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

Great. Thanks for joining us, everybody. This is Terence Flynn. I cover the biopharma sector at Goldman Sachs. We're very pleased to have Regeneron Pharmaceuticals joining us today at our conference. We have Dr. Izzy Lowy, who is Senior Vice President, Translational Science and Oncology; and Justin Holko, who is Vice President, Investor Relations. I think, first, Justin had some -- a statement to make, and then we're going to launch into Q&A.

Thanks, Terence, and good afternoon, everybody. We're pleased to be joining you today in this conference. As always, we will be making some forward-looking statements as it pertains to our pipeline and our business. Please refer to our SEC filings as a reference to some of the risks and uncertainties associated with the business. Any of the statements that we make may not come true, but obviously, we'll do our best to deliver on those statements. Happy to turn it back to you and Izzy, Terence.

Great. Great. Well, thanks again for joining us. Izzy, maybe to start, when we think about Regeneron, I think most people -- oncology isn't the first area that they think of, just given the company's history. But obviously, it's been an important area of pipeline development, and there's been a lot of progress on that front. So maybe you could just start to give a high-level overview of the company's strategy in cancer. And what's different about your approach versus maybe some of the other companies that when we think of those companies we think of cancer? So how are you different from those other players?

Thank you for that, Terence, and for hosting us. So let's sort of roll the clock back a bit and just say how we got to where we are today, and that will sort of give, I think, people a nice view of where we plan to go. So I've been at Regeneron now 10 years. Prior to that, I was at small company, Medarex, where it was involved in the very first trials of anti-CTLA-4 and anti-PD-1 and the combination. Those drugs turned into ipilimumab and Yervoy and OPDIVO after the BMS acquisition. And at that point, I came to join George and Len and their team, with the idea that it was all going to be around the combinations. And we needed to develop a plan and a pipeline to develop that. And we recognize that as a foundational element of that pipeline, we would want to have our own anti-PD-1. And we wanted it because it would afford us flexibility and the opportunity to do all sorts of combinations in an efficient manner as well as reap the rewards of a novel PD-1 and trend coming into the field. And what we were able to do is execute on that vision in the following ways. Number one, we identified anti-PD-1 cemiplimab now approved as Libtayo. We actually found 2 untouched indications where we, in the case of one, cutaneous squamous cell carcinoma, we got our first approval in 3 years from first patient dose. We've identified advanced basal cell carcinoma is another opportunity where, in the second line, there is no therapy. And we just recently released positive data on that that we will describe more at ESMO. And then we had the pleasure of having our Phase III study in lung cancer for the high PD-L1, 50% or more population succeed at an interim analysis and with very strong results that allowed us to basically declare victory. So our strategy has always been let's find some places where we can develop PD-1. Let's try to compete in the big markets. And especially today, it was still striking that this many years later, it's still quite limited in terms of who has an approval in first-line lung cancer, and we hope to be joining that group this year. And again, there will be data, detailed data at ESMO. And then beyond that, to sort of compete and enhance is also to extend to basically say, okay, what kind of combinations can we bring forward to augment the activity of Libtayo? And so if Libtayo is the first of our foundations, a second foundation rests in a whole new set of technologies, are bispecific technologies, which come in 2 flavors today, 2 major flavors. One is the bispecifics that engage CD3, the T cell receptor on T cells, and round up T cells and bring them into the tumor microenvironment where they can attack on the basis of an antigen. We started off with our CD20xCD3 in lymphomas, followed that with a BCMAxCD3 in myelomas. And both of those are now showing very promising activity. And as a consequence, we believe that the success of one wasn't just a fluke but that it really bodes well for the soundness of our platform. More recently, we've developed a new approach to bispecifics that we call costim bispecifics. And these are molecules that also target a tumor antigen, but instead of targeting CD3, they target the CD8 receptor on T cells and deliver a what's called a costimulatory signal, Signal 2. And it's the most important receptor on T cells for giving Signal 2, so that once a T cell recognizes a tumor or foreign infection or whatever, it requires that second signal in order to be turned into a very effective active killer cell and proliferate, et cetera. And these