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

Hi, everybody, and thank you for joining us for this session of the SEC with Len Schleifer, CEO of Regeneron; and the IR team. I'm Ronny Gal, the -- I guess, biopharma analyst here at Bernstein. Len is with us fresh -- very fresh after, I guess, 2 days of talking to investors with the offering that rather came out in the last couple of days. I just learned it's the largest offering in the sector for a very, very long time. And that has gone through successfully. So congratulation, Len and the IR team. So a little bit of a post that set of issues, we have a nice time for us to discuss the business and how it looks forwards with potentially some new people who are now fresh investors in the company. For those of you who have joined us, the investors, I want to mention to you that there's an interactive Q&A format that we're using here, called Pigeonhole. There's a link on the left side of your screen to access that application. When you click on the link, it will open up as a new window, and you can see questions and you can submit questions that I will choose from to answer, and you can vote for questions on the people posted, and obviously, questions really want to be answered, we'll try to make sure that they do. So this is the kind of the upfront comment, and let's just, Len, jump again. And first, thank you very much for being with us today.

COVID-19, I guess we have to start there. A little bit of an update on the program, kind of when is the next set of data that you expect? And anything you can share to us about the timing, actually starting the clinical trial.

Sure. Maybe before we get started, I guess, Justin might want to say something about our forward-looking statements.

Good morning, everyone. It's Justin Holko with Investor Relations. Thanks to everyone who's dialing in, just want to echo Ronny's comments. We will be making some forward-looking statements today. We encourage you to check on our SEC filings with respect to risks and uncertainties associated with the business in those forward-looking statements, and we look forward to having some time with you over the next hour. Ronny?

Great. Okay. Good to be here. Thanks for having us. It's good to get off the road, the virtual road and get back focusing on the business. But -- well, of course doing that to have a little discussion with you. COVID-19 is always a great topic because it's affecting all of us personally, our families, our friends and the entire country and world. We have viewed the COVID opportunity as in the words of one preeminent scientist, it is almost as though Regeneron's technology and biology and knowledge was designed to solve these kinds of problems. And I'll tell you what I mean in a minute. But the big perspective is that we have thought about 3 basic approaches to COVID. There's the kitchen sink approach. What have you got that might in some random way, repurposed way work to help with the disease or to stop the inflammation or something like that. There's the other end, which is the vaccine, which, of course, would be great if we could have a highly effective vaccine as quickly as possible. We can talk about our views on that. That's going to take some time. It's going to take large numbers, et cetera. And then there's what we think in the sweet spot for us in the middle is to come up with something that's specifically designed to address COVID-19. So let me focus a little bit first on the kitchen sink approach and tell you what we're doing there and tell you why that's not a place for great optimism. So basically, people have said, "Well, what do they have that's here and now that might address this problem." And some people out of China said, "Hey, maybe it's inflammation, maybe it's IL-6". So we give an IL-6 receptor blocker and lo and behold, everybody does well. Unfortunately, what we learned about that is that so do the placebos when you do this in a placebo-controlled manner. So it's hard to know. Is IL-6 is a player? It's a random shot on goal. IL-6 is certainly correlated with severity of disease. We've got a potent IL-6 blocker. We'll get some data. But that's not where we see a likely strategy to emerge to deal with the problem. Biology is really hard. And random approaches usually wind up unfortunately disappointing. But highly targeted approaches using natural biology really works. I think if you think about what the body does when it's faced with a virus. It immediately kicks its immune system into gear. And it tries to make antibodies and immune response fast enough, so that the antibodies can kill the virus before the virus kills you. And our immune system is amazing. It takes some time because think about it, you are trying to, in a random way, come up with something that the immune system produces that can attack this virus. And the immune system is really good, but it does take some time. Our goal, our strategy is simply to use what the immune system does, but give it to people immediately as a drug, not depending on their own immune system or a vaccine to kick into gear, we immediately will give people these highly neutralizing antibodies. Now is that a sensible, conceptually sound approach? Absolutely. Why? If you think about it, nature does it. What does a mother do for a newborn baby? Newborn baby, even -- let's go back a step. A baby in-utero has a lousy immune system. The mother transfers antibodies across the placenta, in case a virus gets in-utero, to protect the baby. The baby is born. The baby still has a poor immune system. What does the mother do in the colostrum, the first mother's milk, the baby gets a lot of antibodies to protect it. That's passive transfer. That's normal biology. Passive transfer makes sense. And by the way, it's been proven. The first Nobel Prize was given out in 1901 for passive transfer of diphtheria toxin, the first Nobel Prize in medicine or physiology. So this has been...

I didn't...

Pardon me?

I did not know that.

