a lesser extent, income earned in foreign jurisdictions with tax rates lower than the U.S. federal statutory rate and federal tax credits for research activities. In the third quarter of 2020, the non-GAAP effective tax rate was 16.3%, compared to 13.6% in the third quarter of 2019.
GAAP net income per diluted share was $7.39 in the third quarter of 2020, compared to GAAP net income per diluted share of $5.86 in the third quarter of 2019. Non-GAAP net income per
diluted share was $8.36 in the third quarter of 2020, compared to non-GAAP net income per diluted share of $6.67 in the third quarter of 2019. A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.
In August 2020, the Company issued and sold $1.250 billion aggregate principal amount of 1.750% senior unsecured notes due 2030 and $750 million aggregate principal amount of 2.800% senior unsecured notes due 2050. Net proceeds to the Company from the issuance and sale of the notes were used in part to repay the $1.5 billion bridge loan facility, which was previously entered into in May 2020 in connection with the Company’s purchase of shares of its common stock held by Sanofi.
Net cash used in operating activities in the third quarter of 2020 was $254 million, compared to $557 million in net cash provided by operating activities in the third quarter of 2019, which led to $(408) million in free cash flow for the third quarter of 2020, compared to $436 million for the third quarter of 2019. The decrease in cash from operating activities primarily resulted from an increase in trade accounts receivable in connection with extending payment terms to certain of the Company’s EYLEA customers due to the COVID-19 pandemic.
This press release uses non-GAAP R&D, non-GAAP SG&A, non-GAAP COGS, non-GAAP other income (expense) net, non-GAAP effective tax rate, non-GAAP net income, non-GAAP net income per share, and free cash flow, 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/or other items from the related GAAP financial measure. The Company also includes a non-GAAP adjustment for 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 investments in equity securities) or items that are not associated with normal, recurring operations (such as restructuring-related expenses, including employee separation costs). 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. With respect to free cash flows, the Company believes that this non-GAAP measure provides a further measure of the Company’s operations’ ability to generate cash flows. 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.
(2) 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. (3) The Company’s 2020 financial guidance does not assume the completion of any significant business development transactions not completed as of the date of this press release. (4) Applicable amounts previously reported for the three and nine months ended September 30, 2019 and as of December 31, 2019 have been revised to reflect a change in presentation of cost reimbursements from collaborators who are not deemed to be the Company’s customers from collaboration revenue to a reduction of the corresponding operating expense. The Company also changed the presentation of amounts recognized in connection with up-front and development milestone payments received from collaboration revenue to other operating income, as well as the presentation of the corresponding balance sheet accounts. The revisions were reclassifications only and had no impact on the Company’s previously reported GAAP and non-GAAP net income and net income per share. Refer to the Company’s Form 10-Q for the quarterly period ended September 30, 2020 (Note 1 of the Notes to Condensed Consolidated Financial Statements) for further details. (5) Corresponding reimbursements from collaborators and others for manufacturing of commercial supplies is recorded within revenues.Conference Call Information
Regeneron will host a conference call and simultaneous webcast to discuss its third quarter 2020 financial and operating results on Thursday, November 5, 2020, at 8:30 AM. To access this call, dial (888) 660-6127 (U.S.) or (973) 890-8355 (International), conference ID 1535889. 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 at least 30 days.