雷傑納榮製藥 (REGN) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Regeneron Pharmaceuticals' Q2 2015 earnings conference call.

(Operator Instructions)

As a reminder, this call is being recorded.

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

You may begin.

Thank you very much.

Good morning and welcome to Regeneron Pharmaceuticals' second-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; Dr. George Yancopoulos, Founding Scientist, President of Regeneron Laboratories and Chief Scientific Officer; Bob Terifay, Senior Vice President Commercial; and Bob Landry, Chief Financial Officer.

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

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

Such statements may include, but are not limited to, those related to Regeneron and its products and business, sales and expense forecast, financial forecast, 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, or SEC, including its Form 10-K for the year ended December 31, 2014 and Form 10-Q for the quarter ended June 30, 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 these 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, Bob Landry and the IR team will be available to answer further questions.

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

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

The second quarter was yet another strong and successful quarter.

EYLEA continued to show very impressive growth and we achieved significant advances in our pipeline, which now has late-stage clinical programs across five diseases.

And in the month of July, we launched Praluent, a first-in-class medicine for the treatment of elevated LDL cholesterol for US patients and we entered into a strategic new collaboration with Sanofi in the exciting and evolving field of immuno oncology.

Financially, we delivered a strong quarter driven by top line growth.

On a worldwide basis EYLEA delivered nearly $1 billion of sales in the second quarter.

I think I'm going to say that again it sounded good.

On a worldwide basis EYLEA delivered nearly $1 billion of sales in the second quarter.

Based on the strong US EYLEA net sales in the second quarter, we are increasing our full-year US EYLEA net sales guidance to be year-over-year growth of between 45% and 50% from the previously provided range of 30% to 35%.

We are particularly pleased with the FDA approval of Praulent, which represents the fourth approved drug that was discovered at Regeneron labs led by my partner George Yancopoulos.

We, and our partner Sanofi, have launched Praulent in the United States and are proud to bring an important new option to patients who struggle with elevated LDL cholesterol or bad cholesterol and the physicians who treat them.

You'll hear more about the ongoing launch from Bob Terifay.

On the strategic front, we recently announced a major collaboration with Sanofi in immuno oncology.

We believe that these are early days in immuno oncology and the efficiency and sophistication of our VelociSuite technologies, including our proprietary bi-specific platform, combined with our capabilities in human genetics and our established partnership with Sanofi make us uniquely positioned to accelerate the development of potential new immuno oncology treatment options.

You'll hear more about this from George from the scientific perspective, and Bob Landry will address some of the financial implications of this collaboration.

On the pipeline front we have made steady progress.

We now have 15 antibodies that are in clinical development and we have late-stage programs in five different therapeutic areas.

Sarilumab for rheumatoid arthritis, dupilumab for atopic dermatitis and asthma, fasinumab for pain and REGN2222 for RSV, or respiratory syncytial virus.

With that, let me turn the call over to Dr. George Yancopoulos, Regeneron's Chief Scientific Officer.

He will be followed by Bob Terifay and then by Bob Landry.

George?

Thank you, Len, and a very good morning to everyone who has joined us today.

Before I talk about the pipeline, I want to offer my congratulations to all my colleagues at Regeneron as well as our partners for the continued success of EYLEA and the recent approval of Praulent.

And also acknowledge many patients, investigators and physicians involved in all these efforts.

Last week we announced a major collaboration with Sanofi in the arena of immuno oncology, and I'd like to begin by providing some additional details on the scientific and strategic aspects of this collaboration.

Immuno oncology has been a rapidly evolving area and has shown the potential to dramatically improve outcomes for patients with certain types of cancers.

The current immuno therapies, which are delivered as monotherapy or in combination with traditional chemotherapy, have yielded overall response rates from the 10% to 30% range.

Many of these responses have been durable and that led to increased survival indications such as melanoma, kidney and lung cancer to date.

While these data are incredibly exciting, we believe that the field is still in its early days.

Our goal is to improve the outcome in a range of different cancers.

We believe that we are well positioned to deliver on this goal.

We increasingly believe that the future of cancer medicine will involve innovative combinations of targeted medicines.

We of course are cognizant of the fact this is a crowded area with many players who have immuno oncology assets that are more advanced.

Nevertheless, we believe that the key to future successes in this complicated area is the efficiency and sophistication with which one can attempt and evaluate novel treatments and their combinations in novel settings.

We believe that we are well positioned to be competitive in this area.

With Regeneron's unique biology, technology and genetics capabilities, we hope to be able to combine antibodies to multiple targets, adopt creative ways to use these antibodies as well as harness novel technologies such as bi-specifics.

In addition, access to our proprietary animal models allows us an early indication of which combinations are more likely to be successful in the clinic, which we think gives the collaboration additional advantage.

