雷傑納榮製藥 (REGN) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Regeneron Pharmaceuticals Third Quarter 2020 Earnings Call. (Operator Instructions)

I would now like to hand the conference over to your speaker Justin Holko. Please go ahead, sir.

Thank you, Deborah. Good morning, good afternoon and good evening to everyone listening around the globe. Thank you for your interest in Regeneron Pharmaceuticals, and welcome to the third quarter 2020 conference call. An archive of this webcast will be available on our website. Joining me on the call today are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Senior Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Commercial -- 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 today's call include forward-looking statements about Regeneron. Such statements may include, but are not limited to, those related to Regeneron and its products and business, financial forecasts and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, as well as intellectual property, pending litigation, other proceedings 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, including its Form 10-Q for the quarterly period ended September 30, 2020, which has been filed with the SEC today. Regeneron does not undertake any obligation to update 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, Justin, and thanks to everyone joining today's call. In the third quarter, Regeneron delivered another strong financial performance of double-digit top and bottom line growth while achieving numerous milestones in our research and development pipeline and making remarkable progress against COVID-19 with our novel antibody cocktail.

Importantly, our growth and financial strength is being fueled by an increasingly diversified set of revenue and earnings streams while we invest in R&D for the long term. Furthermore, our results show the importance of products that meaningfully address serious medical needs and have the power to transform lives even during a pandemic. EYLEA is a great example. EYLEA Global net sales were $2.1 billion in the quarter and grew 9% compared to the same period last year. In the U.S., sales rebounded from second quarter COVID lows to $1.3 billion and grew 11% versus prior year. The efficacy, safety and convenience that EYLEA offers in protecting eyesight had proven to be highly valued by treating physicians and their patients as the product again outperformed the anti-VEGF market for retinal diseases.

Next, we continue to build momentum with Dupixent as we and Sanofi recorded our first ever quarter of more than $1 billion in sales. This milestone speaks to the power of Dupixent across a broad array of type 2 inflammatory diseases and to our team's ability to execute despite COVID-19. Adding to this momentum, we've recently announced results from another successful Phase III trial, this time in pediatric asthma. We are eager to submit these data for regulatory review and expect that Dupixent will remain a robust and durable growth driver for years to come.

In oncology, we are solidifying our leadership position in cutaneous squamous cell carcinoma. Additionally, the FDA has granted priority review for our regulatory filings in lung cancer and basal cell carcinoma as we prepare for potential launches in these indications early next year.

Regeneron is also making critical advancements in the treatment of infectious diseases. Last month, the FDA approved Inmazeb, the first-ever treatment for Ebola virus infection. Building upon our work in Ebola, our team and rapid response technologies have developed our novel REGN-COV2 antibody cocktail in the fight against COVID-19. Last week, we announced another major data set from our outpatient study that showed our antibody cocktail significantly reduced viral loads as well as medically attended visits, such as emergency room visits and hospitalizations. We have submitted these data to regulators and eagerly await guidance on next steps.

In closing, we could not be prouder of our teams and everything they have been able to achieve across the organization in the third quarter and in 2020 to date. Our momentum is accelerating with an impressive growth profile. In 2021, we look forward to building upon that momentum with several important launches for Libtayo, Dupixent and other programs, further enhancing our diverse growth platform. We are excited by the progress we are making against COVID-19, and we are confident that our investments in R&D to broaden and advance our pipeline across all stages will position Regeneron well for sustained growth.

Now I'll turn the call over to George.

Thanks, Len. And as Len just pointed out, we are advancing programs across all stages of our diverse and growing portfolio.

With the pandemic unfortunately still raging and even escalating, we know there's a lot of focus on COVID 19, and we will start with our REGN-COV2 program. From the beginning, there was a lot of attention to our efforts against the coronavirus because of our success using a similar approach with Ebola. As you just heard from Len, we received FDA approval for our Ebola cocktail that our team delivered, validating our approach for not only this, but other deadly infectious diseases and particularly COVID-19. We're investigating REGN-COV2, our antibody cocktail for COVID-19 in infected patients as well as for prevention in several ongoing clinical trials.

Earlier this year, we released a descriptive analysis of the first 275 patients in the REGN-COV2 seamless Phase II/III trial in ambulatory patients. Importantly, we obtained insights into the natural history of COVID-19 from these early data. Large numbers of patients normally generate their own antibodies against the virus early on, and this robust endogenous immune response is associated with rapid clearance of the virus and decreased need for medical attention. That's why most patients do so well. However, some patients are slow to mount an immune response and are at higher risk for attended medical visits.

In line with this observation, our initial analysis show that providing our exogenous antibody cocktail did not provide much benefit to the fast responders, but it benefit those who did not mount their own immune responses efficiently, allowing REGN-COV2 to clear virus more rapidly and decrease the need for future medical attention in these otherwise slow responders.

