Regeneron Pharmaceuticals, Inc. (REGN) Earnings Call Transcript & Summary

Hi, this is Kennen MacKay from RBC, and it's my great pleasure to kick off the first of my fireside chats with Regeneron. And from Regeneron, I'm joined by Bob Landry, the Executive Vice President of Finance and the Chief Financial Officer of Regeneron. Bob, thank you so much for joining us this morning.

Kennen, thanks for the invite. This is kind of inaugural for Regeneron to be with RBC, and we're very, very happy. Again, I wish we could be in person. And I hope everyone out there listening is -- are staying very, very safe in this trying times. Let me open up with our FLS and then get into some opening comments. So again, I'd like to remind you that remarks made on the webcast, they 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 forecast and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage, reimbursement issues and the like. Each forward-looking statement is subject to risks and uncertainties that can cause actual results and events to differ materially from those projected in that statement. And I'd encourage everyone to go to our 10-K where we have a very elaborate outline of the risks and uncertainties that Regeneron incur. So thank you for that. So with that, let me just, kind of 1.5 minutes, it feels like a long time ago, but our earnings were not that long ago. Given the collaborations we have with Sanofi and Bayer, we're always sort of at the tail end of the reporting cycle for Q1. So very pleased -- the management team at Regeneron was very pleased with the solid top and bottom line results. We had 33% top line growth and 48% year-over-year -- 48% bottom line growth. And again, that's despite the initial impacts from COVID-19. And I'm sure that, Kennen, Justin Holko, who is also joining me on this call, VP of IR, will be discussing in the 25 minutes that we have. We did point out in the call and I do want to just reemphasize this, that unlike other companies that we're reporting, I mean we had no tailwinds associated with kind of stocking issues. The products that we have just don't open itself up for having a lot of stocking. So the EYLEA numbers that we'll talk about soon are within the stocking levels that we've had previously, 5 to 10 days has been our customary order. So there has been no change with that. No change with Libtayo, DUPIXENT, KEVZARA, PRALUENT. Everything that you're seeing is -- was the normal course of business from a demand perspective. We did, right around the time of our earnings release, make significant pipeline progress, and that is with the exciting news of our non-small cell lung cancer data, where the OS data was read out by our data monitoring committee, and we're able to stop early. And the team is working feverishly in terms of trying to get that filed as soon as possible with the FDA. And then shortly thereafter, we followed it with BCC data, which we are in communications with the regulatory agencies and hope to have that filed by the end of the year. We anticipate a catalyst-rich year, and we're still on track for that. Despite COVID-19, we have not seen, with regards to our later-stage programs, much impact at all on it. We're going to have a DUPIXENT readout on Phase II EoE, which will be in the second half of the year. Second half of the year, we're going to have a Phase III pediatric asthma for ages 6 to 11. We have our long-anticipated fasinumab readout. And again, that's on both efficacy and long-term safety, and that's coming in the next couple of months. And again, we -- Justin and I like to call that as a free call option for our investors because people do not have that in their models, and we're very anxious to see what cards get revealed there. We have data updates on the bispecs, BCMA and CD20xCD3. To be specific with regards to that, we have regulatory actions coming up, 3 in particular. I'll start with probably our most important and it's coming next week. It's dupilumab in pediatric ADs. Again, that's the 6- to 11-year olds, good age group. And we can continue to peel the onion with Sanofi in terms of going with more and more geographic areas and more and more age groups, and you'll see that age group, the 6 to 11 in ADs data -- not data, the filing will get approved, hopefully, with our May PDUFA date. We also have an auto-injector in the middle of June that has a PDUFA date, and we're hoping to get approval there. And then certainly, Ebola, which has been filed, and we're looking for an October PDUFA date on that. And then, Kennen, probably something I'm most proud about, in addition to all those great highlights, is just all the accounting changes we made. So if you're new to Regeneron, you're probably lucky on that front because we were a difficult company to follow with regards to how our financial statements were laid out previously. If you had been following Regeneron in the past, hopefully, you saw the first quarter financial package between the MD&A and the results and how the data was redone. We recasted our first quarter 2019 numbers to come into a more friendlier-user approach, and that's been very well received, and that was rolled out in the first quarter. So again, a lot going on. I do want to mention that we do have a June 1 oncology event at ASCO where we're going to be talking about our oncology program. There's a webcast that's planned. So if you do have an interest on that, please make every attempt to try to dial-in to that event. So Kennen, probably longer than 1.5 minutes, but I'll turn it over to you to start Q&A.