In terms of novel combination therapies, we have several immune targets, such as LAG-3 Inhibitor in late-stage preclinical development.

Our PD-1 antibody, which we anticipate might be the foundation of several combination therapies, has already demonstrated evidence of activities in early clinical trials.

In addition, we believe that our novel and proprietary bi-specific platform will deliver additional opportunities for both monotherapy and combination approaches.

Our first bi-specific, a CD20xCD3 antibody, which is outside of the Sanofi collaboration, has already demonstrated activity in early human trials and could potentially pave the way for multiple additional bi-specific to enter the clinic in the coming years.

These other potential bi-specific antibodies are included in our immuno oncology collaboration with Sanofi.

Bob Landry will review the financial aspects of the collaboration shortly, but let me highlight some of the key aspects of the deal, and in particular the differences from the existing antibody collaboration.

As a reminder, in the existing collaboration Sanofi provides funding for preclinical discovery and development work up through filing of an investigational new drug, or IND application, at which point Sanofi can either opt in or not for these antibodies.

During that pre clinical work, Regeneron has final say over all activities.

If Sanofi opts in, Sanofi funds 100% of the clinic development costs and also has final say over clinical development and commercial activities.

Under the new immuno oncology collaboration, Sanofi's right to opt in is later at clinical proof of concept, which means Regeneron has greater control of development through a later stage.

In addition, after opt-in, unlike the existing collaboration, Regeneron retains the lead global development roll and lead commercialization role in the US, where half of the antibodies on an alternating basis beginning with PD-1.

Obviously there's an incredible amount of trust that has been built through the many years of the Sanofi collaboration that allows such an arrangement, and we look forward to working with Sanofi on building an immuno oncology franchise.

In terms of late-stage antibodies, let me begin with our most advanced program sarilumab, our IL-6 receptor antibody, which is in clinical studies for the treatment of rheumatoid arthritis.

In the second quarter, we reported positive data from three additional Phase 3 trials, including the SARIL-RA target study of sarilumab in combination with non-biological disease modifying anti-rheumatic drugs, or DMARD therapy in patients who are inadequate responders to or intolerant of TNF-alpha inhibitors.

These data are in addition to the previously reported data from the Phase 3 MOBILITY study where sarilumab demonstrated positive results in both signs and symptoms, as well as in radiographic progression.

We are on track to submit a BLA in the US by year end and regulatory submission in Europe towards the end of next year.

One of the most exciting late-stage product candidates in our pipeline is dupilumab, our IL-4, 13 pathway blocking antibody, which is in clinical studies in multiple indications.

Our pivotal Phase 3 studies in the atopic dermatitis indication are fully enrolled and we expect to report data from these studies in the first half of next year.

Our second pivotal study of dupilumab in asthma is currently enrolling patients.

This Phase 3 study will explore two doses of dupilumab, 200 milligram and 300 milligram administrated every other week.

As we have mentioned previously, following discussion with the FDA we will only need to conduct this one additional Phase 3 efficacy study in this indication since our Phase 2b trial will be considered pivotal.

Our Phase 2 study of dupilumab in eosinophilic esophagitis is ongoing and currently enrolling patients.

Turning now to our other late-stage programs.

Nursery preterm, our first Phase 3 trial of our antibody for RSV is enrolling patients in the southern hemisphere where the RSV season is from May through October.

A second Phase 3 trial in this indication is planned for later this year in the northern hemisphere.

I'm happy to report that fasinumab, our NGF antibody, is now in Phase 2b/3 clinical trial.

We expect to hear from the FDA in the second half about the partial clinical hold, which, if lifted, will allow us to conduct studies that are longer than 16 weeks in duration.

Our EYLEA combination trials are ongoing.

A Phase 2 trial of EYLEA co-formulated with our PGF receptor antibody is underway and has been granted fast-track designation for the treatment of wet AMD.

Our Phase 1 combination study of EYLEA co-formulated with our ANG2 antibody is also ongoing and we expect to report data from this study later this year.

The Regeneron genetics center continues to make progress anchored by our foundational collaboration with Geisinger Health Systems.

We currently have about a dozen additional collaborations across a variety of therapeutic areas and remain on track to sequence 100,000 individuals by the end of this year.

With that update, I'd like to turn this call over to Bob Terifay.

Thank you, George, and good morning, everyone.

This is a very exciting time in the history of Regeneron.

Almost four years after its initial US launch, EYLEA, or aflibercept injection, continues to demonstrate strong sales growth.

In addition, just last month Praluent, or alirocumab, received US regulatory approval for the lowering of poorly controlled low-density lipoprotein cholesterol in specific high-risk patient groups, and was shortly thereafter made available to patients who need it.