Last week, we provided important updates from this ongoing study in ambulatory COVID-19 patients. In a formal statistical way, we presented prospective validation of our earlier observation in a confirmatory analysis involving more than 500 additional patients. Data showed significant viral load reductions in patients treated with REGN-COV2 compared to placebo. And consistent with earlier data, these results were driven by the patients who had not mounted their own effective immune response at the time of treatment or had high viral loads at baseline. Importantly, results in the combined analysis of the first 799 patients enrolled in the study demonstrated a statistically significant reduction in medically attended visits, including hospitalizations and emergency room visits.

This effect was most prominent with patients with high risk factors, high viral loads and those who had not yet mounted their own immune response. We shared these data with the FDA as an update to our EUA submission and await regulatory feedback.

We are investigating the potential benefit of this REGN-COV2 cocktail in different stages of disease in our other ongoing studies, our household contact study, which is testing the cocktail as a prophylactic treatment, and it has enrolled approximately 1,000 patients to date. In hospitalized patients, we have 2 ongoing studies, our study as well as the U.K. RECOVERY Protocol.

All Regeneron-sponsored COVID-19 treatment trials are being supervised by the same independent data monitoring committee, which recently recommended that we pause enrollment in 2 cohorts representing the most severe hospitalized patients, while recommending that all our other studies continue as initially designed, including the 2 less severe patient cohorts in our hospitalized patient study. Since the lower of the 2 REGN-COV2 doses demonstrated the activity comparable to the higher dose, suggesting that both doses maximize the benefit of this approach, we intend to investigate even lower doses going forward. If effective, this could allow us to extend the benefit of our cocktail to even more patients.

As we await next steps on the regulatory front, we continue to ramp up production for REGN-COV2. Under our U.S. government agreement, we now expect to have 2.4-gram treatment doses ready for approximately 80,000 patients by the end of this month, 200,000 total doses ready by the first week of January and approximately 300,000 total doses ready by the end of January. We continue to increase our in-house production capacity for further doses of REGN-COV2 and are thrilled to be partnering with Roche to substantially expand global capacity of REGN-COV2 as their production comes online early next year.

Moving on to Dupixent.

We recently announced positive Phase III data in asthma for children ages 6 to 11. In this study, Dupixent reduced severe asthma attacks by up to 65% versus placebo over one year, and Dupixent also rapidly and sustainably improved lung function in these children. We are planning to file these data with regulators early next year. Additionally, in Europe, we received a positive CHMP committee recommendation for Dupixent in atopic dermatitis in children ages 6 to 11. The Dupixent clinical program continues to progress and expand across a wide range of type 2 inflammatory conditions.

In September, the FDA granted breakthrough therapy designation for Dupixent in eosinophilic esophagitis based on early Phase III results, which were recently presented at medical meetings. Before the end of the year, we expect to report Phase II data of Dupixent in combination with oral immunotherapy for peanut allergy. Additionally, Phase III studies are ongoing in several additional dermatology and pulmonary indications with readouts expected in 2022 and 2023, and we expect to begin additional Phase III pivotal trials by the end of the year. Putting this all together, Dupixent will soon be pivotal trials for 8 type 2 diseases that are not currently in the label and could address disease in nearly 1 million additional patients in the United States alone.

Dupixent is also an important part of our 2-pronged approach against chronic obstructive pulmonary disease, or COPD, along with etokimab, our anti interleukin-33 antibody. Based on achieving a prespecified efficacy milestone in an interim analysis of our first Phase III study in type 2 COPD, we initiated a second Dupixent Phase III study. Data readouts are expected in 2023. We believe that our anti IL-33 antibody could help an additional group of COPD patients beyond those with type 2 disease.

Based on a proof-of-concept data that has been submitted for publication, we believe that blocking IL-33 could be especially useful in the former smoker COPD patient subset. The pivotal etokimab program, consisting of 2 parallel Phase III studies, will initiate by year-end. We hope that Dupixent and etokimab can provide real benefit for the many desperate patients suffering from COPD.

Moving on to oncology and first Libtayo. At the European Society for Clinical Oncology, the ESMO meeting in September, we shared results of our first pivotal -- of our pivotal first line non-small cell lung cancer study as well as our locally advanced basal cell carcinoma or BCC study. These data are now filed as supplemental label applications with the regulators with the FDA recently awarding priority review for approval of Libtayo as a monotherapy in a proposed lung cancer indication with an action date of February 28, 2021.

We also announced that we completed enrollment in the Libtayo chemotherapy combination trial in first line lung cancer with first results from this study available as early as next year. Also, the BCC results presented at ESMO showed that Libtayo has the potential to be the first approved treatment with a clinical benefit in the advanced BCC setting following failure of a hedgehog inhibitor. The FDA granted a priority review for our BCC filing with an action date of March 3, 2021. We continue to make significant progress with Libtayo as a foundation to our oncology strategy.

Moving on to our oncology bispecific efforts. We are in a pivotal program in non-Hodgkin's lymphomas for our CD20xCD3 bispecific odronextamab, also known as REGN1979. We are working towards initiating a pivotal program for REGN5458, our BCMAxCD3 bispecific for relapsed/refractory multiple myeloma. And in solid tumors, dose escalation for REGN4018, our MUC16xCD3 bispecific continues in the first-in-human study in ovarian cancer in which we are observing preliminary evidence of activity.

