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

Great. Let's go ahead and get started with our next session. Thanks, everybody, for dialing in for the Piper Sandler. This is our 33rd Annual Healthcare Conference. I'm very pleased to have with us our next presenter, which is Regeneron. Just a little bit of housekeeping for folks. We are obviously doing this virtually and very much hope to get back in-person next year. But for folks who are listening in, if you have any questions, I think there's an option for you on your Zoom app that's opened. If you don't want to do that, you can also just e-mail me, just hit me up on e-mail, and I'll be monitoring that. So we've got 25 minutes. We've got Bob Landry, who's the CFO and also Vesna Tosic, who is the Head of IR function at Regeneron. So I think, Vesna, you're going to have some safe harbor statements, so you go out, take care. And then Bob's got a little bit of an intro, and then we'll dive into questions. So guys, please take it away.

Chris, this is Vesna Tosic, member of the IR team. And I just would like to remind everyone that remarks made today include forward-looking statements about Regeneron, and 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 our SEC filings. And with that, I would like to turn it over to our CFO, Bob Landry.

Great, Vesna. Thank you for that. Chris, good morning. Those that are on the call, good morning, good afternoon, good evening. Thanks for dialing in and hearing kind of a quick snippet with regards to what's up with Regeneron. And again, we look forward to the Piper Conference. So thanks to Chris Raymond and the team for inviting us again this year. So as Chris said, let me get into just a couple of tiny comments. There's a lot happening. Obviously, we want to get into Omicron and Chris will do that. But just to kind of open up, we're coming off a really strong third quarter. We had strong top and bottom-line growth. Our core business with EYLEA and Dupixent is executing well. Again, in the third quarter, certainly as will occur in the fourth quarter, we are augmented by deliveries of our 1.4 million additional doses of our third government contract on REGEN-COV which we announced in September. As you may remember, in the third quarter, we recorded roughly 300,000 of the 1.4 million doses. And again, REGEN-COV is our antibody cocktail against COVID-19. Our pipeline continues to advance across many therapeutic categories. We do have several upcoming catalysts coming up into 2020, including a conference call and simultaneous webcast. We'll host on Monday, December 13 at 4:30 p.m. Eastern Time to share an update on our heme portfolio. So again, lots of excitement and certainly, barring what happened on Friday with the news coming out of South Africa, I mean, it's really interesting times that, that we're living in. So Chris with that, let's kick it off.

Yes. So certainly, Omicron is top of mind. And I guess COVID has given us a lot of lessons in the last almost 2 years, I guess, for me, I made the mistake of writing all my questions before the Thanksgiving weekend to so much for that. So maybe let's just jump in, I guess, on Omicron.

So I know you guys have been very upfront even before all this happened about anticipating more variants emerging. George even spent a decent amount of time on your Q3 call, essentially saying Regeneron is prepared for that scenario. So we're obviously now here we are. So reading your press release yesterday, like I think everybody else did, that prior in vitro work and structural modeling indicate that this current format of REGEN-COV may not have the same level of efficacy against Omicron. And you're currently testing against the actual sequence. So the good news here is you're not starting from scratch. And the team has gotten a good start -- head start, I guess. But the first thing, I guess, I'd ask is, you have to understand how well it works against the actual sequence, but assuming that you'll need one of these backup programs, maybe just walk through -- I know it's still early, Bob, but walk through the sequence of events, how you guys are sort of laying out? How -- where we go from here to being able to get to have something to submit to the FDA?

