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

Thanks for joining us for the next session. I'm Matthew Harrison, one of the biotech analysts here at Morgan Stanley. Very pleased to have Regeneron with us for the next session. I just need to read a disclosure statement before we begin. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at morganstanley.com/researchdisclosures. And very pleased to have Marion McCourt, who runs commercial; and Justin Holko, who runs IR, with us. I'm going to turn it over to them to make some opening comments, and then we can jump into Q&A.

Great. Thank you, Matthew. Great opportunity to be with you again this year. Before we begin, I would like to remind you that remarks made today 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. Matthew, I think before we begin, I think Marion would like to make a few opening remarks, and then happy to take your questions.

Thank you, Justin. Matthew, great to be here and everybody on the line today. I'll keep some of the early comments very short so we can get into the Q&A, but I did think maybe covering a few items with a focus on what has happened since some of the discussion in our last earnings call. But I share first from a commercial standpoint, it's an exciting time but a very busy time at Regeneron. Our business performance reflects robust momentum, competitive strength, our focused execution across the portfolio. As our in-line medicines continue to thrive, our ongoing launches are progressing to plan and provide [Technical Difficulty] since August. I'll do a quick sound check. Can everyone hear me?

Yes, you're back, Marion.

I'm back. Okay. I got zapped for a minute. But since August, we have had some very encouraging Phase II data on our high-dose EYLEA program. It is early in a smaller group of patients, but the safety did look good and solid. We saw some better drying with the high-dose formulation, and that potentially supports the value proposition for a high dose in the future. Dupixent, as I mentioned, continues to perform very well, and we recently announced also in August a positive Phase III study for Dupixent in very young children with atopic dermatitis that once again underscores our safety and also our efficacy. We're excited also about the future launch in asthma for our pediatric patients for Dupixent with regulatory approval hopefully later this year. For Libtayo, we also had Phase III lung chemo combo study, which was stopped early for overwhelming efficacy. That obviously bodes well for our competitive profile and for the appropriate lung cancer patients. And certainly, with REGEN-COV, we are making a meaningful difference for patients in need of both outpatient treatment and those who, under our current EUA, would benefit from post-exposure prophylaxis. So we're very interested, obviously, in progressing these future developments. For the Dupixent regulatory action, as I mentioned, is coming up for pediatric asthma aged 6 to 11. We also will have Phase III data readouts in eosinophilic esophagitis, and prurigo nodularis coming up. For Libtayo, we have regulatory filings in first-line lung chemo combo, second-line cervical cancer. And for Dupixent in atopic dermatitis for children 6 months to 5 years who are in tremendous need of therapy. Our pipeline across the oncology business. Costim's biospecifics, is certainly very exciting. And as I mentioned, the high-dose EYLEA program, the Phase III results will read out in 2022. And so with that, I've tried to give you a little bit of an update of what's happened since our last earnings call on items that have been made public. And certainly, Matthew and team, look forward to any questions you have for me and for Justin.

Perfect. No, that's great. Thank you, Marion. Why don't we start with high-dose EYLEA since I think that's on people's minds, and you obviously talked about it a little bit. I guess from a commercial perspective, maybe the simplest question or the most straightforward question is what do you need to see out of that data from next year to make high-dose EYLEA an important commercial product for you?

Sure. So of course, next year, we'll have the opportunity to look at the Phase III data. I'm reporting early information based on the recent Phase II readout. I think before we even go into the high-dose program, I've got to remind everybody how well EYLEA is performing in the market today. We said, in the second quarter, we had 28% year-over-year growth. Certainly, half of that was related to the year-on-year comparison with the pandemic period, but half of it was related to market growth and competitive demand growth. So we're coming from a situation where our share, which is about 50% of the overall category, anti-VEGF category with EYLEA now, and we're about 75% of the branded marketplace. Our hope, obviously, Matthew, for the future with the high-dose program is that we're able to keep great efficacy, keep the great safety profile, keep everything we have today with EYLEA, which is certainly difficult to do in the marketplace, but make it possible for patients to be treated less frequently and, in that way, contribute to a better overall profile. So we'll certainly look forward to the incremental data coming from the Phase III program. We did think that what we saw in August was compelling. We were looking for a proof-of-concept type data for wet AMD patients. And we thought it was very important that the evaluation of the 8-milligram aflibercept program met the primary safety and efficacy endpoints. So we'll stay tuned for more but certainly feel we potentially have an important program readout coming our way.

