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

Good morning. My name is Bert Powell. I'm the Global Director of Research here at BMO Capital Markets. Thank you for joining us today. Life science continues to be a core area of focus for us here at BMO and our Biopharma Spotlight Series has been a terrific platform to go deeper into specific therapeutic areas. Past events are focused on protein degradation, other next-gen protein technologies, and tech-enabled drug discovery. Stay tuned. We will be announcing our next Biopharma Spotlight Series in the not-too-distant future. Today's series will focus on rare disease and ophthalmology. We have a great lineup of fireside chats with Regeneron, Horizon Therapeutics and Ionis, 3 leading companies in these areas. As well, we have 3 KOLs -- 2 KOLs and 3 panels on ophthalmology, rare CNS diseases and rare autoimmune and genetic diseases. Today's spotlight series will be moderated by our senior research analysts, Gary Nachman, and Matt Luchini. I also wanted to take this opportunity to share with you some very exciting news. We have expanded the BMO Life Sciences research platform. Today, Evan Seigerman joins the BMO research team covering biotechnology and pharmaceuticals. Evan brings a deep understanding of the biotech sector and biotechnology and pharmaceuticals. In addition, Trung Huynh will join the team with over 10 years of experience covering therapeutics and pharmaceutical companies. Both joined us recently from Credit Suisse, and along with our current research analysts, allow us to further expand the depth and breadth of our research coverage. This emphasizes our firm's commitment to the biotech sector. So we are thrilled today to announce that both Evan and Troy joined the BMO research platform. And with that, Matt, I will hand it over to you to kick off our fireside chat with Regeneron. Matt, over to you.

Great. Thanks, Bert. Good morning, everyone. Thank you for joining us. My name is Matthew Luchini. I'm one of the biotech analysts here at BMO. Welcome to the BMO biopharma day, spotlight on rare disease and ophthalmology. Happy to have Regeneron with us and from the company, Executive Vice President of R&D, Neil Stahl; and Vice President of Investor Relations, Justin Holko. Good morning, gentlemen. How are you, and thank you for being here. Before we get started, just as a reminder, you can submit questions to me via the chat function and also e-mail me, matthew.luchini@bmo. Happy to ask anonymously on your behalf. And before we get started, I know, Justin, you wanted to make a couple of introductory comments. So let me turn it to you first.

Thank you, Matthew. Great to join you and appreciate the opportunity to be at the conference again this year. Before we begin, I would like to remind you that remarks made on today's webcast do 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 the statement. More complete description of these and other material risks can be found in Regeneron's SEC filings. Matthew, I think this is a really exciting time to be at Regeneron. I know that we're going to spend a lot of our discussion today talking about EYLEA and our ophthalmology business. But Regeneron has really evolved into a very broad and diverse story compared to the last several years. We've had significant top and bottom line growth over 2020 despite the pandemic. In the first quarter of this year, we actually grew 50% on the bottom line and more than 30% on the top line. And that top line growth is now being driven by non-EYLEA sources. We've really evolved into a company with multiple blockbusters and potential blockbusters. And on top of that, we have a very rich pipeline and a lot of events upcoming that we're quite excited about. So I'd encourage first-time listeners to also go to our website to take a look at our corporate deck and corporate materials to really see how Regeneron has evolved with the very diverse and strong competition.

Okay. Thanks, Justin. And Neil, you've been more public-facing now over the last year or so. But for those who may not know, could you just maybe give us a 1- to 2-minute intro on who you are and your role at Regeneron?

Sure. Thanks for the invitation to be here. I've been at Regeneron 30 years now. It's kind of hard to believe that the decades have rolled by. And I played a role in building everything that we do, all the technologies and things like that from basic research through to early clinical. Right now, I directly oversee the middle part, all the preclinical of selecting antibodies, making cell lines, process manufacturing, transfer to our industrial operations outfit. And I participate widely in research from the earliest stages through to clinical designing studies with the team and interpreting them.

Well, thank you for being here. I think this will be a great discussion. As Justin said, this is going to largely focus on EYLEA. And maybe just to get things started, Justin, as you pointed out, it's been a remarkable year, strong growth. EYLEA in particular, was really durable in 2020. I see volumes are back to pre-COVID levels. Would love to get a sense of what you're seeing most recently in terms of mix, new versus existing patients, and any color you can share on the existing indications, within the individual indications as well would be great, just to sort of help catch us up on how things are looking today.

