On February 3, 2023 Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) reported financial results for the fourth quarter and full year 2022 and provided a business update (Press release, Regeneron, FEB 3, 2023, View Source [SID1234626815]).
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"In 2022, Regeneron reported record revenue for EYLEA, Dupixent and Libtayo and made exciting progress across the entire pipeline," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron. "In the fourth quarter of 2022, we submitted our Biologics License Application for neovascular age-related macular degeneration and diabetic macular edema for aflibercept 8 mg, which could potentially reach patients in the third quarter of 2023. We also continued to expand the use of our commercial products with the U.S. FDA approval of Libtayo in combination with chemotherapy for non-small cell lung cancer and the European Commission approval of Dupixent for prurigo nodularis. In 2023, we remain committed to achieving the full potential of our diverse commercial- and clinical-stage portfolio, with a particular focus on aflibercept 8 mg, Dupixent in a variety of type 2 allergic diseases, and our promising oncology and hematology assets."
Financial Highlights
Three Months Ended
December 31, Year Ended
December 31,
($ in millions, except per share data) 2022 2021 % Change 2022 2021 % Change
Total revenues $ 3,414 $ 4,952 (31%) $ 12,173 $ 16,072 (24%)
Total revenues excluding REGEN-COV and Ronapreve(a)(b) $ 3,018 $ 2,654 14% $ 11,546 $ 9,882 17%
GAAP net income $ 1,197 $ 2,229 (46%) $ 4,338 $ 8,075 (46%)
GAAP net income per share – diluted $ 10.50 $ 19.69 (47%) $ 38.22 $ 71.97 (47%)
Non-GAAP net income(a) $ 1,449 $ 2,677 (46%) $ 5,164 $ 8,454 (39%)
Non-GAAP net income per share – diluted(a) $ 12.56 $ 23.42 (46%) $ 44.98 $ 74.35 (40%)
"We were pleased with our fourth-quarter and full-year 2022 financial performance, highlighted by revenue growth of 14% and 17%, respectively, when excluding contributions from REGEN-COV and Ronapreve, demonstrating the commercial strength and increasing diversity of our business," said Robert E. Landry, Executive Vice President, Finance and Chief Financial Officer of Regeneron. "In January 2023, our Board of Directors authorized a new $3.0 billion share repurchase program, enabling us to continue returning capital directly to shareholders. This year, we look forward to driving long-term shareholder value through continued investment in R&D, excellent commercial execution and strategic business development."
Business Highlights
Key Pipeline Progress
Regeneron has approximately 35 product candidates in clinical development, including a number of marketed products for which it is investigating additional indications. Updates from the clinical pipeline include:
Aflibercept 8 mg
A Biologics License Application (BLA) for the treatment of wet AMD and DME was submitted to the U.S. Food and Drug Administration (FDA) in December 2022. The Company is utilizing a priority review voucher in connection with the submission.
EYLEA (aflibercept) Injection
In December 2022, the European Commission (EC) approved EYLEA for the treatment of retinopathy of prematurity (ROP) in preterm infants. The supplemental BLA (sBLA) for EYLEA to treat ROP in preterm infants is currently under review by the FDA, with a target action date of February 11, 2023.
Dupixent (dupilumab)
In December 2022, the EC approved Dupixent for the treatment of adult patients with moderate-to-severe prurigo nodularis who are candidates for systemic therapy, making Dupixent the first and only targeted medicine specifically indicated to treat prurigo nodularis in Europe.
In January 2023, the EC also approved Dupixent for the treatment of adults and adolescents with EoE, making Dupixent the first and only targeted medicine specifically indicated to treat EoE in Europe.
The European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for Dupixent to treat children aged 6 months to 5 years with severe atopic dermatitis. The EC decision is expected in the coming months.
An sBLA for the treatment of adult and adolescent patients with chronic spontaneous urticaria (CSU) was submitted.
