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

Okay. Welcome to the afternoon sessions of the BofA Virtual Vegas Global Healthcare Conference. My name is Geoff Meacham. I'm the senior biopharma analyst here, and I have Alec Stranahan from my team on the line as well. And we're thrilled to have Regeneron for a session today. And with us today, we have CFO, Bob Landry; and Head of Commercial, Marion McCourt. Bob, Marion, welcome. We also have Justin Holko from the IR. Hey, guys.

Hey, Geoff. Thanks. Good afternoon, everyone. Thanks for joining us today. And Geoff and Alec, thanks for inviting us to your conference. We always look forward to attend the annual conference. This year's virtual, but I'm sure we'll be in person next year. Happy to be there. So before we begin, let me remind everyone that 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 those 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 obligations to update any forward-looking statements, whether as a result of new information, future events or otherwise. So last Thursday morning, we announced our Q1 2021 results, which got us off to a really strong start for the year. And what was considered leading into that, a somewhat turbulent earnings season for several of our peers, given the COVID situation that was certainly around in Q1. So for the first quarter, total revenues grew 38% year-over-year to $2.5 billion, driven by growth in global EYLEA sales; increased Sanofi collaboration profitability, driven by Dupixent; and then sales of REGEN-COV, the antibody cocktail. Diluted net income per share grew 50% year-over-year to $9.89 on net income of $1.1 billion. So excluding revenues related to REGEN-COV, we achieved 20% total revenue growth, and we had 34% EBIT growth versus Q1 2020, which we are very, very proud of to the start the year. So similar to what we saw in Q4, and we talked about, we are continuing to diversify revenue and earnings streams away from EYLEA, approximately 70% of our year-over-year Q1 growth was driven from non-EYLEA sources. And then finally, to me, what was felt like a very heavy REGEN-COV new story period for Regeneron. These past few months, we do have a lot of catalysts coming up in the next 12 to 18 months beyond REGEN-COV. So just to highlight a little bit and get that on your radars. So I mean, we will be reporting results from Phase II readout of high-dose EYLEA in wet AMD in the second half of 2021. We have Dupixent FDA regulatory action for peds asthma with an October 21, PDUFA date, and then Phase III results of EoE prurigo nodularis and chronic spontaneous urticaria coming up. And then we have the Libtayo-chemo combo IA for overall survival in non-small cell lung. That's expected in the second half of 2021. We're still awaiting EC regulatory decisions for our new U.S. FDA approvals and BCC in mono, non-small cell lung. We expect that to come in Europe in mid-2021. And we plan on releasing pivotal Phase II data for our CD20, CD3 and BCMA and initial MUC16 and PSMA data in sometime in 2022. So I know it feels like everything coming out of us has been REGEN-COV driven, but we do have a lot of catalysts coming up beginning kind of in the middle of the year. Marion, please?

Sure. I'm going to do the quick sound check to make sure you can see me because I seem to have lost video. I hope you can still see me.

Yes. We can see you.

Okay. Great. Well, I'll just go ahead. But it's great to be joining you. And I hope next year, like my colleagues to be in person, but as Bob picked up, we reported a strong quarter. Definitely, I want to get on to your questions, but a couple of quick comments. Our core brands, obviously, EYLEA and Dupixent performed really well in the quarter. EYLEA remains the preferred option in anti-VEGF therapy, certainly a leader in wet AMD, and we do see a tremendous opportunity to grow our business in diabetic eye disease. So that will be a focus moving ahead. As an example, we're only about 10% to 15% penetrated with EYLEA for patients with diabetic eye disease who we could potentially help with vision loss or other catastrophic events associated with their vision impairments. With Dupixent, we continue to see strong performance in atopic dermatitis. The pediatric launch is progressing well. I'll remind everyone that with Dupixent, we launched adolescent and pediatric indications during the pandemic. I think it shows a lot about the durability of Dupixent and how transformational it is to patients and prescribers in terms of the level of growth we see in its responsiveness to consumer promotion, field force activity. We continue to prepare certainly for the pediatric launch in asthma coming up. And overall, we're seeing strong recovery of new-to-brand prescriptions as the COVID situation or recovery continues to improve specifically in the U.S., but hopefully, in other markets as well. Recent launches, there have been 3 since the start of the year, so we've been busy. We had 2, as you know, indication launches with Libtayo for lung cancer and certainly see positive early launch indicators, things like already being included on the NCCN guidelines. We are seeing academic and also community oncologists start to evaluate Libtayo for appropriate lung cancer patients. We're working on local formularies, payer decisions. It's early days, but certainly, we're very focused on the lung opportunity. Basal cell carcinoma also is a really nice opportunity to leverage our existing relationships in oncology, dermatology. Obviously, with Libtayo, our smaller indication launch with cutaneous squamous cell carcinoma has resulted in Libtayo being a standard of care. So we're very interested in what we'll be able to do to help patients with basal cell carcinoma. And then also, we launched Evkeeza by our cardiometabolic rare disease team. It's being well received by patients with HoFH, which is a very serious condition resulting in catastrophic cardiovascular events for patients. We can help them with Libtayo. And early on in the launch, we have had a lot of interest from specialists, lipidologists and other cardiovascular specialists who treat these patients.

That's a great summary, Marion and Bob. We'll kick it off with the last comment you made, Marion, on Libtayo. Just maybe help us with a little bit more detail on kind of the initial reception to Libtayo and non-small cell lung and kind of your kind of gauge about the level of awareness and then we can get into competition, et cetera?

Absolutely. So as I mentioned, we're in early days, but we did extensive market research before the launch, and we're certainly very much in the mode of collecting feedback as we move into the launch weeks. The initial launch market for patients, for our indication, monotherapy patients, these are high PD-L1 expression patients. That market is about a $1.2 billion market in the U.S. Early days, we're hearing positive comments in terms of interest in evaluating Libtayo for appropriate lung cancer patients with the monotherapy indication. I mentioned receiving very early, the NCCN 1 -- category 1 preferred grading in lung cancer, that it's very quick to have received that within the first several weeks following an FDA approval. We are seeing initial orders from top academic and community centers as we increase market awareness. We just recently completed deployment of our extended field staff to support the lung cancer launch and also basal cell carcinoma, and we'll continue to work on inclusion in local institutional pathways, formularies and other means to make sure that physicians have ease of prescribing. I'll also comment that as we built out our oncology team, as you've heard me say before, we always built with the future in mind. Libtayo is foundational to our oncology franchise going forward. We have been able to attract the industry talent and many of you who already had experience in extensive launch and lung launches to help us with this launch effort. There's been tremendous interest in the community and individuals who are very close to supporting lung cancer patients, sadly an incident population diagnosed of this each year. So there is a ready-made pool of new patient starts that are not currently on treatment and are potential candidates for Libtayo treatment. So early days, we're encouraged, but I do want to set expectations appropriately that we will see a buildup over time. We are in the early days of our launch. We're very focused. We're quite optimistic, but we know we have a lot of work to do as well.

And Marion, in BCC, there, the landscape is more favorable than you guys have been in lung. Obviously, there's a ton of established and up and coming products. Just wanted to get your sense for Libtayo kind of pricing win the context of potential entrants in the intermediate to longer-term from China or lower cost entrants? I know this has been a topic of a little bit of a debate across the IO kind of landscape.

Right. No, I'm happy to comment on that. I do think that to your comment a moment ago, within basal cell carcinoma, there are fewer alternatives for patients, and sadly patients progress on Hedgehog inhibitors or they have tolerability issues. So certainly, Libtayo is being greeted as a tremendous opportunity for these patients. But I do want to go back to the competitive marketplace in the lung cancer and share that one of the things that's been so important and rewarding early days is the level of interest in our clinical data, in the subset populations within our clinical data. As an example, patients who responded who have brain metastases, significant tumor burden, have been on other therapies. So I do want to make sure that it's recognized that our science and the clinical data is front and center in our launch and captivating interest and attention. We don't agree with the notion that the category is becoming, in any way, commoditized. And that cost is the main differentiator that we should explore in the marketplace. And certainly, we already have some rapid price advantage in the U.S. marketplace with Libtayo opposite competition. But we do believe it is the clinical aspects of Libtayo that are meaningful to prescribing decisions. And we had significant experience as a company in a highly competitive marketplace. And certainly, Libtayo, a product coming into, it's now second and third indication. We're very excited about the lung launch and the early receptivity that we're seeing in terms of interest in prescribing Libtayo for the appropriate lung cancer patients.

And just sort of feeding off that, obviously, you guys had commented on Libtayo being a potential sort of foundational therapy on which to build sort of unique or bespoke combination approaches off of. So could you sort of talk about how that pipeline is evolving? And sort of when we might see some early combination data, I think you may have said 2020?

Sure. So I'll start, and then I'll let my colleagues pick up. But certainly, we do see Libtayo being foundational to our strategy going forward. It's not the only piece, but it's a very important piece. We will look forward to looking at innovative combinations with Libtayo is a way to enhance and then also extend our response rates.

Sure. Happy to jump in, Alec. So we've spent a lot of time and a lot of energy investing in an oncology platform portfolio that we think stands pretty very well versus the peers and versus competition. And really allows us to potentially, as Marion has said, unlock the potential of immuno-oncology and a broader set of patients and a broader set of cancers. We've shown proof-of-concept with our CD3 platform in hematologic malignancies in non-Hodgkin lymphoma as well as in multiple myeloma. Those programs are important to us as we think about not only combinations, but just monotherapy alone, it looks like we have a very active programs. We also are beginning to see activity within our CD3 platform in solid tumors, as we've talked about in recent months in ovarian cancer, in particular, with our MUC16xCD3, we're seeing some pretty interesting signals there. We're now at the point where we're combining that MUC16xCD3 with Libtayo in ovarian cancer. And then we also have a whole set of co-stimulatory BioSpecifics that we've talked about that. I think we're fairly unique that we are certainly one of the few pioneers in the space for thinking about the CD28 target and utilizing that in the presence of various tumor targets, be it PSMA, which is our most advanced costim program, that is in combination with Libtayo. And we're hoping to see data, if not late next year, perhaps early next year. And then we also have eGFR, which could be applicable on a wide variety of solid tumors that express EGFRxCD28. That program is moving along. And as well as MUC16 costim. There are more that we expect will hit the clinic in the coming months, and we're really excited about the opportunity where we can mix and match and create these combinations, which we do believe is the long-term potential and the oncology to really help more patients with more cancer types.

Let's switch gears to Dupi. And when you think about it, Sanofi has guided to about $10 billion in peak forecast. I know you guys have worked on a lot of label expansion strategies, but I wanted to get a sense from you all, what would be a significant upside driver based on all of the studies that you guys have going on, obviously, asthma it's still fairly early, atopic derm was the first indication that maybe that has a little bit of a runway. But can you just help us with kind of what indications and you guys view have the biggest runway over the intermediate-to-longer term?

Sure. I'm happy to comment first. And I do think for those who have commented for some years now, the Dupixent is a portfolio of a product that certainly is. We have a lot to go. I want to get to my favorite new indications to answer your question, but I also just want to remind everyone that we have tremendous unmet patient needs still in atopic dermatitis across adults, adolescents and pediatric patients. And then similarly, within the respiratory category with asthma. And obviously, we're looking not only to continue to support adult and adolescent patients, but we look forward to our pediatric asthma launch coming later this year with the PDUFA date in October. And certainly, we've seen tremendous results too in helping patients with nasal polyps and avoid surgeries or not have to have repeat surgeries because they're able to take Dupixent and restore their ability to taste and smell food and they'll have this terrific pain associated with serious nasal polyps. But as the indications that I think are most exciting for the future, there are many across this allergic cascade and Type 2 disease that Dupixent assists with. So in many ways, it's hard to pick. I could spend a whole bunch of time just talking a bit about various allergic conditions. But to give you maybe the 2 that I personally think are among the most exciting, I would point to COPD is a very exciting opportunity where we know there was tremendous unmet need probably with about 500,000 patients in the U.S. alone that potentially could benefit from Dupixent in the COPD population. It also fits very nicely with what we're doing with our own IL-33. So certainly look forward to the incremental data for that population of patients. And then the other one, we're -- I know we just shared on our earnings call to updates on timing of data that the patient population of eosinophilic esophagitis, there are about 50,000 patients in the U.S. that suffer from eosinophilic esophagitis. We don't call obviously on gastroenterologists today but we do know from understanding this marketplace, that there is tremendous unmet patient need and a great deal of interest. There are very few therapies that are helpful to these patients today. So we do think that, that's a very, very strong opportunity and look forward to incremental data coming and being able to hopefully create a solution in the marketplace with a possible launch for eosinophilic esophagitis in the future. And we'd be delighted to be able to call on gastroenterologists as a group as well with a launch program and support program when and if the time is right. The other thing, I guess, I probably should mention too is we're all keeping track of the members is that you mentioned Sanofi's numbers and over $10 billion. But the opportunities that I'm talking about with COPD and eosinophilic esophagitis were not even included in those numbers. Those were existing indications that have been launched in some markets at the time.

Okay. That's helpful color. And I did want to follow-up. And obviously, this is acute interest for investors, which is the maybe changing competitive landscape over the next year or 2 in atopic dermatitis. And obviously, Dupixent has established itself as a leader in the indication it's had a few years to enjoy growth there. But how do you guys view JAK's as a competitive source in AD? And I guess, beyond that, maybe looking at bevacizumab from [indiscernible] as well?

So I think it's important to note that we will always keep a very class eye on competition and as well, it's been shown many times that in marketplaces where there's a lot of unmet patient need, sometimes competition is good in terms of being able to trigger more physicians and more patients to seek care. Before Dupixent came into the marketplace, so many patients had given up because there was no way to treat their atopic dermatitis. Even when I joined Regeneron, I remember hearing from many key opinion leaders that their atopic dermatitis patients, eczema used to be the most difficult patient visit they had of the day because they had so little to offer. And the emotional consequences of the pain and suffering for patients and adolescents and pediatric, not to mention adults, was so substantial. Now it's such a rewarding experience to be able to treat patients with Dupixent. And obviously, there's been a tremendous ability for patients to get the relief that they need and go about their normal activities and not to have the burden of pain and itch and loss of sleep and all the other complexities that come with the situation. Patients are able to administer Dupixent in a way that's easy. They don't require a lab monitoring. It's very rare that any lab monitoring is involved. We have a very specific mechanism of action. And therefore, you ask a question about a category of medications. Then in other areas might be the only or one of the only elements to help patients, but in atopic dermatitis, I think that from what physicians share with me, they would think long and hard before having patients take a chronic medication like the JAK inhibitors that require extensive laboratory monitoring, depress the immune system. We know Dupixent is not an immunosuppressant and have very serious potential safety issues associated with infection, thrombolytic concerns, malignancies, things that for chronic therapy, physicians, dermatologists, allergists would want to avoid for chronic patients even they're doing well on Dupixent. But we still will recognize competition in the marketplace positions Dupixent appropriately and certainly know from frequent conversations that there is a high degree of confidence in Dupixent to initiate patient therapies, and very rarely to patients not have a strong response on Dupixent if they in fact have atopic dermatitis.

And Marion, just a real quick follow-up to that. I mean in the real world, I guess, commercially, what's been kind of your -- the Dupixent in atopic derm, has the duration of therapy been kind of in line with what you guys thought upon launch? I know there aren't many options now, but going forward, to your point, even with the JAK inhibitor available, it may be not as persuasive to switch if someone is doing well.

Well, there's great retention and persistency of patients. We look at data after initial prescription, it's very, very high. The refill rate is probably the highest I've ever seen in my career. It's way up in the 90s because the patients with atopic dermatitis sadly had a constant reminder if they're not on their Dupixent on a regular basis. Equally, the level of persistency at 6 months, 9 months, 1 year, is very, very high. I think the concern is that, to your point, it would not be what a physician would want to do in terms of exposing patients to products with black box warning and the like. And there's been a lot of attention, I think, called to this recently because of the delays that many of the JAK inhibitors are experiencing and some of the data that's come out that has limited use and higher doses. So I go back to Dupixent and say we still have a lot of work to do. And a lot of need to treat patients who haven't been treated and are potentially suffering, but we bring forward a clinical profile and a safety profile that our physicians, prescribers and patients can have a lot of confidence in. And it is unfortunately for patients a chronic condition with atopic dermatitis. And for some patients, more than one aspect of Type 2 disease, it's usually 1 indication, respiratory, asthma, atopic dermatitis that brings a patient to their doctor, to their specialists for treatment, but it's also not unusual to have concomitant disease and comorbidities. And that's also where Dupixent has a very unique profile in terms of being able to help with type 2 disease broadly. So we're really excited about the future opportunity and believe that anything that can be done to educate more patients, bring more patients to their physicians for prescribing will be very positive for them, adult, adolescence and children and also for the physicians who treat them.

