OREANDA-NEWS. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) today announced financial results for the fourth quarter and full year 2015 and provided an update on development programs.

Financial Highlights
                 

($ in millions, except per share data)

  

Three Months Ended

December 31,

  

Year Ended

December 31,
   

2015

  

2014*

  

% Change

  

2015

  

2014*

  

% Change

EYLEA U.S. net product sales

  

$

746

    

$

518

    

44

%

  

$

2,676

    

$

1,736

    

54

%

Total revenues

  

$

1,098

    

$

802

    

37

%

  

$

4,104

    

$

2,820

    

46

%

Non-GAAP net income(2)

  

$

327

    

$

328

    

—

%

  

$

1,404

    

$

1,175

    

19

%

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

  

$

2.83

    

$

2.79

    

1

%

  

$

12.07

    

$

10.00

    

21

%

GAAP net income

  

$

155

    

$

90

    

72

%

  

$

636

    

$

338

    

88

%

GAAP net income per share - diluted

  

$

1.34

    

$

0.78

    

72

%

  

$

5.52

    

$

2.98

    

85

%
                         

* See note (4) below for an explanation of revisions made to certain amounts previously reported for the three months and year ended December 31, 2014.
 

"Regeneron had a successful 2015, with strong growth in EYLEA sales for retinal diseases, the approval of Praluent for hypercholesterolemia, and important advances across all stages of our pipeline," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron.  "In 2016, we look forward to driving increased physician education, patient access, and reimbursement for Praluent in the United States and to launching this important medicine in other countries around the world.  We also anticipate significant pipeline progress including the U.S.FDA action on the sarilumab application for rheumatoid arthritis, the Phase 3 results and potential U.S. regulatory submission for dupilumab in atopic dermatitis, and the continued progress of our development programs for retinal diseases, asthma, pain, infectious diseases, and cancer.  Realizing these important product and pipeline opportunities will require significant investments, which are essential to support our long-term growth and success."

Business Highlights

EYLEA® (aflibercept) Injection for Intravitreal Injection

  • In the fourth quarter of 2015, net sales of EYLEA in the United States increased 44% to $746 million from $518 million in the fourth quarter of 2014.  For the full year of 2015, net sales of EYLEA in the United States increased 54% to $2.676 billion from $1.736 billion for the full year 2014.  Overall distributor inventory levels remained within the Company's one- to two-week targeted range.
  • Bayer HealthCare commercializes EYLEA outside the United States.  In the fourth quarter of 2015, net sales of EYLEA outside of the United States(1) were $413 million, compared to $297 million in the fourth quarter of 2014.  In the fourth quarter of 2015, Regeneron recognized $140 million from its share of net profit from EYLEA sales outside the United States, compared to $88 million in the fourth quarter of 2014.  For the full year of 2015, net sales of EYLEA outside of the United States(1) were $1.413 billion, compared to $1.039 billion for the full year 2014.  For the full year of 2015, Regeneron recognized $467 million from its share of net profit from EYLEA sales outside the United States, compared to $301 million for the full year 2014.
  • In October 2015, the European Commission granted marketing authorization of EYLEA for the treatment of visual impairment due to myopic choroidal neovascularization.

Praluent® (alirocumab) Injection for the Treatment of High Low-Density Lipoprotein (LDL) Cholesterol

  • In the fourth quarter of 2015, net sales of Praluent were $7 million.  For the full year of 2015, net sales of Praluent were $11 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 in the fourth quarter of 2015.
  • The Phase 3 ODYSSEY OUTCOMES trial completed enrollment during the fourth quarter of 2015. 

Pipeline Progress

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 is the Company's antibody targeting IL-6R for rheumatoid arthritis.  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. Sarilumab is currently being studied in the global Phase 3 SARIL-RA program

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.

  • Multiple Phase 3 studies of dupilumab in atopic dermatitis are currently underway.  Phase 3 pivotal trials in atopic dermatitis are fully enrolled.
  • A Phase 3 pivotal study of dupilumab in patients with uncontrolled persistent asthma continues to enroll patients.

Fasinumab is an antibody targeting Nerve Growth Factor (NGF).  A sixteen-week Phase 2b/3 clinical trial for pain due to osteoarthritis has completed enrollment.  The FDA has confirmed that the Company may proceed with studies of longer than sixteen-week duration.

REGN2222, an antibody targeting the respiratory syncytial virus (RSV), is in Phase 3 clinical development.  In October 2015, the FDA granted Fast Track designation to REGN2222 for the prevention of serious lower respiratory tract disease caused by RSV.

