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Press Release: Regeneron Reports Fourth Quarter -3-

· 02/05/2021 06:30
% % GAAP Change Non-GAAP(1) Change Q4 Q4 Q4 Q4 ($ in millions) 2020 2019 2020 2019 Research and development (R&D) $745 $552 35% $675 $450 50% Selling, general, and administrative (SG&A) $304 $452 (33%) $381 $311 23% Cost of goods sold (COGS) $180 $109 65% $166 $93 78% Cost of collaboration and contract manufacturing (COCM) $174 $113 54% * * n/a Other operating (income) expense, net $(145) $(38) 282% * * n/a * GAAP and non-GAAP amounts are equivalent as no non-GAAP adjustments have been recorded % % GAAP Change Non-GAAP(1) Change ($ in millions) 2020 2019 2020 2019 Research and development $2,735 $2,450 12% $2,411 $1,770 36% Selling, general, and administrative $1,346 $1,342 --% $1,280 $1,069 20% Cost of goods sold $492 $362 36% $451 $316 43% Cost of collaboration and contract manufacturing $628 $403 56% * * n/a Other operating (income) expense, net $(280) $(209) 34% * * n/a * GAAP and non-GAAP amounts are equivalent as no non-GAAP adjustments have been recorded -- The higher GAAP and non-GAAP R&D expenses in the fourth quarter and full year 2020, compared to the same periods in the prior year, were primarily due to additional costs incurred in connection with COVID-19 related development activities. The higher GAAP and non-GAAP R&D expenses for full year 2020 were also due to additional costs incurred in connection with the Company's earlier-stage pipeline, higher headcount and headcount-related costs, and an increase in clinical manufacturing activities. GAAP R&D expenses for full year 2020 included $85 million of up-front payments in connection with the Intellia collaboration agreement, and GAAP R&D expenses for full year 2019 included a $400 million up-front payment in connection with the Alnylam collaboration agreement. -- The change in GAAP and non-GAAP SG&A expenses in the fourth quarter and full year 2020, compared to the same periods in the prior year, was primarily due to an increase in commercialization-related costs for EYLEA and Libtayo, higher headcount-related costs, and, effective April 1, 2020, no longer receiving Praluent-related cost reimbursements from Sanofi for Regeneron-incurred expenses. GAAP SG&A expenses for the fourth quarter and full year 2020 were also positively impacted by a reversal of $121 million in accruals for litigation-related loss contingencies in the fourth quarter of 2020 as a result of the October 2020 ruling by the Technical Board of Appeal of the European Patent Office and its impact on certain patent infringement actions in Europe relating to Praluent. In addition, in the fourth quarter of 2019, the Company recorded a $35 million GAAP SG&A charge related to employee separation costs, as the Company eliminated certain commercialization activities and related headcount in connection with the restructuring of the antibody agreement with Sanofi. -- The increase in COGS in the fourth quarter and full year 2020, compared to the same periods in the prior year, was primarily due to the recognition of manufacturing costs in connection with the initiation of product sales of REGEN-COV (which commenced in the third quarter of 2020) and Praluent in the United States (which were recorded by Sanofi prior to April 1, 2020), as well as higher product sales of Libtayo and EYLEA in the United States. These increases were partly offset by lower period costs for the Company's Limerick commercial manufacturing facility and lower inventory write-downs and reserves. -- The increase in COCM in the fourth quarter and full year 2020, compared to the same periods in the prior year, was primarily due to the recognition of manufacturing costs associated with Dupixent and recognition of costs in connection with manufacturing ex-U.S. commercial supplies of Praluent for Sanofi. In addition, COCM increased for full year 2020 due to process validation costs in connection with manufacturing Inmazeb under our BARDA agreement. -- Other operating (income) expense, net, includes recognition of a portion of amounts previously deferred in connection with up-front and development milestone payments, as applicable, received in connection with the Company's collaborative arrangements. The increase in other operating income in the fourth quarter and full year 2020 was primarily due to the recognition of cumulative catch-up adjustments of $100 million, net, arising from an update to the estimate of the stage of completion for certain collaboration programs.

