On February 2, 2024 Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) reported financial results for the fourth quarter and full year 2023 and provided a business update (Press release, Regeneron, FEB 2, 2024, View Source [SID1234639821]).
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"2023 marked another year of exceptional accomplishments for Regeneron as we further diversified our revenue base and made important progress in our robust R&D pipeline," said Leonard S. Schleifer, M.D., Ph.D., Board Co-Chair, President and Chief Executive Officer of Regeneron. "In 2024, we plan to build on this momentum with continued growth of our breakthrough products Dupixent and EYLEA HD while we bring additional new therapies to market and advance our growing pipeline. Lastly, I want to congratulate our Chief Financial Officer, Bob Landry, on the occasion of his retirement and thank him for his significant contributions to Regeneron during his ten years with the Company."
Financial Highlights
Three Months Ended
December 31, Year Ended
December 31,
($ in millions, except per share data) 2023 2022 % Change 2023 2022 % Change
Total revenues $ 3,434 $ 3,414 1 % $ 13,117 $ 12,173 8 %
Total revenues excluding Ronapreve(a)(b) $ 3,436 $ 3,018 14 % $ 12,906 $ 11,546 12 %
GAAP net income $ 1,160 $ 1,197 (3 %) $ 3,954 $ 4,338 (9 %)
GAAP net income per share – diluted $ 10.19 $ 10.50 (3 %) $ 34.77 $ 38.22 (9 %)
Non-GAAP net income(a) $ 1,366 $ 1,449 (6 %) $ 5,045 $ 5,164 (2 %)
Non-GAAP net income per share – diluted(a) $ 11.86 $ 12.56 (6 %) $ 43.79 $ 44.98 (3 %)
"We were pleased with our fourth-quarter and full-year 2023 financial performance, highlighted by revenue growth of 14% and 12%, respectively, when excluding contributions from Ronapreve, reflecting continued strength across our business," said Robert E. Landry, Executive Vice President, Finance and Chief Financial Officer of Regeneron. "In 2024, we plan to continue investing heavily in internal R&D, driving commercial execution with targeted promotion, and prudently deploying capital to business development and share repurchases, all of which is expected to better position the Company to deliver sustainable growth and long-term value to shareholders."
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:
EYLEA HD (aflibercept) 8 mg
In January 2024, the European Commission (EC) and Japan’s Ministry of Health, Labour and Welfare (MHLW) each approved EYLEA 8 mg (known as EYLEA HD in the United States) for the treatment of patients with wet age-related macular degeneration (wAMD) and diabetic macular edema (DME).
In January 2024, the United States Centers for Medicare & Medicaid Services (CMS) assigned a permanent and product-specific J-code (J0177) for EYLEA HD. Under the Healthcare Common Procedure Coding System (HCPCS) process, the EYLEA HD J-code will become effective on April 1, 2024. J-codes are permanent reimbursement codes used by government payers and commercial insurers in the United States to facilitate billing for Medicare Part B treatments, which must be administered by a healthcare professional. J-codes simplify and streamline the billing and reimbursement processes, allowing for efficient claims processing.
Dupixent (dupilumab)
The Company and Sanofi announced that based on results from an interim analysis, the second Phase 3 trial (NOTUS) in patients with uncontrolled COPD and evidence of type 2 inflammation met its primary endpoint and showed that Dupixent significantly reduced exacerbations by 34% (confirming positive results from the replicate Phase 3 BOREAS trial). The NOTUS trial also confirmed that treatment with Dupixent led to rapid and significant improvements in lung function by 12 weeks and were sustained at 52 weeks. In December 2023, a supplemental Biologics License Application (sBLA) was submitted to the U.S. Food and Drug Administration (FDA) based on the results of these two trials. A regulatory application has also been submitted in the European Union (EU).
In January 2024, the FDA approved Dupixent for the treatment of children aged 1 to 11 years (weighing at least 15 kg) with eosinophilic esophagitis (EoE), making Dupixent the first and only medicine specifically indicated to treat these patients. A regulatory application has also been submitted in the EU.
Oncology Programs
The Company presented updated positive data from the pivotal trial of linvoseltamab, a bispecific antibody targeting BCMA and CD3, in patients with relapsed/refractory multiple myeloma at the 65th American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting and Exposition.
A BLA for linvoseltamab in relapsed/refractory multiple myeloma was submitted to the FDA in December 2023 and a regulatory application is also under review in the EU.
