雷傑納榮製藥 (REGN) 2017 Q2 法說會逐字稿

Welcome to the Regeneron Pharmaceuticals Q2 2017 Earnings Conference Call.

My name is Jason, and I will be your operator.

(Operator Instructions) Also please note, this conference is being recorded.

I will now turn the call over to Manisha Narasimhan.

You may begin.

Thank you, Jason.

Good morning, and welcome to Regeneron Pharmaceuticals' second 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 CEO; Dr. 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 businesses, sales and expense forecasts, financial forecasts, development programs and related anticipated milestones, collaborations, finances, regulatory matters, intellectual property, pending litigation 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 June 30, 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 those measures to GAAP is available in our financial results press release, which can be accessed on our website at www.regeneron.com.

We are aware that there is some technical issues with our externally hosted website, which we hope will be resolved shortly.

Once our call concludes, 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.

Thank you, Manisha.

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

It has been an incredibly productive first half of the year for Regeneron with the launch of 2 important new medicines, and we are looking forward to continued progress in the second half of the year.

EYLEA, our flagship anti-VEGF drug for the treatment of a variety of retinal diseases, delivered strong results in both the U.S. and x U.S. markets.

In the U.S., we experienced an 11% year-over-year growth in net sales during the quarter.

We are proud that U.S. EYLEA net sales have grown steadily since our launch in 2011 without ever having taken any price increases.

This growth has been driven by new patients and new indications.

The launch of Dupixent, our breakthrough IL-4/IL-13 inhibitor for the treatment of moderate-to-severe atopic dermatitis is under way.

Though it is still early, we are happy to report that the launch continues to progress extremely well, and most important, we have been very pleased with the positive reception that Dupixent has received from patients and physicians, along with the progress we have made with payers.

In terms of the pace of the launch, we have seen a steady flow of both prescriptions written for new patients as well as prescriptions filled for new patients without any evidence of a bolus effect.

We know from patients that atopic dermatitis can have a terrible impact on their lives, so we are glad that we are hearing positive anecdotes about how patients are responding to Dupixent in a manner consistent with the effect we saw in our clinical trials program.

The teams at Regeneron and Sanofi have been working together to improve patient and physician awareness and ensure that those eligible for Dupixent are able to receive the drug.

Bob Terifay will provide detailed metrics about this exciting launch.

We are encouraged by the clinical progress that we are making with dupilumab and indications beyond atopic dermatitis.

The most advanced of these is asthma, where we expect top line Phase III data from our second pivotal trial later this quarter, with a potential U.S. regulatory submission in the fourth quarter of this year.

George will address the asthma indication in greater detail.

In May, we received approval for and launched Kevzara, our IL-6 receptor antibody for the treatment of rheumatoid arthritis in the United States.

Kevzara marks the sixth FDA approved drugs for Regeneron.

We are proud that these 6 approved drugs, along with our pipeline of 17 product candidates, have all been discovered by the scientists at Regeneron.

As you all know, it is rare for any biopharmaceutical company to bring a single drug all the way from discovery to commercialization.

To have done it 6 times is a tribute to our people and their efforts.

Regeneron-discovered drugs had over $1.5 billion in global net sales in the second quarter of 2017.

Turning now to PRALUENT.

We are awaiting the opinion of the U.S. Court of Appeals for the Federal Circuit found in the oral arguments that occurred in early June.

We continue to believe that the law and facts support our position.

Our 18,000-patient cardiovascular outcome study is ongoing, and we expect to report data from this study in early 2018.

We and our collaborator, Sanofi, are committed to optimizing the potential benefit that this important drug can bring to patients.

Our immuno-oncology programs continue to advance.

At the June Annual ASCO meeting, we presented positive clinical data from our PD-1 antibody program in cutaneous squamous cell carcinoma.

George will provide additional details on these data, as well as the progress we are making with our other immuno-oncology programs.

We are preparing for a busy second half, with multiple important data readouts and continued pipeline progress.

You'll hear more about that -- some of these programs from George.

With that, I'd like to turn the call over to George.

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

We believe Regeneron is a very different type of company in that it was founded by and is led by physicians and scientists dedicated to a science-first approach to bringing new medicines that can make important difference in patients' lives.

This commitment, supported by a talented and longstanding team of scientists and strategic investments in internal technology development, has today produced what many believe is one of the best pipelines in the industry.

And as Len mentioned, all of our approved and investigational therapies were discovered in our own labs by our own people.

I will provide a general update in our R&D progress today and highlight 2 Phase III programs for which we expect to have data readouts in the second half of this year.

These are dupilumab in asthma and Regeneron 2810, our PD-1 antibody in cutaneous squamous cell carcinoma.

I'd like to begin with one of our most exciting late-stage programs.

Dupixent, also known as dupilumab, our interleukin-4 and interleukin-13 blocker, which was approved in March by the FDA for the treatment of moderate-to-severe atopic dermatitis in adult patients whose disease is not adequately controlled with topical prescription therapy or when therapies are not advisable.

In addition to the FDA approval, we were recently granted a positive opinion by the European Medicines Agency's Committee for medicinal products for human use, or the CHMP, for the treatment of moderate-to-severe atopic dermatitis in adults who are candidates for systemic therapy.

We expect to receive EU approval in the third quarter of 2017.

In the pediatric atopic dermatitis setting, we are currently enrolling a Phase III study of dupilumab in patients 12 to 17 years of age.

In the second half of the year, we expect to initiate 2 additional studies in the younger atopic dermatitis patients, the first in children between the ages of 6 and 11 and the second children between the ages of 6 months and 5 years.

We believe that dupilumab has potential to benefit a variety of allergic or atopic conditions, and we are investigating the use of dupilumab in several of these, including asthma, eosinophilic esophagitis and nasal polyps.

Today, I'd like to focus on the potential opportunity in our most advanced indication, asthma, where we expect top line data later this quarter from our pivotal Phase III study, LIBERTY ASTHMA QUEST.

Data from our previously reported positive Phase II study are considered pivotal and will support our regular submission, which we anticipate in the fourth quarter of 2017.

The Phase III LIBERTY ASTHMA QUEST study enrolled approximately 1,800 adult and adolescent patients with persistent uncontrolled asthma.

In this study, patients were randomized to one of 2 dupilumab arms, 200 milligrams every other week or 300 milligrams every other week or placebo.

Patients who are on background therapy of medium-to-high dose inhaled corticosteroids, plus a second controller medications, such as a long-acting beta agonist or a leukotriene receptor antagonist.

The study has 2 primary endpoints.

The annualized rate of asthma attacks or exacerbations over the 52-week treatment period and the absolute change from baseline in FEV1 at week 12, a measure of lung function, both of which will be assessed in the overall patient population.

I'd like to remind you of data from our previously reported positive Phase IIb study, which was conducted in a patient population similar to the one we are studying in Phase III.

This Phase IIb study randomized 769 patients with moderate-to-severe asthma who are uncontrolled despite treatment with inhaled corticosteroids and long-acting beta agonist.

The results from this study demonstrate that dupilumab administered at 200 milligrams every other week or 300 milligrams every other week, in combination with standard of care therapy, demonstrated a significant 12% to 15% improvement in FEV1 at week 12 over the standard of care alone, as well as a significant 64% to 75% reduction in exacerbations over standard of care alone.

Importantly, these positive responses were seen in both the patient population with high blood eosinophils believed to be a marker of the allergic disease patients, as well as the overall study population.

The most common adverse event in the study was injection site reaction, which was more frequent in the dupilumab dose group at 13% to 25% compared to 12% in the placebo group.

The incidence of infections was balanced across treatment groups, as was the incidence of serious adverse events.

We believe that if the Phase III LIBERTY ASTHMA QUEST data demonstrate efficacy, both in terms of reduction and exacerbations and an improvement in lung function in all comers, including the subset of patients with high eosinophil count, as well as the subset of patients with low eosinophil counts, it will be an important differentiating factor.

No approved biologic has demonstrated robust improvement in lung function, as well as profound reduction in exacerbations in the overall asthma population, including both these important subsets of patients.

In addition to the LIBERTY ASTHMA QUEST study, we are also conducting another Phase III study, LIBERTY ASTHMA VENTURE, which is designed to determine the efficacy and safety of dupilumab, while reducing the use of oral corticosteroids in patients with severe oral steroid-dependent asthma.

Top line results from this study will be reported by the end of 2017, and are anticipated to be part of our regulatory submission.

We are also investigating the use of dupilumab in younger patients with asthma with an ongoing Phase III study in children ages 6 to 11 years old.

Turning now to other potential and important indications where we are investigating dupilumab.

We currently have 2 Phase III studies ongoing in patients with nasal polyps.

We're also planning a Phase III study in patients with eosinophilic esophagitis, following recent positive results from a Phase II proof-of-concept study.

These results will be presented in detail at an upcoming medical conference.

We're also planning studies of dupilumab in patients with food allergies.

According to data from the Centers for Disease Control, or the CDC, allergic diseases are the sixth leading cause of chronic illness in the United States and have reached epidemic proportions.

There is a tremendous amount of scientific debate on the drivers behind this increased incidence and prevalence.

Our collective data from the dupilumab clinical studies suggest that deviation of the immune system, triggered by overactivity of the IL-4/IL-13 access may be the key driver of many, if not, most allergic conditions.

So-called allergic patients with an overactive IL-4/IL-13 pathway often suffer for more than one manifestation at a given time.

For example, patients with asthma or atopic dermatitis often also suffer from severe respiratory or food allergies, and the combination of multiple allergic conditions can be quite devastating for an allergic individual.

The possibility that a single biologic may simultaneous help many of these related allergic conditions would be very exciting and important to many patients.

Just as important, it would be ideal if such a correction of allergic disease could occur without inducing concurrent immunosuppression.

All our studies to date indicate that unlike many other biologics that target the immune system, which often produces immunosuppression and side effects, such as infections, dupilumab does not appear to be an immunosuppressant.

Rather, dupilumab appears to be an immunomodulatory agent that blocks the pathologic overactivity of IL-4/IL-13-driven allergic responses.

I would now like to talk about another important area of research for us at Regeneron, and that is the field of immuno-oncology.

Despite all the early successes and excitement in the field, cancer remains a challenging area, and there have been a recent string of disappointments, with several development programs.

Just last week, another highly anticipated trial exploring the PD-L1 antibody alone, and in combination with the CTLA-4 antibody yielded disappointing data.

These developments underscore that the field is still in the very early stages of fully understanding how to exploit and optimize the power of immuno-oncology.

In contrast to some of the recent disappointing results elsewhere, recent developments with our PD-1 antibody have been positive.

The ASCO Conference in June this year was an exciting time for us.

We presented important data with Regeneron 2810, our PD-1 antibody in cutaneous squamous cell carcinoma, or CSCC, which is the second most common skin cancer after basal cell carcinoma and the second deadliest skin cancer after melanoma.

It is estimated that there are approximately 4,000 to 8,000 deaths annually in the United States from CSCC.

For patients with advanced CSCC, there are limited treatment options and no standard of care.

The data that we presented at the ASCO Conference were the pooled results from 2 expansion arms in metastatic or inoperable locally or regionally advanced CSCC from 26 patients in our 392-patient Phase I trial.

These CSCC data demonstrated that treatment with Regeneron 2810 led to an overall response rate of 46%, including 2 complete responses, according to investigators' assessments, in a disease control rate of 69%.

The median progression free and overall survival were not reached at the data cut off date, with the median follow-up of 6.9 months.

The adverse event profile was generally consistent with agents in this class.

Based on these encouraging results, we are conducting larger efforts in metastatic and locally advanced cutaneous squamous cell carcinoma.

Recent discussions with the FDA indicate that if these data are robust, they could form the basis of our regulatory submission in the first quarter of 2018.

Work on developing Regeneron 2810 and other indications continues, where we are currently enrolling a Phase III study in our non-small cell lung cancer indication, a Phase II study in basal cell carcinoma, and additional earlier studies in other indications as well.

We are also exploring the use of our PD-1 antibody in combination with novel vaccines and oncolytic viruses.

Our second checkpoint inhibitor, Regeneron 3767, an antibody LAG3, is currently enrolling patients in 2 studies, one in monotherapy and one in combination with our PD-1 antibody.

Additionally, our bispecific CD20 CD3 antibody, Regeneron 1979, is also being studied in the clinic as both a monotherapy and in combination with our PD-1 antibody.

In the second quarter, we were granted orphan drug designation from the FDA for Regeneron 1979 for the treatment of diffuse large b-cell lymphoma, or DLBCL.

Our EYLEA business continues to be strong and we remain committed to maintaining our leadership position.

Part of this commitment is to help educate the community on the importance of regular dosing with anti-VEGF therapies.

Real-world evidence indicates that many patients receiving anti-VEGF therapies are not being optimally treated, resulting in more widespread vision loss than is necessary.

This decreases patients quality of life, and results in substantial costs to society, particularly when leading to blindness and disability.

There has even been a bias that chronic sustained VEGF inhibition may account for the inability of most patients to maintain their vision over the long term.

Our long-term data with the VIEW Extension Study, which followed wet AMD patients treated for approximately 4 years using EYLEA in a standardized and fixed regimen, showed that for the first time, the initial gains seen with any anti-VEGF agents can be largely maintained for the long term.

This was the first time that such data have been demonstrated with any anti-VEGF agents.

This is in contrast to long-term studies with other anti-VEGF agents, using flexible dosing regiments, such as the CAT study, which resulted in loss of the early visual acuity gains that were achieved with monthly dosing.

Taken together with additional real-world data, this suggested under-treatment with anti-VEGF agent is a serious disservice to patients and a major public health issue.

We believe the overall data in this field indicates that the treatment goal of anti-VEGF therapy should be chronic, sustained and potent VEGF inhibition.

Many elderly people are needlessly losing vision and going blind.

We are committed to doing a better job to address this issue.

In the second half of this year, we expect to report top line data from 2 Phase II studies, one in wet age-related macro degeneration, or wet AMD, and another in diabetic macular edema, or DME, of EYLEA in combination with nesvacumab, an antibody to angiopoietin-2.

The primary endpoint in these studies will be assessed at 36 weeks, and we expect top line results from these studies in the fourth quarter of 2017.

These results will help us understand where the combination of EYLEA with an antibody to angiopoietin-2 can improve upon the already high bar that has been set by EYLEA.

Panorama, our Phase III study of EYLEA in patients with non-proliferative diabetic retinopathy without diabetic (inaudible), continues to enroll patients.

The primary endpoints of this study will be assessed at week 24 and at week 52.

A separate Phase III study in this syndication, Protocol-W, which is being conducted by the Diabetic Retinopathy Clinical Research Network, or the DRCR, continues to enroll patients.

This study will explore every 16-week dosing of EYLEA, which is the only anti-VEGF treatment being investigated in this study.

We plan to submit our supplemental BLA for EYLEA dose every 12 weeks by the end of the year.

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

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

If these results are positive and recognized in formal treatment guidelines, we believe this would allow for greater uptake of drugs in this important class.

In addition to our efforts with PRALUENT in cardiovascular disease, we are also developing evinacumab, our antibody to angiopoietin-like 3, for the treatment of homozygous familial hypercholesterolemia or homozygous FH, a severe forms of hyperlipidemia.

Following positive data from a Phase II proof-of-concept study in patients with homozygous FH, we plan to advance evinacumab into a Phase III trial in homozygous FH.

Additional studies in hypertriglyceridemia and heterozygous familial hypercholesterolemia are also being planned.

As a reminder, evinacumab has been granted both orphan drug as well as breakthrough designation by the FDA for the treatment of homozygous FH.

In May of this year, we published data in the New England Journal of Medicine showing that people with inactivating mutations of angiopoietin-like 3 have an approximately 40% reduced risk of coronary artery disease, and significantly lower levels of key blood lipids, including triglycerides and LDL cholesterol.

We were able to identify these mutations through our genetics efforts at the Regeneron Genetics Center.

Furthermore, we published Phase II clinical data that demonstrated blocking angiopoietin-like 3 with evinacumab in patients with homozygous FH, who were on lipid lowering therapy, resulting in an additional 49% reduction from base line in LDL cholesterol at week 4. A reduction in other key lipid parameters, including Lp(a) and triglycerides, was also observed.

Kevzara, or sarilumab, our interleukin-6 receptor antibody for rheumatoid arthritis, has received regulatory approval in Canada, the United States and the EU.

In terms of clinical development for sarilumab, we are currently enrolling patients in a Phase II study in polyarticular course juvenile idiopathic arthritis, or pJIA.

We are also advancing our Phase III program for fasinumab, our nerve growth factor antibody for pain, where we dose the first patient or our Phase III efficacy study in osteoarthritis pain.

We remain on track to initiate a Phase III efficacy study in chronic lower back pain in the second half, and we continue to enroll our long-term safety study.

In the second half of the year, we expect to report top line data from our Phase III program with Regeneron 2222, also known as suptavumab, a wholly-owned antibody that we are investigating for prophylactics of respiratory syncytial virus or RSV.

RSV infections represent a substantial burden, and it's estimated that over 20% of infants under the age of 6 months require medical attention for RSV annually.

This study explores 2 dosing regimens, suptavumab administered either once or twice during the RSV season in preterm infants.

Development in other parts of our early stage pipeline continue to advance, and I would like to highlight a few of the programs.

Our Activin A antibody, Regeneron 2477, is in clinical development for the treatment of the rare disease, Fibrodysplasia Ossificans Progressiva, or FOP.

In the second quarter of 2017, we received Fast Track designation from the FDA, and we anticipate initiating a Phase II clinical study in the second half of 2017.

We're also studying our Activin A antibody in combination with our GDF8 antibody in settings where there may be a benefit to promoting muscle growth.

Regeneron 3500, our interleukin 33 antibody, is in Phase I clinical studies in patients with asthma; and Regeneron 3918, our wholly-owned C5 antibody, has now entered clinical development.

Before I conclude, I want to say a few words about the ending of our antibody discovery agreement with Sanofi, which Bob Landry will discuss in more detail, PRALUENT; Dupixent, Kevzara; REGN2810, or our anti-PD-1 antibody; Regeneron 3500, or anti-IL 33 antibody; and Regeneron 3767, our anti 3 LAG3 antibody, were all discovered and initially developed under this antibody discovery agreement.

PRALUENT, Dupixent, Kevzara and Regeneron 3500 will continue to be developed and commercialized, as applicable, with Sanofi under the antibody License and Collaboration Agreement.

Regeneron 2810 and Regeneron 3767 will continue to be developed with Sanofi under the immuno-oncology collaboration.

We believe that our collaboration with Sanofi is one of the most productive arrangements in the history of the biotechnology industry, and we look forward to continued collaborative efforts with Sanofi in the future.

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

Thank you, George, and good morning, everyone.

EYLEA continues to be the market-leading product among FDA approved anti-VEGF agents for all of its approved indications in the United States, with a 73% market share in terms of dollars in the second quarter of 2017 compared to 69% market share in the second quarter of 2016.

In the second quarter of 2017, U.S. net sales of EYLEA, or aflibercept, were $919 million versus $831 million in the second quarter of 2016, which represents growth of 11% year-over-year.

Ex-U.

S., net sales of EYLEA in the second quarter of 2017 were $542 million compared to $486 million in the second quarter of 2016, which represents growth of 12% on a reported basis.

For the second 6 months ended June 30, 2017, U.S. EYLEA net sales grew 10% year-over-year compared to the first half of 2016.

The overall branded anti-VEGF market in the U.S. grew by 7.4% in the first half of 2017 compared to the first half of 2016.

These numbers indicate that EYLEA growth is driven by overall growth in the market, as well as an increase in market share.

As George noted, we are preparing for the submission this year of data to the FDA from the second year of our Phase III wet AMD studies, which showed that approximately 50% of patients were able to be treated with every 12-week dosing.

We are also continuing to enroll patients in a Phase III study in nonproliferative diabetic retinopathy.

Turning now to the recent launch of Dupixent, or dupilumab, in the U.S. for the treatment of adult patients with moderate-to-severe atopic dermatitis.

As reported by our collaborator, Sanofi, global net sales for Dupixent in the second quarter were $29 million.

These sales largely reflect end-user demand in the United States, with negligible contribution from inventory build.

We are pleased with the way the launch is tracking, and the prescriptions are trending ahead of other recently launched Biologics in dermatology.

As of last week, over 5,000 health care professionals had prescribed Dupixent, with over 13,000 prescriptions written.

Over the past 2 months, approximately 750 new patients per week have received a prescription for Dupixent from a health care provider.

During the past 2 months, approximately 500 patients per week who are new to the brand have had prescriptions filled.

On the market access front, things are progressing well.

As we've previously communicated, the 2 largest pharmacy benefits managers, Express Scripts and CVS, provided immediate coverage for launch -- from launch, with utilization management criteria that are consistent with the Dupixent label.

We continue to work with payers to try and ensure that all appropriate patients are able to access Dupixent, and expect to have broad market access by the end of the year.

Outside of the United States, Dupixent has received a positive CHMP recommendation in July of this year, with a launch expected in Europe later this year.

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

Net global sales through the end of the second quarter were $1 million.

It is still very early days, given that Kevzara was approved and launched in the United States towards the end of May.

The initial feedback from physicians has been positive, and we are working on building market access.

We have received EMA approval of Kevzara in the EU, with the launch beginning in August.

Turning now to PRALUENT, or alirocumab.

As reported by Sanofi, net sales in the second quarter were $46 million worldwide, with the U.S. accounting for $33 million of the total.

While we continue to be disappointed by the uptake of the PCSK9 inhibitor class, we are encouraged by ongoing discussions with payers with respect to improvement in utilization management criteria.

Earlier this week, CVS announced that it would provide copreferred access to PRALUENT through its CVS Caremark commercial formularies, which cover approximately 25 million lives.

We remain optimistic about the long-term potential for this class.

The potential resolution of our patent dispute with Amgen and anticipated cardiovascular outcomes data for PRALUENT in early 2018 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.

We're also proceeding with our potential regulatory filings and commercialization planning for Dupixent in asthma and REGN2810, our PD-1 inhibitor, in cutaneous squamous cell carcinoma.

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

Thanks, Bob, and good morning, everyone.

Regeneron posted strong second quarter 2017 financial results, driven from the continued strength of our global EYLEA franchise.

We are particularly pleased with achieving these results during a period where together with our collaborator, Sanofi, we have launched in the U.S. and are preparing to launch x U.S. 2 significant products, Dupixent and Kevzara.

During today's call, I will discuss our financial results and highlight changes to our full year 2017 guidance line items.

In the second quarter of 2017, we are in $4.17 per diluted share from non-GAAP net income of $487 million.

This represents a year-over-year increase in both non-GAAP diluted EPS and net income of 48%.

Regeneron's second quarter 2017 non-GAAP net income excludes noncash share-based compensation expense in the loss on extinguishment of debt, and includes the income tax effect of non-GAAP reconciling items.

A full reconciliation of GAAP to non-GAAP earnings is set forth in our earnings release, which can be found on our website.

Total revenues in the second quarter of 2017 were $1.47 billion, which represented year-over-year growth of 21% over the second quarter of 2016.

Net product sales were $924 million in the second quarter of 2017 compared to $834 million in the second quarter of 2016.

EYLEA net product sales in the United States were $919 million in the second quarter of 2017 compared to $831 million in the second quarter of 2016, which represents an increase of 11%.

For the 6 months ended June 30, 2017, EYLEA net product sales in the United States were $1.77 billion versus $1.61 billion for the 6 months ended June 30, 2016, an increase of 10%.

We are raising our estimated full year 2017 U.S. EYLEA net product sales growth guidance to approximately 10% over 2016.

Similar to the first quarter of 2017, EYLEA experienced another modest decrease in U.S. distributor inventory levels during the second quarter, and remains within our normal 1- to 2-week targeted range.

Ex-U.

S. EYLEA net product sales, which are recorded by our collaborator, Bayer, were $542 million in the second quarter of 2017, as compared to $486 million in the second quarter of 2016, representing a 12% increase on a reported basis.

On an operational or constant-currency basis, sales increased approximately 16%.

In the second quarter of 2017, Regeneron recognized $191 million from our share of net profits from EYLEA sales outside the United States.

Total Bayer collaboration revenue for the second quarter of 2017 was $210 million.

Total Sanofi collaboration revenue was $222 million for the second quarter of 2017.

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 second quarter of 2017, our share of losses in connection with the commercialization of PRALUENT, Dupixent and Kevzara was $122 million.

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

This loss includes our share of increased spending related to the ongoing Dupixent and Kevzara launches in the United States, as well as preparations related to launching Dupixent and Kevzara in other territories.

We continue to proactively manage our marketing and selling expenditures in the global commercialization of PRALUENT with our collaborator, Sanofi.

Netted within these losses were the global sales of PRALUENT, Dupixent and Kevzara, as recorded by our collaborator, Sanofi.

For the second quarter of 2017, global net sales were: PRALUENT, $46 million; Dupixent, $29 million; and Kevzara, $1 million.

Dupixent net sales in the second quarter largely reflect end-user demand and negligible contribution from inventory build.

There were no material Dupixent sales outside the U.S.

Before I move on from the Sanofi antibody collaboration line, I'd like to inform you that the antibody discovery agreement will be ending in accordance with its terms without any extension on December 31, 2017.

The antibody licensing collaboration agreement, the immuno-oncology discovery and development agreement and the immuno-oncology licensing collaboration agreement are not impacted by the expiration of the antibody discovery agreement.

The $130 million of 2017 annual funding from Sanofi under the antibody discovery agreement is expected to be fully utilized by the end of the third quarter of 2017.

In the second quarter of 2017, other revenue was $114 million versus $23 million as of the second quarter of 2016.

This increase was primarily due to the achievement of milestones in connection with our collaboration agreements related to the development of fasinumab, with both Teva and Mitsubishi Tanabe Pharma.

In the second quarter of 2017, we recognized the $25 million substantive milestone from Teva, and the $30 million substantive milestone from Mitsubishi.

For further details, you can find the summary of the components of other revenue in the MD&A section of our 10-Q.

Turning now to expenses.

Non-GAAP R&D expenses were $440 million for the second quarter of 2017.

Our non-GAAP unreimbursed R&D expense, which is calculated as the total non-GAAP R&D, less R&D reimbursements from our collaborators, was $196 million in the second quarter of 2017.

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

We are lowering and tightening our full year 2017 guidance for non-GAAP unreimbursed R&D to be in the range of $925 million to $965 million from our previous guidance of $950 million to $1.025 billion.

Non-GAAP SG&A expense was $262 million for the second quarter of 2017.

We are tightening and lowering our full year 2017 guidance of non-GAAP SG&A to $1.12 billion to $1.16 billion from our previous guidance range of $1.14 billion to $1.2 billion.

Sanofi reimbursement of Regeneron commercialization-related expenses, a line item found within Sanofi collaboration revenue, was $87 million for the second quarter of 2017.

We are tightening and lowering our full year 2017 guidance of Sanofi reimbursement of Regeneron commercialization-related expenses, the $370 million to $400 million from our previous guidance range of $385 million to $425 million.

One last operating expense I'd like to review was our cost of collaboration and contract manufacturing.

As a reminder, this line item primarily reflects the cost incurred to manufacture commercial supplies for our collaborators.

The increase to $61 million for the 3 months ended June 30, 2017 versus $28 million for the 3 months ended June 30, 2016, was primarily driven by higher-than-historical manufacturing losses.

Before I conclude my prepared remarks with a review of taxes and our liquidity position, I do want to highlight an out-of-period adjustment to reflect the correction in our accounting for the lease of the Tarrytown, New York facility that was recorded in the second quarter of 2017.

The adjustment resulted in the recognition of a $30 million loss on extinguishment of debt related to the March 3, 2017 lease transaction and a corresponding decrease to property plant and equipment.

These adjustments consisted entirely of noncash adjustments, and therefore, had no impact on our previously reported amounts in the statement of cash flows.

Further details can be found in our most recent 10-Q that was filed earlier this morning.

This loss on debt extinguishment has not been included within our non-GAAP results.

Turning now to taxes.

Our effective tax rate for the second quarter of 2017 was approximately 26%, as compared to approximately 33% for the second quarter of 2016.

For the full year 2017, we are tightening and lowering guidance for our effective tax rate to be in the range of 27% to 31% from the previous range of 32% to 38%.

This updated guidance reflects higher actual and forecasted tax deductions from stock option exercises, given the recent increase in our stock price, as well as lower forecasted losses in foreign jurisdictions.

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

From a cash flow and balance sheet perspective, we ended the second quarter of 2017 with cash and marketable securities of $2.3 billion, a level consistent with March 31, 2017.

Despite strong quarter 2017 operational results, our cash flow from operations in the second quarter was adversely impacted due to 3 factors: higher inventory levels to support our 2 recent launches, plus more EYLEA inventory to support increased demand; higher Sanofi Bayer and trade account receivable and higher cash tax payments.

The tax payments included the final payment related to the Sanofi immuno-oncology collaboration upfront that we received in 2015.

Our capital expenditures for the 3 months and 6 months ended June 30, 2017, were $55 million and $105 million, respectively.

We are lowering and tightening our full year 2017 capital expenditure guidance to be in the range of $250 million to $285 million from our previously provided range of $300 million to $350 million.

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

Thank you, Bob.

Jason, we'd now like to open the call for Q&A.

(Operator Instructions) We will be available in the office after the call for follow-up questions.

(Operator Instructions) Our first question comes from Ying Huang from Bank of America Merrill Lynch.

I want to ask about EYLEA.

It sounds like your competitor, Lucentis, in the U.S. is experiencing actually quarter-over-quarter sequential decline in their sales in 2Q.

So I was wondering, what contributed to the strength in EYLEA?

And also, what has changed since you've guided single-digit growth in the beginning of the year?

And then quickly on Dupixent, any reason why we should see a strong inflection of additional patients add every week instead of just steady in RX every week?

Bob, you want to handle the EYLEA question?

Yes.

EYLEA, as we pointed out earlier, has grown due to a growing of the market, which is partially related to the demographics in the marketplace, and also has grown in terms of market share.

We believe some of that growth in market share is related to the positive data we've seen with EYLEA in diabetic macular edema.

And in terms of a decline in Lucentis, there's multiple factors that could contribute to it, including any discounting they're doing, which relates to growth to net differences.

With regards to Dupixent, we have payers coming onboard on a regular basis.

As I said, we expect market access, broad market access, by the end of the year.

Patient claims are still making their way through the pipeline in many cases, so we do expect more prescriptions being dispensed.

And we continue to educate on disease awareness to let patients who've been disenfranchised from the system get back into their physicians and benefit from the product.

It's Len.

Let me just amplify a little bit on the Dupixent question there.

Remember, the first question that we all were interested in, would there be a bolus?

Would there be a large number of patients who would get a prescription very soon at the launch and then the number of the prescriptions written go down dramatically?.

We did not see that.

We've seen a very steady number of prescriptions written.

As we indicated somewhere over the last couple of months, it's been very steady on a weekly basis.

The way that number could -- so we're very pleased that there's no bolus.

Obviously, this is what the system, if you will, can turn out right now.

How could that grow?

We can see in -- I'm just talking about on the written prescription side, not the fill side, that, that could grow, obviously, if we see an increase in the number of prescribers, which takes time, but we're starting to see that.

Or whether or not the prescribers start to write prescriptions for patients who are not just their most severe patients.

We're seeing, from what we can tell in here, that as you would expect with the launch of a new class of drug, that patients who have been prescribed the drug typically are the most severe of the patients.

So that -- those are ways that the number could go up.

But first stop in this was to make sure there wasn't just a bolus, and it was all going down, which we can now say, at least, over the first period of this launch, that's not the case.

On that Len, I think it's important to mention that now as these patients are coming back to their physician, we're hearing many of these patients are having very, very positive results in terms of reduced lesions and improved itch, and that is really contributing to patient satisfaction.

Yes.

I just wanted to -- this is George, I wanted to point out a couple of things.

Despite the mechanics of the health care system and reimbursement and rebates and all this, I'd like to think that physicians and patients are still driven quite a bit by how the drugs are actually performing and making a difference in their lives.

So I'd like to think that one of the reasons that EYLEA is growing in market share is because of the recognition by physicians and patients of what a difference it's making in their experiences.

And I think, as Bob points out, we hope to see that the same will continue to be true as we're seeing from the early reports on Dupixent, and I think another very important thing to realize about Dupixent is also the long view.

As I noted in my remarks.

We are developing this for a very large number of allergic indications.

The data right now, the early data and including pivotal study data is all very promising.

So long-term growth in dupilumab is going to be by the recognition that it may be an important drug for many different allergic conditions, starting with asthma and going onward.

And moreover that in a single patient, hopefully, we'll be able to show in convincing ways, in a single patient, it will be able to simultaneously benefit multiple of their allergic conditions.

And so we think that if the medicine is doing and bringing the sort of benefit that we think it's doing to that patients that, that recognition will drive, of course, use because of the benefit it provides.

We have Chris Raymond from Raymond James.

I got a question on the pipeline.

So, Len, I heard you say in the recent meeting, I heard you highlight Regeneron 2810, your PD-1.

When you are asked to talk about which pipeline program excites you the most.

So I think we know the clinical plan that you guys have outlined is unique.

You guys have seen now what looks like a pretty novel and quick path to market, but maybe you can talk about the biology of the molecule that makes you think that sort of head to head, this should be better maybe than other more advanced PD-1s.

Just maybe talk about what drives you to highlight that molecule as the most exciting pipeline drug.

Yes.

I'm going to let George deal with that question.

But before I turn it over to him, I just wanted to point out that this is tough business.

And if you look at each of our programs and what's been going on around us, it's been quite remarkable.

If you just think about it, in the PD-1 space, which George will get into in a bit more, we've seen failures of PD-L1 to deliver survival benefits where PD-1 agents had.

We've seen a failure of a PD-1 agent where another PD-1 agent was successful.

In the PCSK9 space, we've seen the failure of one agent to get to market because of issues in, from what I understand, immunogenicity.

In the IL-4/13 space, we've seen people historically have failed with even going after the right target and people having failed by going after the wrong target, such as going after IL-13, and maybe people not getting even optimum results going after IL-5.

If you think about EYLEA, we've seen a lot of explanations about why people shouldn't be able to get long-term benefit in it.

The savior for this was going to be PDGF and anti-VEGF therapy was bad.

And you've heard George, I think, put out a very convincing case that that's just not the case, and that PDGF has fallen by the wayside.

Just yesterday, in the IL-6 space, you've seen a group of people who chose IL-6 ligand instead of the IL-6 receptor, and that didn't seem to go so well, at least based on the vote of the advisory panel.

So I just want to say that there's a lot that goes on, and maybe the guy who makes all these choices for us, and it seems to have gotten -- done pretty good in the batting average can comment on the PD-1 space.

George?

Yes.

I was going to actually bring up a lot of the same examples, as Len just did, in terms of pointing out how really difficult this business is, how it really is so challenging.

It's really such a industry of failure because the bar is rightfully set so high.

I mean, we want to be bringing forward important, effective and safe medicines to patients, and that, frankly, is probably the single hardest thing that we as a society actually do in terms of discovering and developing products.

And while I was reading my comments, I have to say I was shocked and stunned at how productive our people have been over so many years to produce so many product candidates, and as Len said, I'm a big track-record guy.

Over and over again, we've made the right decisions about which targets about picking and selecting the right -- out of many candidates, the right candidates to bring forward, and over and over again, we more likely than not have been proven right.