Oncology Programs
Libtayo (cemiplimab)
In November 2022, the FDA approved Libtayo in combination with platinum-based chemotherapy for the first-line treatment of adult patients with advanced NSCLC.
In November 2022, the EC approved Libtayo as a monotherapy for the treatment of adult patients with recurrent or metastatic cervical cancer and disease progression on or after platinum-based chemotherapy. In December 2022, the Ministry of Health, Labour and Welfare (MHLW) in Japan also approved Libtayo in advanced or recurrent cervical cancer.
Fianlimab, an antibody to LAG-3
A Phase 3 study in first-line adjuvant melanoma was initiated.
Linvoseltamab, a bispecific antibody targeting BCMA and CD3
The Company announced positive initial data from a pivotal Phase 2 expansion cohort evaluating linvoseltamab at the 200 mg dose in patients with heavily pre-treated, relapsed/refractory multiple myeloma. The results were presented at the American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting and Exposition.
Odronextamab, a bispecific antibody targeting CD20 and CD3
Positive data were also presented at ASH (Free ASH Whitepaper) from two cohorts of a pivotal Phase 2 trial studying odronextamab in patients with relapsed/refractory diffuse large B-cell lymphoma (DLBCL) and follicular lymphoma (FL).
Other Programs
A BLA for pozelimab, an antibody to C5, for the treatment of CD55-deficient protein-losing enteropathy (CHAPLE) was submitted.
The FDA accepted for priority review the sBLA for Kevzara (sarilumab) to treat polymyalgia rheumatica (PMR), with a target action date of February 28, 2023.
The FDA accepted for priority review the sBLA for Evkeeza (evinacumab) as an adjunct to other lipid-lowering therapies to treat children aged 5 to 11 years with homozygous familial hypercholesterolemia (HoFH), with a target action date of March 30, 2023.
Corporate and Business Development Updates
In November 2022, the Company and CytomX Therapeutics, Inc. entered into a license and collaboration agreement to create conditionally-activated investigational bispecific cancer therapies utilizing CytomX’s Probody therapeutic platform and Regeneron’s Veloci-Bi bispecific antibody development platform. Under the terms of the agreement, the Company made an upfront payment of $30 million and will be responsible for funding development and commercial activities, and CytomX will be eligible to receive future target nomination payments and preclinical, clinical, and commercial milestone payments as well as royalties on global net sales.
The Company was included on the Dow Jones Sustainability World Index (DJSI World) for the fourth consecutive year and on the Dow Jones Sustainability North America Index (DJSI North America) for the third year.
Select 2023 Milestones
Programs Milestones
Aflibercept 8 mg - FDA decision on BLA for wet AMD and DME (third quarter 2023)
- Report two-year data from PULSAR (wet AMD) and PHOTON (DME) Phase 3 studies (third quarter 2023)
EYLEA (aflibercept) - FDA decision on sBLA for ROP (target action date of February 11, 2023)
Dupixent (dupilumab) - EC decision on regulatory submission for atopic dermatitis in pediatrics (6 months–5 years of age) (first half 2023)
- Submit sBLA for EoE in pediatrics (mid-2023)
- FDA decision on sBLA for CSU in adults and adolescents (second half 2023)
- Report results from first Phase 3 study in COPD and Phase 3 study in chronic inducible urticaria – cold (first half 2023)
Solid Organ Oncology - Initiate Phase 3 study for fianlimab (in combination with Libtayo) in perioperative melanoma (mid-2023)
- Initiate Phase 2/3 studies for fianlimab (in combination with Libtayo) in first-line advanced NSCLC (first half 2023) and Phase 2 study in perioperative NSCLC (second half 2023)
- Report additional results from Phase 1/2 study of REGN5678 (PSMA and CD28 bispecific antibody) in combination with Libtayo in prostate cancer (2023)
