UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2005
REGENERON PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
New York 000-19034 133444607
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
777 Old Saw Mill River Road, Tarrytown, New York 10591-6707
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(Address of principal executive offices) (Zip Code)
(914) 347-7000
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On April 28, 2005, Regeneron Pharmaceuticals, Inc. announced its
financial and operating results for the quarter ended March 31,
2005. A copy of the news release is attached hereto as Exhibit
99(a) and is incorporated herein by reference.
Effective January 1, 2005, Regeneron began recognizing non-cash
compensation expense related to employee stock option awards
(Stock Option Expense) in operating expenses in accordance with
Statement of Financial Accounting Standards No. 123 (SFAS No.
123). Prior to the adoption of SFAS No. 123, compensation expense
related to employee stock options was not reflected in operating
expenses and prior period operating results have not been
restated.
The news release includes certain financial measures that are
calculated in a manner different from generally accepted
accounting principles (GAAP) and are considered non-GAAP
financial measures under United States Securities and Exchange
Commission rules. Non-GAAP financial measures for the three
months ended March 31, 2005 included in the news release are: (1)
pro forma net income and pro forma net income per share (basic
and diluted), exclusive of Stock Option Expense and (2) research
and development expenses, general and administrative expenses,
and contract manufacturing expenses, all exclusive of Stock
Option Expense. Our management does not intend that the
presentation of non-GAAP financial measures be considered in
isolation or as a substitute for results prepared in accordance
with GAAP.
Our management believes that the non-GAAP financial measures
described above present helpful information to investors and
other users of Regeneron's financial statements by providing
greater transparency about the nature of and trends in our
operating expenses and net income and a more useful basis for
comparing our operating results in the first quarters of 2005 and
2004. In addition, Regeneron's management uses non-GAAP financial
measures which exclude Stock Option Expense internally for
operating, budgeting, and financial planning purposes. The news
release includes tables which provide a reconciliation of the
differences between these non-GAAP financial measures and the
most directly comparable financial measures calculated and
presented in accordance with GAAP in the news release.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
99(a) Press Release of Regeneron Pharmaceuticals,
Inc. dated April 28, 2005.
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
REGENERON PHARMACEUTICALS, INC.
Dated: April 28, 2005 By: /s/ Stuart Kolinski
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Stuart Kolinski
Vice President and General
Counsel
Exhibit Index
Number Description
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99(a) Press Release of Regeneron Pharmaceuticals, Inc. dated
April 28, 2005.
Exhibit 99(a)
REGENERON
REGENERON PHARMACEUTICALS, INC.
777 OLD SAW MILL RIVER ROAD
TARRYTOWN, NY 10591
TELEPHONE: 914-345-7400
FAX: 914-345-7797
FOR IMMEDIATE RELEASE
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REGENERON REPORTS FIRST QUARTER FINANCIAL AND OPERATING RESULTS
Tarrytown, New York (April 28, 2005) -- Regeneron Pharmaceuticals, Inc.
(Nasdaq: REGN) today announced financial and operating results for the first
quarter of 2005.
Regeneron reported a net loss of $4.1 million, or $0.07 per share (basic and
diluted) for the first quarter of 2005 compared with net income of $64.5
million, or $1.17 per basic share and $1.06 per diluted share, for the first
quarter of 2004. Effective January 1, 2005, the Company began recognizing
non-cash compensation expense related to employee stock option awards (Stock
Option Expense) in accordance with Statement of Financial Accounting Standards
(SFAS) No. 123. Excluding Stock Option Expense, the Company had net income of
$1.3 million, or $0.02 per share (basic and diluted), in the first quarter of
2005 as follows:
For the three months ended March 31, 2005
- --------------------------------------------------------------------------------------------------
(in millions, except per share data)
- --------------------------------------------------------------------------------------------------
Net Income (Loss) per Share -
Net Income (Loss) Basic and Diluted
- --------------------------------------------------------------------------------------------------
Net loss, as reported ($4.1) ($0.07)
- --------------------------------------------------------------------------------------------------
Add: Stock Option Expense 5.4 0.09
--- ----
- --------------------------------------------------------------------------------------------------
Pro forma net income, exclusive
of Stock Option Expense $1.3 $0.02
==== =====
- --------------------------------------------------------------------------------------------------
Net loss in the first quarter of 2005 included a $25.0 million non-recurring
payment from the sanofi-aventis Group in connection with an amendment to the
Company's collaboration agreement with sanofi-aventis. Net income in the first
quarter of 2004 included $82.6 million of income related to the Company's
collaboration with Novartis Pharma AG, consisting of a $17.8 million research
progress payment and $64.8 million of non-recurring income following Novartis'
decision to forego certain development rights.