Yes. This has been known for centuries. Passive transfer works. We know it works. It's been done for diphtheria. It's been done for tetanus. It's been done more recently for RSV. We did it for Ebola. We did it for MERS, although we couldn't do it in people because thank goodness, there was no epidemic or pandemic, but we could do it in animals. And the remarkable thing about, and sometimes confusing thing for people, is a passive transfer can act both as a preventative, so in a vaccine-type way, or in a treatment modality, after you've already got the disease. We saw that in Ebola. When people were dying, we actually could save lives with a passive cocktail. So what we're doing is conceptually makes so much sense. The key is to do this right. Now right means not necessarily super-fast, ignoring the risks. What are the risks here? You give 1 antibody that you happen to find. It's not a great blocker and -- or even if it is 1 antibody, boom, you can get escape mutations and create a whole new strain. When you stress this virus, you're going to create -- you're going to select for mutations. That's why, in our point of view, if you want to do this right, you have to know how to get really high affinity antibodies. And you have to have to know what the goal of these antibodies is, is to get the spike protein smother. And we can smother it with 2 antibodies that bind in completely different places at the same time, which allows us to avoid this high-risk of mutations emerging. More on that to come, perhaps. But anyway, we've got these antibodies. We've selected them, we know to make them. We have end-to-end speed that's, I think, the rival of the best in the industry. And the bottom line is that we can now look forward next month in June to starting trials. We're looking at 3 different classes. We're look at prevention setting. So we have to -- then you have to find people at high risk to get it. Otherwise, you'll be standing around twiddling your thumbs, right? If -- you need people at risk in the placebo group. The second is in symptomatic patients, who are early, recently diagnosed, okay? Maybe not even hospitalized. Can we treat their disease? Can we shorten the viral load in the respiratory tracts, so they're less contagious? Can we prevent them from going on? So that's a whole segment. And then, of course, it's exactly what we did with Ebola, which is treat the hospitalized patients. So lots to do. We have plenty of material to get started in June. We have lots of scale-up activities going on, so we can treat a lot of people, but we can't treat the entire world. We can't treat the entire country in a preventative mode. That's just not possible. That would have to be done with a vaccine. Go ahead, Ronny. You wanted to ask.

So basically, you're saying a clinical program will start in June. You're already passed the -- looking at the binding characteristics of the virus against -- your antibodies against the virus. So it's not like you're getting ready to start the trial. Are all 3 programs going to start in June, the preventative, diagnosed and symptomatic patients?

Yes. We expect all the trials. We're going to try and do them in parallel. They'll enroll at different rates, of course. We're going to try and start in parallel. We'll have plenty of material to do that. We're gearing up to do that.

Sure. And one question about treating the broader population. It feels like you'll need to go into Eastern Europe, Latin America, given those are the current hot spots. Are we looking here at global trials? Do you have the infrastructure to do those things on a -- in going to where the hot spots are currently appearing, so you can get -- prevent the infection in nonsymptomatic or people exposed or so forth? Or do you have to partner for that?

I mean, we have -- we did -- think about our trials, which maybe we'll talk about later with Libtayo and non-small cell lung cancer. We had to go around the globe in places where there was no KEYTRUDA or other treatments available. So yes, we can do that. But I think there's still -- even though the cases are down in the U.S., there's still plenty, and I fear -- I hope it won't become to pass that we're going to see some bushfires and second waves.

So we are seeing that in our data already. Some of the [indiscernible] above line in the last couple of weeks. So in terms of the -- kind of -- I'm not sure if you can share this, but projections for timing for the first one, I guess, the symptomatic patients or hospitalized patient will be first. Kind of like when should we start seeing the first batch of results coming through?

Yes. Obviously, depending upon enrollment, once we can get enrollment going, then you only need a matter of 3 weeks because that's the natural sort of course of disease. So I think we'll keep you posted. We're going to be very transparent about this. We'll keep you posted on how we're doing. And it should go fairly fast. Slower, obviously, when you're looking for the people to convert, who have not. But we have some good ideas there as well. So we're going to have a lot of data. I would suspect around the end of the summer, when...

Yes. So 3 months roughly for the earliest data just to get yourself proof of concept in people currently?

It depends on what's going on, as I said, because in the height -- when we were studying KEVZARA, and we were enrolling like 100 patients in a day in the height of things. But thank goodness, we're not seeing those numbers now.

Okay. The other question I have for you is -- there are 2 more questions to follow up on this. One of them is this your fill-finish capacity. So it looks pretty clear that manufacturing the antibodies themselves, so the virus particles themselves is not too much -- too challenging in terms of just getting the API out just because of the very high efficiency of the system that you guys have created and others have created. We're talking about 2,000 to 4,000 liters. But it looks like sales finish for what will be hundreds of millions of doses. It's actually not something we have capacity for especially if you want to need to have a cold chain or a super cold chain. How are you guys targeting this? Do you guys have a solution for your own? Like, are there obvious people to go to?

We do -- we have long relationships being in this business. And by the way, we wouldn't be targeting millions, that is hundreds of millions of people. That's sort of a vaccine-type level. I can't imagine that we'd be treating those amounts of people. But we have lined up the capacity we need for the fill-finish. And we can -- even if that gets strained, we have other ways we can deal with this in clever solutions. So our guys have taken that all into account.

So I look at the influenza market. We don't [indiscernible]. We talk like 200,000 to 800,000 infections per year in the United States. I kind of look at that, if we start there and assume that we get some need for antibodies that is based on that. It seems like you're still on the pretty high, even if you want 3 or 4 antibodies to make it in the market, it feels like that market could easily exceed 1 million bills per year just for you.

I think you're right that is because -- and that's an interesting proxy, if you will, or an analog that you're using because you're dealing with people where there is a vaccine, but we don't know how the effectiveness. If you assume similar effectiveness, and you've seen a similar amount of people who don't take it and so on and so forth, those are numbers -- that's sort of a clever way of doing it, Ronny. I mean I think we've said we can put out hundreds of thousands of doses for preventative probably fivefold less if you turn it all into treatment. So if you're talking 100,000 a month, we could get to for treatment, something of that nature with other people helping. I think we can treat a reasonable amount. I think there'll be others out there. I think that capacity will not fully meet demand on a global basis. So I hope that the competition is with us and going as fast as they can because I think it is a case where we'll need multiple solutions.

Okay. So the other thing that comes up in that respect is something that some of your peers are doing from there, which is this entity of knocking the antibody itself into the genome of the patient. Obviously, you were talking here about a pretty tangy technology. How do you think about this? And it's actually something that you can think about more broadly than just the antibody, just -- that's the COVID-19 situation. I'm sure you evaluated this. Any thoughts about this approach? And how far are we from being able to rely on something like this?

We actually have some proof-of-concept approaches there where we can do this. But -- and it's proprietary and it's clever and all that. But I still think that there are issues. So for example, thinking about, you can't turn it off or if you do, we're going to have to build in, we got to build into a switch. And scale-up is not as trivial for these approaches as you might think, either. So there will be a role down the road, but I don't think right now, this is the case. And you're going to put in a single antibody and then you're going to want them selecting for your mutation. I don't know if that's such a great strategy.

So if you don't mind, how far is this in the clinic, at least in your hands? Is it like 6 months, 3 years? We don't know it actually totally.

We haven't really unveiled that. So we'll keep that -- we'll keep you guessing on that one. Sorry.

Okay. Yes. You can feel free to disclose. I mean this is a public forum. So I think that you're okay, I suppose. And the other one, are you going to -- should we expect a paperwork from you kind of characterizing your antibodies somewhere in the next couple of weeks? Or as you go to the clinic, is this something we should expect to see?

No, we haven't -- I have to talk to the team. We have been so focused, at least I have, and George has I know in getting everything we need, everything properly, the right antibodies, et cetera, et cetera, make them [indiscernible], make them scale up [Technical Difficulty] communicating what we're doing. We want to help on this, so.

So okay. Len, if you don't mind coming a little bit closer to your screen because you kind of faded a little bit while we were on the last answer.

Oh, is that better?

Much better. The other -- the last question I will have here on COVID-19 before we move on, is to basically just ask about this effort to bring manufacturing onshore in the United States. Now you are primarily a U.S. manufacturer, a U.S. operation. So I'm guessing you had at least some role in those discussions. In your mind, if you have to project what will happen with the drug industry, like 3 to 5 years out. Are we talking about more kind of like local manufacturing of drug is something that will take place and what's your take on this?

It's a great question, Ronny. And I really do hope that we don't get into this bordered approach to things. We're prepared for that. I mean we have, frankly, more manufacturing capacity modestly outside the United States than we have inside the United States. People don't realize that. But we are -- we've shifted around, and we're going to do all this manufacturing inside the United States. I certainly hope that we're -- because just like if there was a great result from the British vaccine, we certainly would want to be able to get it in the United States. So I think we're going to have to figure out a way to make sure we just get supply up. So globally, wherever it may be developed, people can afford it. Not afford, but we get these treatments around the globe to where they're really needed. Will there be some aspect? Am I sympathetic to the argument that the U.S. government pays for things and that the U.S. should get a priority? Absolutely. I don't think that people should be getting a free ride. I do think there's a bit of remarkable behavior when the United States government pays for everything. And then -- and historically, other countries having want to pay for things. And then they want free access, it doesn't really make sense. What I'd rather see is upfront, all the countries getting together and funding certain types of efforts so that we can -- and rather than saying you're entitled to something later that you haven't paid for, so.

Okay. So as a transition question here to the business itself. What do you think would be the legacy of -- a technological legacy of this infection? Essentially is -- are vaccines going to become a much broader technology use in cancer and other conditions or the antibody technology is going to make a step-wise leap in abilities? If you have to think 3, 5 years down the road, crisis generally has the opportunity to be side to it, what will change in terms of our ability to address disease more broadly after this epidemic?

Well, first of all, I do believe that this is a transformational moment for the industry. You, me, people at our companies, people on this call, they understand our ecosystem and just how amazing it is. They understand that it takes basic research, NIH-funded research, university-based research, entrepreneurs, venture capitalists, risk takers, capital markets, financial analysts, bankers, CEOs, and most importantly, people in the lab, doing things to make drugs and consumers and an economic system that rewards all of this. This is the best system we have in the world. We need to demonstrate with this moment that it works and it delivers. And I think that a lot of the -- there's still going to be people who will say, no matter what we do, that they want it for free and everybody is entitled to get it for free. But what they don't realize is that you want an incentive-based system. You want to reward a company that comes up with a new vaccine here or a new antibody treatment. Why? Because frankly, shareholders, the next time around, aren't going to be so interested in funding these things, risk capital that goes into these small companies. We can afford to fund things as we're doing, provided the rewards still come in for the things we've already done. But if we don't live by this reward system, which is the most productive system in the world, we're not going to have the innovation we need and then it will turn from a transformational moment, it'll turn into an existential threat to the world, because we need a vibrant biopharmaceutical industry. So I believe that -- like with our cocktail, I don't think we should be giving it away. I think we should be making it affordable. I think people has to be accessible. It has to be fair. And even if the government contributes the money, that doesn't mean that all of the decades of research that we put into it is the convenience, the equity, 25 years of not making the nickel, people taking risk. Our shareholders need some reward. So we all have to be mindful of, our system is the greatest, we just have to make it work, and we can't pressure it too far in one direction where we have people taking -- we can't have profiteering on one hand, but we can't accept the Russian approach where there's no incentive and there's nothing going on. And I'm not worried that the Russians are going to have to invent this, unless we change basically.

