Regeneron Reports Second Quarter 2013 Financial and Operating Results

Regeneron Reports Second Quarter 2013 Financial and Operating Results

-- Second quarter EYLEA® (aflibercept) Injection global net sales of $426 million, including $330 million in the U.S. and $96 million in rest of world
-- Estimated full year 2013 EYLEA U.S. net sales forecast raised to $1.3 billion - $1.35 billion
-- Second quarter non-GAAP net income of $198 million or $1.73 per diluted share

TARRYTOWN, N.Y., Aug. 6, 2013 /PRNewswire/ -- Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) today announced financial and operating results for the second quarter of 2013 and provided an update on development programs. 

The Company reported total revenues of $458 million in the second quarter and $897 million in the first half of 2013, compared to $304 million in the second quarter and $536 million in the first half of 2012.  EYLEA U.S. net product sales grew 70% to $330 million in the second quarter of 2013 from $194 million in the second quarter of 2012.  First half of 2013 EYLEA U.S. net product sales grew 103% to $644 million from $318 million in the first half of 2012. 

The Company reported non-GAAP net income of $198 million, or $1.73 per diluted share, in the second quarter and $398 million, or $3.50 per diluted share, in the first half of 2013, compared to $102 million, or $0.90 per diluted share, in the second quarter and $142 million, or $1.28 per diluted share, in the first half of 2012.  Non-GAAP net income excludes non-cash share-based compensation expense, non-cash interest expense related to the Company's convertible senior notes, and non-cash income taxes.  The Company reported GAAP net income of $87 million, or $0.79 per diluted share, in the second quarter and $186 million, or $1.69 per diluted share, in the first half of 2013, compared to $77 million, or $0.70 per diluted share, in the second quarter and $88 million, or $0.81 per diluted share, in the first half of 2012.  The Company's revenues and net income in both the second quarter and first half of 2013 were reduced by two $10 million up-front payments made to Sanofi to acquire full rights to antibodies to PDGF and antibodies to Ang2 in ophthalmology, as described below.

"We are pleased with the continued progress of EYLEA both in terms of commercialization and development in additional indications," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron.  "Today, we reported positive Phase 3 data for EYLEA from the VIVID-DME and VISTA-DME trials in diabetic macular edema (DME).  Based upon discussions with the U.S. Food & Drug Administration, we now plan to submit a regulatory application for approval for EYLEA in the DME indication in the U.S. later this year, approximately one year ahead of our previous plan.  Additional Phase 3 trials for EYLEA, alirocumab and sarilumab continue to advance and we expect to report data from the VIBRANT study with EYLEA in macular edema following branch retinal vein occlusion and the ODYSSEY MONO study with alirocumab for hypercholesterolemia later this year; the ODYSSEY MONO trial will be the first Phase 3 data from this class.  We also moved two new antibodies into clinical development in this quarter."

Second Quarter (and Third Quarter To-Date) 2013 Business Highlights

EYLEA® (aflibercept) Injection for Intravitreal Injection

  • EYLEA is currently approved in the United States for the treatment of neovascular age-related macular degeneration (wet AMD) and macular edema following central retinal vein occlusion (CRVO).  In the second quarter of 2013, net sales were $330 million, compared to $194 million in the second quarter of 2012.
  • The Company and Bayer HealthCare collaborate on the global development and commercialization of EYLEA outside the United States, and share profits and losses from commercialization of EYLEA outside the United States except for Japan, where the Company receives a royalty on sales.  Regeneron maintains exclusive rights to EYLEA in the United States and is entitled to all profits from any such sales.
  • Bayer HealthCare commenced sales of EYLEA for the treatment of wet AMD in the fourth quarter of 2012 following receipt of regulatory approvals in the European Union, Japan, Australia, and other countries.  In the second quarter of 2013, Bayer HealthCare recorded net sales of EYLEA outside of the United States of $96 million, compared to $65 million in the first quarter of 2013.  Regeneron's share of profits (including royalties on sales in Japan) for EYLEA was $34 million in the second quarter of 2013, and after repaying $15 million in development expenses, the Company recognized $19 million in net profit from EYLEA sales outside the United States in the quarter.
  • Launches in additional countries are anticipated to continue throughout 2013 as regulatory and pricing approvals for EYLEA for the treatment of wet AMD are achieved. In May 2013, the United Kingdom's National Institute for Health and Care Excellence (NICE) issued a positive recommendation for EYLEA for the treatment of wet AMD.
  • Applications for marketing authorization for EYLEA for the treatment of macular edema following CRVO are also pending in Europe, Japan, and other countries.  In July 2013, the European Committee for Medicinal Products for Human Use (CHMP) recommended approval of EYLEA to the European Medicines Agency (EMA) for the treatment of macular edema secondary to CRVO and final approval is anticipated by the end of the year.
  • In June 2013, the Company and Bayer HealthCare announced positive top-line results for EYLEA from the Phase 3 MYRROR study in myopic choroidal neovascularization (mCNV).  Data from this study will be presented at an upcoming medical conference. The first application for regulatory approval is expected to be submitted for this indication in Asia by the end of 2013.
  • Earlier today, the Company and Bayer HealthCare reported positive, top line, one-year results from the Phase 3 VIVID-DME and VISTA-DME trials in DME.  Data from these studies will be presented at upcoming medical conferences.  Applications for regulatory approvals in the United States and Europe are expected to be submitted for this indication by the end of 2013; the U.S. regulatory submission is approximately one year earlier than previously planned. 

