Sanofi-aventis’ reimbursement of Regeneron’s aflibercept expenses decreased for the three and six months ended June 30, 2009, compared to the same periods in 2008, primarily due to lower Company costs associated with internal research activities and manufacturing clinical drug supplies. Sanofi-aventis also incurs aflibercept development expenses directly, including costs related to the Phase 3 clinical trials sanofi-aventis is overseeing in the oncology program.
Sanofi-aventis’ reimbursement of Regeneron’s expenses under the antibody collaboration increased for the three and six months ended June 30, 2009, compared to the same periods in 2008, due to an increase in research activities conducted under the collaboration’s discovery agreement and increases in development activities for REGN88, REGN421, and REGN475 under the collaboration’s license agreement.
For the three and six months ended June 30, 2009 and 2008, contract research and development revenue from Bayer HealthCare consisted of the following:
In periods when the Company recognizes VEGF Trap-Eye development expenses that the Company incurs under the collaboration with Bayer HealthCare, the Company also recognizes, as contract research and development revenue, the portion of those VEGF Trap-Eye development expenses that is reimbursable by Bayer HealthCare. The Company incurred higher VEGF Trap-Eye development expenses under the collaboration for the three and six months ended June 30, 2009, compared to the same period in 2008, primarily in connection with the collaboration’s clinical development programs in wet AMD, DME, and CRVO.
Net Product Sales
Revenue and deferred revenue from product sales are recorded net of applicable provisions for prompt pay discounts, product returns, estimated rebates payable under governmental programs (including Medicaid), distributor fees, and other sales-related costs. For the three and six months ended June 30, 2009, the Company recognized as revenue $4.5 million and $8.4 million of ARCALYST® (rilonacept) net product sales, respectively, for which the right of return no longer exists and rebates can be reasonably estimated. At June 30, 2009 and 2008, deferred revenue related to ARCALYST net product sales totaled $4.9 million and $2.3 million, respectively.
Expenses
Total operating expenses for the second quarter of 2009 were $106.3 million, 32 percent higher than the same period in 2008, and $198.4 million for the first six months of 2009, 30 percent higher than the same period in 2008. Average headcount increased to 966 in the second quarter of 2009 from 771 in the same period of 2008 and increased to 952 for the first half of 2009 from 742 in the same period of 2008, due primarily to the Company’s expanding research and development activities principally in connection with the sanofi-aventis antibody collaboration. Operating expenses included non-cash compensation expense related to employee stock option and restricted stock awards of $7.4 million in the second quarter of 2009 and $15.1 million for the first six months of 2009, compared with $8.2 million and $16.5 million, respectively, for the same periods of 2008.
Research and development (R&D) expenses increased to $94.2 million in the second quarter of 2009 from $66.8 million in the comparable quarter of 2008, and to $174.5 million in the first six months of 2009 from $128.2 million in the same period of 2008. In the second quarter and first half of 2009, the Company incurred higher R&D costs primarily related to additional R&D headcount, clinical development costs for ARCALYST, VEGF Trap-Eye, and REGN88, research and preclinical development costs associated with the antibody programs, and facility-related costs to support expanded R&D activities.
Selling, general, and administrative (SG&A) expenses decreased to $11.6 million in the second quarter of 2009 from $13.5 million in the comparable quarter of 2008, and to $23.1 million in the first six months of 2009 from $24.5 million in the same period of 2008. In the second quarter and first half of 2009, the Company incurred lower selling expenses related to ARCALYST, lower SG&A recruitment costs, lower market research costs related to various development programs, and lower legal and professional fees related to various corporate matters, which were partly offset by higher compensation expense associated with additional SG&A headcount.
Other Income and Expense
Investment income decreased to $1.3 million in the second quarter of 2009 from $4.5 million in the comparable quarter of 2008 and to $3.1 million in the first half of 2009 compared to $11.8 million in the first half of 2008. The decrease in investment income was due to lower yields on, and lower balances of, cash and marketable securities in 2009 compared to 2008.
Interest expense in the second quarter and first half of 2008 was attributable to the Company’s 5.5 percent Convertible Senior Subordinated Notes; no Notes were outstanding in 2009. In the second quarter of 2008, the Company repurchased $81.3 million in principal amount of these convertible notes, which were due in October 2008, and recognized a $0.9 million loss on early extinguishment of debt.
Revision of Previously Issued Financial Statements
The Company has revised its financial statements at December 31, 2008 and for the three and six months ended June 30, 2008, in connection with the application of Emerging Issues Task Force Statement No. 97-10,The Effect of Lessee Involvement in Asset Construction (EITF 97-10), to the Company’s December 2006 lease, as amended, of laboratory and office facilities in Tarrytown, New York. The revisions consisted entirely of non-cash adjustments, primarily to the Company’s balance sheet at December 31, 2008, and had no impact to the Company’s business operations, existing capital resources, or the Company’s ability to fund its operating needs, including the development of its product candidates. The revisions, and a description of the basis for the revisions, are more fully described in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
About Regeneron Pharmaceuticals
Regeneron is a fully integrated biopharmaceutical company that discovers, develops, and commercializes medicines for the treatment of serious medical conditions. In addition to ARCALYST® (rilonacept) Injection for Subcutaneous Use, its first commercialized product, Regeneron has therapeutic candidates in clinical trials for the potential treatment of cancer, eye diseases, inflammatory diseases, and pain, and has preclinical programs in other diseases and disorders. Additional information about Regeneron and recent news releases are available on Regeneron’s web site at www.regeneron.com.