Total revenues also include Sanofi and Bayer collaboration revenues(2) of $678 million in the fourth quarter and $2.373 billion for the full year 2020, compared to $482 million in the fourth quarter and $1.549 billion for the full year 2019. Sanofi collaboration revenue increased primarily due to the Company's share of profits from commercialization of antibodies, which were $230 million and $785 million in the fourth quarter and full year 2020, respectively, compared to $104 million and $209 million in the fourth quarter and full year 2019, respectively. The change in the Company's share of profits from commercialization of antibodies was primarily driven by higher Dupixent profits. In addition, in the third quarter of 2020, the Company earned the first $50 million sales-based milestone from Sanofi, upon annual sales of antibodies outside the United States exceeding $1.0 billion on a rolling twelve-month basis.

Refer to Table 4 for a summary of collaboration revenue.

Other revenues in the fourth quarter and full year of 2020, compared to the same periods in the prior year, increased primarily due to recognition of revenue of $43 million and $187 million, respectively, in connection with the Company's agreement with the Biomedical Advanced Research Development Authority (BARDA) related to funding of certain development activities for antibodies related to the treatment of COVID-19. Other revenues for the full year of 2020 also increased due to recognition of revenue in connection with the Company's agreement with BARDA related to funding of certain Inmazeb development activities and Sanofi's reimbursement for manufacturing commercial supplies of Praluent.

Operating Expenses

Other Financial Information

GAAP other income (expense), net, includes the recognition of net gains on equity securities of $60 million in the fourth quarter and $222 million for the full year 2020, compared to net gains of $189 million in the fourth quarter and $118 million for the full year 2019. In August 2020, the Company issued and sold $1.250 billion aggregate principal amount of 1.750% senior unsecured notes due 2030 and $750 million aggregate principal amount of 2.800% senior unsecured notes due 2050, for which the associated interest expense is included in GAAP and non-GAAP other income (expense), net.

GAAP income tax expense was $75 million and the effective tax rate was 6.2% in the fourth quarter of 2020, compared to $98 million and 11.0% in the fourth quarter of 2019. GAAP income tax expense was $297 million and the effective tax rate was 7.8% for the full year 2020, compared to $313 million and 12.9% for the full year 2019. The GAAP effective tax rate for the fourth quarter and full year 2020 was positively impacted, compared to the U.S. federal statutory rate, primarily by stock-based compensation, federal tax credits for research activities, and income earned in foreign jurisdictions with tax rates lower than the U.S. federal statutory rate. In the fourth quarter and full year 2020, the non-GAAP effective tax rate was 7.7% and 9.1%, respectively, compared to 10.6% and 14.6% in the fourth quarter and full year 2019, respectively.

GAAP net income per diluted share was $10.24 in the fourth quarter of 2020, compared to GAAP net income per diluted share of $6.93 in the fourth quarter of 2019. GAAP net income per diluted share was $30.52 for the full year 2020, compared to GAAP net income per diluted share of $18.46 for full year 2019. Non-GAAP net income per diluted share was $9.53 in the fourth quarter of 2020, compared to non-GAAP net income per diluted share of $7.50 in the fourth quarter of 2019. Non-GAAP net income per diluted share was $31.47 for the full year 2020, compared to non-GAAP net income per diluted share of $24.67 for the full year 2019. A reconciliation of the Company's GAAP to non-GAAP results is included in Table 3 of this press release.

During 2020, the Company repurchased 1.6 million shares of its common stock under the Company's share repurchase program. As of December 31, 2020, the Company had repurchased the entire $1.0 billion it was authorized to repurchase under the program.

In January 2021, the Company's board of directors authorized a new share repurchase program to repurchase up to $1.5 billion of the Company's common stock. Repurchases may be made from time to time at management's discretion through a variety of methods. The program has no time limit and can be discontinued at any time.

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February 05, 2021 06:30 ET (11:30 GMT)