- Report initial data across solid organ oncology, including for CD3 bispecifics and CD28 costimulatory bispecifics (2023)
- EC decision on regulatory submission for Libtayo (in combination with chemotherapy) in advanced NSCLC (first half 2023)
Odronextamab (CD20 and CD3 Bispecific Antibody) - Initiate Phase 3 studies in FL and DLBCL, including earlier lines of therapy (first half 2023)
- Submit BLA for relapsed/refractory FL and DLBCL (second half 2023)
Linvoseltamab (BCMA and CD3 Bispecific Antibody) - Initiate Phase 3 study in multiple myeloma, including earlier lines of therapy (first half 2023)
- Submit BLA for relapsed/refractory multiple myeloma (second half 2023)
Pozelimab (C5 Antibody) - FDA decision on BLA for CHAPLE (second half 2023)
Fourth Quarter 2022 Financial Results
Revenues
($ in millions) Q4 2022 Q4 2021 % Change FY 2022 FY 2021 % Change
Net product sales:
EYLEA – U.S. $ 1,496 $ 1,547 (3% ) $ 6,265 $ 5,792 8%
Libtayo – U.S. 110 81 36% 375 306 23%
Libtayo – ROW** 42 — * 73 — *
Praluent – U.S. 36 40 (10% ) 130 170 (24% )
REGEN-COV – U.S. — 2,298 (100% ) — 5,828 (100% )
Evkeeza – U.S. 15 9 67% 48 19 153%
Inmazeb – U.S. — — —% 3 — *
ARCALYST – U.S.*** — — * — 2 *
Total net product sales 1,699 3,975 (57% ) 6,894 12,117 (43% )
Collaboration revenue:
Sanofi 836 518 61% 2,856 1,902 50%
Bayer 355 372 (5% ) 1,431 1,409 2%
Roche 396 — * 627 362 73%
Other revenue 128 87 47% 365 282 29%
Total revenues $ 3,414 $ 4,952 (31% ) $ 12,173 $ 16,072 (24% )
Total revenues excluding REGEN-COV and Ronapreve(a) $ 3,018 $ 2,654 14% $ 11,546 $ 9,882 17%
* Percentage not meaningful.
** Rest of world (ROW). Effective July 1, 2022, the Company began recording net product sales of Libtayo outside the United States. Excluded from this line item is approximately $17 million and $34 million of net product sales recorded by Sanofi in the fourth quarter and second half of 2022, respectively, in connection with sales in certain markets (Sanofi will record net product sales in such markets during a transition period until inventory on hand as of July 1, 2022 is sold through to the end customers).
*** Effective April 1, 2021, Kiniksa records net product sales of ARCALYST in the United States. Previously, the Company recorded net product sales of ARCALYST in the United States.
Net product sales of EYLEA in the U.S. in the fourth quarter of 2022 were negatively impacted by (i) a short-term shift to off-label use of compounded bevacizumab, (ii) a temporary closing in the fourth quarter of 2022 of a not-for-profit fund that provides patient co-pay assistance, and (iii) an increase in sales-related deductions. Volumes of U.S. EYLEA in the fourth quarter of 2022 increased compared to the fourth quarter of 2021.
There were no sales of REGEN-COV in the U.S. during 2022 as the Company had completed its final deliveries of drug product under its agreements with the U.S. government as of December 31, 2021.
Sanofi collaboration revenue increased 61% to $836 million in the fourth quarter of 2022, compared to the fourth quarter of 2021, and increased 50% to $2.856 billion for the full year 2022, compared to the full year 2021. This increase was primarily due to the Company’s share of profits from commercialization of antibodies, which were $619 million and $388 million in the fourth quarter of 2022 and 2021, respectively, and $2.082 billion and $1.363 billion for full year 2022 and 2021, respectively. The change in the Company’s share of profits from commercialization of antibodies was driven by profits associated with higher Dupixent sales. In addition, during 2022 the Company earned two $50 million sales-based milestones (including one in the fourth quarter of 2022) from Sanofi based upon sales of antibodies outside the U.S. on a rolling twelve-month basis, compared to earning one $50 million sales-based milestone in 2021 (in the third quarter of 2021).
