*
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996March 31, 1997
---------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to _______________________
Commission File Number 0-19034
-------
REGENERON PHARMACEUTICALS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-3444607
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
777 Old Saw Mill River Road
Tarrytown, New York 10591-6707
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(914) 347-7000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
___----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of October 31, 1996:April 30, 1997:
Class of Common Stock Number of Shares
- ------------------------------- ----------------
Class A Stock, $0.001 par value 4,616,0734,335,824
Common Stock, $0.001 par value 21,029,76022,166,169
Page 1 of 3417
REGENERON PHARMACEUTICALS, INC.
Table of Contents
September 30, 1996March 31, 1997
Page Numbers
------------
PART I-I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheets (unaudited) at September 30,
1996March 31, 1997
and December 31, 19951996 3
Condensed statements of operations (unaudited) for the three
months ended March 31, 1997 and nine months ended September 30, 1996
and 1995 4
Condensed statements of cash flows (unaudited) for the
ninethree months ended September 30,March 31, 1997 and 1996 and 1995 5
Notes to condensed financial statements 6-86
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-177-13
PART II- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 1814
SIGNATURE PAGE 19
Exhibit 3(i) Certificate of Amendment of the Restated
Certificate of Incorporation of Regeneron
Pharmaceuticals, Inc., as at October 18, 1996. 20-31
Exhibit 4 Rights Agreement, dated as of September 20, 1996,
between Regeneron Pharmaceuticals, Inc. and ChaseMellon
Shareholder Services L.L.C., as Rights Agent, including
the form of Rights Certificate as Exhibit B thereto.
(Incorporated by reference.)15
Exhibit 11 Statement of computation of net loss per share for the three
months ended March 31, 1997 and nine months ended September 30,
1996 and 1995. 32
Exhibit 17 Letter of Resignation of James W. Fordyce, Director,
dated October 1, 1996. 3316
Exhibit 27 Financial data schedule. 3417
2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REGENERON PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS AT SEPTEMBER 30, 1996MARCH 31, 1997 AND DECEMBER 31, 19951996 (Unaudited)
September 30,March 31, December 31,
ASSETS 1997 1996
1995
---- ---------------- -------------
ASSETS
Current assets
Cash and cash equivalents $37,452,802 $32,736,026$ 27,914,539 $ 34,475,060
Marketable securities 29,230,441 13,417,634
Receivable due from Amgen-Regeneron Partners 1,972,660 668,99040,141,043 45,587,404
Receivable due from Sumitomo Pharmaceuticals Company, Ltd. 2,352,499 1,749,0622,072,473 2,072,455
Receivable due from Merck & Co., Inc. 1,551,712 271,630793,581 1,816,056
Receivable due from Amgen-Regeneron Partners 446,269 446,269
Prepaid expenses and other current assets 847,259 359,111
-------------- --------------528,087 611,435
------------- -------------
Total current assets 73,407,373 49,202,45371,895,992 85,008,679
Marketable securities 21,319,621 13,468,35023,223,159 16,965,302
Investment in Amgen-Regeneron Partners 1,260,158 1,273,5381,205,299
Property, plant and equipment, at cost, net of accumulated depreciation
and amortization of $17,954,424 in 1996 and $14,402,833 in 1995 33,686,093 27,870,72033,846,173 34,297,843
Other assets 926,596 1,996,284
-------------- --------------102,935 104,731
------------- -------------
Total assets $130,599,841 $93,811,345
============== ==============$ 129,068,259 $ 137,581,854
============= =============
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $4,230,306 $6,289,832
Note payable, current portion 79,062 83,444$ 3,416,852 $ 4,357,145
Capital lease obligations, current portion 3,687,186 3,408,0903,291,977 3,505,221
Note payable, current portion 76,532 77,684
Capital contribution due to Amgen-Regeneron Partners 485,700
Deferred revenue, current portion 920,831 3,166,665
-------------- --------------2,426,326 4,108,412
------------- -------------
Total current liabilities 8,917,385 12,948,0319,697,387 12,048,462
Capital lease obligations 3,351,957 4,152,1002,726,546 3,400,015
Note payable 1,767,722 1,825,7661,730,031 1,748,082
Other liabilities 163,748 103,374198,337 183,426
Deferred revenue 12,174,499 6,925,62513,673,302 13,270,870
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 30,000,000 shares authorized; issued and outstanding - none
Class A Stock, convertible, $.001 par value; 40,000,000 shares authorized;
4,777,7574,345,824 shares issued (4,760,684 outstanding)and outstanding in 1996;
5,403,9231997
4,355,994 shares issued (5,386,850 outstanding)and outstanding in 1995 4,777 5,4041996 4,346 4,356
Common Stock, $.001 par value; 60,000,000 shares authorized;
20,855,18622,152,619 shares issued and outstanding in 1996;
16,465,4291997
21,319,896 shares issued and outstanding in 1995 20,855 16,4651996 22,153 21,320
Additional paid-in capital 254,145,791 193,594,141264,848,892 264,742,236
Unearned compensation (1,170,000) (1,440,000)(990,000) (1,080,000)
Accumulated deficit (148,886,178) (124,605,334)(162,957,961) (157,029,112)
Net unrealized gain on marketable securities 109,452 285,940
-------------- --------------
104,224,697 67,856,616
Less, Class A Stock held in treasury, at cost: 17,073 shares in 1996 and
1995 (167) (167)
-------------- --------------115,226 272,199
------------- -------------
Total stockholders' equity 104,224,530 67,856,449
-------------- --------------101,042,656 106,930,999
------------- -------------
Total liabilities and stockholders' equity $130,599,841 $93,811,345
============== ==============$ 129,068,259 $ 137,581,854
============= =============
The accompanying notes are an integral part of the financial statements.
