01—Abstract
Summary
Summary of the 10-K filed February 8, 2021. Cited figures are marked; the original filing is the authoritative source.
Regeneron's FY2020 10-K shows a company at a financial inflection point.
Total revenues rose 30% to $8.50 billiona in 2020 from $6.56 billion in 2019, and net income more than doubled to $3.51 billion, or $30.52 per diluted share (versus $18.46). Growth was driven by EYLEA U.S. net sales of $4.95 billion, Dupixent profit-sharing with Sanofi (Sanofi collaboration revenue rose to $1.19 billion), and first-time REGEN-COV product sales. The effective tax rate fell to 7.8%, which supported earnings, and operating income reached $3.58 billion.
Investors should note that the 2020 profit was helped by a $95 millionb litigation accrual reversal in SG&A and by $99.8 million of net catch-up adjustments in other operating income. Concentration risk remains high. EYLEA U.S. represented 58% of total revenues in 2020, down from 71% in 2019, as Dupixent and REGEN-COV grew in share.
Two customers, Besse Medical (AmerisourceBergen) and McKesson, accounted for 83%c of gross product revenue. EYLEA faces biosimilar threats after November 2023 (with possible extension to May 2024), a pending ITC/patent dispute with Novartis over the pre-filled syringe, and a Medicare Part B most-favored-nation rule that a preliminary injunction has blocked. The company also faces a DOJ civil Anti-Kickback complaint, a related UnitedHealthcare suit, and a CID on physician payments.
Balance-sheet and capital-allocation activity was substantial. Cash and marketable securities totaled $6.72 billiond against $1.98 billion of long-term debt, following $2.0 billion of 2030/2050 senior notes issued to refinance the bridge loan used to buy $5 billion of stock from Sanofi.
Management guided 2021 capex to $600 to $680 million and approved a new $1.5 billion buyback in January 2021. Pipeline catalysts for 2021 include the EYLEA-related FDA decisions, Libtayo first-line NSCLC and BCC decisions, the Evkeeza HoFH decision, and REGEN-COV data and BLA/MAA submission plans, while the odronextamab clinical hold and the garetosmab and fasinumab setbacks are key pipeline risks.
02—Key points
Key Highlights
- Revenue grew 30% to $8.497B in 2020 (from $6.558B), with net income up 66% to $3.513B and diluted EPS of $30.52 versus $18.46 in 2019.
- EYLEA U.S. net sales reached $4.947B (up 6.5%), still the dominant revenue driver, though its share of total revenue fell to 58% from 71% as other products grew.
- Dupixent drove a sharp rise in Sanofi collaboration revenue to $1.186B from $404M, with Regeneron's share of antibody profits reaching $785M and Dupixent U.S. net sales (recorded by Sanofi) growing strongly.
- REGEN-COV received an EUA in November 2020 and generated $185.7M in 2020 U.S. government sales, with a January 2021 agreement for up to $2.625B in additional doses.
- The effective tax rate fell to 7.8% (from 12.9%), and the 2020 results include a $95M litigation accrual reversal and $99.8M of net collaboration catch-up adjustments that flatter reported earnings.
- Customer concentration is high: two distributors accounted for 83% of U.S. gross product revenue, and biosimilar exposure for EYLEA begins in late 2023.
- Capital allocation was active: $5B repurchased from Sanofi in May 2020, $2.0B of senior notes issued, $1.0B buyback completed, and a new $1.5B buyback authorized for 2021.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 8, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $8.50B$6.56B | +29.6% |
| R&D Expenses | $2.65B$2.45B | +8.0% |
| SG&A Expenses | $1.35B$1.34B | +0.3% |
| Operating Expenses | $4.92B$4.35B | +13.2% |
| Operating Income | $3.58B$2.21B | +61.9% |
| Interest Expense | $56.90M$30.20M | +88.4% |
| Net Income | $3.51B$2.12B | +66.0% |
| EPS (Basic) | $32.65$19.38 | +68.5% |
| EPS (Diluted) | $30.52$18.46 | +65.3% |
| Shares Outstanding (Basic) | 107.60M109.20M | −1.5% |
| Shares Outstanding (Diluted) | 115.10M114.60M | +0.4% |
05—Questions
Frequently Asked Questions
How dependent is Regeneron on EYLEA, and what is the risk from biosimilars?
EYLEA U.S. net sales were $4.95B in 2020, representing 58% of total revenues (71% in 2019). The company expects biosimilar competition after the regulatory exclusivity period expires on November 18, 2023, which could extend to May 2024 if pediatric exclusivity is granted. Several companies are developing EYLEA biosimilars, and a loss of exclusivity would likely materially reduce revenues from the product.
What drove the increase in 2020 profitability?
Revenue rose $1.94B, led by EYLEA U.S. sales, Sanofi collaboration revenue (Dupixent profit-sharing), first REGEN-COV sales, and Libtayo growth. Operating expenses rose $573M, largely from R&D and cost of goods. Net income was also boosted by a lower effective tax rate (7.8%) and a $95M reversal of litigation accruals in SG&A. Investors should weigh that one-time benefit when assessing run-rate earnings.
What are the main legal and regulatory risks disclosed?
Key items include: a civil False Claims Act and Anti-Kickback complaint filed by the U.S. Attorney's Office for Massachusetts (motion to dismiss denied in December 2020); a DOJ CID on physician payments; a UnitedHealthcare lawsuit; Novartis's ITC and district court patent actions over the EYLEA pre-filled syringe; Amgen patent litigation over Praluent; and the Medicare Part B most-favored-nation interim final rule, which is currently enjoined. Each could materially affect revenues or results if adversely resolved.
How is the balance sheet positioned to fund operations and capital returns?
At year-end 2020, the company had $6.72B of cash and marketable securities against $1.98B of long-term debt (2030 and 2050 senior notes) plus $717M of finance lease liabilities for the Tarrytown facility. A $750M revolving credit facility was undrawn. The company expects 2021 capex of $600 to $680M and has authorized a new $1.5B share repurchase program. Management believes existing resources are sufficient for the foreseeable future.
What near-term pipeline and regulatory catalysts should investors watch?
Near-term catalysts include FDA decisions on Libtayo for first-line NSCLC (target February 28, 2021) and advanced BCC (March 3, 2021), a Praluent HoFH sBLA decision (April 4, 2021), an Evkeeza BLA decision (February 11, 2021), Dupixent sBLA decisions for pediatric asthma and a 200 mg auto-injector, and REGEN-COV data and a planned BLA/MAA submission in mid-2021. Risks include the odronextamab partial clinical hold, the garetosmab deaths under review, and the discontinued fasinumab program.
06—Continue