Sure. Happy to do so. I can take you really to our results in the first quarter, which I think demonstrate that it's really important to have a strong product profile that offers great safety, great efficacy as well as convenience. And I think that's kind of regardless of the disease area when you're talking about a pandemic where we had several months where patients could not get to their physician, and it was really challenging for patients to get their medications. EYLEA really did phenomenally through the pandemic and coming into the first quarter of this year. We grew more than 15% actually in the first quarter. And that was driven by really all of the indications. So really, the majority of the business is still coming from AMD. Diabetic eye disease has been an important growth driver for us, and we'll speak more to that in a little bit. During the pandemic, wet AMD probably held up a little better than some of the diabetic eye disease indications, but we're now at a point where we're seeing new patients start to get back to the levels that we were seeing pre-pandemic. I think what we just go to as probably as important as anything is the ability to treat and extend, so that once they had a harder time getting in, physicians knew that they had the flexibility by EYLEA to take patients out longer if the patient's disease severity allowed for. So we're very pleased where we are out of that pre-pandemic levels. We've been able to continue to take share as kind of an indicator of having a really strong product. We've taken some share from both branded and unbranded competition. So where we stand today, we're quite pleased.

And there's been some at least sporadic shortages of Avastin. So maybe how has that helped EYLEA? And do you expect -- is it a reasonable assumption to assume that a patient who hopped over to EYLEA say from Avastin is now going to be sticky as a -- and remain on EYLEA as the sort of support of Avastin supply stabilizes?

That's right, Matthew. These shortages pop up over time. Sometimes they're more transient than others. But I would say that generally, when a patient goes on to EYLEA, they're not going to then go backwards in terms of going to, in this case, an off-label product that clearly is not as good of a product as EYLEA. So I would say if history is any indication, those patients tend to not switch from EYLEA once their [ active on it ], certainly not back from that.

Okay. And you mentioned diabetic eye disease, and we've -- it's been a topic of conversation for a while now, how to move the needle there, patient education, physician education, getting patients to actually seek treatment. How does Regeneron really actually grow the opportunity? And what does it take to actually move the needle from here?

That's a great question. And Matthew, what we would say is diabetic eye disease as a whole represents the largest growth opportunity. Now the anti-VEGF market for retinal diseases is growing and has a significant tailwind to it, whether you're talking about demographics of age or just the increase in diabetes, and so those are already tailwinds. But when you look at the diabetic eye disease market, it's only about 10% to 15% penetrated. And what we are trying to do is, to your point, grow awareness and to ensure that patients are caring for their eyes just as much as they would be caring for their body mass index and having a good diets and thinking about circulation and other elements of disease management that comes with diabetes. And it's a multipronged approach. We've seen good growth in diabetes, but we really need to ensure that the patient is aware of the needs of caring for their vision. And just to give you some figures, only about 50% of diabetic patients even go for eye exams. And then of those who are in need of treatment, a very small fraction of those actually receive some sort of treatment or anti-VEGF treatments. And even beyond that, you just don't need the pull-through with regard to actually going to see a retinal specialist. So we think there's a significant opportunity just to create that awareness that if you have diabetes, caring for your vision is just as important as many of the other elements of ultimately [ treating ] the disease. So more to come on that. We are going to initiate some DTC later this year.

And is -- these are things that have been kind of discussed in the past. Is it now on the back end -- we're through COVID, growth remains as important as ever that this area is taking a greater level of prioritization within the company, driving diabetes relative to some of the other indications? Or is it a new strategy even within awareness that's going to help us? I'm just trying to understand a little better what gives you guys the confidence that these efforts will work in this space where it's been challenging up until now.

Sure. And I think we can take you back a couple of years. So when we initially released the Panorama data in the nonproliferative disease, that was a significant boost to our overall efforts with physicians in particular when it came to diabetic eye disease. And so we were already indicated in diabetic macular edema. And this launch in the diabetic retinopathy indication really helped the overall diabetes business. And if you go back to the 2019 time frame, that was really when we were seeing diabetes indications that outgrow AMD. AMD was doing quite open. The diabetes indications went from 30% to almost 40% of the business. And we were getting ready to do some more focused efforts on the consumer back in 2020. But obviously, we know that 2020 was a year where best-laid plans kind of took a bit of a detour, and we just didn't feel like it was the right timing to be motivating or activating a consumer to get into the retinal specialist office. Again, particularly since we even saw the diabetes patients were harder to -- they just weren't getting into the office to the extent that the AMD patients were. So it's not a new strategy by any stretch. It certainly took a bit of a delay due to the pandemic, but very much see this as a significant opportunity for EYLEA as well as for patients.

