Regeneron Reports Full Year and Fourth Quarter 2008 Financial and Operating Results
`
`February 26, 2009
`Regeneron Reports Full Year and Fourth Quarter 2008 Financial and Operating ResultsTARRYTOWN, N.Y.--(BUSINESS
`WIRE)--Feb. 26, 2009-- Regeneron Pharmaceuticals, Inc. (Nasdaq: REGN) today announced financial and operating results for
`the full year and fourth quarter 2008. The Company reported a net loss of $82.7 million, or $1.05 per share (basic and diluted), for
`the year ended December 31, 2008 compared with a net loss of $105.6 million, or $1.59 per share (basic and diluted), for the
`same period in 2007. The Company reported a net loss of $31.5 million, or $0.40 per share (basic and diluted), for the fourth
`quarter of 2008 compared with a net loss of $13.1 million, or $0.19 per share (basic and diluted), for the fourth quarter of 2007. In
`the fourth quarter of 2007, in connection with the Company’s VEGF Trap-Eye collaboration with Bayer HealthCare, the Company
`recognized a cumulative catch-up of revenue and expenses that reduced the net loss for the quarter by $25.3 million, as
`described below.
`
`At December 31, 2008, cash, restricted cash, and marketable securities totaled $527.5 million compared with $846.3 million at December 31, 2007.
`During 2008, the Company retired the full $200 million of its 5.5 percent Convertible Senior Subordinated Notes.
`
`Current Business Highlights
`
`ARCALYST® (rilonacept) – Inflammatory Diseases
`
`The Company shipped $10.7 million of ARCALYST® (rilonacept) Injection for Subcutaneous Use to its distributors in 2008. In February 2008, the
`Company received marketing approval from the U.S. Food and Drug Administration (FDA) for ARCALYST for the treatment of Cryopyrin-Associated
`Periodic Syndromes (CAPS), including Familial Cold Auto-inflammatory Syndrome (FCAS) and Muckle-Wells Syndrome (MWS) in adults and children
`12 and older. ARCALYST, an interleukin-1 (IL-1) blocker, is the only therapy approved in the United States for patients with CAPS, a group of rare,
`inherited, auto-inflammatory conditions characterized by life-long, recurrent symptoms of rash, fever/chills, joint pain, eye redness/pain, and fatigue.
`Intermittent, disruptive exacerbations or flares can be triggered at any time by exposure to cooling temperatures, stress, exercise, or other unknown
`stimuli.
`
`In March 2008, ARCALYST became available for prescription in the United States, and the Company transitioned the patients who participated in the
`CAPS pivotal study from clinical study drug to commercial supplies. The Company currently projects shipments of ARCALYST to its distributors to total
`approximately $20-24 million in 2009.
`
`The Company is in the process of initiating a Phase 3 clinical development program with ARCALYST for the treatment of gout. Two Phase 3 clinical
`trials will evaluate ARCALYST versus placebo for the prevention of gout flares in patients initiating urate-lowering drug therapy. The Company plans to
`initiate a Phase 3 clinical trial of ARCALYST for acute gout that will evaluate treatment with ARCALYST alone versus ARCALYST in combination with a
`non-steroidal anti-inflammatory drug (NSAID) versus an NSAID alone. The Phase 3 clinical development program will also include a separate safety
`study.
`
`Aflibercept (VEGF Trap) – Oncology
`
`Regeneron and collaborator sanofi-aventis are enrolling patients in four Phase 3 trials that combine aflibercept, an anti-angiogenesis agent, with
`standard chemotherapy regimens for the treatment of cancer. One trial is evaluating aflibercept as a 2nd line treatment for metastatic colorectal cancer
`(the VELOUR study) in combination with FOLFIRI (folinic acid (leucovorin), 5-fluorouracil, and irinotecan). A second trial is evaluating aflibercept as a
`1st line treatment for metastatic pancreatic cancer in combination with gemcitabine (the VANILLA study). A third trial is evaluating aflibercept as a 1st
`line treatment for metastatic androgen- independent prostate cancer in combination with docetaxel/prednisone (the VENICE study). The fourth trial is
`evaluating aflibercept as a 2nd line treatment for metastatic non-small cell lung cancer in combination with docetaxel (the VITAL study). All four trials
`are studying the current standard of chemotherapy care for the cancer being studied with and without aflibercept. Each of the four Phase 3 trials is
`over one-third enrolled, and initial data from the Phase 3 program is expected in 2010. In addition, a Phase 2 study of aflibercept in 1st line metastatic
`colorectal cancer in combination with folinic acid (leucovorin), 5-fluorouracil, and oxaliplatin (the AFFIRM study) began recruiting patients in January
`2009.