So with that, we do want to make it all about COVID-19 for this hour. So let's move ahead and talk about some of your businesses and products. So in the just kind of -- in the order of revenues/prospects, let's start with EYLEA. So I guess the first question for you. We are -- we just put it out this morning. We are seeing a nice rebound in EYLEA. I guess the question for you is, as EYLEA and the other VEGFs come up to speed, how far are we right now from demand saturation for this market across the broader set of indications? Are we kind of like 20% or like 40%, 60%, 80%? How far are we from financing...

That's hard to answer. But I would say the penetration, for example, in diabetes is extremely low. So there's a long way to go. I think the penetration is obviously much higher in age-related macular degeneration. If you're speaking about the home market, I do believe that the branded market is going to grow even more because we've seen that recently. Our drug is longer lasting. We've proven it. Avastin hasn't proven it. People liked it because it was cheap and so forth. But you know what, during this pandemic, having something that's a little longer-lasting, I think some of that market share is coming from Avastin into the branded marketplace. We realize.

So we got both the growth in DME, and you've got some shared shifts going on from Avastin into the brand products.

I think AMD under normalized conditions is still going to grow also. It grew last year, I don't know, close to double digits. I think that -- or at double digits. I think this is a remarkable statement that -- and it's really just a reflection of demographics. We got every -- you get a boost from demographics every year. The aging population is increasing by a significant amount. The diabetic population is increasing by a significant amount. So between age-related macular degeneration getting the boost there, and unfortunately, many more diabetics living longer -- fortunate, they're living longer, but unfortunate that there are so many diabetics that you're getting a lot more diabetic macular edema. And so big opportunity still there.

So obviously, in today's news, I don't know if you had a chance to look at it yet, Roche's PDS. Any thoughts there? I mean, it seems like the -- if you're one of those people who have to be injected every 5, 6 weeks, this becomes viable for you. How do you think about them as a competitor?

I think what we've learned recently with the Beovu launch, and I would suggest that you take a look, there was an editorial that came out yesterday by sort of one of the deans in the field, Phil Rosenfeld from Bascom Palmer in the American Journal of Ophthalmology, who basically said that Beovu should not be used. I mean you can read his words themselves where I think he said it explicitly, at least until this was all figured out. I think people are realizing that safety, safety, safety is really important. And the eye is a very sensitive assay, if you will, for problems that can go wrong. And port is a nice concept. I haven't seen the data carefully. But I would say they have a long way to go to convince the retinal community that it's a good idea to communicate from the outside world to the inside world on a permanent basis. As a young neurologist, we used to do that with shunts and reservoirs. And you know what, periodically, they got infected and it was a big problem. So I don't know what their safety profile looks like in this study, haven't seen it, but they're going to need lots more numbers, I think, to convince people that putting a permanent foreign object communicating from outside to inside is a good idea. But that's what competition is all about. Maybe they have something that would be useful in the highly needed -- treatment-needed person.

So the other question I have for you is, obviously, high-dose EYLEA is one of the most interesting opportunities you have in terms of extending the duration of this franchise. And first, can you remind us when that program is supposed to read out and can I read from the fact that we haven't heard anything that you're not seeing any vasculitis side effects at least in the blind data that you're seeing today?

Yes. We don't have a huge experience there yet, okay? So -- but we have enough, okay, to know that we haven't had inflammation as a serious problem yet. But until we've done a lot, I think that it's premature. We try and be conservative here. I think that you can be cavalier and run into problems. Beovu ran into problems and what -- they stuffed a lot of stuff into the eye. And obviously, they had a significant side effect profile. We don't want to tarnish the name of EYLEA. I'm not suggesting there's any issue, but I'm just saying, we want to be careful, and we don't want to push something until we know it's really safe. So we're going to look at this carefully.

Have you changed the drug protocol for the high-dose EYLEA to resolve for the Beovu? I mean, are you doing more in terms of follow up? Are you slowed down -- are you slowing down the patient acquisitions? Have you changed the entry quantities to make sure at least early on, you have for your patients that might have the inflammation? Or is there anything that happened there that you've done to adapt?

No. Nothing. But of course, COVID is going to impact a lot of trials and enrollment.

Sure. Sure. It's also down because of its own. How far is that trial right now at completion? Kind of, do you have the horizon? So is that like first half of '21, second half? Roughly, when is it supposed to come through?

Justin, I don't think -- have we guided on that? I'm not sure we have.

Not yet. No.

So actually, there is no data out there?

No. Not yet.

Okay. Okay. The other thing is this issue of the novel competitors. I kind of look at the data being collected like Kodiak, [ Bayer ]. They seem to have a biological fact. It's a long path forward [Technical Difficulty] what's your take about the evolution of your own product?

You broke up a little bit, but I think I got the gist of your question. How does competition look? And what do we think about it and all that? Look...

The technology.

Yes. I mean, look, it's hard to beat EYLEA. It's an amazingly effective molecule that has got 20 million injections under its belt with an incredible safety profile. And so I think that there are these technologies that were trying to deliver things and maybe have them last longer. But I think you -- and what we realize is that the tolerance. This is not like making Humira or something like that, where you're making a biosimilar, and it's easy and it's who cares if your injection inflammation is a little bigger than the other guys a little bit in 4% of people. Nobody is going to pay much attention to that. But at the eyeball, what have we learned? A few percent of problems that lead to a smaller percentage of blindness, and you're dead in the water, your propeller is turned off. And so these approaches, they're interesting. We look at that. We work in that area. They're all smart people trying, but it's a very high bar. So I just think it's too early. I mean we've been chasing -- we've been -- long before you got in this business, we used to get questions about PDGF. What's going to happen there? Ang-2, what's going to -- this and that? I mean, EYLEA sets a damn eye bar. Competition will come, but there's a lot of comfort when you know what this drug does and the scores of millions of people who have had and it's quite remarkable.

