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

Good morning, everybody. I'm Matthew Harrison, one of the biotech analysts, and pleased to start the session off today with Regeneron. Quickly before we get started, I just need to read a disclosure statement. Please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you're a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley representatives. So pleased to have Bob Landry, the CFO; Marion McCourt, who runs Commercial; and Justin Holko, who heads IR at Regeneron. I know Bob and Marion, you wanted to make some opening statements. So I'll let you do that and then we can jump into Q&A.

Sure. Good morning, Matthew, and good morning to everyone that's joined the call. Like usual, we very much being appreciated to be invited to this conference. Regeneron will be making comments this morning that includes forward-looking statements that involve risks and uncertainties relating to future events and Regeneron's future performance, and actual events or results may differ materially from these forward-looking statements. Statements made may include risks and uncertainties. A description of Regeneron's material risks can be found in Regeneron's December 31, 2019 10-K and our June 30, 2020 Form 10-Q. So as Matt said, before we begin with Q&A, Marion and I will just kind of make some opening remarks, maybe a minute or 2 each, talk about what's been going on. We do have some new exciting disclosures that we would like to make, note to that. And I'll start in that area with regards to oncology. So we're stating today that within the last couple of weeks, we have made our regulatory submissions for Libtayo in lung, in BCC in both the U.S. and in the EU. And we're also now fully enrolled in our Libtayo-chemo combo study in lung cancer patients. Again, both of those things are very exciting. And as we previously announced, but just letting everybody know, we are looking forward to further updates in our bispec platform at ASH. With regards to pipeline progress, we announced this morning via press release that Dupixent has been granted breakthrough designation for EoE. As you may know, we were granted orphan drug back in 2017. With our partner, Sanofi, we've commenced a second Dupixent Phase III study in COPD. And pertaining to our CoV-2 cocktail, we are continuing with enrollment in our treatment and prevention studies. Again, we expect to have hundreds of patients already enrolled and to be enrolled by the end of the month. We stated and are on track to receive urology and biomarker data from our treatment studies by the end of this month that we will read out on. In July, we announced the signing of a $450 million deal with U.S. DoD in BARDA to supply Regeneron CoV-2 initial doses. And in mid-August, I'm sure everyone has seen, we signed a global supply arrangement with Roche, expanding global supply of Regeneron CoV-2 by 3.5x in terms of what we could have done ourselves. Again, a little bit on the summer news. On the capital front, we executed the secondary placement and buyback of Sanofi state. In early August, we took out via a public debt offering, $1.5 billion. We did a $2 billion debt offering to take out $1.5 billion of the bridge loan associated with the buyback on the secondary offering that was made at the very end of May. And then kind of last but not least, to reiterate, we had really strong 2Q results. Our top line was up 24% year-over-year. Bottom line, 19% growth despite the impacts from COVID-19. Again, I think it demonstrates the resilience of our business during this pandemic. So with that, I'm going to turn it over to Marion. She'll make a few quick Q&A comments, and then we'll kick it back to Matt to start Q&A.

