雷傑納榮製藥 (REGN) 2012 Q4 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the Regeneron Pharmaceuticals conference call to discuss the fourth quarter and year end 2012 financial results.

My name is Bethany, and I will be your coordinator today.

At this time, all participants are in a listen-only mode.

We will conduct a question-and-answer session towards the end of the call.

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Dr. Michael Aberman, Vice President of Strategy and Investor Relations for Regeneron.

Please proceed, Dr. Aberman.

Thank you, Bethany.

Good morning, and welcome to Regeneron Pharmaceuticals' fourth quarter and full year 2012 conference call.

An archive of this webcast will be available on our website under Events and Presentations for 30 days.

Joining me on the call today is Dr. Leonard Schleifer, Founder, President, and Chief Executive Officer; George Yancopoulos, Founding Scientist, President of Regeneron Labs, and Chief Scientific Officer; Murray Goldberg, Chief Financial Officer; and Robert Terifay, Senior Vice President Commercial.

After our prepared remarks, we will open the call for Q&A.

I would also like to remind you that remarks made on this call that are not historical in nature may be forward-looking statements about Regeneron, and are subject to a number of risks and uncertainties.

Actual events and our actual results may differ materially.

Such remarks may include, but are not limited to, those related to Regeneron and its products and businesses, sales forecast, financial forecasts, development programs, collaborations, finances, regulatory matters, intellectual property, competition.

All of which involve a number of risks and uncertainties.

A more complete description of these other and other material risks can be found in Regeneron's filing with the United States Securities and Exchange Commission, or SEC, including its Form 10-K for the year ended December 31, 2012, which we will be filing with the SEC tomorrow, and Form 10-Q for the quarter ended September 30, 2012.

Regeneron does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise unless required by law.

GAAP and non-GAAP measures will be discussed on today's call.

Information regarding our use of non-GAAP financial measures and a reconciliation of these measures to GAAP are available in our financial results press release, which can be accessed on our website.

Once our call concludes, the IR team will be available to answer further questions.

With that, let me turn the call over to our President and Chief Executive Officer, Dr. Leonard Schleifer.

Thank you Michael, and good morning everyone.

2012 was a good year for Regeneron, as it marked our transformation from a development stage company to a profitable biotech company, driven by the highly successful launch of EYLEA, or aflibercept injection, one of the top product launches in the history of our industry.

With fourth quarter EYLEA US net sales of $276 million and 2012 full year US EYLEA net sales reaching $838 million, we are pleased to report that fourth quarter '12 was our fourth consecutive profitable quarter with non-GAAP net income of $171 million, or $1.47 per diluted share, and full year non-GAAP net income of $530 million, or $4.66 per diluted share.

As a reminder, non-GAAP net income excludes non-cash compensation expense, non-cash interest expense, and non-cash income taxes, all of which Murray will discuss in greater detail later.

The ability to deliver such strong earnings with over $0.5 billion of non-GAAP profit in the first full year that EYLEA was on the market while continuing to invest in our robust pipeline highlights the unique business model we have created at Regeneron.

The EYLEA launch continues to go very well, and we expect strong growth in the US in 2013, as Bob Terifay will describe in more detail.

As we announced earlier in the year, we estimate full year 2013 EYLEA US net sales will grow approximately 50% to between $1.2 billion and $1.3 billion.

Outside the US, our partner, Bayer Healthcare has launched EYLEA across multiple geographies, including Japan, Australia, and several countries in Europe and South America.

In the fourth quarter, the first quarter of sales, Bayer recorded ex-United States EYLEA net sales of approximately $19 million.

We will not comment on the details of the ex-US launch on this call, as that should be left to our partner Bayer Healthcare to discuss, but we can say that we are very pleased with the progress to date.

We are also pleased with our regulatory achievements in 2012.

We received approval for EYLEA in the United States in a second indication, macular edema, following central retinal vein occlusion.

And our partners Sanofi received US approval in August 2012 for ZALTRAP in combination with FOLFIRI for patients with metastatic colorectal cancer that is resistant to, or has progressed, following an oxaliplatin regimen, and just last week Sanofi received approval for ZALTRAP in the European Union.

While ZALTRAP will not have the same impact on our net income as EYLEA because of a smaller market opportunity and our repayment obligations to Sanofi, especially in the early launch years.

ZALTRAP US net sales, as reported by Sanofi, are off to a strong start, with US net sales of $23 million in the fourth quarter of '12, and $32 million from the launch in late August until the end of last year.

Our pipeline also made significant advances in 2012, which George will discuss in a minute.

