On November 8, 2017 Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) reported financial results for the third quarter of 2017 and provided a business update (Press release, Regeneron, NOV 8, 2017, View Source [SID1234521761]).

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Financial Highlights

($ in millions, except per share data)

Three Months Ended
September 30,

2017

2016

% Change
EYLEA U.S. net product sales

$
953

$
854

12%
Total revenues

$
1,501

$
1,220

23%
GAAP net income

$
388

$
265

46%
GAAP net income per share – diluted

$
3.32

$
2.27

46%
Non-GAAP net income(2)

$
470

$
365

29%
Non-GAAP net income per share – diluted(2)

$
3.99

$
3.13

27%
"In the third quarter, Regeneron made significant progress with our commercialized medicines, including continued strong global sales for our retinal therapy EYLEA and the completion of enrollment in our Phase 3 PANORAMA study in diabetic retinopathy, which represents an important new potential indication for EYLEA. We also saw robust U.S. launch progress with Dupixent in moderate-to-severe atopic dermatitis, and a favorable U.S. appellate court ruling for Praluent in our ongoing PCSK9 antibody litigation," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron. "Looking forward, we anticipate a U.S. regulatory submission for dupilumab in uncontrolled asthma later this year and continue to advance a broad dupilumab development program in other Type 2 allergic diseases. In addition, we are making important strides in our immuno-oncology program and expect to submit our first U.S. regulatory application for cemiplimab, our PD-1 antibody, in advanced cutaneous squamous cell carcinoma in early 2018."

Business Highlights

Marketed Product Update

EYLEA (aflibercept) Injection for Intravitreal Injection

In the third quarter of 2017, net sales of EYLEA in the United States increased 12% to $953 million from $854 million in the third quarter of 2016. Overall distributor inventory levels remained within the Company’s one- to two-week targeted range.
In the third quarter of 2017, enrollment was completed in the Phase 3 PANORAMA study in patients with non-proliferative diabetic retinopathy without diabetic macular edema (DME).
Bayer commercializes EYLEA outside the United States. In the third quarter of 2017, net sales of EYLEA outside of the United States(1) were $564 million, compared to $471 million in the third quarter of 2016. In the third quarter of 2017, Regeneron recognized $205 million from its share of net profit from EYLEA sales outside the United States, compared to $171 million in the third quarter of 2016.
Dupixent (dupilumab) Injection

Dupilumab, an antibody that blocks signaling of IL-4 and IL-13, is currently being studied in asthma, pediatric atopic dermatitis, nasal polyps, and eosinophilic esophagitis (EoE).
In the third quarter of 2017, global net sales of Dupixent were $89 million, which were almost exclusively in the United States. Product sales for Dupixent are recorded by Sanofi, and the Company shares in any profits or losses from the commercialization of Dupixent.
In September 2017, the European Commission granted marketing authorization for Dupixent for use in adults with moderate-to-severe atopic dermatitis who are candidates for systemic therapy.
In September 2017, the Company and Sanofi presented positive results from the Phase 3 LIBERTY AD CAFÉ study in atopic dermatitis at the annual European Academy of Dermatology and Venereology (EADV) Congress.
In September 2017, the Company and Sanofi announced that the Phase 3 LIBERTY ASTHMA QUEST study of dupilumab in a broad population of adults and adolescents with uncontrolled, persistent asthma met its two primary endpoints.
In October 2017, the Company and Sanofi announced that the Phase 3 LIBERTY ASTHMA VENTURE study evaluating dupilumab in adults and adolescents with severe, steroid-dependent asthma met its primary endpoint and key secondary endpoints.
In September 2017, the FDA granted orphan drug designation for the treatment of EoE.
In October 2017, the Company and Sanofi presented positive results from the Phase 2 study in adults with active moderate-to-severe EoE at the World Congress of Gastroenterology.
Praluent (alirocumab) Injection for the Treatment of Elevated Low-Density Lipoprotein (LDL) Cholesterol

In the third quarter of 2017, global net sales of Praluent were $49 million, compared to $38 million in the third quarter of 2016. Product sales for Praluent are recorded by Sanofi, and the Company shares in any profits or losses from the commercialization of Praluent.
In October 2017, the U.S. Court of Appeals for the Federal Circuit ordered a new trial on the issues of written description and enablement and vacated the permanent injunction in the ongoing PCSK9 litigation.
A Phase 3 study in homozygous familial hypercholesterolemia (HoFH) was initiated in the fourth quarter of 2017.
Kevzara (sarilumab) Injection

In the third quarter of 2017, global net sales of Kevzara were $3 million. Product sales for Kevzara are recorded by Sanofi, and the Company shares in any profits or losses from the commercialization of Kevzara.
In September 2017, the Pharmaceuticals and Medical Devices Agency (PMDA) in Japan approved Kevzara for the treatment of adult patients with rheumatoid arthritis who have had an inadequate response to conventional treatments.
Pipeline Progress

Regeneron has sixteen product candidates in clinical development, which consist of EYLEA and fully human monoclonal antibodies generated using the Company’s VelocImmune technology, including six in collaboration with Sanofi. In addition to EYLEA, Dupixent, Praluent, and Kevzara discussed above, updates from the clinical pipeline include:

Cemiplimab (REGN2810), an antibody to programmed cell death protein 1 (PD-1), is being studied in patients with cancer.

