雷傑納榮製藥 (REGN) 2017 Q1 法說會逐字稿

Welcome to the Regeneron Pharmaceuticals First Quarter 2017 Earnings Conference Call.

My name is Sylvia, and I'll be your operator for today's call.

(Operator Instructions) Please note that this conference is being recorded.

I will now turn the call over to Manisha Narasimhan.

Manisha, you may begin.

Thank you, Sylvia.

Good morning and welcome to Regeneron Pharmaceuticals First Quarter 2017 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 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 on this call today 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 Securities and Exchange Commission, or SEC, including its Form 10-Q for the quarter ended March 31, 2017, which was filed with the SEC this morning.

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

In addition, please note that GAAP and non-GAAP measures will be discussed on today's call.

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

Once our call concludes, Bob Landry and the IR team will be available to answer your questions.

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

Thanks, Manisha.

Good morning, everyone, and thank you for joining us on the call and webcast today.

The first quarter of 2017 was an eventful and significant quarter.

Dupixent, our breakthrough drug for the treatment of moderate-to-severe atopic dermatitis in adults, received regulatory approval in the United States and the launch is underway.

This marked the first of 2 anticipated FDA approvals in 2017, the second being for sarilumab, also now known as Kevzara, where we have been granted an FDA action or PDUFA date of May 22.

Before we get into the details of our quarterly performance, I want to take a moment to remind everyone of 2 important priorities at Regeneron.

At the core, we have always been a company that is driven by science and committed to bringing important new drugs to patients in need.

These priorities are directly responsible for the robust pipeline that we have today with 5 FDA-approved drugs and 16 product candidates in various stages of clinical development, all of which have come out of Regeneron Labs.

George will provide more details on pipeline progress.

As we advance as a company the commercial aspect of our business has grown in importance as well.

This year, we and our collaborator, Sanofi, are laser-focused on ensuring that the ongoing Dupixent launch is successful.

While it is too early for us to provide you with sales updates, I am pleased to share with you that about 5 weeks into the launch of Dupixent, things are going -- continuing to go well.

We are pleased with the interest and reception from both patients and physicians.

Just last week, you heard from our partner, Sanofi, that about 4 weeks into the launch, more than 2,500 prescriptions for new patience for Dupixent had been written.

I'm happy to inform you to date that over 3,500 new prescriptions have been written for Dupixent, which translates into over 900 prescriptions written in the past week.

We are also pleased with the reaction from the payers on our responsible approach to pricing to date.

We continue to work hard to ensure that eligible patients have access to the drug, and we are pleased with the coverage and utilization management criteria that have been put in place thus far.

Bob Terifay will provide additional details.

While atopic dermatitis in adults is a first indication, we are also investigating the use of Dupixent in several other indications and age groups, ranging for what we think could be a near-term opportunity in asthma to other indications such as nasal polyps and eosinophilic esophagitis.

Just today, we reported our Phase II proof-of-concept study in eosinophilic esophagitis was positive.

If we can get approval for these additional indications, we expect to be in launch mode with Dupixent for many years to come.

Maintaining our leadership position with EYLEA as the market-leading, branded anti-VEGF drug continues to be a key focus.

With our first regulatory approval in wet age-related macular degeneration, or wet AMD, the EYLEA business was initially more concentrated towards the elderly, the majority of whom are Medicare patients.

But with such approvals and indications such as diabetes macular edema, or DME; and diabetic retinopathy in DME; and retinal vein occlusion, we have diversified the patient groups where there is less reliance on Medicare.

We continue to support the ongoing launch of PRALUENT, our PCSK9 inhibitor antibody for lowering LDL cholesterol.

We expect our 18,000-patient cardiovascular outcome study to be completed towards the end of the year with data in early 2018.

On the U.S. patent litigation, we and our collaborator, Sanofi, have been granted an oral argument date of June 6, 2017, at the Court of Appeals for the Federal Circuit.

Based on this timing, we could get a decision on the appeal before the end of the year.

With that, I will now like to turn the call over to George.

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

On the call today, I would like to focus and our ongoing clinical development program for dupilumab, review some important data on the long-term use of EYLEA, share some updates on our immuno-oncology program, as well as the progress of the rest of our pipeline.

I'd like to begin with the approval of Dupixent, our IL-4/IL-13 blocker for the treatment of moderate-to-severe atopic dermatitis in adult patients whose disease is not adequately controlled with topical prescription therapies or when those therapies are not advisable.

This approval was the culmination of a scientific quest that has been decades in the making.

While Bob Terifay will address the ongoing launch of Dupixent into greater detail, I would like to focus on the progress that we are making in the clinical dupilumab in various other indications.

Asthma is an important late-stage opportunity where we are investigating the use of dupilumab.

Despite the recent approval of drugs from the IL-5 inhibitor class in what has been characterized as the allergic patient population.

We believe there is an unmet medical need for these patients for a drug that can markedly improves lung function as well as provide further protection against exacerbations.

In addition, there is a need for drugs that'll show efficacy in a wider patient population across all allergic classifications.

Based on results from our Phase IIb pivotal study in asthma, where we showed robust improvements in both lung function, as measured by FEV1, and reductions in exacerbations in all patients regardless of their allergic classification, we believe that dupilumab has the potential, if approved, to fill these needs.

