雷傑納榮製藥 (REGN) 2015 Q3 法說會逐字稿

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

(Operator Instructions)

As a reminder, this conference call may be recorded.

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

You may begin.

Thank you, operator.

Good morning, everybody, and welcome to Regeneron Pharmaceuticals' third-quarter of 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 of Commercial; and Bob Landry, our Chief Financial Officer.

After our prepared remarks, we will open the call for questions and answers.

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 forecasts, financial forecasts, development programs, collaborations, finances, regulatory matters, intellectual property and competition.

Each forward-looking statement 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 Security 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 September 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 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 team will be available to answer further questions.

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

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

I'm pleased to share with you that we delivered another strong quarter.

EYLEA continued to show growth, both in the US and globally.

Praluent, our first-in-class PCSK9 inhibitor for the treatment of elevated LDL cholesterol, was approved and the launch is under way.

And we continue to advance our early- and late-stage pipeline programs.

This quarter, I am particularly proud to announce that quarterly global sales of EYLEA surpassed $1 billion for the first time in the product's commercial history.

Overall, EYLEA has driven the solid financial performance we delivered in the third quarter of 2015, which you will hear more about from Bob Landry.

Based on the continued strong growth in US EYLEA net sales, we are increasing our full-year US EYLEA net sales guidance to year-over-year growth of between 50% and 55%, from the previously provided range of 45% to 50%.

To help put in perspective how strong the performance of EYLEA has been during the first nine months, you may recall that our original guidance that we provided at the beginning of the year was for 25% to 30% year-over-year growth.

Bob Terifay will review EYLEA sales in more detail.

In the third quarter, we received regulatory approval in the US and the EU for Praluent, our PCSK9 antibody.

While the US launch is still in its early days, and many challenges remain, we, along with our collaborator, Sanofi, are encouraged by what we have seen so far.

Bob Terifay will discuss the ongoing launch in greater detail.

We have also made important progress with our pipeline.

Today we have four late-stage antibodies: sarilumab for rheumatoid arthritis, dupilumab for a variety of allergic and atopic diseases, REGN2222 for respiratory syncytial virus, and fasinumab, our NGF antibody for osteoarthritis-related pain.

We also made important announcements around our early-stage research programs, including a collaboration with the US Health and Human Services Biomedical Advanced Research and Development Authority Division, also known as BARDA, in Ebola, which highlights Regeneron's rapid response capabilities for emerging infectious diseases.

And the publication of our discovery of the mechanistic basis for the rare disease known as fibrodysplasia ossificans progressiva, or FOP, in Science Translational Medicine, as well as the identification of a therapeutic candidate for this terrible disease.

You'll hear more about some of these advances from George.

As we discussed on our last quarterly call, early in the third quarter we announced a major new collaboration with Sanofi in immuno-oncology, and we continue to advance our programs in this area.

I want to take a moment to reflect on our achievements this quarter, as they highlight Regeneron's unique position.

While we continue to have strong top-line growth from EYLEA, we are also in the midst of an important launch with Praluent, and a position to bring multiple important new medicines to patients in the coming years, including sarilumab for rheumatoid arthritis, and three additional antibodies which are in late-stage development.

Our investments in R&D have the potential to help diverse groups of patients in need.

We expect to make significant investments in the coming year to support these important programs, in terms of launch and development costs.

These critical investments will fuel our efforts to continue to move our pipeline forward, and thereby, hopefully allowing Regeneron to continue to execute on its mission to provide important new medicines to patients in need.

Bob Landry will update you on our financial results.

In addition to our progress with our late-stage antibodies, we maintain our commitment to continue to innovate, whether that is for rare diseases like FOP, emerging diseases like Ebola, or the genetics effort at -- with the Regeneron Genetics Center to name a few.

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.

As Len mentioned, we have remained committed to being a research-driven company, and the depth and breadth of our proprietary technology, and the resulting pipeline of molecules, all of which have been invented in our own labs is a testament to that vision.

Len and I are proud of our team and what they are accomplishing.

One of the features that distinguishes as a company is that the core group of scientists who helped build Regeneron from the very beginning continues to be actively involved as leaders, and is now being joined by the next generation of new scientists who are attracted to our research-based approach.

To that end, we are proud that we are one of the top two employers by Science Magazine for the fifth year in a row, and once again, the top employer in the biopharmaceutical industry.

Turning to developments this quarter, I would like to begin with Praluent, where we currently have a Phase 3 outcome study ongoing.

We expect this study to be fully enrolled by the end of the year, with final data expected in 2017, and interim analysis by the independent data monitoring committee reported next year.

At the annual meeting of the European Society of Cardiology Congress, we presented new data from a pooled analysis of over 1,200 heterozygous familial hypercholesterolemia patients, one of the major group of patients for whom Praluent is indicated.

This represented the largest group of HeFA patients ever studied in a Phase 3 program.

This pooled analysis was concurrently published in the European Heart Journal.

We look forward to presenting additional new analyses from our Phase 3 program at the American Heart Association meeting this upcoming weekend.