Select Upcoming 2016 Milestones

Clinical Programs

  

Milestones

EYLEA

-

Initiate Phase 3 study for the treatment of diabetic retinopathy in patients without diabetic macular edema (DME)

REGN2176-3 (PDGFR-beta
Antibody co-formulated with
aflibercept)

-

Report results from Phase 2 study

Nesvacumab/aflibercept
(Ang2 Antibody co-formulated
with aflibercept)

-

Initiate Phase 2 study

Praluent

-

Independent Data Monitoring Committee (IDMC) interim analyses of ODYSSEY OUTCOMES trial

-

Ongoing launch in the United States as well as in additional territories outside the United States

Sarilumab (IL-6R Antibody)

-

Regulatory decision in the United States

-

File for regulatory approvals outside the United States

-

Report results from Phase 3 SARIL-RA-MONARCH trial evaluating sarilumab versus adalimumab in monotherapy

Dupilumab (IL-4R Antibody)

-

Report results from Phase 3 atopic dermatitis pivotal trials

-

Complete rolling BLA submission for atopic dermatitis in the United States

Fasinumab (NGF Antibody)

-

Report results from Phase 2b/3 study in osteoarthritis

-

Initiate longer duration (greater than 16 weeks) Phase 3 trial

Immuno-oncology (PD-1 Antibody
and bi-specific antibody against CD20 and CD3)

-

Report data from Phase 1 studies in patients with cancer
     

Fourth Quarter and Full Year 2015 Financial Results

Product Revenues: Net product sales were $750 million in the fourth quarter and $2.689 billion for the full year 2015, compared to $522 million in the fourth quarter and $1.751 billion for the full year 2014.  EYLEA net product sales in the United States were $746 million in the fourth quarter and $2.676 billion for the full year 2015, compared to $518 million in the fourth quarter and $1.736 billion for the full year 2014.

Total Revenues: Total revenues, which include product revenues described above, increased by 37% to $1.098 billion in the fourth quarter of 2015, compared to $802 million in the fourth quarter of 2014.  Total revenues also include collaboration revenues of $330 million in the fourth quarter of 2015, compared to $272 million in the fourth quarter of 2014.  Full year 2015 total revenues increased by 46% to $4.104 billion, compared to $2.820 billion for the full year 2014, and included collaboration revenues of $1.339 billion for the full year 2015, compared to $1.037 billion for the full year 2014.  Collaboration revenues in the fourth quarter and full year 2015 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, partly offset by the Company's share of higher collaboration losses primarily in connection with commercialization of Praluent.  Collaboration revenue for the full year 2015 and 2014 also included $15 million and $105 million, respectively, of sales milestone payments from Bayer HealthCare.

Refer to Table 4 for a summary of collaboration revenue.

Research and Development (R&D) Expenses: In 2015, GAAP R&D expenses were $461 million in the fourth quarter and $1.621 billion for the full year, compared to $352 million in the fourth quarter and $1.271 billion for full year 2014.  The higher 2015 R&D expenses in the fourth quarter and full year were principally due to higher development costs primarily related to dupilumab and higher headcount to support the Company's increased R&D activities.  In 2014, GAAP R&D expenses also included the Company's 50% share, or $34 million, of the cost of purchasing a FDA priority review voucher.  In addition, in 2015, R&D-related non-cash share-based compensation expense was $73 million for the fourth quarter and $256 million for the full year, compared to $51 million in the fourth quarter and $184 million for the full year 2014.

Selling, General, and Administrative (SG&A) Expenses: In 2015, GAAP SG&A expenses were $295 million in the fourth quarter and $839 million for the full year, compared to $175 million in the fourth quarter and $519 million for full year 2014.  The increases were primarily due to higher headcount and higher commercialization expenses related to EYLEA and Praluent.  These increases were partly offset by a 2014 incremental charge related to the Branded Prescription Drug Fee, based on final regulations issued by the Internal Revenue Service (IRS) in July 2014.  In 2015, SG&A-related non-cash share-based compensation expense was $82 million for the fourth quarter and $193 million for the full year, compared to $61 million in the fourth quarter and $135 million for the full year 2014.   

Cost of Goods Sold (COGS): In 2015, GAAP COGS was $71 million in the fourth quarter and $242 million for the full year, compared to $38 million in the fourth quarter and $129 million for the full year 2014.  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.

Cost of Collaboration and Contract Manufacturing (COCM): In 2015, GAAP COCM was $40 million in the fourth quarter and $151 million for the full year, compared to $22 million in the fourth quarter and $76 million for the full year 2014.  COCM includes costs the Company incurs in connection with producing commercial drug supplies for Sanofi and Bayer HealthCare.  COCM increased primarily due to royalties payable to Genentech in connection with sales of EYLEA outside the United States, as well as the recognition of costs associated with commercial supplies of EYLEA manufactured for Bayer HealthCare.

Other Income (Expense): In 2015 and 2014, GAAP other expense includes losses on extinguishment of debt related to conversions of a portion of the Company's 1.875% convertible senior notes.  In addition, GAAP other expense includes interest expense on the Company's convertible senior notes, which decreased due to conversions of a substantial portion of these notes in 2014 and 2015.