We are excited about the encouraging data we are observing in the studies of our CD3 class of bispecifics. However, we believe that our key potential advantage over other approaches is our ability to mix and match these CD3 bispecifics with not only our anti-PD-1, but also with our next class of bispecifics, the novel CD28 or costimulatory bispecifics. Our CD3 bispecifics currently in the clinic are designed to be paired with matching costim bispecifics for targets on a variety of different cancers with the intent to synergistically unleash the power of immuno-oncology more broadly than currently approved treatments.

Our first costim bispecific, PSMAxCD28, in combination with Libtayo for prostate cancer is progressing through dose escalation cohorts, and thus far, the therapy is well tolerated. We will soon start trials with 2 novel costims, MUC16xCD28 in combination with either our MUC16xCD3 bispecific or with Libtayo for ovarian cancer. And our EGFRxCD28 in combination with Libtayo for solid tumors, including in lung, head and neck and colorectal cancers.

The first member of a third class of tumor-targeting bispecifics, our MET X MET bispecific, has recently completed dose escalation and is currently in the dose expansion phase of the first-in-human trial. Remember, this bispecific targets 2 distinct epitopes on the MET oncogene, causing rapid internalization of this receptor and ablation of its signaling. MET mutations are present in 3% to 4% in MET gene amplifications and about another 3% of non-small cell lung cancers.

Across our pipeline, we are pleased with the progress we are making across all stages of our rich oncology portfolio to compete, enhance and extend the power of immuno-oncology to more patients suffering from a wide variety of cancers. Beyond oncology, our pipeline continues to expand. In our C5 program, we will shortly begin dosing healthy volunteers in combination with Alnylam's C5 RNAi inhibitor, cemdisiran.

The goal of the combination approach is to achieve convenient self-administration with a subcutaneous dosage form in addition to the more complete and durable blockade of the complement activation in patients suffering from paroxysmal nocturnal hematuria and other complement-mediated diseases. This will be the first example of a combination of an antibody with an RNAi against the same target. And we believe that this could be the first in a series innovative antibody RNA combination that could change the treatment paradigm in multiple disease settings.

We are also excited about additional collaborative programs with Alnylam, including utilization of their siRNA approach against targets that we have identified through our Regeneron Genetic Center. As Alnylam has just announced, we have initiated dosing in sRNA against one such target, HSD17B13, for the treatment of NASH. Additionally, I want to acknowledge an important milestone for another innovative collaboration we have with Intellia. In the very near term, the first patient should be dosed with the groundbreaking systemically delivered CRISPR/Cas9 gene editing therapy, a potential one-and-done treatment for transthyretin amyloidosis or ATTR.

As the first systemically administered gene editing intervention, we hope that this will provide proof-of-concept for future systemic gene editing efforts. Alnylam and Intellia collaborations represent an important new strategy for Regeneron as we attempt to broaden our efforts in the future of genetic therapies where we combine our capabilities and expertise to help empower those of our partners and to help change the practice of medicine and make new forms of gene therapy a reality.

By the end of this year, we and our collaborators will have introduced 8 new investigational therapies into the clinic, an accomplishment we are proud of in a challenging year. To conclude, we are looking forward to several catalysts over the next several months. We expect imminent updates and additional data readouts on our REGN-COV2 therapy, first regulatory approval for evinacumab by February of next year, approval for first line lung cancer and basal cell carcinoma indications for Libtayo, filing for Dupixent in pediatric asthma and many more to come. It is a very exciting time at Regeneron.

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

Thank you, George. Our third quarter commercial results reflect a solid execution across our core brands, EYLEA, Dupixent and Libtayo. We remain confident that the competitive strengths of our growing and diversified commercial portfolio will carry us through and beyond the COVID-19 environment.

I'm going to begin with EYLEA, which grew 9% year-over-year to approximately $2.1 billion in global net sales. In the U.S., EYLEA grew 11% year-over-year with net sales of more than $1.3 billion as the anti-VEGF demand recovered. In the U.S., EYLEA outperformed the category with shared gains from both branded and unbranded competition. In fact, EYLEA's share of the branded U.S. category grew to more than 70% for the quarter based on volume, and EYLEA remains the #1 prescribed anti-VEGF therapy in wet AMD and diabetic eye disease.

Patient volume increased as those who delayed treatment earlier this year have returned to retina offices. EYLEA's market-leading clinical profile offering dosing flexibility, real-world experience and established safety led to a quicker recovery and stronger growth across all indications than the competition. EYLEA's flexible 12-week dosing regimen in wet AMD and the newly launched prefilled syringe also support EYLEA's market-leading value proposition. We are monitoring the recent spike in coronavirus cases across the country.

In some hotspots, retina offices are beginning to see some modest reductions in patient volume, which may impact future EYLEA demand. That said, retina offices have become highly effective in managing their patients in this environment compared to the early days of the pandemic. In summary, EYLEA had an impressive quarter.

Turning next to Libtayo. Third quarter global net sales grew to $96 million. In the U.S., net sales were $72 million with consistent and steady volume growth aided by the gradual reopening of infusion centers and an increase in breadth of prescribing. Libtayo continues to drive overall market growth in advanced cutaneous squamous cell carcinoma and remains the most prescribed systemic treatment for CSCC. EYLEA remains the anti-PD-1 of choice with nearly 90% market share of the class.

