Regeneron reports total revenues of $304 million for second quarter 2012

Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) announced financial and operating results for the second quarter of 2012 and provided an update on development programs. 

The Company reported total revenues of $304 million in the second quarter and $536 million in the first half of 2012.  Total revenues included EYLEA net product sales of $194 million in the second quarter and $318 million in the first half of 2012.  The Company reported non-GAAP net income of $102 million, or $0.90 per diluted share, in the second quarter and $142 million, or $1.28 per diluted share, in the first half of 2012.  Non-GAAP net income excludes non-cash share-based compensation expense and non-cash interest expense related to the Company's convertible senior notes.  The Company reported GAAP net income of $77 million, or $0.70 per diluted share, in the second quarter and $88 million, or $0.81 per diluted share, in the first half of 2012. 

"The EYLEA launch continues to progress extremely well and is driving strong sales and earnings growth," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron.  "Based on the results to date, we now forecast 2012 U.S. EYLEA net product sales of $700 to $750 million and expect to be profitable for the full year.  We look forward to marketing approvals and launch of EYLEA outside the U.S. by our collaborator, Bayer HealthCare, during the second half of the year.  We also await the September 23, 2012 PDUFA date for an FDA decision on our application to market EYLEA in the U.S. for the treatment of central retinal vein occlusion (CRVO), which would be in addition to our already approved EYLEA indication in the U.S. for neovascular age-related macular degeneration (wet AMD)."

Second Quarter 2012 Clinical Program Highlights

EYLEA® (aflibercept) Injection

• In May 2012, Bayer HealthCare's Japanese subsidiary, Bayer Yakuhin, Ltd., and Santen Pharmaceutical Co, Ltd. entered into an agreement to co-promote EYLEA in Japan should marketing approval be achieved.  In conjunction with this agreement, Bayer HealthCare and Regeneron amended their existing global license and collaboration agreement for EYLEA to convert the 50/50 profit share for Japan into a royalty arrangement that approximates the economics of the profit split. 
• In June 2012, Bayer HealthCare received marketing approval for EYLEA in Colombia for the treatment of patients with wet AMD.  Regulatory applications were previously submitted in the European Union, Japan, and other countries for this indication and marketing approval has also been received in Australia.
• Enrollment in the international Phase 3 study in diabetic macular edema (DME) was completed in the second quarter.  Enrollment in the U.S. Phase 3 study was completed in the fourth quarter of 2011.
• Regeneron's application to market EYLEA for CRVO in the United States has a PDUFA date of September 23, 2012.  

ZALTRAP® (aflibercept)

• In June 2012, data from a Phase 3 trial with ZALTRAP were presented at an oral session at the American Society of Clinical Oncology (ASCO) meeting in Chicago.
• The application to market ZALTRAP in the United States for patients previously treated for metastatic colorectal cancer has a PDUFA date of August 4, 2012. 

ARCALYST® (rilonacept)

• Regeneron's sBLA for marketing approval of ARCALYST in the United States for the prevention of gout flares in patients initiating uric acid-lowering therapy has a PDUFA date of July 30, 2012.  In May 2012, an FDA Arthritis Advisory Committee voted to recommend against approval of ARCALYST for this indication. 

Monoclonal Antibodies

• Ten fully human monoclonal antibodies based on our VelocImmune^® technology continued in clinical development, including seven in collaboration with Sanofi.
• Following discussions with U.S. and E.U. regulatory authorities, ODYSSEY, a large, global Phase 3 program with REGN727 was initiated in June 2012.  This is the first Phase 3 program of an investigational drug targeting PCSK9 to reduce low-density lipoprotein (LDL) cholesterol.  The ODYSSEY program will include over ten clinical trials and will test the safety and efficacy of REGN727 in multiple treatment strategies and patient types.
• In May 2012, data from an additional Phase 2 trial with REGN727 were published online in The Lancet and also presented at an oral session at the 80th European Atherosclerosis Society (EAS) Congress in Milan, Italy.
• In June 2012, data from a Phase 2b trial with sarilumab in rheumatoid arthritis were presented at an oral session at the Annual European Congress of Rheumatology of the European League Against Rheumatism (EULAR).  The Phase 3 MOBILITY trial continues to enroll patients.

Second Quarter 2012 Financial Results

Total Revenues: Total revenues were $304 million in the second quarter of 2012, compared to $108 million in the second quarter of 2011.  Total revenues include collaboration revenues of $98 million in the second quarter of 2012, and $96 million in the second quarter of 2011.

Product Revenues: Net product sales were $200 million in the second quarter of 2012, compared to $5 million in the second quarter of 2011.  The increase was due to the approval and launch of EYLEA in November 2011.  EYLEA net product sales were $194 million in the second quarter of 2012.  ARCALYST net product sales were $6 million in the second quarter of 2012, compared to $5 million in the second quarter of 2011.  

Research and Development (R&D) Expenses: GAAP R&D expenses were $147 million in the second quarter of 2012, compared to $143 million in the second quarter of 2011.  The increase in 2012 was primarily due to higher R&D headcount and activities (partly related to the Company's antibody collaboration with Sanofi and partly related to the Company's own internal R&D efforts) and higher non-cash share-based compensation expense, partly offset by lower wet AMD development costs incurred by Bayer HealthCare.  In the second quarter of 2012, R&D related non-cash share-based compensation expense was $11 million, compared to $8 million in the second quarter of 2011.

Selling, General, and Administrative (SG&A) Expenses: GAAP SG&A expenses were $48 million in the second quarter of 2012, compared to $25 million in the second quarter of 2011.  The increase was primarily due to higher selling expenses in connection with commercialization of EYLEA, higher SG&A headcount, and higher non-cash share-based compensation expense.  In the second quarter of 2012, SG&A related non-cash share-based compensation expense was $8 million, compared to $5 million in the second quarter of 2011.    

Cost of Goods Sold (COGS): GAAP COGS was $22 million in the second quarter of 2012, compared to approximately $400,000 in the second quarter of 2011.  The increase in 2012 was due to the launch of EYLEA in the fourth quarter of 2011. 

Interest Expense: GAAP interest expense was $11 million in the second quarter of 2012, compared to $4 million in the second quarter of 2011.  In the second quarter of 2012, interest expense included $2 million of cash interest expense and $5 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 Income (Loss): The Company reported non-GAAP net income of $102 million, or $1.07 per basic share and $0.90 per diluted share, in the second quarter of 2012, compared to a non-GAAP net loss of $50 million, or $0.55 per share (basic and diluted), in the second quarter of 2011.  Non-GAAP net income (loss) excludes non-cash share-based compensation expense and non-cash interest expense related to the convertible senior notes. 

The Company reported GAAP net income of $77 million, or $0.81 per basic share and $0.70 per diluted share, in the second quarter of 2012, compared to a GAAP net loss of $63 million, or $0.69 per share (basic and diluted), in the second quarter of 2011. 

Cash Position: At June 30, 2012, cash and marketable securities totaled $597 million (including $8 million of restricted cash and marketable securities), compared to $811 million (including $8 million of restricted cash and marketable securities) at December 31, 2011.  In addition, accounts receivable related to sales of EYLEA totaled $348 million at June 30, 2012.