The Company presented updated data for odronextamab, a bispecific antibody targeting CD20 and CD3, in patients with relapsed/refractory follicular lymphoma (FL) and diffuse large B-cell lymphoma (DLBCL) at the 65th ASH (Free ASH Whitepaper) Annual Meeting and Exposition. A BLA for odronextamab in relapsed/refractory FL and DLBCL is currently under review by the FDA, with a target action date of March 31, 2024, and a regulatory application is also under review in the EU.
The Company presented, at European Society for Medical Oncology Immuno-Oncology (ESMO IO) Congress 2023, initial Phase 1 dose-escalation data for REGN5668, a costimulatory bispecific antibody targeting MUC16 and CD28, in combination with Libtayo (cemiplimab) that showed encouraging initial activity in patients with recurrent ovarian cancer.
Other Programs
The EC approved Evkeeza (evinacumab) as an adjunct to other lipid-lowering therapies to treat children with homozygous familial hypercholesterolemia (HoFH), which extended the approved indication to children as young as 5 years of age.
A Phase 3 study was initiated for NTLA-2001, a TTR gene knockout using CRISPR/Cas9, in transthyretin (ATTR) amyloidosis with cardiomyopathy (ATTR-CM).
The FDA granted Breakthrough Therapy designation to mibavademab, an agonist antibody to leptin receptor (LEPR), for generalized lipodystrophy (for which a Phase 2 study is ongoing).
Corporate and Business Development Updates
In the Company’s ongoing patent infringement lawsuit against Mylan Pharmaceuticals Inc., a wholly-owned subsidiary of Viatris Inc., and Biocon Biologics Inc. concerning Mylan’s filing for FDA approval of an aflibercept 2 mg biosimilar (now owned by Biocon), the United States District Court for the Northern District of West Virginia issued a decision finding that (i) the asserted claims of one of the Company’s formulation patents (U.S. Patent No. 11,084,865) were valid and infringed by Mylan and (ii) the asserted claims of two of the Company’s methods of treatment patents (U.S. Patent Nos. 10,888,601 and 11,253,572) were infringed by Mylan but were invalid as obvious.
In January 2024, the Company entered into an agreement with 2seventy bio, Inc. to acquire full development and commercialization rights to its preclinical and clinical stage cell therapy pipeline and will assume ongoing program, infrastructure, and personnel costs related to these programs. The transaction is expected to close in the first half of 2024 subject to certain customary closing conditions.
The Company announced its inclusion on the Dow Jones Sustainability World Index (DJSI World) for the fifth consecutive year, alongside its fourth consecutive inclusion on the Dow Jones Sustainability North America Index (DJSI North America).
Select Upcoming 2024 Milestones
Programs Milestones
Ophthalmology - Initiate pivotal retinal vein occlusion (RVO) study of EYLEA HD (mid-2024) to enable FDA submission
- Initiate pivotal studies of pozelimab (C5 antibody) in combination with cemdisiran (siRNA therapy) in geographic atrophy (second half 2024)
Immunology & Inflammation - EC decision on regulatory submission for Dupixent for EoE in children (1–11 years of age) (second half 2024)
- sBLA acceptance for Dupixent in COPD with type 2 inflammatory phenotype (first quarter 2024) and FDA decision on sBLA (mid/second half 2024); EC decision on regulatory submission (second half 2024)
- Report results from ongoing Phase 3 study for Dupixent in chronic spontaneous urticaria (CSU) in biologic-naïve patients (fourth quarter 2024)
- Initiate Phase 1 study in severe food allergy following transient linvoseltamab treatment (in combination with Dupixent) (2024)
- Complete enrollment of Phase 3 studies of itepekimab (IL-33 antibody) in COPD (second half 2024)
Solid Organ Oncology - Conduct interim analysis from Phase 3 study of Libtayo in adjuvant cutaneous squamous cell carcinoma (CSCC) (second half 2024)
- Report potentially pivotal initial results from Phase 2/3 study of fianlimab (LAG-3 antibody) in combination with Libtayo in first-line metastatic melanoma and initial combination data in first-line advanced non-small cell lung cancer (NSCLC) (second half 2024)