3
REGENERON PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three months Nine months
ended September 30, ended September 30,
1996 1995 1996 1995
---------------------------- ----------------------------
Revenues
Contract research and development $4,306,232 $4,783,045 $13,085,518 $18,489,394
Contract manufacturing 557,927 743,357 1,394,287 743,357
Investment income 1,357,528 659,265 3,088,713 2,409,070
--------------- ------------ --------------- ----------------
6,221,687 6,185,667 17,568,518 21,641,821
--------------- ------------ --------------- ----------------
Expenses
Research and development 7,660,787 5,679,154 21,389,751 17,319,913
Loss in Amgen-Regeneron Partners 4,109,300 3,693,578 10,288,380 9,103,278
General and administrative 1,422,479 1,365,963 4,519,978 4,594,079
Depreciation and amortization 1,497,494 1,463,267 4,513,749 4,441,375
Interest 214,181 218,896 692,239 969,667
Other 206,159 910,687 445,265 910,687
--------------- ------------ --------------- ----------------
15,110,400 13,331,545 41,849,362 37,338,999
--------------- ------------ --------------- ----------------
Net loss ($8,888,713) ($7,145,878) ($24,280,844) ($15,697,178)
--------------- ------------ --------------- ----------------
Net loss per share ($0.35) ($0.37) ($1.01) ($0.81)
===============Three months
ended March 31,
1997 1996
------------ ------------
Revenues
Contract research and development $ 4,238,438 $ 4,182,896
Investment income 1,278,741 600,422
Contract manufacturing 696,456 405,351
------------ ------------
6,213,635 5,188,669
------------ ------------
Expenses
Research and development 7,076,471 6,926,403
Loss in Amgen-Regeneron Partners 1,700,000 2,661,900
General and administrative 1,463,927 1,510,945
Depreciation and amortization 1,201,497 1,490,954
Contract manufacturing 492,862 115,336
Interest 207,727 250,629
------------ ------------
12,142,484 12,956,167
------------ ------------
Net loss ($ 5,928,849) ($ 7,767,498)
============ ============
Net loss per share ($0.23) ($0.35)
============ ============
Weighted average number of Common
and Class A shares outstanding 25,798,971 22,007,864
============ ============ =============== ================
Weighted average number of Common
and Class A shares outstanding 25,605,159 19,520,245 24,066,180 19,444,247
=============== ============ =============== ================
The accompanying notes are an integral part of the financial statements.
4
REGENERON PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
NineThree months ended September 30,March 31,
1997 1996
1995
---- ---------------- ------------
Cash flows from operating activities
Net loss ($24,280,844) 5,928,849) ($15,697,178) 7,767,498)
------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities
Loss inShare of net loss of Amgen-Regeneron Partners 10,288,380 9,103,2781,700,000 2,661,900
Depreciation and amortization 4,513,749 4,441,375
Amortization of lease incentive (50,300)1,201,497 1,490,954
Stock issued in consideration for services rendered 270,000 270,00090,000 90,000
Changes in assets and liabilities
IncreaseDecrease in amounts due from Amgen-Regeneron Partners (1,303,670) (865,894)
Increase162,410
(Increase) in amounts due from Sumitomo
Pharmaceuticals Co., Ltd. (603,437) (1,749,062)
Increase(18) (216,769)
Decrease (increase) in amounts due from Merck & Co., Inc. (1,280,082) (910,024)
Increase1,022,475 (1,493,359)
(Increase) in investment in Amgen-Regeneron Partners (10,275,000) (5,471,000)
Increase(9,001) (2,670,000)
Decrease in prepaid expenses and other assets (380,617) (201,267)
Increase (decrease)85,144 10,823
(Decrease) increase in deferred revenue 3,003,040 (8,083,337)
Decrease(1,279,654) 899,634
(Decrease) in accounts payable, accrued expenses,
and other liabilities (158,504) (1,067,722)
------------- -------------(240,643) (507,183)
------------ ------------
Total adjustments 4,073,859 (4,583,953)
------------- -------------2,569,800 428,410
------------ ------------
Net cash used in(used in) operating activities (20,206,985) (20,281,131)
------------- -------------(3,359,049) (7,339,088)
------------ ------------
Cash flows from investing activities
PurchasesPurchase of marketable securities (54,530,151) (21,660,071)
Sales(20,561,837) (18,387,003)
Sale of marketable securities 30,689,585 26,604,38819,593,368 9,483,152
Capital expenditures (8,014,762) (561,501)
------------- -------------(1,184,566) (4,758,580)
------------ ------------
Net cash (used in) provided by investing activities (31,855,328) 4,382,816
------------- -------------(2,153,035) (13,662,431)
------------ ------------
Cash flows from financing activities
Net proceeds from the issuance of stock 59,367,260 541,927equity securitie 107,479 1,000,283
Principal payments on note payable (62,426) (68,007)(19,203) (20,694)
Capital lease payments (2,525,745) (2,312,814)
Purchase of treasury stock (5)
------------- -------------(1,136,713) (789,904)
------------ ------------
Net cash (used in) provided by (used in) financing activities 56,779,089 (1,838,899)
------------- -------------act (1,048,437) 189,685
------------ ------------
Net increase (decrease) in cash and cash equivalents 4,716,776 (17,737,214)
------------- -------------(6,560,521) (20,811,834)
------------ ------------
Cash and cash equivalents at beginning of periodyear 34,475,060 32,736,026
23,645,914
------------- ------------------------- ------------
Cash and cash equivalents at end of period $37,452,802 $5,908,700
============= =============year $ 27,914,539 $ 11,924,192
============ ============
Supplemental disclosure of cash flow information
Cash paid for interest $631,865 $891,687$ 192,816 $ 230,282
============ ============
The accompanying notes are an integral part of the financial statements.
5
REGENERON PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
1. Interim Financial Statements
In the opinion of management of the Company, the accompanying
unaudited interim financial statements reflect all adjustments,
consisting only of normal recurring accruals, necessary to present
fairly the Company's financial position as of September 30, 1996March 31, 1997 and
December 31, 19951996 and the results of operations for the three and nine months
ended September 30, 1996March 31, 1997 and 1995.1996. The results of operations for such
interim periods are not necessarily indicative of the results to be
expected for the full year.
The
condensed interim financial statements should be read in conjunction with the
audited financial statements included in the Company's annual report on Form
10-K.
Certain reclassifications have been made to the financial statements
for 1995 in order to conform with the current period's presentation.
2. Statement of Cash Flows
Supplemental disclosure of noncash investing and financing activities:
CapitalThere were capital lease obligations of approximately $2,005,000 and $361,000
were$250,000 incurred duringin the first
ninethree months of 1996 and 1995, respectively, when
the Company leased new equipment.1997.
Included in accounts payable and accrued expenses at September 30,March 31, 1997
and December 31, 1996 were approximately $432,000$104,000 and $800,000,
respectively, of accrued capital expenditures.
At December 31, 1995, the Company had accrued $850,000 as its
contribution to the settlement of a securities class action lawsuit. During
January 1996, the Company issued shares of its Common Stock, valued at
$850,000, in settlement of this obligation.
3. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses as of September 30, 1996March 31, 1997 and
December 31, 19951996 consist of the following:
September 30,March 31, December 31,
1997 1996
1995
---- -------------- ----------
Accounts payable ............................. $2,371,027 $3,240,050$1,586,646 $2,178,308
Accrued payroll and related costs ............ 779,904 1,054,626776,755 1,047,812
Accrued clinical trial expense ............... 319,500 350,000
Accrued litigation settlement ................ 850,000319,500
Accrued expenses, other ...................... 337,412 299,412311,488 389,062
Deferred compensation ........................ 422,463 495,744422,463
---------- ----------
$4,230,306 $6,289,832$3,416,852 $4,357,145
========== ==========
6
4. Marketable Securities
The following table summarizes the amortized cost basis of marketable
securities, the aggregate fair value of marketable securities, and gross
unrealized holding gains and losses at September 30, 1996:
Amortized Fair Unrealized Holding
Cost Basis Value Gains (Losses) Net
---------- ----- ----- -------- ---
Maturities within one year
Corporate debt securities $ 7,220,473 $ 7,273,750 $ 58,192 ($4,915) $ 53,277
U.S. Government securities 21,807,885 21,956,691 156,153 (7,347) 148,806
---------- ---------- ------- ------- -------
29,028,358 29,230,441 214,345 (12,262) 202,083
---------- ---------- ------- -------- -------
Maturities between one and two years
Corporate debt securities 9,317,154 9,304,152 11,719 (24,721) (13,002)
U.S. Government securities 12,095,098 12,015,469 4,037 (83,666) (79,629)
---------- ---------- ------- -------- --------
21,412,252 21,319,621 15,756 (108,387) (92,631)
---------- ---------- ------- --------- --------
$50,440,610 $50,550,062 $230,101 ($120,649) $109,452
=========== =========== ======== ========== ========
The aggregate net unrealized gain of $109,452 has been included as an
increase to stockholders' equity at September 30, 1996.
5. Stock and Warrant Agreement
On April 15, 1996 Amgen Inc. purchased from the Company 3 million
shares of Common Stock for $48.0 million. The purchase price also included
warrants to purchase an additional 700,000 shares of Common Stock at an
exercise price of $16.00 per share. The warrants are fully exercisable, expire
on April 15, 2001, and are subject to antidilution provisions.
6. Collaboration Agreement
On June 27, 1996, the Company and Medtronic, Inc. ("Medtronic")
entered into a worldwide exclusive joint development agreement (the "Medtronic
Agreement") to collaborate on research and development of a family of
therapeutics for central nervous system diseases and disorders using
experimental Regeneron compounds and Medtronic delivery systems. The Medtronic
Agreement, among other things, provides for the Company and Medtronic to fund
development costs and supply amounts of drug and delivery systems,
respectively. In addition, Medtronic is required to make payments to Regeneron
if certain clinical milestones are achieved and the Company is required to pay
royalties to Medtronic based upon net sales of any drug developed under the
collaboration. The Medtronic Agreement may be terminated by written agreement
of both parties, by either party if certain regulatory approvals have not been
obtained within specified time periods, or by either party under certain other
conditions.
In addition, on June 27, 1996, Medtronic purchased from the Company
460,500 shares of Common Stock for $10.0 million. The purchase price also
included warrants to purchase an additional 107,400 shares of Common Stock at
an exercise price of $21.72 per share. The number of shares issuable upon
exercise of these warrants is subject to reduction in the event that Medtronic
elects a cashless exercise option. The warrants are fully exercisable, expire
on June 26, 2001, and are subject to antidilution provisions.
7
7. Shareholder Rights Plan
On September 20, 1996, the Company announced that it adopted a
Shareholder Rights Plan in which Rights will be distributed as a dividend at
the rate of one Right for each share of Common Shares and Class A Stock
(collectively, "Common Stock") held by shareholders of record as of the close
of business on October 18, 1996. Each Right initially will entitle the
registered holder to buy a unit ("Unit") consisting of one-one thousandth of a
share of Series A Junior Participating Preferred Stock ("A Preferred Stock") at
a purchase price of $120 per Unit (the "Purchase Price"). Initially the Rights
will be attached to all Common Stock certificates representing shares then
outstanding, and no separate Rights certificate will be distributed. The Rights
will separate from the Common Stock and a "distribution date" will occur upon
the earlier of (i) ten days after a public announcement that a person or group
of affiliated or associated persons, excluding certain defined persons, (an
"Acquiring Person") has acquired, or has obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of Common Stock
or (ii) ten business days following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 20%
or more of such outstanding shares of Common Stock.
The Rights are not exercisable unless a distribution date occurs and
will expire at the close of business on October 18, 2006 unless earlier
redeemed by the Company, subject to certain defined restrictions, for $.01 per
Right. In the event that an Acquiring Person becomes the beneficial owner of
20% or more of the then outstanding shares of Common Stock (unless such
acquisition is made pursuant to a tender or exchange offer for all outstanding
shares of the Company, at a price determined by a majority of the independent
directors of the Company who are not representatives, nominees, affiliates,
associates of an Acquiring Person to be fair and otherwise in the best interest
of the Company and its shareholders after receiving advice from one or more
investment banking firms), each Right will entitle the holder to purchase, at
the Right's then current exercise price, Common Shares (or, in certain
circumstances, cash, property or other securities of the Company), having a
value twice the Right's Exercise Price. The Exercise Price is the Purchase
Price times the number of shares of Common Shares associated with each Right
(initially, one). Upon the occurrence of any such events, the Rights held by an
Acquiring Person become null and void. In certain circumstances, a Right
entitles the holder to receive, upon exercise, shares of common stock of an
acquiring company having a value equal to two times the Exercise Price.
As a result of the Shareholder Rights Plan, the Company's Board of
Directors designated 100,000 shares of preferred stock as A Preferred Stock.
The A Preferred Stock has certain preferences, as defined.
8. Capital Leases
In June 1996, the Company executed a new leasing agreement (the "New
Lease Line") which provides up to $3.0 million to finance equipment
acquisitions and certain building improvements, as defined, (collectively, the
"Equipment"). The Company may utilize the New Lease Line in increments
("leases"). Lease terms are for four years after the takedown, after which the
Company is required to purchase the Equipment at specified amounts, or the
leases will be renewed for eight months at specified monthly payments after
which the Company will own the Equipment. At September 30, 1996, the Company
had available approximately $1.0 million of the New Lease Line.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Overview. The discussion below contains forward-looking statements that
involve risks and uncertainties relating to the future financial performance of
Regeneron Pharmaceuticals, Inc. ("Regeneron" or the "Company") and actual
events or results may differ materially. These statements concern, among other
things, the possible therapeutic applications of the Company's product
candidates and research programs, the timing and nature of the Company's
clinical and research programs now underway or planned, a variety of items
described herein and in the footnotes to the Company's financial statements (including the
useful life of assets, the anticipated length of agreements, and other
matters), and the future uses of capital and financial needs of the Company.
