雷傑納榮製藥 (REGN) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Regeneron Pharmaceuticals Q4 2015 earnings conference call.

(Operator Instructions)

As a reminder, today's conference is being recorded.

I would like to introduce your host for this conference call, Dr. Michael Aberman, Senior Vice President of Strategy and Investor Relations.

You may begin, sir.

Thank you very much.

Good morning, everybody, and welcome to Regeneron Pharmaceuticals' fourth-quarter and year-end 2015 conference call.

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

Joining me on the call today are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; George Yancopoulos, Founding Scientist, President of Regeneron Laboratories, and Chief Scientific Officer; Bob Terifay, Executive Vice President, Commercial; and Bob Landry, Chief Financial Officer.

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

I would also like to remind you that remarks made in 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 businesses, 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 Securities and Exchange Commission, or SEC, including its Form 10-Q for the quarter ended September 30, 2015, and Form 10-K for the year ended December 31, 2015, which is expected to be filed with the SEC later this morning.

Regeneron does not undertake any obligation to update publicly any forward-looking statements, 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, our CFO, Bob Landry, and the IR team will be available to answer further questions.

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

Thanks, Michael.

Very good morning to everyone who has joined us on the call and webcast today.

2015 was another successful and productive year for Regeneron.

EYLEA delivered impressive global growth and we received approval for and launched Praluent, which is indicated in the US as an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with heterozygous familial hypercholesterolemia or clinical atherosclerotic cardiovascular disease who require additional lowering of LDL cholesterol.

We made significant advances in our late-stage pipeline, submitting a biologic license application, or BLA, for sarilumab in rheumatoid arthritis and advancing Phase 3 clinical development for dupilumab in atopic dermatitis and asthma.

In 2015, we also advanced two new antibodies into Phase 3: Regeneron2222 for the prevention of respiratory syncytial virus, or RSV, infection in infants; and our anti-NGF antibody for osteoarthritis pain.

We also advanced our early-stage pipeline with progress across multiple therapeutic areas, including retinal diseases, cancer, infectious diseases, and cardiovascular diseases.

Turning to EYLEA performance.

EYLEA is now the market-leading branded anti-VEGF therapy for retinal disease in the United States and continued to exhibit strong growth, both in the US and worldwide.

We saw approximately 54% growth year over year in the US, with sales of $2.68 billion.

On a worldwide basis, EYLEA sales were approximately $4.1 billion for the full year.

For the full-year 2016, we estimate US EYLEA net sales to grow approximately 20% over full-year 2015 US net sales.

We are focused on maintaining our leadership in the retinal space.

We are continuing clinical development with EYLEA where we have ongoing combination programs with PDGF and with ANG-2 and are pursuing important additional indications for EYLEA that George will review later in the call.

Turning now to Praluent, we're proud to have brought the first PCSK9 inhibitor to the market in the United States for patients with uncontrolled LDL cholesterol, which was approved and launched in July of last year.

We are still in the early stages of this launch and have been working diligently to provide broad access to eligible patients and educating physicians and patients in order to increase adoption.

Bob Terifay will provide some additional metrics on how the launch is progressing.

Our mission in Regeneron for 25-plus years has been to consistently and repeatedly bring important new medicines to patients in need.

And we feel that we are well positioned to deliver on this mission with our innovative pipeline.

Building on last year's approval of Praluent, we anticipate at least one approval each year for the coming years.

In 2016, we anticipate the approval of sarilumab for the treatment of rheumatoid arthritis.

Our breakthrough product, dupilumab in atopic dermatitis, is progressing, and we expect to report top-line Phase 3 data and submit a BLA in the US during this year.

Beyond dupilumab, we have a rapidly developing late- and early-stage pipeline that now consists of 13 product candidates that were all discovered by the scientists at Regeneron, and we expect to put additional new candidates into the clinic this year.

George will provide some perspective on this during his remarks.

In summary, we are in the midst of a very exciting time at Regeneron, with many important events anticipated in 2016.

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.

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

As Len said, 2015 was a very successful and exciting year for R&D at Regeneron.

I would like to begin with EYLEA.

Diabetic retinopathy is the most common cause of vision loss in patients with diabetes and is a result of microvascular damage to the blood vessels in the retina.

If left untreated, diabetic retinopathy can progress to profound and sometimes acute vision loss.

While EYLEA is approved to treat diabetic retinopathy in patients with diabetic macular edema, or DME, we believe that it could benefit the much broader patient population with diabetic retinopathy who do not have DME where there is no approved anti-VEGF therapy.

Therefore, in the first quarter of this year, we plan to initiate Panorama, a Phase 3 study of EYLEA in patients with non-proliferative diabetic retinopathy without diabetic macular edema.

The National Institutes of Health will also independently investigate the potential role of anti-VEGF therapy in the treatment of diabetic retinopathy.

This study, called Protocol W, will be sponsored by the Diabetic Retinopathy Clinical Research Network, or DRCR, and will compare EYLEA to sham in patients with severe non-proliferative diabetic retinopathy.

Protocol W is expected to begin in the first quarter.