Sure. Let me give you kind of a, thanks for that, Chris, a summary of kind of where we are and what's happened in the last couple of days, and that will get to some of your questions, and then we'll pivot off of that. Like our -- I won't say press release. It's on our website. We didn't put out a formal press release, but those that didn't see it, we did put a statement out that's on our website. And it starts off by saying, first and foremost, REGEN-COV is still very effective against the main variance of concern that are currently circulating in the U.S. Now that includes Delta, which obviously still remains the predominant strain in the U.S. and we want patients to be very clear on that, right? We don't want kind of headline to get ahead of currently what is out there, particularly in the U.S. as it pertains to getting an antibody treatment or [ prophy-prevention ] type indication. Still many unknowns, many cards that need to be turned over. But as of today, we do have a very safe and effective cocktail that's benefiting thousands of patients. So it has not yet been proven yet by neutralization analysis, Chris, that Omicron variant mutations affect our current cocktail. We will have that data in a couple of weeks. Like you said, Chris, prior in vitro analysis and structural modeling regarding the individual mutations present in the Omicron indicate that there may be reduced neutralization. I think Len on CNBC said that it looks like we're going to take a hit certainly in one of our 2 antibodies. And it's important to note that our current 1,200 mg REGEN-COV dose given is very high. So even if there is a hit on neutralization, it is feasible that our current cocktail will still block Omicron. But again, we're going to need to take a couple of weeks and look at the sequencing on that and see exactly how that plays out. So one issue that we've been banging the drum on kind of prior to this situation happening, it is now rising to the forefront including yesterday's kind of Squawk Box airing with our CEO is the discussion on getting the immunocompromised patients access to this drug prophylactically. Now as you know, we have an EUA that's currently in place for that's both treatment, but it's a prevention of a certain class of people from a [ prophy ] point of view and it's not yet indicated for immunocompromised patients. And as you know, it seems that this very evolved to its potency in immunocompromised people in South Africa, the region in South Africa where this originated as a high HIV population, so it makes sense that, that could happen. So this could be a problem going forward with regards to immunocompromised people being able to mount a response against COVID. And until those people are covered. And again, we have sent down our data, and we've updated our data to the FDA with regards to trying to get this indication. Until those people are covered, I mean, we're going to have a weak link in the chain where variants are going to be able to mutate. And I think that, that's the part that kind of concerns us in addition to everything else. So Chris, was hinting on this question on the upbeat news, there is upbeat news, as George has mentioned in our Q3 earnings that if a new cocktail is needed we do have a large pool of antibodies to advance. That should be no surprise in terms of kind of the arsenal that we have on this. When we picked our first 2 antibodies, we had kind of thousands of victims, and we picked the ones at the time that did the best binding and eliminated kind of any [indiscernible] that we envision what's going to happen. So again, George and the team, they anticipated the virus will continue to evolve. That's what it does. We're fortunate to have a number of next-gen antibodies, which based on preliminary analysis, have the potential to retain activity against the Omicron variant as well as other existing variants. And in fact, one of these antibodies, Regeneron14256 is already in the clinic and others can be entering the clinic in the next few months. We feel like we have an advantage here. We have an unparalleled access to a large collection of fully human monoclonal antibodies against this virus. You can look at our competitors, and I'm not sure all the competitors basically have such an arsenal in which they can pick and choose from, which is what we're going to be doing over the next couple of weeks if necessary. Now again, how quickly can this be authorized? Well, I mean, it depends on how bad turns out to be, Chris and how proactive the FDA is going to be on granting an EUA to a new cocktail. There's still so much to learn on this. And I mean our team is kind of going 24/7. It's the same team that went 24/7 back in kind of early January of 2020. And we kind of know the playbook. We know what we're doing here. The benefit is we have an arsenal of backup antibodies, and we just kind of need to go through and see from a sequencing point of view, what is currently being impacted with our existing REGEN-COV and then if so, what that's going to mean going forward. So again, that's kind of a mouthful. Let me stop and see if there are any questions coming from any of that.

Yes. And just maybe as a follow-up, I know there's -- you're still at the beginning here of this at bottom of the hill, if you will. And so I guess I kept hearing you say, Bob, within the next couple of weeks after you guys have done your in vitro work, against the actual sequence, maybe you'll have better. So should we anticipate then in the month of December, perhaps that there'd be some sort of news from you guys [indiscernible] at the very least?

Yes, Chris, I mean, I'm hoping that by 2 weeks, we will know internally, and then it's a matter of the messaging that needs to go out, which normally we're pretty quick on that. So we're thinking for sure, it will be a December event. Again, I say that now. This is the finance guy telling [indiscernible] guys with regards to time lines. But everything I'm hearing in the meetings I've been in, it's certainly our goal to do it as quickly as possible and to get more information out there on that front. And the good news is we already have, and people can go to clinicaltrials.gov that we already have an antibody that's in the clinic. Now the question is, are we going to put another one with that? It's going to be a combo? Is it going to be a threesome? And that's kind of all the magic that George and the team is going to need to work out.

Yes. Go it. Okay. Great. Well, listen, we can obviously spend a lot more time on this particular issue, but just in interested time. Just a couple more sort of general question on REGEN-COV,and then we've got obviously some of the aspects to the business to cover here. So I'll jump along very quickly. But just in terms of the outlook, I know you guys don't guide on this stuff at all. But the #1 question I get from investors, still REGEN-COV and now even more right with this new twist with Omicron is, how do we model the business going forward? And there's a ton of puts and takes, obviously, not least of which being the fact that the government is heavily involved in the distribution and deciding who gets it, et cetera. I guess just a general question. When -- as you guys look at it, this business from a 50,000-foot perspective, when do we -- do you think this could be more like a regular product in terms of its distribution, availability to patients, et cetera?

Chris, our current thinking now and again, all things may change given the potency on REGEN-COV going forward is that the EUAs that we currently have in place, which is for treatment and for, I would say, limited kind of profuse kind of household contact...

Plus exposure, plus exposure prophylaxis.

Exposure. Thank you, Vesna. We have an April PDUFA date that's currently in place. And then prior to the April PDUFA date, we have an AdCom meeting, which it's not out there publicly with regards to the timing associated with that, but that will kind of come before the PDUFA date. And we are planning on the PDUFA date, the government to basically hand over the keys, the distribution on this product and basically tell Regeneron to kind of go at it and that they are no longer in the business. I've heard from Len a couple of times that certainly, the government doesn't want to be in this business. And to the extent that they're able to kind of hand this back to manufacturers, i.e., Regeneron, then they'll be looking to do that. So we're kind of gearing up for an April keys to be handed back with regards to the distribution. And with that, because it's under EUA, Chris, we don't have any -- there are really no sales marketers out there. Now there are certainly -- we certainly have our medical affairs people out there, meeting with KOLs and doing what they're able to do. But the guidelines are quite specific to the extent that you don't have commercial authorization. So it's not as if we have a sales force out there that's continuing to promote and work with hospitals and all that. I mean, we're doing that through medical affairs on a more scientific approach. But all that, too, will change come April where Marion's team will then kind of get the keys to this product and be off and running.