Praulent was also given a positive recommendation by the European regulators with EU approval expected in September.

Starting with EYLEA, second-quarter US net sales grew 58% year over year.

Net US EYLEA sales to distributors in the second quarter were $655 million.

Underlying physician demand has continued to remain strong and grew sequentially quarter over quarter by 19%, representing the highest sequential quarter-over-quarter growth that we've experienced since the third quarter of 2012.

Market research with retinal specialist indicates that a key driver of EYLEA growth in the second quarter is the continued positive impact of the results of the Protocol T study in patients with diabetic macular edema, or DME.

As a reminder this independent NIH-sponsored study explored the comparative effectiveness of EYLEA with ranibizumab and off label bevacizumab and demonstrated that EYLEA provided greater efficacy despite one fewer injection and fewer laser treatments.

The efficacy differences were particular pronounced in the prespecified group of patients whose vision was worse at study initiation.

This group represents about 50% of all DME patients.

These data have been viewed very positively by physicians and payers and were one of the biggest drivers of strong EYLEA growth in the second quarter.

According to a survey of 200 retinal specialists evaluating the reported usage of VEGF inhibitors in the second quarter of 2015, as well as a chart audit from 183 retinal specialists, EYLEA is now the market leading product among FDA approved anti-VEGF drugs in all of our labeled indications.

With our share of eyes growing quarter over quarter versus ranibizumab in DME and macular edema following retinal vein occlusion and remaining consistent relative to ranibizumab in the last quarter in wet AMD.

Likewise, overall EYLEA is gaining market share from bevacizumab, especially in DME.

The share gain is coming from both switches, as well as new patient starts.

Lastly EYLEA growth is also coming from penetration into new physician practices that previously did not use EYLEA.

Outside of the United States where we share EYLEA profits with our collaborator Bayer HealthCare, second-quarter EYLEA sales were $338 million, representing a 37% growth year over year on a reported basis, notwithstanding substantial adverse currency impact.

In the second quarter, Bayer HealthCare received regulatory approval in Japan for EYLEA for the treatment of macular edema secondary to retinal vein occlusion, or RVO.

Turning now to Praluent, since it's only been 10 days since US approval, it's too early for me to provide any meaningful specifics about the ongoing launch.

We are, however, pleased with our operational implementation of the launch.

We received FDA approval for Praulent on Friday afternoon July 24.

We created and trained the field space forces on the final customer facing materials, certified them on contact and made all launch materials available to the field teams over the weekend following approval.

We had a full field force deployment on Monday, July 27.

We actually had our first prescription form submitted to our reimbursement and patient services hub called My Praulent on Sunday night July 26.

From the information that we have, it appears that the first patient dosed with commercial Praulent occurred on Monday morning July 27.

I'd also like to spend some time talking about the eligible patient population for Praulent.

We are gratified that the Food and Drug Administration has recognized a significant unmet medical need in a broad group of indicated patients, those with clinical atherosclerotic cardiovascular disease, which includes patients with a history of acute coronary syndromes or myocardial infarction, stable or unstable angina, coronary or other arterial revascularization, stroke or transient ischemic attack or peripheral arterial disease presumed to be of atherosclerotic origin.

These patients are receiving maximally tolerated statin therapy and are not at their LDL-C goal.

Praluent is also indicated for patients with a history of heterozygous familial hypercholesterolemia receiving maximally tolerated statin therapy whose conditions are diagnosed based upon a combination of cholesterol levels, physical manifestations, family history and genetic testing.

Our health economics analysis indicates that there are approximately 8 to 10 million patients in the United States who could be eligible for PCSK9 inhibitor therapy.

However, maximally tolerated statin therapy will and should remain the mainstay of therapy.

With our educational efforts, we believe that more patients will likely go on and stay on statins and therefore may be able to get to their goal on statin therapy alone.

Other factors that will contribute to reduce the size of the actual PCSK9 inhibitor market include the resistance of some physicians to use biologic therapy for LDL-C reduction, physicians reluctance to take on responsibility for prior authorization documentation, patients unwillingness to inject themselves, and ongoing low physician and patient urgency to get LDL-cholesterol under control.

As I stated previously the reimbursement environment is complex and will be carefully managed.

Our goal has been to ensure that payers and healthcare providers understand the value that Praluent can offer to patients.

And to that end, we are actively engaged in extensive discussions with payers.

We expect that it will take several months for some commercial and government payers 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.

In response to potential delays in formulary decisions and reimbursement decisions, we're offering samples and free product to appropriate labeled patients who are awaiting an insurance coverage decision.

This may delay uptake in commercial sales reporting.

For example, for Medicare Part D or government paid patients, there could be up to a six-month coverage decision period.

So for the next several months performance cannot be judged based upon reported sales.