`
`Aflibercept is also being studied in a Phase 2 single-agent study in advanced ovarian cancer (AOC) patients with symptomatic malignant ascites
`(SMA). This trial is now fully enrolled and we expect to have initial data from this trial by mid 2009.
`
`VEGF Trap-Eye – Ophthalmologic Diseases
`
`VEGF Trap-Eye is a specially purified and formulated form of VEGF Trap for use in intraocular applications. Regeneron and collaborator Bayer
`HealthCare are testing VEGF Trap-Eye in a Phase 3 program in patients with the neovascular form of age-related macular degeneration (wet AMD).
`Regeneron and Bayer HealthCare also initiated a Phase 2 study of VEGF Trap-Eye in patients with diabetic macular edema (DME) in late 2008.
`
`The Phase 3 trials in wet AMD, known as VIEW 1 and VIEW 2 (VEGF Trap: Investigation of Efficacy and Safety in Wet age-related macular
`degeneration), are comparing VEGF Trap-Eye and ranibizumab (Lucentis®, a registered trademark of Genentech, Inc.), an anti-angiogenic agent
`approved for use in wet AMD. VIEW 1 is being conducted in North America and VIEW 2 is being conducted in Europe, Asia Pacific, Japan, and Latin
`America. The VIEW 1 and VIEW 2 trials are both evaluating dosing intervals of four and eight weeks for VEGF Trap-Eye compared with ranibizumab
`
`Celltrion Exhibit - 1041
`Celltrion, Inc. v. Regeneron Pharmaceuticals, Inc.
`
`Pg. 001
`
`

`

`dosed according to its U.S. label every four weeks over the first year. As needed dosing (PRN) with both agents will be evaluated in the second year of
`the studies. The VIEW 1 and VIEW 2 trials are expected to complete enrollment in 2009, and initial data are expected in late 2010.
`
`The recently initiated Phase 2 DME study, known as the DA VINCI study, is a double-masked, randomized, controlled trial that is evaluating four
`different VEGF Trap-Eye regimens versus laser treatment. The study will be enrolling approximately 200 patients in the U.S., Canada, European
`Union, and Australia. The patients in the study will be treated for 52 weeks followed up by six additional months of safety evaluation. The primary
`efficacy endpoint is the change in best corrected visual acuity (BCVA) from baseline to week 24.
`
`Monoclonal Antibodies
`
`Regeneron and sanofi-aventis are collaborating on the discovery, development, and commercialization of fully human monoclonal antibodies
`generated by Regeneron using its VelocImmune® technology. The first therapeutic antibodies to enter clinical development under the collaboration are
`REGN88, an antibody to the interleukin-6 receptor (IL-6R) that is being evaluated in rheumatoid arthritis, and REGN475, an antibody to Nerve Growth
`Factor (NGF) that is being developed for the treatment of pain. In addition, a Phase 1 trial is in the process of being initiated for REGN421, an antibody
`to Delta-like ligand-4 (Dll4) that will be evaluated in oncology in patients with advanced malignancies. Over the course of the next several years, the
`Company and sanofi-aventis plan to advance an average of two to three new fully human antibodies into clinical development each year.
`
`Financial Results
`
`Revenues
`
`Total revenues decreased to $55.8 million in the fourth quarter of 2008 from $64.7 million in the same quarter of 2007 and increased to $238.5 million
`for the full year 2008 from $125.0 million for the same period of 2007. The Company’s revenue was comprised of contract research and development
`revenue, technology licensing revenue, and net product sales.
