Analyst Conference Summary

Biotechnology

conference date: November 5, 2019 @ 5:30 AM Pacific Time
for quarter ending: September 30, 2019 (Q3, third quarter 2019)

Forward-looking statements

Overview: Strong revenue growth. Note large difference between GAAP and non-GAAP profit numbers.

Basic data (GAAP):

Revenue was $2.05 billion, up 3% sequentially from $1.93 billion and up 23% from $1.66 billion in the year-earlier quarter.

Net income was $670 million, up 247% sequentially from $193 million, and up 13% from $595 million year-earlier.

Diluted Earnings Per Share (EPS) was $5.86, up 249% sequentially from $1.68 and up 13% from $5.17 year-earlier.

Guidance:

Changed guidance for full year 2019, notably increasing bottom of capital expenditures range, increasing tax rate range, slight changes in expenses, and lowering the Sanofi collaboration revenue range to $490 to $510 million from a prior range of $500 to $530 million.

Expects R&D expense to increase in 2020.

Conference Highlights: Continued rapid revenue growth plus pipeline plus share buybacks.

Leonard S. Schleifer, CEO, said "We are broadening our efforts in retinal and type 2 inflammatory diseases, including initiating late-stage trials of Dupixent in additional type 2 diseases in the coming months. Oncology is a major focus of our research and development efforts, and we are advancing important new potential treatments for patients with a variety of cancers. We currently have six bispecific antibodies in the clinic, and multiple pivotal trials with Libtayo in non-small cell lung, skin, and other cancers." Robert Landry added "Our financial results, strength of our balance sheet, and confidence in our business longer-term allow us to continue deploying capital by investing in internal and external innovation to expand our pipeline, while also returning cash to shareholders with the initiation of a $1 billion share repurchase program." Added a $1 billion share repurchase program in November.

The EU added approval of Dupixent for adolescents with atopic dermatitis in August 2019. Dupixent was approved by the EU for severe asthma in Q2 2019, following the March 2019, FDA approval of Dupixent for adolescent patients 12 to 17 years of age with moderate-to-severe atopic dermatitis whose disease is not adequately controlled with topical prescription therapies. Dupixent as an add-on maintenance treatment for adults with inadequately controlled severe chronic rhinosinusitis with nasal polyps (CRSwNP), was approved in Q2 2019. In Europe the CHMP recommended Dupixent as an add-on maintenance treatment for severe asthma. In Q1 2019 also initiated a Phase 3 study in COPD.

Revenue by type: product sales $1.24 billion. Sanofi collaboration revenue $404 million. Bayer collaboration revenue $303 million. Other income $103 million.

Dupixent sale by Sanofi hit $633 million. Believes Dupixent in the field is showing advantages in effectiveness and safety over competitors.

In the coming years expects to bring an extensive line of bispecific antibodies to the clinic. Believes has advantages over competitors for these, as well as for the PD1 antibody (Libtayo).

Non-GAAP results: net income $762 million, up 10% sequentially from $690 million and 13% from $675 million year earlier. Diluted EPS $6.67, up 11% sequentially from $6.02 and up 14% from $5.87 year-earlier.

Fasinumab for pain due to osteoarthritis Phase 3 study reported positive results in Q3 2019. A Phase 3 study for chronic lower back pain continued. But moving forward only with the lower-dose regimen.

Regeneron and Sanofi have an agreement to restructure their Immuno-oncology Discovery and Development Agreement narrowing the scope of the existing activities conducted by the Company to developing therapeutic bi-specific antibodies targeting BCMA and CD3 (BCMAxCD3) and MUC16 and CD3 (MUC16xCD3). Regeneron retains full rights to its other immuno-oncology programs that were part of the original agreement.

In Q3 Entered into a collaboration with Bluebird Bio for combinations with CART therapies. Includes buying $100 million worth of BLUE stock.

Has moved four bispecifics, to the clinic this year. REGN4018 (MUC16 and CD3) has shown encouraging results so far in platinum-resistant ovarian cancer.

REGN1979 Phase 2 trial in advanced follicular lymphoma started in Q2, 2019, is being followed by a cohort of DLBCL.

REGN2477 for FOP (fibrodysplasia ossificans progressiva) continues Phase 2 study.

REGN3500 Phase 2 program for asthma had positive results, but not better than Dupixent. Studies for COPD, and atopic dermatitis should present results later in 2019. Could be complementary to Dupixent. Partnered with Sanofi.

In April 2019, Regeneron entered into a collaboration with Alnylam (ALNY) to discover, develop, and commercialize new RNA interference, or RNAi, therapeutics for diseases of the eye, central nervous system, and targets expressed in the liver.

See also the Regeneron Pipeline.

Cash and equivalents balance ended at $5.99 billion, up sequentially from $5.55 billion. No long term debt.

GAAP expenses of $1.31 billion consisted of: cost of goods sold $116 million; research and development $663 billion; selling, general and administrative $420 million; collaboration manufacturing costs $111 million. Leaving income from operations of $739 million. Interest and other net income was $30 million. Income tax was $99 million.

Q&A summary:

Eylea next generation efforts? Exclusivity runs to 2024. We are not giving a timeline for new products to go into the clinic, except our high-dose product in in Phase 2.

Avastin supply impact? There were some modest shortages that benefitted Eylea.

CD3/CD20 vs. competitors? The program is wholey owned, there is no option on it. We are encouraged by how our data looks vs. Roche. We think the opportunity is in combinations, including Libtayo and other bispecifics. We have shown that in preclinical models.

We have been working with Sanofi to try to reign in op ex for Praluent and Kevzara.

Claims to have the ownly platform to creat bispecifics that are natural in the sense that they act like normal antibodies. They don't need special infusion methods.

Are Kevzara, Libtayo, and Praluent contributing to positive cash flow? Evaded answering.

Change from prior capital allocation strategy? We believe the stock is cheap, given our future prospects, and so repurchases are a good use of cash.

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