Got it. I mean this is -- retinal disease and indications where EYLEA is approved or obviously, faced a lot of competition. It's evolving pretty rapidly. I guess as the market leader or the incumbent, how does EYLEA maintain its position in the market going forward? And what do you see as -- your competitors will have plenty of marketing messages. What do you see as the most effective kind of counter detailing message? And perhaps embedded in that, there was the brolucizumab safety data from a couple of -- I guess it was last month now, so how does something like that play to EYLEA's advantage? Sort of a commercial question then it started to become a clinical one for me ultimately.

Sure. Absolutely. So I guess starting on the commercial side. But we talk about it all the time, and it really matters when it comes to just the experience that physicians have with EYLEA and the high bar that EYLEA sets on, again, that kind of -- that 3-legged stool of efficacy, convenience and safety. And so when you have to think about new potential market entrants, everything that we know of at this time is a noninferior type profile when it comes to efficacy, but there's just not the experience when it comes to safety. And as we saw with brolucizumab, any hint of safety issues is going to be a very hard sell for customers, for physicians as well as patients. And you're going to have to ask yourself, what is the kind of the risk benefit of moving to a different product when it's a profile that, again, is not inferior. So experience and safety are probably the most important. But I would also just say, EYLEA sets a very high bar in efficacy. It's not that competitors haven't tried for superior data or tried for creating study design that would allow them to perhaps get a superiority endpoint. It hasn't happened. So it just speaks to the fact that EYLEA, despite being on the market for several years, does set a very high bar for any [ potential competition ].

And that's probably a good way to transition over to Neil. Certainly, one of the things that we're looking forward to towards the end of the year is the Phase II high-dose data, [indiscernible] then, I believe. Maybe first things first, just walk us through the biologic rationale for the high-dose formulation. And what -- I mean, frankly, what gives you confidence that the study is going to work?

Well, as Justin said, EYLEA so far has shown really incredible efficacy and safety. And the safety part is something that really has to be emphasized because a lot of the would-be competitors haven't been able to match that on this end. And so we, over the years, have understood a lot about the behavior of EYLEA in the eye and pharmacokinetics in the eye. And so it just follows that if you get more in there and you're above a critical concentration for a longer period of time, that at least some individuals should have a longer interval. So that's what we're looking for. And as well, so far, we haven't seen any safety problems with EYLEA. And so that will be a major readout of high dose as well. There is data with faricimab now showing that if you administer a higher dose of a VEGF block, it may have some benefit. Yes, it has an Ang2 arm as well, but we did very careful well-controlled studies with our own Ang2 blocker years ago now, and we didn't see a benefit in vision enhancement with that. So we think that if there is any benefit in terms of duration from faricimab, it's actually probably from the higher VEGF blockade concentration. So we're anxiously looking forward to seeing what we get out of that where we're looking at 8-week and 12-week intervals and also looking at the drying in the eye and the improvement in retinal behavior.

And so I guess, to your point, we're going to be getting -- it's 8- and 12-week intervals. You mentioned something about anatomical end points. I guess what measures do you -- does Regeneron expect to communicate at the time, I guess, at least initially of top line release? And as always, that age-old investor question, right, what is the definition of good data? And probably built into that is this inherent thought, which is part of the purpose of the Phase II is to help with Phase III, right? And the Phase III is already ongoing. So how does 8- and 12-week Phase II data help set expectations around the Phase III study as well? So there's a couple of different phases of information.

So we're going to get information, as you emphasized, on the anatomical readouts, which will give us an indication like over a 12-week interval whether patients are rebounding in terms of their anatomical benefit. So we'll see that. We'll also see the safety, which is a very important aspect of it. So -- and then we will get an indication, a hint at least of whether there is more individuals that can last longer, at least in terms of anatomical benefit at a 12-week interval with the 8 meg. So it's an intermediate readout and then it should give us a hint towards the Phase IIIs.

Okay. And maybe just talk a little bit more around the anatomical differences that you would want us to focus on. I mean you mentioned a little bit in your last answer. But is that the entire number? Or is there any other sort of secondary end points or other measures that you would one-off like maybe want to call out?