This would understate both the volume of physician and patient adoption.

Outside of the United States, Praulent has received a positive opinion from the European CHMP with approval expected in late September.

Our 18,000 patient ODYSSEY OUTCOME study is ongoing and we expect this study to be fully enrolled by year end with completion expected by the end of 2017.

Turning now to sarilumab, the IL-6 inhibitor class has shown consistent double-digit growth in the United States year over year.

If sarilumab is approved it will be the second entrance in this class.

With the availability of second agent in the class, we anticipate that increased awareness and education should contribute to further class growth.

We also continue on our pre-commercialization efforts for dupilumab.

For example in June we had a major presence at the World Congress of Dermatology Meeting in Vancouver, British Columbia with an educational booth and symposium focused on the path of physiology of and impact of atopic dermatitis.

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

Thanks, Bob, and good morning to everyone who has joined us today.

Regeneron posted another strong financial performance in the second quarter of 2015 and we are very pleased with our financial results for the first half of the year.

In the second quarter 2015, we earned $2.89 per diluted share from non-GAAP net income of $338 million, which represents year-over-year growth in both non-GAAP diluted EPS and net income of 17%.

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

Second quarter non-GAAP net income reflects cash income taxes expected to be paid or payable for 2015.

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

Total revenues in the second quarter of 2015 were $999, million which represented year-over-year growth of 50%.

Net product sales were $658 million in the second quarter of 2015 compared to $418 million in the second quarter of 2014.

EYLEA net product sales in the United States were $655 million in the second quarter of 2015, compared to $415 million in the second quarter of 2014 which represents an increase of 58%.

During the second quarter of 2015, EYLEA experienced a slight decrease in US distributor inventory levels as compared to the first quarter of 2015, but remained within our normal one to two week targeted range.

I also want to note that despite having launched almost four years ago, EYLEA experienced sequential dollar sales growth this past quarter of $114 million, the largest in the product's history.

As Len mentioned earlier, we are raising our US EYLEA net sales growth guidance for full year 2015 over 2014 to be between 45% and 50% from our previous guidance of 30% to 35%.

Ex-US EYLEA sales were $338 million in the second quarter of 2015, as compared to $247 million in the second quarter of 2014, representing a 37% increase on a reported basis.

On an operational basis or constant currency basis, sales increased approximately 64%.

Sequentially sales grew 17% when comparing second quarter 2015 versus first quarter 2015 on an operational basis.

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

In the second quarter of 2015 Regeneron recognized $107 million from our share of net profits from EYLEA sales outside the United States.

Bayer HealthCare collaboration revenue for the second quarter was $134 million.

Total Sanofi collaboration revenue was $195 million for the second quarter of 2015.

The Sanofi collaboration revenue line item 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.

As a reminder, while we get reimbursed for antibody related commercial 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 second quarter of 2015 our share of losses in connection with commercialization of antibodies, primarily Praulent, was $46 million.

This can be found in table 4 of our earnings release.

Turning now to expenses, non-GAAP R&D expenses were $330 million for the second quarter.

Our unreimbursed R&D expense, which is calculated as the total GAAP R&D expense less 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.

Given the unreimbursed R&D expense for the first six months of 2015 and in light of the additional reimbursements associated with the recently executed immuno oncology collaboration, we are lowering and tightening our guidance for non-GAAP unreimbursed R&D to be in the range of $510 million to 550 million, which is lower than our previous guidance of $525 million to $575 million.

Non-GAAP SG&A expenses were $142 million for the second quarter.

As you might have noted this is a significant increase when compared to the first quarter 2015.

As we've said before this was driven by higher commercialization expenses in anticipation of the launch of Praulent.

For the full year, we project non-GAAP SG&A expenses to be between $610 million and $650 million, which is lower than our previous guidance of $650 million to $725 million.

To be clear the new SG&A guidance does not reflect any planned change in the combined investment we and our partners Sanofi are spending on the launch and commercialization of Praluent, but rather results from more of these expenses been incurred by Sanofi than by Regeneron.

Non-GAAP cost of goods sold was $60 million for the quarter, the components of this line item include the cost in connection with producing EYLEA commercial supplies, start up expenses associated with our Limerick manufacturing site, and the most substantial component, the royalty expense in connection with our agreement with Genentech related to US EYLEA sales.

As reiterated in earlier quarters, we are obligated to pay this royalty until May 2016, at which point the payments will end.

As we had mentioned on last quarter's call, in 2015 we begin paying significant cash income taxes as compared to prior periods.

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

On a non-GAAP basis, our cash tax rate for the second quarter of 2015 and for the six months ended June 30, 2015 was approximately 23% and 18% respectively of non-GAAP pretax income.

The increase to the second quarter rate versus first quarter 2015 reflects an increase in our projected annual cash tax rate.