Great. Thanks, Bob, and good morning to everybody. Great to be here today. As Bob mentioned, we did have a strong second quarter commercial performance, certainly showing the resilience of our business, our competitive strength and that's most reflected in our core brands of EYLEA, Dupixent and Libtayo. To make a couple of comments first on EYLEA, we outperformed the overall anti-VEGF market in the U.S. with continued share gains, both from branded and unbranded competition. And since May, we've seen a pronounced and sustained demand recovery, new patient volumes are approaching the pre-COVID levels. As we go on to Dupixent, in the second quarter, we show that our net sales have grown by 70% and we are now approaching a run rate of about $4 billion net sales on an annualized basis in the U.S. The growth is driven by broad performance across all of our improved indications, atopic dermatitis, asthma and chronic rhinosinusitis with nasal polyps. One of the indicators that we obviously look at most closely, as to you, is our new patient starts, or NBRxs. They continue to improve. We're getting close to the pre-COVID levels and certainly the persistency of Dupixent has been demonstrated in continuing patient therapies that are very, very robust because of the results that patients are achieving and their end prescribers are seeing. We continue to have expansion of indications into the younger populations. Our launch of pediatric atopic dermatitis has been encouraging. And certainly, we're very pleased about the geographic expansions we see through our collaborator, Sanofi. There's substantial patient opportunity in Type 2 inflammatory disease, as we know, and we certainly have a robust clinical and development programs. We're all really excited about the needs that Bob shared earlier on eosinophilic esophagitis and the breakthrough designation there. As we go on to Libtayo, certainly, we're excited that Libtayo is a leading treatment for advanced cutaneous squamous cell carcinoma. The team has performed very well in our first oncology indication launch with more to come. And as you might imagine, we are looking forward to getting ready for launches both in lung and basal cell carcinoma. Hopefully, with FDA approvals next year, both represent really important and meaningful opportunities for patients, for prescriber choice and certainly for Libtayo. So with that, I'll stop with the planned comments and certainly, Matt, back to you with any items you and the team would like us to address.

Great. Thanks for those. Those are helpful.

So we were discussing before we started about how, for the past couple of years, I've asked a question about drug pricing. And so I thought maybe and keeping with tradition and given the administration's executive order that was signed last night, maybe you could just comment on what you think, if any, is how that's going to play out? And I guess what I'm more interested in is, what happens next here? And how do we see this play out, if at all, given questions around maybe the legal authority to actually do anything right now?

Sure, Matt. So I'm happy to kick off with that. So certainly at Regeneron, we support appropriate steps to make medicines available and accessible and affordable to Americans, including seniors and truly as well at prices that are affordable, but also truly reward innovation. So we are reviewing the executive order signed yesterday on September 13, which orders the Secretary of Health and Human Services to implement a rule-making plan to test a most favored nations model. Based on our initial reading of the EO, it does not seem to apply to EYLEA, given that Regeneron does not sell the product outside the United States. Aris is responsible for selling and pricing EYLEA outside the United States as well as manufacturing the final commercial product for these markets. We need to learn more as the order is clarified, and we will share our thoughts with the administration as warranted. In the meantime, we continue our innovative work against COVID-19 and other various diseases.

And would you -- I mean, I guess -- so thanks for that, and I think that's useful. And as this plays out, I mean what's your view on the potential for maybe something more significant from a congressional standpoint or CMS themselves to put something together related to drug pricing? What's your outlook on that over the, let's call it, next 6 to 12 months?

So Matt, we'll have to stay close to developments. We have a long history as Regeneron with stepping up and doing the right thing and making sure that our medicines are accessible to patients and prescribers have the freedom of prescribing. I think we'll have to wait and see how the next weeks and months continue. And certainly, Regeneron will participate in discussions appropriately with administration and with authorities as things are worked on.

Okay. So Marion, in your prepared remarks, you talked about how you're seeing prescribing levels, especially in office visits related to therapies trend back to pre-COVID levels. I'm wondering, as a company, do you have an outlook for a disease spread and how you think that's going to impact what we see this upcoming winter? How are you thinking about being prepared for that? And what sort of variability that may play into your outlook?