This news release discusses historical information and includes forward-looking statements about Regeneron and its products, development programs, finances, and business, all of which involve a number of risks and uncertainties, such as risks associated with preclinical and clinical development of Regeneron’s drug candidates, determinations by regulatory and administrative governmental authorities which may delay or restrict Regeneron’s ability to continue to develop or commercialize its product and drug candidates, competing drugs that are superior to Regeneron’s product and drug candidates, uncertainty of market acceptance of Regeneron’s product and drug candidates, unanticipated expenses, the availability and cost of capital, the costs of developing, producing, and selling products, the potential for any collaboration agreement, including Regeneron’s agreements with the sanofi-aventis Group and Bayer HealthCare, to be canceled or to terminate without any product success, risks associated with third party intellectual property, and other material risks. A more complete description of these and other material risks can be found in Regeneron’s filings with the United States Securities and Exchange Commission (SEC), including its Form 10-K for the year ended December 31, 2008 and Form 10-Q for the quarter ended June 30, 2009. Regeneron does not undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events, or otherwise unless required by law.
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| Contacts Information: | |
| |
| Peter Dworkin | Laura Lindsay |
| Investor Relations | Media Relations |
| 914.345.7640 | 914.345.7800 |
| peter.dworkin@regeneron.com | laura.lindsay@regeneron.com |
REGENERON PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS (Unaudited)
(In thousands)
| | June 30, | | December 31, |
| | 2009 | | 2008 |
| | | | | (Revised)* |
| ASSETS | | | | | | |
| Cash, restricted cash, and marketable securities | | $ | 466,363 | | $ | 527,461 |
| Receivables | | | 60,046 | | | 35,212 |
| Property, plant, and equipment, net | | | 195,408 | | | 142,035 |
| Other assets | | | 20,528 | | | 19,512 |
| |
| Total assets | | $ | 742,345 | | $ | 724,220 |
| |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
| Accounts payable and accrued expenses | | $ | 51,881 | | $ | 36,168 |
| Deferred revenue | | | 215,798 | | | 209,925 |
| Facility lease obligation | | | 62,925 | | | 56,019 |
| Other long term liabilities | | | 1,235 | | | 594 |
| Stockholders' equity | | | 410,506 | | | 421,514 |
| |
| Total liabilities and stockholders' equity | | $ | 742,345 | | $ | 724,220 |
* Revised as described in the paragraph of this press release titled "Revision of Previously Issued Financial Statements."
REGENERON PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
| | For the three months | | For the six months |
| | ended June 30, | | ended June 30, |
| | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | (Revised)* | | | | | | (Revised)* |
| Revenues | | | | | | | | | | | | | | | | |
| Contract research and development | | $ | 75,532 | | | $ | 50,653 | | | $ | 136,622 | | | $ | 97,036 | |
| Technology licensing | | | 10,000 | | | | 10,000 | | | | 20,000 | | | | 20,000 | |
| Net product sales | | | 4,500 | | | | | | | | 8,391 | | | | | |
| | | 90,032 | | | | 60,653 | | | | 165,013 | | | | 117,036 | |
| |
| Expenses | | | | | | | | | | | | | | | | |
| Research and development | | | 94,231 | | | | 66,777 | | | | 174,538 | | | | 128,246 | |
| Selling, general, and administrative | | | 11,632 | | | | 13,495 | | | | 23,052 | | | | 24,549 | |
| Cost of goods sold | | | 435 | | | | | | | | 827 | | | | | |
| | | | 106,298 | | | | 80,272 | | | | 198,417 | | | | 152,795 | |
| |
| Loss from operations | | | (16,266 | ) | | | (19,619 | ) | | | (33,404 | ) | | | (35,759 | ) |
| |
| Other income (expense) | | | | | | | | | | | | | | | | |
| Investment income | | | 1,328 | | | | 4,535 | | | | 3,078 | | | | 11,839 | |
| Interest expense | | | | | | | (2,674 | ) | | | | | | | (5,685 | ) |
| Loss on early extinguishment of debt | | | | | | | (931 | ) | | | | | | | (931 | ) |
| | | 1,328 | | | | 930 | | | | 3,078 | | | | 5,223 | |
| |
| Net loss | | $ | (14,938 | ) | | $ | (18,689 | ) | | $ | (30,326 | ) | | $ | (30,536 | ) |
| |
| Net loss per share amounts, basic and diluted | | $ | (0.19 | ) | | $ | (0.24 | ) | | $ | (0.38 | ) | | $ | (0.39 | ) |
| |
| Weighted average shares outstanding, basic and diluted | | | 79,626 | | | | 78,689 | | | | 79,562 | | | | 78,591 | |
* Revised as described in the paragraph of this press release titled "Revision of Previously Issued Financial Statements."
