Analyst Conference Summary

Biotechnology

conference date: November 3, 2022 @ 5:30 AM Pacific Time
for quarter ending: September 30, 2022 (Q3, third quarter 2022)

Forward-looking statements

Overview: Revenue down y/y as Covid sales go to zero, but other products continue to ramp.

Basic data (GAAP):

Revenue was $2.94 billion, down % sequentially from $na billion but down 15% from $3.45 billion in the year-earlier quarter.

Net income was $1.32 billion, down % sequentially from $na billion, and down 19% from $1.63 billion year-earlier.

Diluted Earnings Per Share (EPS) was $11.66, down % sequentially from $na and down 19% from $14.33 year-earlier.

Guidance:

Did not given revenue guidance. Estimated R&D expense $3.51 to $3.60 billion GAAP. SG&A $2.01 to $2.09 billion. Gross margin 90.5% to 91%. Effective tax rate 12% to 13%.

Conference Highlights:

Leonard S. Schleifer, CEO, said "Regeneron's strong operational momentum continued in the third quarter, highlighted by important developments across our pipeline and outstanding commercial execution. Total revenues for the quarter increased by 11% compared to last year when excluding contributions from our Covid antibody cocktail. With global net sales of Dupixent and Libtayo, as well as U.S. net sales of Eylea once again reaching new all-time quarterly highs and growing by double digits." Expects to expand R&D spending in 2023.

Pushing the idea that giving Eylea at an increased, 8 mg dose, at longer (12 to 16 week) intervals, will extend the lifetime of revenue, despite expiring patents. 8 mg dose has not yet been approved, but trial data released in Q3 2022 is encouraging. Sees a potential FDA approval around August 2022.

There are a large number of data readouts ahead in the cancer pipeline programs over the next two years. The first FDA submissions, for Linvoseltamab and Odreonextamab, could come in 2023.

Pozelimab for CD55-deficient protein-losing enteropathy could have the BLA submitted to the FDA within 12 months (so end of 2023).

In Q3 2022 the FDA approved Dupixent for prurigo nodularis.

In Q3 2022 The CHMP adopted a positive opinion for Libtayo as a monotherapy for treatment adult patients with recurrent or metastatic cervical cancer and disease progression on or after platinum-based chemotherapy. The European Commission is expected to make a final decision on the application in the coming months. Positive data from the Phase 2 trial for Libtayo in neoadjuvant cutaneous squamous cell carcinoma (CSCC) was reported at ESMO 2022. Effective July 1, 2022, Regeneron obtained the exclusive right to develop, commercialize, and manufacture Libtayo worldwide under its agreement with Sanofi. It made a $900 million up-front payment, and Sanofi is eligible to receive a $100 million regulatory milestone and up to an aggregate of $100 million in sales-based milestones upon achieving certain amounts of worldwide net product sales of Libtayo through 2023. The Company also pays Sanofi a royalty on net product sales of Libtayo. The percentage of the Company's share of profits used to reimburse Sanofi for its development balance reimbursement obligation increased from 10% to 20%.

Future growth will be fueled by the breadth and depth of the pipeline. Genetic medicines portfolio pipeline has high potential future value.

The company continued to advance its bispecific antibodies for cancers in early stage trials. The first data readout from a prostate cancer bispecific is expected later this year. Many anti-cancer agents are being tested in combination with Libtayo. In all it has 30 product candidates in clinical development.

Revenue by type: product sales $1.80 billion. Collaboration revenue $1.05 billion. Other income $84 million.

Non-GAAP results: net income $1.27 billion, down % sequentially from $na billion and down 28% from $1.77 billion year earlier. Diluted EPS $11.14, down % sequentially from $na and down 28% from $15.37 year-earlier.

Regeneron now has about 35 therapies in clinical development.

See also the Regeneron Pipeline.

Cash and equivalents balance ended at $13.0 billion, up sequentially from $na billion. $1.98 billion long-term debt. Cash from operations was $ billion, free cash flow $ billion. $913 million shares repurchased in the quarter.

GAAP expenses of $1.71 billion consisted of: cost of goods sold $141 million; research and development $911 million; selling, general and administrative $529 million; collaboration manufacturing costs $177 million; other operating income 46$ million. Leaving income from operations of $1.22 billion. Other income was $266 million. Income tax was $194 million.

Q&A selective summary:

Capital allocation priorities, dividend? Our R&D growth is the main use for capital. For business development we are looking for opportunities where they work out. No current plan for dividends. Opportunistic in buybacks, with $1.2 billion remaining authorized.

Odronextamab? Has the potential to be a vary important molecule, even if some competitors are ahead of us. Confident in its profile, potential for combinations.

Eylea market v. Roche? Eylea continues to perform extremely well, including in the overall branded market. Eylea captured growth from Lucentis and Avastin.

Dupixent COPD market opportunity? It is a very difficult disease for new therapies. There is a CHP inflamation subtype that Dupixent could benefit. Waiting for data.

Dupixent competition from Lilly? There is room for competitors. We have only modestly penetrated the opportunity. The profiles are not that similar. Many patients have comorbidities that a single drug can treat. We are the market leader, new drugs may grow the market.

Slowing growth in Eylea? There was a decline in the anti-VEGF category, but it is difficult to know if that is a trend.

Prostate bispecific competition? There are several players, they look competitive, there is room in the space. The differentiation will be in combinations and moving to earlier lines of therapy. Patients seemed to see dramatic drops in PSA regardless of where there PSA started out. Plus remission, including bone lesions.

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