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

Good morning, everybody, and thank you once again for joining us for the 31st Annual Cowen Healthcare Conference. I'm Yaron Werber, Biotech Analyst at Cowen, and it's a great pleasure to moderate the fireside chat with Regeneron. With us today, we have Bob Landry, EVP, Finance and CFO; and Neil Stahl, who is the EVP of R&D. And we have Justin Holko as well if needed. Gentlemen, thanks so much for joining us. We appreciate it. So we have a lot to cover. Absolutely, a lot going on in Regeneron. So Bob, maybe do you want to kick it off with forward-looking statements and give us your kind of opening remarks?

Sure. Thanks. And again, thank you for inviting Regeneron to the conference. Always really good to be here. So before we begin, let me remind you, remarks made in the webcast include forward-looking statements about Regeneron. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from these projected in that statement. A more complete description of these and other material risks can be found in Regeneron's SEC filings. We do not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, we may be talking about GAAP and non-GAAP measures on the webcast today. So let me jump in, Yaron, with regards to kind of just opening talking points because there's been a lot going on, particularly with regards to product approvals and I'm proud like when each one comes, it's kind of a check the box, execution, execution, execution. And in fact, I think all of them have come earlier than the regular PDUFA date. But let me remind everybody, we ended 2020 with very positive momentum on our commercial portfolio. We grew our top line for the full year in excess of our right at 30%. Our core products, EYLEA, Dupixent and Libtayo, delivered strong performances throughout 2020. And again, EYLEA had another strong year. Despite the pandemic, we grew 6.5% for the full year and actually 10% in the fourth quarter alone. Ex U.S. grew 2.2% for the full year. And again, as people know, that is -- we've outlicensed that to Bayer, who continues to do a very good job. Despite that, more than 80% of our top line growth came from revenue sources other than EYLEA. So again, we harked on our fourth quarter call with regards to diversification, diversification. And I think investors have been waiting to see it. And certainly, it is upon us, and they saw that in a very bright picture on the Q4 call. As I mentioned, in 2021 off to a very busy start. We've had 3 recent FDA approvals. We got HoFH with Evkeeza, which will allow us to get into the rare disease field, and we're very excited about that. And then obviously, with Libtayo, as you know, we already have the CSCC approval, then we got basal cell. And then just a couple of days ago, we got non-small cell lung, which is, again -- the tie was our foundation, and we're kind of playing the playbook the way it should be done. And we're very excited to be launching those 2 new opportunities. From a capital allocation point of view, in our February earnings, we announced that we have $1.5 billion of share repurchases that got approved. And again, that kind of aligns with our capital allocation priorities. And with regards to our 2020 results, coupled with near-term launch opportunities, we think we're really positioned well particularly in 2021 with regards to growth opportunities and longer-term going forward. So we like where we are. It's been a very, very busy past couple of months. So let's go right into Q&A, please.

Great. Thanks, Bob. So let's start with -- we'll start with EYLEA, the high dose testing, the 8 mgs versus the 2 mgs, the Phase II in AMD is ongoing. We're expecting data late this year, early next year. Maybe give us a little bit of a sense, what are you expecting from that study, that's a Phase II in AMD? And then separately, you actually have a Phase III. You have a couple of Phase IIIs going on globally with Bayer. What are you expecting from the data? And is it ultimately going to get you closer to maybe even Q16? Or can you -- is it really kind of Q12 in most patients where you can get to?

Right. Well, obviously, the goals of the Phase II study are twofold. One is to evaluate whether and what fraction of patients can actually go longer either to Q12 or to Q16. And we know so much about the PK in the eye, EYLEA and the behavior of EYLEA in the eye. To me, there's no question that we're going to increase the fraction of patients. It's just a question of how much and how long. The other major readout, of course, is just the safety because EYLEA itself has such pristine safety record after millions of injections that it's a high bar. And so we want to make sure that the 8 mg dose of the same molecule doesn't have a safety signal that's going to make it unusable even at a longer interval. So we should get both of those from the Phase II and lead us into the Phase III.

And Neil, in -- for DME, you did decide to go right into a Phase III, right, head to head again, against...

Yes.

Why is that? DME...

Well, I think that we thought the AMD would give us a good readout on the safety signal and things. And so we decided just to jump right in on the DME.

Got it. Okay. And then thoughts in general, your partner, Bayer, again, ran a study, a Phase IV study in Japan that did show that a higher fraction of patients can even go to Q12 weeks and even Q16. When you compare that against faricimab in AMD, it looks fairly competitive and DME it also gets you some of the way there. Some of the KOLs are saying, well, you have to look at the population, technically. It had a slightly different CNV in that population. It was slightly an easier population. Any thoughts about that comment in that Japanese study?