receptors are rather plentiful on immunologic malignancies because they share the same lineage as typical antigen-presenting cells. The B7 molecules is the family of the ligands for CD28. They're found on dendritic cells, B cells, macrophages. So it's not surprising that maybe that's perhaps that's why CAR-T cells and CD3 bispecifics seem to be having the bulk of their efficacy to date in liquid tumors. B7 molecules, on the other hand, are very seldom found in solid tumors. It's not part of an epithelial carcinoma to express B7 or sarcoma to express B7. So what we've done with our costim bispecifics is the same idea of bridging, but now we bridge tumor antigen to the CD28. And we've done this in a way such that the ability to deliver this important signal is only in the setting of the presence of the tumor antigen. So it really -- that [ key pick ] that the T cells get to be even more active occurs in the setting of the tumor or in draining lymph nodes where we're stimulating T cells to be very effective. So those are the 3 arms or the 3 foundations, if you will, of where we are now. We are exploring, even within the typical antibody class, additional agents in the checkpoint family. We have a LAG3 antibody that is under investigation and looking at particular expansion cohorts, where we think we may have some intriguing efficacy. We just recently received allowance from the FDA to open up clinical studies with a GITR antibody. Our GITR antibody, we believe, is differentiated from other GITR antibodies. It is -- we believe it will effectively deplete Tregs in the tumor microenvironment and leave the effector CD8s relatively unscathed and free to benefit from the addition of either CD3 bispecifics or Libtayo or ultimately it's conceivable we might find a place to use all 3 agents. So that arm is filling out, and we continue to look for targets that we think are of value. And with the CD3 bispecifics, we've also now made a foray into solid tumors with a MUC16xCD3, which is targeting ovarian cancer. So that study is underway as a monotherapy and in combination with Libtayo. And in that setting also, we just recently received IND allowance -- FDA allowance to initiate studies with our second costim bispecific to enter the clinic, this will be MUC16xCD28. So what you see is rolling out an array of agents that have the opportunity to collaborate with each other in almost a plug-and-play fashion. And we are not limited to those agents. We also recognize that other companies have developed technologies outside of our wheelhouse. So we have collaborations underway with companies that make promising oncolytic viruses or vaccine platforms. And we also have partnered with a cellular therapy company, bluebird, for the settings in which maybe cellular therapies might still be -- have an advantage over bispecifics, but they can certainly benefit from the fine and high-quality antibodies and TCR receptors we can provide. And we've had our ongoing collaboration with Sanofi, who are partnered with us on Libtayo and who also have agents of their own that they will find of interest to combine with Libtayo, so we both benefit from that setting. So what you are seeing is the result today of a filings of agents that are marching forward to take on cancer. And we sort of -- we were in the quiet for quite a few years until we had developed all the in-house technologies that we needed to test all these antibodies, the right models, thinking through the right kinds of agents and thinking how we were going to stage these, and we are moving forward. So we have Libtayo, had great follow-on data at ASCO on CSCC. We look forward to sharing more data with BCC and lung cancer, our CD20xCD3 for lymphoma, our BCMAxCD3 for myeloma are moving forward, they will -- our lymphoma program is opening up a Phase II to -- in multiple subtypes of lymphoma that could be registrational. Our solid tumor efforts are underway with the MUC16xCD3 with PD-1. We have our first costim in the clinic, PSMAxCD28 in the clinic in combination with Libtayo as well. So that's where we're going. And so we came from a point of -- from the beginning, feeling that combinations were important and felt that it was important for us to develop a deep portfolio with the ability to actually really play different cards in this game.

Great. Well, I think that's a really comprehensive overview and a great place to start. Maybe just the one follow-up question I had on that front and, obviously, you have a lot of history in the field, just given your time at Medarex. But just predictability of early stage models because we continue to hear about new IO targets, whether it's LAG3 or GITR or TIGIT most recently, and just maybe remind us how predictable are the latest animal models in terms of understanding these new targets, and what we're going to see when we go into the clinic. And how confident are you guys in terms of kind of seeing clinical activity when you move forward with a program like you talked about GITR, for example, and it's differentiated? So just the level of confidence that comes from the models you're currently using.