Got you. Let's switch gears to EYLEA. And I wanted to ask you, a lot of indications have had some disruption from office visits from COVID. I didn't think that was that impactful for 1Q this year, but I'm sure that there still are some nuances. Wanted to kind of ask you with respect to patient visits and the logistics, do you think we're going to get closer to back to normal or normal practice for wet AMD and for DME? And then we can talk a little bit about just the life cycle management aspects of high-dose EYLEA and how that kind of plays out?

Of course. So I'd say that with EYLEA, what we are seeing is return to normal patient flows in the retinal specialists and ophthalmology offices. Certainly, when we compared the first quarter this year to last year, we were comparing to a quarter where the COVID pandemic impact had started to occur towards the end of the first quarter last year. So as an example to quantify it for you. If we looked at a 15% increase this year, first quarter to last, probably about that -- half of that is demand based and the other hand is probably due to patient flows. But to your question, things have now normalized in terms of patients, wet AMD patients into physician offices. We're also starting to see the return of diabetic patients to physician offices and initiations are going back to levels that we saw prior to COVID. We have a lot of work to do, as I mentioned in my opening comments related to diabetic eye disease, while we still retain our position as market leader in wet AMD and all of the indications where we participate. In case of diabetic eye disease, there are just many patients who aren't seeking proper care and tragically or potentially losing vision. So we are going to work very hard this year on consumer education and campaigns to bring more of those patients to see appropriate physicians, to get exams and eye care and treatment where appropriate so that we can help them.

Got you. Okay. That's helpful. I wanted to -- Bob, you mentioned REGEN-COV, I wanted to kind of ask towards the end here, just the impact of that. So when you think about the situation in India, I wanted to sort of just to see what kind of efforts you guys have made outside the U.S. for broader availability? Are you starting to see an impact from some of the variants that is -- could impact the efficacy? I want to get your perspective on that from a capacity and from an efficacy perspective.

Sure. Thanks, Geoff. So for those of you that do not know, I mean, Roche is responsible for the ex U.S. contract of REGEN-COV, and that obviously includes distribution. In Q1 sales, I think they did roughly $175 million, that's recorded on their books. We realize profitability of $67 million of that. We didn't get a lot of visibility going forward on that. We didn't want to get ahead of our skis because Roche was relatively quiet. On that front in terms of what they anticipate. But rest assured, there are contracts that are being negotiated and signed, and this will be certainly for the short term, additional contracts that will be able to be fulfilled. And on the good news event, you may have heard that the Indian government, I think it was over the weekend, they did recently granted EUA for the cocktail, at both the 1.2 gram in 2.4 gram strengths, and I know both Regeneron and Roche are coordinating in terms of being able to get product over to India to help out that situation. With regards to variants, again, we couldn't be prouder of the team. I mean, last year, during our development, the research team, as they're putting the Cocktail together, they anticipated almost the exact variants that we saw and they thought that those are going to emerge and therefore, designed our Cocktail to be active against these variants. The experimental evidence suggests that our Cocktail has indeed acted against all the current variants of concern. And in anticipation of future variants, George talked on the call that the team is working away in our Tarrytown labs. And as we speak, developing future antibodies and we'll expect to bring those to the clinic shortly. So we know this space. I mean, we knew this space with Ebola with regards to the TRIPOD cocktail that we did there. George was kind of a step ahead of everybody in terms of determining what variants were coming and was able to kind of design a cocktail treatment that was able to kind of circumvent and take care of the variants as we currently stands. But he would anticipate as does our research that future variants are coming, and we got our guard up and team working away on that.

Perfect. Okay. Well, with that, we're out of time. So Marion and Bob, Justin, thanks a lot for your time. Really appreciate the dialogue, guys.

Thank you, Geoff.

Thanks, Geoff. Thanks, Alec.

Thank you so much for having us today.

Thanks, Alec.

All right. Thank you. Take care.