So let's stop and talk about dupi for a second.

Okay. Good.

Biggest question I got from the audience. Dupi, a little bit of update on the dupi auto-injected? What is the reason for the CRL? And can we be reasonably certain that will get addressed?

Yes. We can be reasonably certain. We're confident. I mean, this is typical carefulness on the pod. And it has nothing to do with the drug, what have you had to do with proper instructions. And did we have all that. And this will -- we're confident, this is going to be resolved. I think we're expecting an action date sometime before the end of this quarter.

Can you say it again? We expect it when?

Before -- I think it's before the end of this quarter, we were expecting in action. So I think we'll be okay.

Got it. So the point is this is primarily by the device itself, the human factors are all fine. It's just a matter of making sure the instructions are clear. Is that all there is to do it?

It's just a matter of that -- making sure that the patients can use the auto-injector in the right way and you get the reproducible results. I don't think you have to worry about, Ronny, the details there. We feel pretty comfortable we'll get that across the finish line.

Okay. Second question here is the Dupixent approval for atopic dermatitis in the 6 to 11 age group. Kind of like, can you talk a little bit about the commercial strategy here to expand to that group? And will -- can we expect that to be expanding into further south, as further south registry, younger age group over time?

Yes. Look, what we've learned about dupi is that -- it used to be the question, will dupi work in this disease, will dupi work in that disease? Will it work in another disease? We've almost gotten to the point that you can -- if dupi doesn't work, it's not a type 2 inflammation. It's almost the paradigm now you define type 2 inflammation. And let me give you an example. You look at eosinophilic esophagitis, data which we had put out on a Friday night, which was actually rather spectacular data. The data that I've seen with the IL-5s where you think eosinophilic, like a blocky eosinophils, when they block the eosinophils, but they didn't affect symptoms, okay? And we had a dramatic effect on symptoms. Why is that? Because I don't think this is just a disease of eosinophils. It's type 2 inflammation, which includes eosinophils, includes IL-4, IL-13 and downstream factors, okay? So dupi is truly the drug that treats type 2 inflammation, and we're kind of running through the table now in a consistent way, atopic dermatitis, asthma, nasal polyps, now eosinophilic esophagitis, and there's a whole prurigo nodularis, there's a whole bunch of other of these, okay? The true pipeline in a single drug. And we are barely penetrating the diseases we're in. I think only 15% of people with asthma, thinking about people who can use this drug use a biologic, I think it's only about 25% of atopic dermatitis penetration, who haven't started at all in these younger patients. Yes, we will move younger. We haven't barely scratched the surface on the geographies, okay? And we haven't scratched the surface on the indication. So if you think about it, where is dupi got to go? It's got to go deeper into the approved indications. It's got to go into the younger age groups. It's got to go into geographies, and it's got to get market share. There's a lot of, lot of, lot of runway for this remarkable drug. Will there be other drugs? Will there be maybe some of the JAKs and JAK/STAT inhibitors? There will be some ways along the line. But you've got to imagine, we have this safety profile that's just truly amazing. And it's not a classic immunosuppression. It doesn't carry the baggage of not being able to -- suppressing your ability to fight infections because the broad action of some of these other classes. So I really am excited. This has tremendous runway. Paul Hudson has told his company, this is really important. It's their largest product they think right now. We're working together, shoulder to shoulder. We've got a lot of heavy lifting to do, but yes, the short answer to your question, yes, we'll go to every age group where it's appropriate because you have such safety here and such dramatic efficacy in some of these poor kids. It's heartbreaking to look at them, and we're really excited based on what we saw [there].

So Len, I got to give you credit here. You've been telling us now for 2 years, we are making a mistake modeling this only in atopic dermatitis. And with a little bit of asthma on top, look, this is a broad disease. We're going to go much broader. You're modeling this wrong. So I know you guys hate modeling and you keep telling us...

To correct you. First of all, I never would have said you're modeling it wrong. I would have said you're thinking about it wrong, okay? Because I'm not a big modeler.

I know you're not a big modeler, but all of us -- all the people listen to us live and die in their Excel spreadsheet. So I think I'm going to ask you, let's see if we can get you. One step into the modeling world and help us saying, if we got to look at the markets you're currently in, not including the children's coming in. The children's coming in right now for atopic. And you ask what is the ratio? In 2030, what is going to be the ratio of those initial indication in asthma and atopic dermatitis of the total usage, okay? Are we only talking about 20%? Or is this 80% or 50%? If you think about this, where it will eventually be used? And in addition [indiscernible] just the thumbnail or are those the core and you would just add to it?

I have to say that I have no idea how to answer that question because I don't have asymmetric knowledge here. As I like to tell my shareholders and the analysts. If I have a lot of asymmetric knowledge, I'll offer hazard a guess. But you're really smart, Ronny. I think -- and you dig into these numbers and you model, you're probably -- your guess is probably better than mine. What I will say is there is just not enough penetration into the diseases we're in. There are a lot more diseases to go after. There are a lot more geographies, and there are a lot more age groups. So I don't know how to solve that 4-part equation and give you a ratio. If I did, it would probably be wrong. I do think that there's just tremendous opportunity. When a drug can define type 2 inflammation -- let's just take eosinophilic esophagitis, okay? I think that -- I don't know what the estimates are 50,000, 100,000, 150,000 people, I don't know. I actually think that the number is going to go up dramatically when you have a drug that actually can treat it as well as our data suggested it can once there's an approval out there. Based on these data, we are excited about the prospects for this. I think we will get many more people diagnosed. Because -- I have friends who are gastroenterologists, and they say, "Hey, Len, what about that drug for eosinophilic esophagitis? I just saw 2 people in the office this week." I hear that a lot. So I think this disease is sort of like other diseases of the GI track may be underdiagnosed. That's just 1 example. You don't know...

