On May 3, 2018 Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) reported financial results for the first quarter of 2018 and provided a business update (Press release, Regeneron, MAY 3, 2018, View Source [SID1234526025]).
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"Regeneron’s commercial business continues to advance with positive sales growth for EYLEA and strong underlying demand for Dupixent," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron. "This year, we have reported positive Phase 3 results for Praluent in cardiovascular risk reduction and for EYLEA in diabetic retinopathy – and look forward to continued progress with Dupixent, including a U.S. regulatory decision in uncontrolled asthma and Phase 3 results in both adolescents with atopic dermatitis and adults with nasal polyps. Our immuno-oncology portfolio is advancing rapidly, with a potential first approval for cemiplimab in advanced cutaneous squamous cell carcinoma, and a broad pivotal program in lung cancer."
First Quarter 2018 Business Highlights
Key Pipeline Progress
Regeneron has seventeen product candidates in clinical development, which consist of EYLEA and fully human antibodies generated using the Company’s VelocImmune technology, including six in collaboration with Sanofi. Updates from the clinical pipeline include:
EYLEA (aflibercept) Injection
In the first quarter of 2018, the Company announced positive top-line results from the Phase 3 PANORAMA study of EYLEA in moderately severe to severe non-proliferative diabetic retinopathy (NPDR). PANORAMA will form the basis of a supplemental Biologics License Application (sBLA) to the U.S. Food and Drug Administration (FDA) by the end of the year.
Dupixent (dupilumab) Injection
Dupixent, an antibody that blocks signaling of IL-4 and IL-13, is currently approved in atopic dermatitis for adults in the United States, European Union, and certain other countries outside the United States.
Dupilumab is being studied in asthma, adolescent and pediatric atopic dermatitis, nasal polyps, and eosinophilic esophagitis (EoE), with additional studies planned in 2018. Data are expected to be reported from Phase 3 studies in patients with nasal polyps and adolescent patients with atopic dermatitis during 2018.
In March 2018, the sBLA for Dupixent as an add-on maintenance treatment in certain adults and adolescents (12 years of age and older) with moderate-to-severe asthma was filed with the FDA, with a target action date of October 20, 2018. In the first quarter of 2018, regulatory applications were also accepted for review by the European Medicines Agency (EMA) and the Pharmaceuticals and Medical Devices Agency (PMDA) in Japan for Dupixent in asthma.
Dupixent for the treatment of atopic dermatitis in adults not adequately controlled with existing therapies was approved by the Ministry of Health, Labor and Welfare (MHLW) in Japan in the first quarter of 2018, and has recently been launched.
In the first quarter of 2018, a Phase 2/3 study in younger pediatric patients (from six months to five years of age) with severe atopic dermatitis was initiated.
Praluent (alirocumab) Injection
In the first quarter of 2018, the Company and Sanofi announced that the ODYSSEY OUTCOMES trial met its primary endpoint, demonstrating that high-risk patients who added Praluent to maximally-tolerated statins experienced significantly fewer major adverse cardiovascular events compared to those on maximally-tolerated statins alone. In addition, in this study, adding Praluent to maximally-tolerated statins was associated with reduced death from any cause.
In May 2018, the Company and Sanofi announced they will lower the net price of Praluent in exchange for straightforward, more affordable patient access from Express Scripts. Praluent will become the exclusive PCSK9 inhibitor therapy on the Express Scripts national formulary. The agreement takes effect on July 1, 2018 for commercial patients covered by the Express Scripts National Preferred Formulary (approximately 25 million individuals in total).
Cemiplimab, an antibody to programmed cell death protein 1 (PD-1), is being studied in patients with cancer.
In April 2018, the FDA accepted for priority review the BLA for cemiplimab for the treatment of patients with metastatic CSCC or patients with locally advanced CSCC who are not candidates for surgery. The target action date for the FDA decision is October 28, 2018.
In April 2018, the EMA also accepted for review the Marketing Authorization Application (MAA) for cemiplimab in patients with metastatic CSCC or patients with locally advanced CSCC who are not candidates for surgery.
Fasinumab, an antibody targeting Nerve Growth Factor (NGF), is being studied in patients with osteoarthritis of the knee or hip and chronic low back pain in patients with concomitant osteoarthritis of the knee or hip.
An independent Data Monitoring Committee monitoring the ongoing safety and efficacy of the fasinumab clinical trials recommended that the higher dose-regimens be discontinued based on the risk benefit assessment and that the program may continue with the lower dose-regimens of fasinumab. The trials are being modified accordingly.
Evinacumab is an antibody to angiopoietin-like protein 3 (ANGPTL3). A Phase 3 study in homozygous familial hypercholesterolemia (HoFH) was initiated in the first quarter of 2018.
Financial Results
Product Revenues: Net product sales were $988 million in the first quarter of 2018, compared to $858 million in the first quarter of 2017. EYLEA net product sales in the United States were $984 million in the first quarter of 2018, compared to $854 million in the first quarter of 2017. Overall distributor inventory levels remained within the Company’s one- to two-week targeted range.