This increase is due to a higher forecasted full year non-GAAP income before tax related to higher estimated US EYLEA net sales and cash taxes paid or payable on a portion of the upfront payments we will receive in connection with our new immuno oncology collaboration with Sanofi.

In addition, this quarter includes incremental cash tax related to first-quarter earnings as the cash tax forecast in the first quarter used a lower estimated full-year cash tax rate.

Primarily as a result of these changes, we are raising and tightening our cash tax guidance as a percentage of non-GAAP pretax income to be between 15% and 22% for 2015 from the previously provided range of between 10% to 20%.

In light of our recent immuno oncology collaboration with Sanofi, I'd like to discuss how you should model some of these financial components of this collaboration.

As was outlined in an earlier press release, Sanofi has committed to an initial investment of up to $2.17 billion, which includes $640 million in upfront payments and a potential sales milestone of $375 million to Regeneron.

Regeneron currently anticipates that the non refundable upfront payments will be recorded as deferred revenue, that is recognized over the related performance period, beginning in the third quarter of 2015.

Note that the deferred revenue balance from these upfront payments as of the end of 2015 is anticipated to be subject to taxation for cash tax purposes in the US in 2016.

In terms of expenses, we will recognize immuno oncology collaboration research and development expenses in our P&L in the quarter in which they occur and also recognize as Sanofi collaboration revenue the portion of these R&D expenses that are reimbursable by Sanofi similar to our antibody collaboration.

Accordingly, Regeneron will continue to incur unreimbursed R&D for its portion of the R&D that remains unfunded.

These obligations include the following: Regeneron will spend up to approximately $1.1 billion under the immuno oncology collaboration discovery agreement and Sanofi will reimburse us for up to $825 million of these costs.

Regeneron and Sanofi will equally fund post proof-of-concept development for clinical programs for which we are construed the development and US commercialization lead.

For REGN2810, our PD1 antibody that is currently in clinical development, a separate $650 million commitment has been established that will be equally funded by both Companies.

Regeneron is the development and commercial lead in the US for this program.

In addition, Sanofi will fund 100% of any development costs associated with the immuno oncology clinical programs for which they are considered the development and global commercialization leader.

Regeneron's recently filed 10-Q for the quarterly period ended June 30, 2015 in a Form 8-K filed on July 15 provides further disclosure of our recent immuno oncology collaboration with Sanofi.

Our capital expenditures for the first half of 2015 were $354 million.

Given the first half spent and our remaining outlook, we are tightening our 2015 capital expenditure guidance to a range between $675 million to $750 million from $650 million and $750 million.

Our Raheen, Ireland commercial manufacturing site, which is under construction, continues to represent our largest capital investment in 2015 and continues to progress as planned.

Additionally both the first half 2015 expenditures and full year 2015 guidance includes infrastructure expansions related to increasing our manufacturing capacity in Rensselaer, as well as the ongoing expansion of our Tarrytown R&D and corporate headquarters in order to meet our continual growth outlook.

We ended the second-quarter with cash and marketable securities of $1.19 billion.

With the recent execution of the immuno oncology collaboration, we are expecting receipt of the $640 million in upfront payments from Sanofi shortly.

As we have been reporting, we have been opportunistically repurchasing the warrants that we issued in 2011 in connection with our convertible debt.

We intend to continue repurchasing these warrants up to an aggregate amount of $400 million.

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

Thank you, Bob.

That concludes our prepared remarks.

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

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

Bob Landry and the IR team will be available after the call for follow-up questions.

Thank you.

Operator, you can please open the call for questions.

(Operator Instructions)

Yeng Wong with Bank of America.

Congratulations for a great quarter.

First question on the strength of EYLEA in this quarter, Bob, maybe can you give us a little bit more color in terms of whether you also see more penetration in AMD rather than just in DME and where that share is coming from?

And then secondly question on Praulent.

CVS CEO just said on their earnings call this morning that they plan to employ a similar strategy to the so-called formulary exclusion strategy to manage their PCSK9.

So I was wondering what's your strategy if that happens actually from the payers?

And then housekeeping question, are you going to block the IMS sale scripts for Praulent or not?

That was three questions Yeng, so bad instruction following.

Bob Terifay.

So in terms of EYLEA growth, the bulk of the growth is coming in DME both in terms of growing the DME market overall for the anti-VEGF class as well as taking market share from both Lucentis as well as bevacizumab.

We do see some growth in RVO and some slight growth in wet AMD but the majority of the growth that we're seeing is in DME.

In terms of your questions on Praulent, it's too early to talk specifically about payers.

But we've always expected that the payers are going to want patients to step through maximally tolerated statin therapy in order to get access to Praulent.

