01—Abstract
Summary
Summary of the 10-K filed February 18, 2010. Cited figures are marked; the original filing is the authoritative source.
Regeneron's FY2009 10-K shows a company still in the investment phase, with its financial profile driven by collaboration revenue rather than product sales.
Total revenue rose to $379.3 milliona in 2009 from $238.5 million in 2008, while the net loss narrowed to $67.8 million ($0.85 per share) from $79.1 million ($1.00 per share). Roughly $247 million of revenue came from sanofi-aventis under the aflibercept and antibody collaborations, and $67 million came from Bayer HealthCare for VEGF Trap-Eye. ARCALYST, the only marketed product, generated just $18.4 million in net product sales in 2009, and its CAPS-only label keeps the commercial opportunity small.
The company reported a cumulative deficit of $941.1 millionb since inception and $390.0 million in cash, cash equivalents, restricted cash and marketable securities at year-end, which management says funds operations through at least 2012. The near-term value drivers are the late-stage pipeline and the expanded sanofi-aventis antibody partnership. Rilonacept's Phase 3 gout program has data expected in the first half of 2010, VEGF Trap-Eye's VIEW 1 and VIEW 2 wet AMD trials report in late 2010, and the aflibercept VELOUR trial has an interim analysis in the second half of 2010.
Management expects R&D spending to rise substantially in 2010, with headcount growing to roughly 1,350-1,400, so losses are likely to widen before collaboration reimbursements offset them. The November 2009 amendment expanded the antibody collaboration to up to $160 millionc per year of sanofi-aventis funding through 2017. Key risks include the dependence on sanofi-aventis and Bayer HealthCare, both of which can terminate with notice, the competitive threat from Novartis's IL-1 antibody in CAPS and gout, and the discontinuation of the VANILLA pancreatic cancer trial in September 2009.
The filing also discloses a $300 milliond-plus lease-related facility obligation that resulted from an accounting revision. Investors should weigh the cash runway and partner-funded pipeline against heavy clinical spending and the binary outcomes of the pivotal trials.
02—Key points
Key Highlights
- Total revenue rose 59% to $379.3 million in 2009, driven by sanofi-aventis collaboration revenue of $247.2 million and Bayer HealthCare revenue of $67.3 million
- Net loss narrowed to $67.8 million ($0.85 per share) from $79.1 million ($1.00 per share) in 2008, though R&D expense rose to $398.8 million
- ARCALYST (rilonacept) net product sales reached $18.4 million in 2009 versus $6.3 million in 2008; the product is approved only for CAPS in the U.S.
- Cash, cash equivalents, restricted cash and marketable securities totaled $390.0 million at December 31, 2009, down from $527.5 million a year earlier; management expects capital to last through at least 2012
- Key 2010 catalysts include rilonacept gout Phase 3 data (SURGE and PRE-SURGE 1) in the first half, VEGF Trap-Eye VIEW 1/VIEW 2 wet AMD data in late 2010, and an aflibercept VELOUR interim analysis in the second half
- The sanofi-aventis antibody collaboration was expanded in November 2009, with funding of up to $160 million per year through 2017 and an expected 30-40 antibody candidates over eight years
- The aflibercept Phase 3 pancreatic cancer trial (VANILLA) was discontinued in September 2009 after an interim analysis found it unlikely to show a survival benefit
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2009, Regeneron Pharmaceuticals lost $0.18.
- Revenue$379.3M100.0%
- Cost of revenue−$1.7M0.4%
- Gross profit$377.6M99.6%
- Operating costs−$451.7M119.1%
- Operating income−$74.1M19.5%
- Interest, other & tax$6.3M1.7%
- Net income−$67.8M17.9%
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 18, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $379.27M$238.46M | +59.1% |
| Cost of Revenue | $1.69M$923K | +82.7% |
| Gross Profit | $377.58M$237.53M | +59.0% |
| R&D Expenses | $398.76M$274.90M | +45.1% |
| SG&A Expenses | $52.92M$48.88M | +8.3% |
| Operating Expenses | $453.37M$324.71M | +39.6% |
| Operating Income | -$74.10M-$86.25M | +14.1% |
| Interest Expense | $2.34M$7.75M | −69.9% |
| Net Income | -$67.83M-$79.13M | +14.3% |
| EPS (Basic) | $-0.85— | — |
05—Questions
Frequently Asked Questions
How much revenue did Regeneron generate in 2009 and where did it come from?
Regeneron reported total 2009 revenue of $379.3 million, up from $238.5 million in 2008. Sanofi-aventis collaboration revenue was $247.2 million, primarily expense reimbursement for antibody and aflibercept development. Bayer HealthCare contributed $67.3 million, including a $20.0 million milestone for the first CRVO Phase 3 patient dosed. Technology licensing from AstraZeneca and Astellas was $40.0 million, ARCALYST net product sales were $18.4 million, and contract research and other revenue was $6.4 million.
Is Regeneron close to profitability?
Not in the near term. The company has accumulated losses of $941.1 million since its 1988 inception and expects operating losses to continue for several years. Management expects R&D expenses to increase substantially in 2010 and headcount to grow to about 1,350-1,400, so the 2009 net loss of $67.8 million is not a reliable indicator of 2010 results. Profitability depends on successful late-stage trials and commercialization, as well as collaborator reimbursement.
How long will the company's cash last?
Management believes existing capital resources, including funding due under collaboration agreements, will support operations through at least 2012. That projection depends on the current operating plan and could shorten if collaborations terminate, revenue declines, or expenses rise. The company has no bank credit line and states it may need additional financing, which could be dilutive to shareholders.
What are the biggest risks to Regeneron's partnerships?
Sanofi-aventis can terminate the aflibercept collaboration on twelve months' notice and the antibody discovery agreement on three months' notice before December 2017. Bayer HealthCare can terminate VEGF Trap-Eye on six or twelve months' notice. Regeneron would lack the resources to replace either partner, so a termination would significantly slow development and commercialization. Sanofi-aventis's roughly 18.8% stake also carries standstill restrictions and a lock-up on sales until December 2017.
What are the key near-term clinical catalysts?
Initial rilonacept gout Phase 3 data (SURGE and PRE-SURGE 1) are expected in the first half of 2010, and REGN475 osteoarthritis Phase 2 data are expected in the first half of 2010. VEGF Trap-Eye VIEW 1 and VIEW 2 wet AMD data are expected in the fourth quarter of 2010, with CRVO data in early 2011. The aflibercept VELOUR colorectal trial has an interim analysis in the second half of 2010, and the company intends to file a BLA only if pivotal results are positive.
06—Continue