No. No worries, and I want to thank you again for joining. To your point, arguably, the business, in consensus, has really never been stronger despite COVID. The pricing conversation and sort of the political headlines has really all but disappeared. EYLEA is incredibly strong. DUPIXENT, again, is incredibly strong. And to your point now, there's free call option with fasinumab and also, arguably, with some of the COVID work that you're doing as well. Maybe we can touch on each of those points. But first, on EYLEA. To your point, there were mixed impacts in Q1 but major tailwinds from Beovu's commercial setbacks, some headwinds towards the end of the quarter, especially from ophthalmology clinics, really reducing volumes, shutting down mid-COVID. Can you maybe talk a little bit about Q2 and beyond and sort of what we're seeing in terms of COVID impact there?

Sure. Let me give a little bit of highlight with regards to Q1 and then I'll jump into kind of your Q2 question. I mean, having been CFO, I think, almost 7 years here. I mean it was the strangest kind of EYLEA quarter that I've experienced. We started the quarter with a heavyweight competitor that's in there that we knew was going to do their best to try as much share as we could get from Regeneron. Fast forward to mid-February and then all of a sudden, issues happened with regards to the vasculitis issues and the inflammation that's being seen. And then we proceed after that with having kind of a strong kind of end of February, early March, and then all of a sudden, COVID-19 with states getting shut down, we start to see severe impact with regards to that. And that rolls into the first 2 weeks of April. So again, with the last 2 weeks of March, first 2 weeks of April, we were certainly significantly impacted, certainly by the type of product where we have where it's in-office administration for the EYLEA product. Now despite all that, I think we did surprise the market with 9% year-over-year growth, particularly with Lucentis having a lousy print in the first quarter and people having concerns on all the KOL calls that were being done by analysts and -- with regards to the amount of visits that patients were making were getting cut in half and even -- sometimes even worse than that. So again, we're very pleased with how the first quarter worked out. With regards to the second quarter, as you're alluding to, certainly, first 2 weeks of April looked very similar to the first -- last 2 weeks of March in which it was very weak volume. But then we saw nice increases in the last 2 weeks of April, and we have said to everyone that our April results were 15% less than the period last year. Again, we thought that was an important data point to get out there. We'd like to get out asymmetric data points when we think that they exist, and that was certainly one of them. Now Kennen, the big question is what's going to happen with regards to May and June. I don't want to talk with regards to what we saw in May. I mean it somewhat continues on within the last 2 weeks of April, but we'll have to wait and see and take a cautious approach in terms of what the loosening does for the practices and the like with regards to the patients coming back to the retinal offices.

And maybe just going a little bit further into EYLEA. Obviously, you've done a ton, ton, ton of work and Marion has done a ton of work making EYLEA much more defensive against Beovu, but one other dynamic that is changing is Lucentis potentially going off-patent either this year or potentially a year out, and biosimilars, again, potentially, maybe about a year out. Can you maybe talk a little bit about how some of the defensive work that you've already done on EYLEA could defend against a biosimilar Lucentis and sort of how you are preparing for that and thinking about that?

Sure. Let me get into that. And probably, let me start with regards to the patent thicket around EYLEA as it pertains to us. Our first patent's going to come due, I think, in May of 2024, and it is only a composition of matter. I say, "only," I mean that's enforceable, but our biosimilar entry, we don't anticipate before kind of May of 2024. And then we have a whole bunch of other patents, formulations, manufacturing that go out for a longer period of time beyond that, okay? And if the Beovu situation has shown us anything, it's how difficult this business is. I mean this is kind of a thousand pound gorilla, who knows this space very well, who is already in this space. As they try to enter this marketplace, they had significant issues with regards to the inflammation. So I would say, as biosimilars are coming, I mean inflammation really, really matters. And this is a very, very delicate and difficult process when you're doing intravitreal injection, particularly with regards to the sterility around the manufacturing, okay? So let me get that out there first. Now with regards to the Lucentis biosimilar, I mean this market is very unique, the VEGF market, particularly with regards to the use of off-label Avastin. So there's already a low-priced option with significant market share that we've had to deal with for a long time out there. This dynamic could limit the impact of a biosimilar that would enter the market, which could also impact the price differentials between what we're going to see on the enervator and the biosimilar drugs. Again, biosimilars provide no opportunity for improved efficacy while there may be a risk of issues due to differences in the final product, and again, like I said, formulations and manufacturing processes and the like. What we've learned over the years through our own efforts and those of competitors is that EYLEA sets a very, very high bar for efficacy and safety. And again, we've dosed over 30 million people with regards to this product. And if anything, it's the safety and efficacy that's going to stand out. Justin, anything to add on this?

No.

And Kennen, I will say, yesterday, there was -- Samsung Bioepis announced kind of 24-week interim results from their Phase III, going up against Lucentis in wet AMD. I think the interim results showed nothing surprising. I think what I found surprising myself was there was no safety data kind of attached to that. Obviously, when we go out with our clinical data, there's always safety data enclosed. So it's kind of a wait and see. It's the first of probably many trials that are going to come out. It went out or it's compared against Lucentis' weakest of their 3 trials in wet AMD. So kind of no conclusions can be made on that other than we'll have to wait and see what the safety information is associated with that next biosimilar.