While 2012 was a transformational year, we see a bright future with the ongoing global launch of EYLEA, expansion of EYLEA into new indications, and the additional opportunities in our pipeline.

With that, let me turn the call over to George Yancopoulos, my partner and Regeneron's Chief Scientific Officer, to discuss our pipeline in a little more detail.

George will be followed by Bob Terifay, Senior Vice President of Commercial, who will elaborate on our commercial activities, and finally Murray Goldberg, our Chief Financial Officer, will discuss our financial performance during 2012 and provide some guidance for 2013 expenses.

George?

Thanks, Len.

2012 was also a good year for Regeneron's research and development organization.

I will highlight a few accomplishment and upcoming milestones from our pipeline.

For EYLEA, as you just heard from Len, we received approval in an additional indication in 2012, macular edema following central retinal vein occlusion.

We also initiated an additional trial in patients with macular edema following branch retinal occlusion, and we fully enrolled our US and ex-US Phase 3 DME trials.

We look forward to getting the top line results from the one-year primary endpoint for the ex-US DME Phase 3 trial, Vivid-DME, by the end of the year.

As a reminder, for DME in the EU, a one-year primary efficacy endpoint is required for regulatory approval.

While in the US, it had been a two-year efficacy endpoint.

Turning to Regeneron's 727, our PCSK9 antibody targeting lowering of LDL cholesterol, for which we have just had a generic name approved, [aleroquemed].

In 2012, we presented and published positive Phase 2 data, and subsequent initiated a 22,000 patient Phase 3 program, Odyssey -- which includes an 18,000 patient cardiovascular outcomes trial.

While the majority of the Phase 3 results will emerge in 2014, we now expect the first Phase 3 trial in the program, Odyssey Mono, to have data available in the third quarter of 2013.

While this is a small trial in a monotherapy setting, it will represent the first Phase 3 trial results for a PCSK9.

In 2012, we also fully enrolled the first of our Phase 3 trials for sarilumab, our IL-6 receptor antibody, called the Saril-RA-Mobility trial.

We initiated an additional Phase 3 trial, Saril-RA Target, and will shortly initiate additional Phase 3 trials in the Saril-RA program.

Just last month, we announced that we have positive proof of concept datum for our IL-4 receptor antibody, Regeneron 668, for which we also have a generic name, [stubalipumab] in two allergic diseases, atopic dermatitis and allergic asthma.

We are particularly excited about this program is these diseases remain high areas of a high degree of unmet medical need, and we believe that blocking both the IL-4 and IL-13 pathways with our antibody has the potential to be a disease-modifying therapy.

Obviously, it is still early in terms of drug development, but we look forward to presenting the atopic dermatitis data at the American Academy of Dermatology meeting in March in Miami and the asthma data at a conference later in the year.

We anticipate starting Phase 2b trials for both indications in the middle of this year.

Before turning the call over to Bob Terifay, I want to also mention that while we focus in our investor calls in our late stage pipeline, we invest a lot of time and resources to our early stage pipeline, technology development, and our discovery efforts.

Therefore, I want to quickly highlight some of these efforts.

Specifically, we have made significant progress in our bispecific antibody program, our long-acting antibody program -- one of which we call catch-and-release, as well as our antibody drug conjugate, or ADC efforts.

We hope to provide more details on these programs as the year progresses, but like our VelocImmune platform, we believe we are developing best-in-class of purchase for these next-generation antibody-like therapeutics.

With that, I'd now like to turn the call over to Bob to provide an update on the EYLEA launch.

Thank you, George.

We're very pleased with the rapid acceptance of EYLEA and the successful US launch.

In fact, according to our calculations, EYLEA represents the third most successful launch in the history of the US biopharmaceutical industry.

This success is a reflection of the truly differentiated product profile for EYLEA, as well as the strong execution by our commercial team, both in the field, as well as inside in supporting roles.

In the fourth quarter, we continued to see strong uptick for EYLEA, despite some challenges that we face, that included Hurricane Sandy on the East Coast and the Thanksgiving and Christmas holidays.

During the first quarter, overall penetration of EYLEA into that wet AMD market continued to grow, both in terms of newly treated patients, as well as those switching from bevacizumab and ranibizumab.

Based on the updated qualitative market research surveys that we conducted during the fourth quarter, in terms of unit volume, that decision map represented 47% of treated eyes.

Ranibizumab 30%, and EYLEA captured approximately 22% of the wet AMD market.

Of the patients who were newly treated with EYLEA, approximately 65% were new to anti-VEGF therapy, and 35% were switches from existing therapy.