Sanofi and Bayer collaboration revenue (and specifically, the share of profits the Company earned in connection with commercialization of products) was adversely impacted in 2022 by the U.S. dollar strengthening against foreign currencies, including the Japanese yen and the euro.
The Company recorded Roche collaboration revenue during full year 2022 and 2021 in connection with payments from Roche attributable to global gross profits from sales of Ronapreve. Roche collaboration revenue increased in the fourth quarter of 2022, compared to the fourth quarter of 2021, as no Roche collaboration revenue was recorded during the fourth quarter of 2021 since the Company owed a payment to Roche (which was recorded to Cost of goods sold) in connection with global gross profits of REGEN-COV and Ronapreve.
Refer to Table 4 for a summary of collaboration revenue.
Operating Expenses
GAAP %
Change
Non-GAAP(a) %
Change
($ in millions) Q4 2022 Q4 2021 Q4 2022 Q4 2021
Research and development (R&D)** $ 1,043 $ 738 41% $ 911 $ 635 43%
Acquired in-process research and development (IPR&D)** $ 30 $ 48 (38% ) * * n/a
Selling, general, and administrative (SG&A) $ 661 $ 560 18% $ 579 $ 495 17%
Cost of goods sold (COGS) $ 302 $ 812 (63% ) $ 126 $ 559 (77% )
Cost of collaboration and contract manufacturing (COCM) $ 238 $ 171 39% * * n/a
Other operating (income) expense, net $ (7 ) $ (16 ) (56% ) * * n/a
GAAP %
Change
Non-GAAP(a) %
Change
FY 2022 FY 2021 FY 2022 FY 2021
Research and development** $ 3,593 $ 2,860 26% $ 3,169 $ 2,544 25%
Acquired in-process research and development** $ 255 $ 48 431% * * n/a
Selling, general, and administrative $ 2,116 $ 1,825 16% $ 1,853 $ 1,606 15%
Cost of goods sold $ 800 $ 1,773 (55% ) $ 507 $ 1,470 (66% )
Cost of collaboration and contract manufacturing $ 760 $ 664 14% * * n/a
Other operating (income) expense, net $ (90 ) $ (46 ) 96% * * n/a
* GAAP and non-GAAP amounts are equivalent as no non-GAAP adjustments have been recorded.
** Certain reclassifications have been made to prior period amounts to conform with the current period’s presentation. See note (f) below for additional information.
GAAP and non-GAAP R&D expenses increased in the fourth quarter and full year of 2022, compared to the same periods in the prior year, driven by the impact of the 2022 amendments to the Sanofi collaboration agreements, additional costs incurred in connection with the Company’s late-stage pipeline, an increase in clinical manufacturing activities, and higher headcount and headcount-related costs. The increase for the full year of 2022, compared to full year 2021, was partly offset by lower costs incurred in connection with development activities for REGEN-COV and fasinumab.
Acquired IPR&D for full year 2022 included a $195 million charge related to the Company’s acquisition of Checkmate Pharmaceuticals, Inc., a $30 million up-front payment in connection with the Company’s collaboration agreement with CytomX (fourth quarter 2022), and a $20 million opt-in payment in connection with a product candidate under the Company’s collaboration agreement with Adicet Bio, Inc. Acquired IPR&D for the fourth quarter and full year of 2021 included $34 million in aggregate up-front payments in connection with the Company’s collaboration agreement with Nykode Therapeutics.
GAAP and non-GAAP SG&A expenses increased in the fourth quarter and full year of 2022, compared to the same periods in the prior year, primarily due to an increase in commercialization-related expenses for Libtayo (as effective July 1, 2022, the Company became solely responsible for the commercialization of Libtayo worldwide), higher contributions to an independent not-for-profit patient assistance organization, and higher headcount and headcount-related costs, partly offset by educational campaigns related to COVID-19 that did not recur during 2022.