These statements are made by the Company based on management's current beliefs
and judgment. In evaluating such statements, stockholders and investors should
specifically consider the various factors identified under the caption "Factors
That May Affect Future Operating Results" which could cause actual results to
differ materially from those indicated by such forward-looking statements.
During the thirdfirst quarter of 1996,1997, Amgen Inc. ("Amgen"), on behalf of
Amgen-Regeneron Partners, completed the treatment period of a Phase III
clinical trial designed to determine the safety and efficacy of brain-derived
neurotrophic factor ("BDNF") in the treatment of amyotrophic lateral sclerosis
("ALS", commonly known as Lou Gehrig's disease). In addition, Amgen, on behalf
of Amgen-Regeneron Partners, continued to conduct a Phase I/IIfurther clinical trial of
neurotrophin-3 ("NT-3") for the treatment of peripheral neuropathies caused by
diabetes. Amgen also continued to conduct a trial of BDNF in Europe for the
treatment of neuropathies caused by diabetes. The Company continued to develop
and manufacture BDNF for use by Sumitomo Pharmaceuticals Co., Ltd. ("Sumitomo
Pharmaceuticals"Pharmacteuticals") in Japan and continued the development of a series of
preclinical research programs in the areas of inflammatory and muscle disease,
angiogenesis, hematopoiesis, and cancer.
The BDNFIn January 1997, Amgen and Regeneron announced that the Phase
III clinical trial forof BDNF delivered subcutaneously did not demonstrate
clinical efficacy in patients with ALS was completed in September
1996, but the results are uncertain and will not be known until the data is
reviewed and analyzed. The Company believes that such results are likely to be
known during the first quarter of 1997. If the study demonstrates a
statistically significant and clinically effective and safe treatment regimen,
it could have a materially beneficial effect on the Company. However, if the trial is not conclusively successful, it could haveconfirmed the safety
and tolerability of BDNF seen in earlier trials. The failure of the Phase III
trial to achieve its primary end points had a materially adverse effect on the Company, the
price of the Company's Common Stock (which declined more than 50% immediately
after the announcement of the results of the trial). After the Phase III
clinical trial results were announced, the Company retained independent experts
in the fields of neurology and gastroenterology, as well as independent
statisticians, to conduct further examination of the data. This review by the
Company and the outside panels indicated 1) that a subset of ALS patients in
the trial may have received a benefit from BDNF treatment and 2) that BDNF
appeared to have an effect on the gastrointestinal system and might have a
therapeutic role in treating constipating conditions, among other disorders.
The panels recommended, among other things, that additional clinical and
preclinical investigations of subcutaneous BDNF for ALS and BDNF for
gastrointestinal conditions should be undertaken. The Company is reviewing
these recommendations and the Phase III data and is discussing with Amgen and
Sumitomo Pharmaceuticals whether to undertake these or other investigations of
BDNF. Further development of BDNF in the United States must be undertaken in
accordance with the terms of the Company's ability to raise additional capital.collaboration agreement with Amgen.
Although Sumitomo Pharmaceuticals had planned a Phase I safety assessment of
BDNF early in 1997, they are currently reviewing their BDNF development plan in
light of the recently available information.
7
The results of the Company's and its collaborators' past activities in
connection with the research and development of BDNF and NT-3 do not
necessarily predict the results or success of future activities including, but
not limited to, any additional preclinical or clinical studies of BDNF or NT-3.
The Company cannot predict whether, when, or under what conditions BDNF or NT-3
will be shown to be safe or effective to treat any human condition or be
approved for marketing by any regulatory agency. The delay or failure of
current or future studies to demonstrate the safety or efficacy of BDNF or NT-3
to treat human conditions or to be approved for marketing would have a material
adverse impact on the Company.
9
The potential successCompany and Amgen are conducting a Phase I trial of BDNF for ALS
using intrathecal delivery. While intrathecal delivery may be more successful
in delivering BDNF to certain motor neurons (the nerve cells that degenerate in
ALS), it is not known whether intrathecal delivery will prove any more
successful in demonstrating safety and utility in patients with ALS than the
BDNFsubcutaneous delivery used in the Phase III clinical trial that failed to
achieve its primary end points. If additional studies of BDNF for ALS are
undertaken, the time and expense required for such trials could be material to
the Company and the outcome will be uncertain. If subsequent trials are
conducted and such trials fail to demonstrate that BDNF is also dependent
upon, among other things, certain factors that could undermine the significance
of the data collected from such patients. Patients who were taking RilutekTM,
an orally administered drug manufactured by Rhone-Poulenc Rorer approved forsafe and effective
in the treatment of ALS, were not, on that basis, ineligible to participate in the
BDNF clinical trial, and Amgen and the Company know that some patients who were
taking RilutekTM were enrolled in the BDNF trial. The clinical effects of
taking both drugs are completely unknown and therefore unanticipated effectsfailure could complicate the trial or render the data collected difficult to analyze or
interpret. Amgen, on behalf of Amgen-Regeneron Partners, designed the BDNF
clinical trial to take into account the inclusion of patients who may have been
taking RilutekTM. However, if the Phase III clinical study is compromised
through the inclusion of patients who were taking RilutekTM or other
medications, with or without the consent or knowledge of the trial sponsor, the
results of the study may be undermined and additional clinical studies may be
required, causing a delay in, and increasing the costs of, the development of
BDNF, which would have a materialmaterially adverse effect on
the Company.Company, the price of the Company's Common Stock, and the Company's ability
to raise additional capital.
No assurance can be given that extended administration of NT-3 will be
safe or effective. The Phase I study of NT-3 in normal human volunteers that
concluded in 1995 was a short term (seven day) treatment study. The 1996current
NT-3 clinical study involves substantially longer treatment (six months or
longer). In the Phase I
study, two out of the seventy-six patients developed significant abnormalities
of blood tests of their liver function. These laboratory abnormalities reversed
after cessation of treatment and were not associated with any other evidence of
liver dysfunction. Similar abnormalities have not been observed in preclinical
toxicology studies with NT-3. However, if such abnormalities were to occur in a
number of patients in subsequent trials, including the 1996 study, this result
could delay or preclude the further development of NT-3. The treatment of peripheral neuropathies associated with cancer chemotherapies or diabetesneuropathy may present additional clinical
trial risks in light of the complex and not wholly understood mechanisms of
action that lead to the neuropathies, the presence of many other drugs to treat
the underlying conditions, the potential difficulty of achieving significant
clinical endpoints, and other factors. No assurance can be given that these or
any other studies of NT-3 will be successful or that NT-3 will be
commercialized.
