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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
June 30, 2019
 
 
OR
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 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 incorporation or organization)
 
(I.R.S. Employer Identification No.)
777 Old Saw Mill River Road
Tarrytown,
New York
10591-6707
(Address of principal executive offices, including zip code)

(914) 847-7000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock - par value $.001 per share
REGN
NASDAQ Global Select Market

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
No
 
 
 
 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No

The number of shares outstanding of each of the registrant's classes of common stock as of July 22, 2019:
Class of Common Stock
 
Number of Shares
Class A Stock, $.001 par value
 
1,848,970
Common Stock, $.001 par value
 
107,983,401




REGENERON PHARMACEUTICALS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS

 
 
 
 
Page Numbers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 









"ARCALYST®", "EYLEA®", "Libtayo®" (in the United States), "Regeneron®", "Regeneron Genetics Center®", "Veloci-BiTM", "VelociGene®", "VelociMab®", "VelocImmune®", "VelociMouse®", "VelociSuite®", and "ZALTRAP®" are trademarks of Regeneron Pharmaceuticals, Inc. Trademarks and trade names of other companies appearing in this report are, to the knowledge of Regeneron Pharmaceuticals, Inc., the property of their respective owners.


Table of Contents


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions, except share data)
 
June 30,
 
December 31,
 
2019
 
2018
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
1,045.5

 
$
1,467.7

Marketable securities
1,624.2

 
1,342.2

Accounts receivable - trade, net
1,920.2

 
1,723.7

Accounts receivable from Sanofi
252.0

 
226.4

Accounts receivable from Bayer
283.7

 
293.1

Inventories
1,317.2

 
1,151.2

Prepaid expenses and other current assets
208.2

 
243.3

Total current assets
6,651.0

 
6,447.6

 
 
 
 
Marketable securities
2,884.6

 
1,755.0

Property, plant, and equipment, net
2,676.6

 
2,575.8

Deferred tax assets
821.6

 
828.7

Other noncurrent assets
139.8

 
127.4

Total assets
$
13,173.6

 
$
11,734.5

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 
 
 
Accounts payable
$
244.0

 
$
218.2

Accrued expenses and other current liabilities
876.7

 
772.1

Deferred revenue from Sanofi
424.3

 
246.7

Deferred revenue - other
168.1

 
205.8

Total current liabilities
1,713.1

 
1,442.8

 
 
 
 
Finance lease liabilities
711.3

 
708.5

Deferred revenue from Sanofi
544.2

 
279.3

Deferred revenue - other
181.2

 
184.9

Other noncurrent liabilities
267.9

 
361.7

Total liabilities
3,417.7

 
2,977.2

 
 
 
 
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; shares issued and outstanding - 1,911,354 in 2019 and 2018

 

Common Stock, $.001 par value; 320,000,000 shares authorized; shares issued - 111,889,570 in 2019 and 111,084,951 in 2018
0.1

 
0.1

Additional paid-in capital
4,263.6

 
3,911.6

Retained earnings
5,918.2

 
5,254.3

Accumulated other comprehensive income (loss)
15.8

 
(12.3
)
Treasury Stock, at cost; 4,018,269 shares in 2019 and 3,990,021 shares in 2018
(441.8
)
 
(396.4
)
Total stockholders' equity
9,755.9

 
8,757.3

Total liabilities and stockholders' equity
$
13,173.6

 
$
11,734.5

 
 
 
 
The accompanying notes are an integral part of the financial statements.

2


Table of Contents


REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(In millions, except per share data)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Statements of Operations
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
Net product sales
 
$
1,205.3

 
$
996.4

 
$
2,309.7

 
$
1,984.3

Sanofi collaboration revenue
 
349.1

 
237.8

 
595.5

 
427.2

Bayer collaboration revenue
 
289.0

 
262.9

 
565.2

 
510.8

Other revenue
 
90.3

 
110.9

 
175.1

 
197.2

 
 
1,933.7

 
1,608.0

 
3,645.5

 
3,119.5

 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Research and development
 
1,048.3

 
529.3

 
1,690.1

 
1,027.9

Selling, general, and administrative
 
417.3

 
364.8

 
828.1

 
695.6

Cost of goods sold
 
67.0

 
36.0

 
137.9

 
105.2

Cost of collaboration and contract manufacturing
 
85.5

 
55.7

 
193.8

 
101.4

 
 