We have submitted our BLA for sarilumab, our interleukin-6 receptor antibody for rheumatoid arthritis, and look forward to a potential FDA action in the second half of 2016.

Next week at the American College of Rheumatology meeting, we will be presenting additional Phase 3 data for sarilumab, including data from the positive target study which was in patients who were inadequate responders to, or intolerant of, TNF-alpha inhibitors, in combination with non-biologic disease modifying anti-rheumatic drugs, or DMARD therapy.

We'll be hosting a conference call next week from ACR.

The target data, along with the previously reported published data from the Phase 3 mobility study of sarilumab in combination with methotrexate in patients who were inadequate responders to methotrexate alone, are included in our regulatory submission in the US.

In addition, the Phase 3 MONARCH study of sarilumab versus adalimumab in the monotherapy setting is now fully enrolled, and we expect to report data from this study in the second half of 2016.

Turning to dupilumab, our antibody that blocks the interleukin-4 and interleukin-13 pathways, we expect to see data in early 2016 from our pivotal Phase 3 studies in atopic dermatitis, both of which are fully enrolled, with a regulatory submission to follow in the second half of the year.

A Phase 2 study in the pediatric atopic dermatitis population is also fully enrolled, and we are committed to moving as quickly as possible to address this important patient population.

In the asthma indication, our confirmatory Phase 3 study is ongoing and enrolling patients.

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

In addition, we continue to explore other potential allergic indications for dupilumab, such as nasal polyps and eosinophilic esophagitis.

Regeneron 2222, our antibody to respiratory syncytial virus, is in Phase 3 clinical development.

An open-label pharmacokinetic portion of the study has been completed in healthy pre-term infants.

It has enabled dose selection for the second part of this Phase 3 study, which is expected to commence shortly.

A separate second Phase 3 study is planned for next year.

Fasinumab, our antibody that blocks nerve growth factor, is currently in Phase 3 clinical studies for osteoarthritis-related pain.

Last month we announced a collaboration agreement in Asia for this program with Mitsubishi Tanabe, and look forward to working with our new Japanese collaborators to advance fasinumab.

We also announced and launched our new immuno-oncology collaboration with Sanofi during the quarter.

With the additional resources and commitment to immuno-oncology, coupled with our capabilities in both immunomodulatory antibodies and bispecific antibodies, our goal is to become a major contributor to this exciting new field.

Our PD-1, which is expected to serve as a backbone of several future combination approaches, continues to enroll in patients in an early clinical study, as does our CD3 by CD20 bispecific antibody, which is not included in the immuno-oncology collaboration, but will nevertheless serve as the proof-of-concept for our overall bispecific platform.

I'd now like to spend a few minutes on our earlier-stage pipeline.

In September, we announced that Science Translational Medicine had published a paper describing the discovery and pre-clinical validation of a key biological mechanism that drives the pathophysiology of a rare genetic disorder, fibrodysplasia ossificans progressiva, or FOP.

FOP is a progressive, severely disabling and ultimately fatal disease, in which muscles, ligaments, tendons and other connective tissues are transformed into bone.

While FOP is a very rare disease, with approximately 800 confirmed cases in the world, we have been inspired by the stories of the patients with this terrible disease, by our interactions with the international FOP Association, which represents the patients and their families, and the clinical community, particularly Dr. Fred Kaplan and his group at the University of Pennsylvania, as well as our own scientific drive to understand this important pathway and its potential implications to other diseases.

A critical factor that enabled us to elucidate this signalling pathway and identify Activin-A as a potential therapeutic target for the treatment of FOP was our proprietary VelociGene technology.

We use this to develop a genetically humanized and novel mouse model of FOP, in which the hypothesized molecular pathophysiology of disease was elucidated.

Additionally, our proprietary VelocImmune platform enabled us to generate an antibody highly selective to the therapeutic target.

We think underserved diseases like FOP highlight the need for innovative R&D, and we hope that our efforts may ultimately result in important new therapies.

Similarly, I would now like to provide you with an update on our efforts in emerging infectious diseases that pose a risk to public health, such as Ebola.

We believe we could take advantage of Regeneron's rapid response technologies in this space, as they can be immensely useful in emergency situations for diseases that pose a large and quickly expanding threat to the general population.

In September, we announced that we had received funding from BARDA to advance, test and manufacture a monoclonal antibody cocktail for the treatment of Ebola virus infections.

In addition to Ebola, a proprietary antibody Regeneron rapid response platform has been used to generate antibodies for Middle Eastern Respiratory Syndrome, or MERS, which has been the recent cause of outbreaks in both Saudi Arabia and South Korea, and has the potential to address other emerging infectious diseases.

Before I turn the call over to Bob Terifay, I would like to briefly highlight the impressive speed by which the Regeneron Genetic Center, or the RGC, has become a leader in the human genetics space.

In October, we presented several abstracts at the American Society for Human Genetics meeting, which showed the potential of our unique approach which integrates genomic data with electronic health records from a growing database of patient volunteers.

We are currently on track to sequence over 100,000 individuals by early 2016, approximately two years after we launched this initiative.

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

Thanks, George, and good morning, everyone.