`
`Contract Research and Development Revenue
`
`Contract research and development revenue relates primarily to the Company’s aflibercept and antibody collaborations with sanofi-aventis and the
`Company’s VEGF Trap-Eye collaboration with Bayer HealthCare. Contract research and development revenue for the three months and years ended
`December 31, 2008 and 2007, consisted of the following:
`
`(In millions)
`Contract research & development revenue
`Sanofi-aventis
`Bayer HealthCare
`Other
`Total contract research & development revenue
`
`  Three months ended
`
`  Year ended
`
`December 31,
`
`December 31,
`
`2008
`
`$37.6
`3.0
`1.7
`$42.3
`
`  2007
`
`2008
`
`  2007
`
`$17.2
`35.9
`1.6
`$54.7
`
`$154.0
`31.2
`7.0
`$192.2
`
`$51.7
`35.9
`9.0
`$96.6
`
`For the three months and years ended December 31, 2008 and 2007, contract research and development revenue from sanofi-aventis consisted of
`the following:
`
`(In millions)
`Aflibercept:
`Regeneron expense reimbursement
`Recognition of deferred revenue related to up-front payments
`Total aflibercept
`Antibody:
`Regeneron expense reimbursement
`Recognition of deferred revenue related to up-front payment
`Other
`Total antibody
`Total sanofi-aventis contract research & development revenue
`
`Three months ended
`
`Year ended
`
`December 31,
`
`December 31,
`
`2008
`
`$6.3
`2.5
`8.8
`
`25.5
`2.6
`0.7
`28.8
`$37.6
`
`2007
`
`$10.5
`2.1
`12.6
`
`3.7
`0.9
`___
`4.6
`$17.2
`
`2008
`
`2007
`
`$35.6
`8.8
`44.4
`
`97.9
`10.5
`1.2
`109.6
`$154.0
`
`$38.3
`8.8
`47.1
`
`3.7
`0.9
`___
`4.6
`$51.7
`
`Sanofi-aventis’ reimbursement of Regeneron’s aflibercept expenses decreased for the three months and year ended December 31, 2008, compared
`to the same periods in 2007, primarily due to lower costs related to manufacturing aflibercept clinical supplies.
`
`Revenue under the antibody collaboration increased for the three months and year ended December 31, 2008 compared to the same periods in 2007
`due to the initiation of the collaboration in November 2007.
`
`For the three months and years ended December 31, 2008 and 2007, contract research and development revenue from Bayer HealthCare consisted
`of the following:
`
` 
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`Pg. 002
`
`

`

`  Three months ended   Year ended
`
`December 31,
`
`December 31,
`
`2008
`(In millions)
`$0.5
`Cost-sharing of Regeneron VEGF Trap-Eye development expenses
`Recognition of deferred revenue related to up-front and milestone payments 2.5
`Total Bayer HealthCare contract research & development revenue
`$3.0
`
`  2007
`$20.0
`15.9
`$35.9
`
`2008   2007
`$18.8 $20.0
`12.4
`15.9
`$31.2 $35.9
`
`In connection with the Company’s VEGF Trap-Eye collaboration with Bayer HealthCare, the Company received a $75.0 million non-refundable,
`up-front payment in October 2006 and a $20.0 million milestone payment in August 2007. Through September 30, 2007 all payments received from
`Bayer HealthCare, including the up-front and milestone payments and cost sharing reimbursements, were fully deferred and included in deferred
`revenue. In the fourth quarter of 2007, the Company commenced recognizing previously deferred payments from Bayer HealthCare and cost sharing
`of the Company’s VEGF Trap-Eye development expenses in the Company’s Statement of Operations through a cumulative catch-up. The $75.0
`million non-refundable, up-front license payment and $20.0 million milestone payment are being recognized as contract research and development
`revenue over the related estimated performance period. In periods when the Company recognizes VEGF Trap-Eye development expenses that it
`incurs under the collaboration, the Company also recognizes, as contract research and development revenue, the portion of those VEGF Trap-Eye
`development expenses that is reimbursable from Bayer HealthCare. In periods when Bayer HealthCare incurs agreed upon VEGF Trap-Eye
`development expenses that benefit the collaboration and Regeneron, the Company also recognizes, as additional research and development
`expense, the portion of Bayer HealthCare’s VEGF Trap-Eye development expenses that the Company is obligated to reimburse.
`
`In the fourth quarter of 2007, the Company recorded a cumulative catch-up of $35.9 million of contract research and development revenue from Bayer
`HealthCare. In addition, in the fourth quarter of 2007, the Company recorded a cumulative catch-up of $10.6 million of additional research and
`development expense related to the portion of Bayer HealthCare’s 2007 VEGF Trap-Eye development expenses that the Company was obligated to
`reimburse.
