Regeneron reports total revenues of $123.0M for fourth quarter 2011

Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) announced financial and operating results for the fourth quarter and full year 2011 and provided an update on development programs.  

The Company reported total revenues of $123.0 million for the fourth quarter and $445.8 million for the year ended December 31, 2011.  This includes EYLEA net product sales of $24.8 million for the fourth quarter of 2011.  The Company reported a non-GAAP net loss of $34.0 million, or $0.37 per share (basic and diluted), for the fourth quarter and a non-GAAP net loss of $161.7 million, or $1.79 per share (basic and diluted), for the year ended December 31, 2011.  Non-GAAP net loss excludes non-cash share-based compensation expense and non-cash interest expense related to the Company's convertible senior notes.  The Company reported a GAAP net loss of $53.4 million, or $0.58 per share (basic and diluted), for the fourth quarter and a GAAP net loss of $221.8 million, or $2.45 per share (basic and diluted), for the year ended December 31, 2011.  

Regeneron ended the year with approximately $811 million in cash and securities, following an offering of convertible senior notes in October 2011.

"2011 was a milestone year for Regeneron led by the approval and launch of EYLEA for the treatment of wet age-related macular degeneration in the United States," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron.  "The EYLEA launch is off to a strong start, with net sales of $24.8 million from launch on November 21 through December 31, 2011.  We look to continue to build on this success through 2012, and we now forecast 2012 U.S. EYLEA net product sales of $250 million to $300 million."

"In 2011, we also submitted supplemental Biologics License Applications (sBLA) to the FDA for EYLEA for the treatment of central retinal vein occlusion and for ARCALYST® for the prevention of gout flares in patients initiating uric acid-lowering therapies," said George D. Yancopoulos, M.D., Ph.D., Executive Vice President, Chief Scientific Officer, and President, Regeneron Research Laboratories. "Regulatory actions on these sBLAs, as well as on a recently submitted BLA for ZALTRAP® for patients with previously treated metastatic colorectal cancer, are expected during 2012.  Additionally, our collaborator Bayer HealthCare has submitted regulatory applications for EYLEA in Europe, Japan, and other countries, and our collaborator Sanofi has submitted a regulatory application for ZALTRAP in the EU.  We are also pleased with progress in our pipeline, where ten antibodies are now in clinical development, including eight that are part of the Sanofi collaboration. Two antibodies - sarilumab for rheumatoid arthritis and REGN727 for hyperlipidemia - will be in Phase 3 testing in 2012."

Clinical Programs Update

EYLEA® (aflibercept) Injection – Ophthalmologic Diseases

EYLEA, known in the scientific literature as VEGF Trap-Eye, is a fusion protein locally administered in the eye that is designed to bind Vascular Endothelial Growth Factor-A (VEGF-A) and Placental Growth Factor (PlGF), proteins that are involved in the abnormal growth of new blood vessels.  Regeneron maintains exclusive rights to EYLEA in the United States.  Bayer HealthCare has rights to market EYLEA outside the United States, where the companies will share equally in profits from any future sales.

In November 2011, Regeneron announced that it received notification from the U.S. Food and Drug Administration (FDA) that the agency had approved EYLEA Injection for the treatment of patients with the neovascular form of age-related macular degeneration (wet AMD).  The approval was granted under a Priority Review.  During 2011, Bayer HealthCare submitted regulatory applications for marketing approval of EYLEA in wet AMD in the European Union and Japan.  Wet AMD is the leading cause of acquired blindness for people over the age of 65 in the United States and Europe.  

In November 2011, Regeneron and Bayer HealthCare announced the initiation of a Phase 3 trial (SIGHT) evaluating the efficacy and safety of EYLEA in wet AMD in China.  The SIGHT trial will include approximately 300 patients and will be the largest retinal trial conducted in China.  

In December 2011, Regeneron and Bayer HealthCare also announced that in an integrated analysis of two parallel Phase 3 studies (VIEW 1 and VIEW 2) in patients with wet AMD, patients treated with EYLEA showed a sustained improvement in visual acuity at 96 weeks versus baseline with a safety profile similar to that reported in the first year of the study.  

Regeneron has filed an sBLA for EYLEA in central retinal vein occlusion (CRVO) in the United States, and was granted a Prescription Drug User Free Act (PDUFA) date of September 23, 2012.  Bayer HealthCare plans to submit a similar regulatory application outside the United States in 2012 or early 2013.  

Earlier this year, Regeneron and Bayer HealthCare initiated two Phase 3 trials of EYLEA in a third indication, diabetic macular edema (DME).  The VISTA-DME U.S. trial has completed enrollment and the VIVID-DME global trial is enrolling patients.  