The third quarter was a significant one for Regeneron.

EYLEA, or aflibercept injection, continued to demonstrate strong sales growth, both in the United States, as well as the rest of the world.

In addition, in July we launched Praluent, alirocumab, in the United States for the lowering of poorly controlled low-density lipoprotein cholesterol in certain high-risk patient groups.

Praluent was also approved in September by European regulators.

Starting with EYLEA, third-quarter US net sales growth was 65% year over year.

Net US EYLEA sales to distributors in the third quarter were $734 million.

Underlying physician demand has continued to remain strong, and grew sequentially quarter over quarter by 10%.

A survey of 200 US retinal specialists who evaluated the reported use of VEGF inhibitors in the third quarter of 2015 indicates that EYLEA growth in the quarter was driven largely by growth in diabetic macular edema, or DME, and macular edema following retinal vein occlusion.

Third-quarter net sales were also impacted by a slight increase in distributor inventory levels.

I should note that fourth-quarter net US sales could be negatively impacted by several factors, such as potential changes in inventory levels, seasonal fourth-quarter holidays resulting in reduced office visits, and potential bad weather.

According to our third-quarter survey of retinal specialists, the market share of eyes treated with EYLEA in DME is roughly double that for ranibizumab, and similar to that for off-label bevacizumab.

Our market share of eyes treated for macular edema following retinal vein occlusion actually surpassed the individual shares for both bevacizumab and ranibizumab in the third quarter.

Per the survey, EYLEA continues to be the market-leading product among FDA-approved anti-VEGF agents in all of our labeled indications, in terms of market share of treated eyes.

Outside of the United States, where we share EYLEA profits with our collaborator, Bayer HealthCare, third-quarter EYLEA net sales were $371 million, representing 34% year-over-year growth on a reported basis.

This is notwithstanding substantial adverse currency impact.

In constant currency, ex-US EYLEA net sales in the third quarter grew 58% year over year.

Regulatory and pricing approvals for new indications continue to contribute to ex-US sales growth.

For example, just this past week, Bayer HealthCare received regulatory approval in the EU for EYLEA for the treatment of visual impairment secondary to myopic choroidal neovascularization.

Let's turn now to Praluent.

While it is still very early in the launch, we are pleased with our operational implementation of the launch.

The Regeneron and Sanofi field teams were fully trained and in physicians' offices on the first business day after approval.

To date, we have jointly called on over 39,000 healthcare professionals, and 4,600 healthcare professionals have participated in our educational programs.

Over 4,000 prescribers have submitted prescriptions to MyPraluent, our reimbursement and patient services hub.

Of all prescriptions received, approximately 90% of the prescriptions have been filled for our recommended 75 milligram low-dose option.

As reported by Sanofi, net sales to wholesalers in the third quarter were $4 million.

As a reminder, the reimbursement environment is complex, and will be carefully managed by payers.

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 continue to emphasize to payers that physicians and patients should have choice in selecting a PCSK9 inhibitor.

We expect that it will take several months for some commercial and government payers to conduct formulary reviews, make reimbursement coverage decisions, and to begin 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 are 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 can be up to a six-month coverage decision period.

So, for the next several quarters, performance cannot be judged based upon reported sales or filled prescriptions.

We would expect that this would understate both the volume of physician and patient adoption.

As a proxy for physician prescription demand, we are currently evaluating physician prescriptions submitted to the MyPraluent hub for reimbursement verification.

In the third quarter of 2015, submissions were consistent with our expectations.

Outside of the United States, Praluent was approved in the EU in September, with some launches expected before year end.

As mentioned earlier, we recently submitted a BLA to the US Food and Drug Administration for sarilumab, our interleukin-6, or IL-6, inhibitor for rheumatoid arthritis.

We're actively preparing for a potential US launch in 2016.

As part of our pre-launch preparation, we will have a large presence at the upcoming American College of Rheumatology meeting in San Francisco this weekend.

We also continue to prepare for the potential US launch of dupilumab, our IL-4 and -13 inhibitor in 2017.

For example, last month at the European Academy of Dermatology and Venereology meeting in Copenhagen, hundreds of dermatologists participated in our educational symposium on atopic dermatitis.

We are actively in the process of hiring internal commercialization team members for both sarilumab and dupilumab ahead of their potential launches.

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

Thanks, Bob, and good morning to everyone.

Regeneron posted strong financial results in the third quarter of 2015.

In the third quarter of 2015, we earned $3.47 per diluted share from non-GAAP net income of $403 million, which represents year-over-year growth in non-GAAP diluted EPS and net income of 38% and 37%, respectively.

Regeneron's third-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.

Third-quarter non-GAAP net income is based upon an estimated full-year cash tax rate that reflects cash income taxes expected to be paid or payable for 2015.

The difference between GAAP and non-GAAP earnings were primarily driven by non-cash share-based compensation expense and non-cash income taxes.

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

Total revenues in the third quarter of 2015 were $1.14 billion, which represented year-over-year growth of 57%.

Net product sales were $738 million in the third quarter of 2015, compared to $449 million in the third quarter of 2014.

EYLEA net product sales in the United States were $734 million in the third quarter of 2015, compared to $445 million in the third quarter of 2014, which represents an increase of 65%.

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

As Len mentioned earlier, we are raising our US EYLEA net sales growth guidance for full-year 2015 over 2014 to be between 50% and 55%, from our previous guidance of 45% to 50%.

Ex-US EYLEA sales were $371 million in the third quarter of 2015, as compared to $277 million in the third quarter of 2014, representing a 34% increase on a reported basis.

On an operational basis, or a constant-currency basis, sales increased approximately 58%.

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

In the third quarter of 2015, Regeneron recognized $131 million from our share of net profits from EYLEA sales outside the United States.

Total Bayer HealthCare collaboration revenue for the third quarter was $158 million.

Total Sanofi collaboration revenue was $225 million for the third 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.

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 third quarter of 2015, our share of losses in connection with commercialization of antibodies, primarily Praluent, was $75 million, which can be found in table 4 of our earnings release.

Netted within this loss were the US sales of Praluent for the quarter, as recognized by our partner, Sanofi, of $4 million.

Additionally, in connection with our new immuno-oncology collaboration with Sanofi, in the third quarter of 2015 we received $640 million in upfront payments from Sanofi, of which we recognized $20 million as collaboration revenue during the quarter.

These non-refundable upfront payments were recorded as deferred revenue upon receipt, and are being recognized as revenue ratably over the related performance period, which is currently estimated to be approximately eight years.

Note that the deferred revenue balance from these upfront payments as of the end of 2015 is currently anticipated to be approximately $600 million, and subject to taxation at the US statutory rate in 2016.

Turning now to expenses, non-GAAP R&D expenses were $362 million for the third quarter.

Our unreimbursed R&D expense, which is calculated as total GAAP R&D expense, less R&D reimbursements from our collaborators and R&D non-cash share-based compensation expense, was $135 million for the quarter.

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

As a result of a growing number of unpartnered pipeline candidates, and our having reached Sanofi's full-year 2015 antibody discovery reimbursement level of $145 million during the first three quarters, we expect our unreimbursed R&D expense to continue to increase in the fourth quarter.

Therefore, we are raising and tightening our guidance for non-GAAP unreimbursed R&D to be in the range of $540 million to $560 million, from our previous guidance range of $510 million to $550 million.

Non-GAAP SG&A expenses were $174 million for the third quarter, a sequential increase of 22% versus second quarter of 2015, and 111% versus the third quarter of 2014.

These percent increases are in line with our expectations, and are primarily driven by the commercialization expenses to launch Praluent.

We are tightening our guidance for non-GAAP SG&A to $630 million to $650 million, from our previous guidance range of $610 million to $650 million.

As we mentioned previously, in 2015 we began paying significant cash income taxes, as compared to prior periods.

Our non-GAAP tax rate for this quarter, as well as for all of 2015, is 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 cash tax rate for the third quarter of 2015 and for the nine months ended September 30, 2015, was approximately 19% and 18%, respectively, of non-GAAP pre-tax income.

As we approach year end, we are tightening our cash tax guidance as a percentage of non-GAAP pre-tax income to be between 16% and 20% for 2015, from the previously provided range of between 15% and 22%.

In September, we entered into a collaboration with Mitsubishi Tanabe Pharma Corporation for our NGF antibody, fasinumab, which is in late-stage development for osteoarthritis-related pain.

Under the terms of the agreement, Mitsubishi will obtain exclusive development and commercial rights to fasinumab in Japan, Korea, and nine other Asian countries, excluding China.

The signing of this agreement did not have a material impact on the third quarter of 2015, nor will it materially impact the P&L for the full-year 2015.

In connection with the collaboration, we've received a $10 million non-refundable upfront payment from Mitsubishi, which was deferred upon receipt, and will be recognized ratably as revenue over the related performance period.

We are also entitled to receive up to an aggregate of $65 million in payments for development milestones achieved by us, and $150 million in other contingent payments primarily related to development milestones achieved by Mitsubishi.

Our capital expenditures for the nine months ended September 30, 2015, were $500 million.

This spend is slightly lower than expected, and as a result, we are tightening and lowering our full-year 2015 capital guidance to a range of $625 million to $675 million, from $675 million to $750 million.

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

This 400,000 square foot state-of-the-art biologics production facility is now operational, with the first production line on track to enter validation within a few months.

In the third quarter, we also saw the completion and opening of two new buildings on our Tarrytown campus, which has provided us with approximately 297,000 square feet of new laboratory and office space.

We ended the third quarter of 2015 with cash and marketable securities of $1.58 billion.

This reflects both the $640 million of upfront payments we've received from Sanofi related to our immuno-oncology collaboration, as well as a $400 million disbursement made to reduce the number of outstanding warrants originally issued in connection with the issuance of our senior convertible notes in 2011.

Before I hand the call over to Michael for Q&A, let me reemphasize Len's comments regarding the important investment year 2016 is shaping up to be.

This investment year will be anchored by the funding of Praluent during its first full year on the market, and will also include preparing for the launch of multiple important new medicines that we plan to bring to patients, specifically sarilumab for RA and dupilumab for atopic dermatitis.

With regards to R&D investment, we are planning for significant expenses related to our late-stage pipeline, which includes initiating in the first-half 2016 the funding of 20% of dupliumab's Phase 3 clinical development costs for both the asthma and atopic dermatitis indications, assuming positive Phase 3 data is reported for dupilumab in atopic dermatitis; the continuation of funding 20% of Phase 3 studies in both Praluent and sarilumab; advancement of our Phase 3 REGN2222 and fasinumab programs; and progressing our early-stage unpartnered pipeline forward.

In addition to incurring these investment expenses, it's important to remember that the intellectual property associated with our late-stage pipeline has been migrated offshore, thus these expenses will be incurred in foreign jurisdictions with tax rates lower than the US federal statutory rate, which we expect will result in higher cash tax and effective tax rates for 2016.

With that, I would like to turn the call back to Michael.

Thank you, Bob.

That concludes our prepared remarks.

We would now like to open the call to Q&A.

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

For other questions that you don't get to ask, our team will be available in our office after the call for follow-up questions.

Thank you.

And, operator, if you could please open the call for questions?

(Operator Instructions)

[Ying Huang], Bank of America.

Hi, good morning.

Thanks for taking my questions, and congratulations on the great quarter for EYLEA.

So first, I have a question on the formulary access for Praluent.

You have got the branded Tier 2 preferred formulary access from Express Scripts.

Should we expect a similar tiering for the other payers?

And then some of your investors have been wondering that, given this preferred status, branded tier two, you probably have to provide a sizable rebate for Praluent.

Is that the case?

And then secondly, maybe for Bob Terifay here, you have been gaining share for EYLEA in both AMD and DME.

In the fourth-quarter, maybe you are saying that there is some headwind here.

But should we assume that you will continue to gain share from both off label of [Avastin] and also [Lucentis]?

Thank you.

Ying, thank you for your three questions.

Ying, do you have one of those that you would like us to answer (laughter -- inaudible) Well, first of all, as formulary access, we have always stated and Bob has stated, that the Company believes what's best in this field for patients, is that patients and doctors have a choice, and they are the ones who make the decision.

And so that's where we would like to see things turn out.

How things actually turn out, and the size of rebates, et cetera, et cetera, is not something that we can predict or speculate or comment on at this time.

Bob wants to comment on the EYLEA gaining share.

Go ahead, Bob.

So obviously we have been encouraged by the growth that we've seen, especially in DME with market share.

Physicians have been very pleased with the outcomes of the independent protocol [P] studies which compared these three available products for DME in the marketplace, and have been -- have adopted EYLEA very rapidly there.

To project where things are going to go in the future, Ying, I can't do that for you.

So we'll have to see how the market plays out.

Next question?

Joseph Schwartz, Leerink Partners.

Thanks very much.

You have two very large Phase 2 studies, looking at [PDGF and Ang-2] inhibition in combination with EYLEA.

So I was wondering if you could talk about how you're thinking about positioning these, or alternatively are you looking to select one of these programs versus the others to take it to Phase 3?

Yes, I am sure this is going to be a data-driven decision, and we'll see what we get.

George, do you have anything further to add on that?

Well, just as Len said, we let the data speak, and help us guide our decisions.

So we can't predict how it would work out.

Doesn't make sense to target any different [inhibitions] with Ang-2 versus PDGF?

We will see.

Well, in terms of PDGF, as you probably know it, is not appropriate use for diabetic macular edema.

So certainly the Ang-2 has a broader potential applications.

But at the end of the day, we have limited data, and we don't have it yet.

Thank you.

Next question?

Terence Flynn, Goldman Sachs.

Hi, thanks for taking the questions.

First on just on Praluent, can you comment at all, of the prescriptions that have been submitted, what percent you would expect to get filled?

Or maybe to ask another way, what percentage, meet the label criteria?

And then, just the second one is on antibody for FOP.

Just wondering what's gating to moving that into human, if we could see proof-of-concept data next year?

Thanks.

So I don't think we can get into the details of -- and I'm not even sure we have all the details at that level of granularity.

And in this competitive environment, we probably can't even share them.

Sorry about that, Terrence.

In terms of FOP, George, any feeling when we might be able to get that into patients?

Yes.

I mean, certainly, we are moving it along.

And I think as with any complex setting like this in a rare disease, it's going to be -- we're going to have to deal with the complexities of dealing with the patient population.

Also try and design the right clinical study, where it's not clear that all the right endpoints and approaches have been defined to date.

So it's a complex problem, but we do think that there's a lot of reason for hope here.

And we hope to do our best to bring -- to develop this in the right way, and see if we can really make a difference in these patients lives.

Great, and next question?

Chris Raymond, Raymond James.

Hey, thanks.

Just a question on Praluent.

I wanted to clarify exactly the range of outcomes around this Odyssey outcomes interim look.

I think that this is the first time I think I've heard use guys overtly talk about this interim of look in 2016.

Last time, I think I heard you guys talk about it, you were saying that the [DSMB] would be taking this look, and that you would be blinded.

Can you maybe talk about, if there is a chance that there could be more detail?

Thanks.

George, do want to take that?

Well, let me ask my man, Abraham here.

Are we allowed to disclose the details on this?

Yes, there was a publication where all these details were spelled out.

All right.

Thank you.

So if people want to look at that, they can.

Okay.

I wouldn't though -- not everything, but yes.

Right.

So as you all know, this is an event-driven trial.

And it all depends on when the event actually occur, and that's not entirely predictable.

But the interim analyses are gated to occur when 50% of the events have occurred, that initial analysis will be an interim analysis by the data safety monitoring board for futility.

And then when 75% of the events have occurred, there will be a second interim analysis for both futility and overwhelming efficacy.

So I don't think that we will be expected to get any information that we can relay, other than if something has been met, and we get that information.

Beyond that, these things sort of occur out of our sphere of influence and information.

They just go on by the DSMB.

Okay, next question, Mike?

Okay.

Next question?

[Adrian Butt], RBC Capital Markets

Good morning, everyone.

So first on Praluent, one the [payers] did not offer exclusive activity, could other [payers] take a similar approach, or could they -- or could exclusivity still exist for others?

And then, on 2170, the combo PDGF on in EYLEA, either Len or George, what kind of benefit do you think would be of interest to clinicians over EYLEA alone?

So on the first question, I don't think there's any real correlation between what one payer does versus what's another payer could or might do.

Obviously, we continue to feel that patient and physician choice is the best way to go, and we'd like to see all or most of the market if possible go in that direction.

As far as what the patients, or what the doctors would like to see in any of these combination trials, it's always the two things, which is the potential for better efficacy, or a longer duration of action with potentially less injections.

George, anything to add to that?

Yes, I do think it's important to point out that, I mean, obviously safety here will be key, because of the long-standing experience with EYLEA in this space.

And so, I think that would be the first thing people -- physicians should not want to be endangering their patients lives for a little bit of benefit.

But if there is a benefit, in the setting of good safety, I think it's important to point out that I think the -- any benefit should be of interest to physicians, particularly because in our approach, we will be providing both agents in a single [intravitreal] approach.

So for example, if physicians had to think about giving a second injection to gain just a little bit of efficacy, that would take maybe a lot more thinking.

But the fact that it's all provided in a single intravitreal injection, assuming that the safety is good, you would think that any benefit would then be adopted by the physicians and their patients.

Great.

Next question?

Matt Roden, UBS.

Great.

Thanks very much for taking a picture -- for taking the questions, and congrats on a nice quarter here again.

George, a big picture question for you, on how you think about the opportunities you have with your bispecifics, as it relates to other technologies out there, like cellular therapies CAR-T, et cetera?

CAR-T has shown some pretty profound efficacy in some smaller studies, selective indications, but bispecifics, of course, have potential benefits on logistics, convenience, potential safety advantages, et cetera.

But I guess, when I think about cancer therapy, I always think about efficacy being paramount.

So can you talk about what you would like to see from your bispecific programs, whether or not you think a similar level of efficacy is potentially achievable with bispecifics versus CAR-T?

And if not, whether or not, the other advantages are sufficient to be important to patients?

Thanks.

Yes, we agree with you.

I mean, our goal is to have an bispecific program essentially achieves the sort of efficacies that one can imagine by genetically engineering the T-cells themselves, but also producing -- and as you said, a logistically much more reasonable way for more widespread utilization by physicians and patients.

So yes, our target, our goal, and the science that's backing it up, is hoping that we are going to be achieving those levels of efficacy.

It may not be an immediate.

There may be have to be combinations of bispecifics and so forth, but that is indeed the goal.

Yes, I wanted to -- just to add one of the things that George, I think has talked about publicly about this, is that bispecifics do add the advantage of better ability to, not just convenience and logistics, but dose titration.

George, maybe you want to comment on that?

Yes, that's also an important point, in that as we've seen with the CAR-T cells, one will be able to, for example, slowly dial up the bispecific level to get more gradual kill, which could result in much better safety and efficacy in the patients.

And also in settings where one might want to withdraw treatment, either temporarily or permanently, you'd have those opportunities as well.

So as Len said, there is the possibility, and there is also the possibility of mixing and matching the bispecifics, that one could get actually even better efficacy and improved safety and so forth.

But of course, it's going to be a long process, and there is going to be a lot of work to be done.

And there's a lot of unknowns here.

But we have a lot of potential here we feel.

Yes, and, of course, building the whole pipeline of Immuno-Oncology under one program allows us, I guess, George to do combinations.

Yes, I think that's the one thing that we are perhaps the most excited about is -- it's not clear to me, if anybody else has the toolkit, has built the toolkit over the years that we have here.

And that we have here in ways, which are more easily perhaps matched and tested.

So that's one of the reasons, we also have a lot of excitement about this program.

Operator, next question?

Matthew Harrison, Morgan Stanley.

Great.

Thank you very much for taking the question.

I just wanted to go back to EYLEA, and some of the potential headwinds that you guys had mentioned for the fourth quarter, and just make sure that we understood what you were trying to say.

If you look at your guidance, obviously at the high end of the range, there's some sequential growth, and at the sort of midpoint, it actually goes negative quarter over quarter.

I'm just wondering, I mean, are you expecting a lot of inventory?

Do you view your guidance as conservative?

Or do you just think the seasonality that you've seen in years past, and you're sort of baking that into the number?

So we try and give the best guidance we can give, based on the information we have.

And while we've always said this here, that looking into the future is not necessarily the most productive thing one can do.

But we do our best.

And the fact is, Bob, do you want to comment, that you took into account?

I think historically, if you look even last year, when we had rapid growth occurring in diabetic macular edema, fourth quarter over third-quarter growth did slow down, and it's related to a seasonality we see.

We do see some inventory adjustments many times.

We also have the holidays.

And it's not just for example, a Thanksgiving or a Christmas.

It's the days preceding and the days following, where a number of the patients just don't want to go to the doctor's office around the holidays.

So we see less visits and less injections.

I can't -- Len calls me the weather man -- I can't project what's going to happened with the weather, but we do have to take into account that the fourth quarter often does have storms, which also does impact office visits.

So that's why our guidance is the way it is.

Some growth on the high end, and some loss on the low end.

Great, and next question, please?

Phil Nadeau, Cowen and Company.

Good morning.

Thanks for taking my question, and congratulations on the progress.

First, one clarifying question.

On your guidance for the interim analysis for Praluent in 2016, is that specifically referring to the first interim, or and when do you expect to see the second interim at 75% of events?

And then second, on the scripts for Praluent -- I know you said that they are not accurate.

Your competitor AmGen is saying, in their interim (inaudible) their scripts are become more increasingly more accurate, is it a difference between you, based on your sampling program specifically?

Thanks.

As far as the interim analyses, this is speculation, because it's not based on enrollment or time.

It's based on the number of events.

We think there's a good possibility that we could see both analyses during 2016, based on the event rate that we've seen.

The first one is, as George has mentioned, it would be for futility, and the second one would be for futility and overwhelming efficacy.

And remember, you don't know what to root for, because if the drug works really well, you will actually accrue events at a lower rate.

So it's complicated.

Anyway, as far as -- I don't think we have anything further to add on the Praluent story.

Bob, unless you have any --?

I would caution you.

If you look at the IMS prescription data, the numbers are very, very small right now.

Both companies are offering samples, and have bridge programs for patients who don't yet have insurance coverage, to allow patients to get access to the product, while we are working with the payers to achieve coverage.

So it's hard -- I wouldn't project anything off of samples at this time or off -- or access at this time.

And just remember, for example, as Bob mentioned I think in his remarks, that Medicare can take up to six months.

And many are --since one of our main indications is for people who have atherosclerotic cardiovascular disease and insufficient lowering with current therapies of their LDL, many since they have disease, many of these people are elderly, are Medicare, and they may not the coverage for six months, which would put us into the early part of next year.

Next question?

Mark Schoenebaum, Evercore ISI.

Hey, guys.

Thanks a lot for taking the question.

And Lenny, just for the record, I thought this was a fantastic, absolutely fantastic quarter.

And I thought for my question, I would just back up a little bit.

And as one of the longest serving CEOs in big-cap biotech and big-cap pharma, and small-cap biotech for that matter, I was just wondering if you could share some wisdom about, what we're all hearing right now around drug pricing?

And I think coming from the platform of Regeneron to opine on this, is powerful, because in developing specialty medicines, primary care medicines, biologics across all different disease types including ultra-orphan, as well as things like obviously the PCSK9 antibody.

So what do you think is happening right?

Do you think the current price points of drugs are sustainable?

Do think the rate of inflation has got to decline?

What's your thoughts on that, Len?

Thank you.

Yes, this is probably more than a 30 second comment, because there is a lot of --

I got the 4 pm booked so.

Well, we can take it off line now, because I do have a lot of thoughts on the subject of drug pricing.

I am a big believer that we need pricing power in this industry.

Pricing power comes from patents.

I like to say, remember what President Lincoln said, is that patents add the fuel of interest to the fire of genius.

And I think that -- basically translated into modern terms, capital being the fuel that fires things up here, capital is agnostic, and it will only go, where it can get a good return.

So if we want innovation, we want new drugs, we have to figure out ways to make sure that it's attractive for investors.

And that means to be able to reasonably price.

On the other hand, to some respects, pharmaceutical industry, maybe might say the biopharmaceutical industry is reviled for lots of different reasons, and is attacked from many different quarters, including some from my next-door neighbor in town, Secretary Clinton, and sometimes for very good reason.

There have been some scandalous things that are done in the industry.

You read them about every day.

And it's no surprise, if you couple that with high prices, that people get very disgusted with the industry.

On the other hand, as I said, if you are an innovative company such that we, are innovation needs to be rewarded.

But you have to do it in a way, where you create value for patients and the healthcare system.

So, Mark, I would like to just go back to -- I would like to say, that we have a lot we can say on that issue, but I prefer changing the subject back to what I thought I heard you say, which is we had a fantastic quarter, which is nice of you to say that.

Next question?

Thank you.

Next question, operator?

Lynn Boynton, Guggenheim.

I think we lost him.

Why don't we go to the next person?

John Newman, Canaccord.

Hi guys, thanks for taking the question, and my congrats on the quarter, even if it is not as enthusiastically, as Mark said, [great numbers].

So my question is a general question on Praluent.

I'm just wondering how you think long-term about the compliance on the product?

Because even with oral drugs sometimes unfortunately patients don't take their medications, but given the dosing interval for Praluent, I'm just curious, when you think about the drug internally, what you think about terms of the ranges of compliance that we might see?

So compliance for a drug that is preventative for a silent killer can be very difficult, because people for lots of reasons don't want to think, or admit that they have problems that need to be treated.

They feel fine.

Why don't have to take these medicines, et cetera, et cetera.

In terms of specifically compliance for Praluent, the only thing -- the only data that we have, because it's too early to tell from the commercial world yet -- the only data we have is from our clinical trials, where I believe and Bob or George can correct me if I'm wrong, that the compliance for the injections was extremely high, even higher perhaps than for the concomitant statin therapy that people were on.

Bob?

That is the situation in the clinical program.

One thing I would say, is that Praluent is an injectable specialty product.

The nice thing about that is, we have to refill the prescription by mail on a monthly basis to the patient.

So we have an opportunity to encourage patient adherence with the product on a monthly basis, actually with outbound calls, or if the patients wants a text message or however.

So I do hope that with the constant contact with the patients, we will be able to add to the adherence.

I will also say, that at least from the clinical program, the safety profile for Praluent was very good.

So the patients were not feeling very bad on the product, which should also help with adherence.

I think it should also be pointed out that, paradoxically one should realize that there may be advantages vis-a-vis compliance with long-acting antibody drugs.

Because if you're late by a day or even a week or longer with a dose, it's not like skipping even a day or let alone a week, with one of these small molecule drugs where you completely lose your efficacy, because these of such long-acting drugs.

So I think that in terms of the biological effects and the ability, not that we would encourage it, but being late or even missing a dose, you can still retain long-term biological effect.

And I think that's -- those sorts of the effects of missing doses of short-acting drugs obviously that's been demonstrated in other fields, such as in the hypertension field and so forth.

So I think that that's something to consider is a major advantage for long-acting biologicals.

Operator, another question?

Geoff Meacham, Barclays.

Good morning, guys.

Thanks for taking the question.

It sounds like from Bob's comments in the prepared remarks that 2016 will be a big investment year.

And I know you guys aren't in a position to give guidance for next year, but I was hoping to -- maybe in broader brush strokes to get a sense, as to what some of the bigger variables were, as you look to next year?

Yes, Geoff, I think if you go back over the transcript, what Bob referred to, and what I was trying to direct you towards, is that we have a lot of investment related to the launch of Praluent.

We have investment related to the ongoing Odyssey trials, where we split 20%.

In Dupilumab, if the -- in the early part of the year -- if the Phase 3 are positive, we'll start picking up 20% of the expenses in the entire Phase 3 program for both atopic dermatitis as well as in asthma.

And also, we'll be picking up prelaunch expenses for Dupilumab.

We also have some unpartnered assets in NGF and RSV, and we also have the launch of sarilumab.

So those sorts of pipeline events, we think these are great investment opportunities, because we think of the potential -- if you think about the potential, for example of dupilumab, we think it is a very high potential product, and the rest of the pipeline has high potential.

So we have to make these investments, but clearly, we will be making them next year.

Bob, did you want to add anything?

Yes.

So just to punctuate what Len said, I mean, again it's the convergence of a lot of things, as Len kind of listed verbally, and again, what's in our transcript, all coming to a head in 2016.

And again, it's also important that we've talked about the migration of our late stage antibodies offshore.

And again, a lot of our expenses related to these things will be taken in tax jurisdictions that are going to be lower than the federal statutory tax rates.

So that will also have an impact with regards to ETR and cash tax rates.

So again, it's all of these things together, all for -- as a good story type message.

Operator, we have time for one last question.

Cory Kasimov, JPMorgan.

Hey, good morning, guys.

Thank you for squeezing me in here.

I wanted to ask more broadly on Praluent, now that you've had three months on the market, are you able to gather and share any real-world feedback on the key aspects of the Praluent's profile that is really resonating most with physicians?

Or maybe said another way, are there any early points of pushback, aside from gaining broader coverage?

Thanks a lot.

Yes, I think Bob, as he said in his talk, and what's important to emphasize is that, we have a low dose option, and that's the recommended starting dose.

And what we're seeing in our prescriptions is 90% of docs are opting for that recommended, low 75 milligram starting dose.

So we think that's resonating with physicians.

Beyond that, I think we don't have much further to say, it's too early.

Thank you, everybody, for joining.

Operator, this will be the conclusion of our call.

And again, if you have any follow questions, please email myself, Manisha, Colleen on the IR team, and we'll get back to you as soon as we can.

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

That does conclude today's period.

You may disconnect.

Have a great day, everyone.