Yes. And maybe just to elaborate on that. So is the thinking that a biosimilar Lucentis may not impact the market much, again, because you do have a generic Avastin, even though Avastin is not approved in this indication? I guess as I've looked at my modeling, I had thoughts on low-priced approved competitor here could potentially be quite significant.

Yes, Kennen, I don't think I said exactly that, but I mean we're going to have to wait and see how it plays out. I mean I think what I said is we're used to kind of a big low-priced similar product being in the marketplace that we've gone head-to-head with since the inception of this product. And as the data has proven out, our data has proved better than Avastin's. And obviously, that's why we've gotten the branded market share that we have on that front.

Fair enough. No, that makes a lot of sense. Maybe moving on to oncology. Obviously, a big home run trial from Libtayo recently in frontline lung cancer. Can you maybe talk a little bit about your plans for potentially competing as a monotherapy PD-1 versus those entrenched agents that are out there, KEYTRUDA, OPDIVO as well as some of the combinations that you are most excited about using Libtayo as a backbone and sort foot in the door to this immuno-oncology market?

Yes. Justin and I will tag team on this. So the kind of the way my simple mind works, we have Libtayo out there. We've shown very good data. Our team -- Marion's team has done great with regards to capturing a big share of the CSCC market. It's being liked by docs. We're probably at a $300 million-plus run rate today. I mean all that's fine. But with everything we have, we needed to kind of really ensure that we have this foundational bedrock within our I/O program. And the non-small cell lung cancer program was going to tell us what we have here. And I couldn't have been more pleased and more proud of the team when we were able to kind of stop the trial early for OS and kind of reconvince everybody out there that this is going to be a good foundational play along with all the other combos that we have that we can get into it -- associated with that. So I know a lot of people immediately started kind of pinging us with regards to, "What's the penetration? What's the plan? How are you going to steal share away from KEYTRUDA?" I mean KEYTRUDA is the beast that it is and good for them with regards to that. I mean we're looking to kind of get our piece. If we can get our piece of the gigantic pie on non-small cell but then really start to make headways with regards to all the combos that we have coming in addition to the chemo combo trial, which is going to read out -- be fully enrolled and hopefully read out by the end of the year, I couldn't have been more pleased with regards to how that event played out. Justin, you want to tag on to that with...

Sure. And Kennen, it's a fair question with regard to how to compete. And obviously, we're working through that. But just to put out there, physicians like having choice when it comes to selecting a treatment for individual patients. And what you see, whether it's in the TNF market or even in within immuno-oncology, is that there's room for a lot of players to do well. And physicians will oftentimes have different experiences with different drugs that ultimately lead them to want to use them in different situations and scenarios. So up until very recently, there's only been one drug in monotherapy in the first-line lung cancer space. And given the results that we were able to announce just a few weeks ago, to reiterate Bob's point, we clearly have a very active drug here that, as a first step, will compete in monotherapy, but we hope will compete in broader lung cancer settings with combinations as well as other tumor types that historically are not all that responsive to immunotherapies such as in prostate cancer where we have ongoing combination studies with Libtayo and our costim CD28xPSMA. So lots of runway ahead of us in cancer but certainly, we're pleased with the early results that we're seeing with Libtayo and across the portfolio.

And how about the combinations? Which -- what, I guess, combination partner are you most excited about for Libtayo?

It's probably too early to say just yet. We do have several combinations that are in the clinic, Kennen. Probably the closest that we'll be talking about is the -- as Bob referenced, the chemotherapy combination now. We do anticipate that study will be fully enrolled this year. No timing on data just yet. But even in this COVID environment, we do expect that, that study will be fully enrolled. So that's something that we're excited about. And there is some proof-of-concept out there with regard to the combination of chemotherapy and anti-PD-1 treatments. But beyond that, there are many bispecifics that are already in combination, as I mentioned, across the portfolio. We have MUC16xCD3 in ovarian cancer. We have a couple of bispecifics in hematologic malignancies, one directed against CD20 and another directed against BCMA. There are additional bispecifics that we anticipate will hit the clinic this year. Some of them will be in combination with Libtayo. Some of them may be in combination with some of the other bispecifics that we have. So it's probably too early for us to call winners and losers yet on the combinations that we're most excited about. But I think what's equally important to stress is that some of these bispecifics look like they may be very potent drugs in and of themselves. Again, I go back to the CD20xCD3 and the BCMAxCD3. Those look like they're very active drugs by themselves. And we'll continue to evaluate what the profiles of those products are, both on their own as well as in combinations.

