Analyst Conference Summary

Biotechnology

Regeneron Pharmaceuticals
REGN

conference date: May 5, 2020 @ 5:30 AM Pacific Time
for quarter ending: March 31, 2020 (Q1, first quarter 2020)


Forward-looking statements

Overview: Strong revenue growth. Positive Libtayo Phase 3 topline data.

Basic data (GAAP):

Revenue was $1.83 billion, down 16% sequentially from $2.17 billion and up 33% from $1.37 billion in the year-earlier quarter.

Net income was $625 million, down 21% sequentially from $792 million, and up 36% from $461 million year-earlier.

Diluted Earnings Per Share (EPS) was $5.43, down 22% sequentially from $6.93 and up 36% from $3.99 year-earlier.

Guidance:

Full Year 2020: R&D expense $2.15 to $3.13 billion GAAP, $1.90 to $2.04 billion non-GAAP. SG&A $1.38 to $1.50 billion, or $1.19 to $1.29 billion non-GAAP. COGS $350 to $420 million, or $295 to $355 million non-GAAP. Effective tax rate 10% to 12%, or 12% to 14% non-GAAP. Did not give revenue guidance.

Sees impact from pandemic to peak in Q2.

Conference Highlights:

Leonard S. Schleifer, CEO, said "Over 30 years, the Regeneron team has built a science and technology engine uniquely suited to address the COVID-19 pandemic and we are applying our signature passion, innovation, and drive to advance solutions. Our novel antibody cocktail, REGN-COV2, which is specifically-designed for both prevention and treatment, is expected to begin human studies in June and we are working in parallel to have large-scale quantities available by late summer... we continue to advance our broad immuno-oncology platform, including the PD-1 inhibitor Libtayo, for which we plan regulatory submissions this year in both non-small cell lung cancer and basal cell carcinoma, based on recent promising late-stage results."

Working with Sanofi, on April 1 finalized a modified antibody agreement for Praluent which is expected to be accretive in 2020. Also working on restructuring the Kevzara agreement.

In April 2020, the Company and Sanofi announced that the primary endpoint was met in the Phase 3 trial of Libtayo (cemiplimab), a PD-1 antibody, as monotherapy in first-line NSCLC. The Independent Data Monitoring Committee recommended that the trial be stopped early due to highly significant improvement in overall survival. Regulatory submissions will be made in the U.S. and EU in the second half of 2020. In May 2020, the Company and Sanofi announced that Libtayo demonstrated clinically meaningful and durable responses in a pivotal, single-arm, open-label trial in patients with advanced basal cell carcinoma and plan regulatory submissions in 2020.

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).

Revenue by type: product sales $1.24 billion. Sanofi collaboration revenue $247 million. Bayer collaboration revenue $281 million. Other income $63 million. Started to see some negative impact from the pandemic in late March.

Regeneron sales and royalties, $ millions
therapy Q1 2020 Q1 2019 y/y
Eylea $1,854 $1,744 6%
Dupixent* 855 374 129%
Praluent* 80 64 25%
Kevzara* 60 34 78%
Zaltrap* 28 25 14%
Arcalyst 3 4 -14%
Libtayo 75 27 179%

*global sales, including by partners

Non-GAAP results: net income $771 million, down 10% sequentially from $858 million and up 49% from $518 million year earlier. Diluted EPS $6.60, down 12% sequentially from $7.50 and up 48% from $4.45 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.

In Q1 2020 the FDA accepted for priority review the supplemental Biologics License Application (sBLA) for children aged 6 to 11 years with moderate-to-severe atopic dermatitis, with a target action (PDUFA) date of May 26, 2020. In March 2020, Dupixent for chronic rhinosinusitis with nasal polyposis (CRSwNP) was approved in Japan.

n March 2020, the Phase 3 trial in adult patients with homozygous familial hypercholesterolemia (HoFH) met its primary endpoint. Regeneron plans to submit an sBLA in mid-2020.

In Q3 2019 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.

Pozelimab, a C5 antibody, started a Phase 2 trial for CD55-deficit.

In April 2020, entered into an agreement with Zai Lab Limited to develop and commercialize REGN1979 (bispecific antibody targeting CD20 and CD3) in mainland China, Hong Kong, Taiwan, and Macau. Zai is obligated to make a $30 million up-front payment, with Regeneron eligible to receive up to $160 million in additional milestone payments. Zai will be responsible for funding a portion of the global development costs.

Working on antibody treatments for COVID-19.

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 $7.24 billion, up sequentially from $na billion. No long term debt. Free cash flow was $528 million.

GAAP expenses of $1.13 billion consisted of: cost of goods sold $79 million; research and development $584 million; selling, general and administrative $367 million; collaboration manufacturing costs $139 million. Leaving income from operations of $700 million. Interest and other net expense was $32 million. Income tax was $44 million.

Q&A summary:

Libtayo competition plans? The lung field is dominated by the leading antibody. Our data looks very impressive re overall survival. We should be well positioned in such a large indication. We have many combination programs underway or planned. We are very excited. We will collaborate with Sanofi, taking the lead in the US.

COVID, antibody contribution to adverse reactions? We generated a collection of thousands of antibodies. We picked the best blend. We also have a backup cocktail. With potent neutralizing antibodies the risks are quite limited. The risk of ADE with these antibodies is quite low. We don't think the antibody response caused the lung inflammatory response.

Did Gilead set a bar by giving away the initial remdesivir for free? We are working on our manufacturing capability, we will make pricing decisions later.

Could an antibody therapy be available by this fall? We are in an unprecedented situation. Regulators are in a collaborative spirit. In June we will initiate trials in three settings. We are hoping to see some data within a month or two.

PSMA bispecific data? We think the bispecific costims are designed to have little activity on their own. They only work in combination. The early clinical data support that, the monotherapy part of the trial. We are seeing evidence of activity, we will give you more data later.

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Disclaimer: My analyst call summaries may include both condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. These are my personal notes and serve as the basis of my Seeking Alpha articles.

Copyright 2020 William P. Meyers