On May 4, 2023 Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) reported financial results for the first quarter of 2023 and provided a business update (Press release, Regeneron, MAY 4, 2023, View Source [SID1234631050]).
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"In the first quarter of 2023, we achieved six FDA and EC approvals across five products, allowing our homegrown medicines to reach even more patients around the world, while we also continued to grow revenue," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron. "We remain focused on advancing our robust pipeline at all stages, and we were pleased to announce positive data from a late-stage study of Dupixent in COPD and make continued progress with our costimulatory and bispecific antibody candidates in oncology."
Financial Highlights
($ in millions, except per share data) Q1 2023 Q1 2022 % Change
Total revenues $ 3,162 $ 2,965 7 %
GAAP net income $ 818 $ 974 (16 %)
GAAP net income per share – diluted $ 7.17 $ 8.61 (17 %)
Non-GAAP net income(a) $ 1,168 $ 1,318 (11 %)
Non-GAAP net income per share – diluted(a) $ 10.09 $ 11.49 (12 %)
"Our business is off to a strong start in 2023, marked by our solid first quarter financial results and the pipeline progress we have achieved," said Robert E. Landry, Executive Vice President, Finance and Chief Financial Officer of Regeneron. "We continue to make investing in innovation, both internal and external, our top priority for capital allocation."
Business Highlights
Key Pipeline Progress
Regeneron has approximately 35 product candidates in clinical development, including a number of marketed products for which it is investigating additional indications. Updates from the clinical pipeline include:
Aflibercept 8 mg
The U.S. Food and Drug Administration (FDA) accepted for priority review the Biologics License Application (BLA) for the treatment of wet AMD, DME, and diabetic retinopathy, with a target action date of June 27, 2023. A regulatory application has also been submitted for the treatment of wet AMD and DME in the European Union (EU) and Japan.
EYLEA (aflibercept) Injection
In February 2023, the FDA approved EYLEA for the treatment of retinopathy of prematurity (ROP) in preterm infants.
Dupixent (dupilumab)
In January 2023, the European Commission (EC) approved Dupixent for the treatment of adults and adolescents with eosinophilic esophagitis (EoE).
In March 2023, the EC also approved Dupixent as the first and only targeted medicine indicated to treat children aged 6 months to 5 years with severe atopic dermatitis in Europe.
The Company and Sanofi announced the primary and all key secondary endpoints were met in a Phase 3 trial in adults currently on maximal standard-of-care inhaled therapy (triple therapy) with uncontrolled COPD and evidence of type 2 inflammation. Dupixent is the first and only biologic to demonstrate a clinically meaningful and highly significant reduction (30%) in moderate or severe acute exacerbations of COPD (rapid and acute worsening of respiratory symptoms) over 52 weeks, while also demonstrating significant improvements in lung function, quality of life, and COPD respiratory symptoms. The safety results were generally consistent with the known safety profile of Dupixent in its approved indications.
The FDA accepted for review the supplemental BLA (sBLA) for the treatment of adults and adolescents aged 12 years and older with chronic spontaneous urticaria (CSU), with a target action date of October 22, 2023. A regulatory application has also been submitted in Japan.
The Phase 3 study in chronic cold induced urticaria did not meet its required efficacy endpoints and further development has been discontinued.
A Phase 2/3 study in eosinophilic gastroenteritis and a Phase 2 study in ulcerative colitis were initiated.
Oncology Programs
In March 2023, the EC approved Libtayo (cemiplimab) in combination with platinum-based chemotherapy for the first-line treatment of adult patients with advanced NSCLC with ≥1% PD-L1 expression.
A Phase 2/3 pivotal study was initiated for fianlimab, an antibody to LAG-3, in combination with Libtayo for first-line advanced NSCLC.
A Phase 1 study was initiated for Libtayo in combination with BioNTech’s BNT116 in patients with first-line NSCLC.