The overall profile of high response rate with many complete and durable responses positions Libtayo for continued growth. To fuel additional growth, we anticipate 2 new potential indication launches in non-small cell lung cancer and basal cell carcinoma in the first quarter of 2021. For basal cell carcinoma, we aim to build upon our success in CSCC and establish Libtayo as the standard of care for non-melanoma skin cancers. We expect Libtayo to be first-in-class and will work to establish it as the standard of care in second line BCC.

Non-small cell lung cancer is the largest opportunity within the PD-1 space with more than 200,000 new diagnosis of lung cancer in the U.S. each year. We plan to leverage our oncology presence as the majority of treatment centers and oncologists are familiar with Libtayo in CSCC. We believe that patients, providers and payers prefer choice in determining the most appropriate treatment.

Libtayo demonstrated an overall survival benefit in a real world, higher-risk population of patients, including patients with stable brain metastases, infections and progressive disease. These data, along with an additional product attributes, support Libtayo as a potential new option for anti-PD-1 monotherapy in the treatment paradigm.

Finally, moving to Dupixent. Global net sales in the second quarter were $1.1 billion, representing 69% growth compared to the prior year.

In the U.S., broad-based growth across all indications contributed net sales of $851 million. Among all specialties, patient visits improved throughout the quarter as the health care field has adapted to treating patients in the COVID environment. Current weekly new patient starts have recovered and are nearing pre-pandemic levels. The 300-milligram pre-filled pen was launched this quarter, providing additional patient convenience and choice. Atopic dermatitis remains Dupixent's largest indication and is a significant growth driver based on its rapid onset, proven efficacy and well-established safety profile.

We continue to expand prescribing across both moderate and severe disease. Despite the impressive growth trajectory since launch, a low percentage of biologic eligible patients have been treated, leaving substantial opportunity for more patients to benefit. Our ongoing launches for both adolescents and pediatric patients are progressing very well. Since the May launch of the pediatric indication, we are seeing encouraging trends, comparable to the adolescent launch where initiations grew rapidly and HCPs were quick to prescribe. Significant runway is evident with approximately 400,000 adolescents and 90,000 children in this country that could benefit from Dupixent therapy.

Moving to asthma, Dupixent continues to perform well in the competitive asthma space based on its clinical efficacy and safety profile. Our national DTC campaign is well underway, and we are seeing an uptick in new initiations. We look forward to submitting our pediatric clinical data to regulators, which could lead to further label expansion and benefit as many as 75,000 eligible children. Additionally, we see strong uptick in chronic rhinosinusitis with nasal polyps.

Since approval last year, patients have been initiated on Dupixent regardless of prior surgery, while the availability of elective surgeries has improved as healthcare facilities have reopened. Demand for Dupixent remained strong among ENTs and allergists. Dupixent is making an important contribution to our business, and we're excited about the significant opportunity for future growth from our in-line business and from new potential indications, age groups and geographies.

In closing, our commercial teams delivered strong performance across our diversified portfolio. We have a set of meaningfully differentiated products that are growing despite COVID-19. Additionally, we will enter a new phase of launches in 2021, including evinacumab for HOFH, pediatric asthma for Dupixent and lung and BCC for Libtayo. These launches will add to our momentum and the significant growth of our business. These are very exciting times at Regeneron.

I'll turn the call to Bob.

Thank you, Marion. For the third quarter of 2020, Regeneron delivered strong based growth on both the top and bottom lines, resulting from continued execution across all aspects of our business. Improving Dupixent profitability and contributions from additional revenue sources highlight the continued diversification of our business.

For the third quarter, total revenues grew 32% year-over-year to $2.29 billion, driven by strong U.S. EYLEA growth and higher Sanofi collaboration revenues as a result of increased Dupixent sales and achievement of a $50 million sales milestone. Non-GAAP diluted net income per share grew 25% year-over-year to $8.36 on non-GAAP net income of $961 million. Since Marion discussed our U.S. EYLEA results, I will start with our Bayer and Sanofi collaborations.

Starting with the Bayer collaboration. Ex U.S. EYLEA net product sales reported to us by Bayer were $780 million, representing a growth of 7% on a reported basis, compared to the prior year and a 22% improvement from second quarter 2020 lows. Total Bayer collaboration revenue was $300 million, of which we recorded $288 million for our share of net profits from EYLEA sales outside the U.S. Total Sanofi collaboration revenue was $353 million in the third quarter. Our share of the profits from the commercialization of non-IO antibodies was $213 million. This compares favorably to profits of $94 million in the prior year, which was primarily driven by higher Dupixent profits. We also recognized a $50 million milestone payment from Sanofi as a result of Dupixent, Praluent and Kevzara ex U.S. sales achieving $1 billion in the trailing 12-month period.