1,618.1

 
985.8

 
2,849.9

 
1,930.1

 
 
 
 
 
 
 
 
 
Income from operations
 
315.6

 
622.2

 
795.6

 
1,189.4

 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
Other (expense) income, net
 
(82.9
)
 
40.8

 
(9.1
)
 
65.4

Interest expense
 
(8.0
)
 
(6.9
)
 
(15.7
)
 
(13.3
)
 
 
(90.9
)
 
33.9

 
(24.8
)
 
52.1

 
 
 
 
 
 
 
 
 
Income before income taxes
 
224.7

 
656.1

 
770.8

 
1,241.5

 
 
 
 
 
 
 
 
 
Income tax expense
 
(31.6
)
 
(104.7
)
 
(116.6
)
 
(212.1
)
 
 
 
 
 
 
 
 
 
Net income
 
$
193.1

 
$
551.4

 
$
654.2

 
$
1,029.4

 
 
 
 
 
 
 
 
 
Net income per share - basic
 
$
1.77

 
$
5.12

 
$
6.00

 
$
9.56

Net income per share - diluted
 
$
1.68

 
$
4.82

 
$
5.69

 
$
8.97

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
 
109.2

 
107.8

 
109.1

 
107.7

Weighted average shares outstanding - diluted
 
114.6

 
114.5

 
115.0

 
114.7

 
 
 
 
 
 
 
 
 
Statements of Comprehensive Income
 
 
 
 
 
 
 
 
Net income
 
$
193.1

 
$
551.4

 
$
654.2

 
$
1,029.4

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on debt securities
 
14.4

 
3.4

 
30.5

 
(7.7
)
Unrealized (loss) gain on cash flow hedges
 
(1.4
)
 
0.6

 
(2.4
)
 
2.0

Comprehensive income
 
$
206.1

 
$
555.4

 
$
682.3

 
$
1,023.7

 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the financial statements.


3


Table of Contents


REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(In millions)
 
 
Class A Stock
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Balance, December 31, 2018
 
1.9

 

 
111.1

 
$
0.1

 
$
3,911.6

 
$
5,254.3

 
$
(12.3
)
 
(4.0
)
 
$
(396.4
)
 
$
8,757.3

Issuance of Common Stock in connection with exercise of stock options
 

 

 
0.6

 

 
140.9

 

 

 

 

 
140.9

Common Stock tendered upon exercise of stock options and vesting of restricted stock in connection with employee tax obligations
 

 

 

 

 
(10.7
)
 

 

 

 

 
(10.7
)
Issuance/distribution of Common Stock in connection with Company 401(k) Savings Plan
 

 

 

 

 
4.3

 

 

 
0.1

 
6.2

 
10.5

Repurchases of Common Stock from Sanofi
 

 

 

 

 

 

 

 
(0.1
)
 
(54.0
)
 
(54.0
)
Stock-based compensation charges
 

 

 

 

 
114.8

 

 

 

 

 
114.8

Adjustment upon adoption of new accounting standard
 

 

 

 

 

 
9.7

 

 

 

 
9.7

Net income
 

 

 

 

 

 
461.1

 

 

 

 
461.1

Other comprehensive gain, net of tax
 

 

 

 

 

 

 
15.1

 

 

 
15.1

Balance, March 31, 2019
 
1.9

 

 
111.7

 
0.1

 
4,160.9

 
5,725.1

 
2.8

 
(4.0
)
 
(444.2
)
 
9,444.7

Issuance of Common Stock in connection with exercise of stock options
 

 

 
0.3

 

 
13.9

 

 

 

 

 
13.9

Common Stock tendered upon exercise of stock options and vesting of restricted stock in connection with employee tax obligations
 

 

 
(0.1
)
 

 
(29.7
)
 

 

 

 

 
(29.7
)
Issuance/distribution of Common Stock in connection with Company 401(k) Savings Plan
 

 

 

 

 
9.3

 

 

 

 
2.4

 
11.7

Stock-based compensation charges
 

 

 

 

 
109.2

 

 

 

 

 
109.2

Net income
 

 

 

 

 

 
193.1

 

 

 

 
193.1

Other comprehensive gain, net of tax
 

 

 

 

 

 

 
13.0

 

 

 
13.0

Balance, June 30, 2019
 
1.9

 