A Phase 1 study was initiated for REGN5837, a bispecific antibody targeting CD22 and CD28, in B-cell non-Hodgkin lymphoma (B-NHL).
The FDA granted Fast Track designation to linvoseltamab, a bispecific antibody targeting BCMA and CD3, for multiple myeloma.
Other Programs
The FDA approved Kevzara (sarilumab) as the first and only biologic for the treatment of polymyalgia rheumatica (PMR).
The FDA approved Evkeeza (evinacumab) as an adjunct to other lipid-lowering therapies to treat children with homozygous familial hypercholesterolemia (HoFH), which extended the approved indication to children as young as 5 years of age.
The FDA accepted for priority review the BLA for pozelimab, an antibody to C5, for the treatment of ultra-rare CD55-deficient protein-losing enteropathy (CHAPLE) in adults and children as young as 1 year of age, with a target action date of August 20, 2023.
The Company and Alnylam Pharmaceuticals, Inc. reported positive interim results from the ongoing single dose part of the Phase 1 study of ALN-APP, an investigational RNAi therapeutic targeting amyloid precursor protein (APP), in patients with early-onset Alzheimer’s disease. Patients treated with ALN-APP experienced dose-dependent, rapid, and sustained reduction in cerebrospinal fluid of both soluble APPα (sAPPα) and APPβ (sAPPβ), biomarkers of target engagement, with maximum reduction of 84% and 90%, respectively. These interim results demonstrated encouraging safety and tolerability to date.
A Phase 2 study was initiated for ALN-HSD, an RNAi therapeutic targeting HSD17B13, in nonalcoholic steatohepatitis (NASH).
Corporate and Business Development Updates
The Company announced that P. Roy Vagelos, M.D., will retire from his role as Chair of the Company’s Board of Directors and will not stand for reelection at the Company’s 2023 Annual Meeting of Shareholders on June 9, 2023. Dr. Vagelos will complete his current term through the conclusion of the Annual Meeting, at which time the Board plans to appoint Leonard S. Schleifer, M.D., Ph.D., and George D. Yancopoulos, M.D., Ph.D., as Co-Chairs of the Board, in addition to their roles as President and Chief Executive Officer and President and Chief Scientific Officer, respectively. The Board also plans to appoint current director Christine A. Poon as the Lead Independent Director of the Board.
In March 2023, the Company and Sonoma Biotherapeutics, Inc. entered into a license and collaboration agreement to bring together the Company’s VelociSuite technologies with Sonoma’s technology platform for the discovery, development, and commercialization of novel regulatory T cell (Treg) therapies for autoimmune diseases. In connection with the agreement, the Company made a $45 million up-front payment and, in April 2023, the Company purchased an aggregate of $30 million of Sonoma preferred stock. Sonoma is also eligible to receive a $45 million development milestone payment. The Company and Sonoma will co-fund research and development activities and share equally any future commercial expenses and profits. The Company will have the option to lead late-stage development and commercialization on all products globally, with Sonoma retaining rights to co-promote all such products in the United States.
First Quarter 2023 Financial Results
Revenues
($ in millions) Q1 2023 Q1 2022 % Change
Net product sales:
EYLEA – U.S. $ 1,434 $ 1,518 (6 %)
Libtayo – U.S. 110 79 39 %
Libtayo – ROW** 67 — *
Praluent – U.S. 40 34 18 %
Evkeeza – U.S. 15 8 88 %
Inmazeb – U.S. 2 — *
Total net product sales 1,668 1,639 2 %
Collaboration revenue:
Sanofi 798 631 26 %
Bayer 357 385 (7 %)
Roche 222 216 3 %
Other 1 — *
Other revenue 116 94 23 %
Total revenues $ 3,162 $ 2,965 7 %
Total revenues excluding Ronapreve(a)(b) $ 2,940 $ 2,749 7 %
* Percentage not meaningful.