Well, we already have Q12 in the label. And certainly, with treat-and-extend, there are patients that can go longer than that. The faricimab study wasn't really designed to really fairly evaluate how long we could go. We were pegged at Q8. And some of the endpoints were also selected to make them look good. So right now, there's no evidence that it has superiority in any way in terms of vision gains. We explored Ang2 in the past with a really good Ang2 blocker, and we didn't see any increase in vision. We did see maybe a little bit of a signal of better drying, which they might see as well. So really, I think if they do have a longer interval, it's probably just from the 6 mg dose compared to the 2 mgs of EYLEA that they used in that study. So I think we will find out.

Okay. Got it. Let's...

I lost your sound.

I'm on mute. There you go. So I'm switching over to...

Not just me.

I'm lip synching poorly. So switching over to Dupi. The Phase III in EoE is ongoing. The Phase II, obviously, was successful. What are you looking for? There was a slight switch in the endpoint from the Phase II as you went into the pivotal, that was based on regulatory advice. And I believe this is the first study really doing -- looking for an endpoint and an approval in EoE. So there's obviously some setting precedent here. How is the endpoint different in the Phase III? And what are you looking for from the data?

Well, they wanted a dysphagia symptom questionnaire score to prove that it was really benefiting patients directly. And we've measured that and I think we have a high level of confidence that it should provide a positive readout from our drug. So we look forward to getting that data.

And the study had a Phase II component in the Phase III, right? So as you...

Yes. It had a Part A, that was successful, yes.

Right. Can you just remind us what did the Part A investigate and what's remained to be -- what's being investigated in Part B?

Yes. I can't actually remember. Justin, do you have that at your fingertips?

Yes. We looked at more of these qualitative measures in Part A, and really, it was intended to be a proof-of-concepts. Part B of the study, as Neil spoke to, is currently enrolling. Actually, it's fully enrolled now. It's a larger group of patients. And then Part C, just to round out the study design, is the longer-term follow-up from Part A and Part B. When we originally met with FDA, on what ultimately is the registration package for this program, we thought it's going to have to be based upon the study in its entirety. Given the dramatic results, more than 60% of patients benefiting in Part A, we were able to then downsize Part B and also apply for and receive breakthrough designation, which has the potential to allow for some accelerated approval options. We'll have to see. I think right now, we're still carrying a 2022 submission for the program based upon completion of the broader study in its entirety. But to the extent that we're able to move that along more quickly as a result of breakthrough designation, we'll be happy to let you know.

Great. Thank you, Justin. Very useful. Okay. So let's -- Neil, let's say with Dupi. There is a big program now underway with 2 studies in type 2 COPD that's obviously on the inflammatory component, there's going to be data in 2023. What are you -- and we're going to be discussing that in our lung cancer panel, I believe it's tomorrow. What are you looking for in terms of -- based on the proof-of-concept, why did you get comfortable to move into Th2 for COPD? And what percentage of patients are -- have the Th2 phenotype?

I think roughly, it's about half of the patients have the type 2 phenotype in COPD. We're really excited about COPD. The data that we had so far in type 2 looked pretty interesting. That's the amazing thing about Dupixent is that so far, it's just been a stellar performer in -- across the board in every type-2 indication. And it's just really satisfying. I worked on this for 25 years myself. So it's great to see. And we also have the IL-33 blocker in partnership with it. And IL-33, there's some evidence that it actually works in the non-type-2 patients as well that are former smokers. And so we'll be exploring that. We had a first study where we hit a pretty stringent cutoff endpoint to allow us to start the Phase III. So coupling these 2 together, I think, it's going to be really interesting for COPD patients in general.

And the IL-33 axis, that's going to be monotherapy, right? So it's completely separate from Dupi.

Yes.

What does the biology show you there? Or what did you see in that -- in the proof-of-concept study?

In the proof-of-concept study, we saw that there was fewer exacerbations. And it was a very good -- it exceeded a very strict cutoff. And so it gave us the confidence to go forward in that population, whereas we have Dupi in the type 2 population.

What's known about the relevance of IL-33 in previous or -- for Cmax COPD?

Yes. Well, there's a large amount of biology about all these different molecules, IL-33, TSLP, and, of course, IL-4 and IL-13, which is the 2 pathways that Dupi blocks, remain the broadest players across the board in type 2 diseases. But you do see that some of these other guys are good in one-off indications here or there. A lot of people with type 2 diseases have multiple type 2 diseases. And so there, you also have the benefit with Dupixent of getting relief maybe from multiple things as well.