Okay. Great. And obviously, one of the key things, and you mentioned this, that people think about, especially when they think about higher doses is safety. The Phase II study obviously looked clean but small number of patients. I mean anything that you guys are watching as you think about larger number of patients or any changes in manufacturing that you have to do to get that dose that would make you look for any other -- inflammation, obviously, is a key thing people are focused on. But anything else that you would be looking for?

Of course, early days, Matthew. As you point out, the Phase III data is a smaller population set. It is very important that we do the incremental study, look at the Phase III data in a larger population. But to date, we're pleased with the results that we were obviously rigorously reviewing in the Phase II program. You underscore something that we all know. And if we learn the lesson the marketplace with other competitive programs, that safety is paramount.

Okay. Perfect. Perfect. Maybe we could touch on some of the competitive dynamics principally because there's a lot of at least potential competitive readouts, and I think people would love to hear your thoughts on how they could impact the marketplace. So why don't we start with biosimilar Lucentis? I think they have a [ to be sold ] of date sometime this month probably. So how do you think about biosimilar Lucentis, if at all, having an impact on the market?

Sure. Well, all of you who have had a pleasure to speak with me now for 3 years at Regeneron know that I take every competitor very, very seriously, and we have a very, very busy team. I would say as it relates to the biosimilar Lucentis program that it is more likely to potentially impact Lucentis than it would EYLEA. The products are deemed to have different characteristics related to efficacy for sure in the marketplace, and we compete today with Lucentis quite effectively, garnering share growth in the branded marketplace. We're up to about 75% market share. We take none of that for granted, but that is a really strong leadership position in the marketplace. And then secondarily, I would offer, we certainly have a very low-cost alternative in the marketplace today with unapproved Avastin so that for those that are looking for a very low-cost alternative, it exists. Having said that, we'll stay attuned to the market dynamic. But certainly, our conclusion at this point is that a biosimilar Lucentis will have much more impact on Lucentis than it would EYLEA. And for those who want a low-cost alternative, that already exists today and probably is a lower low-cost alternative than a biosimilar would launch yet.

Okay. Perfect. And I guess the follow-up that people will look at as they say, okay, that makes sens, but perhaps how Lucentis is eroded by biosimilar Lucentis. Does that tell us anything about how EYLEA may be eroded by EYLEA biosimilars? Obviously, in a few year -- multiple years' time, but how do you think about that as an analog? Or are there different characteristics that you would point to?

Yes. So -- we're having some sound problems, Matthew, but I do believe that you were talking about potential future biosimilars to EYLEA.

Yes.

Certainly, that is in a longer potential window of time. I think there are a number of factors informing the market before then, not the least of which. And I probably should say this for any competitive product, not only the ability to get to market based on patent expiry, patent protections but also aspects of safety of any product coming into the marketplace, whether a biosimilar or a branded product. And certainly, we potentially, by then, will have other extensions to our portfolio that may be meaningful.

Okay. Perfect. Branded competition, there are sort of 3 things that I can think of that people are focused on. Obviously, we have 2 products from Roche coming into the market, port delivery and the Ang2 bispecific. And then you have potentially longer duration or a competitive product from a novel product but also potentially longer duration from Kodiak. Any thoughts on their profiles and what you're watching for them in the marketplace? Is that -- Justin, do you know -- is Marion not able to hear us? Is that the problem?