** Rest of world (ROW). Effective July 1, 2022, the Company began recording net product sales of Libtayo outside the United States. Excluded from this line item is approximately $6 million of net product sales recorded by Sanofi in the first quarter of 2023 in connection with sales in certain markets (Sanofi records net product sales in such markets during a transition period until inventory on hand as of July 1, 2022 is sold through to the end customers).
Net product sales of EYLEA in the U.S. decreased in the first quarter of 2023, compared to the first quarter in 2022, primarily due to an increase in sales-related deductions, partly offset by higher sales volume.
Sanofi collaboration revenue increased in the first quarter of 2023, compared to the first quarter of 2022, primarily due to the Company’s share of profits from commercialization of antibodies, which were $637 million in the first quarter of 2023, compared to $415 million in the first quarter of 2022. The change in the Company’s share of profits from commercialization of antibodies was driven by profits associated with higher Dupixent sales. Additionally, in the first quarter of 2022, the Company earned a $50 million sales-based milestone from Sanofi, which did not recur in the first quarter of 2023.
The Company recorded Roche collaboration revenue during the first quarter of 2023 and 2022 in connection with payments from Roche attributable to global gross profits from sales of Ronapreve.
Refer to Table 4 for a summary of collaboration revenue.
Operating Expenses
GAAP % Change
Non-GAAP(a) % Change
($ in millions) Q1 2023 Q1 2022 Q1 2023 Q1 2022
Research and development (R&D) $ 1,101 $ 844 30 % $ 960 $ 751 28 %
Acquired in-process research and development (IPR&D) $ 56 $ 28 100 % * * n/a
Selling, general, and administrative (SG&A) $ 601 $ 450 34 % $ 515 $ 389 32 %
Cost of goods sold (COGS) $ 208 $ 207 — % $ 168 $ 136 24 %
Cost of collaboration and contract manufacturing (COCM) $ 249 $ 198 26 % * * n/a
Other operating (income) expense, net $ (1 ) $ (20 ) (95 %) * * n/a
* GAAP and non-GAAP amounts are equivalent as no non-GAAP adjustments have been recorded.
GAAP and non-GAAP R&D expenses increased in the first quarter of 2023, compared to the first quarter of 2022, driven by additional costs incurred in connection with higher headcount and headcount-related costs, the advancement of the Company’s late-stage pipeline, and the impact of the 2022 amendments to the Sanofi collaboration agreements.
Acquired IPR&D for first quarter of 2023 included a $45 million up-front payment in connection with the Company’s collaboration agreement with Sonoma. Acquired IPR&D for the first quarter of 2022 included a $20 million opt-in payment in connection with a product candidate under the Company’s collaboration agreement with Adicet Bio, Inc.
GAAP and non-GAAP SG&A expenses increased in the first quarter of 2023, compared to the first quarter of 2022, primarily due to an increase in commercialization-related expenses for Libtayo outside the U.S. (as effective July 1, 2022, the Company became solely responsible for the commercialization of Libtayo worldwide), higher headcount and headcount-related costs, and higher contributions to an independent not-for-profit patient assistance organization. These increases were partly offset by a decrease in commercialization-related expenses for EYLEA.
COCM expenses increased in the first quarter of 2023, compared to the first quarter of 2022, primarily due to the recognition of costs in connection with manufacturing commercial supplies for Sanofi related to Praluent outside the U.S. and Dupixent globally.
Other Financial Information
GAAP other income (expense) included the recognition of net unrealized losses on equity securities of $165 million in the first quarter of 2023, compared to $211 million of net unrealized losses in the first quarter of 2022. GAAP and Non-GAAP other income (expense) also included interest income of $95 million in the first quarter of 2023, compared to $19 million in the first quarter of 2022.
In the first quarter of 2023, the Company’s GAAP effective tax rate (ETR) was 4.7%, compared to 8.3% in the first quarter of 2022. The decrease in the GAAP ETR was primarily due to a higher benefit of stock-based compensation. In the first quarter 2023, the non-GAAP ETR was 9.7%, compared to 11.6% in the first quarter of 2022.
