Regeneron Pharmaceuticals Inc (NASDAQ:REGN) announced financial results for the first quarter of 2016 and provided a business update.
“The year is off to a very productive start at Regeneron. This quarter, we saw continued strong sales growth with EYLEA, made additional launch progress with Praluent, prepared for the potential launch of sarilumab, and reported important new data across our pipeline,” said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron. “Our innovative new therapy dupilumab showed positive results across two Phase 3 trials in moderate-to-severe atopic dermatitis, a debilitating disease with very limited treatment options, and we look forward to submitting a Biologics License Application to the U.S. FDA in the third quarter.”
Marketed Product Update
EYLEA® (aflibercept) Injection for Intravitreal Injection
- In the first quarter of 2016, net sales of EYLEA in the United States increased 44% to $781 million from $541 million in the first quarter of 2015. Overall distributor inventory levels remained within the Company’s one- to two-week targeted range.
- Bayer commercializes EYLEA outside the United States. In the first quarter of 2016, net sales of EYLEA outside of the United States(1) were $419 million, compared to $292 million in the first quarter of 2015. In the first quarter of 2016, Regeneron recognized $146 million from its share of net profit from EYLEA sales outside the United States, compared to $89 million in the first quarter of 2015.
- A Phase 3 study of EYLEA for the treatment of non-proliferative diabetic retinopathy in patients without diabetic macular edema (DME) was initiated in the first quarter of 2016.
Praluent® (alirocumab) Injection for the Treatment of High Low-Density Lipoprotein (LDL) Cholesterol
- In the first quarter of 2016, net sales of Praluent were $13 million. Product sales for Praluent are recorded by Sanofi, and the Company shares in any profits or losses from the commercialization of Praluent. Praluent was launched in the United States in the third quarter of 2015 and in certain countries in the European Union commencing in the fourth quarter of 2015.
- In March 2016, the Company and Sanofi reported data from the Phase 3 ODYSSEY ESCAPE study in patients with heterozygous familial hypercholesterolemia (HeFH) who were undergoing LDL apheresis therapy. The trial achieved its primary endpoint, demonstrating that patients who added Praluent to their existing treatment regimen significantly reduced the frequency of their apheresis therapy by 75%, compared to placebo.
- In the first quarter of 2016, the Data Monitoring Committee (DMC) of the ODYSSEY OUTCOMES study for Praluent completed the first interim analysis. In accordance with the protocol, the DMC performed a futility assessment. The DMC recommended the study continue with no changes. Regeneron remains blinded to the actual results of this analysis. The ongoing ODYSSEY OUTCOMES trial is assessing the potential of Praluent to demonstrate cardiovascular benefit.
Regeneron has thirteen product candidates in clinical development. These consist of EYLEA and twelve fully human monoclonal antibodies generated using the Company’s VelocImmune® technology, including four in collaboration with Sanofi. In addition to EYLEA and 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.
- In March 2016, the Company and Sanofi reported results from the 24-week Phase 3 SARIL-RA-MONARCH study in adult patients with active rheumatoid arthritis who were inadequate responders to, intolerant of, or inappropriate candidates for methotrexate (MTX) therapy. The study met its primary endpoint, demonstrating that sarilumab monotherapy was superior to adalimumab monotherapy (marketed by AbbVie Inc. as HUMIRA®).
- In December 2015, the U.S. Food and Drug Administration (FDA) accepted for review a Biologics License Application (BLA) for sarilumab, with a target action date of October 30, 2016.
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.
- In April 2016, the Company and Sanofi reported that the Phase 3 LIBERTY AD SOLO 1 and SOLO 2 trials evaluating dupilumab in adult patients with inadequately controlled moderate-to-severe atopic dermatitis met their primary endpoints.
- A Phase 2 study of dupilumab in pediatric patients (6-17 years of age) with moderate-to-severe atopic dermatitis is fully enrolled and ongoing.
- A Phase 3 pivotal study of dupilumab in patients with uncontrolled persistent asthma continues to enroll patients.
- A Phase 2 study of dupilumab in eosinophilic esophagitis is ongoing.
Fasinumab, the Company’s antibody targeting Nerve Growth Factor (NGF), is currently being studied in patients with pain due to osteoarthritis and lower back pain.
