Why Regeneron Pharmaceuticals’ SG&A Expenses Jumped in 2015



Increased SG&A expenses

In 4Q15, Regeneron Pharmaceuticals (REGN) reported SG&A (selling, general, and administrative) expenses amounting to $295 million, which represents a jump of 68.6%. Similarly, for fiscal 2015, this expense rose to $839 million from the level of $519 million in 2014.

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Why did Regeneron’s SG&A expenses rise?

Historically, this expense was about 18%–19% of Regeneron’s total revenues. However, in 4Q15, this figure jumped to 27% of total revenues driven by the increased headcount and a rise in the commercialization expenses associated with Eylea and Praluent. In 4Q15, SG&A expenses as a percentage of total revenues for Amgen (AMGN), Biogen (BIIB), and Celgene (CELG) stood at 25.6%, 20.5%, and 23.8%, respectively.

Should we expect even higher SG&A expenses in 2016?

On the non-GAAP (generally accepted accounting principles) basis, Regeneron’s SG&A expenses for fiscal 2015 stood at $646 million. But Regeneron anticipates its non-GAAP SG&A to fall in a range of $925 million–$1 billion in 2016. The ongoing launch of Praluent along with the potential launch of two more drugs, Sarilumab and Dupilumab, would drive this rise.

We should note too that SG&A is a very crucial expense for any pharmaceutical or biotechnology company. With the potential launch of a new product, the company has to expand its workforce to support the commercialization, but with the uptake of the drug, the expense with respect to total revenue comes down gradually.

To diversify the risk of investing directly in the equity of Regeneron, investors can look for options such as the PowerShares QQQ (QQQ), which has 0.82% of its total holdings in Regeneron.


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