Okay. Great. Let's move to Libtayo, there's a lot to talk about. You've now gotten approval in first-line lung. The data looked really terrific. I mean, the data was essentially Keytruda-like, right? And the only challenge is Keytruda has 90% share or so in that setting. How do you compete?

Yes. Yaron, we're -- I mean, obviously, very pleased. We're very excited when we saw the data. And I love the fact that you kind of acknowledge that it's kind of Keytruda-like because that's exactly what we see. Now we're going to be co-marketing this with our Sanofi friends and Sanofi will handle ex U.S., and we're ready to go. The pump is primed, and we are -- certainly from a SG&A perspective and marketing perspective, we're going to put a lot of cost behind ensuring that we do a very, very good job. One of the things we've done is we've done a very good job on recruiting. So if you'd look at kind of the new Regenerons coming in, you'll see a lot of pharma tag lines on people that have done and been very successful with previous products. We've been very, very fortunate to have a really top group of kind of new sales reps coming in that are bringing in a lot of relationships with them. So that certainly helps. Raising market awareness that there is now another PD-1. I mean, certainly, docs have experience with CSCC. There is some overlay with regards to that. So it was good to have CSCC out there foundationally. We'll speak to populations like brain mets and locally advanced diseases that are not suitable for chemo and radiation, that will -- populations that really Keytruda may not be able to speak to. So that's a nice foot in the door. And we've done a lot of profiling, as you can expect. And if you're a believer of these kind of profile studies, what we're finding is that 2/3 of oncologists, they're open. They're going to be open to looking at other treatments. And again, that's no mark on how great Keytruda has done. But we're -- we like where we're at. And again, as I said on my initial comments, I mean, this is a good foundation. This is kind of step 1 on everything that's planning to come behind this with regards to the combos and buy specs and things like that. So it's a good first start. And we do expect to have interim reads coming out in 2021 with regards to chemo combo. So we like the antibody. We hope that the antibody will behave in the same sense on the chemo combo studies, which we look forward to reading out. So we're hopeful. We're hopeful and we're entering with a lot of confidence.

Is there any play here, as you said, 2/3 of oncology so interested in trying another PD-1. At the same time, sometimes the decision is really not on their own if there's another option that's on formulary. Is there an element to try to use price here at all? I mean, maybe especially given some of the Chinese, the multinational products are going to come -- are going to probably start getting filed pretty soon in the U.S. and the price in China is literally 5% of the price in the U.S.? So they can definitely offer discounts?

Right. So I mean, obviously, you'd expect we did a lot of work with Sanofi on this and not to disclose right now in terms of our pricing strategy on it. But we do think we're a little unique in that front, but nothing super disruptive.

Okay. Great. Let's -- and again, to your point, Libtayo really is a foundational drug anyway, and you're starting with a low base, so everything is pretty much upside. But everything is going to get built upon it. So let's kind of move to the deeper oncology pipeline. And Neil, maybe for you. The first question I want to ask is more, when you look at your bispecifics, odronextamab has had phenomenal efficacy when you compare it to, let's say, the Roche compound, the Genmab compound, the therapeutic window was obviously a little bit more challenging, and you've been looking to expand it and enhance the dosing and the approach. The data at ASH shows that you're trying to titrate it, and you obviously are still not quite where you need to be. What are the next steps?

Well, we anticipated from the very beginning of this program that we would have to start out at a lower dose and titrate up. Part of it may just be to remove some of the tumor burden, in some case, so that there's a little less target around to cause cytokine release. And so right now, we're continuing to explore the up titration path and we're also looking to maybe add in IL-6 receptor blockers as well as steroids in additional points in the dose escalation to mitigate any of the CRS that we see, but we think we'll get there.

Okay. So do you need to do -- it sounds like you need to do a more dose exploration before you can officially move into the pivotal component?

Well, we're working with the FDA right now to do that so that we can get into the pivotal as quickly as possible.

Okay. Got it. Okay. And then when you think more on moving to the BCMA side and you have 2 different strategies there, but I'm going to start with myeloma with 5458 with a higher CD3 affinity. The data there did show a nice therapeutic window, the 63% ORR. So that was a little bit still early. There's just a ton of competition, a lot of them were very early. When you look at their early data, some of them have higher response rates. Do you have room to titrate up maybe on this one and use some of your therapeutic window?