Regeneron and Bayer HealthCare also initiated a Phase 3 trial in Asia in collaboration with the Singapore Eye Research Institute in patients with choroidal neovascularisation (CNV) of the retina as a result of pathologic myopia.

Regeneron plans on initiating a Phase 3 study in branch retinal vein occlusion (BRVO) in the first quarter of 2012.  

ZALTRAP® (aflibercept) – Oncology

ZALTRAP, also known as VEGF Trap, is a fusion protein that is designed to bind VEGF-A, VEGF-B, and PlGF, proteins that are involved in the abnormal growth of new blood vessels in solid tumors.  ZALTRAP is being developed worldwide by Regeneron and its collaborator Sanofi for the potential treatment of patients with solid tumors.  

As previously reported in June 2011, in the Phase 3 study (called VELOUR) of ZALTRAP in previously treated metastatic colorectal cancer (mCRC) patients, the addition of ZALTRAP to the FOLFIRI chemotherapy regimen (folinic acid [leucovorin], 5-fluorouracil, and irinotecan) significantly improved both overall survival.

In the VELOUR study, grade 3 or 4 adverse events (AEs) that occurred with a more than two percent greater incidence in the ZALTRAP arm than in the placebo arm included diarrhea, asthenia/fatigue, stomatitis/ulceration, infections, hypertension, GI/abdominal pains, neutropenia, neutropenic complications, and proteinuria.  Deaths on study treatment due to AEs occurred in 2.4 percent of patients in the ZALTRAP arm and in 1.0 percent of patients in the placebo arm.

Based upon these positive results from the VELOUR study, regulatory applications for marketing approval of ZALTRAP were submitted to the FDA and European Medicines Agency.

As previously reported in December 2011, initial data from the Phase 2 AFFIRM study in the first-line mCRC setting showed that in patients who received ZALTRAP in combination with the modified FOLFOX6 regimen (folinic acid [leucovorin], 5-fluorouracil, and oxaliplatin), the Progression Free Survival (PFS) rate at one year was similar to that seen in the standard therapy arm for patients who received the modified FOLFOX6 regimen alone.  The safety profile of ZALTRAP was similar to what was seen in prior trials.

ARCALYST® (rilonacept) – Gout

ARCALYST is a fusion protein that blocks the cytokine interleukin-1 (IL-1).  ARCALYST is currently available for prescription in the United States for the treatment of Cryopyrin-Associated Periodic Syndromes (CAPS), including Familial Cold Auto-inflammatory Syndrome (FCAS) and Muckle-Wells Syndrome (MWS), in adults and children 12 and older.  CAPS is a group of rare, inherited, auto-inflammatory conditions characterized by life-long, recurrent symptoms of rash, fever/chills, joint pain, eye redness/pain, and fatigue.

In the fourth quarter of 2011, Regeneron submitted an sBLA for ARCALYST for the prevention of gout flares in patients initiating uric acid-lowering therapy and was granted a PDUFA date of July 30, 2012.  Regeneron owns worldwide rights to ARCALYST.

Monoclonal Antibodies

Since 2007, Regeneron and Sanofi have collaborated on the discovery, development, and commercialization of fully human monoclonal antibodies generated by Regeneron using its VelocImmune® technology.  

The following ten antibody candidates are currently in clinical development, eight under the collaboration with Sanofi:

Sarilumab (REGN88), an antibody to the interleukin-6 receptor (IL-6R), is in the Phase 3 stage of a Phase 2/3 study (MOBILITY) in rheumatoid arthritis (RA).  

In July 2011, Regeneron and Sanofi announced results from Phase 2b trials in RA with sarilumab.  The Phase 2b MOBILITY trial in RA demonstrated that patients treated with sarilumab in combination with a standard RA treatment, methotrexate (MTX), achieved a significant and clinically meaningful improvement in signs and symptoms of moderate-to-severe RA compared to patients treated with MTX alone.  The MOBILITY study is a 306-patient, dose-ranging, multi-national, randomized, multi-arm, double-blind, placebo-controlled study, that compared five different dose regimens of sarilumab in combination with MTX to placebo plus MTX.  The most common adverse events (>5%) reported more frequently in active treatment arms included infections (non-serious), neutropenia, and liver function test abnormalities.  The types and frequencies of adverse events were consistent with those previously reported with IL-6 inhibition.  The incidence of serious adverse events among the five sarilumab treatment groups and placebo group were comparable.  Sarilumab also demonstrated significant benefit compared to placebo in secondary endpoints, including ACR 50, ACR 70, and DAS 28 scores, additional measures of clinical activity used in RA trials.  