To date, Regeneron has not received any revenues from the commercial
sale of products and depending on the success of the BDNF ALS trial, may notnever receive any such revenues for several years.revenues. Before such revenues can
be realized, the Company (or its collaborators) must overcome a number of
hurdles which include successfully completing its research and development
efforts and obtaining regulatory approval from the United States Food and Drug
Administration ("FDA") or regulatory authorities in other countries. In
addition, the biotechnology and pharmaceutical industries are rapidly evolving
and highly competitive, and new developments may render the Company's products
and technologies noncompetitive and obsolete.
In the absence of revenues from commercial product sales or other
sources (the amount, timing, nature, or source of which can not be predicted),
the Company's losses will continue as the Company conducts its research and
development activities. The Company's activities may expand over time and may
require additional resources, and the Company's operating losses may be
substantial over at least the next several years. The Company's losses may
fluctuate from quarter to quarter and will depend, among other factors, on the
timing of certain expenses and on the progress of the Company's research and
development efforts.
108
In September 1996, the Company announced that the Board of Directors
adopted a Shareholder Rights Plan in which Rights will be distributed as a
dividend at the rate of one Right for each share of Common Shares and Class A
Stock (collectively, "Common Stock") held by shareholders of record as of the
close of business on October 18, 1996. Each Right initially will entitle the
registered holder to buy a unit ("Unit") consisting of one-one thousandth of a
share of Series A Junior Participating Preferred Stock ("A Preferred Stock") at
a purchase price of $120 per Unit (the "Purchase Price"). Initially the Rights
will be attached to all Common Stock certificates representing shares then
outstanding, and no separate Rights certificate will be distributed. The Rights
will separate from the Common Stock and a "distribution date" will occur upon
the earlier of (i) ten days after a public announcement that a person or group
of affiliated or associated persons (an "Acquiring Person") has acquired, or
has obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding shares of Common Stock or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 20% or more of such outstanding shares of Common
Stock. The definition of Acquiring Person, subject to certain limitations set
forth in the Rights Agreement, excludes Amgen Inc. and Leonard S. Schleifer,
M.D., Ph.D., founder, President, and Chief Executive Officer of the Company.
The Rights are not exercisable unless a distribution date occurs and
will expire at the close of business on October 18, 2006 unless earlier
redeemed by the Company. In the event that an Acquiring Person becomes the
beneficial owner of 20% or more of the then outstanding shares of Common Stock
(unless such acquisition is made pursuant to a tender or exchange offer for all
outstanding shares of the Company, at a price determined by a majority of the
independent directors of the Company who are not representatives, nominees,
affiliates, associates of an Acquiring Person to be fair and otherwise in the
best interest of the Company and its shareholders after receiving advice from
one or more investment banking firms), each Right will entitle the holder to
purchase, at the Right's then current exercise price, Common Shares (or, in
certain circumstances, cash, property or other securities of the Company),
having a value twice the Right's Exercise Price. The Exercise Price is the
Purchase Price times the number of shares of Common Shares associated with each
Right (initially, one). Upon the occurrence of any such events, the Rights held
by an Acquiring Person become null and void. In certain circumstances, a Right
entitles the holder to receive, upon exercise, shares of common stock of an
acquiring company having a value equal to two times the Exercise Price.
As a result of the Shareholder Rights Plan, the Company's Board of
Directors designated 100,000 shares of preferred stock as A Preferred Stock.
The A Preferred Stock has certain preferences, as defined.
Results of Operations
Three months ended September 30, 1996March 31, 1997 and 1995.1996. The Company's total revenue
for both the third quarter of 1996 and 1995 wasincreased to $6.2 million. Contract
research and development revenue decreased to $4.3 million for the thirdfirst quarter of 19961997 from $4.8$5.2 million for
the same period in 1995.1996. Contract research and development revenue remained the
same at $4.2 million for the first quarter of 1997 compared to the same period
in 1996. Contract research and development revenue earned from Sumitomo
Pharmaceuticals increased to $2.8 million forin the thirdfirst quarter of 19961997 from
$2.7 million for the same period in 1995.1996. Of the thirdfirst quarter 1997 and 1996
Sumitomo Pharmaceuticals revenue, $0.8$0.7 million was for contract research for
both periods, and $2.1 million and $2.0 million was reimbursement for
developing manufacturing processes for BDNF and supplying BDNF. Of
11
the third quarter 1995 Sumitomo Pharmaceuticals revenue, $1.0 million was for
contract research and $1.7 million was reimbursement for developing
manufacturing processes for, and supplying, BDNF.BDNF, respectively.
Contract research and development revenue earned from Amgen and Amgen-Regeneron Partners
(the
"Partnership"("the Partnership") decreased to $1.5$0.5 million for the thirdfirst quarter of 19961997
from $2.1$1.5 million for the same period in 1995.1996. This reflects a decision by the Partnership
to focus more spending in 1996 on clinical trials and other precommercial
activities conducted by Amgen and less spending on
preclinical research conducted by Regeneron. During the third quarter of 1995, theRegeneron and Amgen on BDNF and NT-3. The Company entered
into a research collaboration agreement with Procter & Gamble Pharmaceuticals,
Inc. ("Procter & Gamble") in December of 1996, and contract research revenue
related to this agreement totaled $0.9 million for the first quarter 1997.
Contract manufacturing revenue related to the long-term manufacturing agreement
(the "Merck Agreement") with Merck & Co., Inc. ("Merck"), and contract manufacturing revenue for the thirdfirst quarters
of 1997 and 1996 and 1995 related to this agreement totaled $0.6$0.7 million and $0.7$0.4 million, respectively.
Investment income in the thirdfirst quarter of 19961997 increased to $1.4$1.3 million from
$0.7$0.6 million for the same period in 1995,1996, due primarily due to increasedhigher levels of
interest-bearing investments resulting from the sale by the
Companyprivate placements of equity
securities towith Amgen, Medtronic, Inc. ("Medtronic"), and Procter & Gamble in
April, June, and December 1996, and to Medtronic, Inc. in
June 1996.respectively.
