Analyst Conference Summary

Biotechnology

conference date: May 4, 2017 @ 5:30 AM Pacific Time
for quarter ending: March 31, 2017 (Q1, first quarter)

Forward-looking statements

Overview: Continued solid revenue growth, with much more rapid profit growth.

Basic data (GAAP):

Revenue was $1.32 billion, up 7% sequentially from $1.23 billion and up 10% from $1.20 billion in the year-earlier quarter.

Net income was $249 million, down 2% sequentially from $253 million, and up 38% from $181 million year-earlier.

Diluted Earnings Per Share (EPS) was $2.16, down 1% sequentially from $2.19 and up 36% from $1.59 year-earlier.

Guidance:

Updated 2017 guidance to lower rate of Sanofi reimbursement of Regeneron expenses to $385 to $425 million (had been $400 to $450 million) Also Capital expenditures were revised downswart to $300 to $350 million. Non-GAAP SG&A estimate reduced to $1.14 to $1.20 billion (had been $1.175 to $1.250 billion).

Conference Highlights:

Leonard S. Schleifer, President and CEO, said "In the first quarter, we were thrilled to receive U.S. FDA approval for Dupixent, our breakthrough therapy for moderate-to-severe atopic dermatitis. We are also pleased to have  positive Phase 2 results with dupilumab in moderate-to-severe eosinophilic esophagitis, which marks the fourth allergic disease in which dupilumab has shown proof of concept.  These data further validate the hypothesis that the IL-4/IL-13 pathway is a major driver in multiple allergic diseases.  Additionally, we have received a new FDA action date for Kevzara, our therapy for rheumatoid arthritis, and are looking forward to a potential U.S. approval and launch in late May 2017."

Praluent (Alirocumab) a PCSK9 inhibitor for LDL cholesterol control (hypercholesterolemia) had global sales by Sanofi of $36 million, down sequentially from $41 million. In January lost a patent case against Amgen, but that was suspended pending an appeal. A decision on the appeal could come before the end of the year.

Eylea (aflibercept) revenue from U.S. sales increased to $854 million, down less than 1% sequentially from $858 million and up 9% from $781 million year-earlier. Bayer's sales outside the U.S. were $484 million, up 16% from $418 million year-earlier. Regeneron recognized $175 million from those ex-U.S. sales. Regardless of the anti-VEGF therapy used, "Choosing convenience-based dosing has a high-risk of causing permanent vision loss." Offered a small discount to all offices, and also had more Medicare patients.

Dupilumab (Dupixent) is was approved by the FDA for moderate to severe atopic dermatitis. Also being studied for asthma, eosinophilic esophagitis, and chronic sinusitis. The approval was too late in the quarter to allow revenue to be generated. Five weeks into the launch "things are going well." Pharmacy benefit managers have already provided coverage. Believes pricing is fair. Hopes for European approval before the end of 2017.

Sarilumab (Kevzara) for rheumatoid arthritis now has an FDA PDUFA date of May 22, 2017. It was approved in Canada in January. Europe's CHMP recommended approval in April.

Non-GAAP results: net income $336.5 million, down 5% sequentially from $353 million and up 23% from $272.9 million year earlier. Diluted EPS $2.92, down 4% sequentially from $3.04 and up 22% from $2.40 year-earlier. Excludes the usual GAAP items, notably $133 million in non-cash share-based compensation expense.

Fasinumab for pain due to osteoarthritis is in a Phase 3 study started to test long-term safety and efficacy. Also a Phase 3 study for chronic lower back pain will be initiated in 2017.

REGN2810 antibody for PD-1 for cutaneous squamous cell carcinoma continued a potentially pivotal Phase 2 trial in collaboration with Sanofi. Phase 2 studies in non-small cell lung cancer and basal cell carcinoma should begin in 2017

REGN1500, another dyslipidemia treatment, is in Phase 2 trials. Initial data from a smaller study will be presented soon.

REGN2222 targeting RSV (respiratory syncytial virus) is in Phase 3 clinical studies and should report results in 2017.

REGN2176-3 for neovascular age-related macular degeneration, or wet AMD, is in a Phase 2 trial that should report data in 2016.

REGN 2477 for FOP (fibrodysplasia ossificans progressiva) is completing a Phase 1 study in healthy volunteers and received orphan drug designation.

Nesvacumab/aflibercept continued a Phase 2 study in DME and wet AMD, with data expected in 2017.

Regeneron also hope to continue to expand the label for Eylea. A phase 3 study for diabetic retinopathy in patients not having DME is ongoing.

See also the Regeneron Pipeline.

Cash and equivalents balance ended at $2.27 billion, up sequentially from $1.90 billion. .

GAAP expenses of $888 million consisted of: cost of goods sold $61 million; research and development $507 million; selling, general and administrative $297 million; collaboration manufacturing costs $23 million. Leaving income from operations of $431 million. Interest and other net expense was $2 million. Income tax expense was $183 million.

The tax rate will be variable quarter to quarter because of the new rule for stock-based compensation.

Q&A:

C5-antibody program? CD20 by CD3 bispecific is moving along.There have been concerns with similar agents and CART. We are being careful with dosing. Our C5 antibody should be in the clinic some time this year.

Potential for market of kids under 6? Yes, atopic dermatitis does afflict the very young. We are working with regulatory authorities to progress towards treating the very young. We have breakthrough status for the 12 to 17 age group. Some chilren outgrow the disease, but once it is in adults it is chronic.

Eylea vs. rivals market share and size? Branded market grew 9% y/y, which we matched. 65% of market is branded, which has not changed.

Dupixent cost of launch? The targetted audiences are different for Praluent and Dupixent. So the Dupixent launch can focus on just 7000 specialists.

Eylea dosing inverval data, does it apply to Novartis RTH? It takes a long time to get long-term data. We have the only long term data. Field has been going in the wrong direction, focusing on convenience rather than on efficacy.

Eosinophilic esophagitis size of market? Appears to be growing, but that may be because it was underdiagnosed. It could be 100 to 200 thousand in the U.S., or more if it is still underdiagnosed.

OpenIcon Analyst Conference Summaries Main Page

Search

More Analyst Conference Pages: