雷傑納榮製藥 (REGN) 2018 Q1 法說會逐字稿

Welcome to the Regeneron Pharmaceuticals First Quarter 2018 Earnings Conference Call.

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

(Operator Instructions)

Also, please note this conference is being recorded.

And I'll now turn the call over to Manisha Narasimhan, Head of Investor Relations.

You may begin.

Thank you, Jason.

Good morning, and welcome to Regeneron Pharmaceuticals First Quarter 2018 Conference Call.

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

Joining me on the call today are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Founding Scientist, President and Chief Scientific Officer; Marion McCourt, Senior Vice President and Head of Commercial; and Bob Landry, Senior Vice President and 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, financial forecasts and guidance, 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 that statement.

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, 2018, which will be filed with the SEC later today.

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

In addition, please note that GAAP and non-GAAP measures will be discussed in 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.

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 to everyone who has joined us on today's call and webcast.

In my prepared remarks, I will focus on Regeneron's high-level strategy.

George will provide details on how our R&D prowess enables and supports that strategy.

Marion will update you on the status of our commercialization efforts, which will drive the realization of our strategy.

And Bob will recap our financial results.

Let me begin with EYLEA.

EYLEA has been a very successful product both in terms of how much value it brings to patients with vision-threatening retinal diseases as well as how much value it brings to our business.

Since approval in late 2011, EYLEA has taken over as the market-leading FDA-approved anti-VEGF agent for retinal diseases.

More than 15 million doses of EYLEA have been administered globally since launch.

During the first quarter of 2018, global net sales of EYLEA were $1.6 billion.

Clearly, at the moment, EYLEA is our most important product.

And naturally, many of our shareholders have questions about the sustainability of the EYLEA franchise over the near and long term.

We believe that while competition is expected in the anti-VEGF space around late 2019, the therapeutic profile of EYLEA sets a very high bar, and there are no products in late-stage development to our knowledge that are likely to have substantially differentiated product profile from EYLEA.

In addition, we see significant opportunities for growth based upon the aging of the population as well as the unfortunate but dramatic increase in the prevalence of diabetes.

While EYLEA is well penetrated in wet age-related macular degeneration, there remains a large untapped opportunity in diabetic eye disease.

That is why we are focused on expanding our indications in diabetic retinal diseases.

Currently, EYLEA is indicated for the treatment of diabetic macular edema, where we are the market-leading branded anti-VEGF supported by the NIH-sponsored Protocol T study.

Many diabetic patients can also suffer from eye disease without having diabetic macular edema.

And much of this results from a condition called diabetic retinopathy without macular edema.

Some of these patients are at high risk of suffering from catastrophic vision-threatening complications.

Later this year, we plan to submit an sBLA for approval in diabetic retinopathy without DME based upon the striking initial results that were observed with EYLEA in the PANORAMA study at 6 months.

We also look forward to longer-term results from the PANORAMA study, where we will be evaluating the ability of EYLEA to prevent vision-threatening complications.

But the success of EYLEA creates a challenge for Regeneron to diversify its revenue and profit base.

I am pleased to say that we can now see the strategy we put in place, many years ago, starting to bear fruit.

Our strategy was and continues to be to invest heavily in our internal research capabilities rather than look externally for new products.

Though we do strategically combine our research capabilities with partners, such as Intellia, Alnylam and others, to collaboratively create new product opportunities.

So where do we stand?

From a broad perspective, our strategy is working.

We have 6 approved FDA medicines and 17 different product candidates in clinical development, all arising from our internal discovery efforts.

But in terms of the specific near-term evidence of success from this strategy, I would like to highlight 2 areas: allergic diseases and immuno-oncology.

Our efforts to tackle allergic diseases began decades ago and resulted in Dupixent, a true pipeline in a product.

Dupixent is currently approved for adults with moderate-to-severe atopic dermatitis, and the launch in the United States is going quite well.

We and our collaborator Sanofi are in the midst of launching Dupixent for atopic dermatitis in the rest of the world, which represents another very significant opportunity.

Moreover, we are in the process of completing trials that would support the expansion of Dupixent into adolescent and pediatric patients with atopic dermatitis, which once again is another substantial opportunity.

But atopic dermatitis may be just the tip of the allergic iceberg.

Because we are seeing strong clinical evidence that Dupixent is active in a number of different allergic or so-called type 2 diseases, we believe there is a remarkably broad and deep pipeline within Dupixent itself.

And we, along with our collaborator Sanofi, have committed the resources necessary to fully execute our development plan for Dupixent.

We anticipate regulatory approval in asthma later this year and have Phase III trials underway in adolescent and pediatric patients with atopic dermatitis, pediatric patients with asthma as well as adults with nasal polyps.

Top line data from the Phase III nasal polyps study and the adolescent atopic dermatitis study are expected later this year.

In addition, in the second half of this year, we plan to begin pivotal studies in COPD, another very large opportunity.

We will also initiate a late-stage program in eosinophilic esophagitis and a Phase II program in peanut and grass allergies later this year.

Finally, we will be studying the potential of combining our IL-3 -- IL-33 antibody with Dupixent in several of these allergic or type 2 indications.

In our view, the potential for the Dupixent pipeline is analogous to what happened when it was realized that the anti-TNFs were not just drugs for rheumatoid arthritis but drugs for many different diseases involving overactivity of type 1 immunity.

We believe that the evidence thus far is compelling that Dupixent is not just a drug for atopic dermatitis but has the potential to address multiple other allergic or type 2 diseases.

In short, we think that Dupixent may be able to bend the arc of allergic disease.

Now let's turn to another pillar of our diversification strategy and that is the area of immuno-oncology.

Let me be clear, our goal is to become a major player in this space, and we believe that we have the science, tools, technologies, and most importantly, the product candidates to compete and win.

Immuno-oncology has transformed the treatment of cancer and is turning out to be one of the largest commercial opportunities in the history of the biopharmaceutical industry.