The Company's total operating expenses increaseddecreased to $15.1$12.1 million in
the thirdfirst quarter of 19961997 from $13.3$13.0 million for the same period in 1995.1996.
Research and development expense increased to $7.7$7.1 million in the thirdfirst quarter
of 19961997 from $5.7$6.9 million for the same period in 1995 primarily due to costs
related to the Company's preclinical research programs,1996 as well as the costsa result of increased
activity in the Company's Rensselaer, New York manufacturing facility related
to the Company's agreement with Sumitomo Pharmaceuticals.Merck. Loss in Amgen-Regeneron Partners
increaseddecreased to $4.1$1.7 million in the thirdfirst quarter of 19961997 from $3.7$2.7 million for
the same period in 1995, primarily due1996, as the Partnership completed the Phase III clinical
trial of BDNF in 1996. Research and development expenses (including Loss in
Amgen-Regeneron Partners) were approximately 72% of total operating expenses in
the first quarter of 1997 compared to increased costs
related to clinical trials and precommercial activities conducted by Amgen on
behalf of74% for the Partnership.same period in 1996.
General and administrative expense was $1.4expenses totaled $1.5 million in both the thirdfirst
quarters of 1997 and 1996, as a decrease in legal and patent expenses in 1997
offset increases in salary and employee benefit expenses. Depreciation and
amortization decreased from $1.5 million in the first quarter of 1996 and 1995. Depreciation expense was $1.5to $1.2
million in both the thirdfirst quarter of 19961997 as older lab equipment became fully
depreciated and 1995. Other expenses ofbecause capitalized patent costs were fully amortized in 1996.
Interest expense decreased to $0.2 million in the thirdfirst quarter of 1997 from
$0.3 million for the same period in 1996, resulting from the expiration of
equipment leases during 1996. Contract manufacturing expenses are direct
expenses related to contractthe long-term manufacturing foragreement with Merck. Other expenses of $0.9 million in the third quarter of 1995 related
primarily to the recognition of the Company's contribution to the settlement of
shareholder class action litigation.
The Company's net loss for the thirdfirst quarter of 19961997 was $8.9$5.9 million,
or $0.35$0.23 per share, compared to a net loss of $7.1$7.8 million, or $0.37$0.35 per share,
for the same period in 1995.
Nine months ended September 30, 1996 and 1995. The Company's total
revenue for the nine months ended September 30, 1996 was $17.6 million,
compared to $21.6 million for the same period in 1995. Contract research and
development revenue decreased to $13.1 million for the nine months ended
September 30, 1996 from $18.5 million for the same period in 1995. Contract
research and development revenue earned from Sumitomo Pharmaceuticals decreased
to $8.7 million in the nine months ended September 30, 1996 from $12.7 million
for the same period in 1995. Of the nine months ended September 30, 1996
Sumitomo Pharmaceuticals revenue, $2.2 million was for contract research and
$6.5 million was reimbursement for developing manufacturing processes for, and
supplying, BDNF. Of the nine months 1995 Sumitomo Pharmaceuticals revenue, $7.4
million was for contract research (including $5.4 million related to a
non-recurring contract research payment) and $5.3 million was reimbursement for
developing manufacturing processes for, and supplying, BDNF. Contract research
and development revenue earned from Amgen and Amgen-Regeneron
121996.
9
Partners decreased to $4.4 million for the nine months ended September 30, 1996
from $5.8 million for the same period in 1995. This reflects a decision by the
Partnership to focus more spending in 1996 on clinical trials and other
precommercial activities conducted by Amgen and less spending on preclinical
research conducted by Regeneron. During the third quarter of 1995, the Company
entered into the Merck Agreement. Contract manufacturing revenue for the nine
months ended September 30, 1996 and September 30, 1995 related to this agreement
aggregated $1.4 million and $0.7 million, respectively. Investment income for
the nine months ended September 30, 1996 increased to $3.1 million from $2.4
million for the same period in 1995, primarily due to increased levels of
interest-bearing investments resulting from the sale by the Company of equity
securities in a public offering in November 1995 and in private placements to
Amgen and Medtronic, Inc. in April and June 1996, respectively.
The Company's total operating expenses increased to $41.8 million in
the nine months ended September 30, 1996 from $37.3 million for the same period
in 1995. Research and development expense increased to $21.4 million in the
nine months ended September 30, 1996 from $17.3 million for the same period in
1995 primarily due to costs related to the Company's preclinical research
programs, as well as the costs of increased activity in the Company's
Rensselaer, New York manufacturing facility related to the Company's agreement
with Sumitomo Pharmaceuticals. Loss in Amgen-Regeneron Partners increased to
$10.3 million in the nine months ended September 30, 1996 from $9.1 million for
the same period in 1995, primarily due to increased costs related to clinical
trials and other precommercial activities conducted by Amgen on behalf of the
Partnership.
General and administrative expense decreased to $4.5 million for the
nine months ended September 30, 1996 from $4.6 million for the same period in
1995. Interest expense decreased to $0.7 million in the nine months ended
September 30, 1996 from $1.0 million for the same period in 1995, resulting
from the expiration of capital leases during 1995 and the first nine months of
1996. Other expenses of $0.4 million in the nine months ended September 30,
1996 were direct expenses related to contract manufacturing for Merck. Other
expenses of $0.9 million in the nine months ended September 30, 1995 related
primarily to the recognition of the Company's contribution to the settlement of
shareholder class action litigation.
The Company's net loss for the nine months ended September 30, 1996
was $24.3 million, or $1.01 per share, compared to a net loss of $15.7 million,
or $0.81 per share, for the same period in 1995.
Liquidity and Capital Resources
Since its inception in 1988, the Company has financed its operations
primarily through private placements and public offerings of its equity
securities, revenue earned under the several agreements between the Company and
each of Amgen, Sumitomo Chemical Company, Ltd., Sumitomo Pharmaceuticals,
Merck, Medtronic, and Merck,Procter & Gamble and investment income. In connection
with the Company's agreement to collaborate with Procter & Gamble in the
research and development of skeletal muscle disease and injury, Procter &
Gamble paid the Company $1.0 million in December 1996, and has agreed to pay
the Company an additional $3.75 million per year through at least December
1999. In connection with the Company's agreement to collaborate with Sumitomo
Pharmaceuticals in the research and development of BDNF in Japan, Sumitomo
Pharmaceuticals has paid the Company $19.0$22.0 million through December 1996 (which
includes a payment of $3.0 million for 1997) and has agreed to pay the Company an
additional $3.0 million annually in 1997 and 1998. Sumitomo Pharmaceuticals has the option to
cancel any remaining annual payments;the 1998 payment; however, if such a cancellation were to occur,
theSumitomo Pharmaceutical's rights to develop and commercialize BDNF in Japan
would revert to the Company. In addition,
13
the Company is being reimbursed in
connection with supplying Sumitomo Pharmaceuticals with BDNF for preclinical
use.