- The Company recently reported results from a Phase 2/3 study evaluating fasinumab in patients with moderate-to-severe osteoarthritis pain of the hip or knee who have a history of inadequate pain relief or intolerance to current analgesic therapies. The study met its primary endpoint at 16 weeks.
- In the first quarter of 2016, the Company initiated a Phase 3 long-term safety and efficacy study of fasinumab in patients with pain due to osteoarthritis of the knee or hip, and this trial is currently enrolling patients.
- In the first quarter of 2016, the Company also initiated a Phase 2b/3 study of fasinumab in chronic lower back pain.
REGN2810, an antibody to programmed cell death protein 1 (PD-1), entered a potentially pivotal clinical study for the treatment of advanced cutaneous squamous cell carcinoma in the second quarter of 2016.
Nesvacumab/aflibercept, a combination product comprised of an antibody to angiopoietin-2 (Ang2) co-formulated with aflibercept for intravitreal injection for use in ophthalmology, entered Phase 2 clinical development for the treatment of neovascular age-related macular degeneration (wet AMD) and DME in the first quarter of 2016.
Evinacumab, an antibody to Angptl-3, was granted orphan-drug designation by the FDA in the first quarter of 2016. Clinical studies are ongoing for the treatment of homozygous familial hypercholesterolemia and severe forms of hyperlipidemia.
Select Upcoming 2016 Milestones
Report results from Phase 2 study
DMC interim analysis of ODYSSEY OUTCOMES trial
Ongoing launch in additional countries
Sarilumab (IL-6R Antibody)
FDA target action date of October 30, 2016
File for regulatory approvals outside the United States
Dupilumab (IL-4R Antibody)
Report primary endpoint results from Phase 3
Complete rolling BLA submission for atopic dermatitis in
Initiate Phase 3 study in pediatric patients in atopic
REGN2810 (PD-1 Antibody)
Report data from Phase 1 study in patients with cancer
Human Genetics Initiative
- In the first quarter of 2016, the New England Journal of Medicine published a Regeneron Genetics Center paper showing that inactivating mutations of the angiopoeitin-like 4 (ANGPTL4) gene are associated with a significantly reduced risk of coronary artery disease in humans. ANGPTL4 and ANGPTL3 are thought to be related inhibitors of lipoprotein lipase (LPL).
Business Development Update
- In March 2016, the Company and Bayer entered into a collaboration agreement to jointly develop a combination therapy of the Ang2 antibody nesvacumab and aflibercept for the treatment of serious eye diseases.
- In April 2016, the Company and Intellia Therapeutics, Inc. entered into a license and collaboration agreement to advance CRISPR/Cas gene-editing technology for in vivo therapeutic development. In addition to the discovery, development and commercialization of new therapies, the companies will focus on technology development of the CRISPR/Cas platform.
First Quarter 2016 Financial Results
Product Revenues: Net product sales were $784 million in the first quarter of 2016, compared to $545 million in the first quarter of 2015. EYLEA net product sales in the United States were $781 million in the first quarter of 2016, compared to $541 million in the first quarter of 2015.
Total Revenues: Total revenues, which include product revenues described above, increased by 38% to $1.201 billion in the first quarter of 2016, compared to $870 million in the first quarter of 2015. Total revenues also include collaboration revenues of $399 million in the first quarter of 2016, compared to $297 million in the first quarter of 2015. Collaboration revenues in the first quarter of 2016 increased primarily due to higher reimbursement of the Company’s research and development expenses under its antibody collaboration with Sanofi, an increase in the Company’s net profit from commercialization of EYLEA outside the United States, and reimbursement of the Company’s research and development expenses and amortization of up-front payments received in connection with the Company’s July 2015 immuno-oncology collaboration with Sanofi.
Refer to Table 4 for a summary of collaboration revenue.
Research and Development (R&D) Expenses: GAAP R&D expenses were $470 million in the first quarter of 2016, compared to $343 million in the first quarter of 2015. The higher R&D expenses in the first quarter of 2016 were principally due to higher development costs primarily related to dupilumab and fasinumab, and higher headcount to support the Company’s increased R&D activities, partly offset by lower development costs primarily related to Praluent. In addition, in the first quarter of 2016, R&D-related non-cash share-based compensation expense was $78 million, compared to $60 million in the first quarter of 2015.