For example, the sales of anti-PD-1 antibodies across a number of cancers are currently at a $12 billion global annual run rate and still growing, driven in large part by use in non-small cell lung cancer.

Our strategy, in this important therapeutic area, has proven to be spot on, in terms of the selection of molecular targets, engineering of complex drug candidates and the selection of the right initial disease states for development.

In terms of targets, we chose PD-1 over PD-L1 and that turns out to be the right choice in our opinion based upon the available data.

Moreover, we leveraged our VelocImmune technology to select an excellent antibody, and our clinical group selected a previously overlooked cancer, cutaneous squamous cell carcinoma or CSCC.

Cemiplimab, our PD-1 antibody has produced breakthrough data in CSCC, and we are awaiting FDA action for this important indication.

The response rates we have seen are amongst the highest reported for solid tumor and served as the basis for our breakthrough designation by the FDA.

While CSCC is a significant opportunity by itself, non-small cell lung cancer is the largest indication where we are currently studying cemiplimab.

Our positive early data from a small cohort of patients with advanced non-small cell lung cancer supports our decision to aggressively move forward in multiple settings of this disease.

These data will be presented at the upcoming annual ASCO conference.

Our first-line lung cancer study, comparing cemiplimab monotherapy to chemotherapy, is on track to complete enrollment around the end of this year or early next year.

We except cemiplimab to be the foundation of our immuno-oncology efforts for years to come.

Another component of our immuno-oncology strategy is our bispecific platform.

We are combining our biological and technical capabilities to build molecules that combine tumor targeting and effective functions.

Our CD20xCD3 bispecific antibody, entirely owned by Regeneron, is now making excellent progress in the clinic.

You will hear more about this from George at an upcoming medical meeting.

Other bispecifics include MUC16xCD3 and BCMAxCD3, both of which we anticipate advancing into the clinic this year.

Additional CD3 bispecifics are moving towards the clinic, and over the course of this year, we will be giving you information about a new class of bispecific antibodies.

Much like Dupixent, we believe that cemiplimab has the potential to be a pipeline within a molecule.

And we believe our bispecific platform is able to produce a steady stream of new drug candidates as well.

Perhaps most importantly, we see strong potential for combination treatments involving our PD-1 antibody and our bispecifics.

So to recap, we believe EYLEA has meaningful additional opportunity for continued growth.

Our diversification strategy is clearly on track to deliver the full potential of the Dupixent pipeline and our immuno-oncology franchises, which position us well to continue commercial success.

And we will continue to aggressively move the rest of our deep pipeline along as well.

With that, let me turn the call over to George.

Thank you, Len, and good morning to everyone.

The first quarter of 2018 has been very busy and productive from an R&D perspective, and I will provide some of the key highlights.

Beginning with EYLEA, we reported positive data from the Phase III PANORAMA study in diabetic retinopathy.

In this study, at 24 weeks, 58% of patients receiving EYLEA experienced a 2-step or greater improvement from baseline on the diabetic retinopathy severity scale compared to 6% of patients receiving sham injection, with a p-value of less than 0.0001.

No new safety signals were observed.

Importantly, this was the first time that any therapy demonstrated the ability to reverse disease progression in a study specifically designed to evaluate patients with moderately severe to severe nonproliferative diabetic retinopathy without diabetic macular edema.

We will continue to evaluate these patients for longer durations to determine whether EYLEA treatment can prevent progression to neovascular vision-threatening complications and also to diabetic macular edema.

We expect to make a regulatory submission in the United States later this year.

In March, at the annual meeting of the American College of Cardiology, we reported positive data from the 18,000 patient cardiovascular outcome study of Praluent, which compared Praluent to maximally tolerated statins.

These data showed that Praluent significantly reduced the risk of major adverse cardiovascular events, or MACE, in these high-risk patients and was associated with a lower rate of all-cause death.

Safety was consistent with previous trials and no new safety issues were observed.

In a prespecified analysis, the patients with baseline LDL cholesterol levels, at or above 100 milligrams per deciliter, experienced more pronounced benefit from Praluent, reducing the risk of MACE by 24% and the risk of death from coronary heart disease by 28%.

In additional post hoc analyses of this prespecified group, Praluent was associated with a 29% lower risk of death from any cause.

These results are consistent with the recently published meta-analysis in the Journal of the American Medical Association that showed an association between more intensive LDL cholesterol lowering and a greater reduction in the risk of total and cardiovascular mortality in patients whose baseline LDL cholesterol was greater than 100 mg per deciliter.

We expect a regulatory submission to the FDA based on these data around the middle of the year.

Len has shared our enthusiasm for the Dupixent pipeline.

Our regulatory submission for Dupixent for the treatment of uncontrolled asthma in adults and adolescents is currently under review by the FDA, with a PDUFA date in October.

Detailed results from the Phase III QUEST and VENTURE asthma studies will be presented at the upcoming meeting of the American Thoracic Society.

Our Phase III study of asthma in the pediatric setting is currently underway.

We also have 3 ongoing Phase III studies of Dupixent in adolescent and pediatric atopic dermatitis.

The first of these in adolescents between the ages of 12 and 17 years old is fully enrolled, and we expect to report top line data shortly.

2 pediatric studies: one in children aged 6 to 11 years old, and the second, in children aged 6 months to 5 years old, are currently enrolling.

Based on the scientific pathway, we believe that dupilumab could be used in a variety of additional allergic or so-called type 2 immune conditions.

We expect to report top line data from 2 Phase III studies of dupilumab in nasal polyps later this year.

We plan to initiate, later this year, a study in patients with comorbid conditions as well as our Phase III programs of dupilumab in COPD and in eosinophilic esophagitis.

We also plan to launch Phase II studies of dupilumab in peanut and grass allergies in 2018.

Let me remind you that the human genetic findings from our Regeneron Genetics Center, together with our preclinical studies, support the hypothesis that blocking interleukin-33 might have additional benefits for some patients being treated with dupilumab in some of these diseases.