`
`Under the terms of the Bayer HealthCare collaboration, in 2008, the first $70.0 million of agreed-upon VEGF Trap-Eye development expenses
`incurred by the Company and Bayer HealthCare under a global development plan were shared equally, and the Company was solely responsible for
`up to the next $30.0 million. During the fourth quarter of 2008, Regeneron was solely responsible for most of the collaboration’s VEGF Trap-Eye
`development expenses. As a result, in the fourth quarter of 2008, the portion of the Company’s VEGF Trap-Eye development expenses that were
`reimbursable from Bayer HealthCare, and recognized as contract research and development revenue, amounted to only $0.5 million.
`
`Technology Licensing Revenue
`
`Regeneron has entered into non-exclusive license agreements with AstraZeneca and Astellas that allow those companies to utilize VelocImmune®
`technology in their internal research programs to discover human monoclonal antibodies. Each company made $20.0 million annual, non-refundable
`payments in each of 2007 and 2008 and agreed to make up to four additional annual payments of $20.0 million, subject to the ability to terminate their
`agreements after making two such additional payments. Upon receipt, these payments are deferred and are recognized as revenue ratably over
`approximately the ensuing year of each agreement. Regeneron will also receive a mid-single-digit royalty on sales of any antibodies discovered
`utilizing VelocImmune.
`
`Net Product Sales
`
`The Company shipped $10.7 million of ARCALYST® (rilonacept) to its distributors in 2008 and recorded $3.5 million and $6.3 million in product sales
`revenue for the three months and year ended December 31, 2008. 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. At December 31, 2008, $4.0 million of ARCALYST net product sales was included in deferred revenue in the Company’s
`financial statements.
`
`Expenses
`
`Total operating expenses for the fourth quarter of 2008 were $90.4 million, 19 percent higher than the same period in 2007, and $328.3 million for the
`full year 2008, 37 percent higher than for the same period of 2007. Average headcount increased to 903 for the fourth quarter of 2008 compared to
`665 for the same period in 2007 and increased to 810 for the full year 2008 from 627 for the full year 2007, due primarily to the Company’s expanding
`research and development activities principally in connection with the Company’s antibody collaboration with sanofi-aventis.
`
`Operating expenses included non-cash compensation expense related to employee stock option and restricted stock awards of $7.8 million in the
`fourth quarter of 2008 and $32.5 million for the full year of 2008, compared with $7.5 million and $28.1 million, respectively, for the same periods of
`2007.
`
`Research and development (R&D) expenses increased to $76.3 million in the fourth quarter of 2008 from $64.8 million in the comparable quarter of
`2007, and to $278.0 million for the full year 2008 from $201.6 million for the same period of 2007. In the fourth quarter and for the full year of 2008, the
`Company incurred higher R&D costs primarily related to additional R&D headcount, clinical development costs for ARCALYST and REGN88, research
`and preclinical development costs associated with our antibody programs, and facility-related costs to support the Company’s expanded R&D
`activities. In addition, for the full year of 2008, the Company incurred higher R&D costs related to clinical development of VEGF Trap-Eye and
`manufacturing supplies of our drug product candidates, especially our monoclonal antibodies. Also, as described above, commencing in the fourth
`quarter of 2007, the Company began recognizing as additional R&D expense, the portion of Bayer HealthCare’s VEGF Trap-Eye development
`expenses that the Company is obligated to reimburse.
`
`Selling, general, and administrative (SG&A) expenses increased to $13.5 million in the fourth quarter of 2008 from $11.4 million in the comparable
`quarter of 2007, and to $49.4 million for the full year 2008 from $37.9 million for the full year 2007. In 2008, the Company incurred $5.2 million of
`selling expenses related to ARCALYST® (rilonacept) for the treatment of CAPS. In addition, the Company incurred higher compensation expense and
`recruitment costs associated with expanding the Company’s SG&A headcount, higher professional fees related to various general corporate matters,
`and higher SG&A facility related costs.
`
`Pg. 003
`
`

`

`Other Income and Expense
`
`Investment income increased to $2.6 million in the fourth quarter of 2008 from $1.5 million in the comparable quarter of 2007, and decreased to $18.2
`million for the full year 2008 from $20.9 million for the full year 2007. For the full year 2008, investment income decreased primarily due to lower yields
`on our cash and marketable securities. The Company recognized charges of $0.2 million and $5.1 million for the fourth quarters of 2008 and 2007,
`respectively, and $2.5 million and $5.9 million for the full year 2008 and 2007, respectively, related to certain marketable securities that were
`determined to be other-than-temporarily impaired. For the full year 2008, these charges were partially offset by realized gains of $1.2 million on sales
`of marketable securities during the year.