Total Revenues: Total revenues, which include product revenues described above, increased by 15% to $1.511 billion in the first quarter of 2018, compared to $1.319 billion in the first quarter of 2017. Total revenues include Sanofi and Bayer collaboration revenues of $437 million in the first quarter of 2018, compared to $404 million in the first quarter of 2017. Sanofi collaboration revenue in the first quarter of 2018 decreased primarily due to the Company’s Discovery and Preclinical Development Agreement with Sanofi ending on December 31, 2017, lower reimbursement for Dupixent (dupilumab) development activities, and an increase in the Company’s share of the collaborations’ Dupixent commercialization expenses. These decreases were partly offset by the Company’s share of higher net sales of Dupixent (as the product was launched at the end of March 2017), and an increase in reimbursement revenues in connection with late-stage clinical development activities for cemiplimab. Bayer collaboration revenue increased in the first quarter of 2018 primarily due to an increase in the Company’s share of net profits in connection with higher sales of EYLEA outside the United States.
Other revenue in the first quarter of 2018 increased primarily due to higher reimbursements of the Company’s fasinumab research and development expenses in connection with the Company’s collaboration agreement with Teva.
The Company adopted Accounting Standard Codification (ASC) 606, Revenue from Contracts with Customers, as of January 1, 2018. The Company adopted the standard using the modified retrospective method; prior period amounts have not been adjusted and the Company recognized a cumulative-effect adjustment to reduce Retained earnings and increase Deferred revenue on January 1, 2018 by $143 million, net of tax. The adoption of the new standard did not have a material impact of the Company’s total revenues in the first quarter of 2018.
Refer to Table 4 for a summary of collaboration and other revenue.
Research and Development (R&D) Expenses: GAAP R&D expenses were $499 million in the first quarter of 2018, compared to $507 million in the first quarter of 2017. The lower R&D expenses in the first quarter of 2018 were principally due to a decrease in clinical manufacturing costs and a decrease in dupilumab development costs. These decreases were partly offset by an increase in cemiplimab and fasinumab clinical trial costs. In the first quarter of 2018, R&D-related non-cash share-based compensation expense was $41 million, compared to $74 million in the first quarter of 2017. The decrease in total non-cash share-based compensation expense in the first quarter of 2018 was primarily attributable to a revision in the Company’s estimate of the number of stock options that are expected to be forfeited.
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Selling, General, and Administrative (SG&A) Expenses: GAAP SG&A expenses were $331 million in the first quarter of 2018, compared to $297 million in the first quarter of 2017. The higher SG&A expenses in the first quarter of 2018 were primarily due to higher headcount and headcount-related costs and an increase in commercialization-related expenses to support the launch of Dupixent. In the first quarter of 2018, SG&A-related non-cash share-based compensation expense decreased to $35 million, compared to $54 million in the first quarter of 2017, primarily due to the revision in the Company’s estimate of stock option forfeitures as described under "R&D Expenses" above.
Income Tax Expense: In the first quarter of 2018, GAAP income tax expense was $107 million and the effective tax rate was 18.3%, compared to $183 million and 42.4% in the first quarter of 2017. The Company’s effective tax rate for the first quarter of 2018 was significantly impacted by the bill known as the Tax Cuts and Jobs Act (the "U.S. Tax Reform Act"), which reduced the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018. The effective tax rate for the first quarter of 2018 was positively impacted, compared to the U.S. federal statutory rate, primarily by the foreign-derived intangible income deduction and the federal tax credit for research activities.
Other income, net: GAAP other income in the first quarter of 2018 included the recognition of unrealized gains on equity securities. In the first quarter of 2018, the Company adopted Accounting Standards Update ("ASU") 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, as of January 1, 2018, which requires the Company to measure equity investments at fair value with changes in fair value recognized in net income; previously, such changes in fair value were recognized in Other comprehensive income (loss). Refer to Table 3 for the non-GAAP adjustment related to these gains.
GAAP and Non-GAAP Net Income(2): GAAP net income was $478 million, or $4.44 per basic share and $4.16 per diluted share, in the first quarter of 2018, compared to GAAP net income of $249 million, or $2.36 per basic share and $2.16 per diluted share, in the first quarter of 2017.
Non-GAAP net income was $537 million, or $4.99 per basic share and $4.67 per diluted share, in the first quarter of 2018, compared to non-GAAP net income of $337 million, or $3.19 per basic share and $2.92 per diluted share, in the first quarter of 2017
Regeneron records net product sales of EYLEA in the United States. Outside the United States, EYLEA net product sales comprise sales by Bayer in countries other than Japan and sales by Santen Pharmaceutical Co., Ltd. in Japan under a co-promotion agreement with an affiliate of Bayer. The Company recognizes its share of the profits (including a percentage on sales in Japan) from EYLEA sales outside the United States within "Bayer collaboration revenue" in its Statements of Operations.
This press release uses non-GAAP net income, non-GAAP net income per share, non-GAAP unreimbursed R&D, and non-GAAP SG&A, 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 other items from the related GAAP financial measure. Non-GAAP adjustments also include the estimated income tax effect of reconciling items.
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 equity investments) or items that are not associated with normal, recurring operations (such as changes in applicable laws and regulations). 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. 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. A reconciliation of the Company’s historical GAAP to non-GAAP results is included in Table 3 of this press release.
The Company’s 2018 financial guidance does not assume the completion of any significant business development transactions not completed as of the date of this press release.
Conference Call Information
Regeneron will host a conference call and simultaneous webcast to discuss its first quarter 2018 financial and operating results on Thursday, May 3, 2018, at 8:30 AM. To access this call, dial (800) 708-4540 (U.S.) or (847) 619-6397 (International). A link to the webcast may be accessed from the "Investors & Media" page of Regeneron’s website at View Source A replay of the conference call and webcast will be archived on the Company’s website and will be available for 30 days.