ZALTRAP® (ziv-aflibercept) Injection for Intravenous Infusion

  • The Company and Sanofi collaborate on the global development and commercialization of ZALTRAP, and share profits and losses from commercialization of ZALTRAP except for Japan, where the Company will receive a royalty on sales. 
  • ZALTRAP is currently approved in over 30 countries, including the United States and European Union.  Marketing authorization applications for ZALTRAP are currently under review by additional regulatory agencies worldwide.
  • In the second quarter of 2013, Sanofi recorded worldwide net sales of ZALTRAP of $19 million, compared to $14 million in the first quarter of 2013. 

Monoclonal Antibodies

  • Regeneron has twelve fully human monoclonal antibodies based on the Company's VelocImmune® technology in clinical development, including seven in collaboration with Sanofi.
  • ODYSSEY, a large, global Phase 3 program with alirocumab (REGN727), an antibody targeting PCSK9 to reduce LDL cholesterol, was initiated in June 2012 and is currently enrolling patients.  The ODYSSEY program includes eleven clinical trials evaluating the effect of alirocumab dosed every two weeks.  In addition, a trial of alirocumab dosed every four weeks (ODYSSEY CHOICE) will commence by the end of 2013.  The Company expects to report initial results from the Phase 3 ODYSSEY MONO trial by the end of 2013.  Alirocumab is being developed in collaboration with Sanofi.
  • Data from a Phase 2a trial of dupilumab (REGN668) in allergic asthma were presented at the American Thoracic Society meeting in May 2013.  These data were also published in the New England Journal of Medicine in June 2013.  In the second quarter of 2013, Phase 2b trials of dupilumab in allergic asthma and atopic dermatitis were initiated and are currently enrolling patients.  Dupilumab is being developed in collaboration with Sanofi.
  • The Phase 3 program with sarilumab (REGN88) in rheumatoid arthritis includes multiple trials.  SARIL-RA-MOBILITY has completed enrollment and data are expected in early 2014.   SARIL-RA-TARGET continues to enroll patients.  SARIL-RA-COMPARE and SARIL-RA-ASCERTAIN were initiated during the second quarter of 2013.  Additionally, a Phase 2 study, SARIL-NIU-SATURN, in non-infectious uveitis will commence in the third quarter of 2013.  Sarilumab is being developed in collaboration with Sanofi.
  • Two novel antibodies against undisclosed targets, REGN1193 and REGN2009, entered clinical development.  REGN2009 is being developed in collaboration with Sanofi.  Development of REGN846, which completed a Phase 1 study against an undisclosed target, has been discontinued.
  • In May 2013, the Company made two $10 million up-front payments to Sanofi in connection with the acquisition of full rights to antibodies targeting the PDGF (platelet derived growth factor) family of receptors and ligands in ophthalmology and all other indications and to antibodies targeting the Ang2 receptor and ligand in ophthalmology.  These antibodies were invested at Regeneron and previously included in the antibody collaboration with Sanofi.