Next, we announced in July a $450 million supply agreement with the U.S. government for batches of REGN-COV2. We record sales as batches are supplied to the government. In the third quarter of 2020, under this agreement, we recorded an initial $40 million of sales for REGN-COV2. We expect that in the fourth quarter of 2020, we will record sales approximating half of the value of this agreement. Sales for the remaining batches are expected to be recorded in the first quarter of 2021. In other revenue, we recorded $159 million versus $37 million in the prior year. The primary driver of this increase is the recognition of $70 million from the U.S. government associated with reimbursements of our Ebola and REGN-COV2 development recognition of $28 million in connection with the Regeneron Genetic Center sequencing a certain number of exomes as well as a reimbursement for ex U.S. supply of Praluent to Sanofi.

Looking ahead to fourth quarter and 2021, we expect the other revenue line to trend lower in the absence of an RGC milestone and reduced reimbursements from the U.S. government on Ebola.

Moving to our expense base and starting with R&D. Non-GAAP R&D increased 35% year-over-year to $629 million, driven by significant clinical development costs for our REGN-COV2 antibody cocktail, higher headcount to support our expanding pipeline, increased clinical manufacturing activities and continued advancement of our partner programs with Alnylam, Intellia and other early-stage partners.

Next, non-GAAP SG&A expense increased 10% year-over-year to $291 million. The year-over-year increase was largely driven by increased headcount as well as commercial costs for EYLEA and Praluent. Cost of collaboration and contract manufacturing was $143 million, compared to $110 million in the third quarter of 2019, primarily due to increased sales of Dupixent. Non-GAAP cost of goods increased 22% from the prior year related to higher sales of Libtayo and the inclusion of sales from Praluent and REGN-COV2.

Turning now to taxes. The non-GAAP effective tax rate was 16.3% in the third quarter of 2020, compared to 13.6% in the third quarter of 2019, primarily due to discrete items to the quarters. Shifting now to cash flow and the balance sheet. Regeneron continues to maintain a strong balance sheet, ending the quarter with cash and marketable securities of $5.9 billion.

Our third quarter free cash flow was negatively impacted by the extension of EYLEA payment terms to support physician offices during COVID. We expect this will reverse in 2021 as payment terms return to normal. Additionally, in the quarter, we issued $2 billion of long-term debt, leveraging historically low interest rates while decreasing our cost of capital. With the issuance of this debt, we expect to incur approximately $45 million of incremental interest expense on an annual basis. Finally, we repurchased $100 million of stock in the third quarter as part of our $1 billion Board-authorized share buyback program.

Now I'd like to spend a few moments to provide updates to our full year 2020 guidance. We updated our guidance on several expense line items where, in many cases, we either lowered or narrowed guidance range. Please refer to our press release for our entire updated 2020 guidance. Specific to R&D. We are revising upward our forecasted 2020 non-GAAP R&D expense to be in the range of $2.42 billion to $2.47 billion.

While we increased R&D guidance on our second call to reflect REGN-COV2 expenses, we have since substantially expanded the scope and enrollment targets across the REGN-COV2 clinical program, which will result in increased expenses in the fourth quarter and into first half 2021. Also, while we are not providing 2021 guidance today, we do expect that 2021 full year R&D expenses will increase to fund an advancing and expanding pipeline as well as early stage partnership assets.

In conclusion, Regeneron's business remains healthy, and we continued to deliver strong year-over-year growth as we diversify our revenue and earnings and advance our robust pipeline. We remain well positioned for future growth with healthy core brands and multiple near-term launches while investing in our R&D engine to drive longer-term growth.

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

Thank you, Bob. Deborah, that concludes our prepared remarks. We'd now like to open the call for Q&A. We have more than 20 callers in the queue. So to ensure that we are able to address as many callers as possible, we will answer one question from each caller before moving to the next. Please go ahead, Deborah.

(Operator Instructions) And we'll go with our first question. We've got Carter Gould with Barclays.

I guess for George and Len, clearly, a lot of enthusiasm around the potential for the costims as we look to some of those readouts. I guess when we look to 2021, are we going to have a clear signal if these are living up to their promise in 2021? I know moving through some of these dose escalations takes time, but do you guys have confidence we'll be in a position to have a clear read on if they're living up to their hype next year?

Well, it all depends on, as you said, these dose escalation studies, how they progress and proceed, we certainly hope that we will be getting signals of efficacy sooner rather than later, but it all depends on the clinical development and how that all goes. But we remain incredibly enthusiastic and excited about this class, and we're investing enormously. As I said, we have pairs of CD3 and CD28 bispecifics for numerous different cancers, not only the ones that are already in the clinic, but ones that will be entering into the pipeline over the next year or 2 or 3. So we're very excited about this class and the potential of combining them with the 2 sets of bispecifics as well as with the PD-1.

Next question please.

And your next question comes from Chris Raymond with Piper Sandler.

Just on REGN-COV2. Just wondering if you could walk through the biology behind why there would be a safety signal in these vented or high-flow oxygenated patients. I mean, I guess, especially given how clean it looked in mild-to-moderate cases, is there some threshold of viral load? Or is it underlying overactivation of the immune system that's driving this problem? And can you maybe describe the ADEs, please?