- Initiate potentially pivotal Phase 2 study for fianlimab (in combination with Libtayo) in perioperative melanoma and Phase 2 study for fianlimab (in combination with Libtayo) in perioperative NSCLC (first half 2024)
- Initiate dose-expansion cohorts of REGN7075 (EGFR and CD28 costimulatory bispecific antibody) in combination with Libtayo in EGFR-high tumors (first half 2024)
- Initiate cohorts combining REGN5678 (PSMA and CD28 costimulatory bispecific antibody) and REGN4336 (PSMA and CD3 bispecific antibody) in metastatic castration-resistant prostate cancer and initiate REGN5678 monotherapy cohort in renal cell carcinoma (first half 2024)
Hematology - FDA decision on BLA (target action date of March 31, 2024) and EC decision on regulatory submission (second half 2024) for odronextamab in relapsed/refractory FL and DLBCL
- BLA acceptance for linvoseltamab in relapsed/refractory multiple myeloma (first quarter 2024) and FDA decision on BLA (second half 2024)
- Initiate Phase 1 study of linvoseltamab in combination with CD38 and CD28 costimulatory bispecific antibody in multiple myeloma (2024)
- Report Phase 2 results for REGN9933 (Factor XI antibody) in thrombosis (second half 2024)
Genetic Medicines - Initiate Phase 1 study of Factor 9 gene insertion in hemophilia B (mid-2024)
- Report additional data from Phase 1/2 study for DB-OTO (AAV-based gene therapy) in pediatrics with hearing loss (2024)
- Initiate Phase 1 study of ALN-SOD (SOD1 siRNA) in amyotrophic lateral sclerosis (ALS) (2024)
Obesity - Initiate Phase 2 study of semaglutide in combination with trevogrumab (anti-myostatin) with and without garetosmab (anti-Activin A) (mid-2024)
Fourth Quarter 2023 Financial Results
Revenues
($ in millions) Q4 2023 Q4 2022 % Change FY 2023 FY 2022 % Change
Net product sales:
EYLEA HD – U.S. $ 123 $ — * $ 166 $ — *
EYLEA – U.S. 1,338 1,496 (11 %) 5,720 6,265 (9 %)
Total EYLEA HD and EYLEA – U.S. 1,461 1,496 (2 %) 5,886 6,265 (6 %)
Libtayo – Global** 244 152 61 % 863 448 93 %
Praluent- U.S. 61 36 69 % 182 130 40 %
Evkeeza – U.S. 24 15 60 % 77 48 60 %
Inmazeb- U.S. 62 — * 70 3 *
Total net product sales 1,852 1,699 9 % 7,078 6,894 3 %
Collaboration revenue:
Sanofi 993 836 19 % 3,800 2,856 33 %
Bayer 377 355 6 % 1,487 1,431 4 %
Other — 396 (100 %) 216 627 (66 %)
Other revenue 212 128 66 % 536 365 47 %
Total revenues $ 3,434 $ 3,414 1 % $ 13,117 $ 12,173 8 %
* Percentage not meaningful
** Effective July 1, 2022, the Company began recording net product sales of Libtayo outside the United States. Excluded from the full year 2023 is approximately $6 million of first quarter 2023 net product sales recorded by Sanofi in connection with sales in certain markets (Sanofi recorded net product sales in such markets during a transition period). Similarly, excluded from the fourth quarter and full year 2022 is approximately $17 million and $34 million, respectively, of net product sales recorded by Sanofi (see Table 5).
Net product sales of EYLEA in the U.S. decreased in the fourth quarter and full year 2023, compared to the same periods of 2022, primarily due to changing market dynamics, resulting in a lower net selling price and lower volumes. EYLEA volumes in the fourth quarter of 2023 were impacted by the August 2023 launch of EYLEA HD and subsequent transition of EYLEA patients to EYLEA HD.
Sanofi collaboration revenue increased in the fourth quarter and full year 2023, compared to the same periods of 2022, primarily due to the Company’s share of profits from commercialization of antibodies, which were $886 million and $619 million in the fourth quarter of 2023 and 2022, respectively, and $3.137 billion and $2.082 billion for the full year 2023 and 2022, respectively. The change in the Company’s share of profits from commercialization of antibodies was driven by higher profits associated with an increase in Dupixent sales. In addition, during 2023 (third quarter) the Company earned the final $50 million sales-based milestone from Sanofi based upon aggregate annual sales of antibodies outside the U.S., compared to earning two $50 million sales-based milestones in 2022 (including one in the fourth quarter of 2022).