In the third quarter of 2017, the FDA granted Breakthrough Therapy designation for the treatment of adults with metastatic cutaneous squamous cell carcinoma (CSCC) and adults with locally advanced and unresectable CSCC.
A pivotal Phase 2 study in metastatic or locally advanced and unresectable CSCC is ongoing.
A Phase 3 study in cervical cancer was initiated in the third quarter of 2017.
Fasinumab is an antibody targeting Nerve Growth Factor (NGF). A Phase 3 efficacy study of fasinumab compared to placebo or naproxen in patients with pain due to osteoarthritis of the knee or hip was initiated in the third quarter of 2017.

Suptavumab is an antibody to the Respiratory Syncytial Virus-F (RSV-F). In August 2017, the Company reported that a Phase 3 study evaluating suptavumab did not meet its primary endpoint of preventing medically-attended RSV infections in infants. Further clinical development of suptavumab has been discontinued.

Select Upcoming 2017 Milestones

Programs

Milestones
EYLEA
•
File sBLA with FDA for every 12-week dosing interval in
neovascular age-related macular degeneration (wet AMD)
Dupixent
•
Submit sBLA for asthma in adult/adolescent patients
•
Initiate Phase 3 studies in younger pediatric patients in
atopic dermatitis
Praluent
•
Complete ODYSSEY OUTCOMES study (with data
expected in early 2018)

•
File sBLA with FDA for use with apheresis
Cemiplimab (PD-1 Antibody)
•
Report interim data from pivotal Phase 2 CSCC study
Fasinumab (NGF Antibody)
•
Initiate Phase 3 study in patients with both chronic low back
pain and osteoarthritis
Nesvacumab/aflibercept
(Ang2 Antibody co-formulated
with aflibercept)
•
Report top-line data from Phase 2 studies in DME (RUBY)
and wet AMD (ONYX)
REGN2477 (Activin A
Antibody)
•
Initiate Phase 2 study in patients with Fibrodysplasia
Ossificans Progressiva (FOP)
Third Quarter 2017 Financial Results

Product Revenues: Net product sales were $957 million in the third quarter of 2017, compared to $857 million in the third quarter of 2016. EYLEA net product sales in the United States were $953 million in the third quarter of 2017, compared to $854 million in the third quarter of 2016.

Total Revenues: Total revenues, which include product revenues described above, increased by 23% to $1.501 billion in the third quarter of 2017, compared to $1.220 billion in the third quarter of 2016. Total revenues include Sanofi and Bayer collaboration revenues of $482 million in the third quarter of 2017, compared to $336 million in the third quarter of 2016. Sanofi collaboration revenue in the third quarter of 2017 included higher reimbursements by Sanofi in connection with validating the Company’s commercial manufacturing facilities and the recognition of a higher amount of previously deferred revenue from up-front and other payments in connection with the Company’s Antibody Discovery Agreement which will end on December 31, 2017 without any extension.

Refer to Table 4 for a summary of collaboration and other revenue.

Research and Development (R&D) Expenses: GAAP R&D expenses were $530 million in the third quarter of 2017, compared to $543 million in the third quarter of 2016. The lower R&D expenses in the third quarter of 2017 were principally due to a $25 million up-front payment made in connection with the license and collaboration agreement with Adicet Bio in the third quarter of 2016 and a decrease in clinical manufacturing activities, partly offset by an increase in cemiplimab clinical trial costs. In addition, in the third quarter of 2017, R&D-related non-cash share-based compensation expense was $70 million, compared to $81 million in the third quarter of 2016.

Selling, General, and Administrative (SG&A) Expenses: GAAP SG&A expenses were $307 million in the third quarter of 2017, compared to $270 million in the third quarter of 2016. The higher selling, general, and administrative expenses were primarily due to the launches of Dupixent and Kevzara as well as an increase in commercialization-related expenses associated with EYLEA. In the third quarter of 2017, SG&A-related non-cash share-based compensation expense was $48 million, compared to $49 million in the third quarter of 2016.

Cost of Collaboration and Contract Manufacturing (COCM): GAAP COCM was $58 million in the third quarter of 2017, compared to $14 million in the third quarter of 2016. The higher COCM costs were primarily due to validation activities at the Company’s Limerick commercial manufacturing facility related to products that are in collaboration with Sanofi.

Income Tax Expense: In the third quarter of 2017, GAAP income tax expense was $177 million and the effective tax rate was 31.3%, compared to $101 million and 27.6% in the third quarter of 2016. The effective tax rate for the third quarter of 2017 was positively impacted, compared to the U.S. federal statutory rate, by the tax benefit associated with stock-based compensation, the domestic manufacturing deduction, and the federal tax credit for research activities, partly offset by the negative impact of losses incurred in foreign jurisdictions with rates lower than the federal statutory rate and the non-tax deductible Branded Prescription Drug Fee.

GAAP and Non-GAAP Net Income(2): The Company reported GAAP net income of $388 million, or $3.64 per basic share and $3.32 per diluted share, in the third quarter of 2017, compared to GAAP net income of $265 million, or $2.53 per basic share and $2.27 per diluted share, in the third quarter of 2016.

The Company reported non-GAAP net income of $470 million, or $4.41 per basic share and $3.99 per diluted share, in the third quarter of 2017, compared to non-GAAP net income of $365 million, or $3.48 per basic share and $3.13 per diluted share, in the third quarter of 2016.

A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.