Importantly, during the fourth quarter we continued to gain new accounts, many of whom were previously mainly bevacizumab users.

Also during the fourth quarter, we saw the beginning of our penetration into the macular edema following central retinal vein occlusion, or CRVO market.

Our qualitative market research during the quarter suggests that we gained 10% of the CRVO market at the end of 2012.

We hope to continue that momentum in CRVO throughout 2013.

As a reminder, our market research is based on position questionnaires, and therefore is qualitative in nature.

Patient access remained very important for Regeneron.

Our EYLEA 4U program has become a valuable resource for patients, physicians, and their practices to help ensure that patients who need EYLEA have access.

As an example of our commitment to patient access, this year we've significantly increased our charitable donations to independent foundations that provide co-pay assistance.

Just last month, EYLEA received a permanent reimbursement code, or J-code, for Medicare.

Since EYLEA is a buy-and-build product, confidence in reimbursement is an important factor in the prescribing decisions for many physicians.

We believe that the permanent J-code will make some physicians more comfortable using EYLEA.

We're already seeing faster turnaround times for claims processing from the Medicare carriers.

Turning to our guidance for EYLEA US sales for 2013, we considered multiple factors, including, on the positive side, one, the carryover of wet AMD patients who started EYLEA treatment throughout 2012.

Two, the permanent J-code that we received last month.

Three, the ongoing launch in macular edema following central retinal vein occlusion.

And four, continued share gains from both ranibizumab and bevacizumab in the wet AMD market.

This may be partially offset by the slowing in new account acquisition, and an increased duration between injections as patient move from the initial monthly dosing period.

With those factors in mind, you heard that we forecast US EYLEA sales for 2013 of $1.2 billion to $1.3 billion, which represented an approximately 50% increase over 2012.

Outside the United States, Bayer has launched EYLEA for the treatment of wet AMD in Japan, Australia, and several European and South American countries.

As you may know, the actual market launch in Europe occurs in a staggered fashion, as each country has a different process for obtaining pricing approval.

That said, we are pleased with the progress to date, and the feedback that we are getting from Bayer, which you will hopefully hear from them about in the next few weeks when they do their earnings call.

Net US sales reported to us by Bayer for the fourth quarter were $19 million, largely from Japan and Australia, the first countries where the product launch outside of the United States.

I'd now like to turn from ophthalmology to oncology, where we made our first foray in the third quarter of 2012, with the US approval of ZALTRAP, also known as ziv-aflibercept, for the treatment of patients with metastatic colorectal cancer, who have progressed following treatment with an oxaliplatin-containing regimen that could have included bevacizumab.

We co-commercialized ZALTRAP with our collaborative Sanofi.

Sanofi, however, is currently responsible for the field-based selling effort.

Interest in the uses of ZALTRAP in its approved medical setting where historically there were no therapies to demonstrate the improved overall survival in combination with the standard-of-care chemotherapy regimen FOLFIRI continues.

This is highlighted by the $23 million in net sales recorded by Sanofi in the fourth quarter of 2012, and $32 million between launch in late August through the end of last year.

With the recent approval of ZALTRAP in the EU, we look forward to the launch rollout throughout 2013.

With that, let me turn the call over to our Chief Financial Officer, Murray Goldberg.

Thank you Bob, and good morning to everyone.

I'm very pleased to discuss our financial results for the fourth quarter and full year 2012.

As Len noted at the outset of this call, but certainly warrants repeating, the fourth quarter of 2012 was our fourth consecutive profitable quarter, with non-GAAP net income of $171 million, or $1.47 per diluted share.

Full year non-GAAP net income was $530 million, or $4.66 per diluted share.

This strong bottom-line performance was driven by US EYLEA net sales of $276 million in the fourth quarter, and $838 million for the full year.

EYLEA inventory held by US distributors at the end of the year was consistent with prior quarters at about one to two weeks of sales.

Sanofi collaboration revenue was $105 million for the fourth quarter, and $424 million for the full year.

The Sanofi collaboration revenue line includes reimbursement of our R&D expenses for preclinical and clinical research within our antibody collaboration, and any ZALTRAP R&D expenses; recognition and/or amortization of upfront and milestone payments; and our share of the profit or loss associated with the ongoing launch of ZALTRAP.

In the fourth quarter of 2012, Sanofi recorded $23 million of ZALTRAP net sales in the US, and the Sanofi collaboration revenue line included a $6 million loss for us associated with global pre-marketing activities and the US launch of ZALTRAP.