The Company recorded collaboration revenue during 2023 and 2022 in connection with payments from Roche attributable to global gross profits from sales of Ronapreve. The decrease in other collaboration revenue was due to lower sales of Ronapreve.
Refer to Table 4 for a summary of collaboration revenue.
Other revenue for the fourth quarter and full year 2023 included the recognition of $16 million and $50 million, respectively, of revenue in connection with the Company’s agreement with BARDA to fund certain costs for a next-generation COVID-19 monoclonal antibody therapy for the prevention of SARS-CoV-2 infection. The increase in other revenue in 2023 was also due to higher royalties earned in connection with sales of Novartis’ Ilaris (canakinumab).
Operating Expenses
GAAP % Change
Non-GAAP(a) % Change
($ in millions) Q4 2023 Q4 2022 Q4 2023 Q4 2022
Research and development (R&D) $ 1,177 $ 1,043 13 % $ 1,031 $ 911 13 %
Acquired in-process research and development (IPR&D) $ 30 $ 30 — % * * n/a
Selling, general, and administrative (SG&A) $ 738 $ 661 12 % $ 622 $ 579 7 %
Cost of goods sold (COGS) $ 307 $ 302 2 % $ 259 $ 126 106 %
Cost of collaboration and contract manufacturing (COCM) $ 210 $ 238 (12 %) * * n/a
Other operating (income) expense, net $ (1 ) $ (7 ) (86 %) * * n/a
GAAP % Change
Non-GAAP(a) % Change
FY 2023 FY 2022 FY 2023 FY 2022
Research and development $ 4,439 $ 3,593 24 % $ 3,919 $ 3,169 24 %
Acquired in-process research and development $ 186 $ 255 (27 %) * * n/a
Selling, general, and administrative $ 2,631 $ 2,116 24 % $ 2,232 $ 1,853 20 %
Cost of goods sold $ 932 $ 800 17 % $ 770 $ 507 52 %
Cost of collaboration and contract manufacturing $ 884 $ 760 16 % * * n/a
Other operating (income) expense, net $ (2 ) $ (90 ) (98 %) * * n/a
* GAAP and non-GAAP amounts are equivalent as no non-GAAP adjustments have been recorded.
GAAP and non-GAAP R&D expenses increased in the fourth quarter and full year 2023, compared to the same periods in the prior year, driven by additional costs incurred in connection with higher headcount and headcount-related costs, the advancement of the Company’s late-stage pipeline, and increased manufacturing activity associated with the Company’s product candidates.
Acquired IPR&D for the full year 2023 included a $100 million development milestone in connection with the Phase 1 ALN-APP program, which is in collaboration with Alnylam Pharmaceuticals, Inc. Acquired IPR&D for the full year 2022 included a $195 million charge related to the Company’s acquisition of Checkmate Pharmaceuticals, Inc.
GAAP and non-GAAP SG&A expenses increased in the fourth quarter of 2023, compared to the fourth quarter of 2022, primarily due to higher headcount and headcount-related costs and higher commercialization-related expenses for various products, including the Company’s retinal franchise, partly offset by lower contributions to an independent not-for-profit patient assistance organization. GAAP and non-GAAP SG&A expenses increased for the full year 2023, compared to full year 2022, primarily due to higher headcount and headcount-related costs, an increase in commercialization-related expenses for Libtayo, and, to a lesser extent, various other products, and higher contributions to an independent not-for-profit patient assistance organization.
Non-GAAP SG&A expenses excluded certain charges related to acquisition and integration-related activities primarily incurred in connection with the July 2022 acquisition of Libtayo worldwide rights.
GAAP and non-GAAP COGS for the fourth quarter and full year 2023, when compared to the same periods in the prior year, included higher start-up costs for the Company’s Rensselaer, New York fill/finish facility and an increase in period costs at the Company’s manufacturing facilities (resulting from lower production volumes). GAAP COGS for the fourth quarter and full year 2023, when compared to the same periods in the prior year, included lower inventory write-offs and reserves (which were primarily related to REGEN-COV in 2022).
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 2022, respectively.
COCM decreased in the fourth quarter of 2023, compared to the fourth quarter of 2022, primarily due to lower Dupixent manufacturing costs as a result of the transition to a higher-yielding manufacturing process. COCM increased for the full year 2023, compared to full year 2022, primarily due to the recognition of costs in connection with manufacturing commercial supplies for Sanofi related to Praluent outside the United States and for Bayer related to EYLEA outside the United States.