 
111.9

 
$
0.1

 
$
4,263.6

 
$
5,918.2

 
$
15.8

 
(4.0
)
 
$
(441.8
)
 
$
9,755.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

4


Table of Contents


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (continued)
 
 
Class A Stock
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Balance, December 31, 2017
 
1.9

 

 
109.5

 
$
0.1

 
$
3,512.9

 
$
2,946.7

 
$
0.6

 
(3.8
)
 
$
(316.2
)
 
$
6,144.1

Issuance of Common Stock in connection with exercise of stock options
 

 

 
0.1

 

 
13.6

 

 

 

 

 
13.6

Issuance of Common Stock in connection with Company 401(k) Savings Plan
 

 

 
0.1

 

 
(0.7
)
 

 

 

 

 
(0.7
)
Stock-based compensation charges
 

 

 

 

 
85.8

 

 

 

 

 
85.8

Cumulative-effect adjustment upon adoption of new accounting standards
 

 

 

 

 

 
(136.9
)
 
(6.6
)
 

 

 
(143.5
)
Net income
 

 

 

 

 

 
478.0

 

 

 

 
478.0

Other comprehensive loss, net of tax
 

 

 

 

 

 

 
(9.7
)
 

 

 
(9.7
)
Balance, March 31, 2018
 
1.9

 

 
109.7

 
0.1

 
3,611.6

 
3,287.8

 
(15.7
)
 
(3.8
)
 
(316.2
)
 
6,567.6

Issuance of Common Stock in connection with exercise of stock options
 

 

 
0.4

 

 
19.8

 

 

 

 

 
19.8

Common Stock tendered upon exercise of stock options and vesting of restricted stock in connection with employee tax obligations
 

 

 
(0.2
)
 

 
(31.9
)
 

 

 

 

 
(31.9
)
Repurchases of Common Stock from Sanofi
 

 

 

 

 

 

 

 
(0.1
)
 
(37.6
)
 
(37.6
)
Stock-based compensation charges
 

 

 

 

 
113.1

 

 

 

 

 
113.1

Net income
 

 

 

 

 

 
551.4

 

 

 

 
551.4

Other comprehensive gain, net of tax
 

 

 

 

 

 

 
4.1

 

 

 
4.1

Balance, June 30, 2018
 
1.9

 

 
109.9

 
$
0.1

 
$
3,712.6

 
$
3,839.2

 
$
(11.6
)
 
(3.9
)
 
$
(353.8
)
 
$
7,186.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the financial statements.


5


Table of Contents


REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
 
 
Six Months Ended
June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
654.2

 
$
1,029.4

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
103.1

 
70.0

Non-cash compensation expense
 
213.7

 
189.2

Other non-cash items, net
 
110.7

 
(54.9
)
Deferred taxes
 
(125.3
)
 
(15.5
)
Changes in assets and liabilities:
 
 
 
 
Increase in Sanofi, Bayer, and trade accounts receivable
 
(256.8
)
 
(64.9
)
Increase in inventories
 
(168.2
)
 
(182.1
)
Decrease in prepaid expenses and other assets
 
42.5

 
59.4

Increase (decrease) in deferred revenue
 
401.1

 
(84.2
)
Increase in accounts payable, accrued expenses, and other liabilities
 
110.3

 
67.0

Total adjustments
 
431.1

 
(16.0
)
Net cash provided by operating activities
 
1,085.3

 
1,013.4

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of marketable and other securities
 
(2,189.1
)
 
(1,181.2
)
Sales or maturities of marketable securities
 
745.9

 
462.2

Capital expenditures
 
(168.9
)
 
(191.4
)
Net cash used in investing activities
 
(1,612.1
)
 
(910.4
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of Common Stock
 
155.1

 
34.1

Payments in connection with Common Stock tendered for employee tax obligations
 
(40.5
)
 
(31.9
)
Repurchases of Common Stock
 
(10.0
)
 

Net cash provided by financing activities
 
104.6

 
2.2

 
 
 
 
 
Net (decrease) increase in cash, cash equivalents, and restricted cash
 
(422.2
)
 
105.2

 
 
 
 
 
Cash, cash equivalents, and restricted cash at beginning of period
 
1,480.2

 
825.2

 
 
 
 
 
Cash, cash equivalents, and restricted cash at end of period
 
$
1,058.0

 
$
930.4

 
 
 
 
 
The accompanying notes are an integral part of the financial statements.


