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.
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.
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