Second Quarter 2013 Financial Results

Total Revenues: Total revenues were $458 million in the second quarter of 2013, compared to $304 million in the second quarter of 2012.  Total revenues include collaboration revenues of $117 million in the second quarter of 2013, compared to $98 million in the second quarter of 2012.  Collaboration revenues in the second quarter of 2013 were reduced by two $10 million up-front payments made to Sanofi to acquire full rights to antibodies to PDGF and antibodies to Ang2 in opthalmology.

Product Revenues: Net product sales were $334 million in the second quarter of 2013, compared to $200 million in the second quarter of 2012.  EYLEA net product sales were $330 million in the second quarter of 2013, compared to $194 million in the second quarter of 2012.  ARCALYST net product sales were $4 million in the second quarter of 2013, compared to $6 million in the second quarter of 2012. 

Research and Development (R&D) Expenses: GAAP R&D expenses were $187 million in the second quarter of 2013, compared to $147 million in the second quarter of 2012.  The increase was principally due to increased R&D activities, primarily related to the Company's antibody collaboration with Sanofi, higher R&D headcount, and higher non-cash share-based compensation expense.  In the second quarter of 2013, R&D related non-cash share-based compensation expense was $28 million, compared to $11 million in the second quarter of 2012.

Selling, General, and Administrative (SG&A) Expenses: GAAP SG&A expenses were $72 million in the second quarter of 2013, compared to $48 million in the second quarter of 2012.  The increase was primarily due to higher expenses in connection with commercialization of EYLEA and higher non-cash share-based compensation expense.  In the second quarter of 2013, SG&A related non-cash share-based compensation expense was $16 million, compared to $8 million in the second quarter of 2012.   

Cost of Goods Sold (COGS): GAAP COGS was $27 million in the second quarter of 2013, compared to $22 million in the second quarter of 2012.  The increase was due to higher EYLEA sales in 2013. 

Cost of Collaboration Manufacturing: GAAP cost of collaboration manufacturing, which was $12 million in the second quarter of 2013, primarily consisted of third party royalties, as well as costs in connection with producing commercial supplies of EYLEA for Bayer HealthCare and ZALTRAP for Sanofi.

Interest Expense: GAAP interest expense was $11 million in both the second quarter of 2013 and 2012, which included $7 million related to the Company's convertible senior notes, which were issued in October 2011.  Non-cash interest expense related to the convertible senior notes was $6 million in the second quarter of 2013 and $5 million in the second quarter of 2012.

Income Tax Expense: GAAP income tax expense was $60 million in the second quarter of 2013.  The effective tax rate was 40.8% for the quarter.

In the second quarter of 2012, the Company did not recognize any income tax provision because it continued to recognize a full valuation allowance against its net operating loss carry-forward and other deferred tax assets.  In the fourth quarter of 2012, the Company recorded an income tax benefit attributable to the release of substantially all of the valuation allowance against the Company's deferred tax assets.   Starting in 2013, the Company has recorded income taxes on GAAP income using an estimated effective tax rate.  Non-GAAP net income excludes non-cash income tax expense.  The Company does not currently pay, or expect to pay in the near future, significant cash income taxes. 

Non-GAAP and GAAP Net Income: The Company reported non-GAAP net income of $198 million, or $2.02 per basic share and $1.73 per diluted share, in the second quarter of 2013, compared to non-GAAP net income of $102 million, or $1.07 per basic share and $0.90 per diluted share, in the second quarter of 2012.  Non-GAAP net income excludes non-cash share-based compensation expense, non-cash interest expense related to the convertible senior notes, and non-cash income tax expense. 

The Company reported GAAP net income of $87 million, or $0.89 per basic share and $0.79 per diluted share, in the second quarter of 2013, compared to GAAP net income of $77 million, or $0.81 per basic share and $0.70 per diluted share, in the second quarter of 2012. 

Cash Position: At June 30, 2013, cash and marketable securities totaled $711 million, compared to $588 million (including $8 million of restricted cash and marketable securities) at December 31, 2012.  In addition, accounts receivable related to sales of EYLEA totaled $766 million at June 30, 2013, compared to $592 million at December 31, 2012.