For the full year 2012, ZALTRAP US net sales were $32 million, and the Sanofi collaboration revenue line included a $26 million loss for us, associated with global pre-marketing activities and commercialization of ZALTRAP.

Our share of the loss in 2012 was more than offset by a $50 million milestone payment we received in August 2012 related to ZALTRAP approval in the US.

As a reminder, we do not anticipate a meaningful positive contribution from the commercialization of ZALTRAP in the near-term, because of our obligation to repay Sanofi from our share of ZALTRAP profits for a 50% of the ZALTRAP development expenses that they have funded.

Buyer collaboration revenue was $22 million for the fourth quarter and $70 million for the full year.

Similar to the Sanofi collaboration revenue line, Bayer collaboration revenue includes cost-sharing of EYLEA development expenses that we incurred, recognition and/or amortization of upfront and milestone payments, and our share of net profits from EYLEA sales outside the United States.

For the full year 2012, Bayer collaboration revenue included a total of $25 million in milestone payments, a $15 million milestone payment that we received in the third quarter for marketing approval of EYLEA in Japan, and a $10 million milestone payment in the fourth quarter for pricing approval of EYLEA in Japan.

In the fourth quarter, Bayer recorded net sales of EYLEA outside the US of approximately $19 million.

As with Sanofi and ZALTRAP, as EYLEA becomes profitable, we are obligated to repay Bayer for 50% of the ex-US EYLEA development expenses that they have funded.

Each quarter, that repayment is equal to the lesser of 5% of the outstanding repayment obligation or our share of that quarter's ex-US EYLEA profits.

During the fourth quarter of 2012, our share of collaboration profit from sales of EYLEA outside the US, including royalties on sales in Japan, was $4 million.

This was fully offset by our repayment obligation to Bayer.

At the end of 2012, our remaining repayment obligation to Bayer was approximately $273 million.

The components of both the Sanofi and Bayer collaboration revenue lines are detailed in our Form 10-K for 2012, which we expect to file tomorrow, and will also be shown in future quarterly filings.

Non-GAAP cost of goods sold was $30 million, or 10.6% of total net product sales in the fourth quarter, and $83 million or 9.7% of total net product sales for the full year.

As a reminder, COGS includes royalty expense in connection with our agreement with Genentech relating to ophthalmic sales of EYLEA in the United States.

Turning to R&D, non-GAAP R&D expense was $163 million in the fourth quarter, and $572 million for the full year.

If we net out R&D reimbursements from our collaborators from our R&D expense line, our net non-GAAP unreimbursed R&D expense was $48 million for the fourth quarter, and $157 million for the full year.

Thus, more than 70% of our R&D expense was funded by Sanofi and Bayer.

As you may remember, we had guided towards fourth quarter unreimbursed non-GAAP R&D expense of $50 million to $90 million.

Actual unreimbursed R&D expense in 2012 was below guidance, partly because our NGF antibody program remains on clinical hold, so we did not initiate our planned Phase 3 program in 2012.

That said, we do expect a significant increase in unreimbursed non-GAAP R&D expense in 2013 compared to 2012, with expenses of $275 million to $325 million.

This increase in non-GAAP unreimbursed R&D expense is largely due to increased spending on EYLEA clinical program compared to 2012, including the Phase 3 DME and the BRVO trials, advancing unpartnered antibody programs, such as Regeneron 1400 which targets ERRB3, and three other antibodies to undisclosed targets through to proof-of-concept stage, and increased spending on early stage technologies, such as antibody drug conjugates by specific antibodies and longer-acting antibody technologies.

In addition, as George mentioned, we expect results from one of the Phase 3 Odyssey trials for Regeneron 727, or aleroquemed, later this year.

If these data are positive, it would trigger the real-time sharing of 20% of subsequent Phase 3 development expenses for the Odyssey program.

Estimates of all these expenses are included in our non-GAAP unreimbursed R&D guidance.

Non-GAAP SG&A expense was $46 million in the fourth quarter, and $172 million for the full year.

We expect non-GAAP SG& A expense in 2013 to grow to $215 million to $235 million.

This increase is largely due to two items, an increase in our contribution to independent co-pay foundations, as Bob mentions, and the branded prescription drug fee that was part of the Patient Protection and Affordable Care Act, also known as Obamacare.

As a reminder, non-GAAP R&D and SG&A expenses exclude non-cash share-based compensation expense.

Turning to taxes, as we discussed in our last quarterly call even though we have accumulated a large amount of NOLs and tax credits that could offset future taxable income, under GAAP prior to the fourth quarter of 2012, we had a full valuation allowance against our net deferred tax assets, due to our extended history of operating losses.