I think she may be dialing into the telephone.

Okay. Why don't we give her a second? Or I don't know if you want to comment while we wait for her.

I think I can wait for Marion.

Okay. All right. Perfect. We'll wait a second.

Marion, you're still on mute. Marion, I think you're on mute.

Team, we're having some audio issues here. So I'm actually going to call in a moment as well. Can you hear me at this point?

Okay. You sound good now.

Okay. That's fine. Yes. I guess she can't hear us, though.

You can hear me?

We can hear you, yes. [Technical Difficulty] Perfect. I think Marion has resolved her technical issues and is back on the phone. So Marion, the question I was asking was just if you could comment on some of the branded competitive data either that we're going to get from Kodiak towards the end of this year or the potential competition from Roche related to Ang2 bispecific and the port delivery system.

Sure. So let me take it in that order. First, commenting on the Kodiak program. Obviously, we'll stay tuned. I think the interest level for the specialty community and key opinion leaders relates to incremental data on the Kodiak program. And I think the more recent question had to do with the need to -- on their part to go back and do more 4-week data. And a little bit of a question as to why some of that wasn't done earlier up in the overall clinical program but we'll stay tuned there and await additional information. The questions, of course, will be not only related to overall efficacy but safety of the product as well, dosing flexibility and the like. As it relates to faricimab as a potential competitor, there, too, we'll wait incremental data. I think the questions that I've heard from leaders in the retinal community have related to the design of the program. Is there truly an improvement in dosing intervals since the clinical trial design tended to constrain EYLEA to an 8-week dosing interval but allowed the competitive product to go longer. And then, of course, there were some questions on the safety profile for faricimab in that the IOI rate was about twice that of EYLEA in the clinical data that was revealed so far. I think the port delivery system is probably more to be reserved for patients in the Roche program that really are not responding to anti-VEGF therapy at a lower dosing interval. It's thought to be a very small subset of patients related to the need for surgical procedure and reimplantation of the device as well.

Perfect. Marion, I thought we could switch -- I want to get to PD-1, but maybe we could just take a small detour through COVID since I know that's a topic people are focused on. I guess first question is, you obviously -- or the government bought up their sort of supply agreement last quarter. So what's the outlook from a commercial standpoint here for the remainder of the year on COVID?

Sure. So we anticipate, from a commercial standpoint, through the remainder of the year and even potentially into the early portion of 2022 that we will be working under the EUA. And the 2 indications that we're focused on right now within the EUA design are outpatient treatment of high-risk patients. I remind everyone that the high-risk at-risk patients is about 70% of those who are COVID-positive right now because those risk factors deal with heart disease, respiratory conditions, obesity, age and so on. There are many, many factors. So that's about 70% of the population that is COVID-positive. And then also, we were very excited with the increments of the EUA of post-exposure prophylaxis for those patients, about 2 million in the country in the U.S., that have issues related to immune suppression. They do not respond or can't be vaccinated. So we're very excited to be able to help those patients. As you know, we're looking at additional data for hospitalized patients and more general prophylaxis, but that is not part of our EUA yet. And then, of course, in 2022, we'll look forward to going through the regulatory review process with FDA, and potentially, we'll have approval on our BLA at some point next year. We'll be ready for that. In the meantime, we are working very closely with government stakeholders on everything from education in the market, supply in the marketplace and, certainly, at the ready at every moment to help as many patients as we can. It has kept our scientific teams and our commercial teams, our trade team, our educating teams, our medical affairs team very busy, but we also realize it is work that is saving lives every day, and we're doing everything we can to support the situation.

And can you talk about government contracting, how that works? And I guess in the U.S., and I don't know if you can speak for what Roche is doing outside the U.S.