GAAP net income per diluted share was $7.17 in the first quarter of 2023, compared to $8.61 in the first quarter of 2022. Non-GAAP net income per diluted share was $10.09 in the first quarter of 2023, compared to $11.49 in the first quarter of 2022. A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.
In January 2023, the Company’s Board of Directors authorized a new share repurchase program to repurchase up to an additional $3.0 billion of the Company’s common stock. During the first quarter of 2023, the Company repurchased shares of its common stock and recorded the cost of the shares, or $694 million, as Treasury Stock. As of March 31, 2023, an aggregate of $3.051 billion remained available for share repurchases under the Company’s share repurchase programs.
2023 Financial Guidance(c)
The Company’s full year 2023 financial guidance consists of the following components:
2023 Guidance
Prior Updated
GAAP R&D $4.200–$4.435 billion $4.225–$4.465 billion
Non-GAAP R&D(a) $3.725–$3.925 billion Unchanged
GAAP SG&A $2.460–$2.650 billion $2.490–$2.680 billion
Non-GAAP SG&A(a) $2.130–$2.280 billion Unchanged
GAAP gross margin on net product sales(d) 88%–90% 87%–89%
Non-GAAP gross margin on net product sales(a)(d) 90%–92% 89%–91%
COCM(e)* $720–$800 million $820–$880 million
Capital expenditures* $825–$950 million $800–$900 million
GAAP effective tax rate 10%–12% 8%–10%
Non-GAAP effective tax rate(a) 11%–13% 10%–12%
* GAAP and non-GAAP amounts are equivalent as no non-GAAP adjustments have been or are expected to be recorded.
A reconciliation of full year 2023 GAAP to non-GAAP financial guidance is included below:
Projected Range
($ in millions) Low High
GAAP R&D $ 4,225 $ 4,465
Stock-based compensation expense 490 520
Acquisition-related integration costs 10 20
Non-GAAP R&D $ 3,725 $ 3,925
GAAP SG&A $ 2,490 $ 2,680
Stock-based compensation expense 310 330
Acquisition-related integration costs 50 70
Non-GAAP SG&A $ 2,130 $ 2,280
GAAP gross margin on net product sales 87 % 89 %
Stock-based compensation expense 1 % 1 %
Intangible asset amortization expense 1 % 1 %
Non-GAAP gross margin on net product sales 89 % 91 %
GAAP ETR 8 % 10 %
Income tax effect of GAAP to non-GAAP reconciling items 2 % 2 %
Non-GAAP ETR 10 % 12 %
(a) This press release uses non-GAAP R&D, non-GAAP SG&A, non-GAAP COGS, non-GAAP gross margin on net product sales, non-GAAP other income (expense), net, non-GAAP ETR, non-GAAP net income, non-GAAP net income per share, total revenues excluding Ronapreve, 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. A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.
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 integration-related expenses). 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.
(b) The casirivimab and imdevimab antibody cocktail for COVID-19 is known as REGEN-COV in the United States and Ronapreve in other countries. The Company records net product sales of REGEN-COV in the United States and Roche records net product sales of Ronapreve outside the United States.
(c) The Company’s 2023 financial guidance does not assume the completion of any business development transactions not completed as of the date of this press release.
(d) Gross margin on net product sales represents gross profit expressed as a percentage of total net product sales recorded by the Company. Gross profit is calculated as net product sales less cost of goods sold.
(e) 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 first quarter 2023 financial and operating results on Thursday, May 4, 2023, at 8:30 AM Eastern Time. Participants may access the conference call live via webcast, or register in advance and participate via telephone, on the "Investors and Media" page of Regeneron’s website at www.regeneron.com. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. A replay of the conference call and webcast will be archived on the Company’s website for at least 30 days.