REGN727, an antibody to Proprotein Convertase Substilisin/Kexin type 9 (PCSK9), a novel target for LDL cholesterol ("bad cholesterol") reduction, is in Phase 2 studies.  During 2011, three Phase 2 studies with subcutaneous regimens of REGN727 were initiated: (1) a randomized, double-blind, multi-dose, placebo controlled, 75-patient trial in patients with heterozygous familial hypercholesterolemia (heFH), (2) a randomized, double-blind, multi-dose, placebo controlled, 90-patient trial in combination with atorvastatin in patients with primary hypercholesterolemia, and (3) a randomized, double-blind, multi-dose, placebo controlled, 180-patient trial in combination with atorvastatin in patients with primary hypercholesterolemia and on stable doses of atorvastatin.  The primary endpoint of each Phase 2 study is the change in LDL cholesterol from baseline compared to placebo over the study period.  

In November 2011, Regeneron announced preliminary results from the Phase 2 heFH trial.  In the primary efficacy analysis of the study, after 12 weeks of treatment, patients who received different dosing regimens of REGN727 achieved mean LDL cholesterol reductions from baseline ranging from approximately 30% to greater than 65%, depending on the dosing regimen of REGN727, compared to a mean reduction of 10% with placebo (p<0.05 for all dose groups).  In this trial, REGN727 was generally well tolerated over 12 weeks.  The most common adverse event was injection site reaction and there were no serious adverse events on active treatment.  Additional data from the 8-week post-treatment safety monitoring period will be presented at a future medical congress upon final analysis.

In November 2011, Regeneron also announced preliminary results from the Phase 2 trial studying patients with primary hypercholesterolemia who were on stable doses of atorvastatin.  In the primary endpoint of the study, after eight weeks of treatment, patients who received REGN727 plus atorvastatin 80 milligrams (mg) achieved a greater than 65% reduction in mean LDL cholesterol compared to a mean reduction of 17% for atorvastatin 80mg only (p<0.001).  The study also included a third arm in which REGN727 was added to a stable low dose of atorvastatin, and the patients achieved a greater than 65% reduction in mean LDL cholesterol.  In this trial, REGN727 was generally well tolerated over 16 weeks.  There was one serious adverse event of dehydration in the REGN727 plus atorvastatin 80mg group that was deemed not treatment related.  One patient in the REGN727 plus atorvastatin 80mg group with mildly elevated aspartate aminotransferase (AST) prior to randomization.

Initial data from the third Phase 2 trial, studying subcutaneous regimens of REGN727 in combination with atorvastatin in patients with primary hypercholesterolemia, will be available in the first half of 2012.  

Regeneron and Sanofi are finalizing plans for initiating a Phase 3 program for REGN727.

REGN668, an antibody to the interleukin-4 receptor (IL-4R), a target for allergic and immune conditions, is in a Phase 1b study in patients with atopic dermatitis and a Phase 2 study in eosinophilic asthma.

REGN421, an antibody to Delta-like ligand-4 (Dll4), a novel angiogenesis target, is in a Phase 1 study in patients with advanced malignancies.

REGN910, an antibody to angiopoietin-2 (ANG2), a novel angiogenesis target, is in a Phase 1 study in patients with advanced malignancies.    

REGN475, an antibody to nerve growth factor (NGF), has completed a Phase 2 trial in osteoarthritis of the knee. In December 2010, the FDA informed the Company that a case confirmed as avascular necrosis of a joint was seen in another company's anti-NGF program.  The FDA believes this case, which follows previously-reported cases of joint replacements in patients on an anti-NGF drug candidate being developed by another pharmaceutical company, provides evidence to suggest a class-effect and placed REGN475 on clinical hold.  An FDA Arthritis Advisory Committee is scheduled to meet on March 12, 2012 to discuss possible safety issues related to anti-NGF compounds.  There are currently no ongoing trials with REGN475 that are either enrolling or treating patients.  

REGN728, whose target remains undisclosed, is in a Phase 1 study.

REGN1033, whose target remains undisclosed, will enter Phase 1 studies in the first quarter of 2012.

REGN846, whose target remains undisclosed, is being evaluated in a Phase 2a study in patients with atopic dermatitis.  In July 2011, Sanofi elected not to continue co-development of REGN846, and Regeneron now has sole global rights to REGN846.  Under the terms of the companies' agreement, Sanofi remains obligated to fund REGN846 clinical costs through conclusion of a planned proof-of-concept trial and is entitled to receive a mid-single digit royalty on any future sales of REGN846.  

REGN1154, whose target remains undisclosed, will enter Phase 1 studies in the first quarter of 2012.  Sanofi did not opt in to development of REGN1154.  Regeneron has sole global rights to REGN1154, and Sanofi is entitled to receive a mid-single digit royalty on any future sales of REGN 1154.  