Use of Non-GAAP Financial Measures: The Company believes that the presentation of non-GAAP measures is useful to investors because it excludes (i) non-cash share-based compensation expense which fluctuates 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, (ii) non-cash interest expense related to the Company's convertible senior notes since this is not deemed useful in evaluating the Company's operating performance, and (iii) non-cash income tax expense, since the Company does not currently pay, or expect to pay in the near future, significant cash income taxes due primarily to the utilization of net operating loss and tax credit carry-forwards; therefore, non-cash income tax expense is not deemed useful in evaluating the Company's operating performance.  Furthermore, 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.  However, there are limitations in the use of these 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.  The non-GAAP financial measures 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 GAAP to non-GAAP results is included in Table 3 of this press release.

Conference Call Information

Regeneron will host a conference call and simultaneous webcast to discuss its second quarter 2013 financial and operating results on Tuesday, August 6, 2013, at 8:30 AM.  To access this call, dial (888) 660-6127 (U.S.) or (973) 890-8355 (International).  A link to the webcast may be accessed from the 'Events and Presentations' 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. 

About Regeneron Pharmaceuticals

Regeneron is a leading science-based biopharmaceutical company based in Tarrytown, New York that discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions.  Regeneron markets medicines for eye diseases, colorectal cancer, and a rare inflammatory condition and has product candidates in development in other areas of high unmet medical need, including hypercholesterolemia, oncology, rheumatoid arthritis, allergic asthma, and atopic dermatitis.  For additional information about the company, please visit www.regeneron.com.

Regeneron Forward-Looking Statement

This news release includes forward-looking statements that involve risks and uncertainties relating to future events and the future financial performance of Regeneron, and actual events or results may differ materially from these forward-looking statements.  These statements concern, and these risks and uncertainties include, among others, the nature, timing, and possible success and therapeutic applications of Regeneron's products, product candidates, and research and clinical programs now underway or planned, including without limitation EYLEA® (aflibercept); unforeseen safety issues resulting from the administration of products and product candidates in patients; the likelihood and timing of possible regulatory approval and commercial launch of Regeneron's late-stage product candidates; determinations by regulatory and administrative governmental authorities which may delay or restrict Regeneron's ability to continue to develop or commercialize Regeneron's products and product candidates; competing drugs and product candidates that may be superior to Regeneron's products and product candidates; uncertainty of market acceptance of Regeneron's products and product candidates; the ability of Regeneron to manufacture and manage supply chains for multiple products and product candidates; coverage and reimbursement determinations by third-party payers, including Medicare and Medicaid; unanticipated expenses; the costs of developing, producing, and selling products; the ability of Regeneron to meet any of its sales or other financial projections or guidance and changes to the assumptions underlying those projections or guidance; the potential for any license or collaboration agreement, including Regeneron's agreements with Sanofi and Bayer HealthCare, to be canceled or terminated without any further product success; and risks associated with third party intellectual property and pending or future litigation relating thereto.  A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2012.  Regeneron does not undertake any obligation to update publicly any forward-looking statement, including without limitation any financial projection or guidance, whether as a result of new information, future events, or otherwise, unless required by law.

This news release and/or the financial results attached to this news release include amounts that are considered "non-GAAP financial measures" under SEC rules.  As required, Regeneron has provided reconciliations of these measures.

 

Contact Information:

   
     

Manisha Narasimhan, Ph.D.

 

Peter Dworkin

Investor Relations

 

Corporate Communications

914-847-5126

 

914-847-7640

[email protected]

 

[email protected]

 

 

 

TABLE 1

 

REGENERON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)

 
   

June 30,

 

December 31,

   

2013

 

2012

         

Assets:

       

Cash, restricted cash, and marketable securities

 

$

710,834

   

$

587,511

 

Accounts receivable - trade, net

 

767,865

   

593,207

 

Accounts receivable from Sanofi

 

108,151

   

99,913

 

Deferred tax assets

 

247,634

   

340,156

 

Property, plant, and equipment, net

 

419,651

   

379,940

 

Other assets

 

124,124

   

79,763

 

  Total assets

 

$

2,378,259

   

$

2,080,490

 
         

Liabilities and stockholders' equity:

       

Accounts payable, accrued expenses, and other liabilities

 

$

164,026

   

$

118,604

 

Deferred revenue

 

247,594

   

259,173

 

Facility lease obligations

 

165,186

   

160,810

 

Convertible senior notes

 

308,116

   

296,518

 

Stockholders' equity

 

1,493,337

   

1,245,385

 