And I think that this is something that is incredibly vastly underappreciated in this industry, how much of a role institutional knowledge plays in having a senior experienced leadership team that has the capability to over and over again make these decisions and prolong their collective memories to help make these sort of decisions.

And if you go anywhere else, and you look how long the people who are making these decisions have been around at that particular place, and it's just a couple of years.

Here our senior management team at all levels, and I'm not just talking about me and Len and then the other most senior people, but we have, in general, people, 15, 20 years who have been leading various efforts, and we have enormous collective memory and institutional memory here.

And it's only with that, that you could have that sort of track record that can lead to the discovery of dozens and dozens of product candidates and be moving them forward, and in more cases than not, be making the right decisions and making your bets.

And whether it's picking PD-1 as opposed to PD-L1 and picking the right PD-1 antibody or picking IL-6 receptor versus IL-6 and picking the right IL-6 receptor antibody or picking the right antibody for PCSK9 and picking the right target in the field of allergy, which nobody else happened to have picked in the entire world, this all comes from incredible internal genius and institutional memory that is very rare, and as I said, represents one of the hardest things we do as a society.

The track record in the rest of the world is overwhelmingly one of failure and no, not everything we do will work.

Not everything we do will succeed.

We have an amazing track record because of this institutional memory and the genius that we have here.

We have Geoffrey Porges off Leerink Partners.

I just wanted to follow up on the questions about Dupixent, particularly the launch.

You've mentioned that 13,000 patients have been prescribed Dupixent, but could you tell us how many of those have converted to fill prescriptions?

And then secondly, Bob, could you give us a sense of what -- of the patients that have had one filled prescription, what proportion of them are filling a second, and ideally, a third prescription, i.e., what's the treatment persistence after patients have started on Dupixent?

Just wanted to clarify how this is going.

Well, Jeff, it's Len.

I mean, I think Bob that can comment if he has the number of how many patients we think have actually converted.

There's obviously a lag.

I think the interesting metric for us is that the number of new prescriptions written over the last several months, each week has been in the study range of around 750 new patients per week, and there's been a steady new patients to the brand, as judged by IMS-type data of over 500.

So that gives you a little bit of an idea.

That's obviously not the same -- it's not the 750 that got the prescription this week are the ones that are getting the prescription filled.

But that gives you an idea of where the launch is sort of -- how it's, at least, behaving on a weekly basis for the last several months.

Bob, do we have an idea of how many patients are actually on product at this time?

I think it's fair to say that most patients have received 1 or 2 prescriptions based upon the timing of the launch.

So to talk about it here -- and it's too early to get into the specifics of that.

We have Alethia Young from Crédit Suisse.

I guess just one on the Complement program.

When might we be in the position to get some of the early data and how are you kind of thinking about dosing in that program?

Or maybe is that something you're going to find out in the Phase I?

Yes.

It's a little bit early to tell you much about that, but we'll -- we, of course, are trying to get all the information we can out of that Phase I program.

When we have it, we'll make it available.

Next question?

We have Robyn Karnauskas from Citigroup.

So just a question on the asthma study.

So I know you mentioned that patient populations are different, but are there -- similar, but are there any differences between the 2b and the 3 that you think are notable?

And I know -- I think you're stratifying patients by ease of eosinophil counts.

What happens if you are only successful in high eosinophils, but not among the low eosinophil counts?

Yes.

I think that as I described in my comments, the populations are actually very similar.

Obviously, when you have such a successful study, you do your best to reproduce it with the least number of modifications and changes.

I mean, our first study was rather standard.

It wasn't that we did anything so special.

Other than that, we studied both the all-comer population and then we looked in both the high- and the low-yield subset.

We designed our study to look in the all-comer population, but we also designed it to look in the high-yield population.

If our data is limited to the high yields, it would be a little less differentiating perhaps than we think it might be compared to the other agents that are out there in development right now.

But as you know, the real excitement is if it's positive in the all-comer population, nobody else has data that shows that a biologic can really affect the all-comer population.

We have Carter Gould from UBS.

For Bob, I guess, thanks for all the color.

I recognize it's early in the launch, but generally speaking, for those plants that have opened up access, how satisfied are you with the step out of prior authorization criteria in place?

And for those that have yet to open up access, can you characterize how those conversations are going?

Is it really just sort of inertia from the plants' focus on rebates or step edits versus them sort of just taking a dug-in stance?

So just very quickly, in the interest of time, we can say about a 1/3 of the places, where decisions have been made, have been made according to the label and we're very pleased.

About another 1/3, just roughly speaking, have made decisions, which is slightly more restrictive.

They might have -- require a topical calcineurin inhibitor as opposed to just a topical corticosteroid.

A few of those have required systemic steroids, and there's still another 35-or-so percent that we're working on, which some of them have automatic blocks and some of it just takes time.

But we hope to, as we said, get broad access towards the -- by the end of the year.

Sanofi and Regeneron are working very hard at this, and I think I would have to characterize this based on other metrics.

We've looked at other launches, and it's going very well in this modern era.

All right.

I know many of you were in queue and didn't get a chance to ask your questions.

Just send us an email, and we'll make sure to follow up with you.

Jason?

All right, operator.

Thank you.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for participating, and you may now disconnect.