Fourth Quarter and Full Year 2011 Financial Results

Total Revenues: Total revenues were $123.0 million for the fourth quarter and $445.8 million for the full year 2011, compared to $133.7 million for the fourth quarter and $459.1 million for the full year 2010.  Total revenues include total collaboration revenues of $86.4 million for the fourth quarter and $369.7 million for the full year 2011, compared to $117.0 million for the fourth quarter and $386.7 million for the full year 2010.

Product Revenues: Net product sales were $29.8 million for the fourth quarter and $44.7 million for the full year 2011, compared to net product sales of $5.3 million for the fourth quarter and $25.3 million for the full year 2010.  The increase in net product sales is due to the approval and launch of EYLEA in November 2011.  EYLEA net product sales for the fourth quarter and full year 2011 were $24.8 million.  ARCALYST net product sales for the fourth quarter 2011 were $5.0 million, compared to $5.3 million for the fourth quarter 2010.  ARCALYST net product sales for the full year 2011 were $19.9 million, compared to $25.3 million for the full year 2010 which included $20.5 million of ARCALYST net product sales made during 2010 and $4.8 million of previously deferred net product sales.

Research and Development (R&D) Expenses: In 2011, GAAP R&D expenses were $129.0 million for the fourth quarter and $529.5 million for the full year, compared to $125.2 million for the fourth quarter and $489.2 million for the full year 2010.  The higher R&D expenses in 2011 were primarily related to higher R&D headcount, research and preclinical development activities, principally in connection with the Sanofi antibody collaboration, and higher non-cash share-based compensation expense.  In 2011, R&D related non-cash share-based compensation expense was $9.2 million for the fourth quarter and $32.8 million for the full year, compared to $7.0 million for the fourth quarter and $22.3 million for the full year 2010.

Selling, General, and Administrative (SG&A) Expenses: In 2011, GAAP SG&A expenses were $36.3 million for the fourth quarter and $117.3 million for the full year, compared to $20.6 million for the fourth quarter and $65.2 million for the full year 2010.  The higher SG&A expenses in 2011 were primarily related to higher selling expenses in connection with commercialization of EYLEA, higher SG&A headcount, higher recruiting and non-cash share-based compensation expense, and higher legal expenses in connection with our patent litigation with Genentech.  In 2011, SG&A related non-cash share-based compensation expense was $6.3 million for the fourth quarter and $23.3 million for the full year, compared to $6.6 million for the fourth quarter and $17.6 million for the full year 2010.  

Cost of Goods Sold (COGS): In 2011, COGS was $3.0 million for the fourth quarter and $4.2 million for the full year 2011, compared to $0.6 million for the fourth quarter and $2.1 million for the full year 2010.  The increase in COGS in 2011 was primarily due to the launch of EYLEA in the fourth quarter of 2011.  

Interest Expense: In 2011, GAAP interest expense was $9.5 million for the fourth quarter and $21.3 million for the full year, compared to $2.5 million for the fourth quarter and $9.1 million for the full year 2010.  In the fourth quarter and full year 2011, interest expense included $1.5 million of cash interest expense and $3.9 million of non-cash interest expense related to the Company's convertible senior notes, which were issued in October 2011.  

Non-GAAP and GAAP Net Loss: The Company reported a non-GAAP net loss of $34.0 million, or $0.37 per share (basic and diluted), for the fourth quarter 2011, compared to a non-GAAP net loss of $1.1 million, or $0.01 per share (basic and diluted), for the fourth quarter 2010.  The Company had a non-GAAP net loss of $161.7 million, or $1.79 per share (basic and diluted), for the year ended 2011, compared to a non-GAAP net loss of $64.6 million, or $0.78 per share (basic and diluted), for the year ended 2010.  Non-GAAP net loss excludes non-cash share-based compensation expense and non-cash interest expense related to the convertible senior notes.  

The Company reported a GAAP net loss of $53.4 million, or $0.58 per share (basic and diluted), for the fourth quarter 2011, compared to a GAAP net loss of $14.6 million, or $0.17 per share (basic and diluted), for the fourth quarter 2010.  The Company had a GAAP net loss of $221.8 million, or $2.45 per share (basic and diluted), for the full year 2011, compared to a GAAP net loss of $104.5 million, or $1.26 per share (basic and diluted), for the full year 2010.  

Cash Position: At December 31, 2011, cash and marketable securities totaled $810.6 million (including $7.7 million of restricted cash and marketable securities) compared to $626.9 million (including $7.5 million of restricted cash and marketable securities) at December 31, 2010.  In October 2011, the Company completed a private offering of $400 million aggregate principal amount of 1.875% convertible senior notes.  The net proceeds of the offering were $391.1 million after deducting the initial purchaser's discount and offering expenses.  In connection with the offering of the notes, the Company entered into convertible note hedge and warrant transactions with multiple counterparties.  The net cost of the convertible note hedge transactions, after taking into account the proceeds received by the Company from the warrant transactions, was $23.7 million.