A Phase II study in asthma of REGN3500, our fully human interleukin-33 antibody, with and without dupilumab, is enrolling patients.

We plan to initiate, in the second half of this year, Phase II studies of IL-33 in atopic dermatitis and COPD.

As you also heard from Len, one of the most important areas of our focus is the exciting field of immuno-oncology, where we have multiple approaches towards harnessing the immune system to fight cancer, founded on opportunities provided by our PD-1 antibody and by our emerging portfolio of bispecific antibodies.

Let me remind you that despite the excitement surrounding the PD-1 pathway, there have also been some sobering realizations.

Early on, many thought that the PD-1 pathway blockade would be commoditized, with a prevailing view that there would be many equivalent agents approved.

As it now stands, many believe that antibodies against PD-1 are differentiated and more active than those against the PD-L1 ligand.

Moreover, out of the 2 approved PD-1 antibodies, only one has been approved as monotherapy in first-line non-small cell lung cancer.

Finally, the PD-1 pathway has not demonstrated profound activity in many of the most prevalent cancer settings, including breast cancer, prostate, colorectal, pancreatic and others.

And even in settings like lung cancer, where the drug is active, most of the patients still do not respond.

Obviously, there is much room to provide much more benefit to many more patients in need.

Later this year, with the PDUFA date in October, we anticipate having the third FDA approved PD-1 antibody, cemiplimab, which would be the first approval in our comprehensive immuno-oncology development program.

In addition to monotherapy opportunities with cemiplimab, we believe cemiplimab will be the bedrock upon which we plan to build additional combination therapies.

We have reported positive data for cemiplimab in metastatic and locally advanced cutaneous squamous cell carcinoma, where we observed an overall response rate of around 47%, which is among the highest response rates seen in any solid malignancy to date with a PD-1 antibody.

Cutaneous squamous cell carcinoma will be the first indication for which we anticipate the approval of cemiplimab.

At the upcoming annual ASCO meeting, we look forward to sharing with you additional data in patients with unresectable metastatic cutaneous squamous cell carcinoma.

We will also be presenting the activity and durability from our pivotal Phase II cutaneous squamous cell carcinoma study.

Importantly, we're also conducting studies in additional tumor types, including first- and second-line non-small cell lung cancer and cervical cancer.

As Len mentioned, first-line non-small cell lung cancer is one of the most exciting opportunities for PD-1 blockade, but only one agent has demonstrated convincing monotherapy activity in this setting.

Our program includes 3 key trials, which if successful, could position cemiplimab as a major competitor in this space.

The first study is cemiplimab monotherapy versus chemotherapy in patients who express PD-L1 of 50% or greater.

This study is ongoing, and we expect enrollment to be completed later this year or early next year.

The second trial of cemiplimab in combination with chemotherapy, with or without ipilimumab, versus chemotherapy alone in patients with PD-L1 expression of 50% or lower, this study is currently enrolling.

Cemiplimab, in combination with ipilimumab, with or without chemotherapy, in patients with 50% or greater PD-L1 expression, this study would also include a pembrolizumab comparator arm.

We plan to initiate this study around midyear.

Turning to our bispecific antibody platform, which provides monotherapy opportunities as well as opportunities to combine with cemiplimab.

Our lead molecule of CD20xCD3 bispecific continues to progress in the clinic.

We would like to remind you that this is a wholly owned molecule.

This molecule could compete in indications where CD20 antibodies, such as rituximab, are no longer efficacious as well as where CD20 antibodies are currently the standard of care.

As we reported at ASH last November, at doses of 5 milligrams or greater, we observed 50% response rates and almost 80% disease control rates in heavily pretreated rituximab refractory patients with non-Hodgkin's lymphoma without any dose-limiting toxicities.

And thus we were reporting that we were continuing to dose escalate our CD20 bispecific.

At higher doses, we are now seeing encouraging signs of increased activities without any dose-limiting toxicities, and we have not yet reached maximally tolerated dose.

We look forward to sharing more data at upcoming medical conference in the second half of this year.

We believe our bispecific platform has the potential to deliver additional clinical candidates, including 2, which are expected to enter the clinic later this year, our MUC16xCD3 and our BCMAxCD3 bispecifics.

We're also advancing a new class of bispecific antibodies and hope to share more with you about this new class of bispecifics later this year.

Turning now to fasinumab, our NGF antibody for pain.

An independent data monitoring committee evaluated the ongoing safety and efficacy of the clinical trials and recommended that the higher dose regimens be discontinued based on their risk-benefit assessment and that the program continue with lower dose regimens.

We are modifying the studies accordingly.

We're anticipating sharing top line results from the ongoing Phase III study later this year.

In the interest of time, I will not talk about many of the remaining programs in our pipeline.

Addressing diseases ranging from an ultrarare condition, such as fibrodysplasia ossificans progressiva to highly prevalent conditions involving muscle wasting and metabolic disorders.

Please refer to our Form 10-Q, which has a description of all of our clinical programs.

I will now turn the call over to Marion.

Thank you, George, and good morning, everyone.

It's a pleasure to be on the call today.

This is my first earnings call with Regeneron, and it is a privilege to be part of this wonderful team.

I'd like to start with EYLEA, where global net sales in the first quarter were $1.6 billion.

EYLEA continues to be the market-leading branded anti-VEGF for retinal diseases in the United States.

In the U.S., EYLEA net sales were $984 million, which represented about 70% of the overall branded market.

Our dollar share of the branded market increased slightly year-over-year.

Based on a survey we conducted in the first quarter, we estimate that currently about 70% of U.S. EYLEA net sales come from wet AMD and about 25% from DME, with the balance coming from other smaller indications.

With the aging of our population and the dramatic increase in the prevalence of diabetes, we expect significant future market growth.

Looking ahead, we see 2 major opportunities to grow the EYLEA franchise.