So first of all, we should point out that we remain blinded to what's going on in those 2 cohorts that were paused. They weren't halted, they were paused so that the IDMC could evaluate the ongoing patients and then decide what to do going forward. We do not know whether there really is any safety signal. And as you said, I think theoretically, there is not really a great deal of rationale why there might be a safety signal there. You could come up with all sorts of complicated scenarios to explain it. But until we're unblinded to the data, until we really get to look at it, at this point, it could simply be that there's lack of efficacy or maybe even early trends which will reverse. So as you said, theoretically, it does not make a great deal of sense. I think the whole concept of what they call ADE or antibody-dependent enhancement, is something that does not look like it's really playing a role in this disease. So we remain hopeful that there is not going to be a safety signal and eventually, at least in some subset of these patients, even the hospitalized patients that we may provide a benefit.

Your next question comes from Evan Seigerman with Crédit Suisse.

I'll limit it to one. So in the 10-Q, you listed the EUA for the AB cocktail during this quarter. Is this official guidance from the FDA? And any idea as to what patient population that this EUA would be granted for?

So it's Len. We have said that we are focusing on the patient population where the data comes from, which is outpatients who have the best baseline characteristics, which would make us think that they would benefit the most, whether that's risk factors or high viral titer or eventually perhaps low antibodies. Those are the sorts of patients we are focused on as an outpatient. There is no PDUFA time line for the EUA. We expect action in the relative near future, but there's no guarantee that will come. The FDA is doing a very careful analysis. We can tell from the kinds of questions we're getting. And we hope that it will be -- reach a successful conclusion. But we don't know the time line because there are no specific time lines. We do know they're working just about as hard as we can imagine and have seen the FDA work. So we're hopeful soon, we'll get an answer.

Your next question comes from Yatin Suneja with Guggenheim Partners.

Question is on EYLEA. Obviously, a very solid quarter. Can you maybe just give us some sense on the relative contribution from AMD versus other indication? How the market share is evolving in DME? What level of penetration you have achieved? And then obviously, COVID is spiking in the Q4...

Well, you have to ask one question. So far you're up to 3. Marion can handle the first one.

I'll do -- I will do my best. And first, let me comment that in the times of pandemic, there probably was more of an impact on patients with diabetic eye disease not either receiving a diagnosis or coming in for treatment, but were starting to see recovery in that. I'm pleased to report that on the split of use of EYLEA by indication, we are approaching 60% for wet AMD, which means over 40% of our business is coming from other indications inclusive of the diabetic eye disease. So on balance, we continue to see diabetic eye disease as our largest future opportunity going forward, but we are the market-leading anti-VEGF therapy across all indications.

Your next question comes from Yaron Werber with Cowen.

Just a quick follow-up on the REGN-COV2. The ongoing studies, George, are still across all patients, not just seronegatives. You clearly saw activity in seronegatives. Lilly sort of, obviously, both with their single and combo, really didn't see the same data. So any explanation to that? And why are you still sort of doing studies across all patients?

Yes. I'm not sure what you mean by Lilly didn't see the same thing. They didn't actually look for where their effect was. And right now, the way the program works is, we are not having any evidence of any untoward effect and maybe just a very small benefit in the seropositive patients who have their own antibodies. I think that if one could actually do point-of-care testing, which is unfortunately, at this moment, not immediately available in most cases. Once the drug might be available, let's say, under an EUA, you might want to limit it to patients based on those characteristics. However, because the benefit/risk does not have any evidence of negative untoward effects in those individuals, one could just treat the entire population, even though the benefit is mostly driven by those who, as we described, are seronegative, have higher viral loads and/or have high risk factors.

Yes. Just -- so just to amplifying on what George said, Yaron, and he said it, I just think it's worth repeating that we did see an effect in the overall population. It's just, as he said, that effect was driven by the people who needed the antibody and that they hadn't mounted their own immune response. That observation, which is something that the team predicted, which is that people who mounted their own immune response wouldn't benefit so much from giving them more of an antibody makes perfect sense. And those that hadn't mounted their own immune response would benefit much more also makes perfect sense, and that is exactly what they saw. And you even see it in the placebo-treated patients that if you don't have antibodies, you start with a very high viral load. If you do have antibodies, you're already 3 logs lower. So all of the biology that George and the team predicted and described was borne out in a very exciting way. So I think it's just a matter of where you see the effect being driven by, not whether or not you can treat an entire population.

And I'm sure, by the way, if Lilly did the same detailed analysis, they would see that their benefit would also be driven by the same sets of patients. They just didn't do those analyses.

Next question please.

Next question comes from Geoffrey Porges with SVB Leerink.

Just a follow-up question on COV2. I'm just not sure how this is going to work. We can't even execute testing in this country reliably. So how are you going to screen the individuals who aren't mounting an immune response on an outpatient basis and then initiate treatment on an outpatient basis? It's just confusing. So help us understand that. And would it be sensible to treat everybody going to hospital for elective procedures of any kind or something else along those lines? It's just a little confusing how you're going to use this medicine.

Right. I think what -- as we just said, and as Len amplified on, the effect is seen in the overall population. It's just driven by those individuals who have the characteristics that we described. The notion is that just as in the clinical studies, it could be given to all of the eligible outpatients because there is no risk to be -- to the individuals who won't benefit the most. So I think that -- the strategy, of course, I think, would be taken would be to limit the drug right now without doing any of the advanced screening and so forth. But to the people who are at the highest risk of progressing to needing medical attention, give it to those people, irregardless if you don't have the point-of-care testing, irregardless of their baseline viral load or their antibody status. In the future, if such testing became available, then you might not want to waste the drug on the people who might not benefit. But initially, I think it would be given to the people who are at the highest risk of developing complications with the goal of preventing those. As we showed in the study, you will reduce dramatically the need for further medical attention. If you give it to individuals and the higher risk the population that you give it to, the NMT goes down. But the only reason really to limit it at this point is because there's going to be limitations for the amount of doses available to treat.

Yes. Let me just also add to that, Geoff, 2 things. First of all, as -- I think George pointed out in his presentation when we first disclosed this data. There's a very high correlation between the baseline viral load and whether or not you have antibodies. It's -- on average, you're 3 logs higher if you don't have antibodies and viral load. So you could use viral load. And everybody who's going to get treated has a viral load test. They have a PCR test. It's reported as -- back as positive, but there's actual cycle time. So I think the testing of reporting -- a testing doesn't necessarily have to change, perhaps the reporting has to change in terms of what your cycle time is. A very low cycle time, meaning very high viral load predicts low or no antibodies. So that could be used, as George said, to screen patients.

The second thing is our partner, Roche, is really one -- probably is the leading company for testing. They have a platform for antibodies that can test hundreds of millions of people per quarter, and it's deployed in, I think, like 70,000 different points of care. So we're working with them to see whether that test can be validated with our dataset or not. So I think there are lots of ways to get at this. You could use -- you can treat everybody, obviously, limiting to the people who have risk factors or you could start to narrow it down to people who have high viral load, low cycle time or eventually with our partners' capabilities, people who at point-of-care have no antibodies. So I think there's a lot of flexibility. It's just that we don't have all this buttoned down in this emergency situation. And it will probably evolve fairly quickly if we get an EUA.

But just to simplify, initially, we believe it will be used in the overall population based on risk factors without regard to serology or viral load. And as Len said, eventually, as these approaches evolve and change, it may allow targeting of the drug to those who might even benefit the most.

Next question please.

Your next question comes from Cory Kasimov with JPMorgan.

I have plenty more on COV2, but given the number we've already had there, I'll change the subject. I want to ask Bob about the R&D spend and really thinking about trends going forward. So in terms of the investment you're making on the antibody cocktail, how long do you expect this to kind of persist for? And just kind of overall, wondering if you can give us any sneak peek into 2021?

Sure. Thanks, Cory. Let me see if I can give you a little bit of color. So as I said in our prepared remarks, we're not going to provide 2021 R&D guidance today. We do expect that next year's R&D expenses will be higher to support pretty much everything that George said with regards to the expanding pipeline, early stage assets, the partnerships with Alnylam and Intellia, which are really starting to blossom and certainly our ongoing COVID-19 efforts.

If you look at 2020, where we sit right now, we anticipate spend of approximately $400 million on our efforts against COVID-19 within the year of 2020. So if you back that spend out from our full year 2020 non-GAAP R&D guidance midpoint, our underlying growth rate in R&D spend, excluding the COVID program efforts, is trending about 15% higher than our 2019 as our -- as we move forward. So Cory, I would use that kind of as a stake in the ground in terms of where we're going to go. I mean, certainly, our COVID-19 spending is going to continue on. People can see on clinicaltrials.gov the extent of the programs that we have, trials that we have going, that will play a factor into 2021.

Next question please.

Your next question comes from Robyn Karnauskas with Truist.

Another one on COV2. So just because it seems like this pandemic is just getting much worse in the United States and globally, can you talk about your efforts to expand manufacturing next year beyond the 300,000? And then I was just curious, given how profile it was that the President and others got a different combination therapies, can you biologically talk about your thoughts on should this drug be combined with Dex or other drugs immediately upfront biologically? And when would you just start like maybe a combo trial that would sort of evaluate that, sort of really make sure that this is a cure rather than just reducing the viral load and reducing time to recover in some patients?

Right. George can -- sorry, I was going to say, George can deal with that. I was going to just deal quickly with the manufacturing question, which is we are scaling up and we expect to be able to make substantially more next year than we were able to make this year. Obviously, we'll have a full year of manufacturing, which we didn't -- we did not have a full year of manufacturing to deliver the 300,000 doses. And we expect to have more facilities that are now operational and dedicated, plus we expect to multiply that with our partner, Roche, who really has been a terrific partner so far. And they, as you know -- because we see their might because we compete with them in many fronts, they're really sophisticated in the biologics space with their Genentech history and their manufacturing capacity. And they're working very hard to bring online very enhanced and large manufacturing capacity. I'll let George deal with the question about combination therapy.

Yes. I think the most important thing to note is because the mechanism of action, our treatment is just an antibody that is essentially analogous to the endogenous antibodies that many of the individuals are making. As I described, we're just providing it to those people who are either slow or failing to make their own antibodies. There's no expectation and no mechanistic rationale for any safety interactions of concern. There should not be any reason why you couldn't mix this with essentially any drug that doesn't have untoward side effects because all we're doing is giving you more of the antibodies that your body normally makes. So that said, you could theoretically combine our treatment with any other treatment without any reason to believe that there would be negative interactions. I remind you that right now, where our data stands and where we are -- we have filed for the EUA is in the outpatient setting, where these other modalities are not being given at this point. So it's going to take future studies plus analyses in the hospitalized patients where you look at patients who had combination therapies to determine whether patients who have these combinations do better than patients who just receive one or the other therapy alone. But in the outpatient setting, right now with our data, it will be our antibody because those are not patients where remdesivir or dexamethasone is currently a standard of care.

Next question please. Next question.

Alethia Young with Cantor.

I just want you guys to talk a little bit about the potential growth opportunity you see there. Obviously, you've had incredible launch so far, but you've gone deeper into commercial marketing and DTC. And I just kind of want to think about how do you drive deeper penetration into biologics, both -- biologic market, both in ADN and also -- sorry, asthma?

Certainly, I'm happy to comment. And today, certainly, we reported, as did Sanofi, very strong results for Dupixent, both in the U.S. and ex U.S. markets. The really important thing to keep in mind is while we've made certainly inroads in helping atopic dermatitis patients and patients with respiratory conditions of asthma and nasal polyps, there is still are -- in all of those indications that are currently approved, not to mention the future indications, a lot of incremental unmet need.

And then beyond that, to your point of strategies and promotional platform and activities to advance the market, Dupixent has been very responsive to promotion. We've been seeing certainly uptick in new initiations and also a remarkable consistency of patients staying on therapy because of the results that they're receiving either in their skin condition or their respiratory condition. So we'll continue to do that. We're looking at a lot of different mechanisms for advancing our promotional platform. We have highly effective field teams in the marketplace. We also benefit from very strong reimbursement across indications and across age groups and certainly, we'll continue to advance on all the in-line indications we currently have, and we'll be very, very well prepared for our future indications as well.

Thanks Marion. Next question please.

And your next question comes from Ronny Gal with Bernstein.

Congratulations on the very nice quarter. My question is actually on the EYLEA, Lucentis dynamics. You've shown a 10% revenue growth. They've shown a 5% revenue decline year-over-year. So obviously, capturing share. But I was wondering about the new patient volume. If you can just share with us, if you could, kind of like where are we in terms of patient starts versus a year ago? And how far do we have to go before we come back to line? And anything you can share about pricing terms as it seemed to be -- you just commented this in the press release, if you can give us a bit more there?

Ronny, in terms of performance of EYLEA in the anti-VEGF category, as I mentioned, we are seeing a rebound in terms of patient treatment coming back into offices. We see an advance in EYLEA's performance versus a year ago. And then coupled with that, we are seeing an increment in share gain from both branded and unbranded competitors. I also mentioned, if I just put it into volume terms for you in the branded marketplace that EYLEA now approaches just over, in fact, 70% of the branded market in the quarter by volume. So we're seeing robust performance and we would attribute that to EYLEA's overall value proposition for retina specialists in choosing anti-VEGF therapy, the -- certainly, the clinical profile, efficacy profile, flexibility of dosing. Now the prefilled syringe is incredibly timely is a convenience, but also in the current environment of office throughput and efficiency, and then beyond that, the established safety.

Operator, we have time for 2 very quick questions if we could try to squeeze them in.

Your next question comes from Biren Amin with Jefferies.

Can you just talk about the competitive landscape in retina with your thoughts on faricimab, given we've -- they're going to have Phase III data relatively soon?

Sure. So I think we all learned a lot about -- I'm sorry, Len, you go first. I'll come back if you'd like.

No, no. Go ahead, Marion.

No. I was just going to comment that I think that the -- for a product entering the marketplace today, it's not assumed anymore that a safety profile will be there until the product has actual market experience. So I just would mention at the start, we always monitor competition very, very carefully, both in market currently and future competition. But certainly, EYLEA sets a very high bar in terms of the clinical profile, the safety profile and the level of experience. But Len, over to you.

No, I think you covered it. Let's go to the next question and the last question.

And your final question comes from Terence Flynn with Goldman Sachs.

This is Dan on for Terence. Just for the Phase II trial of your BCMA bispecific antibody. Just wondering if you could share any more details on the trial and if you're working to develop a subcu formulation?

Yes. I think that right now, we'll -- you'll get updates on the BCMA program at ASH. We have announced that we're going to be entering into a pivotal program very soon. And I guess it's fair to say that it makes sense that we would be developing, yes, a subcutaneous formulation.

Thanks to everyone for joining today's call. We appreciate you dialing in, knowing that many other companies are reporting today. So thank you for your attention and for your questions. Bob Landry and the IR team will be available for additional questions and calls as needed today. Thank you, everyone. Be safe.

This does conclude today's conference call. Thank you for your participation. You may now disconnect.