Well, let me say this. One of the things that I glossed over is the fact that the underlying technology that George and his colleagues have built over time is really, again, a lot of stuff that was done in the quiet, but people didn't see the value initially. But it basically allows the company to humanize mouse -- mice, very easily. So all of the agents that we test in the clinic, we have tested in humanized mice. My prior experience was that was hardly ever done, and that often you would use a surrogate antibody, a mouse antibody in a mouse model to sort of convince yourself that the pathway was worth interfering with. And what we -- what that does for us, it gives us as much confidence as we can have in terms of seeing how these things will play out in the clinic. So what can I tell you? We -- knowing that PD-1 would work, well, that was easy, right? Everybody in a PD-1 would work. What we didn't know is how well it would work and whether it would stack up against the leaders in the field. And the way we gave ourselves the best chance for doing that was we tested many different candidates for PD-1 in these humanized mice models and against OPDIVO and pembro, and basically picked one that performed as well as any of them. And that we thought was putting our best foot forward, and it seems that that's held up. In the case of CD20xCD3, we also made a variety of models. We made models in which the animals, the mice had no lymphocytes, so we could put in human PBMCs with a tumor. And we could also make not -- we also made humanized mice that had CD20 and the T cell CD3 T cell receptor component humanized. And we could check those for activity against tumors that had a CD20 put on them. So we think we're very sophisticated with our tumor models. And we -- and time will tell whether -- in general, the predictability of our models for going forward. But I will tell you that we've seen some dramatic effects with the addition of our costim models -- costim bispecifics in these models. So it's never a guarantee. But I think we've learned to have some confidence in these models, and that's with some major gate for us to get through in order to be confident to take something to the clinic.

Okay. Got it. Maybe just on Libtayo. Again, you mentioned this is your kind of foundational or anchor molecule. As we think about the next key set of data, I guess, it's from the chemo combo study, an all-combo study, anything to call out in terms of that trial versus maybe some of the prior trials? Or is this essentially just kind of taking the Keytruda playbook and you're running a very similar trial, so we shouldn't think of there being a lot of risk here? Or is there anything kind of different about your approach in that study? And then is there a potential for seeing interim data from that study this year?

So what we -- so the study is very much designed to prove that our anti-PD-1 can perform just as well as Keytruda or others that have proven effective. And we've announced that that study will be shortly completing its enrollment, probably by the end of the summer. And we have given guidance that we are planning for an interim analysis in the beginning of 2021, when we think we will have accrued sufficient follow-up and events in order for us to be confident about having -- or have a good chance of success of having a positive readout then. So I would not promise anything before that. If something -- if we do take a peak and it's interesting early on, obviously, we'll let people know. But in early peak, if it's not -- if it doesn't pass, they basically tell you to go on. So we certainly don't expect any surprises that it won't work. I mean nothing is guaranteed until it's done. But we think we -- based on the track record so far, 3 out of 3 registration studies hitting, we are cautiously optimistic that we will, in fact, be successful.

Okay. And one of the other, I think, focal points coming out of ASH was the anti-TIGIT data from Roche. And you guys talked about this on your ASCO conference call in response to a question. It sounded like you weren't overly convinced or excited about TIGIT at this point. Maybe just give us your perspective on kind of why that is. And let's say, for some reason, though, the clinical data from some other companies plays out and they continue to see activity, could that be an area where you could pivot to pretty quickly? Or is it something where you're just further along with LAG3 and GITR and so you see those as more interesting? I mean just maybe help us think about the kind of combo opportunities with Libtayo.

So we have many targets in development. And obviously, we're exploring TIGIT as well. The one that push forward are the ones that in our hands seem to give us some compelling data. So GITR was giving us some compelling data. And it's interesting that the GITR pathway actually talks to TIGIT. And so when you have productive engagement of GITR, it actually down-modulates TIGIT. We've published on this in a science paper late last year when we describe the work with the GITR antibody. The data presented at ASCO, I think, largely showed some evidence for an effect in patients with high PD-L1. So we're not sure that that's enough of a signal there to warrant opening up our own efforts. Obviously, we'll watch it, but we think actually our GITR antibody may positively affect that pathway as well.

Okay. And when -- and so the study you're doing with your GITR, that -- first, you're going to look at monotherapy and then you'd move into combo? Or are you doing combo in parallel?