As a result, we did not include any deferred tax assets on our balance sheet.

In the fourth quarter of 2012 in our GAAP earnings, we recognized a non-cash tax benefit of $336 million, primarily as a result of releasing substantially all of the valuation allowance associated with our deferred tax assets.

The decision to release the valuation allowance in the fourth quarter was made after we determined that it was more likely than not that these deferred tax access would be realized.

One significant factor that influenced this decision was that our cumulative profits over the prior three years turned positive in the fourth quarter of 2012.

As this income tax benefit is non-cash, we excluded it from our non-GAAP earnings.

Looking forward to 2013 and beyond, despite the significant net operating loss and tax credit carry-forwards available to offset future cash tax liabilities, we expect to begin to recognize book income taxes in our GAAP earnings, using an estimated tax rate which is expected to approximate statutory tax rates of around 40%.

That said, given the magnitude of our existing NOL and tax credit carry-forwards, plus anticipated additional tax deductions we expect in connection with future employee exercises of stock options, we do not expect to pay any significant cash income taxes through at least 2014.

Therefore, for our non-GAAP earnings, we will continue to exclude non-cash taxes until we begin paying significant cash income taxes.

At that time, we anticipate that we will no longer exclude non-cash income tax expense from our non-GAAP net income.

It's worth noting that as our business operations expand outside the United States, in a few years we can start to see a downward trend in our GAAP effective tax rate.

Turning to the bottom line, as I said earlier, we reported non-GAAP Net income of $530 million, or $4.66 per fully diluted share for the full year 2012.

Non-GAAP net income excludes non-cash share-based compensation expense, non-cash interest expense related to our convertible senior notes, and non-cash income tax expense or benefit, including in 2012 the non-cash benefit from releasing substantially all of the valuation allowance associated with our deferred tax assets.

Our non-GAAP fully diluted average shares outstanding were approximately 117 million shares in the fourth quarter, and approximately 115 million shares for the full year.

The full year 2012 non-GAAP fully diluted average shares outstanding include about 16 million shares attributable to stock options, restricted stock and warrants accounted for using the treasury method, and about 5 million shares associated with our convertible notes accounted for using the if-converted method.

At December 31, 2012 we had approximately $1.2 billion of cash, marketable securities, and trade receivables, compared to $839 million of the end of 2011.

In 2012, this consisted of $588 million of cash and marketable securities, and $593 million of trade receivables, almost all related to EYLEA sales.

As you will recall, in connection with the launch of EYLEA, we offered our distributors extended payment terms, and they in turn offered positions extended payment terms of up to six months to provide ample time for physicians to receive reimbursement from Medicare and other insurance providers for their EYLEA usage.

Now that we have a permanent J-code, we expect these EYLEA payment terms to decrease over time, and thus the days that our EYLEA trade receivables are outstanding will also decrease.

Thank you, and with that I'll turn the call back to Len.

Thanks, Murray, Bob, George.

To wrap it up, 2012 was a great year.

We believe the future will be bright with the expansion of EYLEA globally ahead of us, and a robust product pipeline advancing.

With that, let me turn the call back to Michael for the question-and-answer portion of the call.

That concludes our prepared remarks.

We'd now like to open up the call to Q&A.

As we'd like to give as many people a chance to ask questions as possible, we do request you limit yourself to one question.

As a reminder, our team will be available in our offices after the call for questions.

Thank you.

Bethany, if you can now open the call for questions.

(Operator Instructions)

Our first question comes from the line of Robyn Karnauskas with Deutsche Bank.

Hi guys.

Happy Valentine's Day, and thanks for taking my question.

So I guess a question around market trends.

You mentioned that Avastin now is about 41% of eyes, EYLEA 22%, I think you said Lucentis 37%, and the previous data set that you threw out there was EYLEA 20%, Avastin 50%, and Lucentis 30%.

So I'm trying to understand, has there have been a shift according to your market research of Avastin to Lucentis, and have you seen any impacts from compounding pharmacies In the new year?

Thanks.

Yes.

Hi.

I can let Bob comment on that Robyn.

Thanks for the question, but before he does, just to really emphasize the point.

These are qualitative research, and they are not really intended to be able to track precisely market share from survey to survey over time.

Bob, you want to elaborate on that?

Yes, I agree, Len.

The way we do the survey is we try to pick a representative sample of 200 retinal specialists, but we do vary it as we go out over time.

So it's very hard to trend specific numbers.

What I can tell you is that it does seem that Avastin sales are slowly declining with the launch of EYLEA.