Potentially, yes, we can go up a little higher. We can also add in a bispecific, that's a CD28 costim to help increase the activity as well. And then, of course, as you mentioned, we have a second BCMA molecule that has a different CD3 that has a somewhat lower affinity. And so it may be that we can try to optimize what is the best treatment paradigm. And this may have a lower CRS, they may have a longer PK. And you can even imagine, I think that you could start with a high affinity one in patients and then switch to the lower affinity one as sort of a maintenance that would have a longer interval in between doses. So I think it gives us a lot of tools to explore, and obviously, it's a really important area.

Okay. Got it. So 5458 obviously has continued to move toward a pivotal. You're comfortable with where you are as a starting block?

Yes. I mean, we have a 63% response rate, 95% very good partial response or better. So the medium duration of response is 6 months with a large range. And so the data that we're getting so far, all looks pretty promising, I think.

Yes. Okay. And when you're thinking about a costim with the CD28. That would be CD28, what's bispecific. So CD28 on one side and what's on the other side?

Well, there's a variety of different B-cell cell surface proteins that we can choose from. The beauty of our bispecific platform is that not only does it look like a regular antibody and it has really predictable characteristics, but each arm like an effector arm or a targeting arm can be mixed with any other arm, right? And so they're totally interchangeable. So it gives us a large library of possibilities to turn to. So we have a number of different B-cell targeting arms that we can put in with our CD28 arm, our favorite CD28 arm, to add to that.

And it sounds like those are going to be targeting novel antigens like maybe a CD38 and other things? Or you have...

Yes, they could. I mean we can still -- we can target BCMA itself as well with a different epitope so it doesn't compete or we can target different other B-cell cell surface proteins, tumor cell surface proteins. And the beauty of the CD28, of course, is that they have really no activity on their own. And so we've proven that in animals and people. And that means that you can very specifically target it to a given cell and just activate the CD28 on that cell, and if there is some other target or that same target that's on non-tumor cells, as long as there's no CD3 stimulation, it doesn't do anything.

Okay. Got it. I'm just going to go back a second to odronextamab. You're also planning on doing a combo with Libtayo. I think PD-1, in general, has been disappointing as mono, right, in DLBCL. Why go back and test it with a bispecific now?

Well, it's just to -- say, why test it with Libtayo?

Libtayo, yes.

I think it's -- I mean, now when you activate T cells that you can upregulate PD-1 on the T cells, right? So that happens with a CD3 bispecific. And so this would give an opportunity maybe to find safe doses where you could combine them and further activate the T cells that you've activated with the CD3.

Okay. Got it. Let's move next and explore the CD28 axis a little bit. Maybe start with kind of a broad-based question. On the one hand, you can -- you have CD3-based agents, like a CD3 MUC16, as we mentioned, CD3 BCMA, CD3 CD20 and then you have the CD28 axis, right. So you even have a CD28 with MUC16, CD28 EGFR, CD28 with other B-cell epitopes as well. With the CD28, you're always going to need another agent. So is that other agent going to alternate between being a CD3 bispecific for Libtayo? Is that the way you're thinking about it? What's the partner and then can...

Yes. So far, we need a way to activate signal one, which is the T-cell receptor, which is what the CD3 bispecs do. And so either with a CD3 bispec or it could be -- we have PSMAxCD28. And so the idea there would be to -- Libtayo or all PD-1 blockers have been a low activity in prostate cancer. And the question is, is it because there's no T cells around to activate that already are specific for tumor markers or do they need a signal too to further activate them, which is what the PSMAxCD28 could do. So that's our goal, is to evaluate with PSMAxCD28, whether or not they're already there and we can really boost their activity to get some antitumor effect.

Okay. And then so what about as you think about the MUC16 CD28, is that going to get combined with Libtayo? Or is that going to combine with the MUC16 CD3?

I think we're thinking about both, but the most obvious one to begin with would be the MUC16xCD3 to, again, get the same effect of further activating the T cells against there. Because, unfortunately, as breakthrough as these therapies are in a lot of settings, you don't treat everybody successfully. And so we're -- we have a nice toolbox now to try to increase the number of patients that respond or even the types of tumors that are not responsive now, but may become more responsive when we add in a second agent. So it's a great thing to explore.

Yes. And so the EGFR CD28, if I had to guess, it's probably going to get combined with Libtayo?

Well, that could get combined with CD3 as well because EGFR is widely distributed amongst a lot of tumor types. And so this gets back -- it's also obviously on skin and things like that. But this gets back to -- this thing I said before about CD28 by itself as Signal 2, unless there's a Signal 1, it doesn't do anything. And so even though it has a broader distribution of binding, when we have it paired with EGFR, it's still going to focus its Signal 2 activity to wherever there is the Signal 1 activity, either be it Libtayo or CD3.