We do combo up -- way upfront. I mean there are certain -- there are -- when we bring in an agent that we don't think may have sufficient monotherapy activity, we bring in cemiplimab with it from the outset. So for example, our costim programs, PSMAxCD28, MUC16xCD28, those are all going to have cemiplimab with them. So the PSMAxCD28 is enrolling and it's with cemiplimab. The reason for that is although these -- I just talked about 2 different types of bispecifics. The behavior of these bispecifics in animals, and we expect in people as well, is very different. The CD3 bispecifics, by rapidly activating T cells, actually results in cytokine release similar to what you see with CAR-T cells or other CD3 bispecifics. The CD28 costims don't really do much on their own, they give Signal 2. But in the absence of Signal 1, you can't jump to 2, you have to have 1 plus 2. So we are not convinced that it's the right thing to do with patients to just start with a costim by itself. And similarly, we have not yet seen sufficient data on GITR activity as a monotherapy and markedly augments with PD-1.

Okay. Understood.

Clear? Okay.

Yes. I guess maybe it's a good segue into your bispecific program. Obviously, this is the second platform that you called out. And as we know, you guys have both the CD3 and the CD28. One, we've seen a lot of interesting activity so far in lymphoma and multiple myeloma now from both you guys and other companies. So it looks like there's definitely activity there. I guess 2 big picture question is, number one, how should we think about the durability of that activity? Because it seems to me like that's one of the things that some of the cell therapy companies talk about is maybe over time we're going to see kind of a waning of efficacy with the bispecific approach, whether it's the local microenvironment or T cell exhaustion, but durability, I guess, is a question. And then the second would be confidence in addressing solid tumors. I know we've talked about this before, Izzy, but just how you -- how confident you are that you think we will see activity in solid tumors, given the animal data and what else we know at this point.

So let's talk about durability first. Durability is obviously key. And even in the CAR-Ts, if you don't have -- if you don't achieve a complete response, the durability of the CAR-Ts is not that terrific. And we simply have not had sufficient follow-up to say what the overall durability is, but we do have patients that have gone on off-therapy for over a year that had been maintained in a deep response. So the premise under which a cellular therapy might have durability is that those cells persist and they can be called upon to amplify if the tumor comes back. There's nothing to stop us from providing some kind of either maintenance therapy, until you get to some really low minimal residual disease. So I don't know that there's any reason to think that they will be better in the long term. I think it will all have to play out in the clinic, and we'll see what the numbers show. We'll be presenting updated data at ASH. You'll have some idea there for longer follow-up on many of our patients. We've seen, in some of our early programs, we didn't give ongoing therapy for -- from beyond a certain point. And we already have patients in our myeloma program who, off-therapy, are maintaining an MRD-negative response. So it's early days. I think what we are -- we're opening up Phase II studies in both of those settings that will have cohorts that are -- have the criteria that they can be registerable if the -- both the response rate and the durability are robust, and we're optimistic about those. With regard to solid tumors, cell therapies, bispecifics to date have not been that potent in solid tumors. And I presented earlier one thought, which is that maybe you are missing some key costimulatory signals in the solid tumor microenvironment, certainly, the tumor cells themselves don't generate, don't express B7. The -- and in the tumor microenvironment, you're basically going to be relying on the ability of T cells to get that benefit of CD28 signaling, either from antigen-presenting cells that are in the tumor microenvironment or antigen-presenting cells that are in the draining lymph node with tumors there. But it's much better if you can turn every single tumor cell and to essentially behave as an antigen-presenting cell and rev up the T cells there. The data we have preclinically look compelling, so we're excited.

Okay. And maybe the last one on the topic is just in terms of thinking about moving bispecifics to an earlier stage patient population. I think that's one of the other things that investors, doctors are debating is just -- we still see some of the CRS with the bispecifics that we see with the CAR-Ts. But how should we think about managing that CRS to move into earlier stage treatment, particularly in something like lymphoma or multiple myeloma?

Well, we've learned over time how to manage CRS and how to make it a very manageable and relatively nonlife-threatening issue. And we were the ones that kind of pioneered this approach of starting with a small dose of a bispecific and then ramping up the dose. And what we found is that with this kind of approach, we can actually -- we start initially with the small dose, the prime, and we get some CRS, but we also premedicate and give a slightly longer infusion. But pretty quickly over time, within a matter of weeks, the physicians can start dialing down on the premedication and speeding up the infusion. So we have patients that end up getting no premedication than just an hour-long infusion once we've gotten through that part. So that's very attractive. And we are planning now studies in combination with other standard of care reagents in preparation for moving it upstream to earlier lines. We're also working on a subcutaneous formulation that we think will add convenience and ease the burden of the infusions. We're also going to be considering maintenance infusions that are -- because of the pharmacokinetics of our molecules that behave like antibodies, they essentially are antibodies. We can rely on a greater extension and time between doses once we've achieved the efficacy we want to get to.