At March 31, 2005, cash and marketable securities totaled $380.5 million
compared with $348.9 million at December 31, 2004. The Company's $200.0
million of convertible notes, which bear interest at 5.5% per annum, mature in
2008.
Regeneron's total revenue decreased to $16.2 million in the first quarter of
2005 from $62.0 million in the same period of 2004 due principally to a
decline in contract research and development revenue to $13.5 million in the
first quarter of 2005 from $41.6 million in the same period of 2004.
Regeneron recognized contract research and development revenue of $9.8 million
in the first quarter of 2005 related to the Company's collaboration with
sanofi-aventis, compared with $16.4 million in the same period of 2004.
Contract research and development revenue from the sanofi-aventis
collaboration consists of reimbursement of VEGF Trap development expenses plus
recognition of amounts related to an $80.0 million up-front, non-refundable
payment received from sanofi-aventis in September 2003. Reimbursement of
expenses decreased to $7.4 million in the first quarter of 2005 from $13.7
million in the same period of 2004, primarily due to lower costs in 2005
related to the Company's manufacture of VEGF Trap clinical supplies.
Recognition of amounts related to the up-front payment was $2.4 million in the
first quarter of 2005 and $2.7 million in the same period of 2004. The Company
recognizes revenue in connection with collaborations in accordance with Staff
Accounting Bulletin No. 104, Revenue Recognition. As a result, $63.5 million
of the original $80.0 million up-front payment has been deferred as of March
31, 2005 and will be recognized as revenue in future periods.
Contract research and development revenue related to the Novartis
collaboration was $22.1 million in the first quarter of 2004 which represented
the remaining amount of a $27.0 million March 2003 up-front payment that had
previously been deferred. Regeneron does not expect future contract research
and development revenue from Novartis. In the first quarter of 2004, Novartis
also forgave all of its outstanding loans to Regeneron, totaling $17.8
million, based on Regeneron's achieving a pre-defined development milestone,
which was recognized as a research progress payment.
Contract manufacturing revenue relates to Regeneron's long-term manufacturing
agreement with Merck & Co., Inc. Contract manufacturing revenue was $2.7
million in the first quarter of 2005 and $2.6 million in the same period of
2004 as the Company shipped similar quantities of product to Merck each
quarter. The Company recognizes revenue and the related manufacturing expense
as product is shipped to Merck.
Total operating expenses for the first quarter of 2005 were $44.5 million, 17
percent higher than the same period in 2004. Operating expenses in the first
quarter of 2005 include a total of $5.4 million of Stock Option Expense, as
follows:
For the three months ended March 31,
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(in millions) 2005 2004
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Expenses as Stock Option Expenses exclusive of Expenses as
Expenses Reported Expense Stock Option Expense Reported (1)
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Research and development $35.9 $3.4 $32.5 $32.2
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Contract manufacturing 2.5 -- 2.5 2.2
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General and administrative 6.1 2.0 4.1 3.8
--- --- --- ---
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Total operating expenses $44.5 $5.4 $39.1 $38.2
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(1) In 2004, expenses as reported in the Company's Statement of Operations did not include Stock Option Expense.
Effective January 1, 2005, the Company adopted the fair value based method of
accounting for stock-based employee compensation under the provisions of SFAS
No. 123, Accounting for Stock-Based Compensation, using the modified
prospective method described in SFAS No. 148, Accounting for Stock-Based
Compensation- Transition and Disclosure. As a result, the Company has begun
recognizing compensation expense in an amount equal to the fair market value
of share-based payments (including stock option awards) on their date of grant
over the vesting period of the awards. Under the modified prospective method,
compensation expense for the Company is recognized for (a) all share based
payments granted on or after January 1, 2005 and (b) all awards granted to
employees prior to January 1, 2005 that were unvested on that date. Prior to
the adoption of the fair value method, the Company accounted for stock-based
compensation to employees under the intrinsic value method of accounting set
forth in Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25), and related interpretations. Therefore,
compensation expense related to employee stock options was not reflected in
operating expenses in any period prior to the first quarter of 2005 and prior
period operating results have not been restated.