Under the Amgen Agreement, Amgen was required to make defined payments
through June 1995 to the Company for research and development efforts in the
United States in connection with BDNF and NT-3. As provided in the Amgen
Agreement, after Amgen determined that Investigational New Drug applications
("IND") should be filed for BDNF and NT-3, Amgen and Regeneron created
Amgen-Regeneron Partners to conduct the development and commercialization of
these product candidates. The Partnership began operations in June 1993 with
respect to BDNF and in January 1994 with respect to NT-3. Amgen's required
payments for BDNF and NT-3 were made directly to Regeneron prior to the
determination by Amgen that the preparation of an IND for each compound should
commence and thereafter to the Partnership. The Company's further activities relating to BDNF and NT-3, as agreed upon by
Amgen and Regeneron, are being reimbursed by the Partnership,Amgen-Regeneron Partners, and the
Company recognizes such reimbursement as revenue. The funding of
the PartnershipAmgen-Regeneron Partners is through capital contributions from Amgen and
Regeneron, who must make equal payments in order to maintain equal ownership
and equal sharing of any profits or losses from the Partnership.partnership. The Company
has made capital contributions totaling $38.7approximately $42.6 million to
Amgen-Regeneron Partners from the Partnership'spartnership's inception in June 1993 through
September 30, 1996.March 31, 1997. The Company expects that its capital contributions in 19961997 will
total approximately $15.5$3.0 million to $5.0 million. These contributions could
increase in
the future,or decrease, depending upon the resultscost of the BDNF ALS clinical trial and the
otherAmgen-Regeneron Partners'
conducting additional BDNF and NT-3 preclinical and clinical studies amongand the
outcomes of those and other things.ongoing studies. Capital contributions beyond 19961997
are also anticipated to be significant.
In September 1995, the Company entered into the Merck Agreement.
Depending on the volume of the intermediate supplied to Merck, total capital
and product payments from Merck to Regeneron could total $40.0 million or more
over the term of the agreement, which is expected to extend to 2003. This
agreement may be terminated at any time by Merck upon the payment by Merck of a
termination fee.
From its inception in January 1988 through September 30, 1996March 31, 1997, the Company
has invested $51.6approximately $54.2 million in property, plant and equipment,
including $16.8 million to acquire and renovate itsthe Rensselaer facility, $6.3
million of newly completed construction, and $11.2$6.6 million of new construction
that is in progress related to the modification of the facility in connection
with the Merck Agreement. In connection with the purchase and renovation of the
Rensselaer New York manufacturing facility, the Company obtained financing of $2.0 million from the
New York State Urban Development Corporation, of which $1.8 million was outstanding at September 30,
1996.is
outstanding. Under the terms of such financing the Company is not permitted to
declare or pay dividends to its stockholders.
In JuneDuring 1996, the Company executedentered into a series of new leasing
agreementagreements (the "New Lease Line") which provides up to $3.0$4.0 million to finance
equipment acquisitions and certain building improvements, as defined,
(collectively, the "Equipment"). The Company may utilize the New Lease Line in
increments ("leases"). Lease terms are for four years after the takedown, after which the Company
is required to purchase the Equipment at specified amounts, ordefined amounts. Certain of the leases
willmay be renewed for eight months at specifieddefined monthly payments after which the
Company will own the Equipment. At September 30, 1996,March 31, 1997, the Company had available
approximately $1.0$0.8 million of the New Lease Line.
10
The Company expects that expenses related to the filing, prosecution,
defense and enforcement of patent and other intellectual property claims will
continue to be 14
substantial as a result of patent filings and prosecutions in
the United States and foreign countries. While the Company has applied for or received a number of
patents to protect its intellectual properties, there can be no assurance that
the patents will be enforceable or will provide protection against competing
technology. The Company is currently involved in
two interference proceedings in the Patent and Trademark Office between
Regeneron's patent applications and patents relating to ciliary neurotrophic factor ("CNTF")CNTF issued to
Synergen, Inc. Amgen acquired all outstanding shares of Synergen in 1994.
As of September 30, 1996,March 31, 1997, the Company had no established banking
arrangements through which it could obtain short-term financing or a line of
credit. Additional funds may be raised through, among other things, the
issuance of additional securities, other financing arrangements, and future
collaboration agreements. No assurance can be given that additional financing
will be available or, if available, that it will be available on acceptable
terms.
At September 30, 1996,March 31, 1997, the Company had $88.0$91.3 million in cash, cash
equivalents, and marketable securities. The Company expects to incur substantialongoing
funding requirements for capital contributions to Amgen-Regeneron Partners to
support the continued development and clinical trials of BDNF and NT-3. If the Partnership's Phase III study of BDNF is successful, the Company
anticipates that expenses related to the launch and initial marketing of BDNF
will be substantial. The
Company also expects to incur substantial funding requirements for, among other
things, its research and development activities (including preclinical and
clinical testing), validation of its manufacturing facilities, and the
acquisition of equipment, and may incur substantial funding requirements for
expenses related to the patent interference proceedings and other patent
matters. The amount needed to fund operations will also depend on other
factors, including the status of competitive products, the success of the
Company's research and development programs, the status of patents and other
intellectual property rights developments, and the extent and success of any
collaborative research programs. The Company expects to incur additional
capital expenditures in connection with the renovation and validation of its
Rensselaer facility pursuant to its manufacturing agreement with Merck.
However, the Company also expects that such expenditures will be substantially
reimbursed by Merck, subject to certain conditions. The Company believes that
its existing capital resources will enable it to meet operating needs for the
next several years.into
1999. No assurance can be given that there will be no change in projected
revenues or expenses that would lead to the Company's capital being consumed at
a faster rate than currently expected. In order to continue to attempt to
assure Regeneron's financial condition and maximize its technological
developments for the long-term benefit of shareholders, the Company from time
to time seeks additional corporate partners and explores other opportunities to
obtain research and development funding. No assurance can be given that such
partners or funding will be available or, if available, will be on terms
favorable or acceptable to the Company.