6


Table of Contents


REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in millions, except per share data)
1. Interim Financial Statements
The interim Condensed Consolidated Financial Statements of Regeneron Pharmaceuticals, Inc. and its subsidiaries ("Regeneron," "Company," "we," "us," and "our") have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and disclosures necessary for a presentation of the Company's financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, these financial statements reflect all normal recurring adjustments and accruals necessary for a fair statement of the Company's condensed consolidated financial statements for such periods. The results of operations for any interim period are not necessarily indicative of the results for the full year. The December 31, 2018 Condensed Consolidated Balance Sheet data were derived from audited financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Certain reclassifications have been made to prior period amounts to conform with the current period's presentation.
We adopted Accounting Standards Codification ("ASC") 842, Leases, on January 1, 2019 (the "effective date") and used the effective date as our date of initial application. See Note 8. The new standard requires a lessee to recognize on its balance sheet (for both finance and operating leases) a liability for future lease payments and a right-of-use asset representing its right to use the underlying asset over the lease term. We elected the practical expedients upon transition, which permitted companies to not reassess lease identification, classification, and initial direct costs under the new standard for leases that commenced prior to the effective date. Upon adoption of the new standard, we recognized right-of-use assets of $33.2 million related to operating leases as of January 1, 2019. The impact of adopting the standard for the facilities that we had historically applied build-to-suit and capital lease accounting was not material to our Condensed Consolidated Financial Statements. Prior period amounts have not been adjusted in connection with the adoption of this standard.
2. Product Sales
Net product sales consist of the following:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
Net Product Sales in the United States
 
2019
 
2018
 
2019
 
2018
EYLEA®
 
$
1,160.3

 
$
992.0

 
$
2,234.4

 
$
1,976.0

Libtayo®
 
40.8

 

 
67.6

 

ARCALYST®
 
4.2

 
4.4

 
7.7

 
8.3

 
 
$
1,205.3

 
$
996.4

 
$
2,309.7

 
$
1,984.3


The Company had product sales to certain customers that accounted for more than 10% of total gross product revenue for each of the three and six months ended June 30, 2019 and 2018. Sales to each of these customers as a percentage of the Company's total gross product revenue are as follows:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Besse Medical, a subsidiary of AmerisourceBergen Corporation
 
56
%
 
56
%
 
57
%
 
55
%
McKesson Corporation
 
34
%
 
35
%
 
32
%
 
37
%

The following table summarizes the provisions, and credits/payments, for sales-related deductions during the six months ended June 30, 2019 and 2018.

7


Table of Contents

REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in millions, except per share data)


 
Rebates, Chargebacks, and Discounts
 
Distribution-
Related
Fees
 
Other Sales-
Related
Deductions
 
Total
Balance as of December 31, 2018
$
41.1

 
$
42.0

 
$
8.3

 
$
91.4

Provisions
185.1

 
114.0

 
33.3

 
332.4

Credits/payments
(139.5
)
 
(87.9
)
 
(30.9
)
 
(258.3
)
Balance as of June 30, 2019
$
86.7

 
$
68.1

 
$
10.7

 
$
165.5

 
 
 
 
 
 
 
 
Balance as of December 31, 2017
$
29.9

 
$
34.1

 
$
21.3

 
$
85.3

Provisions
97.7

 
102.1

 
19.9

 
219.7

Credits/payments
(91.1
)
 
(98.5
)
 
(24.4
)
 
(214.0
)
Balance as of June 30, 2018
$
36.5

 
$
37.7

 
$
16.8

 
$
91.0


3. Collaboration Agreements
a. Sanofi
The collaboration revenue we earned from Sanofi is detailed below:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
Sanofi Collaboration Revenue
 
2019
 
2018
 
2019
 
2018
Antibody:
 
 
 
 
 
 
 
 
Reimbursement of Regeneron research and development expenses
 
$
81.8

 
$
64.5

 
$
156.3

 
$
124.9

Reimbursement of Regeneron commercialization-related expenses
 
121.1

 
103.7

 
237.7

 
189.1

Regeneron's share of profits (losses) in connection with commercialization of antibodies
 
38.8

 
(68.8
)
 
11.0

 
(143.7
)
Other
 
36.5

 
31.7

 
49.4