Are you going to go lower?

Pardon me?

Are you going to go lower below the esophagus? I mean can this be Crohn's, colitis, will you go further down?

I think to the extent that there are, and there are, eosinophilic-type or allergic-type gastritis and colitis, for sure. As you get lower down, it is a little bit more complicated to distinguish between the other diseases that affect there. The esophagus is pretty straightforward. But I suspect the gastroenterology community will tell us where to go because they're going to be looking and then they'll be telling us how many patients -- they'll be on the lookout for eosinophilic gastritis, eosinophilic colitis and so forth, allergic diseases, food allergy. Certainly, we're going to food allergies of the type of that are -- type 2 type disease. So there's tremendous road to go. How much time do we have left, Ronny, because I want to make sure...

We got about 15 minutes. I'm going to ask you 1 more and then we'll hit the cancer. Okay.

Okay. Great.

So if you give me a quick answer, we'll go faster. So the quick question here is, the one thing you have control is a little bit of your cost structure. So we typically see that when drugs get bigger and their cost structure begin to flatten out. And from that point on, operating profits begin to expand tremendously. So we think about Dupixent. Where will that cost structure roughly flatten out? Is that somewhere between like $1 billion and $1.5 billion, $1.5 billion and $2 billion? At what point you basically go, "Look, we're spending as much as we do everything -- any dollar growth beyond that, roughly not all, but 80% of it will end up in operating profit?

Yes. So I'm not going to give you a specific answer, but I'll give you something that will be helpful, I think. Not even ranges like that. But what I would say is that the operating margin, okay, of our partnership has been pretty poor, mainly for 2 reasons. One is we had drags on it like PRALUENT was a big drag. And we got rid of that drag. We separated out. And actually, we think we'll be profitable with what we're doing with PRALUENT. So that drag is gone. The second is we've been able to launch mode. We've had to launch in asthma. It's a whole new set of docs. We've had to launch to the ENT community. We will have to launch to the GI community, but the leverage is going to start to come, obviously, because the operating leverage, we have a long run ahead there. And it's going to come because we won't have to keep building more and more sales forces. We'll be able to use ones that are out there and be more efficient. So operating leverage is going to come for sure, and there's lot of room. We're not super-efficient right now, not because Sanofi Regeneron don't want to be. I mean I think it's because we have -- we're in this real massive growth mode in terms of the number of indications. We got to hit some pediatricians now and so forth, so.

So the next one I want to tackle with you is Libtayo. That and I've a couple of questions here. First, can you remind us when the data if the chemo combination is coming? And then chance people come earlier, probably just ask you that first.

I can't remember exactly, but sometime next year, Justin keeps these exact dates. And I'm always waiting for the early one, if we get an interim analysis, we'll see.

Is there an interim? Is there an interim coming up on this?

There's always a DSMB that looks at these things, and we always put something in there for overwhelming efficacy. You don't always hit it. But -- and I don't even know when it is, because it's event-driven, and I just hear whether or not it -- when we hit it like boom, we hit it with the monotherapy. But I will say that if Justin is on, he can tell us when -- what the status of what we've said about that.

We expect full enrollment this year.

And the interim analysis presumably is event-driven? Or is it after you enroll certain amount of patients for time?

It tends to be event-driven in these trials. But I would encourage you actually -- because I know we're not going to be able to do justice to the whole topic. I would encourage you, view is on June 1, George Yancopoulos, who knows about 100 times more about this stuff than I do, is going to give an update of our cancer efforts, including a little bit more peering into the data. We're very excited about this monotherapy. So you get a little bit more what's going on there and a lot more about our strategy and so forth, so I don't have about it too much.

So let me give you the CEO-level question because I'm sure you got that a little bit. So if we kind of look at your results, and depending on the KEYTRUDA results and your monotherapy trials, you have this closer to KEYNOTE-024 than 42. But on the other hand, good people of Roche came up and told us that there -- with the [ Tecentriq ] monotherapy, the efficacies is much lower because, while the patient group is now different, any -- most people are not using chemo. So you get sicker patients with worse prognosis as your baseline group. In your mind, where do that results that you're seeing for Libtayo fall versus KEYTRUDA? How do you measure that? And as you think about this in terms of positioning, your comment was always that we are the only ones to potentially be as good or better than KEYTRUDA. Still the case?

I think so. We'll see. I mean, the TECENTRIQ data is a little complicated because of what they saw in the combination data, I think, wasn't quite as good, but -- as they saw it in the monotherapy. But I actually think that we have a really great molecule. And I think when you see the entirety of our data, you will also be impressed. So I think I'm going to just -- I'm not going to steal anybody else's thunder, you're going to have to just wait to see our data. I think our data are great. I think we do have what we said we'd have at least as good based on non-head-to-head studies as the best, and we think we have the best pipeline of things to combine it with and the best insights on how to do that. And also our biospecific programs, our CD20 with CD3, our BCMA, our MUC16, our co-stim, our whole panoply of things going on. I think with our CSCC, our BCC and now our monotherapy in lung, this is -- we just keep turning over the cards and they keep coming up the way George expected them to. And so I'm really excited that the prospects for us emerging as a leader in immuno-oncology are really terrific.