`
`During the second and third quarters of 2008, the Company repurchased $82.5 million in principal amount of its 5.5 percent Convertible Senior
`Subordinated Notes. In connection with the repurchased notes, the Company recognized a $0.9 million loss on early extinguishment of debt. The
`remaining $117.5 million of these notes were repaid in full upon their maturity in October 2008.
`
`Income Tax Expense
`
`In the fourth quarter of 2008, the Company recognized a $0.7 million income tax benefit, resulting from a provision in the Housing Assistance Tax Act
`of 2008 that allowed the Company to claim a refund for certain unused pre-2006 research tax credits. For the full year 2008, income tax expense was
`$2.4 million and consisted primarily of alternative minimum tax, which resulted from the utilization of certain net operating loss carry-forwards, that
`would otherwise have expired over the next several years, to offset income for tax purposes.
`
`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. 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.
`
`REGENERON PHARMACEUTICALS, INC.
`CONDENSED BALANCE SHEETS (Unaudited)
`(In thousands)
`
`     December 31,   December 31,
`
`ASSETS
`Cash, restricted cash, and marketable securities
`Receivables
`Property, plant, and equipment, net
`Other assets
`
`Total assets
`
`2008
`
`2007
`
`$527,461
`35,212
`87,853
`19,512
`
`$846,279
`18,320
`58,304
`13,355
`
`$670,038
`
`$936,258
`
`LIABILITIES AND STOCKHOLDERS' EQUITY
`Accounts payable, accrued expenses, and other liabilities $41,261
`Deferred revenue
`209,925
`Notes payable
`Stockholders' equity
`
`418,852
`
`Total liabilities and stockholders' equity
`REGENERON PHARMACEUTICALS, INC.
`CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
`(In thousands, except per share data)
`
`$670,038
`
`$39,232
`236,759
`200,000
`460,267
`
`$936,258
`
` 
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`  
` 
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`Pg. 004
`
`

`

`  For the three months   For the year
`ended December 31, ended December 31,
`2008
`  2007
`2008
`  2007
`
`Revenues
`Contract research and development
`Technology licensing
`Net product sales
`
`Expenses
`Research and development
`Selling, general, and administrative
`Cost of goods sold
`
`$42,294
`10,000
`3,543
`55,837
`
`$54,730
`10,000
`
`   
`  64,730
`
`76,314
`13,491
`631
`90,436
`
`64,825
`11,439
`
`   
`  76,264
`
`$96,603
`28,421
`
`$192,208
`40,000
`   
`6,249
`  238,457   125,024
`
`  
`
`201,613
`37,865
`
`278,016
`49,348
`   
`923
`  328,287   239,478
`
`  
`
`Loss from operations
`
`(34,599 ) (11,534 ) (89,830 ) (114,454 )
`
`Other income (expense)
`Investment income
`Interest expense
`Loss on early extinguishment of debt
`
`1,473
`2,648
`) (3,010
`(295
`   
`2,353
`
`(1,537
`
`18,161
`) (7,752
`(938
`) 9,471
`
`)
`
`20,897
`) (12,043
`)  
`  8,854
`
`  
`
`Net loss before income tax expense
`
`(32,246 ) (13,071 ) (80,359 ) (105,600 )
`
`Income tax expense (benefit)
`
`(728
`
`)  
`
`2,351
`
`    
`
`Net loss
`
`$ (31,518 ) $ (13,071 ) $ (82,710 ) $ (105,600 )
`
`Net loss per share amounts, basic and diluted
`
`$ (0.40
`
`) $ (0.19
`
`) $ (1.05
`
`) $ (1.59
`
`)
`
`Weighted average shares outstanding, basic and diluted 79,190
`
`67,754
`
`78,827
`
`66,334
`
`Source: Regeneron Pharmaceuticals, Inc.
`
`Regeneron Pharmaceuticals, Inc.
`Investor Relations:
`Peter Dworkin, 914-345-7640
`peter.dworkin@regeneron.com
`or
`Media Relations:
`Laura Lindsay, 914-345-7800
`laura.lindsay@regeneron.com
`or
`Kelly Hershkowitz, 212-845-5624
`khershkowitz@biosector2.com
`
` 
` 
` 
` 
` 
` 
`Pg. 005
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`