That is our labeling and so it's not a surprise that people are advocating for patients to have been on maximally tolerated statin therapy.

The IMS data, yes we intend to utilize IMS data, so you will see the IMS data in the audits.

Terence Flynn with Goldman Sachs.

Maybe another one on EYLEA for DME, you mentioned you're seeing new prescribers there.

Are those retinal specialists or is there a broader category here?

And then do you have any insight on referral trends from either ophthalmologists or endos to retinal specialist of DME patients?

Thanks.

So the new practices are generally smaller ophthalmology practices that were rebuying Avastin because they were not familiar with all the reimbursement techniques in terms of buy-and-bill.

But with the recent DME data there's more interest in utilizing EYLEA.

With regards to referrals as we talked about on the last couple of calls, we are actively working with ophthalmologists as well as optometrists to build awareness of the need for regular screening for eye exams and to get patients to retinal specialists as soon as DME is diagnosed.

And we're hoping some of that is starting to pay off.

Matthew Harrison with Morgan Stanley.

I wanted to ask about the bi-specific in the PD1, on the past two calls you've characterized responses that you've seen in those patients.

I don't know if you'd be willing to give us some more detail around that, and if you're not, could you tell us when we might see that data?

Is it possible to see that data at ASH this year?

Thanks.

Yes, we're waiting for the appropriate medical conferences in which to provide more detail.

Thanks.

Robyn Karnauskas with Deutsche Bank.

This is Mohit filling in for Robyn.

Congratulations on a great quarter.

So turning a little bit on your RSV program, could your Phase 3 trial be a pivotal trial given the plan is to enroll 24 patients in this trial?

And what is the baseline risk of developing RSV in the babies you're enrolling in this trial?

Thank you.

I think you're asking about the RSV pivotal trials whether it's a Phase 3 and the last one the risk of enrolling infants or --

The baseline risk of developing RSV in these patients, because it seems like a natural history kind of study, that's why I'm asking.

Right now these are considered to be pivotal studies and we've discussed very carefully with the FDA in terms of the infant population, which is in fact intended to be somewhat broader population of infants at risk.

Thank you.

Geoffrey Porges with Bernstein.

George, can I throw couple questions to you?

First on the immuno oncology side, you mentioned both that you have opted in and will be the commercialization partner for the PD1, but also alluded to the fact that you may have a PD-L1.

Could you give us a sense of your view of the relative merits of a PD1 and a PD-L1 because superficially you might say that was overkill.

And then on the RSV again, could you explain where you are in terms of having a final manufacturing process to take into pivotal trials?

Are you there yet, can you scale up with the process you have?

Yes, on the first question we certainly feel that the science suggests and maybe the early clinical data suggest that if anything PD1 if anything should have somewhat broader advocacy then PD-L1.

On the other hand there may be some patients who might be able to tolerate a PD-L1 better.

In settings where for example they may be getting some toxicity due to for example inhibition of PD-L2.

So we think it might be useful to have both components, but certainly we think that PD1 should be more likely the broader foundational therapy.

On the second question, yes we're using our standard manufacturing approach which we've used for all of our other clinical programs for RSV.

So we think it's certainly commercializable.

Adnan Butt with RBC Capital Markets.

Congrats on the solid EYLEA number as well.

So first could you comment on the scale and scope of the sampling program, will it require the same pre authorization process that would be expected of a paid script?

And then is there a two-year follow-up of Protocol T data as well and is that going to be as meaningful?

Thanks.

So in terms of the sampling, we have to obviously obtain physician signatures to be able to get access to the samples, but then it is up to the physician to determine which patients get access to the therapy.

In terms of Protocol T, yes there will be two-year data and certainly we're very interested in seeing what that data will look like.

John Newman with Canaccord.

I'd like to add my congrats on the EYLEA number, very strong.

My question is regarding the development strategy for both PD1 and PD-L1.

We've seen a few companies around the fringes running studies in combination with -- or running studies where two investigational drugs are being tested at the same time and I'm just curious if that might be a strategy that you would discuss with the agency that could allow you to maybe leapfrog some of your competition in the PD1 and the PD-L1 space?

Thanks.

Yes we are certainly exploring that opportunity, we agree with you that that is frankly going to be a necessary approach for the entire field to make appropriate progress in this very complex setting.

So I'm sure that we and a lot of other people are thinking and considering that approach.

Joseph Schwartz with Leerink Partners.

Mark Schoenebaum with Evercore ISI.

This is John filling in for Mark.

Congrats on the quarter.

Just a quick one on the RSV program, if I may.

So I think you previously mentioned the half-life the antibody could result in so less frequent dosing.

I was wondering if you'd disclose the dosing regimen of the antibody in Phase 3?

Is it in fact less frequent than Synagis?