It's probably better to let Roche speak about specifics of their program ex U.S. But I would say that we've been very pleased with the partnership with Roche and the number of countries that they are now making product available. Obviously, we speak to REGEN-COV in the U.S. They use name Ronapreve ex U.S. So that's been a very important collaboration for both companies to make sure that we're helping as many patients as possible on a global basis. As with government contracts, we certainly now have experience in that area, working with the government on our first 2 contracts. We will stay tuned and certainly continue conversations where we can help broader groups of patients in the future.

Okay. Perfect. And then, I guess, just last question here on COVID. Any improvements that you're making either for newer antibodies, which have broader variant coverage or different combinations to improve sort of varying coverage or formulation improvements to get the number of subcu injections or IM injections down from the current 4?

Sure. So 2 parts, certainly on our scientific platform, as George Yancopoulos mentioned on our last earnings call, we will continue to look at antibody cocktail combinations for the COVID situation that potentially will have utility in the future as the variant profile evolves and moves. So we are looking obviously to the future and, certainly, convenience of dosing, administration and work in that area is ongoing.

Great. Great. Marion, maybe we can switch to PD-1. I guess the sort of key question is if you look across consensus models, PD-1 isn't valued that highly in terms of peak sales. I think you guys, as an organization, continue to have a more positive outlook on PD-1 potential trajectory than The Street. So what do you think investors are missing in terms of your ability to take share in that market?

Sure. So as you saw when we launched Libtayo in cutaneous squamous cell carcinoma, we quickly became the standard of care and treatment in that smaller indication. As we move into lung, albeit first with the smaller indication for monotherapy, we are working forward in educating the marketplace, working with key opinion leaders, academic institutions, payer coverage pathways, and we're making steady progress. The bigger potential indication for us, though, will be chemo combo as we potentially move forward with submission and review and, ultimately, potential approval to promote that larger indication, chemo combo, and monotherapy in the marketplace. So we certainly will be at the ready for that. I'll also comment early days. As you know, in addition to the mono indication launch for lung cancer with Libtayo, we also launched in basal cell carcinoma. That indication launch is going very well. And quickly, Libtayo is becoming a standard of care and treatment for basal cell carcinoma.

Okay. And as we think about sort of the broader oncology pipeline, I mean what about PD-1 combinations? Are there any ways that you guys are thinking about sort of leapfrogging some of the competitors through some novel combinations or other ways in sort of the IO field?

Absolutely. And because of Justin's expertise in that area, I certainly would love for you to be able to hear his view on that. So I'll turn it over to Justin, but first, just make the comment we're very excited about the future combinations and the potential that unlocks for incremental advances in efficacy. But Justin, over to you for more.

Sure, Matthew. I think if you just look at lung cancer alone, there's a tremendous amount of activity that we're very excited about. It's early stages. But we have this platform that you'll hear George and the team refer to as the mix and match and the ability to take multiple classes of antibodies and create combinations and do that efficiently given that we have all of these assets in-house. So as Marion spoke to earlier, we have the monotherapy and the combination but that's -- with chemotherapy, but that's really just the beginning. Beyond that, we have a costim were a CD28 that has an eGFR target that is being looked at in lung cancer in combination with Libtayo. We have a MET X MET antibody, which looks like it could have potential across a wide variety of MET-altered and overexpressed lung cancers. We even have an ADC or antibody drug conjugate MET X MET that may provide a significant opportunity as we think about just the broader lung cancer story itself. And then you think about where we are with regard to the PD-1 market. There's still a lot of patients and a lot of different cancer types that don't respond to anti-PD-1 treatment, whether you're talking about prostate cancer, multimyeloma, non-Hodgkin's lymphoma, pancreatic cancer. So many of those cancers still have a tremendous amount of unmet medical need. And we're excited about the biospecific platform that we could bring to bear on potentially every one of these cancers. So I would say as excited as we are with the progress that we've made thus far, and I think everybody should be excited about that progress, there's still a tremendous amount of upside and opportunity that we're really excited to be getting after.