I don't think you could read that Lucentis is growing from Avastin sales.

I think it was just the distribution of physicians that we had in this survey.

In terms of the compounding question, we do see physicians are concerned.

There are some states now where the physicians are having to write prescriptions or spreadsheets with all the patients for whom compounded Avastin is being used, but there has been no major market shift as of yet.

I guess -- it's Michael.

I just want to make sure.

I think you mentioned some of those numbers wrong, so I just want to clarify what our survey results were.

It was 47% for bevacizumab, 30% for ranibizumab, and 22% for EYLEA.

Great.

Thank you so much.

Our next question comes from the line of Adnan Butt with RBC Capital Markets.

Good morning everyone, and congratulations on the phenomenal 2012.

A bit more on guidance, if you can.

Can you tell us what share you expect from wet AMD and CRVO, and maybe you can shed light on CRVO?

Do you expect similar dynamics to the wet AMD there?

Bob, do you want to take that?

Let's start with the CRVO.

We expect to see a slower uptake in CRVO, in that we are not seeing as many switches in the CRVO market, and part of that may be related to our labeling, which calls for monthly dosing in CRVO.

But we do expect to see continued growth in CRVO, just at a slower pace than at wet AMD.

In terms of giving market share guidance, we are not doing that at this time.

Thank you.

Jason Kantor with Credit Suisse.

Great, and also congratulations on 2012.

One of the things on your guidance.

I just want to understand your R&D and SG&A expense part of it.

You kind of had big step-ups in Q4 for both, and I'm wondering if those are sort of new go-for-it, going forward levels to expect, or if there is some aspect of the expense that was increased in Q4, and then if you could also quantify a little bit better on a quarterly or annual basis what that 20% of the Phase 3 cost of Odyssey might look like?

So Murray'll handle some of the guidance questions, which I think he may have covered in his talk, and he can elaborate on it.

As far as the expenses related to -- specifically related to the Odyssey trials, we're really not in a position to talk about, that's kind of competitive information.

Murray?

Also how much that will cost us will really depend on what trials are ongoing, and how fast they are enrolling patients, and what those costs are.

So, we try to incorporate some estimates into our guidance, but we don't really have specific numbers on that that we can share with you at this point.

The reasons for why we're expecting increases in 2013, as I highlighted with EYLEA, now there's two Phase 3 DME programs are fully enrolled.

So those expenses have picked up, and the BRVO trial is -- Phase III is also moving ahead, and then we have is these other antibodies that earlier stages that are unpartnered that will be eating those expenses on our own, as well as some investment in technologies.

So in terms of the fourth quarter run rate, I indicated that it was -- the unreimbursed R&D was $48 million for the fourth quarter.

If you annualize that, you'd get to roughly $200 million, but we've actually guided to a full year 2013 of $275 million to $325 million.

So we're actually expecting an uptick from what we saw in the fourth quarter.

Got it.

Thank you.

Terence Flynn with Goldman Sachs.

Hi.

Thanks for taking the questions.

I was just wondering if you could remind us in the DME trials about the design of the different dosing arms, and how we should think about, I guess, the importance of the every other month arm, just given how Roche priced Lucentis for DME.

And then the second question I had was REGN1500, is that the PGF antibody that you guys are developing, or is it going after a different target?

Thanks a lot.

Michael?

Yes.

So in terms of the trial design for the DME trial, these are trials versus laser and there are two different dosing arms for EYLEA.

An every four-week dosing arm, as well as an every eight-week dosing after a loading dose.

Was there another question regarding the DME?

Again the European trial has a primary endpoint at one year and US trial was designed with a two-year primary endpoint.

I guess just wondering how important, I guess, the every eight-week dosing arm is in your opinion, given kind of the pricing dynamics in DME with Lucentis?

Again, I think we designed the trial to have both arms.

Obviously, we demonstrated clinically equivalent efficacy in the wet AMD setting.

We'll have to wait to see what the DME data show.

I think it's a little premature to talk about our strategy there, A, before we see our data, and B, before we launch in that indication.

And then you had a second follow-up question?

Regeneron 1500.

No.

That's not our PGF antibody.

Okay next question, operator

Christopher Raymond with Robert Baird.

Thanks.

So I know you're probably not going to be interested in going into too much detail on this, but have you had any discussion with Sanofi since the HSR notice, and can you give us any color on what they, perhaps, might have communicated to you as what their intentions are going forward?

Before we answer that, I want to make sure we wish you a happy birthday, Chris.

Thanks, Michael.

And my answer was, I'm not really interested in going into too much detail on that.