The first is through additional indications, such as diabetic retinopathy, where we recently reported positive Phase III data from PANORAMA study and expect to make a regulatory submission later this year.

If approved, in diabetic retinopathy, we expect that EYLEA could be used in the full spectrum of patients with diabetic eye diseases.

Secondly, diabetic eye diseases are dramatically underdiagnosed and undertreated; and even when treated, it is frequently with sub-optimal therapy.

This is true both for patients suffering from diabetic macular edema as well as from diabetic retinopathy.

We expect that our increased provider and patient outreach and education could result in more patients with DME being diagnosed and receiving therapy in the near term and similarly impacts diabetic retinopathy following potential approval in this indication.

There are also many ongoing efforts both from academia and the industry to develop approaches to identify these patients before they go on to suffer catastrophic vision loss.

A further opportunity to strengthen the EYLEA value proposition is through dosing flexibility.

EYLEA is currently approved for use on a monthly and every 8-week basis.

And we have submitted an application to the FDA for every 12-week dosing in patients with wet AMD with a PDUFA date -- FDA PDUFA date in August 2018.

We recognize that each patient requires a tailored-treatment regimen, and therefore, if this every 12-week label addition is approved, EYLEA will be the only approved drug in wet AMD to have the flexibility to optimally treat patients regardless of whether they require fixed interval dosing of 4, 8 or 12 weeks.

We remind you that our Phase III wet AMD studies, patients were extended to the 12-week dosing interval only after they successfully met treatment goals in more frequent dosing intervals.

Turning now to Dupixent, global net sales in the first quarter of 2018, as recorded by our collaborator Sanofi were $131 million with U.S. net sales of $117 million.

Underlying demand continues to be strong with total prescriptions as well as the number of patients on treatment up approximately 25% sequentially from the last quarter.

Over 500 new patients were added each week during the quarter.

Moreover, we consistently see high persistence rate with over 90% of patients getting their first refill.

And over the course of the first year, approximately 83% of patients who started Dupixent remained on therapy.

Over 10,000 health care providers have prescribed Dupixent through the first quarter and we're beginning to advance depth of prescribing among users, with nearly half of these HCPs having prescribed Dupixent to 3 or more patients.

Dupixent prescribers are highly satisfied, frequently referring to Dupixent as a drug that has been transformational to the lives of their patients and their treatment practice.

We have recently commenced airing a national disease state awareness TV advertisement in order to increase awareness of atopic dermatitis and to encourage appropriate patients to seek further treatment.

We also plan to launch (technical difficulty) on-air direct to consumer campaign in the second half of the year.

We have high expectations for Dupixent and are optimistic about continued growth in the U.S. market in adult atopic dermatitis and multiple planned launches throughout the world in this indication.

In addition, we also anticipate meaningful opportunities for Dupixent in adolescent and pediatric atopic dermatitis, in adult and pediatric asthma and in other indications, such as nasal polyps and eosinophilic esophagitis.

U.S. Dupixent net sales in the first quarter were impacted by trade inventory movements and to a lesser extent high patient assistance program cost, which are typical in the beginning of the year for specialty care products.

We believe that a much better metric for assessing the launch and product potential at this point is to look at the total growth of prescriptions and the increase in new patients added, both of which were increased by 25% sequentially quarter-over-quarter and the high persistence rates.

As you heard from both Len and George, we've completed a regulatory submission for Dupixent in the asthma indication with our anticipated FDA PDUFA date in October 2018.

We along with our collaborator, Sanofi, are preparing for an anticipated launch in this indication later this year.

Turning to Praluent.

Global net sales in the first quarter, as recorded by our collaborator, Sanofi, was $60 million.

We're very pleased with the positive data from the cardiovascular outcome study.

We've continued to work with payers to implement our new commercial strategy, and just earlier this week, we announced a payer agreement in which Praluent was selected as the exclusive PCSK9 inhibitor on the Express Scripts' National Preferred Formulary.

Regeneron and Sanofi have agreed to significantly reduce the net price of Praluent in return for straightforward access for appropriate patients and easing out-of-pocket cost.

We continue to engage productively with several other payers.

We plan to make a submission to regulatory authorities by midyear based on the cardiovascular outcomes data.

Global net sales of Kevzara, as recorded by our collaborator, Sanofi, were $12 million in the first quarter.

Kevzara is our IL-6 or antibody for rheumatoid arthritis.

Although the RA market is crowded, it represents significant opportunity, and we believe that Kevzara has a well-differentiated product profile, most notably, the improvement in radiographic disease progression.

We have been working with payers to secure improved access for Kevzara.

Simultaneously, we continue to work on driving the breadth and depth of prescribing across all health care providers.

In immuno-oncology, our team is moving full speed ahead in preparing for the potential U.S. and EU approvals of our PD-1 antibody cemiplimab as the first treatment for advanced cutaneous squamous cell carcinoma or CSCC.

This week, we announced that the FDA accepted for priority review our Biologics License Application for cemiplimab in CSCC with a PDUFA date in October 2018.

A regulatory application in this indication has also been accepted by the European Medicines Agency, and we expect a decision in the first half of 2019.

In the U.S., we have hired and are training an experienced and specialized field-based team to ensure that we are ready to launch immediately following approval.

Cemiplimab is a collaboration product with Sanofi, where in the U.S. we'll be taking commercial lead and record sales.

In just 3 short years, we've gone from initiating our first immuno-oncology clinical study to potentially having our first immuno-oncology treatment approved.

Ultimately, our efforts to advance cemiplimab as quickly as possible come down to the significant unmet need facing patients with advanced CSCC and our commitment to giving them an effective treatment option.

CSCC is the second most common skin cancer worldwide.

It's estimated about 750,000 patients are diagnosed annually in the U.S. The vast majority of these patients somewhere between 96% and 98% are cured by surgery.

Even so, this leaves thousands of patients with unmet need.

While estimates vary, they suggest that between 4,000 to 8,000 patients die annually.