So Libtayo, in your mind, what is the best combination that you're currently -- right now feeling the most encouraged about?

No comment on that.

Okay. So let's talk a little bit about the CD3, CD20. So lots of data coming in, how are you thinking about the timing of your program coming to the market versus Roche versus some of the guys behind you? Is there some differentiation there in terms of the profile or not that you're seeing? Can you give us an idea about where you are right now in terms of that program?

There are smart people out there who we compete with, obviously, and it's not we compete with 1 person, we compete with the entire world. We tend to be in these hot spots, these hot areas so we're up against a lot of interesting people. I think the Roche program is an interesting program to mention one, for example, and we view them as competitive, and they certainly know the CD20 space. So they'll be formidable. We like our molecule. We like our data. We're going as fast as we can, a little bit of slowing down in this setting of COVID, which we hope will normalize again, but we feel we're in a good position. We also can do combinations now with Libtayo. So we're excited about that. But we're also excited to full scope of all the different ones that we have. We're competing across the whole spectrum. And so we sort of have a bit of an insurance policy, and we get to know the docs and they get to trust us, and we can play around with arms. We can do things with a program, and I think other people may sometimes struggle to do. I know that sounds a little puffing, but I watch the team work. I think we're going to have a steady series of biospecifics, some of which will be better than others, some of which will be a little behind, some of which will be ahead. But when you put the whole program together, I think we're going to do great in immuno-oncology, really great.

So we got to touch on one thing that I've been struggling with, and I think all of us have been sure we trying to put numbers into our model. Sorry for using the word again. We try to put numbers into our model against them. And we are struggling with the fact that there are so many people chasing every target. One of the things that you've always been good at is quickly going after targets. But I was wondering if you could just tell me Tier 3 programs where you're either first or unique. In terms of IO combination, we go, look, that's one area where there aren't 5 or 6 people, and we -- or they might be, but they're chasing us because we've got a year or 2 lead. Is there any ones you can kind of mention to us?

I'll give you a couple of examples. I think our MUC16 is in pretty good shape, maybe ahead of the curve. I'm not sure how many other people are with us, but I think we're ahead there. I think BCMA and CD20 are crowded fields. But I think our CD28-based programs for co-stimulatory molecules that don't act on their own, don't kill people, don't -- will nearly activate T cells. We're in the clinic with that. I think we have a big lead on that. I think that, that is -- could be a franchise unto itself. So there's a couple of examples there.

So this -- the co-stim, when are we going to see kind of the clinical proof of concept? Is this, this ASH? Or are we talking about next year?

We don't have proof-of-concept yet, obviously, because we're going slowly. When we have it, you'll hear about it.

Okay. And the other thing is, look, you've done essentially the equivalent of 2 very large buybacks in the last few months. And one of the kind of -- the book cases since I started covering you, I've really been interested in Regeneron has always been look, at some point, this turns the corner from a small company to a large company. They don't spend out of money on internal -- on external purchases, there's going to be a lot of cash flow that could be used. It feels like you began to go that way, but it's a little bit of a question, is this an opportunistic situation? Or is this essentially the go-forward strategy? So I guess the question is, has the Board has these discussions?

Of course. Of course. And let me just say that stock buyback was difficult for George and myself. We've built this company. And I do think founder built-and-led companies are a little different. They do have the advantage of having a very long-term perspective. We built this company 25 years. As I've said, China rubbed 2 nickels together and hope it turned into a quarter and not 2 pennies. And we lost money for 25 years. So to go out and say we're going to spend $5 billion, so that a piece of paper didn't sit in Sanofi's vault, but in our vault, that was a big, big deal for us, okay?

You can learn new tricks, Len.

Well, we're not too old to learn new tricks. However, having said that, we do have a unique sort of situation. We are not dependent upon having a lot of cash to do these -- to bid for Otezla. We don't need Otezla. We got a dupi, this or that. We build organically. We want to spend our money. We want to spend our money on collaborations with like-minded people where our technology and their technology really can lead to big things. I mean, Alnylam, Intellia those are examples where we think we get together, we have like-minded, smart people, and we do things. 1 and 1 can really be 3 or 4, we hope. So will you see us change our focus? No. We're never going to be a change of focus internal unless we stop being good at it, which I hope is never. Internal organic discovery and growth is our #1. #2 is the kinds of collaborations that I just referred to, where we can saddle up with our smart people, their smart people and go faster and do interesting things. #3 seems very unlikely if we would bid on product in an isolated way. Product, people pay desperate amounts of money, you may wonder sometimes, have you actually done the math. You spend $10 billion on something that's going to have an aggregate sales of $12 billion, does that seem like a smart idea. I'm not referring to anything in specific. I'm just making up numbers. But -- so doing that doesn't seem likely. So therefore, the next place to put the money after internal and these external type of relationships I've referred to, is to return some of it to our shareholders in a judicious way. We didn't just say, well, let's show how tough we are. We can put $5 billion at. When Sanofi came to us, we had choices. We could have said, first of all, you can't sell anything until December. We could have said, go sell it. We're not going to have anything to do with it. Or we could say, listen, we want to participate. We want to buy a big chunk of it because we like the company's future. We do have models, okay? We do have simulations. We do -- we try and be intellectually disciplined but the first question -- and so it fit for us from a valuation point of view to make this big buyback. It fit nicely for us. But the most important first question was do we intellectually [indiscernible] and a gut feel that the business is strong, can we withstand COVID '20 downturn. We don't want to -- we didn't do the whole thing because we didn't want to take away flexibility in case if something comes along that we really do need the cash because of -- and we never want to show a change. We don't manage the business quarter-to-quarter. We manage it from year to 3 years to decades, okay? And so for us, founder-led company, we think of it a little bit differently. And so we are super bullish in our own minds about what Regeneron has out in front of it. But we're cautious in the sense because we instinctually know it was so hard to build this business and signing that $25 billion -- sorry that $5 billion check after 25 years seems like, wow. Okay, we can do it, but it's not something we just take lightly. We're not here for short term, so.