Research and development (R&D) expenses, exclusive of Stock Option Expense,
increased slightly to $32.5 million in the first quarter of 2005 from $32.2
million in the comparable quarter of 2004. In the first quarter of 2005, the
Company incurred higher development expenses for the IL-1 Trap, which were
offset by lower expenses for other clinical development programs, compared
with the same period in 2004.
Contract manufacturing expense, which relates to the Merck agreement, was $2.5
million in the first quarter of 2005 and $2.2 million in the comparable
quarter of 2004. The Company shipped similar quantities of product to Merck
each quarter. General and administrative expenses, exclusive of Stock Option
Expense, increased 8 percent to $4.1 million in the first quarter of 2005 from
$3.8 million in the comparable quarter of 2004. In 2005, the Company incurred
higher administrative personnel and facility costs, and higher accounting and
other professional fees, primarily related to its efforts to comply with the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
In January 2005, the Company and sanofi-aventis amended their collaboration
agreement to exclude from the scope of the collaboration the development of
the VEGF Trap for eye diseases through local delivery systems. In connection
with this amendment, sanofi-aventis made a one-time $25.0 million payment to
the Company, which was recognized as other contract income. In the first
quarter of 2004, in connection with its decision to forego its rights to
jointly develop the IL-1 Trap, Novartis agreed to pay Regeneron $42.75 million
to satisfy certain funding obligations under their collaboration agreement,
which was recognized as other contract income. Investment income increased in
the first quarter of 2005 compared with the same period of 2004 due primarily
to higher effective interest rates on investment securities. Interest expense
decreased slightly in the first quarter of 2005 compared with the same period
in 2004. Interest expense is attributable primarily to the Company's
convertible notes.
Per share amounts are based on the weighted average number of shares of the
Company's Common Stock and Class A Stock outstanding. The weighted average
number of shares outstanding was 55.8 million shares (basic and diluted) in
the first quarter of 2005 and 55.3 million shares (basic) and 63.6 million
shares (diluted) in the first quarter of 2004.
Current Business Highlights
Regeneron has built a broad-based clinical development program that is
evaluating several product candidates in different stages of clinical
development and in multiple therapeutic areas. The two lead candidates in the
development pipeline are the VEGF Trap and the IL-1 Trap.
In the VEGF Trap oncology program, sanofi-aventis reaffirmed its commitment to
develop the VEGF Trap in collaboration with Regeneron. The companies are
completing a phase 1 study that is evaluating the safety and tolerability of
the VEGF Trap delivered through intravenous administration. The companies will
present the preliminary results of this study at the annual meeting of the
American Society of Clinical Oncology (ASCO) in May 2005.
Regeneron and sanofi-aventis plan to initiate multiple clinical studies in
oncology in 2005 to evaluate the VEGF Trap as a single-agent and in
combination with other therapies in various cancer indications. One of these
studies will evaluate the VEGF Trap for a specific niche cancer indication
that has been granted Fast Track designation by the US Food and Drug
Administration (FDA).
In the clinical program for the treatment of eye diseases, Regeneron has
completed two phase 1 trials of the VEGF Trap delivered systemically in
patients with the neovascular form of age-related macular degeneration (wet
AMD) and diabetic macular edema (DME). The results of the AMD trial will be
reviewed at the annual meeting of the Association for Research in Vision and
Ophthalmology (ARVO) in May 2005. Also in the second quarter, Regeneron plans
to initiate a phase 1 trial of the VEGF Trap in wet AMD utilizing local
delivery to the eye.
Regeneron is nearing completion of safety and tolerability studies of IL-1
Trap formulations designed to permit administration of higher doses of the
IL-1 Trap in rheumatoid arthritis patients. Later this year, the Company plans
to initiate a new trial of the IL-1 Trap in rheumatoid arthritis. The trial
will be conducted in a larger patient population, testing higher doses of the
IL-1 Trap over a longer period of time, than the phase 2 study completed in
2003. Regeneron expects to evaluate doses of 160 milligrams and 320 milligrams
of IL-1 Trap delivered subcutaneously once a week.