Our Phase 2 study of EYLEA in combination with our PGF receptor antibody delivered as a co-formulated injection in wet age-related macular degeneration, or wet AMD, is ongoing, and we expect to see top-line data from this study by year end.

This program has been granted fast-track designation by the FDA.

Data from the Phase 1 study of EYLEA in combination with nevascumab, our Ang2 Antibody, delivered as a co-formulated injection, were presented just last week at the [Angiogenesis] Conference.

These data show that the combination of EYLEA with nevascumab was safe and well tolerated in patients with AMD and in patients with DME.

We plan to initiate Phase 2 studies that would include both these patient populations in the first half of the year.

As Len mentioned, our Praluent launch is underway, and you will hear further details from Bob Terifay on the commercial front.

Our 18,000 patient OUTCOMES trial is ongoing, and we expect the first interim analysis, which will test for futility, to occur later this year based upon 50% of the expected events from the trial.

Also, we could potentially have our second interim analysis, which occurs after 75% of the targeted primary events have accrued, by the end of this year, and this interim analysis will test for overwhelming efficacy and futility.

As we previously disclosed, the stopping rule for this efficacy analysis is a hazard ratio of 0.802 favoring Praluent, as well as consistency across subgroups and regions, positive trends for secondary endpoints, including all caused mortality, and no excess non-cardiovascular mortality.

These last points are all important, as we would not want to unblind a trial early because of efficacy in the primary endpoint at the cost of not reaching significant and important secondary influence.

In addition to the OUTCOMES trial, we plan to submit a supplemental BLA in the first half of the year for the Praluent monthly dosing regimen.

Turning now to sarilumab, our IL-6 receptor antibody for rheumatoid arthritis.

Our regulatory submission was accepted by the FDA and has been granted an action date of October 30, 2016.

The Phase 3 MONARCH trial, which is a superiority study of sarilumab mono therapy versus adalimubab, is fully enrolled and we expect top-line data from this study in the first half of 2016.

Our European regulatory submission for sarilumab is expected to be made in the second half of 2016.

I share Len's enthusiasm for dupilumab, our IL-413 pathway blocking antibody, which is currently in Phase 3 clinical studies in asthma and in adults with moderate-to-severe atopic dermatitis, where it has been granted breakthrough designation, in part because there are no FDA-approved systemic therapy for adult patients with moderate-to-severe atopic dermatitis.

We expect to report top-line data from the Phase 3 atopic dermatitis studies, SOLO 1, SOLO 2, and CHRONOS, in the first half of this year and to complete the rolling BLA submission in the second half of the year.

Our approximately 1,700-patient pivotal Phase 3 study of dupilumab in asthma is also enrolling.

We also continue to explore other indications for dupilumab, such as nasal polyps and eosinophilic esophagitis, as well as other allergic or IL-413 mediated diseases.

Our nerve growth factor antibody, or NGF Antibody, fasinumab, is another late-stage pipeline candidate.

Pain is one of the leading reasons that patients visit a doctor and osteoarthritis is one of the major sources of pain in adults, particularly older adults.

The increasing use of prescription opioids to treat pain has led to a growing epidemic of drug addiction and overdose-related fatalities, as well as other opioid-related side effects.

Blocking NGF has already shown the ability to improve pain compared to placebo or an active comparitor, such as non-steroidal anti-inflammatory drugs, or NSAIDs, in Phase 2 and Phase 3 trials.

We now have a clear path forward from the FDA and will be starting a 10,000-patient long-term treatment Phase 3 clinical study of fasinumab in the first half of the year.

We anticipate reporting data from a 16-week study in osteoarthritis pain in the first half of the year.

In our early-stage pipeline, we plan to share data from our Phase 1/2 studies of evanacumab, our antibody to ANG PTL-3 for dyslipidemia, in the first half, as well as data from our ongoing immuno-oncology programs, such as our PD-1 program and the CD20 by CD3 bi-specific program.

We have obviously been very busy and productive.

In fact, this year, we expect to submit a record number of INDs, and we look forward to sharing more details with you as these programs move into the clinic.

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

Thank you, George, and good morning, everyone.

Fourth-quarter 2015 was a productive one for Regeneron.

We continued to see strong sales growth for EYLEA, or aflibercept injection, both in the United States and the rest of the world.

We also made substantial progress in securing access and reimbursement for Praluent, or alirocumab, among US payers.

In addition, the European launch for Praluent commenced.

Starting with EYLEA.

Fourth-quarter US net sales grew 44% year over year.

Net US EYLEA sales in the fourth quarter were $746 million.

Full-year US EYLEA sales were $2.68 billion, which represented 54% year-over-year growth.

A survey of 201 US retinal specialists who evaluated their reported usage of VEGF inhibitors in the fourth quarter of 2015 indicates that 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.

Importantly, the market share of treated eyes for EYLEA in DME is roughly double that for ranibizumab and similar to that for off-label bevacizumab.

Turning now to Praluent.

As reported by Sanofi, net sales in the fourth quarter were $7 million, which understates actual physician and patient demand.

As we reminded you last quarter, we anticipated that it would take some time for commercial and government payers to conduct formulary reviews, make reimbursement coverage decisions, and begin to process patient claims.

Given these reasons, as well as strict utilization management criteria, we continue to expect a gradual uptake.

In response to potential delays in formulary and reimbursement decisions, we are offering free product to appropriate patients, consistent with our labeled indication, who are awaiting an insurance coverage decision.

This delays uptake in commercial sales reporting.

For example, much of Medicare Part D, or government-paid patients, are receiving free drug pending formulary coverage, which is expected later in the quarter.

So, performance cannot be solely judged on sales or filled prescriptions.

As a reminder, the reimbursement environment is complex and is 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 have been and are still actively engaged in discussions with payers.

There are approximately 240 million lives in the United States that have a drug benefit covered by commercial insurance or Medicare Part D plans.

Coverage decisions have already been made for approximately 90% of these lives.

However, implementation is ongoing, and we expect continued rollout of the coverage over the next several months.

Overall, for approximately 50% of the covered lives, a single PCSK9 antibody has been chosen in an exclusive or preferred position.

In these exclusive or preferred cases, we estimate that Praluent was chosen for about 60% of the lives.

The preference for Praluent was particularly evident in the Medicare Part D decisions.

In Medicare, 80% of the lives have a single PCSK9 antibody in an exclusive or preferred position.

For these exclusive or preferred Medicare Part D lives, Praluent was selected approximately 95% of the time.

We believe these Medicare coverage decisions are particularly important, because our major indication for Praluent is for patients with a history of atherosclerotic cardiovascular disease, and these patients tend to be older.

According to our estimates, about 28% of statin patients in the United States are Medicare Part D patients.

We are pleased to see that Praluent is resonating well with payers.

As plans begin to activate their coverage, we anticipate a potential uptake in prescription volume.

Importantly, almost 90% of all prescriptions processed by the hub are for our lower, 75-milligram every-other-week dose.

As a reminder, in our Phase 3 clinical studies, the vast majority of Praluent patients achieved their LDL cholesterol goals with the 75-milligram every-other-week dose.

We continue our efforts to educate both patients and physicians on the benefits of using PCSK9 inhibitor therapy.

Outside of the United States, Praluent was approved in the EU in September, with product available in several countries.

Reimbursement discussions are currently underway with several governments across Europe.

In the fourth quarter, we submitted a BLA to the US Food and Drug Administration for sarilumab, our interleuken-6, or IL-6, receptor inhibitor for rheumatoid arthritis.

We will be co-promoting sarilumab with Sanofi in the United States and are actively recruiting our field-based team.

Co-promotion decisions for other countries will be made over time.

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

We recently informed Sanofi of our intent to co-promote dupilumab in the United States.

Co-promotion decisions for other countries will be made at a later date.

Next month, we will have a significant presence at the American College -- or the American Academy of Allergy, Asthma and Immunology meeting in Los Angeles and the American Academy of Dermatology meeting in Washington, DC.

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.

Overall, we are pleased with the full-year performance Regeneron delivered in 2015.

For the full-year 2015, we earned $12.07 per diluted share from non-GAAP net income of $1.4 billion.

This represents a year-over-year growth in non-GAAP diluted EPS and net income of 21% and 19%, respectively, for the full-year 2015.

In the fourth quarter of 2015, non-GAAP net income per diluted share increased 1%, to $2.83, versus fourth quarter of 2014, and non-GAAP net income of $327 million was unchanged versus fourth quarter of 2014.

Regeneron's 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 2015; and an adjustment for income taxes.

Non-GAAP income tax expense is based upon cash income taxes 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 fourth quarter of 2015 were $1.1 billion and $4.1 billion for the full year of 2015, which represented year-over-year growth of 37% for the three months and 46% for the full year.

Net product sales were $750 million in the fourth quarter of 2015 and $2.69 billion for the full year of 2015, compared to $522 million in the fourth quarter of 2014 and $1.75 billion for the full-year 2014.

EYLEA net product sales in the United States were $746 million in the fourth quarter and $2.68 billion in 2015, compared to $518 million in the fourth quarter of 2014 and $1.74 billion for the full year of 2014, which represents an increase of 44% and 54%, respectively.

During the fourth quarter of 2015, EYLEA experienced a slight increase in US distributory inventory levels as compared to the third quarter of 2015 and, overall, a slight decrease in comparison to the fourth quarter 2014, but remained within our normal one- to two-week targeted range.

As Len mentioned earlier, our US EYLEA net sales growth guidance for full-year 2016 over 2015 is approximately 20%.

Ex-US EYLEA sales were $413 million in the fourth quarter of 2015, as compared to $297 million in the fourth quarter of 2014, representing a 39% increase on a reported basis.

Ex-US EYLEA sales for the full year 2015 were $1.41 billion, compared to $1.04 billion for 2014, representing a 36% increase on a reported basis.

On an operational basis, or a constant-currency basis, sales increased approximately 54% for the three months and 58% for the full year of 2015.

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

In the fourth quarter of 2015, Regeneron recognized $140 million from our share of net profits from EYLEA sales outside the United States and $467 million for the full year of 2015.

Total Bayer HealthCare collaboration revenue for the fourth quarter was $165 million and $580 million for the full-year 2015.

Total Sanofi collaboration revenue was $166 million for the fourth quarter and $759 million for the full-year 2015.

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

In the fourth quarter of 2015, our share of losses in connection with commercialization of antibodies, primarily Praluent, was $96 million, and for the full-year 2015 was $240 million, which can be found in Table 4 of our earnings release.

Netted within these losses were the global sales of Praluent, as recognized by our partner Sanofi, of $7 million for the fourth-quarter 2015 and $11 million for the full-year 2015.

Recall that Praluent was launched in the third quarter of 2015.

Turning now to expenses.

Non-GAAP R&D expenses were $389 million for the fourth quarter and $1.37 billion for the full-year 2015.

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 $214 million for the three months and $570 million for the full-year 2015.

We note that this comes in slightly above our 2015 non-GAAP unreimbursed R&D expense guidance of $540 million to $560 million, primarily due to higher expenditures for our NGF program.

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

For 2016, we'd like to reiterate our previously provided guidance for non-GAAP unreimbursed R&D to be in the range of $875 million to $950 million.

Our non-GAAP unreimbursed R&D spend is driven by three factors: advancing our pipeline outside of the Sanofi and Bayer collaborations, particularly our programs for NGF, RSV, and CD20 by CD3; our obligation to pay for 20% of the Phase 3 clinical development expense following the first positive Phase 3 results of our partnered antibodies, primarily driven by the potential positive dupilumab Phase 3 readout in the first half of 2016; the advancement of our immuno-oncology pipeline in collaboration with Sanofi in proprietary R&D initiatives, such as those in the area of human genomics.

Non-GAAP SG&A expenses were $213 million for the fourth quarter and $646 million for the full-year 2015.

We expect non-GAAP SG&A expense in 2016 to be in the range of $925 million and $1 billion.

The increase in our SG&A expense is primarily driven by the ongoing Praluent launch, which is entering its first full year of launch, and preparing for the potential commercial launches of both sarilumab and dupilumab.

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

Cash tax as a percentage of non-GAAP pretax net income 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.

This amount continues to be substantially lower than our GAAP effective tax rate.

On a non-GAAP basis, cash tax as a percentage of non-GAAP pretax net income for the fourth quarter of 2015 and for the 12 months ended December 31, 2015, was approximately 16% and 18%, respectively.

For 2016, our guidance for cash tax as a percentage of non-GAAP pretax income is 35% to 45%.

This includes a one-time tax of approximately $222 million related to $600 million of our December 31, 2015, deferred revenue balance remaining from the immuno-oncology upfront payment from Sanofi that we received in the third quarter of 2015.

The cash tax impact of the immuno-oncology upfront payment will be spread equally throughout the year.

Our capital expenditures for the 12 months ended December 31, 2015, were $678 million.

We expect our capital expenditures to be between $580 million and $680 million for 2016.

These expenses continue to build on the manufacturing expansions made in 2015, which include expanding our facilities in Rensselaer, New York, and Limerick, Ireland, as well as the continued expansion of our Tarrytown, New York, headquarters.

We ended the fourth quarter of 2015 with cash and marketable securities of $1.7 billion.

As we have previously mentioned, we have been opportunistically entering into agreements to reduce the number of our outstanding warrants that we issued in 2011 in connection with our convertible debt.

In the fourth quarter of 2015, we paid $50 million to reduce these outstanding warrants; and in January, 2016, we paid an additional $135 million to reduce more outstanding warrants.

We intend to continue seeking opportunities to further reduce these outstanding warrants into 2016.

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

Thanks, Bob.

Before starting the Q&A, I just want to correct quickly that the 10-K will be filed later this week, not later this morning.

With that, operator, we can start the Q&A.

(Operator Instructions)

Ying Huang, Bank of America.

Good morning, guys.

Thanks very much for the questions.

First of all, we know that Amgen's CV outcome trial will likely read out earlier than you guys.

I want to ask you about the thought on that.

So do you think that will put Praluent, potentially, at a disadvantage in the commercial market or actually you will get a ripple effect, because both drugs are in the same class of PCSK9 inhibitors.

Secondly, maybe for Bob, some investors a little concerned about the cost trend here.

So can you lay out in the outer years, for the next three, five years, what are your thoughts for the year on SG&A and also R&D cost, and also maybe some trend in long-term tax?

Thank you.

And let me just remind people, one question.

Thank you.

Go ahead, Bob.

I think on the cardiovascular outcomes trial, obviously as George pointed out, we feel it's very important that not only do we meet the primary endpoint, but that we ensure that if there are key secondary endpoints that we allow them to come to fruition so that we ensure that we have a robust out of package.

In terms of the impact of Amgen coming earlier than us, it would be speculative to really say what that means.

But we do think that Amgen having positive data will be positive for the overall class.

Ying, it's Bob.

With regards to your question on costs, certainly it's something that we take very serious about this.

As we mentioned several times in the quarters last year, we are in the midst of a sizable Praluent launch against a very formidable opponent.

And on top of that, we are in the midst of launching sarilumab in the fourth quarter of 2016, and we're also preparing for first half 2017 for dupilumab.

So for those three launches, it is putting stress on our SG&A number.

With regards to R&D, we've highlighted some drivers with regards to the increase in unreimbursed R&D, the biggest one probably being the NGF program.

As you heard from Len and George earlier, the program is full speed ahead with regards to entering Phase 3 very, very shortly.

We're also moving forward with RSV.

Now these are both unpartnered products.

And then again, we get our first positive Phase 3 readout for dupilumab in the first half of 2016.

And as you know and as we've said before, that's a driver with regards to us picking up 20% of the program costs associated with that.

So that would not only include atopic dermatitis, that would also include the asthma indication associated with that.

So all of these things associated are putting some stress on our expenses and maybe Len may have a few additional comments.

Thanks, Bob.

I would just say that if you study this industry and companies in it, nobody ever has a perfectly spaced pipeline.

The spaces are usually too wide, with lots of white space and lots of worry, what to do, where's the next drug going to come from, or very infrequently, as is the case here at Regeneron, there's a lot going on that's very compacted in time.

We, of course, would rather have the latter than the former, and that's what I think is that we're managing through.

It's an exciting time.

An approval in 2015 for Praluent; 2016, we hope, for sarilumab; 2017, the first approval for dupilumab; and beyond that, approvals for dupilumab in asthma, perhaps the NGF coming up, RSV, progress and perhaps approval down the line there, and immuno oncology.

So we have a very intensely compacted pipeline that we have to manage, both from a technical point of view, from an operational point of view, a manufacturing point of view, and of course, as Bob says, from a financial point of view.

Thank you.

Next question.

Terence Flynn, Goldman Sachs.

Thanks for taking the question.

Sorry for the background noise.

On Praluent, just wondering if you can do us additional commentary on the types of patient coming on to therapy and maybe what percentage of scripts are actually getting filled versus rejected.

Thank you.

Yes, I don't think we can get into the metrics in terms of those things, Terence, unfortunately.

It's a fairly competitive marketplace out there.

I will reemphasize some of the points, take this opportunity to reemphasize some of the points that Bob made, which is that we feel, on the contracting side, that process is starting to wind down in terms of about 90% of the lives who have either commercial or Medicare Part D coverage, decisions have been made.

They haven't been fully implemented on many of them, and in fact, the rollout is just going to keep going over the next several months and even into the second quarter of this year, some coverage won't begin.

We did particularly well in those cases where there was a exclusive or preferred decision made.

We won that business over 60% of the time.

And as Bob said, in the Medicare business, where it's a large proportion of the statin use and a large proportion of our patients, we were able, when there was an exclusive or preferred decision made, and that was 80% of the time, when there was an exclusive or preferred decision made, that went 95% of the lives went to Praluent.

So we're very pleased that our product offering is resonating well and that people, I think, are getting our message.

In terms of the patient types, as we mentioned, there are very strict utilization management criteria in the category.

So it is strictly within the labeled population, which is patients with heterozygous familial hypercholesterolemia and patients with a history of coronary disease.

So we're seeing patients who've had myocardial infarction, patients with very, very high baseline LDLC, patients who have FH.

These are the patient populations for which the product is being dispensed.

And we're hoping in the elderly population, where we did win so much of that business, that the availability of our low dose is something that will resonate well with doctors, especially as they are treating elderly people and perhaps wanting to start on a lower dose.

Next question, Michael.

Jeffrey [Figos], Leerink.

Thanks very much for taking the question.

I might go back to EYLEA, if I could.

I'm a little confused both by the quarterly result and then by your guidance.

You grew 1.5% sequentially Q3 to Q4.

You originally guided this year for 25% to 30%, and you grew 54%.

And now you're guiding for 20% next year.

If I run 1.5% sequential growth forward, it only gets to about 15% for the year.

Can you give us a sense of were there any one-time items in either Q4 or Q3, or that you're anticipating for next year, or are you just taking a cautious approach?

And how is the underlying demand trend from Q3 to Q4?

Thanks.

Right.

So no, I think, Jeff, thanks for your question, one point is that this is not driven by inventory or things like that.

Inventory increased very slightly, but within our range in the fourth quarter; and year-over-year, inventory actually decreased a little bit.

So there really wasn't -- that wasn't a driver.

When you look sequentially, you do have to be careful, there are seasonality trends.

Fourth quarter, lots of holidays; fourth and first quarter, lots of weather.

And so you know how we feel about forecasting, it's about the most imprecise scientifically unscientific activity we do here.

But it isn't a matter of guiding conservatively or aggressively or what have you, it's just trying to give you our best guess with the information we have and looking into the future, which is, of course, difficult.

Okay.

Thanks.

Next question.

Adnan Butt, RBC Capital Markets.

Thanks.

So I'll ask a question on the EYLEA combinations.

You have now seen data from both [ansto] and PDGFR.

Which one seems more compelling?

And in the past, you've shed some doubts about PDGF as a target.

Has that view changed since seeing data?

Thanks.

George can comment, but there isn't much to change our view, because the only thing we've really seen thus far is that we can deliver these products in combination and we can do that in what appears to be a safe way.

It's too early to talk about any efficacy.

But George, you have any comments on that?

Yes, similarly, I don't think our views have changed that much.

Mechanistically, the rationale, we believe, is a little stronger for the ANG-2 than the PDGF pathway.

But either way, we would, of course, be excited if in the clinic, either one of these combinations brought added benefit to patients, especially because we think that with our ability to combine these agents into a single formulation, a single injection, if there is increased benefit, we'll be able to have the most convenient delivery regimen for the patient.

Do we're only hoping for success with these combinations.

I might say on combinations, there are others who are trying to do a fixed, a by specific approach.

And I think as George has talked about this in some of his previous meetings we've had, which is that the rationale there to us seems better to be able to combine these as separate drugs in a single formulation, so you can adjust the concentration and dose of each one to an optimal level.

When you see a result with a by specific, you don't know whether or not it's got anything to do with both drugs acting or only one just acting better than the mono specific antibody or drug that you had compared it to.

So we like the approach we are using.

We like the technology.

But the data are going to determine exactly where this goes.

Next question.

Jim Birchenough, Wells Fargo.

Good morning.

It's Nick in for Jim this morning.

Can I just go back to the PD-1 inhibitor?

The trial has ballooned from 60 to now apparently 973 patients.

There is now a [quad om] of chemo, [adzi] and GMCSS.

So can you just talk a little bit about what data we're going to get from this trial and what exactly it is you're trying to show in this trail and perhaps contextualize that with what competitors are doing with their PD-1 inhibitors?

This is obviously a very large and complex trial.

Thank you.

Yes, we're not going to give out the data, but George may want to comment on what the general approach is.

The first point was just to convincingly demonstrate activity and where we think it fits compared to competitors.

Second was to get a broad idea of which settings and which indications, but also the notion of any novel combinations which could then direct us to both settings and combinations where there might be opportunities.

And I think we've said, and Michael can say exactly when, that we will be talking about some of this data in the not too distant future.

Michael, when are we going to be talking about it?

We just said later this year.

So the programs are going well.

They have obviously been enlarged, because we're pleased with the initial results that we're seeing.

And we will be sharing some of that with you at the upcoming appropriate cancer meetings.

Next question.

Christ Raymond, Raymond James.

Good morning.

This is Laura Chico in for Chris Raymond today.

I guess I'd like to go back to Jeff's question on the EYLEA guidance for a moment.

I know you mentioned seasonal and weather potential impacts in Q1, but are there any other broader headwinds we should be thinking about in 2016?

Thanks.

Yes.

So it's always hard to anticipate trends that will drive a drug, at this point.

Remember, we're in the fifth year of a launch, which is a pretty big deal to be expecting 20% year-over-year growth on a very large base.

So we see the product still growing, which is, I think, the most important, if not quantitative, it's the most important qualitative statement.

We've become the leading branded anti-VEGF in the market, and we take this franchise very seriously, as we think there are additional growth drivers.

George talked about the fact that we want to develop it in diabetic retinopathy, and he's talked about looking at it in combinations with PDGF and ANG2.

So we are still committed to developing this market, both in the United States and with our partner Bayer outside of the United States.

We should note that the growth we demonstrated in the United States here was purely volume.

We did not take any price increases.

Now from a macro sense, if there are payer changes on how things are reimbursed or things like that, what we can't say now, because there are none in place, but if things change, I think there will be more rhetoric this year during election year than actual action, but we monitor this very closely.

We think our drug is a sight saving, an important therapy, and we're going to continue to try and grow this franchise.

Great.

Next question.

Matt Roden, UBS.

Thanks for taking the questions.

This is Jeff calling in for Matt.

Regarding the Protocol C trial, when should we expect the two-year data to be presented?

And then secondly, in terms of what we might expect to see, it looks like the EYLEA acuity curve in the 20/50 or worse group is trending a bit higher as you approach the one-year mark.

So this raises the question, could the data get better versus competitors in the second year, and how would you frame the two-year data for us?

Thanks.

Yes, I don't think we can frame the two-year data, because we will just have to wait, and we expect it to come sometime in the first half of this year.

And we don't control the data, obviously.

The data is controlled by our friends at DRCR.

I will say that for us, the most important data set was at the primary endpoint and one year, where we did show superiority to the other therapies and we showed a very strong safety profile.

As you go out to the second year, when you have less patients, some dropouts and what have you, we'll have to see the data set and we'll have to look carefully at, hopefully, to show our drug continues to have a strong safety profile, as it has in all of our studies to date.

Just to build on what Len is saying, really the only valid direct comparison would be in the first year.

Because that's when the drugs were really tried side-by-side, using very similar paradigms, dosing regimens and so forth.

In the second year, things get hopelessly confabulated by the fact that the dosing regimens change, there's a lot more PRN usage, there's a lot more laser usage, and so forth.

So it's going to be very hard to deconvolute, I think, the second year data.

Thanks, guys.

Next question.

Geoff Meacham, Barclays.

Good morning, guys.

Thanks for taking the question.

So last year, with EYLEA, Protocol T obviously a big driver of DME adoption.

I wanted to see if you guys could talk qualitatively about where you think VEGF share of the overall DME market is, what you think the next leg of growth is, and maybe what a driver of that is.

Is it just more blocking and tackling in the marketplace, or are there follow-on data sets that you feel like could be more meaningful to retinal specialists?

Thanks.

So Jeff, obviously, we have seen a lot of our growth this year coming in the DME segment of the marketplace.

Unfortunately, there still are a large number of patients who have diabetes that don't get yearly dilated eye exams, don't get into the retinal specialist, and so DME is currently still under treated.

Although VEGF inhibitors are being used more broadly for patients who are diagnosed with DME, the opportunity for us is to make patients aware that they've got to get their eye exam and get into a retinal specialist if they do have any problems with their vision.

And that really is a major focus of our promotion this year.

And as George mentioned in his talk, remember, we have an indication for diabetic retinopathy in the setting of DME.

But the much broader indication of diabetic retinopathy without DME, broader terms of number of patients, is something that we would like to get added to the label.

And that's why we are conducting pivotal studies to broaden the label for that indication.

So I think it's sort of the same, Jeff, but we see growth in demographics, more patients getting older, more patients with diabetes, we see strength in potential market share, both from off-label and from coming from the off-label avastin, and perhaps from lucentis.

We see geographic growth, with more room to grow outside the United States.

Our ratio outside the United States is not as high as it is inside the United States, in terms of market share.

And finally, new indications, potentially, as I mentioned.

Just add to that, there is a lot of patient and doctor education that needs to be done.

It's still true that unfortunately, despite the data showing that anti-VEGF therapy can provide much better vision results than laser therapy, laser is still the preferred therapy in the DME population.

So there's a lot of patient education and doctor education there.

And as Len said, that's just for the approved setting DME diabetic population.

There is at least three times as many patients who have diabetic retinopathy without DME.

So if the current studies really show their results, there's an opportunity there, as well.

Thanks, guys.

Cory Kasimov, JPMorgan.

Good morning, guys.

Thanks for taking my question.

I am curious what you think is driving the impressive Medicare uptake so far for Praluent, if it's something specific to the drug's profile, such as the dosing options you mentioned, it's primarily the lower dose, or does this have more to do with pricing discounts being offered?

I'm just trying to understand the dynamics there.

Thanks a lot.

That's always hard to know, because we, of course, don't know what the other side's financial offerings are.

We only know ours.

But we believe, in all of these meetings, we spend a lot of time trying to educate the technical people with the payers about the product profile.

We do believe that the low dose, particularly in elderly patients, might be something of value for physicians to choose.

Remember, the vast majority of patients are able to get to their desired level using the lower dose.

Now whether or not the attitude of it doesn't matter how low you go and it's too complicated for doctors to be able to understand to use a low and a high dose, I think that puts not quite enough faith in doctors and my colleagues in the medical profession.

They get the difference.

And I think this may be resonating, frankly.

Next question.

Mark Schoenebaum, Evercore ISI.

Thanks, guys.

I'll follow Michael's rule of no more than seven questions.

Thank you, Mark.

Amgen has actually said that their base case at the final analysis for the CVOT trial is a risk reduction of about 25% to 35%.

So I was struck by your statement that your DSMB would consider about a 20% reduction as overwhelming efficacy.

Can you give us what your base case assumption is at the final analysis for risk reduction?

And just related, Amgen talks a lot about their IVIS trial and how they think that's very important.

To my knowledge, you guys aren't conducting one.

I'd just like to hear you speak about your decision there and your thoughts on if that data will be meaningful in the marketplace.

Thanks so much.

I guess we're not talking about a base case, we're telling you exactly what the study is actually trialed, is powered to pick up.

So that's the numbers that we're giving.

And certainly, we're looking at a variety of imaging studies and so forth.

As Bob said, we certainly realize and recognize that a lot of the outcomes data and these imaging studies and so forth, they are going to speak to the class effects.

And so we're hoping that their results will be positive, and we're also going to be looking at what studies that we can be doing in addition to our outcome studies and in terms of imaging.

It does seem, Mark, you may be one of the only people on the planet who can remember each and every outcome study with the statins and which statin that was used in the outcomes trial.

But I do think, for the most part, there is some genericization, I think.

But there will be subtle differences.

And just to emphasize what George was saying about the power, I think what Amgen is basically telling you, which is correct, which is that in previous studies, the amount of risk reduction you get is proportional to the absolute number of milligrams per deciliter that you lower LDL cholesterol.

Now of course, in their Phase 2B3 studies, and I should say, their Phase 3 non-outcome studies, as well as ours, the starting LDL cholesterol was higher, and so the overall LDL absolute reduction was a lot, and therefore, the risk reduction was a lot.

When you start out with a more modest LDL, which we're both doing in our outcomes trial, you have less LDL lowering and, on average, you should have less risk reduction, but we think a very robust result.

And we will be able to look across the various spectrums of people have this starting LDL and so on and so forth.

So we are very confident in the LDL hypothesis.

Remember, Brown and Goldstein were the first people to understand the LDL receptor on our Board of Directors.

So this is something we've been very close to for a very long time.

So we believe in the LDL hypothesis, and we believe the outcomes trial should continue to support that.

I think Len said it very well, but it was a little complicated, even for me, to understand.

I think the point is, is that the important message here from these studies, I think it's going to be more qualitative than quantitative.

As the FDA always cautions, it's impossible to compare between studies.

And that's because there are so many inherent differences, in the type of the populations, the starting LDL, whether they had recent events or whether it's more of a secondary prevention type of a setting, and so forth and so on.

So there are so many differences between the populations.

So I think one is looking more for qualitative messages here as opposed to specific quantitative differentiators.

Qualitatively, I'd like to say thank you.

(Laughter).

You're welcome, Mark.

Next question.

Quantitatively, you're welcome.

Alethia Young, Credit Suisse.

Hello, guys.

Thanks for taking my question.

Just one on dupi.

I know, I thought I saw a pediatric trial that was a small trial that was ongoing.

Just wondered if you could give us your updated thoughts on the path forward in peds for dupi, please.

Well, as you know, pediatrics patients with atopic dermatitis are a very large population of people.

And these children, many of them, suffer greatly, so we would love to see our drug program expanded to be able to treat children.

Of course, the normal way that this is done is that you wait until you have completed your Phase 3 studies in adults before moving more aggressively into children.

But after, I think, looking at our program and an advisory panel on the subject, the FDA and the advisory panel, I think, pushed us and we agreed that we should be looking, even before we had the final Phase 3 data, because the data we saw in Phase 2B were so strong.

And remember, it was designated a breakthrough therapy by the agency.

So we have moved into pediatrics.

We have a Phase 2 study that's ongoing in patients between the ages of 6 and 17, and we expect to be able to get you data from that, perhaps later this year.

And we have a Phase 3 pediatric study planned, as well.

So we see the need, we see the children who suffer and don't have good alternatives, and we would very much like to expand to be able to treat them.

Next question.

Operator?

Matthew Harrison, Morgan Stanley.

Great.

Thanks.

Good morning, everyone.

I just wanted to ask, on both the ANG2 and the PDGF follow-ons, you obviously are now going to be running two large Phase 2 studies for both of those drugs.

One will read out end of this year and the next one, I assume, some time next year.

How are you thinking about bringing both of those into Phase 3?

Will you decide on them independently or will you wait for both data sets to decide how to move them forward, and anything you can say around what kind of bar you think is relevant from an efficacy standpoint there to be able to move those forward Thanks.

Well, I think data always speaks for us and to us, and that's how we make our decisions.

So we, I think, have designed a very robust and comprehensive Phase 2 program for both of these combination approaches.

And we will make the decisions based on the data.

I think certain advantages that we would have is that if the efficacy advantage, or the interval differentiation, is sufficient, we will be able to conveniently and in a cost effective manner be providing both agents to the patients.

So we're not really limited by saying, oh well, yes, there is an advantage, but it's so modest, how do you justify a whole new biologic here?

We're in the unique position of being able to provide both agents in a very cost effective manner, regardless of what the benefit, if there is definitive, convincing additional benefit.

But it's all going to depend on the data.

I can't over emphasize what George just said, so I will repeat it, which is that when the -- some people are trying to develop add-ons as two separate injections, which really means that you must have a robust efficacy and safety profile to justify the risk, because injections in the eye -- although probably there's been no more injections than I can imagine there's been with EYLEA around the world -- but injections in the eye still carry a small, but real risk each time a physician sticks a needle in the eye without putting anything in there.

And so if you're going to have a very small benefit, two needle sticks probably won't be justified.

And as George said, the cost, we can deliver these at the same cost, if necessary, in a single injection.

So we have both the financial burden, as well as the injection burden really under our control.

So therefore, we can be driven to go to market with smaller benefits than you might have to hold yourself up to if you have to do multiple injections and add-on costs.

Operator, we have time for one last question.

Phil Nadeau, Cowen and Company.

Good morning.

Thanks for fitting in my question.

Just a question on how you think we should model Praluent's uptake through 2016.

I know in the past, you've said that it will take several quarters for sales to reflect end user demand.

Is there a point in 2016 where you think the reimbursement negotiations will be finished and sampling will begin to subside where we can begin to see end user demand reflected in sales, or is 2016 really a preparatory year for the post event study uptake of Praluent?

Just to clarify, although, as we discussed, the class currently has penetrated 90% of covered lives, many of the payers have yet to implement their insurance coverage.

So we expect to see that coverage continue to come on board over the next several months.

Once that coverage comes on board, there is going to be some time for physicians to understand what the utilization management criteria are and how to really document the prior authorization to get these patients through the entire process to get a dispensed prescription.

So I would say you're going to see very gradual uptake for several months until we get to some kind of a steady state.

Great, Operator.

With that, this concludes our call.

I want to thank everybody.

As per usual, myself, the IR team, and Bob Landry, our CFO, are available for follow-up questions, as needed, at our office.

Please let us know if you want to talk.

Thank you.

Ladies and gentlemen, this does conclude today's presentation.

You may now disconnect and have a wonderful day.