GAAP and non-GAAP COGS decreased in the fourth quarter and full year of 2022, compared to the same periods in the prior year, primarily due to the Company recognizing U.S. REGEN-COV net product sales (and corresponding cost of goods sold) during 2021 and a 2021 payment of $260 million owed by the Company in connection with global gross profits under its Roche collaboration agreement; such transactions did not recur in 2022. GAAP and non-GAAP COGS also decreased in 2022 since effective July 1, 2022, following the acquisition of Libtayo worldwide rights, the Company is no longer obligated to pay Sanofi for their share of U.S. Libtayo gross profits.
GAAP COGS also decreased in the fourth quarter and full year of 2022 due to lower inventory write-offs and reserves. Non-GAAP COGS excluded certain charges related to REGEN-COV (primarily inventory write-offs and reserves) of $134 million and $197 million in the fourth quarter and full year of 2022, respectively, and $232 million in each of the fourth quarter and full year of 2021.
Other operating (income) expense, net, for full year 2022 included the recognition of $44 million (an increase to other operating income) as a result of discontinuing further clinical development of fasinumab related to the Company’s Teva and Mitsubishi Tanabe Pharma collaborative arrangements.
Other Financial Information
GAAP other income (expense) included the recognition of net unrealized gains on equity securities of $81 million in the fourth quarter of 2022, compared to $138 million of net unrealized losses in the fourth quarter of 2021. GAAP other income (expense) included the recognition of net unrealized losses on equity securities of $40 million for full year 2022, compared to net unrealized gains of $386 million for full year 2021.
In the fourth quarter and full year 2022, the Company’s GAAP effective tax rate (ETR) was 9.6% and 10.7%, respectively, compared to 11.0% and 13.4% in the fourth quarter and full year 2021, respectively. The GAAP ETR in the fourth quarter and full year 2022, compared to the same periods in the prior year, included a higher benefit from the proportion of income earned in foreign jurisdictions with tax rates lower than the U.S. federal statutory rate (including the impact from REGEN-COV income earned in the U.S. during 2021). In the fourth quarter and full year 2022, the non-GAAP ETR was 11.3% and 12.1%, respectively, compared to 12.6% and 13.5% in the fourth quarter and full year 2021, respectively.
GAAP net income per diluted share was $10.50 in the fourth quarter of 2022, compared to $19.69 in the fourth quarter of 2021. GAAP net income per diluted share was $38.22 for the full year 2022, compared to $71.97 for full year 2021. Non-GAAP net income per diluted share was $12.56 in the fourth quarter of 2022, compared to $23.42 in the fourth quarter of 2021. Non-GAAP net income per diluted share was $44.98 for the full year 2022, compared to $74.35 for the full year 2021. A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.
During the full year 2022, the Company repurchased shares of common stock under its share repurchase program, and recorded the cost of the shares, or $2.100 billion, as Treasury Stock. As of December 31, 2022, $745 million remained available for share repurchases under the program. In January 2023, the Company’s board of directors authorized a new share repurchase program to repurchase up to an additional $3.0 billion of the Company’s common stock. Repurchases may be made from time to time at management’s discretion through a variety of methods. The program has no time limit and can be discontinued at any time.
2023 Financial Guidance(c)
The Company’s full year 2023 financial guidance consists of the following components:
2023 Guidance
GAAP R&D $4.200–$4.435 billion
Non-GAAP R&D(a) $3.725–$3.925 billion
GAAP SG&A $2.460–$2.650 billion
Non-GAAP SG&A(a) $2.130–$2.280 billion
GAAP gross margin on net product sales(d) 88%–90%
Non-GAAP gross margin on net product sales(a)(d) 90%–92%
COCM(e)* $720–$800 million
Capital expenditures* $825–$950 million
GAAP effective tax rate 10%–12%
Non-GAAP effective tax rate(a) 11%–13%
* GAAP and non-GAAP amounts are equivalent as no non-GAAP adjustments have been or are expected to be recorded.