Income Tax Expense: In the fourth quarter of 2015, GAAP income tax expense was $72 million and the effective tax rate was 31.8%, compared to $100 million and 52.5% in the fourth quarter of 2014.  In 2015, GAAP income tax expense was $589 million and the effective tax rate was 48.1% for the full year, compared to $423 million and 55.6% for the full year 2014.  The effective tax rates for the full year of both 2015 and 2014 were 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, in 2015, a higher domestic manufacturing deduction. In the fourth quarter of 2015, the 2015 federal tax credit for increased research activities was enacted retroactive to the beginning of the year.

Non-GAAP and GAAP Net Income: The Company reported non-GAAP net income of $327 million, or $3.15 per basic share and $2.83 per diluted share, in the fourth quarter of 2015, compared to non-GAAP net income of $328 million, or $3.23 per basic share and $2.79 per diluted share, in the fourth quarter of 2014.  The Company reported non-GAAP net income of $1.404 billion, or $13.62 per basic share and $12.07 per diluted share, for the full year 2015, compared to non-GAAP net income of $1.175 billion, or $11.68 per basic share and $10.00 per diluted share, for the full year 2014. 

The Company reported GAAP net income of $155 million, or $1.49 per basic share and $1.34 per diluted share, in the fourth quarter of 2015, compared to GAAP net income of $90 million, or $0.89 per basic share and $0.78 per diluted share, in the fourth quarter of 2014.  The Company reported GAAP net income of $636 million, or $6.17 per basic share and $5.52 per diluted share, for the full year 2015, compared to GAAP net income of $338 million, or $3.36 per basic share and $2.98 per diluted share, for the full year 2014.

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 full year 2016 financial guidance consists of the following components:

EYLEA U.S. net product sales

Approximately 20% growth over 2015

Non-GAAP unreimbursed R&D(2)

$875 million - $950 million

Non-GAAP SG&A(2)

$925 million - $1,000 million

Cash tax as a % of non-GAAP pre-tax income(2)

35% - 45%*

Capital expenditures

$580 million - $680 million
 

* - Includes a non-recurring tax payment of approximately $222 million related to the immuno-oncology upfront payment from Sanofi that the Company received in 2015.

(1)

Regeneron records net product sales of EYLEA in the United States.  Outside the United States, EYLEA net product sales comprise sales by Bayer HealthCare in countries other than Japan and sales by Santen Pharmaceutical Co., Ltd. in Japan under a co-promotion agreement with an affiliate of Bayer HealthCare.  The Company recognizes its share of the profits (including a percentage on sales in Japan) from EYLEA sales outside the United States within "Bayer HealthCare collaboration revenue" in its Statements of Operations.
   

(2)

This press release uses non-GAAP net income, non-GAAP net income per share, non-GAAP unreimbursed R&D, non-GAAP SG&A, and cash tax as a percentage of non-GAAP pre-tax income, which are financial measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").  The Company believes that the presentation of these non-GAAP measures is useful to investors because they exclude, as applicable: (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) the incremental charge recorded in the third quarter of 2014 related to the issuance of the final IRS regulations that provide guidance on the annual fee imposed by the Patient Protection and Affordable Care Act (the final IRS regulations differed from the temporary regulations issued in 2011 which resulted in the recognition of a catch-up adjustment); (iii) 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; (iv) loss on extinguishment of debt, since this non-cash charge is based on factors that are not within the Company's control; and (v) income tax expense for 2014, which was principally a non-cash expense due primarily to utilization of net operating loss and tax credit carryforwards, and deductions related to employee stock option exercises.  In 2015, income tax expense adjustments consider the tax effect of reconciling items and an adjustment from GAAP tax expense to the amount of taxes that are paid or payable in cash in respect of the current period.  As there is a significant difference between the Company's effective tax rate and actual cash income taxes paid or payable, GAAP income tax expense is not deemed useful in evaluating the Company's operating performance.  Non-GAAP unreimbursed R&D represents non-GAAP R&D expenses reduced by R&D expense reimbursements from the Company's collaboration partners.  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 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.
   

(3)

The Company's 2016 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 originally reported for the three months and year ended December 31, 2014 and as of December 31, 2014 have been revised to reflect certain revisions, including a correction to the Company's accounting for certain stock option awards.  These revisions consisted entirely of non-cash adjustments and had no impact on the Company's previously reported non-GAAP financial measures, including non-GAAP net income and non-GAAP net income per share.  Refer to the Company's Form 10-K for the year ended December 31, 2015 (Notes 1 and 14 of the Notes to Consolidated Financial Statements) for further details.
 

 

About Regeneron Pharmaceuticals, Inc.

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 commercializes medicines for high LDL-cholesterol, eye diseases, and a rare inflammatory condition and has product candidates in development in other areas of high unmet medical need, including oncology, rheumatoid arthritis, asthma, atopic dermatitis, pain, and infectious diseases.