Today, there are no FDA- or EMA-approved treatments for advanced CSCC and these patients currently face a hard and long treatment journey.

We look forward to sharing updated data from both our Phase I and Phase II CSCC clinical studies this June at ASCO.

Among the accepted abstracts, are a first look at our proof-of-concept data for cemiplimab in non-small cell lung cancer, and a trial-in-progress poster for our anti-LAG3 candidate REGN3767, which is being studied as both the monotherapy and in combination with cemiplimab.

And with that, I turn the call to Bob.

Thanks, Marion, and good morning, everyone.

During today's call, I'll discuss our first quarter 2018 financial performance and provide updates to our full year 2018 guidance line items.

Regeneron's first quarter 2018 EPS of $4.67 per diluted share, on non-GAAP net income of $537 million has established a solid start for the year.

These results represent a 60% and 59% year-over-year increase in our non-GAAP diluted EPS and net income, respectively.

As a reminder, Regeneron's first quarter 2018 non-GAAP net income excludes noncash share-based compensation expense, and beginning in this quarter, the changes in fair value of equity investments recognized in accordance with the company's recent adoption of Accounting Standards Update 2016-01.

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

Total revenues grew 15% year-over-year to $1.51 billion, driven by continuing strength in our flagship EYLEA franchise and higher contribution from commercialization of Dupixent.

Partially offset by a lower revenue contribution from Sanofi in connection with the discovery and preclinical development agreement that ended on December 31, 2017.

EYLEA net product sales in the United States grew 15% to $984 million compared with $854 million net sales in the first quarter of 2017.

U.S. EYLEA distributor inventory experienced a modest increase as compared to the fourth quarter of 2017, yet remained within our normal 1- to 2-week targeted range.

Additionally, U.S. EYLEA's gross to net percentage increased compared to first quarter 2017 due to slightly higher rebate provisions for government and commercial programs.

Ex U.S. EYLEA net product sales, which are recorded by our collaborator Bayer, were $624 million for the 3 months ended March 31, 2018, representing an 18% operational and 29% reported increase on a year-over-year basis.

In the first quarter of 2018, Regeneron recognized $232 million from our share of net profits from EYLEA sales outside the U.S. compared to $175 million in the first quarter of 2017.

Total Bayer collaboration revenue was $248 million in the first quarter of 2018 as compared to $194 million in the first quarter of 2017.

Total Sanofi collaboration revenue was $189 million for the first quarter of 2018 compared with $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 the recognition of the deferred revenue from the immuno-oncology upfront payments, partly offset by our share of losses in connection with the commercialization of antibodies.

A significant driver of the year-over-year decrease in Sanofi collaboration revenue was the 2017 expiration of the discovery and preclinical development agreement.

We recorded $48 million of revenue in the first quarter of 2017 related to reimbursements of our R&D expenses from this agreement as compared to no revenue this quarter.

Offsetting this revenue decrease was higher Sanofi R&D reimbursement revenue associated with our increased investment in immuno-oncology and a decrease in our share of losses in connection with a commercialization of Dupixent, Praluent and Kevzara, which were $75 million loss in the first quarter of 2018 as compared to a loss of $108 million in the first quarter of 2017.

The lower share of loss was primarily attributable to Dupixent's first quarter 2018 sales in comparison to no sales in the first quarter of 2017, given the late March 2017 U.S. launch.

Global sales of Dupixent, Praluent and Kevzara as recorded by our collaborator Sanofi for the first quarter of 2018, were Dupixent $131 million, Praluent $60 million and Kevzara $12 million.

The split of U.S. and rest of the world net sales for these collaboration products is set out in our press release.

In the first quarter of 2018, other revenue was $86 million versus $56 million during the first quarter of 2017.

This increase was primarily due to reimbursements from our collaborator, Teva, for the continued development of fasinumab, our NGF antibody, in the recognition of deferred revenue associated with this program from Teva and Mitsubishi Tanabe Pharma.

As a reminder, you can find a 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 $458 million for the first quarter of 2018 as compared to $434 million for the first quarter of 2017.

The increase in non-GAAP R&D expense was the result of the continued late-stage clinical development for cemiplimab and fasinumab programs offset by lower clinical manufacturing costs.

Our non-GAAP unreimbursed R&D expense, which is calculated as the total non-GAAP R&D expense less R&D reimbursements from our collaborators, was $278 million for the 3 months ended March 31, 2018, compared to $188 million for the 3 months ended March 31, 2017.

This increase was primarily driven by the expiration of the discovery and preclinical development agreement at the end of 2017, resulting in lower reimbursements received from Sanofi during the first quarter of 2018, offset by higher reimbursements received from our collaborators for cemiplimab and fasinumab.

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

We are tightening our full year 2018 guidance for non-GAAP unreimbursed R&D expense to be $1.23 billion to $1.31 billion from our previous guidance of $1.23 billion to $1.33 billion.

Next, non-GAAP SG&A expense was $296 million for the first quarter of 2018 as compared to $243 million for the 3 months ended March 31, 2017.

As noted in our February 28 earnings call, we originally guided to higher SG&A this year compared to 2017 due to the ongoing launches in Dupixent and Kevzara, an increase in EYLEA commercialization expense, with an increased focus on diabetic eye disease as well as commercialization expenses for the anticipated 2018 U.S. approvals for cemiplimab in CSCC and dupilumab for asthma.

Although we still expect higher non-GAAP SG&A in comparison to full year 2017 for the reasons explained above, due to lower first quarter 2018 G&A and Praluent commercial expenses and lower forecasted SG&A spend in the second half of the year, Regeneron is tightening and lowering our full year 2018 non-GAAP SG&A expense to be $1.325 billion to $1.395 billion from our previous guidance range of $1.35 billion to $1.45 billion.

Sanofi reimbursement of Regeneron commercialization related expenses, a line item found within Sanofi collaboration revenue was $87 million for the first quarter of 2018.