With the CD3xEGFR, I guess the key question is going to be a therapeutic window, right? There's no question to be hiding the question can you get enough?

Yes. That's right.

You minimize...

That's right.

Okay. And so in terms of the PSMA CD28, that's currently ongoing with Libtayo and we'll get data, whether it's this year or next year, right?

Yes.

The MUC16 CD3, that's being tested on its own right now. And again, it sounds like you're seeing some responses. And then the CD28 MUC16, you wouldn't be expecting responses as a single agent. So that's probably just built for being in safety, right?

Right. Exactly, yes.

Okay.

But the CD3 bispec and the costim should start later this year.

The CD3 on the MUC16?

Yes.

Okay. Got it. Okay. So maybe data -- and then the EGFR28, that's obviously beginning now, so that's dose finding safety?

Yes, it's still early.

Right. So really, the next set of data -- I mean, the first of the data they're really going to get on the CD28 axis is going to be with PSMA and PD-1?

Yes.

Okay. Got it. Any thoughts -- the Amgen PSMA CD3, initially, at ASCO GU was almost a year ago, looked really good. It had a decent therapeutic window and decent responses. The later data was more disappointing. It's an elderly population of therapeutic window really narrow during the response, so it's kind of got halted a little bit. I don't want to say they have to go back to the joint board. It's still early, but the therapeutic window wasn't quite where we were hoping for it to be. What are you thinking when you're doing a CD28 with a PD-1? How -- I guess my question is, how active would that combo really be, efficacy wise?

Yes. Well, that's the big question. So it all depends on what fraction of patients might have some antitumor T cells that are lurking, ready to be activated. The nice thing is, since the background rate is actually pretty low of any response, it's easy to detect a combination of response on top of that. So hopefully, that will give us an idea, like a lot of these CD3s, even from a small number of patients who begin to get an idea that the drug is active and what it can do. So stay tuned.

Great. Maybe in -- I think we have 1 minute left, Neil. Maybe we can dive into the REGN-COV2. The big questions have been variants. We actually held a panel in this yesterday as well. And some of the vaccines are showing some Achilles heels against the variants, maybe Pfizer is actually looking pretty good based on the data in Israel and with the U.K. variant. But there's obviously decrement in general in South African and Brazilian variants. What are you seeing with REGN-COV2?

Yes. So we had a collaboration with David Ho in a publication that was -- that recently came out. And he evaluated a bunch of different anti-COV2 antibodies for their ability to neutralize the variants. And what he found was that the -- our cocktail was able to neutralize all the variants that he tested, including South Africa, the U.K. variant. And I don't think in that paper, he did the Brazilian variant, as I recall. But that was very reassuring to us. And the other thing is that we're constantly evaluating new antibodies for cocktails. So should there be a variant that does escape ours, we have a lot -- a very deep toolbox of other antibodies that we're looking at right now. So he also showed that some of the other antibodies that are out there by other companies were totally inactive against the South African variant, for example. So these variants are scary, and, yes, some of the vaccines don't work so well either.

And do you need to do a full clinical study? Or there's obviously guidance on the vaccine side. What about the antibody side? Can you just show safety in maybe in vitro activity for approval?

Yes, I think that's a big question that remains unanswered with the FDA. We have active discussions with them to see what kind of data they're going to need to swap in an antibody.

Okay.

I think it will be a lot lower bar than the first bar, but we'll see.

Okay. And maybe a final question. The issue -- you've been selling to the government and DOD, Lilly has been selling. The uptake has been a little bit more touch and go because issues with infusion centers, awareness, the need to get treated early. How do you address that -- the pull-through to the actual patient?

Yes, Yaron, we have an active program. Obviously, it's an EUA. So we can't commercialize it. So we have our medical affairs team out there. And like you said, there are some locations that are absolutely brilliant in terms of getting patient throughput and having tents and setting up infusion centers, and you've seen that on television, and there are others that just have done nothing in this space and don't want to be -- don't necessarily want to be bothered because of everything else going on. We continue to be -- try to be very, very active, and you'll see more of that coming from us as we try to get more pull-through, certainly in the second part of the year in terms of whether or not this turns into a real commercial play for Regeneron or not.

Okay. Well, terrific. Bob, Neil and Justin, thanks so much for joining us. We really appreciate it.

Thank you. Stay safe.

It's a pleasure, Yaron.

Thank you.