Analyst Conference Summary

Biotechnology

conference date: November 8, 2017 @ 5:30 AM Pacific Time
for quarter ending: September 30, 2017 (Q3, third quarter)

Forward-looking statements

Overview: Continued strong Eylea revenue growth.

Basic data (GAAP):

Revenue was $1.50 billion, up 2% sequentially from $1.47 billion and up 23% from $1.22 billion in the year-earlier quarter.

Net income was $388 million, flat sequentially from $388 million, and up 46% from $265 million year-earlier.

Diluted Earnings Per Share (EPS) was $3.32, down 1% sequentially from $3.34 and up 46% from $2.27 year-earlier.

Guidance:

Updated to 10% y/y Eylea product sales growth. Decreased Sanofi reimbursement to $350 to $375 million. Unreimbursed R&D reduced to $885 to $915 million. SG&A reduced to $1.08 to $1.1 billion. Effective tax rate reduced to 26% to 29%. Capital expenditures increased to $265 to $285 million.

Conference Highlights:

Leonard S. Schleifer, President and CEO, said "In the third quarter, Regeneron made significant progress with our commercialized medicines, including continued strong global sales for our retinal therapy Eylea and the completion of enrollment in our Phase 3 PANORAMA study in diabetic retinopathy, which represents an important new potential indication for Eylea. We also saw robust U.S. launch progress with Dupixent in moderate-to-severe atopic dermatitis, and a favorable U.S. appellate court ruling for Praluent in our ongoing PCSK9 antibody litigation. Looking forward, we anticipate a U.S. regulatory submission for dupilumab in uncontrolled asthma later this year and continue to advance a broad dupilumab development program in other Type 2 allergic diseases. In addition, we are making important strides in our immuno-oncology program and expect to submit our first U.S. regulatory application for cemiplimab, our PD-1 antibody, in advanced cutaneous squamous cell carcinoma in early 2018."

Praluent (Alirocumab) a PCSK9 inhibitor for LDL cholesterol control (hypercholesterolemia) had global sales by Sanofi of $49 million, up sequentially from $46 million and up 29% from $38 million year-earlier. Regeneron shares any profits or losses with Sanofi. Outcome data should be available in Q1 2018.

Eylea (aflibercept) revenue from U.S. sales increased to $953 million, up 4% sequentially from $919 million and up 12% from $854 million year-earlier. Bayer's sales outside the U.S. were $564 million, up 4% sequentially from $542 million, up 20% from $471 million year-earlier. Regeneron recognized $205 million from those ex-U.S. sales.

Dupilumab (Dupixent) for moderate to severe atopic dermatitis global sales by Sanofi were $89 million, up sequentially from $29 million, the first quarter with sales. Also being studied for asthma, eosinophilic esophagitis, and chronic sinusitis. Received European approval in September 2017. The asthma sBLA should be submitted by year end, and a Phase 3 trial in younger atopic dermatitis patients should initiate.

Sarilumab (Kevzara) for rheumatoid arthritis was approved by the FDA in May. Global sales by Sanofi were $3 million. Japan granted commercial approval in September.

Other revenue was $61.5 million, up from $27.0 million year-earlier.

Non-GAAP results: net income $470 million, down 3% sequentially from $487 million and up 29% from $365 million year earlier. Diluted EPS $3.99, down 4% sequentially from $4.17 and up 27% from $3.31 year-earlier. Excludes the usual GAAP items, notably $118 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.

Eylea should have a supplemental application to the FDA for 12 week dosing in wet AMD.

Suptavumab (REGN2222) for respiratory syncytial virus-F was discontinued after a Phase 3 study did not meet its primary endpoint in August.

REGN2810 antibody for PD-1 for cutaneous squamous cell carcinoma continued a potentially pivotal Phase 2 trial in collaboration with Sanofi. Positive preliminary results from the Phase 1 trial were presented at ASCO in June. Phase 2 studies in non-small cell lung cancer and basal cell carcinoma should begin in 2017. Also, the company agreed to evaluate 2810 in combination with a product from Inovio and also in combination with a product from SillaJen. Granted breakthrough designation. A Phas 3 study in cervical cancer was initiated in Q3.

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

REGN 2477 for FOP (fibrodysplasia ossificans progressiva) is should initiate a Phase 2 trial by year-end 2017.

REGN3918 for PNH (paroxysmal nocturnal hemoglobinuria) initiated a Phase 1 study in healthy volunteers in Q2.

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 $2.71 billion, up sequentially from $2.33 billion. Cap ex $60 million.

GAAP expenses of $940.7 million consisted of: cost of goods sold $46.4 million; research and development $529.7 million; selling, general and administrative $306.8 million; collaboration manufacturing costs $57.8 million. Leaving income from operations of $559.9 million. Interest and other net expense was $5.7 million. Income tax expense was $177.3 million.

Q&A:

Dupixent prescriber base, previously 7000, current 7000? Physicians who had written a prescription for biologics in the past was over 7000. But other dermatologists in the same offices had atopic dermatitis patients and began to subscribe. Further growth could come from consumer demand from advertising.

Prefilled Eylea syringes, lifecycle? We look at all kinds of ways to . Genentech was ahead of us with a prefilled syringe, which launched, but did not cut into our market share. Our filing should be in the first half of 2018.

Sanofi said most dupixent patients have severe disease, move to moderate disease? Yes. Severe patients are showing a good response to the drug. Physicians had not used a biologic in this indication before. We should see a transition to moderate disease going forward.

Our PD1 will be going for the non-small cell lung cancer space, one of the bigger opportunities, with only one competitor so far. But we are also looking to it for combination therapies. Unresected or metastatic cutaneous squamous cell carcinoma is a very large opportunity even though most patients are treated with surgery.

Responded to questions with argument about how good dupixent is for asthma, in particular its strong lung function data, "it is the treatment deserve to be given." Often patients who are suffering from one severe allergic condition will have others, our hope is to show dupixent works for them all.

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