We are tightening our full year 2018 guidance for reimbursement of Regeneron commercialization-related expenses to be $450 million to $485 million from our previous guidance of $450 million to $500 million.

Turning now to taxes.

Our effective tax rate in the first quarter of 2018 was 18% compared to 42% for the first quarter of 2017.

The difference was primarily driven by the enactment of the Tax Cuts and Jobs Act, which lowered the U.S. corporate tax rate as well as improved results from our international operations as compared to the first quarter of 2017.

As we continue to assess the full impact of the Tax Cuts and Jobs Act and await additional regulatory guidance, we now expect our full year 2018 effective tax rate to be 15% to 18% versus our previous guidance of 15% to 19%.

Our first quarter 2018 effective tax rate was lower than the new U.S. federal statutory rate of 21%, due to the new foreign-derived intangible income deduction and the federal tax credit for research activities.

Over the next few years, we would expect Regeneron's effective tax rate to stay consistent with 2018 guidance in the mid- to high teens.

Future regulatory guidance under the Tax Cut and Jobs Act in variability of deductions for stock-based compensation could impact our future effective tax rate.

Now to cash flow and the balance sheet.

Regeneron ended the quarter of 2018 with cash and marketable securities of $3.4 billion and generated free cash flow in excess of $500 million.

Our capital expenditures for the 3 months ended March 31, 2018, were $79 million.

As a result of first quarter's spend levels and a revised full year forecast, we are tightening our full year 2018 capital expenditure guidance to be $420 million to $480 million from our prior range of $420 million to $500 million.

Significant 2018 capital projects include the expansion of our manufacturing facilities at Rensselaer, New York, and Limerick, Ireland as well as continued renovations and expansion of our laboratory space within our Tarrytown, New York facility.

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

Thank you, Bob.

Operator, this concludes the prepared remarks portion of our call today.

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

(Operator Instructions) And first we have Ying Huang from Bank of America Merrill Lynch.

So maybe Len and George, since you elaborated more about the PD-1 plans, given the recent data from Merck's KEYTRUDA and Bristol's OPDIVO in first-line non-small cell lung cancer, how do you think your molecules would behave?

Is it because you are designing the molecule in such a way that it is going to be more potent even than both?

Or are you trying to explore a better combination strategy for PD-1?

And then quick one on fasinumab.

Can you just elaborate a little more what causes the high dose to be dropped?

[Is it also the same study that we see], which is osteonecrosis?

George?

Yes, this is George.

Thanks for the question.

I think that as we try to line up, it is really pretty sobering that despite all the excitement and advances with PD-1 and PD-L1, right now the most important setting and indication where they seem to be active in terms of the number of patients, which is first-line lung cancer.

As we all know, the data from the PD-L1s has been quite disappointing.

And even with OPDIVO, if you actually look at the data, it, by far, fails to meet the bar of KEYTRUDA.

So right now, unbelievably enough, there is only one, in our opinion, clear leader in the first-line lung cancer space.

And what we try to explain is that we've designed a series of studies, which will test whether our molecule is in that class, is in the class of KEYTRUDA.

We do believe, as you said, that we have a great technology that has succeeded in the past in delivering some of the first and best-in-class molecules, this VelocImmune technology.

And on top of that, as we've already described, we have this very impressive and comforting data in the squamous cell carcinoma indication, which has some of the best data ever described in solid tumor settings for a PD-1 agent.

So these combine to give us a lot of hope that our first-line cancer studies are going to deliver on the order of KEYTRUDA-like data, which would make us basically a real major competitor in this space.

So we are very excited about the opportunity, and we're very hopeful that the molecule in the studies will come through.

In terms of your second question about fasinumab, as you already pointed out, there is a -- this is a high-risk, high-reward program, as we've described in the past.

It's pretty well demonstrated that the molecule has activity, but it also has certain side effects.

It's not osteonecrosis, it's more defined as rapid progression of the osteoarthritis in some patients.

And this is something that obviously has been seen with this class and with our molecule before.

And so what the Independent Data Monitoring Committee did was, they obviously took an analysis to look at the benefit and the risk that is the therapeutic benefit compared to their analysis of the risk coming from these rapidly progressive osteoarthritis events, and they decided that we should terminate the upper 2 doses and continue with the 2 lower doses.

And so we are planning to modify the studies consistent with their recommendations.

I just wanted to add, Ying, that -- I think George said it and I said it, but it's worth saying again is that the potential for combinations with PD-1, based upon bispecifics that you are aware of as well as new class of bispecifics that we'll talk to about later this year in our proprietary models, is pretty exciting for us.

So it's not only the monotherapy, although clearly the monotherapy is a huge opportunity as evidenced by the $12 billion run rate, the majority of which is a single immuno-oncology agent with or without chemotherapy in lung cancer.

Right.

And when we use the term monotherapy, we should sort of -- we're almost bundling monotherapy and traditional therapies like chemotherapy.

Because as we describe, many of our studies are in combination with existing therapies.

And as Len said, we also have these new combination approaches that we're excited about.

Next, we have Carter Gould from UBS.

Obviously, a lot of focus on Dupixent after your partner reported last week.

Can you maybe just give a little bit more detail on the commercial dynamics you're seeing, namely persistence on therapy?

And I guess, for Marion, whether -- how we should be thinking about IMS data as being predictive of the trends you're seeing in the market landscape?

I'll let Marion answer that question, but we don't get as bogged down as you do in trying to predict the exact quarter sales.

We're looking at the metrics, as Marion said, is how is the launch going.

And I'll let Marion reinforce her earlier comments.

Sure.

Let me take, Carter, the persistence question first.

And as I mentioned in 2 pieces, both very, very encouraging signs on persistence.

First is that we see patients 90% of the time get refills after their first script.

So that was one metric that I gave.

The second one I gave was looking over a longer period of time of persistence and that was, over the course of time since launch, patients on therapy over that duration at 83%.

So 2 metrics, both quite encouraging.

