10-QPeriod: Q3 FY2003

REGENERON PHARMACEUTICALS, INC. Quarterly Report for Q3 Ended Sep 30, 2003

Filed November 12, 2003For Securities:REGN

Summary

Regeneron Pharmaceuticals, Inc. (REGN) reported its third-quarter and nine-month results for the period ending September 30, 2003. The company continues to operate at a net loss, consistent with its business model focused on research and development. Significant developments during the period include new collaboration agreements with major pharmaceutical companies, Novartis and Aventis, for their respective IL-1 Trap and VEGF Trap product candidates. These collaborations provide substantial upfront payments and equity investments, bolstering the company's cash position and validating its drug development pipeline. Financially, Regeneron saw an increase in revenue driven by these new collaborations and its ongoing contract manufacturing agreement with Merck. Despite rising revenues, operating expenses, particularly in research and development, also increased. The company ended the period with a robust cash balance, providing sufficient runway for its ongoing clinical trials and development activities. Investors should monitor the progress of key pipeline candidates, particularly AXOKINE, IL-1 Trap, and VEGF Trap, as well as the terms and milestones of its significant partnerships.

Key Highlights

  • 1Increased total revenue to $17.4 million for Q3 2003 ($6.6 million in Q3 2002) and $36.2 million for the nine months ended Sept 30, 2003 ($17.1 million in the prior year period), primarily driven by new collaboration agreements and contract manufacturing.
  • 2Entered into significant collaboration agreements with Novartis (IL-1 Trap) and Aventis (VEGF Trap), including substantial upfront payments, equity investments, and potential future milestone payments.
  • 3Cash and cash equivalents increased significantly to $298.6 million at September 30, 2003, from $80.1 million at December 31, 2002, indicating strong liquidity.
  • 4Reported net loss for Q3 2003 of $27.4 million (or $0.52 per share), compared to a net loss of $32.8 million (or $0.75 per share) in Q3 2002. Nine-month net loss was $88.1 million (or $1.80 per share) compared to $88.7 million (or $2.02 per share) in the prior year.
  • 5Research and Development expenses increased to $34.7 million for Q3 2003 ($34.3 million in Q3 2002) and $102.8 million for the nine months ended Sept 30, 2003 ($90.5 million in the prior year period), reflecting continued investment in pipeline development.
  • 6Initiated a change in accounting method for revenue recognition related to non-refundable collaborator payments (Substantive Milestone Method), which increased Q3 2003 revenue and reduced net loss.
  • 7AXOKINE Phase III pivotal trial demonstrated statistically significant weight loss but was limited by antibody development; the company is proceeding with further Phase III development for obesity.

Frequently Asked Questions

As of September 30, 2003, Regeneron reported total assets of $500.5 million, with total liabilities of $344.3 million and stockholders' equity of $156.2 million. The company had a strong cash position with $298.6 million in cash and cash equivalents and $69.7 million in marketable securities, indicating sufficient liquidity to fund ongoing operations.

Key developments include progress with AXOKINE for obesity, where further Phase III trials are planned despite antibody-related limitations in previous studies. The IL-1 Trap showed evidence of efficacy and safety in a Phase II rheumatoid arthritis study and is being jointly developed with Novartis. The VEGF Trap, in collaboration with Aventis, is in Phase I trials for cancer and ophthalmology indications, with further studies planned.

The collaborations with Novartis (IL-1 Trap) and Aventis (VEGF Trap) provided significant financial inflows. In the third quarter of 2003, revenue from contract research and development increased substantially due to these agreements, contributing to an overall revenue increase. These partnerships also provided upfront payments and equity investments, bolstering Regeneron's cash reserves and validating its research efforts.

Regeneron expects to continue incurring substantial operating losses as it invests heavily in research and development. The company believes its current capital resources are sufficient to meet operating needs through at least the end of 2005. However, future funding may be sought through additional collaboration agreements or public/private financing. Profitability is contingent on successfully developing and commercializing its product candidates, which remains a long-term objective.