That definitely makes sense. And going into ASCO, there has been a rekindling of excitement around targeting LAG3 from some data that was separately generated by MacroGenics. They're, obviously, using a bispecific. You do have a monoclonal antibody, Regeneron 3767 (sic) [ RGN3767 ] targeting LAG3. Can you maybe talk about sort of the early stage of development of that molecule and potential plans to move that forward?

Sure. So we do have a LAG3 antibody, as you refer to. It's in Phase I, where it's a bit of a basket trial that's looking at various solid and hematological malignancies. We have looked at the combination with Libtayo, particularly in first-line melanoma. And while early, in small numbers, we did see some interesting signals that we're looking to see if they'll play out as we enroll additional patients into that cohort, so more to be seen there. I think there has been some interest on the part of the industry at looking at these targets, and so we're trying to determine what ultimately may be the role for that as it pertains to melanoma and perhaps some other settings as well.

Got it. And going into ASCO, I've been incredibly excited about your CD20, CD3, REGN1979. That is a class that's sort of growing a little bit more crowded with Roche as well as Genmab. Now can you maybe talk a little bit about how you sort of see the field beginning to differentiate from this early-stage data?

Sure. It's probably too early to differentiate amongst the class. I think we're all looking at relatively small numbers of patients, and we're all also working to look at different dosing strategies to try to mitigate some of the realities of these drugs. In particular, there looks like a signal for some grade of cytokine release syndrome, at least early on in dosing, and so we've learned a lot with this program. Actually, a lot of learnings that have enabled us to move more quickly with the BCMAxCD3 program. But I'd say we're really excited about the fact that we're at therapeutic doses now. We have an ongoing Phase II, potentially pivotal study that began in follicular lymphoma but is now expanded to a variety of more aggressive non-Hodgkin lymphomas. Just to ground everybody in terms of why we're so excited about this particular drug. In follicular lymphoma, and this is late-stage follicular lymphoma, we've seen response rates on the order of about 90%, very significant proportion of those being complete responses. And then in DLBCL, we've seen response rates on the order of about 60%. And again, a high rate of complete responses, but what's even more intriguing is that we're seeing these sort of response rates and depth of response in patients who are really in pretty bad shape, including those who have been through prior CAR-T treatment. So this, we believe, is going to be a significant player within this space. We do recognize that there is competition. We are certainly mindful of that, even in this COVID environment, where things like clinical trial enrollments are going to be impacted, that we need to move swiftly here. And we've recently announced a business development deal with Zai Labs. They will be helping us in the development of this program in China as well as the commercialization there, but they'll also be working with us to help get these trials -- these global trials enrolled more quickly as well. So it's a -- I'd say it's a very interesting space for us. It's early but we believe we can be competitive here.

I certainly agree with you on that. We are getting towards the end of our time here, and I would be remiss if I didn't ask about the work that you were doing on COVID. Maybe we did just talk about KEVZARA on the earnings call. So maybe we can talk a little bit about the antibody cocktail that you have in development, potentially blocking the ability of the virus to bind to receptor cells. Can you maybe talk a little bit about that strategy and just remind us where that is in development? And we'll make this our last point.

Yes, Kennen, thanks. So again, Justin and I will tag team on this. But I mean we're very excited on this. It's almost like we were primed for events like this with our work that we've already done with regards to MERS and Ebola. We have the same team. It's the same playbook. And when this initially came up in early January, I mean our teams were right on it. And I have to say, with regards to the pace and the amount of energy and effort that's being put into it, I hope our investors are kind of rest assured we are doing everything physically possible to come up with the treatment with regards to this nasty virus on that front. And all things are looking good so far. Certainly, we used our Mighty Mouse, like we have in the past, and we're able to kind of get really good antibodies. We screened thousands and thousands of them in order to pick out the ones that are best. We do have backups to backups. It's not just the original 2. So we have a cocktail of 2 that we are going to be in the process of putting into primates kind of ASAP. And then we really anticipate going to be in the clinic by kind of second week of June, middle of June. We are working concurrently with that with regards to the manufacturing. We are going at risk, as you know. It's not enough, obviously, just to have the treatment to the extent that there's going to be such demand on this. We have a big part of the company working and coordinating in terms of where the production on this could be. And we've moved things out of our Rensselaer facility. These are our 10,000-liter scale products that we are moving to Raheen, Ireland, in order to free up COVID-19 space, and we are -- we've begun kind of at-risk manufacturing to ensure that the necessary supply is there.

Got you. That's phenomenal news. We'll obviously be watching any developments as it relates to getting these trials off the ground in only a few short weeks. And with that, I'm not seeing any questions in the queue here from our attendees. So why don't we go ahead and wrap things up? And I just want to reiterate, thank you very much again for joining us today, and I hope everyone on the line as well as our attendees from Regeneron, everyone is safe and able to spend some time with their families.

Thank you, Kennen, and thanks for inviting us. Stay safe, everyone.

Thank you.