A reconciliation of full year 2023 GAAP to non-GAAP financial guidance is included below:
Projected Range
($ in millions) Low High
GAAP R&D $ 4,200 $ 4,435
Stock-based compensation expense 470 500
Acquisition-related integration costs 5 10
Non-GAAP R&D $ 3,725 $ 3,925
GAAP SG&A $ 2,460 $ 2,650
Stock-based compensation expense 310 330
Acquisition-related integration costs 20 40
Non-GAAP SG&A $ 2,130 $ 2,280
GAAP gross margin on net product sales 88% 90%
Stock-based compensation expense 1% 1%
Intangible asset amortization expense 1% 1%
Non-GAAP gross margin on net product sales 90% 92%
GAAP ETR 10% 12%
Income tax effect of GAAP to non-GAAP reconciling items 1% 1%
Non-GAAP ETR 11% 13%
(a) This press release uses non-GAAP R&D, non-GAAP SG&A, non-GAAP COGS, non-GAAP gross margin on net product sales, non-GAAP other income (expense), net, non-GAAP ETR, non-GAAP net income, non-GAAP net income per share, total revenues excluding REGEN-COV and Ronapreve, and free cash flow, which are financial measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures are computed by excluding certain non-cash and/or other items from the related GAAP financial measure. The Company also includes a non-GAAP adjustment for the estimated income tax effect of reconciling items. A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.
The Company makes such adjustments for items the Company does not view as useful in evaluating its operating performance. For example, adjustments may be made for items that fluctuate from period to period based on factors that are not within the Company’s control (such as the Company’s stock price on the dates share-based grants are issued or changes in the fair value of the Company’s investments in equity securities) or items that are not associated with normal, recurring operations (such as restructuring- or integration-related expenses). Management uses these non-GAAP measures for planning, budgeting, forecasting, assessing historical performance, and making financial and operational decisions, and also provides forecasts to investors on this basis. With respect to free cash flows, the Company believes that this non-GAAP measure provides a further measure of the Company’s operations’ ability to generate cash flows. Additionally, such non-GAAP measures provide investors with an enhanced understanding of the financial performance of the Company’s core business operations. However, there are limitations in the use of these and other non-GAAP financial measures as they exclude certain expenses that are recurring in nature. Furthermore, the Company’s non-GAAP financial measures may not be comparable with non-GAAP information provided by other companies. Any non-GAAP financial measure presented by Regeneron should be considered supplemental to, and not a substitute for, measures of financial performance prepared in accordance with GAAP.
(b) The casirivimab and imdevimab antibody cocktail for COVID-19 is known as REGEN-COV in the United States and Ronapreve in other countries. The Company records net product sales of REGEN-COV in the United States and Roche records net product sales of Ronapreve outside the United States.
(c) The Company’s 2023 financial guidance does not assume the completion of any significant business development transactions not completed as of the date of this press release.
(d) Gross margin on net product sales represents gross profit expressed as a percentage of total net product sales recorded by the Company. Gross profit is calculated as net product sales less cost of goods sold.
(e) Corresponding reimbursements from collaborators and others for manufacturing of commercial supplies is recorded within revenues.
(f) Beginning with the first quarter of 2022, the Company added Acquired in-process research and development as a new line item to its Statements of Operations, which includes IPR&D acquired in connection with asset acquisitions as well as up-front/opt-in payments related to license and collaboration agreements. Amounts recorded in this line would have historically been recorded to Research and development expenses. Prior period amounts have been reclassified to conform with the current period’s presentation.
Beginning with the first quarter of 2022, IPR&D expenses are no longer excluded in the determination of non-GAAP financial results. Prior period non-GAAP results have also been updated to reflect these changes.
Conference Call Information
Regeneron will host a conference call and simultaneous webcast to discuss its fourth quarter and full year 2022 financial and operating results on Friday, February 3, 2023, at 8:30 AM Eastern Time. Participants may access the conference call live via webcast, or register in advance and participate via telephone, on the "Investors and Media" page of Regeneron’s website at www.regeneron.com. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. A replay of the conference call and webcast will be archived on the Company’s website for at least 30 days.