So happy birthday.

(laughter)

Thanks, guys.

I'll give you a follow-up question, if you want.

It might be worth just taking this moment to explain to -- some of these HSR rules are somewhat arcane, but it might be worth just explaining, as we understand them, in terms of general.

That the basic point is, is that when you want to acquire stock in a company, if the stock that you own plus the stock that you want to acquire is over a certain threshold, and that threshold is $500 million as adjusted, I believe it's around $700 million now, you need to file a pre-action notice with the government and get approval.

It's an odd thing, because it doesn't matter the fact that their stock wasn't valued $500 million or $700 million, whatever the case may be, when they bought it, even though it appreciated.

If they wanted to buy any more shares, even a single share, they needed to file this notice and get approval.

I hope that clarifies at least the mechanics.

I think I heard I was offered a follow-up question.

Yes, go ahead.

For your birthday only.

Thanks.

I wonder if you could also maybe give us an update on the status of the PDGF combo as it relates to what the opt-in rights that Sanofi has on the drug?

Where does that stand?

Yes, I think what we've said is all the antibodies in our collaboration are subject to this opt-in, and we're happy to move forward, either with or without Sanofi, depending on how that goes.

They have no rights to EYLEA, just to be clear.

Okay.

Jim Birchenough with BMO Capital.

Hi, guys.

I'm going to push my luck with a two-part question, but just the quick question is, from your survey do you have a sense of what market share you have in the front line setting for the treatment naive patients.

And then the second part of the two-part is, could you maybe just discuss the competitive landscape as you see it?

Your thoughts on the competitive risks from the DARPin, but more broadly, whether you guys are considering any BD activity to try and stay on top of emerging anti-VEGF therapies that might be competitive?

Thanks.

Great, Jim, thanks.

Let's take it reverse order.

In terms of BD activity, I would say in a global sense, we look at all kinds of activity, from discovery and development internally to BD to making sure that we are staying at the front of this obviously very important area.

As far as how we view the DARPins and what's out there, George, do want to comment on that?

Yes.

Obviously the DARPins are a long way off, and there's been very little real data available on them.

I guess a lot of people were disappointed at this weekend's Angiogenesis Meeting at Bascom Palmer that the investigators weren't allowed to really speak any further beyond the easy publish data.

But they did review the published data to see whether there was really any evidence in the publications to support the possibility that the anti-VEGF DARPin would have any advantages compared to existing agents, and I guess the conclusions that were reached at the presentation at the Angiogenesis Meeting is that it didn't seem that they had any advantages.

For example, the published data supporting the half-life when interpreted by the investigators suggested that, if anything, the half-life was the same or actually shorter than some of the existing agents out there, and of course we already know that they had some safety issues in their early studies, and until you're in hundreds, if not thousands, of patients, one can't really assess the actual safety situation.

So as I said, it's, obviously, it is very early setting.

There's a lot of questions.

We're following it in very interested fashion.

But as Len said, I mean, we not only are following outside developments, but we believe we have a lot of internal efforts that will keep us state-of-the-art in the lead in this field.

Great George, thanks.

Now there was a question on -- Jim that Bob, do you have a comment on whether our front line market share, we have any information on that?

I don't know if we had enough granularity on that.

Yes.

So we're very encouraged.

Our new business is picking up quite well.

We had a 20% market share in the new segment in the fourth quarter.

Overall unit volume, including Avastin and Lucentis.

Including Avastin, yes.

Great.

Yaron Werber with City.

It's not my birthday, but I'm going to ask two questions.

The first one is (inaudible) one, Lucentis had a label change, literally just very recently, where they're talking about PRN dosing after three months, but the label does sort of call out that it's sub-optimal.

What are you hearing from docs on that?

I mean, is that in any way something that you think will gain any traction?

And then secondly, I don't know if you can help us understand in the guidance, how many injections are you baking in this year versus last year?

Thanks -- in wet AMD.

Right.

So I don't think we can give you the specifics on the number of injections that are in our models.

So you'll have to fly on that one yourself, your own.

In terms of the recent Genentech label, you are correct.

The label, they did get a PRN dosing that was specifically called out that it was not as effective compared to monthly dosing, and that it required regular assessment.

By comparison, of course, you can't compare product profiles per se, but you can compare labels, and our label says that you can, with every other month dosing after loading dose, there is no monitoring requirement, and you had clinically equivalent efficacy.

So we're very pleased with where our label is.

Next question.

Steve Byrne with Bank of America.

Your Santen partner in Japan has reported their penetration in wet AMD with EYLEA is, I think, somewhere the 25% range after just a couple months.

Is that pace in line with your expectations, and maybe moreover, is it specific to the demographics there, or do you think that there is some broader conclusion about markets where you don't have much meaningful off-label Avastin use and the potential for EYLEA to penetrate?

Yes.

No, thanks for the question Steve.

The only thing I can say about this is that, give you a qualitative answer.

I know you kind of asked a semi-quantitative question, but the qualitative answer is that Santen is an extremely good partner for Bayer and Regeneron in Japan.

Obviously, they're a top ophthalmology company with a lot of reach to the physicians.

So, we're excited about how the launch is going, and you will get a little more color on that, I think from Bayer.

Thank you.

Our next question comes from the line of Geoff Meacham with JPMorgan.

Hey, guys.

Thanks for taking the question.

Just on the PCSK9.

I know it's competitive.

One of your competitors recently talked about not needing outcomes data for approval, but needing it for broader physician adoption.

I just wanted to get you guys' perspective on that, when you think about the opportunity in this market.

Thanks.

Right.

Thanks for the question, Geoff.

So, yes, you are correct in that the competition, as well as we, have stated that we do not believe the results of an outcomes study are required for approval for a cholesterol lowering indication.

But you're also correct that if you, and you look back to statins.

If you have -- if and when you can get in the label outcomes data, obviously that becomes more compelling to physicians in terms of uptake.

But I think that there is a sufficient unmet medical need here in terms of the millions of patients who either can't tolerate statins or can't get to goal with statins, who need more cholesterol lowering, that we're excited that this presents a very strong opportunity for our product.

Phil Nadeau with Cowen and Company.

Good morning.

Thanks for taking my question.

My question is actually on sarilumab.

Could you give some sense of when we're going to see the first three data from that compound, and what data you think you need to produce in order for it to get good acceptance in what's a relatively crowded field?

Thanks.

Sure.

As we mentioned, the mobility trial is fully enrolled.

That's our first Phase III trial.

I think we expect those data, probably towards early '14, is a timeline there.

As you know, we've announced initiation of additional trials with sarilumab.

We think we have a very robust program, and while it's a crowded field, we do believe if you look at how the aisle six class is doing, and we do think the class matters, and recently our competitor Roche reported really great sales from ACTEMRA, I think you'll see this class is gaining acceptance as a very important treatment paradigm for patients with rheumatoid arthritis.

So we're excited to unveil our complete Phase III program, which you should see relatively soon, and at that time we can discuss in more detail what the package will look like.

Great.

Ted Tenthoff with Piper Jaffray.

Great.

Thank you very much, and it's funny.

I was looking at the 4Q EYLEA sales compared to 4Q a year ago, and it's really been an incredible year.

So congratulations on the execution and all the progress.

One quick question, and I know we'll see a lot more detail in the K tomorrow.

When it comes to recognition of the Bayer overseas sales and the offset, will all of that be included in the collaborative revenue line overall?

Is that were all of that is going to be tucked in?

Yes, Ted.

I mean, the sales, we don't -- doesn't show up anywhere in our income statement.

Our share of the profits is one of the components of the buyer collaboration revenue line, and we'll detail that, as I said in the 10K and in future quarterly filings.

But that is our share of the loss, and then from that we have to subtract our repayment -- I'm sorry.

In the case of EYLEA, our share of the profits, and then from that we subtract our repayment obligation for that particular quarter will be the net profits that we will recognize.

That will be part of the collaboration revenue line for Bayer, and then the detail in the breakout of that will be in the MD&A.

Fantastic, and Murray, since I have you, can you repeat what you said about R&D guidance for 2013?

We said that the unreimbursed R&D expense would range between $275 million to $325 million, is our current best estimate.

Okay, great.

Thank you very much.

Operator, we have time for one last question, please.

Biren Amin with Jefferies.

Hey, guys.

Thanks for fitting me in.

I just wanted to ask you if you could share with us how we should think about the price of EYLEA in the European market?

That's a question that's not easily answered, because it's not one market, and there's many geographies and different pricing and discounts and what-have-you, and it's frankly quite complex.

But best to ask Bayer that when they do their call coming up in the not-too-distant future.

So, with that, let us conclude, and let me once again say how pleased we were to transform the Company to a profitable Company, and return some of that value, in terms of rewarding our shareholders.

But we have a lot of exciting things to look forward to, and we're hard at work trying to continue to execute.

So thanks for your time, and have a great Valentine's Day.

Ladies and gentlemen, this does conclude your conference.

You all may disconnect and have a good day.