Selling, General, and Administrative (SG&A) Expenses: GAAP SG&A expenses were $290 million in the first quarter of 2016, compared to $159 millionin the first quarter of 2015. The increase was primarily due to higher headcount, and higher commercialization expenses related to EYLEA and Praluent. In addition, in the first quarter of 2016, SG&A-related non-cash share-based compensation expense was $60 million, compared to $42 million in the first quarter of 2015.
Cost of Goods Sold (COGS): GAAP COGS was $79 million in the first quarter of 2016, compared to $43 million in the first quarter of 2015. 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, as well as an increase in Limerick start-up costs.
Income Tax Expense: In the first quarter of 2016, GAAP income tax expense was $164 million and the effective tax rate was 49.8%, compared to $201 million and 72.5% in the first quarter of 2015. The effective tax rate for the first quarter of 2016 was negatively impacted, compared to the U.S. federal statutory rate, by losses incurred in foreign jurisdictions with rates lower than the federal statutory rate and the non-tax deductible Branded Prescription Drug Fee, partly offset by the federal tax credit for increased research activities and the domestic manufacturing deduction. The effective tax rate for the first quarter of 2015 was negatively impacted primarily by losses incurred in foreign jurisdictions with rates lower than the federal statutory rate, the non-tax deductible Branded Prescription Drug Fee, and expiration, at the end of 2014, of the federal tax credit for increased research activities.
The non-GAAP income tax adjustment in the first quarter of 2016 is primarily related to the cash taxes the Company expects to be paid or payable in 2016 in connection with the immuno-oncology up-front payment that the Company received in 2015, partly offset by the excess tax benefit associated with stock option exercises. The non-GAAP income tax adjustment in the first quarter of 2015 was primarily related to the Company’s tax credit carry-forwards available for tax purposes and excess tax benefits in connection with stock option exercises.
Non-GAAP and GAAP Net Income: The Company reported non-GAAP net income of $293 million, or $2.81 per basic share and $2.57 per diluted share, in the first quarter of 2016, compared to non-GAAP net income of $336 million, or $3.28 per basic share and $2.88 per diluted share, in the first quarter of 2015.
The Company reported GAAP net income of $166 million, or $1.59 per basic share and $1.45 per diluted share, in the first quarter of 2016, compared to GAAP net income of $76 million, or $0.74 per basic share and $0.66 per diluted share, in the first quarter of 2015.
A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.
2016 Financial Guidance(3)
The Company’s updated full year 2016 financial guidance consists of the following components:
EYLEA U.S. net product sales
20% – 25% growth over 2015
Sanofi reimbursement of Regeneron
$320 million – $370 million
Non-GAAP unreimbursed R&D(2)
$875 million – $950 million (reaffirmed)
$925 million – $1.0 billion (reaffirmed)
Cash tax as a % of non-GAAP pre-tax income(2)
35% – 45%* (reaffirmed)
$550 million – $625 million
Shares of Regeneron Pharmaceuticals are up nearly 4% to $376 in pre-market trading. REGN has a 1-year high of $605.93 and a 1-year low of $348.96. The stock’s 50-day moving average is $390.48 and its 200-day moving average is $463.50.
On the ratings front, Regeneron has been the subject of a number of recent research reports. In a report issued on May 2, Canaccord Genuity analyst John Newman reiterated a Hold rating on REGN, with a price target of $450, which implies an upside of 24.8% from current levels. Separately, on the same day, Leerink Swann’s Geoff Porges reiterated a Buy rating on the stock .
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, John Newman and Geoff Porges have a total average return of -17.3% and -4.1% respectively. Newman has a success rate of 22.4% and is ranked #3821 out of 3827 analysts, while Porges has a success rate of 18.2% and is ranked #3133.
The street is mostly Neutral on REGN stock. Out of 17 analysts who cover the stock, 9 suggest a Hold rating , 7 suggest a Buy and one recommends to Sell the stock. The 12-month average price target assigned to the stock is $489.33, which represents a potential upside of 35.7% from where the stock is currently trading.
Regeneron Pharmaceuticals, Inc. operates as a biopharmaceutical company. It discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions. The company involves in marketing 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, asthma and atopic dermatitis.