Other operating (income) expense, net for the full year 2022 included the recognition of amounts previously deferred in connection with up-front and development milestone payments received in connection with the Company’s previous Sanofi Immuno-Oncology, Teva, and Mitsubishi Tanabe Pharma Corporation collaborative arrangements.
Other Financial Information
GAAP other income (expense) included the recognition of net unrealized losses on equity securities of $238 million for full year 2023, compared to $40 million for full year 2022. GAAP and Non-GAAP other income (expense) also included interest income of $496 million and $160 million for the full year 2023 and 2022, respectively.
In the fourth quarter and full year 2023, the Company’s GAAP effective tax rate (ETR) was (1.0%) and 5.9%, respectively, compared to 9.6% and 10.7% in the fourth quarter and full year 2022, respectively. The GAAP ETR in the fourth quarter and full year 2023, compared to the same periods in the prior year, included a higher benefit from stock-based compensation, federal tax credits for research activities, and the proportion of income earned in foreign jurisdictions with tax rates lower than the U.S. federal statutory rate. In the fourth quarter and full year 2023, the non-GAAP ETR was 2.4% and 9.1%, respectively, compared to 11.3% and 12.1% in the fourth quarter and full year 2022, respectively.
GAAP net income per diluted share was $10.19 in the fourth quarter of 2023, compared to $10.50 in the fourth quarter of 2022. GAAP net income per diluted share was $34.77 for the full year 2023, compared to $38.22 for full year 2022. Non-GAAP net income per diluted share was $11.86 in the fourth quarter of 2023, compared to $12.56 in the fourth quarter of 2022. Non-GAAP net income per diluted share was $43.79 for the full year 2023, compared to $44.98 for full year 2022. A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.
During the fourth quarter and full year 2023, the Company repurchased shares of its common stock and recorded the cost of the shares, or $295 million and $2.215 billion, respectively, as Treasury Stock. As of December 31, 2023, $1.5 billion remained available for share repurchases under the Company’s share repurchase program.
2024 Financial Guidance(c)
The Company’s full year 2024 financial guidance consists of the following components:
2024 Guidance
GAAP R&D $4.820–$5.070 billion
Non-GAAP R&D(a) $4.300–$4.500 billion
GAAP SG&A $2.890–$3.090 billion
Non-GAAP SG&A(a) $2.500–$2.650 billion
GAAP gross margin on net product sales(d) 86%–88%
Non-GAAP gross margin on net product sales(a)(d) 89%–91%
COCM(e)* $850–$910 million
Capital expenditures* $825–$950 million
GAAP effective tax rate 8%–10%
Non-GAAP effective tax rate(a) 10%–12%
* GAAP and non-GAAP amounts are equivalent as no non-GAAP adjustments have been or are expected to be recorded.
A reconciliation of full year 2024 GAAP to non-GAAP financial guidance is included below:
Projected Range
($ in millions) Low High
GAAP R&D $ 4,820 $ 5,070
Stock-based compensation expense 510 540
Acquisition and integration costs 10 30
Non-GAAP R&D $ 4,300 $ 4,500
GAAP SG&A $ 2,890 $ 3,090
Stock-based compensation expense 350 380
Acquisition and integration costs 40 60
Non-GAAP SG&A $ 2,500 $ 2,650
GAAP gross margin on net product sales 86% 88%
Stock-based compensation expense 1% 1%
Intangible asset amortization expense 1% 1%
Acquisition and integration costs <1% <1%
Non-GAAP gross margin on net product sales 89% 91%
GAAP ETR 8% 10%
Income tax effect of GAAP to non-GAAP reconciling items 2% 2%
Non-GAAP ETR 10% 12%
(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 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 acquisition and integration costs). 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 the Company 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. Roche records net product sales of Ronapreve outside the United States.
(c) The Company’s 2024 financial guidance does not assume the completion of any 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) Represents Libtayo global net sales, inclusive of sales outside the United States which were recorded by Sanofi prior to July 1, 2022.
Conference Call Information
Regeneron will host a conference call and simultaneous webcast to discuss its fourth quarter and full year 2023 financial and operating results on Friday, February 2, 2024, 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.