Are you doing it once per season dosing?

And then really fast on IO, trying to better understand how the logistics of alternating the lead programs work.

So is it by order of filed INDs or is it by when Sanofi opts in to the collaboration?

Or is -- and how would that work for combination regimen?

Thanks.

Michael can take the second one.

Yes that will be alternating at the time of opting in and there is a mechanism for how to deal with combinations where you combine two different products either in the discovery program or the license.

I don't know if I want to get into that detail, perhaps after the call.

But this is a good time to day that, this is Len, our relationship with Sanofi as George said in his opening remarks has really been quite spectacular and has been built on many, many years of closely collaborating on every aspect of what we do from discovery to early development to full development to scale up and through commercialization now with Praulent.

So I think the partners know how to work together and this will be handled rather straightforwardly.

But basic concept from your vantage point is that on half the programs we'll be taking the lead, on half the programs they'll be taking the lead.

Just elaborate on what Len send, we've done it before.

We're going to do what's right for the program and we don't necessarily follow the contract because we have such a good relationship with Sanofi.

If it makes sense not to alternate as per what's in the contract, we'll do what's right for the program.

In terms of RSV, yes we are certainly exploring less frequent dosing regimens in the pivotal studies and we have reason to believe that they might work.

So we're hoping that the data might support that.

Brian Skorney with Robert W. Baird.

Hi, this is Colleen Hanley in for Brian Skorney, thanks for taking my questions.

Two quick ones for you on Praulent, how will Praulent be distributed?

Will it be through retail distributors or special channel?

And you touched on this a little bit before, but do you think IMS and prescription data services will be good surrogates for sales or will distribution be so select that you can't really offer a decent capture rate?

Thanks.

So I'll start with the IMS.

It's going -- as I said earlier, it's going to take several months for us to get to a sales reporting that is reliable based upon it taking some time to get reimbursement, patients being on samples and patients being on free products.

So when the IMS data comes out later this week, it's not going to be terribly reliable, it will improve over time.

But again remember not all of the specialty pharmacies report to IMS so some of the data are projected.

So obviously ultimately it's going to be our actual sales data that are going to be more reliable.

In terms of Praulent distribution, we are disturbing through a network of specialty pharmacies.

Okay, thank you.

Cory Kasimov with JPMorgan.

Wanted to ask about the IO collaboration as well.

So in addition to in-house combinations, will you also be looking outside of the Regeneron and Sanofi pipelines for potential combos?

And do you have any residual concerns that IP potentially becomes an issue given the land grab that's currently going on in the field?

Thanks.

I'll -- the first question the answer is yes.

We will be exploring all opportunities for combinations, so I don't have a specifics.

But there's no reason why we couldn't look outside the collaboration for novel combinations.

That said thankfully for us we have George and his team and we have a plethora of things to do internally.

And so those will probably be -- definitely take precedence.

In terms of IP, Len standard answer?

Yes, I don't think we -- we look at IP very carefully, we're pretty experienced and been in this antibody IP business for a long time and we should just leave it at that.

Okay.

Thanks, guys.

Joseph Schwartz with Leerink Partners.

I was wondering if you could give us some insight into what is it about the IO antibodies that you're pursuing that makes you so enthusiastic about the potential to obtain better responsiveness or safety and tolerability?

You alluded to the response rates that it sounds like you think you can approve upon it.

Is it higher affinity for the target as was the case with dupilumab?

Other aspects of the technology that you can offer us some insight into your approach there?

Well I think what's going to be required for success here is a really comprehensive approach and bring to bear many different antibody candidates in the right settings, in the right combination.

And we have not only some of the more carefully characterized targets covered but we also have a large number of innovative and novel targets.

And we think that there's going to be a little bit of magic and maybe a certain degree of luck and a lot of science involved in figuring how to best do this.

And this is what we think we're historically strong at.

So this is why we think that this is a great opportunity because it is so early in the game here and it's going to be a complex business and the complexity I think plays to our advantages.

Gbola Amusa with Chardan Capital.

On EYLEA on the beats, could you confirm where dosing has gone year over year?

We've seen for the overall market for example dosing has gone from 4 (inaudible) to 5 to 6 to 7, so could you confirm that there weren't major changes there?

And then secondly on your economic interest in wet AMD through gene therapy with your Avalanche stake and partnership, could you give any thoughts on the recent Phase 2a data in wet AMD, or if it's too early for that, would you give us a sense on where we -- when we may get more visibility on your intentions with that program?

Right, so in terms of Avalanche, Mike, you might want to comment on that.

Yes, my comment will be we're not going to comment on that.

We'll let the process go out and you'll hear from Avalanche.