Yes. Mostly, it's retinal thickness and seeing how much absolute dryness there is over the dosing intervals. So in other studies with the lower amounts of drug, you can begin to see the retinal thickness rebound at the ends of the dosing intervals. And so we'll be looking for that to see if it stays flatter in a larger number of patients, which would give us an indication that the higher concentrations of drug are doing as we expect and giving its pharmacological benefit over a longer period of time for a greater number of patients.

And the Phase III, I think the last guidance was that DME and AMD should finish enrollment by the end of this year, sometime in the second half. Is that -- are things still tracking toward that time line?

That's a Justin question.

And that's correct.

Okay. And I mean I guess taking a step back a little bit here, how important is the high-dose franchise -- is the high-dose formulation to the franchise over the, I guess, medium to long term?

Yes. Well, we -- throughout our history with EYLEA, we've always focused on things that might provide a benefit. So looking at like Ang2 addition all those years ago to see if that would have a benefit. We also looked at PDGF receptor blocker, which didn't have a benefit. So we continue to do that broadly across all sorts of different aspects. And so the high dose, I think, is just a very simple straightforward once you get the right formulation that's well tolerated, which isn't always straightforward as we've seen with other competitors. But we believe that we do have a very good formulation that should allow us to deliver this 8 milligrams. And so we're very much looking forward to getting that data. And if it replicates what we think it should, both in terms of safety and the longer duration for a greater fraction of individuals, then I think that would be an important step forward.

And I do want to ask -- I want to pivot off of that and ask a little bit about Protocol W, which was the NIH study that went out pretty recently. And if you could just talk about -- remind us briefly what it showed, but really just talk about its impact on the NPDR population. And perhaps more importantly, what do these data mean for EYLEA use broadly in terms of potential for less frequent dosing?

Right. So the Protocol W showed a nonproliferative diabetic retinopathy that, over a 2-year dosing interval, that fewer patients advanced into centrally-involved diabetic retinopathy when they were on EYLEA even at a 16-week interval. So I think that is a nice indicator that longer term, EYLEA intervals are possible, and that was even at a 2 mg dose for that situation. So I think it's a very important benefit for those patients. As Justin said earlier in his talk, the diabetic retinopathy population is way undertreated. And so I think this provides a relatively low burden -- with every 16-week doses, low-burden health care advance that's going to help them keep their vision and prevent advancement.

Okay. And we're rapidly running out of time here, so I want to step away from some of the nitty-gritty and move to some bigger picture questions. And I guess is Regeneron a major player in retinal disease come 2030, 2035?

We have a new early stage program that we call mini-trap that we've been working on for some time now. And what it is, it's EYLEA without the Fc portion. And so what it allows you to do is to actually administer more protein, the actual VEGF blocking part of EYLEA to the eye. And also, once it gets out of the eye, it's cleared from the peripheral circulation much faster. And it has the same high affinity as EYLEA and it should have the same safety parameters as EYLEA. And so we are rapidly moving that forward towards the clinic. And beyond that, we also have other modalities, including small interfering RNA for potential eye targets. And then...

That's with Alnylam? That's part of the Alnylam leverage?

Yes, that's with Alnylam. And just broadly in the big picture, we are really strong believers in branching out beyond just EYLEA and antibodies. I mean we do feel we're one of the best antibody makers in the world. But there are other new modalities that offer just incredible opportunities. And so we've made some very strong strategic partnerships with other companies to take advantage of that, both siRNA with Alnylam. We have a CRISPR initiative with Intellia that includes the very first peripherally administered CRISPR therapeutic that's been given to patients. We don't have any data yet, but that should read out before too long, at least the initial [ studies on it ]. And we're very excited...

So Justin, when can we -- when are we going to start seeing some of these things provide data?

Sure. I believe Intellia readout is this weekend for ATTR. So that will be the first, as Neil spoke to. I would just remind investors that we've been partnered with Intellia for quite some time now. And we have up to potentially 15 different targets, many of which have not been named yet proprietary to some of the efforts we pulled through our own Regeneron Genetics Center that offer very exciting opportunity across a wide variety of diseases down the road. We also have a very strong interest in viral vector technologies that we pioneered within Regeneron, and we have another collaboration, for example, with a company called Decibel, at -- for the ear. So we focused on the eye, which is a very small protected and special environment. And so I think the ear is the next opportunity for something like that. And so stay tuned. You'll be hearing about those as well in the future.

Great. Well, thank you, guys, both very much. We're over time now, we could easily spend another 20 or 30 minutes on this. But appreciate the time this morning. Thank you guys so much, and have a great rest of your day.

Thank you, Matt.

Thank you.