  Total liabilities and stockholders' equity

 

$

2,378,259

   

$

2,080,490

 

 

 

 

TABLE 2

 

REGENERON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)

             
   

Three months ended
June 30,

 

Six months ended
June 30,

   

2013

 

2012

 

2013

 

2012

                 

Revenue:

               

Net product sales

 

$     333,893

 

$     199,519

 

$     652,633

 

$     327,450

Sanofi collaboration revenue

 

85,529

 

88,988

 

184,802

 

173,993

Bayer HealthCare collaboration revenue

 

31,104

 

9,124

 

46,011

 

21,607

Technology licensing

 

5,893

 

5,893

 

11,786

 

11,786

Other revenue

 

1,223

 

875

 

2,074

 

1,352

   

457,642

 

304,399

 

897,306

 

536,188

Expenses:

               

Research and development

 

187,463

 

147,373

 

367,762

 

286,235

Selling, general, and administrative

 

72,463

 

47,705

 

149,723

 

106,133

Cost of goods sold

 

27,283

 

21,843

 

55,304

 

34,141

Cost of collaboration manufacturing

 

12,330

     

13,364

   
   

299,539

 

216,921

 

586,153

 

426,509

                 

Income from operations

 

158,103

 

87,478

 

311,153

 

109,679

                 

Other income (expenses):

               

Investment income

 

954

 

501

 

1,410

 

1,111

Interest expense

 

(11,365)

 

(11,236)

 

(23,040)

 

(22,396)

   

(10,411)

 

(10,735)

 

(21,630)

 

(21,285)

                 

Income before income taxes

 

147,692

 

76,743

 

289,523

 

88,394

                 

Income tax expense

 

(60,316)

     

(103,273)

   
                 

Net income

 

$       87,376

 

$       76,743

 

$     186,250

 

$       88,394

                 

Net income per share - basic

 

$           0.89

 

$           0.81

 

$           1.91

 

$           0.94

Net income per share - diluted

 

$           0.79

 

$           0.70

 

$           1.69

 

$           0.81

                 

Weighted average shares outstanding - basic

 

97,700

 

94,589

 

97,289

 

94,017

Weighted average shares outstanding - diluted

 

111,060

 

110,167

 

110,305

 

108,998

 

 

 

TABLE 3

REGENERON PHARMACEUTICALS, INC.

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME (Unaudited)

(In thousands, except per share data)

             
   

Three months ended
June 30,

 

Six months ended
June 30,

   

2013

 

2012

 

2013

 

2012

                 

GAAP net income

 

$    87,376

 

$   76,743

 

$   186,250

 

$    88,394

Adjustments:

               

R&D: Non-cash share-based compensation expense

 

27,722

 

11,442

 

54,484

 

21,998

SG&A: Non-cash share-based compensation expenses

 

16,344

 

7,790

 

42,130

 

20,368

COGS: Non-cash share-based compensation expense

 

376

 

391

 

859

 

502

Interest expense: Non-cash interest related to convertible

senior notes

 

5,535

 

5,316

 

11,316

 

10,534

Income taxes: Non-cash income tax expense

 

60,316

     

103,273

   

  Non-GAAP net income

 

$   197,669

 

$ 101,682

 

$   398,312

 

$  141,796

                 

Non-GAAP net income per share - basic

 

$         2.02

 

$      1.07

 

$         4.09

 

$        1.51

Non-GAAP net income per share - diluted (1)

 

$         1.73

 

$      0.90

 

$         3.50

 

$        1.28

                 

Shares used in calculating:

               

Non-GAAP net income per share - basic

 

97,700

 

94,589

 

97,289

 

94,017

Non-GAAP net income per share - diluted (2)

 

115,261

 

114,928

 

114,711

 

113,760

 

(1)

For diluted non-GAAP per share calculations, excludes $1.8 million of interest expense for both the three month periods

ended June 30, 2013 and 2012, and $3.7 million of interest expense for both the six month periods ended June 30, 2013

and 2012, related to the contractual coupon interest rate on the Company's 1.875% convertible senior notes, since these

securities were dilutive

   

(2)

Weighted average shares outstanding includes the dilutive effect, if any, of employee stock options, restricted stock

awards, convertible senior notes, and warrants

SOURCE Regeneron Pharmaceuticals, Inc.

 

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