I think the other comment is you're talking about some of the other data metrics that we would say is that, what we're seeing in terms of demand and performance on the product, is -- including the NBRx profile, is very consistent with our long-term growth projections for Dupixent.

So we are on pace as I mentioned with the NBRx number or new patient scripts on a weekly basis at about 500 per week through the quarter, that's 2,000 new patients a month getting their prescriptions filled for Dupixent, and we see that as a very strong growth signal.

Certainly, we're going to work to continue to advance performance but we see that demand going very well at this stage.

And we should just reinforce that once you just try to look across other agents at what the persistent rates are over the course of the year, these numbers are really quite impressive and speak to the need and how satisfied patients are with the treatment.

We have Terence Flynn from Goldman Sachs.

Maybe as we think about your immuno-oncology strategy, when might we see some initial combo data?

And really is the big push here on the bispecifics?

Or are you looking at other approaches as well?

And then the second part of that is, you guys have had a somewhat disruptive approach to pricing of your drugs.

Is that how we should think about cemiplimab as well?

Well, maybe George will take the first part and then Len will take the second part.

But -- so this is George.

We're obviously very excited about this sort of dual opportunity of cemiplimab and of our bispecifics both individually and in combination.

But as you also just pointed out, with cemiplimab, we have just with that a sort of dual approach of combining with a series of more traditional agents, as I described, traditional chemotherapeutic agents.

Other checkpoint inhibitors including others and our own as well as things, for example, that we're collaborating with other people, such as certain types of vaccines and so forth.

So that's one whole set of combination opportunities with cemiplimab.

We have the bispecifics, which by themselves can be used individually or with existing therapies but also combinations with the cemiplimab, and we -- I think have already announced that we have already started dosing patients with our first bispecific and PD-1 in combination.

And we hope that we'll be seeing data and be reporting on that as well.

But the very exciting aspect of this for us is every one of our bispecifics can be evaluated individually, but also we believe in combination with cemiplimab and other checkpoint inhibitors as well as with other agents and as well as with this new class of bispecifics that Len mentioned we will be disclosing over the course of the year.

And in terms of price, Terence, obviously -- and if you're thinking about trying a model our opportunity both in CSCC and how we will compete elsewhere, first of all, I might just say in CSCC, you have to think about the fact that there is a reasonable size patient populations, although it's hard to know because there hasn't been an approved treatment for advanced disease.

And also, you should go back and look at our data.

We can remind you later that we have very long duration of therapy, and many patients are still on drug as of the last update.

So that plays.

In terms of the actual price, we like to price towards value.

These are, I think, high-value molecules to patients.

And we'll let you know what we come out with when we do.

We have Geoffrey Porges from Leerink Partners.

Len, the question is, could you address some of what (inaudible) of Regeneron?

Things like no long-term guidance, no buybacks or dividends, no price increases, no product acquisitions.

Given the fact that the company has lost more than 40% of its value over the last year, are you and the board reconsidering any of these sacred cows?

So let's take them one-by-one.

I'm not sure -- I got to write them down.

You said product acquisitions, what else did you say, Geoff?

Price increases, buyback or dividends, long-term guidance.

Slowdown, slowdown.

I can't write that fast.

Price increases, buybacks, go ahead.

Buybacks or dividends, long-term guidance.

Guidance.

Okay.

So let's go -- let's take the easy ones.

We have 6 approved drugs and 17 in the clinic.

We have, what I think of as one of the most prolific R&D engines in the industry, and we are not nearly as desperate as other companies are to fill up gaps in the pipeline.

So it would be sort of senseless for us to compete in the market where people are dramatically overpaying, and we have a tremendous pipeline of our own.

It doesn't mean we don't want to work with other companies.

You're going to hear more opportunities for us to leverage the capabilities that we do with what other companies can do in some very exciting spaces we're working on.

But in terms of just going out and buying a Phase III molecule that treats Parkinson's disease, buy some small molecule mechanism that would just make no sense for us.

And I think as Len mentioned, Intellia and Alnylam are very interesting examples, where we are, as Len said, leveraging our internal research capabilities with something that somebody else brings to the table, which we believe is very synergistic.

In terms of guidance, we try and give guidance where the knowledge is asymmetric.

But we don't think, Geoff, to be frank, it's our job to try and guess things that we don't have any more information about than you guys have.

And we also don't want to spend a lot of the -- of our internal team's intellectual horsepower trying to guess what a given number of patients will be.

That's kind of why you guys are overpaid.

You are supposed to make those guesses.

So we don't have -- Bob gives a lot of guidance on things that you don't have information about, and then there was a ton of it in there, but to give you product guidance and make guesses, I don't know, we don't want to get in that game because that's not what really the game that the board is in or the company.

In terms of price increases, this is not an environment where you can take price increases easily.

We have felt that growing by price increases is not our strategy.

We drive the growth by fundamental increase in the penetration or diversity of patients that can be on our approved drugs or bring new drugs to market, taking small price increases consistent with inflation or medical inflation is perfectly reasonable.

But we don't want to be participating in the undoing of the industry where there's so much enmity towards us and there's so much potential for bad government action.

Egregious price increases are not a strategy we think are worth deploying.

In terms of capital allocation, I can assure you that the financial team and the board looks at this on a regular basis.

We're well aware of all the data.

We are data-driven.

We know what you can do with dividends with buybacks, with acquisitions, with bolt-on acquisitions, with internal discovery, with partner discovery, keeping money in the bank.

We've got them all, and we study them all.

And I think we'll tell you about them as our strategy does or does not [involve].

I think that covers your list, Geoff.

We have Matthew Harrison from Morgan Stanley.

I guess if I could just ask a couple of the underlying trends on EYLEA for the quarter.

You talked about DME growth, again, I mean -- can you just describe how you see that market growing?

And if that market's growing faster or slower than the AMD market still?

And then just talk a little bit about, I mean, in past first quarters, you've seen some underlying dynamics either from patients finding it harder to get to the doctor or things like that due to weather?

Maybe you could just describe if there are any of those issues in the quarter?

It's always hard to know.

We had a good quarter with EYLEA, despite the fact that there was some transient concern about intraocular inflammation, which based on our monitoring now has returned to background levels, and we don't seem to have had any significant impact on the business there, which we are pleased with.

The product grew year-over-year.

I don't think we've really yet made the big push in diabetes because we have a good approval for DME and that patients do kind of get to the doctor, although there are a lot that don't.

But we're looking to get the broader indication for diabetic retinopathy, and then in concert with that have a much bigger push to get patients to the doctor, hopefully, to have their diabetic eye disease treated.

We do see -- so we haven't seen a big growth yet in diabetes, but we still see it.

I should emphasize that -- while I said that AMD is well penetrated, it's still growing by demographics.

And we're seeing an overall growth in the AMD market because more and more people are living longer, and so there are more and more people getting age-related macular degeneration.

Okay?

We have Phil Nadeau from Cowen and Company.

Maybe to follow up on those questions, 2 longer-term questions on EYLEA.

The first on non-proliferative diabetic retinopathy.

In theory, it's a large market, although our consultants said, it may be hard to get anti-VEGF adoption there.

So can you talk about your plans to try and change the standard of care, in particular any patient populations within that larger group that would be most susceptible to anti-VEGF therapy?

And then second on the competition you've alluded to in your prepared remarks, we did see some new data from brolucizumab this week.

Could you give us your perspectives on that data?

Yes.

So in the diabetic retinopathy, the needle mover from the people we talk to will be not simply or only the important thing of improving the diabetic retinopathy but to prevent the onset of vision-threatening diabetic retinopathy, the vision-threatening complications, the sight threatening.

And then we're going to be able to look at those data from a PANORAMA study later this year.

But I do think that this is like any other market.

I mean, if you go back -- I remember our Chairman, Roy Vagelos, told me that when he launched the first statin, the cardiologist told him, "Well, there is no real need for a statin.

We can control all of that with diet and exercise" and that was the prevailing view.

So there is work that you have to do to change the practice of medicine based on data.

It doesn't happen overnight.

It takes really strong data, a really strong commercial effort.

We're really excited how Marion has integrated so quickly into the organization, and she has taken that on as something that's really important to us.

So we're looking forward over the years to come to have success in that area.

There was a recent approval by the FDA by a small company of a untethered device, that is a device that could diagnose diabetic retinopathy and whether or not you should urgently see a retinal specialist merely by -- that could sit in a drugstore, it could sit in your general practice office, it could sit in your ophthalmologist, it could sit with the optometrist and it's been approved.

It doesn't need a doctor to administer.

You just take a non-dilated picture of the retina and so -- and they found sort of striking data, which the FDA approved the drug on.

And I think more to come about how underdiagnosed this condition is when you have a powerfully broad screening.

And there are a lot of other efforts just to do the exact same thing, in terms of machine learning or as you call it, artificial intelligence.

So we think that -- and when you have a treatment, and we have the broad label, then you can start to push at the front end of the people who could really benefit, and I think there's a lot of them.

In terms of the RTH data, didn't see it very much new there.

What I heard about was that, I think, it was in the mid-80s percentile of those people who went on to the 12-week data could stay on the 12-week data.

But at the end of the day, you can slice this data up any which way you want.

You're still getting about 50-odd percent of people who can go to every 12 weeks, and based on -- and they haven't identified people because if you look carefully, the people who don't succeed at 12 weeks are the ones that lost -- I think a significant amount of vision was one of the criteria.

So I think we have to see how all that plays out, what the label really looks like.

And certainly, we wish them luck because we do -- because I know they're listening to what I say, so good luck to them.

But I also would say that if something comes along that can help patients, that's okay with us.

EYLEA is a high bar, and people should be chasing that, we hope, for years to come.

George, wanted to add one thing.

Yes.

I wanted to expand on one thing that Len said.

And Phil, you referred to the fact that in some ways doctors are perhaps a little cautious about treating patients with diabetic retinopathy and they have views on that.

I think one key aspect of the studies that we're undertaking right now sort of like what we did with Praluent, is to define the patients who are at the highest risk of vision-threatening complications.

So you might imagine that everybody, patients and doctors, would be much more interested in using a very effective preventative therapy if they knew they had a very, very high risk of having a catastrophic event that could cost them their vision.

So a part of the aspect of our studies is not only to show that we're effective at preventing these events but identifying the segment of the population that is at highest need for needing such a therapy because they are at such a high risk.

Next, we have Cory Kasimov from JPMorgan.

I wanted to ask about how we should be thinking with regards to the reimbursement landscape with PCSK9s going forward?

Should we expect more exclusive contracts with payers similar to the one announced with ESI?

And maybe more broadly along those lines, are you getting the sense of how payers are thinking about the best way to define a high-risk patient population that would benefit most from Praluent?

So this is obviously a highly competitive space.

There is another PCSK9 inhibitor out there obviously.

So we can't sort of peel back too much, but we are excited about the fact that there is a possibility to improve the access.

Make it easier for patients to get the prescription that the doctor writes, that it will be approved and make it so that patients can afford it.

We also -- the third pillar of all that, which I don't want to get lost, is we want to make sure that there is some profit left for the innovators, on both sides, so that we don't wind up racing to a place where there is no profit.

So it's a delicate competitive marketplace.

That's about all we can say out there, but we're working hard to get access and affordability.

And also, in the interest of time, this will be our last question but we will be available to answer questions following this call.

So please send me an e-mail, and we'll set some time up for a follow-up call.

We have Geoff Meacham from Barclays.

We didn't hear you.

Great, last question.

Geoff, we lost you.

Well, let me ask the question for Geoff.

That was a great quarter, Len, thanks very much for all of that, and it's fairly self-explanatory.

All right.

I think that wraps it up.

Operator, that concludes our call today.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for participating, and you may now disconnect.