Sure, Matt, a really important question. I'll first comment and I'll comment first as it relates to EYLEA. We are seeing the retina practices getting back to patient volume close to pre pandemic, pre-COVID timings. And of course, that's so important because these are patients who need to be treated because they're suffering from blinding eye disease. We also see the practices now have level of engagement in office staff training so that they probably are in a better situation to deal with spikes in disease, difficulties, making sure they keep their patients safe and keep members of their practice and their community safe. But I think we see a better situation now than back in March when things became difficult at first. So taken all together, we're cautiously optimistic for EYLEA as things continue to recover, but also reflecting as we get in to the colder months, we may see some spikes in disease. Frankly, over the last several months, unfortunately, we have seen spikes in various states where things have become more difficult. That is reflected in patient volumes, but with far better practices in work on behalf of offices so that patients can actually come in for visits. And the throughput of patients is getting back to what would be closer to pre-COVID times. I think the other thing we reflect upon is that EYLEA has a profile for practices that allows for appropriate patients to treat and extend the clinical profile, safety profile of EYLEA. And more recently, we've launched the prefilled syringe, which also makes it very efficient and effective for patient throughput. So everything we're doing as a company to help support our offices virtually and where possible in person, we believe, is really important. And our customers are reflecting that, that support has mattered quite a lot. On Dupixent, as I talk a little bit about the current state of patient demand and what we expect in the future to answer your question, we probably saw a bottoming out in terms of COVID impact in the May time period. And now we're seeing prescribing in treatment levels through NBRxs that are approaching the pre-COVID times. Tier-2 Dupixent has a profile that is attractive for physicians, gives comfort not only in the efficacy, but also the safety. And Dupixent's a product that can be administered at home. It doesn't require a laboratory monitoring from those patients. And very importantly, it is not an immunosuppressant. So we're optimistic we'll work very closely with all our office practices. And hopefully, the next several months, we'll have potentially some bumps along the way, but patients will get the therapies they need, and we'll certainly be there to support our customers and patients.

Okay. Good, good. So maybe it's a good time to transition the COVID antibodies. I know that's a big focus for a lot of people. So I know you're sticking to the sort of end of September time line, it sounds like for the initial data. I guess my question, what's that data is going to tell us? So if we know that you can reduce viral loads, what do you think that means? And what do you think specifically that means in terms of your ability to get an EUA to start supplying drug to patients?

Yes. Matt, I'll start, and then I'll have Justin maybe get into a little bit of the specifics because the data continues to come in. And I mean, this has been a trial where you get to see George Yancopoulos's genius kind of each and every day today with the team. And these things are adaptive studies, and we're kind of making changes as we're learning more and more each day about it. I mean, with regards to the EUA, I mean, we'll have to see what the data looks like. I mean we're -- first and foremost, we are working kind of nonstop on trying to enroll patients across all of our 4 studies, right? We have 2 treatment studies. We have a healthy volunteer study, and then we have a PROFI study that's ongoing. And first and foremost, we're just working kind of 24/7 to get these things enrolled. Like you said, I mean, we will have data at the end of September. We have a couple of hundred patients right now. We're going to have it in the treatment studies. First, Justin, you want to shed maybe a little bit of light in terms of what that stuff may look like on the viral shedding and the like?

Sure. Yes. Just a couple of points. So we remain blinded to the data at this point. So our treatment studies remain in what we're calling the Phase II portion. And what we're really trying to do in the Phase II portions of the studies is to understand as much as we possibly can with regard to how the COVID antibody cocktail may work against the virus. And there's a lot of potential factors that could influence how well it works. And we want to make sure that we're learning as much as we can prior to formalizing our hypotheses and moving into Phase III. So you've probably actually seen that we've increased enrollment to the treatment studies so that we get a better view of what could be a multitude of stratification factors such as baseline viral load, endogenous antibody titers, asymptomatic versus symptomatic patients, things of the like along those lines. As Bob mentioned, we will have several hundred patients' worth of data at the end of the month with respect to virology as it pertains to either reduction in viral load, looking at various viral shedding measures. And then there could be some other biomarkers of interest as well. So more to come on that. But just to reiterate, we remain blinded to the data at this stage.

And so then in terms of the regulatory plan, I mean, I know it's somewhat premature if you don't have the data yet, but do you have any insight into what pieces of data you're going to need to be able to deliver to a regulator for them to decide when an EUA would be appropriate or not?

Yes. Justin, on that, please?