Okay. Great. Maybe just in the last few minutes, I wanted to pivot and loop Justin in here just because, again, I know you guys have been working overtime in terms of the COVID cocktail -- antibody cocktail approach. And so maybe, Justin, you could just give us an update on kind of your time lines, if those are still on track, and then when we might see some initial data out of your antibody approach.

Sure. Thanks, Terence. So we do remain on track with respect to our cocktail program that we've been talking about now for several months for COVID-19. As you heard from us a few weeks ago on our first quarter earnings call, we are poised to begin clinical trials here really within the imminent time frame within the next week or so. And we have, as we talked about, really an abundance of antibodies that we were able to choose from. We chose a 2-antibody cocktail as our lead program that will be going into the clinic. And those are 2 really potent antibodies that are going to bind to the spike protein of the SARS-COVID 2 virus. And they're able to bind simultaneously and in a noncompeting way. What we will show in the not-too-distant future as well is that it's really important as you think about treating this virus as any virus to ensure that there are not possibilities to have a mutational escape. And so we're very excited about getting these antibodies, this cocktail into the clinic here in the imminent time frame. And then, obviously, depending on enrollments and such, we would expect to see perhaps some data toward the end of the summer in the treatment type arrangement that we've been talking about, so treating patients who are both hospitalized as well as not hospitalized. It will be a little further out probably in terms of being able to show data in the preventative setting because, as you've heard from us, we will be looking at the cocktail as a preventative measure as well for potential patients who are at high risk of becoming infected. So we're moving along very quickly in that, and very excited to show some progress in that regard.

Okay. Great. And maybe the second one for you, Justin, just relates to the Sanofi collaboration and everyone is aware that they sold the majority of their stake about a week, 1.5 weeks ago. Maybe you can just give us a little bit more context there on that decision and then the status of the relationship on a go-forward basis.

Sure. And it was a very exciting transaction, I think, for both parties. It's not often that you have a really a win-win type scenario, is what we were able to communicate with our partners at Sanofi. It was good timing for both companies. And I think before we get into the details in terms of why it was really beneficial for us, I'd just first say that there's no change to the relationship as it pertains to developing and maximizing the several products that have come out of that relationship. In fact, I think if you look back at this partnership over the years, it has probably been one of the more productive and innovative ones that we can speak to in the industry. And so what's important to remember is that even though Sanofi more or less liquidated their entire stake in our company, it doesn't change the partnership with respect to maximizing products like DUPIXENT. Libtayo is definitely coming into its own now, as you've heard from Izzy. And so there's no change in the excitement and the commitment to really maximizing those products. But as you think about why this was beneficial for us, it was very clear that Sanofi had the optionality, and they communicated that optionality, to sell their stake in our company as the expiration of the lockup was going to take place on December 20 of this year. By having us work together on this, as a single placement, it created a lot of freedom and efficiency. They were able to get out of their stake and have that asset on their balance sheet available to them for their strategic purposes. But it also removed an overhang from the Regeneron perspective. And as you know, Terence, shareholders had a lot of concern around what could happen once that December 20 expiry came about. And so in many ways, this was great for us in that it removed that overhang. But as you also saw, we took $5 billion of that stake and was able -- we were able to purchase that at $510, which, as you see, where the stock is trading today. And we're very pleased to see how that has performed in the near term. But it's accretive to our shareholders. It gives a sense of confidence to how we feel about our business. We have Izzy on this call today because we don't think that the investment community has done more than just scratch the surface in terms of ascribing value to the oncology program and the pipeline programs that we have that are moving forward. And today, we're really only talking about oncology. There's so much more to talk about that's going on with George and the R&D teams. Not to mention you're really seeing us execute commercially with EYLEA and DUPIXENT. And we're really excited about where we stand with the prospects of the business going forward. So -- and then you just think about the backdrop of placing these shares into an environment where biotech stocks are very much in demand. It really sets up to be the perfect storm, so to speak.

Great. Well, I think we're at the time there. But thank you, Izzy. Thank you, Justin, for your time. Again, best of luck in the coming months, and looking forward to further updates. Thank you both.

Thank you very much.

Thanks, Terence.

Thanks. Take care.