Analyst Conference Summary

Biotechnology

conference date: February 11, 2014 @ 5:30 AM Pacific Time
for quarter ending: December 31, 2013 (Q4, fourth quarter 2013)

at the time this is written, but may buy shares at any time.
Forward-looking statements

Overview: Another good quarter for revenue, and a great looking pipeline.

Basic data (GAAP):

Revenue was $610.4 million, up 2% sequentially from $597.0 million and up 47% from $414.6 million in the year-earlier quarter.

Net income was $98.6 million, down 30% sequentially from $141.3 million, and down 79% from $470.4 million (which included an income tax benefit of $336 million).

Diluted Earnings Per Share (EPS) was $0.86, down 40% sequentially from $1.44 and down 79% from $4.08 year-earlier.

Guidance:

For the full year 2014 Eylea U.S. product net sales are expected between $1.7 billion and $1.8 billion. Non-GAAP unreimbursed R&D expense between $425 and $475 million. Non-GAAP SG&A $330 to $380 million. Capital expenditures $350 to $425 million.

Part of the SG&A expense increase is to subsidize co-payments for patients.

Does not expect to pay significant cash taxes until 2015 (but taxes will appear in GAAP numbers).

Conference Highlights:

In 2014 we expect EYLEA to continue to grow through demographic and geographic expansion, as well as potential approvals in new indications, such as diabetic macular edema. We also look forward to additional clinical data from our Phase 3 program for alirocumab for lowering LDL-cholesterol and Phase 2b data for dupilumab for atopic dermatitis (dupilumab is also being developed for asthma). In addition, we anticipate advancing clinical development of new antibodies, including our PDGFR-beta antibody and EYLEA combination product, which just commenced a Phase 1 study, and our CD20-CD3 bi-specific antibody, which is planned to enter clinical development later this year in immuno-oncology."

Non-GAAP numbers: net income $259 million, down 6.5% sequentially from $277 million. EPS $2.24, down 7% sequentially from $2.40 but up 52% from $1.47 year-earlier. Non-GAAP earnings exclude income taxes of $101.3 million because they do not, at this time, require cash payments, but are for GAAP accounting purposes.

Total revenue of $610.4 million consisted of: product sales $406.1 million; Sanofi collaboration revenue $111.0 million; Bayer collaboration revenue $85.7 million; licensing and other, $7.7 million.

Eylea (aflibercept) U.S. revenue was $402 million, up 11% sequentially from $363 million and up 46% from $276 million year-earlier. Sales of Eylea by Bayer outside the use for wet AMD and macular edema following CRVO were $184 million, of which Regeneron realized $44 million. An application to the FDA to extend the label to diabetic macular edema (DME) should get a decision by August 18, 2014; a similar application was filed in Europe. An application for mCNV (myopic choroidal neovascularization) was submitted in Japan.

Zaltrap for metastatic colorectal cancer is in collaboration with Sanofi, which recorded sales of $20 million, up 11% sequentially from $18 million. Ex-U.S. launches will continue this year. Zaltrap is not expected to be profitable in the near term due to the need to repay Sanofi for Regeneron's share of expenses.

Arcalyst for Cryopyrin-Associated Periodic Syndromes (CAPS) revenue was $4 million, flat sequentially from $4 million.

In January 2014 a wholly owned subsidiary launched a human genetics initiative to help discover diseases with unmet medical needs.

Results of Phase 3 trial of sarilumab for Rheumatoid Arthritis were positive; a Sanofi collaboration.

A Phase 2b study of dupilumab for atopic dermatitis is currently enrolling patients, and another trial for asthma, and a Phase 2 trial for nasal polyposis; and data from the Phase 2a study for atopic dermatosis will be presented in an upcoming meeting. Dupilumab is in collaboration with Sanofi.

In the quarter positive Phase 3 data was reported by Sanofi for Alirocumab for LDL reduction. Expects applications for approval to be submitted in 2015.

Regeneron has a total of 14 antibodies in clinical development, all of which were developed in-house, but seven of which are in collaboration with Sanofi. See also the Regeneron Pipeline.

Cash and equivalents balance ended at $1.08 billion. Debt in convertible senior notes was $320.3 million.

Expenses of $398.3 million consisted of: cost of goods sold $34.5 million; research and development $268.1 million; selling, general and administrative $82.1 million; collaboration manufacturing costs $13.6 million. Leaving income from operations of $212.1 million. Interest and other expense was $13.9 million. Income tax expense was $101.3 million.

Full year 2013 capital expenses were $156 million.

Q&A:

Migration overseas and tax rate? Intellectual property being moved overseas (to Ireland) is not limited to Eylea. In 2017 the transfers might have a favorable impact on tax rates. We have $460 million net operating losses (NOLs) going forward.

The DME has been highly scrutinized because of concerns about anti-VEGF agents and systemic adverse events, including deaths. Our serious adverse events and deaths were not statistically significantly different from the control group.

Eylea market share? Future growth will come primarily from new patients. The biggest challenge to growth is the use of Avastin.

Human genomics color? The program could impact every aspect of every program we do. We have already had impactful data. We hope there will be some huge breakthroughs. We anticipate a lot of publishing from this program.

Lucentis (ranibizumab) has rapidly penetrated the DME market, about 40% vs. 50% for Avastin. We expect more anti-VEGF therapy penetration of this market.

The DME opportunity for Eylea is similar to the market to AMD. We don't think laser therapy is appropriate for DME.

Roche says market for DME is just $250 million per year in the U.S.? You are right. It is a much less mature market than the AMD market, so switches initially might be less. Our statement is a demographics statement, and about switching from laser.

Our guidance did suggest that there might not be sequential Eylea revenue growth in Q1 due to inventory issues.

OpenIcon Analyst Conference Summaries Main Page

Search

More Analyst Conference Pages: