雷傑納榮製藥 (REGN) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Regeneron Pharmaceuticals first-quarter 2015 earnings call.

(Operator Instructions)

As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Dr. Michael Aberman, Senior Vice President Strategy and Investor Relations of Regeneron.

Sir, you may begin.

Thank you very much, operator.

Good morning and welcome to Regeneron Pharmaceuticals first-quarter 2015 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 are Dr. Leonard Schleifer, Founder, President, and Chief Executive Officer; George Yancopoulos, Founding scientist President Regeneron Laboratories, and Chief Scientific Officer; Bob Terifay, Senior Vice President Commercial; and Bob Landry, Chief Financial Officer.

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

I'd also like to remind you that remarks made on this call include forward-looking statements about Regeneron.

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

Each forward-looking statements is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in such statements.

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 including its Form 10-K for the year ended December 31, 2014, and Form 10-Q for the quarter ended March 31, 2015, which was filed with the SEC this morning.

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

In addition, please note that 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 those measures to GAAP are available in our financial results press release which can be accessed on our website at www.Regeneron.com.

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. Len Schleifer.

Thank you, Michael.

And a very good morning to everyone who has joined us on the call and webcast today.

The first quarter of 2015 was once again a very busy and productive time for Regeneron.

Our underlying business continues to be strong, and we believe that we are well-positioned to further execute on our goal of building an innovative company that consistently brings new medicines to patients with serious diseases.

We are pleased with the continued growth that we have seen with our flagship drug EYLEA, also known as aflibercept, where US sales grew over 50% year over year.

Based on these strong results we are raising our guidance for the US EYLEA net sales growth for the full-year 2015 to 30% to 35% from the previously provided range of 25% to 30%.

Turning to Praluent, we and our collaborator Sanofi are actively engaged in preparing for our upcoming FDA advisory committee meeting on June 9. In the US we have been granted an FDA action date of July 24.

Our commercial teams have been very busy preparing for the anticipated approval and launch of Praluent and you'll hear more about this from Bob Terifay.

As we have said before we believe that our long-term growth will be fueled by our ability to consistently bring innovative medicines to the market.

To do this we must intimately advance and refuel the pipeline of medicines to help patients.

We now have 16 product candidates in the clinic and you'll hear more about some key advances from George.

In particular, our late-stage pipeline is advancing rapidly with the submission plan for sarilumab, our IL-6 receptor antibody, later this year, and continued progress with dupilumab, our IL-4, IL-13 blocking antibody.

With that let me turn the call over to George and he will be followed by Bob Terifay and then Bob Landry.

George?

Thank you, Len.

And a very good morning to everyone who has joined us today.

Let me begin with EYLEA.

In February the full results of the independent NIH-sponsored Protocol T study in diabetic macular edema, or DME, were published online and subsequently in the print edition in March in the New England Journal of Medicine.

The results from this study demonstrated that compared to Lucentis and Avastin, EYLEA provided significantly greater efficacy despite one fewer injection and fewer laser treatments.

The improvement with EYLEA relative to alternative anti-VEGF therapies were particularly apparent in the group with moderate or worse vision loss at the start of the trial.

We are pleased with the positive reception that these data have garnered from the retinal specialist community.

EYLEA received an additional FDA approval in the first quarter when it was approved for the treatment of diabetic retinopathy in patients with DME.

Outside the United States EYLEA was approved by the European Commission for the treatment of visual impairment due to macular edema secondary to retinal vein occlusion, or RVO.

Our combination trials with EYLEA are underway and a Phase II trial of EYLEA co-formulated with our PDGF receptor antibody is now ongoing.

This trial will explore two doses of the PDGF receptor antibody, each combined with 2 milligrams of EYLEA in a single intravitreal injection.

The FDA has granted this program fast-track designation for the treatment of patients with wet AMD.

Our Phase I combination study of EYLEA, co-formulated with our angiopoietin-2 antibody, nesvacumab, also in a single intravitreal injection, is also ongoing, and we expect to report data from this study later in the year.

Turning to Praluent, our PCSK9 antibody for lowering LDL cholesterol, 18-month results from the ODYSSEY long-term trial were published in the New England Journal of Medicine in a paper titled Efficacy and Safety of the alirocumab In Reducing Lipids and Cardiovascular Events.

These data show robust and consistent LDL-cholesterol lowering with Praluent from the largest double-blind, placebo-controlled trial of a PCSK9 inhibitor to date, and demonstrated that Praluent, when added to statin therapy at the maximally tolerated dose, significantly reduced LDL-cholesterol levels.

Additionally, in a post hoc analysis from this study, there was evidence of a reduction in the rate of major adjudicated cardiovascular events, or MACE, with Praluent.

At the American College of Cardiology meeting we presented data from the CHOICE I and CHOICE II studies which explored every four-week dosing of Praluent.

Though the every four-week dosing data will not be included in the initial biologic license application, these are important data that further support an individualized dosing approach to patients' lipid lowering needs.

Importantly, these data will consistent were consistent with the LDL-cholesterol lowering observed among alirocumab treated patients across our Phase III program to date.

Turning now to our immunology and inflammation portfolio.

Dupilumab, our IL-4,13 blocking antibody has made clinical progress across multiple indications.

As a reminder, the positive Phase IIa data of dupilumab in asthma and atopic dermatitis were both published in the New England Journal of Medicine.

Later this month we will be presenting data from the positive Phase IIb study in asthma at the annual meeting of the American Thoracic Society.

As a reminder, following discussions with the FDA, this study will be considered a pivotal trial, which means that we will only need to conduct a single Phase III efficacy study in asthma, which we recently initiated.

An additional major indication for dupilumab, atopic dermatitis, for which we have been granted breakthrough designation, is currently enrolling patients in the Phase III LIBERTY program.

We also recently initiated a study in atopic dermatitis in children.

We expect to initiate another Phase III program in patients with nasal polyps with associated chronic sinusitis later this year.

Our proof of concept study in the eosinophilic esophagitis indication is ongoing.

Turning to sarilumab, our IL-6 receptor antibody for rheumatoid arthritis, which has demonstrated positive data in both signs and symptoms as well as in radiographic progression in the Phase III MOBILITY study, we expect to report data from additional Phase III studies in the second quarter of this year.

we are planning on a regulatory submission in the United States in the second half of the year.

We now have a pipeline of 15 fully human monoclonal antibody products that are in clinical development.

I'd like to take a few minutes to highlight some of our earlier stage pipeline antibodies.

Fasinumab, our nerve growth factor antibody for chronic pain, is expected to move into pivotal studies later this year in osteoarthritis.

RSV, or respiratory syncytial virus, is a common seasonal infectious disease that is the leading cause of bronchiolitis, pneumonia and hospitalization in children under the age of one.

Based upon our discussions with the FDA we now plan to move into pivotal studies with this program which we expect to initiate mid-year in the southern hemisphere.

Our antibody is designed to have a higher affinity for RSV and a longer half-life than the currently approved therapy, which could result in less frequent doses.

Regeneron 1033 is our fully human antibody to GDF8 or myostatin.

We recently presented proof of mechanism data in healthy volunteers at the International Conference on Frailty and Sarcopenia Research.

In a separate Phase II proof of concept study in elderly patients with sarcopenia all three doses of Regeneron 1033 met their primary endpoint of an increase in lean body mass by DXA scan at 12 weeks compared to placebo, with changes compared to placebo of approximately 2%.

This is in line with other agents that target GDF8.

We also observed improvements in some, but not all, exploratory functional end points in this trial.

Overall, the drug was well-tolerated with no safety signals.

Based on these initial results, we are considering various options for next steps for this molecule, which may include combination with other agents.

Data from this Phase II study will be presented at a future medical meeting.

Turning to immuno-oncology, our early stage assets are advancing.

Our PD-1 antibody and our CD-20 by CD-3 bispecific antibody are both in the clinic.

While it is still very early and we have only enrolled small numbers of patients, we have already started to see preliminary signs of clinical activity, such as B cell depletion with a bispecific antibody and early clinical responses with our PD-1 antibody.

We hope to be able to share more data from these programs with you later this year or early next year.

We also have multiple additional immuno-oncology targets in preclinical development which we anticipate could be moved into the clinic in the next 12 to 14 months.

I also want to take a moment to give you an update on the progress that we have made at Regeneron Genetics Center, or the RGC.

We have entered into several key collaborations including with the Hospital for Sick Children in Toronto, for the world's largest genetic study in pediatric inflammatory bowel disease; with the Broad Institute and [Lund] University for large-scale cardiovascular target sequencing projects; and the University of Maryland for an Amish genetics collaboration.

We expect to have sequenced about 100,000 individuals by the end of this year.

With that, I would like to now turn the call over to Bob Terifay.

Thanks, George.

And good morning, everyone.

This has been a very exciting quarter for the commercial group at Regeneron as we continue to grow our market share across indications for EYLEA, rapidly build our internal and field-based capabilities, potentially launch Praluent, or alirocumab, later this summer, and rollout our prelaunch programs for sarilumab and dupilumab.

I'd like to begin my comments today with EYLEA.

First-quarter US EYLEA net sales to distributors were $551 million, which represents a 51% increase over first-quarter 2014 and a 5% increase over fourth-quarter 2014.

Importantly, underlying physician demand remains strong and grew from fourth-quarter 2014 to first-quarter 2015 by over 10%.

Much of this growth appears to be related to the reaction among physicians to the Protocol-T study, which George just discussed, and which was published in the New England Journal of Medicine and presented at several retinal meetings in the first quarter of 2015.

According to a qualitative survey of 201 retinal specialists conducted in March 2015, over 50% of the eyes treated with VEGF inhibitors for DME are now treated with one of the two FDA approved DME therapies, with EYLEA capturing a greater share versus ranibizumab.

Importantly, the market share gains for EYLEA are not just resulting from ranibizumab share declines but also from bevacizumab share declines.

We are seeing market share growth in age-related macular degeneration and macular edema following retinal vein occlusion.

According to our qualitative survey, the market share for EYLEA now surpasses that for ranibizumab in the United States.

EYLEA was approved by the FDA in July 2014 for the treatment of DME.

DME is characterized by a low diagnosis rate.

Moreover, of those eyes diagnosed, only a minority are treated with anti-VEGF therapy.

In order to ensure that more diabetic patients get annual dilated eye exams to detect DME in the first quarter we instituted an extensive public awareness campaign entitled -- Don't let diabetes steal your sight -- which includes displays at diabetes patient conferences, a patient website, and unbranded advertising in diabetes patient publications and web programs.

To address the limited DME patient's access to VEGF inhibitors and its potential impact on patient's vision we are conducting educational programs with optometrists, encouraging early referral DME patients to retinal specialists where they're more likely to receive access to anti-VEGF therapy.

In the first quarter we added another indication for EYLEA -- diabetic retinopathy in patients with diabetic macular edema.

This new claim extends insights for physicians into the role of EYLEA in DME management.

Not only does EYLEA reduce macular edema, it also improves retinal damage, highlighting the special role of VEGF inhibitors in the treatment of DME, and further supporting why VEGF inhibitors should be more broadly used in patients with DME.

Turning to the ex-US EYLEA business where we split profits with our collaborator, Bayer HealthCare, first quarter 2014 ex-US EYLEA sales were $292 million, representing a 34% increase year over year on a reported basis.

On a constant currency basis, this represented year-over-year growth in excess of 50%.

Ex-US EYLEA sales continue to be an important driver of growth with continued regulatory approvals and registrations.

For example, in the first quarter of 2015, Bayer achieved CHMP approval of EYLEA for macular edema secondary to retinal vein occlusion in Europe.

With respect to Praluent, or alirocumab, our PCSK9 inhibitor for cholesterolemia, we and Sanofi are busy preparing for a potential third-quarter 2015 US launch.

Let's first discuss the potential patient population for Praluent.

Statins remain the standard of care for the treatment of hypercholesterolemia and should always be used as first-line therapy.

Praluent has been studied in and will be positioned for high-risk patients who cannot get their low density lipoprotein cholesterol or LDL-C target on a maximally tolerated statin or who cannot tolerate statin therapy.

We believe there is a significant underserved market of approximately 11 million patients in the United States at high risk who are not at their LDL-C targets despite standard care therapy.

These high-risk patients include those with familiar hypercholesterolemia, those with statin intolerance, and those at high risk because of a previous cardiovascular event or other comorbidities.

Praluent has been developed to address the individualized LD-C lowering needs of patients.

Praluent was studied using two different dosage strengths, a 75-milligram every two weeks dose, which provides on average about a 50% LDL-C reduction from baseline, and a 150-milligram every two weeks dose which provides on average a 60% or more LDL-C reduction from baseline.

Consistent with the dosing approach to most cardiovascular medicines, including statins, antihypertensives, and anticoagulants, we expect the usual starting dose for Praluent to be the low dose, the 75-milligram dose.

Dosing can be adjusted depending upon patient response to therapy.

The availability of two different dosing strengths offering different levels of LDL-C reductions is an important point of differentiation for Praluent.

Obviously this is all dependent upon FDA review and approval as the year goes by.

In terms of commercializing Praluent, Regeneron and Sanofi share in all global and US internal strategic and tactical planning and execution.

We also share sales force promotion for Praluent in the United States.

The majority of Regeneron's three field-based teams, our specialty representative, our hospital specialist, and our reimbursement specialists, have been hired, and the first two waves of home office training have been completed.

I'm very impressed with the caliber and experience of the Praluent team that we hired in less than three months.

This required screening 20,000 resumes and conducting almost 2,000 interviews.

This will be a market that requires development, given that Praluent represents one of the first injectable biologics for chronic cardiovascular disease with a novel mechanism of action.

We've already launched our unbranded physician and patient campaigns including educational websites.

Meanwhile we are busy finalizing of the potential branded campaigns, preparing our sales and educational pieces and programs, and evaluating pricing options.

As has been broadly reported in the press, the PCSK9 inhibitor class is garnering significant scrutiny from payors, pharmacy benefits managers and specialty pharmacies.

We expect the reimbursement environment to be complex and carefully managed.

Our goal is to ensure that payors and healthcare providers understand the value the PCSK9 inhibitors can offer to patients and the need for physician choice when initiating PCSK9 inhibitor treatment.

We are working with the players involved in the market access decision-making process to focus on patient good.

That said, it will likely take several months for commercial and government payors to conduct formulary reviews, make reimbursement coverage decisions, and begin to process patient claims.

Given these reasons, we expect an initial gradual uptake at launch.

We are also busy preparing the market for the potential launch of sarilumab in the United States next year.

We have a significant presence at the European League Against Rheumatism meeting in Rome in June and the American College of Rheumatology meeting in San Francisco in November.

Overall, we are undertaking substantial commercial investments to fully maximize these exciting opportunities and reach appropriate patients who can benefit most from treatment.

Bob Landry real provide more detail on the financial impact.

With that, let me turn over the call to our Chief Financial Officer, Bob Landry.

Thanks, Bob.

And good morning to everyone who has joined us today.

Overall we are very pleased with our first quarter 2015 performance.

In the first quarter 2015, we earned $2.88 per diluted share from non-GAAP net income of $336 million, which represents year-over-year growth in non-GAAP diluted EPS and net income of 27% and 28%, respectively.

Regeneron's first-quarter 2015 non-GAAP net income excludes non-cash share-based compensation expense, non-cash interest expense related to our senior convertible notes, loss on extinguishment of debt in connection with conversions of a portion of our convertible notes during the quarter, and non-cash income taxes.

First-quarter non-GAAP net income was reduced for cash income taxes expected to be paid or payable in 2015.

A full reconciliation of GAAP to non-GAAP earnings is set forth in our Earnings Release.

Total revenues in the first quarter were $870 million, which represented year-over-year growth of 39% for the three months ended March 31, 2015.

Net product sales were $545 million in the first quarter compared to $362 million in the first quarter of 2014.

EYLEA net product sales in the United States were $541 million in the first quarter compared to $359 million in the first quarter 2014, which represented an increase of 51%.

During the first quarter there was a modest decrease in US EYLEA distributor inventory levels, as compared to the fourth-quarter 2014, and inventory levels remained within our normal 1- to 2-week targeted range.

Underlying physician demand grew by over 10% compared to the fourth quarter of 2014.

As Len mentioned earlier, we are raising our US EYLEA net sales growth guidance for full-year 2015 over 2014 to 30% to 35% as compared to 25% to 30% on the strength seen from first-quarter US EYLEA performance.

Ex-US EYLEA sales were $292 million in the first quarter of 2015 as compared to $218 million in the first quarter of 2014.

Product revenue from ex-US EYLEA sales is recorded by our collaborator Bayer HealthCare.

Please keep in mind that our reported ex-US EYLEA sales will not be exactly the same as the ex-US numbers Bayer HealthCare reports.

This is because for Japan Bayer reports their sales to their distributor, Santen, while we report Santen in market sales.

Ex-US EYLEA sales in US dollars trended down in the first quarter of 2015 when compared to fourth-quarter 2014 due to foreign exchange headwinds.

On a constant currency basis, sales increased sequentially by a mid-single-digit percentage.

I do want to reinforce that currently our overall P&L exposure to currency movements remains limited due to the fact that the bulk of our revenue is US-based.

Additionally we have partially offsetting European operating expenses from our Irish plant startup, Sanofi incurred Praluent launch expenses outside the US, and European clinical trial expenditures.

In the first quarter of 2015, Regeneron recognized $89 million from our share of net products from EYLEA sales outside the United States after repayment of $14 million in development expenses.

Bayer HealthCare collaboration revenue for the first quarter was $124 million.

This included [one $15] million sales milestone, which represents our final milestone to be earned from Bayer relating to ex-US EYLEA sales.

Total Sanofi collaboration revenue was $173 million for the first quarter of 2015.

The Sanofi collaboration revenue line primarily consists of reimbursement of Regeneron incurred R&D expenses, reimbursement of Regeneron commercialization related expenses, and our share of profits or losses in connection with commercialization of antibodies.

In addition, in the first quarter of 2015 Sanofi collaboration revenue included previously deferred revenue related to our ZALTRAP elaboration agreement with Sanofi, which was amended during the quarter.

As a reminder, while we get reimbursed for antibody-related expenses that we incur, these, along with the commercial expenses that Sanofi spends on the antibodies, are included as expenses in the calculation of antibody profits and losses.

In the first quarter of 2015 our share of losses in connection with commercialization of antibodies was $22 million, which can be found in table 4 of our Earnings Release.

Please keep in mind that as we approach the potential approval and launch of Praluent under our antibody collaboration with Sanofi, we expect our share losses in connection with commercialization of antibodies to substantially increase.

However once Praluent and eventually other antibody products are launched and become profitable our share of profits and losses in connection with commercialization of antibodies will become positive revenue.

Additionally, I'd like to highlight a change in a line item included within Sanofi collaboration revenue for Regeneron share losses in connection with the commercialization of ZALTRAP, which will no longer be applicable following the amended ZALTRAP agreement we entered into this past quarter with Sanofi.

Under the terms of the amended agreement, Sanofi will be solely responsible for the development and commercialization of ZALTRAP indications worldwide, including all costs associated with these activities.

Sanofi will pay Regeneron a percentage of net sales of ZALTRAP, between 15% and 30%, and also pay Regeneron for all quantities of ZALTRAP that we manufacture.

As a result of entering into this amended agreement, we recorded $20 million of technology licensing and other revenue this quarter, primarily related to our earned percentage of net sales of ZALTRAP for the period from July 1, 2014 through March 31, 2015 and, for our manufacturing of ZALTRAP commercial supplies for Sanofi.

In addition in the first quarter 2015, we recognized $15 million of previously deferred revenue under the ZALTRAP collaboration agreement which was included in Sanofi collaboration revenue.

Turning now to expenses, non-GAAP R&D expenses were $284 million for the first quarter and unreimbursed R&D expense, which is calculated as the total GAAP R&D expense minus R&D reimbursements from our collaborators and R&D non-cash share-based compensation expense, was $110 million for the quarter.

Our press release includes all the information that is required to calculate unreimbursed non-GAAP R&D expense.

For 2015 we would like to reiterate our previously provided guidance of non-GAAP unreimbursed R&D to be in the range of $525 million to $575 million.

Our non-GAAP unreimbursed R&D spend is primarily driven by three factors -- our obligation to pay for 20% of the Phase III clinical development expense following the first positive Phase III results of our partnered antibodies, advancing our unpartnered pipeline, and proprietary R&D initiatives such as those in the area of human genomics.

Non-GAAP SG&A expenses were $117 million for the first quarter.

And we do expect SG&A expenses to accelerate over the balance of the year as we ready the market for the launch of Praluent.

We continue to expect non-GAAP SG&A expenses in 2015 to be in the range of $650 million to $725 million.

As previously mentioned a portion of that SG&A space will be offset by the reimbursement of Regeneron commercialization related expenses recorded within Sanofi collaboration revenue.

Non-GAAP cost of goods sold was $40 million for the quarter.

As a reminder, in 2015 we expect to begin paying significant cash income taxes.

Our non-GAAP tax rate for this quarter and for all of 2015 will be based on an estimate of the cash taxes paid or payable for the full year, which will be substantially lower than our GAAP effective tax rate.

On a non-GAAP basis our estimated tax rate for the first quarter of 2015 was approximately 12.5% of non-GAAP tax income.

We continue to guide for cash tax as a percentage of non-GAAP pre-tax net income to be between 10% and 20% for 2015.

Our capital expenditures for the first-quarter 2015 were $114 million.

Given this first quarter spend and our remaining outlook, we are tightening our 2015 capital expense guidance to be between $650 million and $750 million as compared to $650 million and $800 million.

Our Limerick commercial manufacturing site, which is under construction, continues to represent our largest capital investment in 2015, and we are on track to begin manufacturing validation batches in the second half of this year.

We also recently completed the land purchase of approximately 100 undeveloped acres adjacent to our Westchester County campus in Tarrytown to provide flexibility for future expansion.

We ended the first quarter of 2015 with cash and marketable securities of $1.23 billion compared to $1.36 billion at December 31, 2014.

The decrease in cash and marketable securities versus year-end 2014 was partly due to higher trade accounts receivables resulting from license and payment terms to US EYLEA customers effective mid 2014 in connection with the launch of EYLEA for treatment of DME These extended US EYLEA dating terms were subsequently reduced in the first-quarter 2015.

In addition, during the first quarter of 2015 we paid a total of $125 million to reduce the number of outstanding warrants held by one of our warrant holders.

These warrants had originally been issued in connection with the issuance of our senior convertible notes in 2011.

Also, in a noteworthy change to our liquidity profile, in March 2015 we entered into a $750 million revolving credit facility, which provides access to capital for general corporate purposes.

We have no current plans to draw upon this facility.

Lastly, in April noteholders surrendered $127 million principal amount of our senior convertible notes, which will be settled in the second quarter of 2015.

After settling these conversion obligations only $35 million principal amount of our senior convertible notes will remain outstanding.

All of these transactions are more fully explained in our first-quarter 2015 10-Q which was filed earlier this morning.

With that I'd like to turn the call back to Michael.

Yes, Bob.

That concludes our prepared remarks.

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

As we'd like to give as many people a chance to ask questions I remind everyone to please limit yourself to one question.

Again as a reminder, our team will be available in our office after the call for any follow-up.

Thank you, operator, if you can now please open the call for questions.

(Operator Instructions)

Yaron Werber, Citi.

Congrats.

This is a terrific amount of progress, especially in the pipeline.

I'm going to be boring and just take the first EYLEA question.

It looks like the growth looks pretty good, obviously.

And the launch in DME, which frankly tracks with what our surveys have been saying historically, which is a faster than your initial comments, going back six months ago, what's the difference?

What's driving the growth?

Is it just purely Protocol T or are you actually seeing market growth?

Thank you.

Bob, do you want to take that?

The Protocol T study has definitely had an impact on the perception of EYLEA in the treatment of DME.

And it appears that a lot of the growth, much of the growth, is coming at the share offset from bevacizumab and ranibizumab.

We are now focused on trying to grow the market more, as I indicated, by getting more patients into retinal specialists.

But the initial growth appears to be primarily coming from the competitors.

Geoffrey Porges, Bernstein.

I'll add my congratulations on the progress and the good results for the quarter.

Perhaps I'll take a question on the pipeline, George, since you're on the call.

On 2222 you moved the time line up, which is encouraging.

Do you think it's feasible that you could get through Phase III in a single season in the southern and northern hemisphere?

And related to that, is it looking as though this is a product that's suitable for full-term infants are you going to focus on the preemies, as your predecessor did?

I think those are great questions.

Of course, generally one would need to have two pivotal trials, so we're hoping that we would be able to complete in one season, one of the studies, though we are prepared to extend it if need be.

And I think you point to the potential opportunity here.

There's a large unmet need.

RSV, in terms of total numbers, occurs much more frequently in full-term infants, as you point out, and it causes a loss of disease and morbidity in that population where right now treatment is not standard of care.

And it would be wonderful to that population to offer them an alternative or to offer them a therapy that could actually prevent this serious disease in infants.

So, it's possible that that could comprise a large part of the opportunity.

Great.

Thanks very much.

Chris Raymond, Robert W. Baird.

Just another DME question.

I think you guys have long talked about the share of intravitreal therapies in DME patients being obviously less than AMD.

I think the number I've heard you guys say for a while is 40% share.

Some of our feedback has been that that might be coming higher, as time progresses.

I wonder if you could maybe update your thoughts for us on what that share might be now.

Or, given all the data that's come, have you seen specifically a movement in that share?

Thanks.

Chris, obviously all of our information and the information that is in the public domain is from anecdotal qualitative surveys with physicians.

I think that there is some growth in the anti-VEGF penetration, but the reality in DME is, unlike wet AMD, where patients' vision is at risk, if you don't treat aggressively, this is a disease where physicians go slower.

And I think aside from the 40% that you're quoting I think the bigger challenge in this marketplace is that many patients get diagnosed with DME and don't make it to a retinal specialist.

They're with an optometrist, they're with an ophthalmologist, where they don't get access to anti-VEGF therapy.

We're working very hard right now to try to get more people into a retinal specialist and treat it with an anti-VEGF therapy.

That is the big obstacle in the marketplace to make sure the patients get to the right doctor.

I just want to make a few comments.

Obviously this is a relatively new field.

But now I think over the last few years the field has really recognized some things that make a huge difference.

Of course, as Bob said, one of the problems is that there's a low diagnosis rate and there's a low treatment rate right now.

However, there's also now the recognition from the entire field that anti-VEGFs really are a dramatic improvement over the previous standard of care and approaches including laser therapy and so forth.

So I think that that's a really big recognition.

And of course another huge piece of data now comes from the Protocol T study that says that some anti-VEGF agents are much more powerful at controlling the disease and improving vision than other anti-VEGF agents.

We believe that there is a very large unmet need here in terms of patients not being diagnosed and not being treated with anti-VEGF therapy, and not receiving obviously the best anti-VEGF therapy.

And that's a very large opportunity.

Great.

Thanks, guys.

Ying Huang, Bank of America Merrill Lynch.

Len, I know that you recently met with the CEO of Sanofi.

Can you give us on a high level, what you think the collaboration's going through and where the strategic direction is for Sanofi with your collaboration?

And then I have a detail question about the DRCR trial.

Obviously we have all anecdotally heard from doctors that the results have been making an impact on their practice in DME.

Do you guys think that there will be some sort of readthrough or spillover effect into AMD, as well?

Thank you.

I have one question for you.

Are you following me around?

Actually, I want to know what happened in Cuba, too.

(laughter).

The answer to your first question is, yes, of course, we've met and spoken several times with CEO, as we would expect it to do.

It's such an important collaborator of hours at Sanofi.

I think Olivier was a great choice by Sanofi's Board to lead that Company.

He's got a lot on his plate, but we were pleased to see that high up on that list was the relationship with Regeneron.

That relationship has got a lot to do and we certainly are focused both on how do we make sure that the launches are going to go seamlessly and spectacularly?

That's job number one.

You do all this hard research and development work and then we got to finish it off by strong launches.

And obviously we've got three potential launches coming over the next several years, not just with Praluent for low-cholesterol but also sarilumab for rheumatoid arthritis, and of course dupilumab for a variety of allergic diseases including atopic dermatitis, asthma and perhaps several others.

So we have lots to talk about, the relationship is strong, and we have plenty to do.

In terms of -- your question is whether there's a halo effect of the Protocol T -- I have heard several people suggest that that's the case.

One person told me that previously a practice might be able to just carry Avastin, that they didn't want to get into the buy and build business, but when they see the Protocol T data they feel they have to carry EYLEA because there's such a differential there.

And once they start doing it, then they might be more inclined to use it for AMD.

I don't know how often that scenario plays out, but I can imagine some sort of a halo effect.

Of course, we're out of the promotional aspect about this.

We don't talk to doctors about Protocol T. We don't promote it.

Our field force doesn't promote it because it's not on our label.

But the good thing about the retinal community is that they have lots and lots of meetings.

And it's already been presented at a retinal specialty meeting.

It was presented -- I was at the RVO meetings over the past several days.

It will be presented again at the ASRS and several other retinal meetings.

So they have lots of opportunity here.

And frankly better than to hear from us, which we can't do.

They hear from the people who conducted the studies who make a very strong presentation about the results.

So I think it will move market share in DME.

I think it will increase market share, moving more people to get treated, and I think potentially could have a halo effect.

Thanks, Len.

Terence Flynn, Goldman Sachs.

Just wondering if you can maybe provide us some insight into the potential questions or topics of the upcoming Adcom for Praluent.

And if not, on that question, then maybe you could give us some more details with respect to any shift in your account base for EYLEA post the DME launch.

Just wondering if you can comment at all about growth trends from existing accounts versus new accounts.

Thanks.

As far as the advisory panel, we're waiting, as you are, for the FDA briefing book and the questions to come out.

So when we know them, obviously you'll know them.

We, of course, have our war games and our scenarios, but we'll probably not comment on that, and let Regeneron and Sanofi do its work.

And Amgen will have to do its work and of course the FDA will be doing the most important work.

Bob, did you want to comment on the EYLEA question?

Yes.

I think in terms of accounts we've pretty well penetrated the retinal accounts and so our DME business is coming from existing accounts.

It is interesting that diabetes is distributed differently in the United States than wet AMD, so, we do see a different geographic disbursement of the sales But in terms of the accounts, it's pretty much the same accounts.

The one qualitative thing, of course, that we feel very good about is that when you are going into a new product cycle, which we hope we're going to, it's nice that your flagship product is still really growing very strongly.

50% year over year in the US growth, that was terrific.

And that was with a little modest inventory drawdown.

I think that that bodes well, that the Company is strong and continues to be strong, as we try and broaden our base of important products.

Joseph Schwartz, Leerink Partners.

I was wondering, still intrigued by the approach that you're taking for Regeneron 1033 in sarcopenia.

So, I was wondering if you could expand a little bit about the signals that you saw in terms of the functional endpoints.

Are any of them potential registrational endpoints?

And then what kinds of combinations are you contemplating for this drug?

George?

We certainly are very gratified that this genetically defined pathway can indeed be followed up with the biologic.

And you can see the right type of biological responses without untoward effects, as the genetics would have predicted.

So, that is very gratifying for the whole field of genetics and genomics and so forth.

This is a very complicated area.

You talked about registrational endpoints and so forth.

This is a very young field.

There really hasn't been too much done in this area, so that's still a developing area in terms of how one would approve it.

And in terms of combinations, that's still very early in our program, and certainly there's a lot of competitive issues there.

So I'm not going to necessarily get into what we might imagine.

But certainly this is an area where we think that there's the possibility of taking this one pathway, where you see there's a moderate benefit perhaps, and combining it with others, and perhaps increase the benefit, both in terms of the anatomy and in terms of the function, and be able to provide a more meaningful result to patients.

Do you think that the accelerometry tools could help you get around any requirements for PROs that the FDA might otherwise require?

It seems like Novartis is working a lot on that area.

We can have this as a side, Bob, perhaps these fine details.

Okay.

Sounds good.

Matt Roden, UBS.

Nice quarter, guys.

And thanks for having me on the call.

I wanted to come back to the RSV program.

Gratified to see that moving forward sooner rather than later.

I'm just trying to think around the corner a little bit to think about how this program could play out here.

George, would I be wrong to interpret your prior comment as meaning that there seems to be interest or buy-in among the regulators to move into a broader target population, the full-term babies?

And then, related, maybe more of a commercial question is, in that core population of those born 32 to 34 weeks gestation, I'm just trying to understand what kind of data you think you need show to get around or mitigate any pricing strategy that might arise from your competitor.

Thanks very much.

My prior comments, I think, were just that, in that I think that these questions point out that the current standard of care is that the actual infants that are treated with the RSV therapeutics is very limited.

And there is a much broader population that in fact the CDC has actually said could dramatically benefit if this type of approach could be made more broadly.

And certainly that is shaping our thinking.

And I think that about represents our perspective.

I would only add, perhaps, George, to emphasize your comments, that we hope to have a differentiated product on terms of maybe how long it might be able to be last before you'd have to give a repeat or something of that nature.

So it isn't simply if we do something the competition can respond in kind commercially.

There may be differentiations in the product, as well.

We'll have to see that as the data goes on.

Adnan Butt, RBC Capital Markets.

Let me throw a curveball and ask on fasinumab, would that be a Phase III study or a Phase II?

And would you be starting at the same dose levels where the program finished off?

Thanks.

The thing about that program that you have to understand is that you could call these really whatever you want, Phase II, III, Phase IIb, Phase III.

What's going to drive it is not the number of efficacy trials you have or need.

What's going to drive this program is the number of patients you need exposed.

Thousands of patients exposed.

And that's really the main driver.

The efficacy part of this is pretty much in hand across the class.

It shows impressive efficacy.

We're finding the doses, of course, can be done in a IIb/III setting.

But, really, the way you have to think about this, the way we're thinking about it, is that it's a question of making sure you're getting the adequate exposure done that would support a filing.

Robyn Karnauskas, Deutsche Bank.

Congrats on the progress.

Just going back to the PCSK9 launch, being about one month ahead of the competitor, what's the benefit there?

And also could you comment any on the litigation with Amgen regarding the patent?

Thank you.

Yes.

We have no comment on really either of those.

To reiterate what we said in the past, we don't believe we infringed any valid claims.

If you've been following this close enough, what we've already said is that in lieu of a preliminary injunction proceeding, the court's going to give an early trial date.

We're expecting that to be around March of next year.

Beyond that we really don't have much to say.

And how we're going to use our month to our advantage is probably better off we keep that to ourselves or we lose that advantage.

I tried.

It's worth trying.

I know Amgen wanted you to try, but we can't oblige.

Sorry.

One quick follow-up that you may be able to answer -- how do you view a broadening in the label for PCSK9?

I didn't hear that.

Say it again.

How do you potentially view -- I know you're launching with a more narrow label for PCSK9 -- how do potentially view a broader label and when we might see that?

I'm not sure what the question is.

We've done a very broad development program that focuses on the people who really could benefit.

We think that it would be irresponsible for anybody to suggest that statins aren't the first line of approach here.

Statins have been very good drugs.

They've been shown to have very strong effects on cardiovascular outcomes.

They've been used by millions and millions of people, of every race and nationality around the world.

There's a strong safety record.

And so we really believe that that's not the marketplace we're going after, obviously.

What we're looking for, nevertheless, is that there are millions, if not maybe even 10 million people, where statins is not adequate for them for a variety of reasons.

Maybe they've got familial hypercholesterolemia and they just simply can't get their cholesterol where their doctors would like it to go.

Maybe they've been on statins and they've had a heart attack or very high risk and they're still at risk and they need to go even lower.

And maybe there are some people who are statin intolerant.

I think you've heard all sorts of estimates out there of how many people and what the market size is and et cetera.

I'm sure that those are grossly exaggerated, at least the ones that I've read.

I think that this could be an important class of drugs when used properly and when respecting the fact that statins should be the front line of therapy.

Thank you very much.

Cory Kasimov, JPMorgan.

With regard to your PD-1 candidate can you elaborate a little on your latest thoughts around development plans there and whether you expect to only combine the agent with other in-house assets or if you'll be looking for outside collaborations, as well?

Thanks.

Yes and yes.

George, do you want to elaborate on that any further?

I think you just gave away the answer.

Yes and yes is the answer.

I think that we all know that this is a very exciting new class and target.

And we have, as we've already indicated, multiple additional targets that are within a year or two of development that are potential partners for this therapy in various settings.

And we also are very actively looking to molecules outside of our own pipeline with which to combine it.

And we think it's very early in the whole entire immuno-oncology field to understand how to really best harness the potential and the power of this field.

So we're very excited to be a part of it and we're very excited to have what, even from our very early clinical studies, looks to be an active molecule that's out there.

John Newman, Canaccord.

I just wondered if you could comment a bit, obviously based on what's in the public domain, regarding what is known about the difference in formulations between your PCSK9 product and Amgen's.

I'm specifically curious as to what we know about the fact that your concentration is half of theirs.

I'm just curious as to what types of implications that might have in the real world, since, just theoretically, having a concentration that's half of another product within the same volume might suggest, some differences in how the drugs are administered.

Thanks.

John, I think you may have some confusion there.

But without getting into the details of the formulation, let me just focus on the important differentiating points that potentially could arise as we look through all the data and get through the advisory panel and approval.

Regeneron has a formulation that allows for the treatment at 75-milligram dosage form, as well as a 150-milligram dosage form.

And there are many patients for whom 75 milligrams is more than adequate, and they will get the benefit that you're looking for.

There are some where people would like to get a higher benefit, then, of course, you have the opportunity to use our higher dose, a 150-milligram formulation.

So, we do have the ability to individualize.

And we don't have to, with our product, give people, what I would call, forced higher dosing over forced overdosing more than you really need to give to get the job done.

These products look -- and I hope that will come across our advisory panel -- these products look very good at this stage.

But, of course, you're only dealing with thousands of patients, years of exposure.

Typically our trials have lasted about 18 months.

So, when you're talking about a lifetime of therapy, of course some people, some doctors would prefer to use the lowest dose that would get the job done.

That to us is a big point of differentiation.

Maybe we should leave it at that and more will come as we get through the advisory panel, the labeling and the launch.

George, do you want to add?

Yes, I just want to make a couple comments.

I think, as Len correctly pointed out, the most important potential difference for the patients is the option -- and for their physician -- is the option to choose between a lower dose or a higher dose, certainly for initiation of therapy.

But as Len said that, to get the facts right, our 150-milligram dose is actually a more concentrated formulation, not a less concentrated formulation.

And also, in terms of that, when for example their monthly dosage form is actually a 3-mills worth of injection.

So, these are actually things that, depending on how you look at it, would actually be considered in our favor.

But those are minor details.

I think the important point is Len's point about the fact that we have the flexibility of dosing.

And the patients and the physicians based on their baseline LDL and their goals can decide which dosage form to initiate therapy with.

Geoff Meacham, Barclays.

A question for you on PCSK9.

When you look at the market awareness today of the class and maybe the urgency to treat, what are the subtleties between the US and EU opportunities?

I'm just trying to get a sense for if there's a reason to think that O-US may be different dynamics based on Bob's launch comment?

Thanks.

Obviously, awareness is very high amongst specialists -- cardiologists, lipidologists, and endocrinologists -- given that the data have come out at the cardiology and lipidology and diabetes meetings.

In terms of the differences between the US and Europe, Europe is very much governed by governmental payors.

So, although awareness is very high, it's going to come down to a decision as to which patient types are deemed to be suitable for PCSK9 inhibitor theory depending upon price point.

In the United States, as we talked about a little bit on the call earlier, the payors are exerting more involvement than they have in the past but the physicians can still have choice as to which patients get access to therapy.

So, I think uptake in the United States, the patient pool in the United States is likely to be larger than that outside of the United States.

I think with that we're going to conclude today's call and thank everybody for participating.

Again, we'll be in our office.

I know we have a bunch of scheduled calls with you guys.

And, again, you know how to reach us if you need anything.

So, take care.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program and you may all disconnect.

Everyone, have a wonderful day.