Okay. Okay. Great. Good. Maybe since we've only got 5 minutes left, maybe we could switch to dupi, and I think the -- I guess one of the things when I think about when I talk to investors, one of the things that people sort of miss on dupi is just how much work there is going on outside of asthma and atopic dermatitis. So Marion, maybe just for everybody's benefit, sort of review for everybody how you think about the size of the markets outside of those 2 key markets and the potential for gaining significant share in those other markets.

Sure, Matthew. Great question and delighted to comment. The first I'll comment is just on our existing indications, even atopic dermatitis across age groups, asthma, chronic rhinosinusitis with nasal polyps, there's still an awful lot of unmet need and patients that we need to reach in those platform-first indications. But then as we go further, I'm happy to highlight those that are coming ahead. As I mentioned, we'll have the pediatric asthma. We have a PDUFA date coming up on October 21. There will be, obviously, working with some of the same physicians, allergists and pulmonologists, where we already have experience and obviously targeting the same physicians, strong and younger patients, to help them as well. The penetration in that case is expected to be an incremental population of about 75,000 patients as we look at the growth of the overall marketplace and the overall ability to bring incremental patients into the fold for treatment. We're also very excited about the indication for chronic spontaneous urticaria, CSU. That population of patients with moderate to severe disease, adult and adolescents in the U.S. is about 300,000 patients, and then another population of about 40,000 in the 6 to 11 age groups. We also see, obviously, an opportunity beyond U.S. for the global treatment of CSU, and the global prevalence is about 0.5% to 1% of the population. As we go further into eosinophilic esophagitis, or EoE, there, too, we very much look forward to the Phase III data that will be coming out in the late portion of this year in terms of the data readout. There's a very large unmet need here. Think the indication could be much larger than some of the current projections of the patient numbers we've given previously. There are really no approved therapies in the U.S. for this population of patients, certainly, adult, potentially adolescents and children going forward. And then prurigo nodularis, we will have incremental data on PN in the second half of 2021. This condition is one that's associated with extreme itching, has a dramatically negative impact on quality of life. There are no FDA-approved treatments in this area. So we certainly are looking forward to making a difference there. I've not covered every indication, but I'm giving you the main ones. And obviously, we have a very robust opportunity with Dupixent to continue with this remarkable efficacy and safety profile across age groups and across patient populations.

Great. And a lot of stuff to pay attention to there. Maybe given that we're almost at time here. I know people have asked about what you're doing with genetics and genetic medicine, especially with your genetic center and some of the work you're doing with your partners, Alnylam and Intellia. So maybe we could finish up there and just talk to people about what the focus is there and what you think about in terms of the opportunity there.

Great. And I think this is one, too, where I'll turn things over to Justin.

Sure, Matthew. We're tremendously excited. And this is an opportunity to say that Regeneron has really kind of grown beyond just being the antibody company at this stage. And it really starts with the RGC and our ability to use big data and many exomes to determine and find new targets, novel ways of treating disease. Sometimes, these targets will be amenable to a traditional antibody. Other times, they may need some other sort of interventions such as a CRISPR/Cas9 or an RNAi. And what George and the team have done very intelligently is to line up these partnerships that allow us access to these various technology platforms such that when we discover these targets, we do, in fact, have opportunities to be able to have modalities that could get after these various diseases. We have not just small partnerships with regard to Intellia and Alnylam. Just to give you a sense of scope, we can commercialize up to as many as 15 different programs with Intellia. Everybody saw the TTR data this summer that was tremendously encouraging. Many more targets and opportunities with that partnership. And then also with Alnylam, as many as 30 potential programs that we could ultimately commercialize. So in the end of the day, this part of the business could end up being bigger than the traditional antibody business as well. So early days, but at the same time, there are things moving into the clinic and, as I mentioned, seeing some really good proof of concept on some of the early programs as well. So much more to come on that front.

Perfect. Well, great. Justin, Marion, thanks very much for being here. I appreciate your time.

Thank you very much, Matthew. Thanks, everyone.