Regeneron is conducting an exploratory trial of the IL-1 Trap in patients with
CIAS1-Associated Periodic Syndrome (CAPS), a spectrum of rare diseases
associated with mutations in the CIAS-1 gene. Interleukin-1 (IL-1) appears to
play a significant role in these diseases. In December 2004, the Company
received Orphan Drug designation for the IL-1 Trap in these diseases. The
preliminary results from the CAPS study will be presented at the Annual
European Congress of Rheumatology in June 2005, sponsored by the European
League Against Rheumatism (EULAR).
Regeneron has completed small pilot studies in healthy volunteers examining
the effects of the IL-1 Trap on a systemic marker of inflammation. The Company
plans to submit the results of these studies for presentation in an abstract
at a cardiovascular conference later this year and for publication in a
peer-reviewed medical journal.
The Company also expects to expand the IL-1 Trap development program in 2005
with the initiation of exploratory proof-of-concept studies in various other
diseases, including other rheumatological disorders and diseases associated
with inflammation in blood vessels.
About Regeneron Pharmaceuticals
Regeneron is a biopharmaceutical company that discovers, develops, and intends
to commercialize therapeutic medicines for the treatment of serious medical
conditions. Regeneron has therapeutic candidates in clinical trials for the
potential treatment of cancer, eye diseases, inflammatory diseases, and
asthma, and has preclinical programs in other diseases and disorders.
This news release discusses historical information and includes
forward-looking statements about Regeneron and its products, programs,
finances, and business, all of which involve a number of risks and
uncertainties, such as risks associated with preclinical and clinical
development of drugs and biologics, determinations by regulatory and
administrative governmental authorities, competitive factors, technological
developments, the availability and cost of capital, the costs of developing,
producing, and selling products, the potential for any collaboration agreement
to be canceled or to terminate without any product success, and other material
risks. A more complete description of these 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, 2004. 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.
This news release includes certain financial measures that are calculated in a
manner different from generally accepted accounting principles (GAAP) and are
considered non-GAAP financial measures under SEC rules. Non-GAAP financial
measures for the three months ended March 31, 2005 included in this news
release are: (1) pro forma net income and pro forma net income per share
(basic and diluted), exclusive of Stock Option Expense and (2) research and
development expenses, general and administrative expenses, and contract
manufacturing expenses, all exclusive of Stock Option Expense. As required, we
have provided reconciliations of non-GAAP amounts to GAAP amounts in tables
shown above. Additional required information is located in the Form 8-K filed
with the SEC in connection with this news release.
###
Contacts:
Investors: Media:
Charles Poole Lauren Tortorete
VP, Investor Relations Biosector2
914.345.7641 212.845.5609
charles.poole@regeneron.com ltortorete@biosector2.com
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REGENERON PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS (Unaudited)
(In thousands)
March 31, December 31,
2005 2004
---------------- ------------------
ASSETS
Cash and marketable securities $380,528 $348,912
Receivables 10,371 43,102
Inventory 3,087 3,229
Property, plant, and equipment, net 69,055 71,239
Other assets 7,251 6,626
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Total assets $470,292 $473,108
================= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $17,468 $18,872
Deferred revenue 67,040 71,693
Notes payable 200,000 200,000
Stockholders' equity 185,784 182,543
----------------- ---------------
Total liabilities and stockholders' equity $470,292 $473,108
================= ===============
REGENERON PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
For the three months
ended March 31,
2005 2004
----------------- ----------------
Revenues
Contract research and development $13,502 $41,610
Research progress payment 17,770
Contract manufacturing 2,707 2,610
----------------- ----------------
16,209 61,990
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Expenses
Research and development 35,912 32,181
Contract manufacturing 2,491 2,225
General and administrative 6,146 3,790
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44,549 38,196
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Income (loss) from operations (28,340) 23,794
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Other income (expense)
Other contract income 25,000 42,750
Investment income 2,230 1,124
Interest expense (3,013) (3,136)
----------------- ----------------
24,217 40,738
----------------- ----------------
Net income (loss) ($4,123) $64,532
================= ================
Net income (loss) per share:
Basic ($0.07) $1.17
Diluted ($0.07) $1.06
Weighted average shares outstanding:
Basic 55,815 55,283
Diluted 55,815 63,625