Regeneron Pharmaceuticals, Inc. — FY2021 Form 10-K Summary
Business context and reporting period
Regeneron is a fully integrated biotechnology company that discovers, develops, manufactures, and commercializes medicines for serious diseases. The filing covers the fiscal year ended December 31, 2021, with comparative information for 2020 and 2019. The company operates as one business segment.
Key commercial products include EYLEA, Dupixent, Libtayo, Praluent, Kevzara, Evkeeza, ARCALYST, and ZALTRAP. REGEN-COV generated substantial 2021 revenue under emergency-use authorizations and U.S. government supply agreements but was not FDA-approved.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $16,071.7 million | $8,497.1 million | +89.1% |
| Income from operations | $8,946.8 million | $3,576.6 million | +150.1% |
| Net income | $8,075.3 million | $3,513.2 million | +129.9% |
| Diluted EPS | $71.97 | $30.52 | +135.8% |
| Operating margin | 55.7% | 42.1% | +13.6 percentage points |
| Net margin | 50.2% | 41.4% | +8.8 percentage points |
| Cash flow from operations | $7,081.3 million | $2,618.1 million | +$4,463.2 million |
| Capital expenditures | $551.9 million | $614.6 million | -$62.7 million |
Net product sales were $12,117.2 million, including U.S. EYLEA sales of $5,792.3 million and REGEN-COV sales of $5,828.0 million. Collaboration revenue included $1,902.2 million from Sanofi, $1,409.3 million from Bayer, and $361.8 million from Roche. Dupixent-related collaboration profits were the primary driver of higher Sanofi collaboration revenue.
At December 31, 2021, cash and cash equivalents were $2,885.6 million and marketable securities were $9,647.1 million, including $1,249.9 million of equity securities. Working capital was $10,082.4 million. Long-term debt was $1,980.0 million, and finance lease liabilities were $719.7 million, for aggregate reported indebtedness of approximately $2.700 billion. The company had $750.0 million available under its revolving credit facility and no borrowings outstanding under that facility.
Material changes versus the prior comparable period
- Revenue increased by $7,574.6 million, primarily because of $5,642.3 million of incremental REGEN-COV sales and higher EYLEA, Dupixent-related collaboration, and Bayer collaboration revenue.
- EYLEA U.S. sales increased $845.1 million to $5,792.3 million, reflecting higher volume and recovery from COVID-19-related demand disruption in 2020, partly offset by higher sales deductions.
- REGEN-COV sales increased to $5,828.0 million from $185.7 million. The company completed final deliveries under its U.S. government agreements by December 31, 2021.
- Operating expenses increased $2,204.4 million to $7,124.9 million. Cost of goods sold increased substantially because of REGEN-COV manufacturing costs, a $259.6 million Roche profit true-up, and a $231.7 million fourth-quarter REGEN-COV inventory write-down.
- Research and development expense increased 6.3% to $2,908.1 million, while selling, general, and administrative expense increased 35.6% to $1,824.9 million, primarily from commercialization activities and higher headcount-related costs.
- Operating cash flow increased sharply, although accounts receivable rose $1,927.4 million, primarily because of REGEN-COV sales to the U.S. government.
- The company repurchased approximately $1,655.0 million of common stock during 2021 and had $2.845 billion remaining under its November 2021 repurchase authorization at year-end.
Guidance, outlook, commentary, risks, and unusual items
Management stated that existing capital resources, available credit, anticipated product sales, and collaboration funding should meet anticipated operating needs for the foreseeable future. The company expects 2022 capital expenditures of approximately $650 million to $730 million, principally for manufacturing expansion, fill/finish capacity, and expansion of the Tarrytown campus.
Management expects continued substantial spending on research and development, commercialization of EYLEA, Dupixent, and Libtayo, COVID-19 antibody development and manufacturing, and intellectual-property activities. The filing does not provide formal revenue or earnings guidance.
- REGEN-COV was highly unlikely to be active against Omicron. In January 2022, the FDA revised the EUA to exclude use where infection or exposure was likely due to an unsusceptible variant, leaving REGEN-COV unauthorized in all U.S. jurisdictions at that time. Future COVID-19 antibody revenue is therefore highly uncertain.
- The company recorded $231.7 million of REGEN-COV inventory impairment in the fourth quarter and total 2021 inventory write-offs and reserves of $457.1 million, primarily related to REGEN-COV.
- The company remains substantially dependent on EYLEA and Dupixent. EYLEA faces branded, biosimilar, device, and alternative-treatment competition; U.S. EYLEA biologic regulatory exclusivity was scheduled to expire November 18, 2023, subject to possible pediatric exclusivity.
- Clinical and regulatory milestones remain uncertain. Important planned activities included applications and decisions for aflibercept 8 mg, Dupixent additional indications, Libtayo combinations, odronextamab, REGN5458, pozelimab, and REGEN-COV.
- Material risks include COVID-19 effects, clinical and regulatory failure, product safety, manufacturing and single-source supply constraints, reimbursement and drug-pricing pressure, patent litigation, reliance on Sanofi and Bayer, data-security and privacy obligations, and healthcare-law investigations.
- Regeneron disclosed Department of Justice investigations and civil litigation concerning patient-assistance programs, alleged kickbacks, EYLEA discounts and reimbursement reporting, as well as related actions by UnitedHealthcare, Humana, and Blue Cross and Blue Shield. Accruals for legal contingencies were not material at year-end, but outcomes remain uncertain.
- The Tarrytown finance lease had a $719.7 million liability and was scheduled to mature in March 2022. A proposed five-year extension was subject to definitive documentation and other conditions; otherwise, the company could have been required to purchase the facility for approximately $720 million plus accrued amounts.
- Unrecognized tax benefits totaled $410.9 million. The company expects the required capitalization and amortization of U.S. research and development expenses beginning in 2022 to have a material impact on cash flows.
Most important facts for investors to verify
- Separate recurring product and collaboration economics from the unusually large, potentially nonrecurring REGEN-COV contribution to 2021 revenue and earnings.
- Verify current REGEN-COV authorization, inventory exposure, future demand, and any additional write-down or manufacturing commitments.
- Track EYLEA volume, pricing deductions, competitive launches, patent proceedings, and the timing of biosimilar entry.
- Assess Dupixent growth and Regeneron’s profit-sharing economics, including development-balance reimbursement obligations to Sanofi.
- Review the status and potential exposure from DOJ investigations, healthcare-law litigation, and patent proceedings involving EYLEA, Dupixent, Praluent, and REGEN-COV.
- Confirm completion or refinancing of the Tarrytown lease obligation and monitor planned 2022 capital expenditures and manufacturing expansion.
- Evaluate liquidity after share repurchases, capital spending, taxes, collaboration obligations, and total debt and lease liabilities.