I might just remind everybody that the prime mover of the Avalanche deal for us was to get a look into gene therapy for eye diseases where there is no standard of care already and where gene therapy would be uniquely positioned as a therapeutic choice.

So therefore the risks, rewards of the programs would be greater.

Nevertheless as Michael says, we will look at and review this data as we expect to.

Bob?

In terms of EYLEA dosing we're trending very close to what we see in our prescribing information which is dosing every eight weeks.

I'll remind you if you look at the number of doses per year in the Protocol T trial, which had a different dosing regimen, they lined up pretty closely to what we saw in our own DME studies.

So physicians are generally after an initial loading dose period able to get patients out for at least eight weeks.

Okay, so no year over year -- apology, no year-over-year change drove the beat effectively.

It was DME.

So you're asking the question, do we have more doses which is driving the increase?

No we're not seeing more doses per year driving net sales.

Phil Nadeau with Cowen and Company.

Let me add my congratulations on all the progress.

A question on dupilumab and atopic dermatitis, in the adult pivotal program, can you remind us what you need to file?

Can you follow on the 16-week data or do you need to wait for the 52-week data?

And then similarly on atopic dermatitis for kids, what is the update on the pediatric development plan and when could you start pivotal trials there?

Thanks.

In terms of the filing, we expect to have to do the 16-week data from two of the trials but we'll expect to have 1-year data from the longer term trial for the initial filing.

So we'll have thousands of patients in that initial filing.

The other question is pediatrics.

Pediatrics, I'm sorry.

The -- those pediatric PK and other preparatory studies as well as getting into actual efficacy studies is really ongoing.

There was a panel -- a conference on this and the idea was that we should be moving sooner rather than later and not waiting for the outcome of our Phase 3 data to move into what can be fairly devastating conditions for pediatric patients.

So that program is ongoing.

Geoff Meacham with Barclays.

Couple on Praulent, I know you guys don't want to give too much detail on launch strategies but is relaxing payment terms as you do with EYLEA initially part of the plan?

And if you don't answer that, when you think about the economics the, payback economics to Sanofi for Praluent, are those flexible depending on the launch trajectory?

In other words can you tweak those in the material way depending on the trajectory?

Thanks.

The payback economics are based upon a percentage of profits, so it's already -- it's all embedded in there and it's only based on the percentage when the product turns profitable, we pay a percentage, 10% of our profits back for repayment.

In terms of the payment terms, remember EYLEA is a buy-and-bill product under very different circumstances from Praulent.

So we don't have the same terms.

Biren Amin with Jefferies.

Maybe on EYLEA, could you maybe review the physician assistance program that you're providing with the DME launch, because I believe you had a pretty robust program at the time of the wet AMD launch?

And second question is on PD1 Phase 1 trial, what tumor types are being enrolled and what's the rationale for combining with Cyclophosphamide?

Thanks.

So our patient assistance program is consistent with all of our EYLEA indications.

We have an income cut off of $100,000 per patient in terms of income.

And if they fall within that, they get access to the patient assistance.

George, the question was on rationale for Cyclophosphamide in PD1.

Yes, the notion is the Cyclophosphamide might be in a certain way not blocking T cell effectiveness in response while activating a certain type of immune activation pathway so that it might work well to go in combination with PD1.

In terms of in our first studies we're going after a broad group of diverse patients in terms of cancers.

Matt Roden with UBS.

Congrats on a really nice progress this quarter.

I just want to go back to EYLEA and Bob it seems like everything that you're describing here in terms of the gains that you've made commercially with EYLEA in really all settings has been -- should be practically sustainable, right?

And yet this quarter we've seen a 21% Q on Q growth that's a lot higher than we've seen in the recent three quarters or so, really the most we've seen in three years.

So I guess I'm getting at is when you look at the guidance, it seems to imply reversion to single-digit growth for the remaining 3Q and 4Q this year and I'm trying to understand why shouldn't the gains that you've made be sustainable?

And it occurs to me that the guidance might just be conservative, but I'm trying to understand if there are any other factors we need to consider that should drive a reversion in the growth?

Thanks very much.

Bob may want to comment beyond the usual factors which includes seasonality.

There's effects on the pent-up demand that may be was satisfied after Protocol-T came out.

Bob anything else?

No I think we -- our guidance we feel very confident in but yes we do model based upon what happens in previous years.

And we do see in the third and fourth quarter that there is with vacations and holidays and the risk of snow that sometimes there is some seasonality.

Great.

Thank you, everybody, for participating in this call.

As was mentioned earlier, the IR team as well as our CFO, Bob Landry, is going to be available if there's follow-up questions we'll be in our office.

Please issue us an email or give us a call and we'll try to get back to you.

Thank you very much.

Operator, that concludes the call.

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

This concludes today's program, you may all disconnect.

Everyone have a great day.