Well, the good thing is, I'm kind of hoping the next $5 billion of writing a check, it will get easier with time line. The next $5 billion might be a little bit easier. Is it fair to ask you, is it -- you've got a few minutes, but is it fair to ask you kind of like at what amount of cash on the balance sheet, would you begin to say, this is roughly about as much as we need for opportunities. I might -- if I know anything else to do, this is probably the right time to think about it? Or is it too specific for you?

I think that's a little specific. I mean, I don't know how much of net cash is -- Apple has a lot of cash. Nice to have $100 billion, $200 billion, whatever they have in cash on your balance sheet. I guess it depends on how much cash we're generating and what our market cap is and what our leverage is and all these things that people like, Bob Landry, our CFO, worries a lot about. We, of course, worry about it. But we don't want to financially engineer a business and gets addicted to financially engineering a business. We want to grow a business by getting new products that really make a difference, getting a fair price and generating that pile of cash and sure, returning it in the appropriate way to our shareholders. But you can get addicted to financial engineering, and -- then you stop doing what we're supposed to be doing.

I don't think you got a addictive personality, Len. I wouldn't worry about it so much. You're turning into somebody financially engineering, it does not sound like a problem you really need to worry about it.

Not frankly.

Okay. So if you don't mind, I'm going to -- I got about 3 minutes, I'm going to ask you 2 specific questions just to be responsive to the people that kind of voted that they want this. There's very good specifics -- short answer. Dupixent, what strategy is in place with the conjunctivitis studies to minimize the impact of adverse events?

Yes. I mean, if you look at the conjunctivitis issue, it's mainly been an issue in the atopic dermatitis patients, it's not going [indiscernible] in the asthma. We -- you can't solve a problem till you fully understand it. And we're still struggling a little bit to fully understand it in that why do -- and first of all, it's not a major problem. The docs have figured out how to work around, and you can just see that by what's going on. But the question is, is what's causing it? Because when it's -- a drug causes something in a specific disease, but in a related disease like asthma, you don't see it, then it's a little bit complicated. So don't have an answer for you on that one. We are thinking about it. We're working on it, but it really has to stem from some sort of a breakthrough in knowledge, which we don't have yet.

Okay. The last specific one is the chemo combo trial for Regeneron 1979, in early line of therapy in NHL. You kind of mention those in the 4Q '19 earnings call. Any update on those plans? What are you going to take the biospecific into earlier lines of therapy in NHL?

Yes. We're looking at that right now. We just had a great new recruit. Andres Sirulnik, who's joined us, and he's really well-regarded heme-onc lymphoma specialist. He's come in, and he's a big addition to the team, and he's looking at that carefully now.

Okay. And I'm going to kind of do the last question kind of opening up for you. So look, you ran the company extremely well. You seem to be in a good position. George has got more placed -- more things to play with than he -- as much as -- I guess you gave him as much to spent as he wants. He's exhausting that money and you still have some extra. I guess the question is for you as a CEO, what is the next thing you need to build? Is it international capability? Do you want to bring a new technology and what is the next challenge for you beyond just running the business?

Yes. I think the challenge is a lot more difficult than you might realize. And you might not even realize what we think the challenge is. To me, the challenge is how do you grow, okay, because we want to be a growth company, right? How do you grow and do that at scale, okay? And that is one of the greatest challenges that our industry has faced, and many have failed at. How do we maintain this entrepreneurial, we can get it done, nonbureaucratic, noncontrolled way. The guys started working on COVID in January. They didn't need somebody to give them permission, okay? They just did it. And we got to maintain that kind of attitude that we're not trying to use tools that large companies use because they can't manage. And so we need to make sure we have the bandwidth and fortunately, George and I have pretty good bandwidth, and we have a strong team of people underneath us who have amazing bandwidth. So I think the future of the company is in good hands. But I really believe that, that's our biggest problem, Ronny. It's not how do we operate and it's not particularly into -- if we kill COVID, I think we can figure out how to sell products in Germany, if we wanted to. You know what I mean. There's nothing intellectually challenging about that's tough. You've got to do it right. You got to have really good people, really smart people, but there's a formula that one can follow, et cetera. But what has never been done well or rarely is operate at scale and still be as productive. So that's why I got to stop and get back to worrying about that. So thank you for this. It's been a fun conversation.

Len, pleasure. I really appreciate you taking the time today. Justin, that's now, rest to the IR team. Thank you very much for being with us today and looking forward to future interactions. Have a great day. We all are rooting for -- in general, for the all the work you're doing. We probably should thank you before I finish for all the work you guys are doing, especially in the corona area.

Thanks.

Thank you very much for the time.

Thanks for the whole team. Take care, Ronny. And everybody, be safe and be well.