Factors That May Affect Future Operating Results
Regeneron cautions stockholders and investors that the following
important factors, among others, in some cases have affected, and in the future
could affect, Regeneron's actual results and could cause Regeneron's actual
results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, Regeneron. The statements under this
caption are intended to serve as cautionary statements within the meaning of
the Private Securities Litigation Reform Act of 1995. The following information
is not intended to limit in any way the characterization of other statements or
information under other captions as cautionary statements for such purpose:
1511
o Delay, difficulty, or failure of the Company's preclinical drug research
and development programs to produce product candidates that are
scientifically or commercially appropriate for further development by the
Company or others.
o Delay, difficulty, or failure in obtaining regulatory approval (including
approval of its facilities for production) for the Company's products
(including vaccine intermediate for Merck), including delays or
difficulties in development because of insufficient proof of safety or
efficacy.
o Delay, difficulty, or failure of the Company's preclinical drug
research and development programs to produce product candidates that
are scientifically or commercially appropriate for further development
by the Company or others.
o Increased and irregular costs of development, regulatory approval,
manufacture, sales, and marketing associated with the introduction of
products in the late stage of development.
o Difficulties in launchingCancellation or marketing the Company's products by the
Companytermination of material collaborative or its licensees, especially when such products are novel
products basedlicensing
agreements and resulting loss of research or other funding and have other
material adverse effects on biotechnology, and unpredictability of customer
acceptance of such products.
o Lack of experience with the ALS or peripheral neuropathy patient
population and customer base in the United States could lead to a
variety of materially adverse developments; other factors that could
materially affect the Company's future potential commerical sales or
success of BDNF and NT-3 include the timing, approval, market launch,
and potential commercialization of competing products, including
riluzole (an approved orally active product for ALS marketed by Rhone
Poulenc Rorer) and insulin-like growth factor (a product being
developed by Chiron Corporation and Cephalon Corp., which the Company
believes will be the subject of a license application to the FDA);
pricing, promotional, and marketing decisions (and the implementation
of such decisions) by the Company and its partner, Amgen; and
reimbursement policiesoperations. A change of
health care providers and insurers.control of one or more of the Company's material collaborators or
licensees could also have a material adverse effect on the Company.
o Competitive or market factors may cause use of the Company's products to
be limited or otherwise fail to achieve broad acceptance.
o The ability to obtain, maintain, and prosecute intellectual property
rights, and the cost of acquiring in-process technology and other
intellectual property rights, either by license, collaboration, or
purchase of another entity.
o Difficulties or high costs of obtaining adequate financing to meet the
Company's obligations under its collaboration and licensing agreements or
to fund 50 percent of the cost of developing product candidates in order
to retain 50 percent of the commercialization rights.
o Amount and rate of growth in Regeneron's selling, general, and
administrative expenses, and the impact of unusual or infrequent charges
resulting from Regeneron's ongoing evaluation of its business strategies
and organizational structure.
o Failure of corporate partners to commercialize successfully the Company's
products or to retain and expand the markets served by the commercial
collaborations; conflicts of interest, priorities, and commercial
strategies which may arise between the Company and such corporate
partners.
o Difficulties in launching or marketing the Company's products by the
Company or its licensees, especially when such products are novel products
based on biotechnology, and unpredictability of customer acceptance of
such products.
o Inability to maintain or initiate third party arrangements which generate
revenues, in the form of license fees, research and development support,
royalties, and other payments, in return for rights to technology or
products under development by the Company.
12
o Delays or difficulties in developing and acquiring production technology
and technical and managerial personnel to manufacture novel biotechnology
products in commercial quantities at reasonable costs and in compliance
with applicable 16
quality assurance and environmental regulations and
governmental permitting requirements.
o Difficulties in obtaining key raw materials and supplies for the
manufacture of the Company's products.product candidates.
o The costs and other effects of legal and administrative cases and
proceedings (whether civil, such as product-related or environmental, or
criminal); settlements and investigations; developments or assertions by
or against Regeneron relating to intellectual property rights and
licenses; the issuance and use of patents and proprietary technology by
Regeneron and its competitors, including the possible negative effect on
the Company's ability to develop, manufacture, and sell its products in
circumstances where it is unable to obtain licenses to patents which may
be required for such products.
o Underutilization of the Company's existing or new manufacturing facilities
or of any facility expansions, resulting in inefficiencies and higher
costs; start-up costs, inefficiencies, delays, and increased depreciation
costs in connection with the start of production in new plants and
expansions.
o Health care reform.reform, including reductions or changes in reimbursement
available for prescription medications or other reforms.
o The ability to attract and retain key personnel. 17As Regeneron's scientific
efforts lead to potentially promising new directions, both outside of
recombinant protein therapies (into orally active, small molecule
pharmaceuticals) and outside of treatments for neurological and
neurodegenerative conditions (into, for example, potential programs in
cancer, inflammation, muscle disease, angiogenesis, and hematopoiesis),
the Company will require additional internal expertise or external
collaborations in areas in which it currently does not have substantial
resources and personnel.
Impact of the Adoption of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Financial Accounting Standard No. 128, "Earnings Per Share" ("SFAS 128"). SFAS
128 will require the Company to replace the current presentation of "primary"
per share data with "basic" and "diluted" per share data. Currently,
outstanding common stock equivalents are antidilutive and therefore management
estimates that the future adoption of SFAS 128 currently will not have a
material impact on the Company's per share data. SFAS 128 will be adopted by
the Company for periods ending after December 15, 1997.
13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
3(i) Certificate of Amendment of the Restated Certificate of
Incorporation of Regeneron Pharmaceuticals, Inc., as at
October 18, 1996.
(*) 4 Rights Agreement, dated as of September 20, 1996,
between Regeneron Pharmaceuticals, Inc. and ChaseMellon
Shareholder Services L.L.C., as Rights Agent, including
the form of Rights Certificate as Exhibit B thereto.
11 Statement of computation of loss per share for the
three months and nine months ended September 30, 1996March 31, 1997 and
1995.
17 Letter of Resignation of James W. Fordyce, Director,
dated as of October 1, 1996.
27 Financial Data Schedule
(b) Reports
No reports on Form 8-K were filed by the registrant during
the quarter ended September 30, 1996.
(*) Incorporated by reference from the Form 8-A for Regeneron
Pharmaceuticals, Inc. filed October 15, 1996.
18March 31, 1997.
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Regeneron Pharmaceuticals, Inc.
Date: November 5, 1996May 7, 1997 By: /s/ Murray A. Goldberg
-------------------------------------------- -----------------------------------------
Murray A. Goldberg
Vice President, Finance & Administration,
Chief Financial Officer, and Treasurer
1915