Sure. No, I would say that the team is meeting with regulators fairly frequently on this program. I think what you've seen, though, across the board is that FDA has been, at least, when you see what's being said about vaccines, for example, they're looking for a pretty high level of evidence. And so our going-in assumption is that we would need clinical outcomes data. We would not have people think that early indications on viral load and things on those lines would be enough for an EUA. Obviously, that remains a topic that we'd have to discuss with regulators. But our anticipation is that we would need to demonstrate that there's an impact or a benefit on clinical outcomes.

And thoughts on that time line for potential clinical outcomes data?

Don't have an update at this stage. I would imagine that when we present some data toward the end of the month, that we'll be in a position to provide an update at that time.

Okay. That's helpful. And I guess -- and then finally, maybe just remind everybody, you talked about the Roche agreement being able to increase supply by you on your own. Can you just remind people how many patients could you possibly treat on your own? And where does that get you in terms of adding the Roche supply in terms of patient numbers?

Yes. Matt, before I get in, I'll just kind of reinforce to that before we get to the Roche agreement, we do have the $450 million DoD agreement, which we were making product over the summer. We continue to make product over the summer. We expect to make delivery to them fairly quickly, and that will kind of roll into early 2021. Outside of that and again, I emphasize outside of that is the Roche agreement where, I mean, we knew we needed more capacity. And after having discussions, we're very pleased with the partner that we were able to get into agreement with. I mean, it increases our manufacturing by 3.5x. And we've said publicly, that should allow us on an annual basis to do 650,000 to 2 million dose treatment doses and 4 million to 8 million prophylactic doses. So it really does step up our capacity. We have committed 40,000 liters of capacity, and they've committed 100,000 liters of capacity. And again, we continue to move forward with our trials. They will have responsibility outside of the U.S. We will have responsibility in the U.S., and we have responsibilities for the filings in both the EU and the U.S. And then we will hand over to them the EU filing, and it'll go from there. Plus they'll handle -- Roche will handle any new filings that are necessary in the other countries. So yes, very pleased with the deal. And we're in the process right now where we've been for the last month in terms of tech transferring our antibody cocktail to their biologic plant where they're going to make this. So things are kind of off and running even before the initial agreement was signed.

Okay. Helpful. Perfect. Maybe just flipping to EYLEA. I guess two things I just wanted to ask about. You're studying a handful of different presentations, high dose, other frequencies, et cetera. Can you just remind us sort of where you are there? And how you think about those trials versus some of the competitors that are going to potentially launch over the course of the next year or 2?

Sure, Matt. So let me take the competitive situation and then move into our high dose formulation for EYLEA. On the competitive front, certainly, EYLEA sets a really high bar in terms of both efficacy and safety. And as we look at competitive developments, we, of course, will monitor them very, very closely, but we do believe that EYLEA's track record provides such a strong competitive profile. And certainly, we all recently in the last year and months have seen the incredible importance of monitoring safety for products since we're launched into this space. And that I don't think anyone ever would or certainly will in the future take safety for granted based on some of the recent events we've seen and even more recently, FDA actions in rejecting certain products out of concerns of inflammation and safety concerns. But on our own front, we do believe that it's always important to be looking for next advancements in care. While I mentioned before, EYLEA does provide, today for the right patients, dosing frequencies out to 12 weeks after treat and extend appropriately by indication. And as physicians see the level of efficacy they need to in patients. But we do think it will be very attractive as we explore the high dose formulation, determine to see if we could maintain our efficacy and safety and go to an even less frequent dosing schema, perhaps going out as far as 16 weeks or even longer as we maintain that same high bar in efficacy and safety. So as we mentioned in our second quarter earnings, we did announce that we're starting to enroll our Phase III trials in DME and wet AMD. And we're very excited about that. We'll continue to monitor the clinical developments for EYLEA with the aspect of potentially going to this high dose formulation and look forward to potentially create improvements for patients in terms of how frequently they are dosed.

And then I guess, the second thing is just prefilled syringe. Can you talk about progress there? How important that's been commercially for you? And maybe what share that has now? And where you think that could get to?