Our second pivotal study in the adult asthma indication, the LIBERTY ASTHMA QUEST study, in patients with uncontrolled persistent asthma, is fully enrolled, and we continue to expect top line data later this year.

We believe these data have the potential to confirm the broad efficacy we observed in the first pivotal study.

If these data are positive, we expect to complete a regulatory submission in the United States in the fourth quarter of this year.

We also recently started enrolling patients in the Phase III study of dupilumab in pediatric asthma patients between the ages of 6 and 11 years in the second quarter of 2017.

We're also evaluating dupilumab in pediatric atopic dermatitis, where there is a high unmet need and we were, again, granted breakthrough status by the FDA.

Positive data from the open label Phase IIa trial in patients 6 to 17 years old with moderate-to-severe atopic dermatitis were recently presented at the American Academy of Dermatology Conference in March.

The safety and efficacy data from this trial were very encouraging.

We have initiated a Phase III study of dupilumab in adolescents between the ages of 12 to 17.

We expect to initiate, in the second quarter of 2017, a second Phase III trial in pediatric patients between the ages of 6 and 11 years.

We're also investigating dupilumab in a third clinical setting, which is the treatment of patients with nasal polyps.

Following up on earlier positive data from our Phase II study in this population, we now have 2 separate Phase III studies that are currently enrolling patients.

As Len mentioned, we recently obtained positive results in a Phase II proof-of-concept study of dupilumab in our fourth important clinical setting, which is in patients with active moderate-to-severe eosinophilic esophagitis, a chronic inflammation of the esophagus and one of the major causes of dysphagia, or difficulty in swallowing.

In this Phase II study, we observed clinically meaningful efficacy for dupilumab as well as profound histologic and endoscopic improvement, together with the safety profile consistent with our previous clinical experience.

Detailed data from this study will be presented in an upcoming medical conference.

While eosinophilic esophagitis can be debilitating in adults, it is especially concerning in the pediatric population, where it can be a cause a failure to thrive, and this could potentially be an area of future clinical investigation to dupilumab.

It is believed that eosinophilic esophagitis can be a manifestation of food allergies, further supporting the rationale of exploring the efficacy of dupilumab in patients suffering from severe specific food allergies.

In the second half of 2017, we intend to initiate a Phase II study of dupilumab in patients with specific food allergy.

The positive data for dupilumab across the 4 allergic or atopic conditions we have investigated to date, that is atopic dermatitis; asthma; nasal polyps; and now, eosinophilic esophagitis; is consistent with our long-standing hypotheses that this allergic condition -- that these allergic conditions reflect the same fundamental disease process, triggered by overactivity of the IL-4/IL-13 (inaudible).

This unifying hypothesis suggest that the differences between these conditions largely reflect how overactivity of the IL-4/IL-13 pathway manifests differently in different tissues.

For example, overactivity of IL-4 and IL-13 in the skin triggers atopic dermatitis; in the lower air way, it results in asthma; in the upper G.I. tract, it results in eosinophilic esophagitis.

Unfortunate for many patients, IL-4/IL-13-driven allergies can manifest in multiple sites at the same time.

Since dupilumab inhibits the key driver of this pathway in all these settings, we believe that it can represent a mechanism-based approach to treat the root cause of these allergic conditions rather than each individual indication on a separate basis.

This represents a fundamentally new way to think of root and treat diseases previously and otherwise thought of as disparate and requiring distinct therapy.

That is, mechanism-based treatment directed not by a diseased organ-specific manifestations by the -- but by the disease's fundamental cause and mechanism.

We're also encouraged by the safety profile that we have observed thus far for dupilumab in these settings.

I'd like to remind you that the current regulatory framework does not allow for mechanism-based approach of treatment but rather an indication-based approach.

We are very interested in discussing this type of mechanism-based approach for treating allergic or atopic disease with the regulatory authorities while we continue to pursue more conventional approval strategies.

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

As Len mentioned, we anticipate a regulatory decision in the United States, where we've been granted an FDA action date of May 22.

In April of 2017, the European Medicines Agency's Committee for Medicinal Products for Human Use, or CHMP, adopted a positive opinion for Kevzara for the treatment of moderate-to-severe RA in adults.

We expect the potential approval in Europe for Kevzara in the second quarter of 2017.

We have also made regulatory submissions for Kevzara in Japan.

Beyond RA, we are currently enrolling patients to the Phase II clinical study of sarilumab for the treatment of polyarticular-course juvenile idiopathic arthritis.

We're also considering and investigating the use of sarilumab in other indications.

Turning to our other late-stage programs, I'd like to begin with EYLEA.

As Len mentioned, we are committed to maintaining our leadership position in bringing important advances to patients with the retinal diseases.

To that end, we are conducting 2 Phase II studies of EYLEA in combination with nesvacumab, our antibody to ANG2, one in diabetic macular edema, our DME; and another in neovascular age-related macular degeneration, or wet AMD.

Both studies are fully enrolled and we will evaluate efficacy and safety at 36 weeks, which we expect in the second half of this year.

In addition, we are also investing in EYLEA as a monotherapy and a Phase III study in patients with nonproliferative diabetic retinopathy without diabetic macular edema.

This study, called Panorama, continues to enroll patients.

I'd like to spend a few moments focusing on findings from long-term follow-up of our Phase III VIEW 1 study of EYLEA in patients with wet AMD, which we recently published on Ophthalmology Retina.

As background, existing long-term data with other anti-VEGF agents, most notably from the government-sponsored [CAT] study, has shown that early visual gains obtained with anti-VEGF agents were not maintained over time.

In fact, by the fifth year patients had lost, on average, over 3 letters compared to their original baseline.

Over 20% of patients have progressed to become legally blind by year 5. It had been postulated that this loss of vision is due to inexorable progression of the disease process itself over time, even in the face of anti-VEGF treatment.

Others had raised the theory that the anti-VEGF agents themselves contribute to geographic atrophy attribute over time, and thus, to the subsequent visual loss.

In marked contrast to the CAT study, long-term follow-up data from the VIEW 1 study, where patients were treated with fixed-interval EYLEA dosing and received EYLEA, on average, every 12 weeks in year 2 and every 8 weeks in year 3 and 4, show that the vision gains observed at the end of the first year were, on average, largely maintained at 4 years.

These long-term results provide the first evidence that long-term treatment with anti-VEGF agents can maintain vision gains in patients with wet AMD.

We think this is our very important findings for the field.

These data support our long-standing view that regular, fixed-interval dosing regimens result in substantially better visual outcomes compared to PRN or treat-and-extend dosing regimens, which, over time, result in suboptimal visual acuity benefits and even in substantial visual loss.

We think this is probably true regardless of the anti-VEGF agent being utilized.

Although we saw that more than -- about 50% of the patients in the second year exploratory-treatment phase of our long-term trial received fix quarterly treatment and maintained their vision, we are more comfortable that the every-2-month regimen is likely to maintain vision over the long term, based on larger and long-term experience.

With regards to convenience-based regimens, such as PRN and treat-and-extend approaches, we think they are lacking in convincing in long-term evidence for their ability to maintain vision over the long term.

With regards to this point, we think that doctors should be strongly cautioning their patients that choosing convenience-based dosing has a high risk of causing permanent vision loss for their patients.

We think it is important that retinal specialists and public health officials begin to recognize the potential public health crisis that may be resulting from irregular dosing regimens that do not follow the FDA-recommended usage guidelines, and that the loss of vision that these protocols may be causing may be needlessly occurring in thousands of patients, leaving many irrevocably legally blind.

Moving on to PRALUENT, our PCSK9 inhibitor antibody for lowering LDL cholesterol.

We are pleased to announce that PRALUENT was recently approved in the 300-milligram, once-monthly dosing regimen.

We expect to report top line data from the 18,000 patient ODYSSEY OUTCOMES study in the first quarter of 2018.

Positive outcome data reported with PCSK9 inhibitors further support the hypothesis that lowering LDL cholesterol with the PCSK9 inhibitor can reduce cardiovascular risk.

We look forward to sharing data from our study in early 2018.

In addition to our efforts with PRALUENT in cardiovascular disease, we are also developing evinacumab, our antibody or ANGPTL3, for the treatment of homozygous familial hypercholesterolemia, or homozygous FH.

In March of 2017, we announced that the FDA granted evinacumab breakthrough designation status.

Just a few weeks ago, we presented a positive data from a Phase II proof-of-concept study of evinacumab in patients with homozygous FH.

These data showed that patients, who normally don't respond well to statins or to PCSK9, experienced an average reduction of 50% in their LDL cholesterol following 2 subcutaneous injections of evinacumab, with an acceptable safety profile.

Our immuno-oncology portfolio continues to progress.

Our potentially pivotal study of Regeneron 2810, our PD-1 antibody, continues to enroll patients in the cutaneous squamous cell carcinoma study.

We look forward to presenting data from our expansion in arm in cutaneous squamous cell carcinoma patients from our Phase I trial at an oral abstract session at the American Society of Clinical Oncology, or ASCO, in June.

We also expect to initiate clinical studies in non-small cell lung cancer and basal cell carcinoma in 2017.

Our second checkpoint inhibitor, Regeneron 3767, an antibody LAG3, is also currently in clinical development, where we are studying it both in the monotherapy setting and in combination with our PD-1 antibody.

As a reminder, we expect additional I-O targets to enter development over the next several years.

Additionally, our bispecific CD20xCD3 antibody is also currently being studied in the clinic, as both a monotherapy and in combination with our PD-1 antibody.

Determining the optimal dosage levels of these therapies that are activating the immune system is very important, as witnessed by some of the toxicities demonstrated in other drug classes such as the CAR-Ts.

While the process been slow, we believe we are nearing dose selection.

Also in late-stage development is suptavumab, also known as Regeneron 2222, which is an antibody in development for respiratory syncytial virus, or RSV.

Our Phase III study has finished enrolling patients, and we expect to report top line data from this study in the second half of the year.

We are also advancing our Phase III program for fasinumab, our Nerve Growth Factor antibody for pain.

Development in other parts of our early-stage pipeline continues to advance.

Regeneron 2477, our Activin A antibody, is in clinical development for the treatment of the rare disease, fibrodysplasia ossificans progressiva, or FOP.

We expect to begin a Phase II trial on this indication in the second half of 2017.

We are also studying Regeneron 2477 in combination with trevogrumab, our antibody GDF8, in a Phase I trial, which is fully enrolled.

Finally, we also initiated a Phase I multiple ascending dose trial in asthma with Regeneron 3500, our antibody of interleukin-33 for inflammatory diseases in the first quarter of 2017.

I think it's important to remind you that all of these programs and all the antibodies in our pipeline are entirely developed and discovered in-house.

Before I turn the call over to Bob, I want to take a moment to share my excitement about the first group of Regeneron Science Talent Search winners who were announced in March.

Our sponsorship of this story high school science competition underscores our commitment to fostering the next generation of scientific leaders.

After meeting these promising high school students, we feel -- are encouraged that our future is in good hands.

With that, let me turn the call over to Bob Terifay.

Thank you, George, and good morning, everyone.

First quarter 2017 U.S. net sales of EYLEA, or aflibercept, were $854 million versus $781 million in the first quarter of 2016.

This represents growth of 9% year-over-year.

Ex U.S. net sales of EYLEA were $484 million compared to $419 million in the first quarter of 2016.

This represents growth of 16% year-over-year.

EYLEA is approved in approximately 100 countries for the treatment of wet AMD and DME.

EYLEA continues to be the market-leading product among FDA-approved anti-VEGF agents for all of its approved indications in the United States.

U.S. EYLEA net sales in the first quarter were impacted by a slight decrease in distributor or inventory as well as an increase in the gross to net margin, which Bob Landry will discuss in more detail.

Based on qualitative market research survey we conducted in the first quarter, EYLEA market share remained consistent at approximately 66% of the FDA-approved anti-VEGF market.

Also based on this survey, FDA-approved anti-VEGF therapies account for approximately 56% of the overall anti-VEGF market.

In terms of treatment regimens, as George noted, the variable-interval dosing regimens that are often used in the treatment of retinal diseases with the anti-VEGF agents can contribute to inadequate vision improvements, and we believe are not optimal for long-term maintenance of visual acuity.

We are focused on educating retinal physicians and their patients on the benefits of using dosing regimens supported by evidence-based medicine and approved by the FDA.

The recent approval and launch of Dupixent, or dupilumab, in the United States is the beginning of a new chapter for Regeneron.

Dupixent was approved for the treatment of adults with moderate-to-severe atopic dermatitis at the end of March.

As Len mentioned, the drug is commercially available to patients.

Our field force is engaged with and educating the 7,000 or so targeted dermatologists, allergist and immunologists in the United States.

The targeted patient population consist of roughly 300,000 patients with moderate-to-severe atopic dermatitis who have the greatest need.

These are the patients who've exhausted all approved therapies and have failed or unable to tolerate unapproved use of immunosuppressants.

Though it's quite early in the launch, we're pleased with what we have seen so far, and I'd like to share with you some of the details of the ongoing launch.

Firstly, we believe that the importance of good market access cannot be underestimated.

To that end, we were very thoughtful about pricing Dupixent following multiple discussions with key stakeholders.

Our goal for access is that utilization management criteria reflect good medical practice, which means that Dupixent should be prescribed by specialists such as dermatologist, allergist, and immunologists, to patients with moderate-to-severe atopic dermatitis who have not responded to maximal topical corticosteroids.

We do not believe that requiring patients to take potentially toxic, off-label systemic immunosuppressants is appropriate now that Dupixent is approved and available.

Two of the largest pharmacy benefits managers, or PBMs, have provided coverage right from the beginning.

Coverage at these 2 PBMs account for approximately 25% of lives in commercial plans in the United States.

We've been actually -- actively engaged with additional payers.

And based on these conversations, we believe are well positioned to receive broad coverage by the end of the year.

We hope that these decisions will come early, since eligible patients have been waiting for a long time for a new treatment for this debilitating disease.

To date, we estimate that over 1,800 physicians across all 50 states have already written a Dupixent prescription.

There have been over 3,500 prescriptions for new patients written for Dupixent as of today.

I would like to remind you that this number only represents the prescriptions written by physicians.

It is not a reflection of the number of prescriptions that have been dispensed.

Writing of prescriptions starts the coverage approval process.

We estimate that the coverage decision should take several weeks, so it's too early for us to predict how many of these prescriptions will ultimately be approved for insurance coverage and dispensed.

However, the early signs are encouraging, and we look forward to updating you during the second quarter.

Outside of the United States, to remind everyone, in the fourth quarter of 2016, we filed a marketing authorization application, or MAA, for Dupixent and hope to have European approval by year-end.

Turning out to Kevzara, or sarilumab, our IL-6 receptor antibody for the treatment of rheumatoid arthritis.

We've been granted an FDA action date of May 22.

We'll be copromoting Kevzara in the United States.

Our sales force is on board and is preparing for the anticipated launch.

In Europe, Kevzara has received a positive opinion from the CHMP.

And our collaborator, Sanofi-Genzyme, is gearing up for a potential launch in Europe later this year as well.

Turning now to PRALUENT, or alirocumab.

As reported by Sanofi, net sales in the first quarter were $36 million worldwide, with the U.S. accounting for $25 million of the total.

I would like to note that there was an impact in the marketplace from the injunction ruling against this in the first quarter of 2017, which was eventually stayed pending appeal.

We are pleased to announce that PRALUENT was recently approved in a 300-milligram, once-monthly dosing regimen.

We continue to be disappointed by the uptake of the PCSK9 inhibitor class, but remain optimistic, given the recent positive OUTCOMES data for this class.

And our own OUTCOMES data are expected in early 2018, which, if positive, could have an impact on demand.

We remain committed to our efforts to improve PRALUENT access and bring this important product to more patients who can benefit.

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

Thanks, Bob, and good morning, everyone.

During today's call, I'll discuss our first quarter 2017 financial performance and highlight changes to a few of our full year 2017 guidance line items.

In the first quarter of 2017, we earned $2.92 per diluted share from non-GAAP net income of $337 million.

This represents a year-over-year increase in non-GAAP diluted EPS in net income of 22% and 23% respectively.

I'd like to remind everyone that these growth numbers are based upon revised first quarter 2016 non-GAAP net income and EPS results, relating to the company's adoption of Accounting Standard Update 2016-09 in the second quarter of 2016.

This accounting standard requires companies to recognize excess tax benefits in connection with employee exercises of stock options in the income statement.

You can access these revised numbers and further information in our Form 10-Q, filed earlier this morning.

Regeneron's first quarter 2016 and 2017 non-GAAP net income excludes noncash, share-based compensation expense and includes the income tax effect of non-GAAP reconciling items.

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

Total revenues in the first quarter 2017 were $1.3 billion, which represented year-over-year growth of 10% over the first quarter of 2016.

Net product sales were $858 million in the first quarter of 2017 compared to $784 million in the first quarter of 2016.

EYLEA net product sales in the United States were $854 million in the first quarter of 2017 compared to $781 million in the first quarter of 2016, which represents an increase of 9%.

For the full year 2017, we reaffirm our U.S. EYLEA net sales guidance of year-over-year single-digit percentage growth.

During the first quarter of 2017, EYLEA experienced a slight drawdown in U.S. distributor inventory levels yet remained within our normal 1- to 2-week targeted range.

Additionally, we experienced an increase in EYLEA gross to net percentage as a result of 2 factors.

First, earlier this year, we started offering a discount to all offices regardless of volume for competitive reasons; and second, there has been a small increase in the number of Medicaid patients being treated with EYLEA.

Ex U.S. EYLEA net product sales, which are recorded by our collaborator, Bayer, were $484 million in the first quarter of 2017 as compared to $419 million in the first quarter of 2016, representing a 16% increase on a reported basis.

On an operational basis or constant currency basis, sales increased approximately 19%.

In the first quarter of 2017, Regeneron recognized $175 million from our share of net profits from EYLEA sales outside the United States.

Total Bayer collaboration revenue for the first quarter of 2017 was $194 million.

Total Sanofi collaboration revenue was $210 million for the first quarter of 2017.

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

In the first quarter of 2017, our share of losses in connection with the commercialization of PRALUENT, Dupixent and Kevzara, was $108 million.

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

This loss represents increased spending related to the Dupixent and Kevzara launches, while we continue to proactively monitor and manage our investment in the global commercialization of PRALUENT.

Netted within these losses were the global sales of PRALUENT, as recognized by our partner, Sanofi, which for the first quarter of 2017, were $36 million.

The U.S. net sales of PRALUENT in the first quarter 2017 were clearly impacted from the news regarding the January 5, 2017, issuance of the permanent injunction, prohibiting the commercialization of PRALUENT in the United States, which was subsequently stayed pending appeal.

In the first quarter 2017, Other revenue increased significantly as compared to the first quarter of 2016.

This increase was primarily due to reimbursements of research and development costs in connection with our collaboration agreement with Teva, which was entered into in September 2016.

You can find a summary of the components of Other revenue in the MD&A section of our 10-K -- 10-Q.

Turning now to expenses.

Non-GAAP R&D expenses were $434 million for the first quarter of 2017.

Our non-GAAP unreimbursed R&D expense, which is calculated as the total non-GAAP R&D expense less R&D reimbursement from our collaborators, was $189 million in the first quarter of 2017.

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

For 2017, we'd like to reiterate our previously provided guidance to non-GAAP unreimbursed R&D to be in the range of $950 million to $1.025 billion.

Non-GAAP SG&A expense was $243 million for the first quarter of 2017.

We are tightening and lowering our full year 2017 guidance for non-GAAP SG&A to $1.14 billion to $1.2 billion from our previous guidance range of $1.175 billion to $1.25 billion.

Sanofi reimbursement of Regeneron commercialization-related expenses, a line item found within Sanofi collaboration revenue, was $74 million for the first quarter of 2017.

We are lowering and tightening our full year 2017 guidance of Sanofi reimbursement of Regeneron commercialization-related expenses to be in the range of $385 million to $425 million from $400 million to $450 million.

Before shifting to taxes, I would also like to note that operating costs related to our Limerick manufacturing facility that have not been capitalized were recognized in cost of goods sold, and therefore, had a negative impact on our first quarter 2017 gross margin as compared to the third and fourth quarters of 2016.

Turning now to taxes.

Our effective tax rate for the first quarter 2017 was approximately 42% as compared to approximately 45% for the first quarter 2016, which as stated earlier, has been revised for the impact of the adoption of ASU 2016-09.

For the full year 2017, we continue to guide our effective tax rate to be in the range of 32% to 38%.

This guidance includes an estimate of the full year tax benefit associated with stock-based compensation.

As stated on previous calls, there will be volatility in our effective tax rate quarter-to-quarter, since the tax benefits of stock-based compensation can only be included based on actual exercises in the quarter.

We expect the majority of our stock-based compensation tax benefits to be recognized in the latter part of the year, as we have a large number of stock options that vest or expire in the fourth quarter.

From a cash flow and balance sheet perspective, we ended the first quarter of 2017 with cash and marketable securities of $2.3 billion.

Our capital expenditures for the first quarter of 2017 were $50 million.

We are tightening and lowering our full year 2017 capital expenditures guidance to be in the range of $300 million to $350 million from our previous guidance range of $375 million to $425 million.

We note that this represents a significantly lower capital spend in the previous 2 years, as we are nearing completion of a few major capital projects, including our drug substance manufacturing facility in Limerick, Ireland.

Also, we finalized the refinancing related to our Tarrytown headquarters in March 2017.

Further details can be found on our website in the 8-K, filed in association with this transaction, or in our most recent 10-Q that was filed earlier this morning.

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

Thank you, Bob.

Sylvia, we'd now like to open the line for Q&A.

In the interest of time, we'd like to request that you limit yourself to 1 question.

We will be available in the office after the call for a follow-up Q&A.

(Operator Instructions) And our first question comes from Geoff Porges from Leerink Partners.

Len, don't take this the wrong way, but congratulations on the cash flow and on filing the Q, the account.

I wanted to ask you, George, just a few questions, related questions on the pipeline.

Looking through the Q this morning, there's no mention of your C5 antibody nor of your CD3 bispecific.

Could you just comment on the status of those programs?

And then on the ODYSSEY OUTCOMES study, given the timing that you provided to us, can you give us a sense of what you estimate the median duration of exposure will be in the study?

And what effect that might have on the likely effect size given the offset of the lower dosing that you may have with some patients?

Yes.

A lot of questions in there.

First, we did actually comment on the CD20xCD3 bispecific, that it's moving along.

That basically, we've spent a lot of time, because as obviously you've all noticed that there have been concerns with similar types of agents as well as the CAR-T approaches in terms of really getting the right dose and avoiding very dangerous toxicity.

So we've been very careful about dosage selection in that program, and we're hoping very close to be to the point where we can initiate larger trials.

In terms of our C5 antibody, I don't know how much we've said publicly about it, but I guess we said that we will be in the clinic with this year.

And I'm sorry I didn't make any reference to it, that was just an oversight on my part.

In terms of our OUTCOMES study, I have to say that there are so many differences between our design and the 4-year design that I think it's almost impossible to try to model it and figure out are the results going to be substantially different.

I think that the 4-year data pretty strongly shows that its results are very consistent with the sort of benefits that one obtains in terms of cardiovascular outcomes with the proportional LDL lowering.

And that's pretty much exactly what we hope to show, that we are pretty much on the same sort of curve as the statin, and now the first results that are coming out of the PCSK9 class.

Operator, next question, please.

Our following question comes from Chris Raymond from Raymond James.

Question on Dupixent.

So according to some of our market checks, that -- looks like that the breakdown among patients by age is at roughly half are adults, you've got maybe 20% adolescents.

But then there's another maybe sort of 33% or 34% that are treated by docs today that are under 12.

I know you guys have talked about the clinical path for kids 6 to 12.

But, at least according to our data anyway, derms today have a sizable patient load under 6, and there's probably many more who haven't made their way to a derm.

So can you maybe talk about the potential to get at that market of kids under 6?

Like for example, some of our data says that maybe as much as 12% or so patient load are actually even under 2. So what's the setup, I guess, for treating kids younger?

Yes.

You are absolutely right that a lot of these allergic diseases, it's not only atopic dermatitis but eosinophilic esophagitis and so forth and so on, unfortunately afflict the very young.

There's a very deliberate process that we work with, with regulatory authorities to progress to the youngest in our population, because we all feel that we have to be very careful.

And we're working very closely with the FDA to follow along those guidelines to be able to bring this treatment down the line to the youngest of patients who really need it.

But as you said, there is a very important unmet need in these populations for all sorts of allergic diseases.

One thing just to amplify what George said is that the FDA clearly recognizes this, they had an advisory group and they, in fact, pushed us to start the younger populations even sooner than one might normally in the development program.

So I think, we get it, the agency gets it.

They've granted us, I think, breakthrough status for -- I can't remember which age group, maybe that -- Manisha do you remember?

12 to 17.

12 to 17.

So I mean, I think everybody gets it.

We've got good early data.

And as George said, we're sort of doing this logically and trying to move to where that need is.

Of course the chronicity of treatment from a commercial point of view, once you make it to adulthood and you have the disease, we should be clear that this is -- we don't view this as treating an episodic disease.

These people have disease chronically and will need chronic treatment, which may be different than children who can possibly outgrow this.

So should we see a trial then start maybe for kids under 6 at some point?

I guess that's the key question.

Yes.

You will see us moving towards younger age groups steadily.

Next question, please.

Our following question comes from Ying Huage from Bank of America Merrill Lynch.

I have one question on EYLEA.

It seems that you reported pretty strong numbers for EYLEA sales in the U.S. and relatively [probably] strong numbers for LUCENTIS.

So does that mean the market is growing at a higher rate this year?

Or are the branded medicines are taking share from off-label Avastin?

And then maybe for George, a quick question on PD-1 trial for non-small cell lung cancer.

Given all this debate around PD-L1 levels, I was wondering if you can comment how do you plan to design that trial in terms of stratification of PD-L expression levels.

And do you see any differentiation from your PD-1 and the other marketed drugs?

Okay.

So let's take that.

Ying, thanks, in 2 parts.

First, Bob can address what he thinks to market sizes overall for anti-VEGF therapy, and what the branded versus nonbranded split is, and then George can deal with your question on lung cancer and PD-1.

I think it's -- as we mentioned, the overall branded anti-VEGF market year-over-year grew by 9%, which is consistent with what we saw in our growth.

So you can assume that both products had approximately 9% growth.

We did mention that in terms of what portion of the market is the branded market, it's approximately 65%.

So...

Which hasn't really changed.

So the market itself seems to be growing, although our figures showed a slight inventory drawdown.

We don't know well enough what happened with LUCENTIS and whether there was some destocking at the end of last quarter and then restocking with their new formulation or not.

So to get more granularity on that, Ying, you'll have to pass it through Roche.

George?

Yes, about PD-1 and PD-L1 levels and so forth.

I don't think there is actually that much of a controversy.

I think that all the data shows that in most cases, higher PDL expression correlates with better responses.

The controversy, I think that you're referring to has to do with the fact that the first-line lung study from Merck with KEYTRUDA was very impressively positive, whereas the very similar population studied with the BMS drug was not.

And this did not really seem to be dependent on the PDL levels.

People are really working hard to understand why the Bristol drug showed very disappointing results in that study.

Our goal is to show that our drug is very effective in the various lung cancer indications.

And we're designing, we hope and we believe, robust studies to demonstrate that.

And we are, I believe, going to be announcing that we're going to be -- when we initiate these studies in the very, very near future.

Good.

Next question.

Our following question comes from Ronny Gal from Bernstein.

A question for Bob.

Could you contrast for us a little bit the cost of launching PRALUENT versus Kevzara and Dupixent?

Essentially, when you think about the magnitude of cost to launch those 2 drugs, how do they differ?

And second, if you think about the international operations of PRALUENT, roughly when should we expect them to break even?

Essentially, what revenue do you need internationally to breakeven on that product?

I'll talk into generalities, I'm not going to talk specifics in the financials.

But what I can say is there is a major difference between Dupixent and PRALUENT in terms of the targeted audiences.

PRALUENT is competing in hypercholesterolemia market.

That is a condition that's primarily treated by primary care physicians, but also is treated by a large group of cardiologists and lipidologists.

So in terms of the effort on PRALUENT, one has to go broad to be able to get to the large physician audience.

In terms of Dupixent, as we mentioned, in the United States, we're targeting about 7,000 specialists.

So the effort is more limited in terms of who you have to call on, and what types of support you have to give to those patients.

In terms of ex U.S., it's premature to talk about breakeven.

And just to reiterate what Bob said, I think if you do the math, we've hit about -- in the neighborhood of about 25% of the doctors we targeted have actually written a prescription, which is really pretty good at this stage of the launch.

Next question?

Our following question comes from Carter Gould from UBS.

I got one for George or Leon.

Regeneron 2222, The PR mentioned enrollment was 1,200, but I think you've been targeting 1,500-plus patients.

This impact your stat plan for the primary endpoint or change how we should be thinking about the likelihood of hitting on onetime season dosing?

And, I guess, if anyone wanted to comment on the competitiveness of this program given Sanofi's history with your program and subsequent decision to partner with Medimmune, that would be appreciated as well.

I'll comment on the latter, and George can comment on the former.

The decisions that people make aren't always the best ones.

And we love our partnership with Sanofi.

But remember they are the ones that turned back EYLEA.

So we'll see them in the marketplace, and we think we have a very good entry and we love the friendly competition with a really good partner.

Now George can get more into the specifics.

Well, as you know, the power of the study is more dependent on events rather than numbers of patients that actually enrolled.

We feel, though there's always concerns, we feel that we're adequately powered and we're hoping that the study will meet its expectations.

Operator, next question, please.

Our following question comes from Terence Flynn from Goldman Sachs.

Maybe, George, I was intrigued by your comments on the long-term EYLEA VIEW data and the importance of adhering to the approved dosing interval.

Do you think that proposition would also apply to Novartis' RTH?

Recognizing we don't have the Phase III data yet, but as you think about what they're trying to accomplish with their drug, maybe help us think about the longer-term -- importance of longer-term data.

Yes.

I think it will be a very long time before one has the long-term data with a new agent to be able to say whether or not they could possibly not only cause initial visual gains but maintain them, which is, I think, is more important over the 4- or 5-year time intervals.

Right now, we have the only such study that shows that and the only such data.

I think that the field has been going in the wrong direction, focusing on convenience, okay?

As opposed to focusing on vision.

We all know, we all cherish our vision.

There is nothing more important than maintaining our vision.

And we think that there's been an over focus on convenience as opposed to on bringing back -- these drugs have the ability to give back vision.

And we have now shown that there's at least 1 drug with 1 regimen or -- an assorted regimen that has the ability to maintain this over the long-term.

And I think that we all have to focus on that and less on trying to save an injection or 2 per year, which is at most, what all of these nonmedicine-based approaches have been doing.

I think this is really important for the field, and we hope, as Bob says, that doctors can be educated about this and stop experimenting on their patients and instead follow the FDA guidelines.

Operator, next question, please.

Our next question comes from Alethia Young from Credit Suisse.

I just had one on EoE.

Can you talk maybe about the potential market size and thoughts on endpoints?

I know there's been some conversations in public domains around the FDA discussing end points.

So in terms of market size, this is very difficult to ascertain.

We know that the market size "is increasing." What we don't know whether that's because there's more patients being diagnosed or it's just tracking the general increase in allergic diseases.

So we remind you that there is a strong set of evidence to indicate that eosinophilic esophagitis can be a manifestation of food allergy.

And so as an allergy, we're seeing lots of these increase.

The actual numbers, we just don't feel we have a good handle on the number of patients.

If Bob wants to give a shot at it, that would be great.

In terms of end points, we saw clear results on -- as George mentioned, both on the patient-reported outcomes as well as the hard and atomic.

In some cases in the past for example, an ulcer disease or erosive esophagitis, and FDA has used end points such as healing actually by endoscopy measured.

We have not had a conversation yet with the Agency about these data.

They're very new to us.

So we will do that and then sort of let you know what it's going to take for -- from an approval perspective.

Bob, you have a comment on this some more?

Yes.

Well, I think Len really nailed the situation with EoE.

It is a disease that has generally been under diagnosed.

The current estimate in the U.S., among adults, is somewhere between 100,000 and 200,000.

But the true instance could be higher based on under diagnosis.

Next question, please.

Our next question comes from Cory Kasimov from JPMorgan.

I wanted to ask on Dupi as well and kind of how you're thinking about the dynamics of a bolus of severe atopic dermatitis patients for Dupixent as we see these early trends and think about the launch going forward.

A thousand scripts written per week is obviously quite an encouraging number, but one obviously we can't expect to go up forever.

So how much pent-up demand do you see out there now that you are in the field?

That's also a very difficult question to get a hard answer on.

When you talk to some doctors, they'll tell you, well, they had a list of patients that they were going to bring in.

When you talk to other doctors, they'll tell you that they're not -- the patients are just sort of showing up and they're incident patients, which they're constantly seeing in their practice and that patients are aware of their product and wanted to discuss it with their doctors.

How long this goes on?

Well, I don't know.

And we don't have enough information to see what the trends are.

Have we peaked because of a bolus?

Are we increasing still?

Are we decreasing?

Really too early to tell you.

We do know that we're focusing on in the 100,000 to 200,000 patient range who are the most difficult to treat.

I think with any new drug class, some of it is also going to be dependent upon the doctors' reaction.

The great data that I think we have in our label encourages doctors to try the product.

But it will take individual experience and successes with individual patients for them to continue to use it.

And so far, we even have heard some early anecdotes on that line as well.

So bottom line is, we just don't have enough information to guide you.

We'd like to know ourselves.

And I think anybody's guess at this point is as good as anybody else.

I think Len makes an important point.

There are patients in need of this important therapy.

And our job beyond this initial bolus is really to educate physicians and patients on the fact that there is now something that could help these patients.

We do want to reach out and we'll reach out appropriately, because -- to patients directly, because we believe, as Bob was just suggesting, that there are patients who have dropped out of the medical system because they've been to so many different doctors with so many different regimens and nothing has helped them.

That making them aware that there is something new is an important part of our effort.

Next question.

Operator in the (inaudible), we have one last question.

After that, we will be in our office to take additional follow-up question.

And our apologies to those who are in queue and who didn't get a chance to ask their questions.

Our next question comes from Hartaj Singh from Oppenheimer.

We just noticed, actually a slightly different take just on your operating expenditures.

You've managed your P&L very well this quarter.

It looks like on just a straight run rate into the end of the year, you would actually come below your guidance.

And with just 110 million shares outstanding, that's not trivial.

Just any thoughts on the progression of operating expenditures and how you're thinking of managing it with the Kevzara launch and all the other activities?

Yes.

No, thanks for the question.

You're right, in terms of the guidance that we've set for the full year and where we are for the first quarter.

As you can imagine, we do, obviously, spend a lot of time and effort in terms of forecasting where we're going to come out in a bi-quarter basis.

And the quarters are not always consistent.

We are going to be in kind of full bloom in the second quarter, when we get, hopefully, our PDUFA approval with Kevzara, and we'll have our full strength out there in the marketplace.

And again, we do expect higher expenditures with regards to SG&A and with unreimbursed R&D in the second half of 2017.

Thank you, operator.

That concludes our call today.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may now disconnect.