Got it. Excellent. Yes. So obviously, this PDUFA date kind of a critical thing. Maybe just let's talk about -- to the extent, again, I know there's -- you're not often in a position to give a lot of granularity into the business. But maybe just can you provide a rough sort of current volume mix between treatment and post-exposure prophy now? And I guess has anyone actually administered this therapy monthly for those that are immunocompromised, et cetera?

Yes, I think the question on -- well, I mean, I think, yes, with regards to whether people are doing it. I mean, it's being distributed by the government. I mean, we're finding out where we're going, but we're not getting great visibility in terms of exactly how it's being used. We have -- we know 60% of doses order are being utilized by accounts that order both IV and subcu. There are some that just are going subcu. So it's a mix. I mean if I had to guess, given everything I've heard kind of in the hallways, I mean, it's still predominantly an IV treatment used product.

Okay. Okay. I just got an e-mail from somebody. I know you kind of touched on this, but I'll just ask it from an investor. So is REGEN14256 expected to be potent against Omicron? Or are there others soon to be in the clinic potent against Omicron?

Vesna on that, do you want to take the first one on?...

Yes. So Chris, thank you for that question. So basically, from everything we know today, yes, we expected it to be potent against Omicron. So we've done testing with some of the mutations previously with these and the other candidates we haven't disclosed yet. So from everything we know now, we expect it to be. But as Bob mentioned, we will have more definitive responses in the coming weeks as the neutralization assays are completed.

Okay. Awesome. All right. Great. All right. So in the interest of time, let's move on maybe to some other topics of the business. Maybe just a strategic question, I guess, on Dupixent. And Bob, excuse this question. I know I've asked this of you guys before, and I think I've asked Len this question a few times. So our checks, we've done a lot of surveys in this space. I know as well as your commercial team certainly has a really good pulse on what's going on. But one of the things that sort of jumps out to us every time we go to derms specifically on AD is the doc seem to be sort of begging for something that combined with Dupixent. And it's a notion that I think is lost on a lot of investors that maybe ADs becoming more of this combo sort of indication. So -- and even actually patients who are categorized as being sort of optimally managed on Dupixent, that docs would like to try something that they could combine and make -- see if they can even actually do better. So I guess just as I look toward it, if that's the case, I would think Regeneron would want to be able to sort of control that combo or at least have some sort of offering that can be layered out rather than let somebody else do it. So I guess, first and foremost, as you talk to your commercial folks, are you getting that indication at all? Or is this maybe sort of a false signal? And how does Regeneron in the company -- I know that Dupixent shared, obviously, but with all the discovery and development capability you guys have, is this something that could be prioritized as we move forward?

Yes, Chris, my response may come off a little cheeky. I mean, we think all this is kind of competitive noise. And it's kind of a tax at Dupixent similar to what we saw with regards to the JAKs -- and great early onset you get from JAKs and stuff like that. Again, no, we're not -- I'm not hearing it. And if the marketing team was hearing it in any kind of loud volume, it would certainly get to -- get to me. I mean our playbook on Dupixent is -- and I would say ours and I'll put Sanofi in there and never want to speak on behalf of our collaborators. But what I'm seeing our playbook is, we need to kind of continue to drive new patients on Dupixent. I mean we pound the table with regards to how well we're doing in Dupixent and AD is a big plus related to that, but it's still mid- to high single digits with regards to penetration. And again, I mean, this is kind of in the U.S. of 2.4 million AD population, again, 6 years and up that I'm including. So how can we continue to kind of get more scripts on this? How can we get that penetration number higher? So with regards to what's next and the competitive noise we're hearing, we kind of pushed that aside a little bit and just really concentrate on getting new scripts and then keeping people on Dupixent once they get there. That's kind of the simple playbook that we have for now. If something was to come along, I mean, certainly, given where we are with Sanofi, we'd be all over it. In terms of some other add-on therapy in combination with Dupixent, trust me, we would be all over that. But as of right now, I think that that's kind of just noise in the system.

Got it. Okay. Well, so let's maybe another topic is EoE labeling. So I know you guys had your data. I guess it was October now, that was positive in EoE and you're filing for approval in 2022, hopefully, launching later in the year. I know this patient population is a little bit on the small side compared to AD and asthma, but it just seems like you guys are a bit more excited about this opportunity and investors are. So maybe sort of a question is, what are investors missing? And maybe just talk about sort of the puts and takes over the next several quarters for -- with EoE in the mix?

It's interesting that, that gets picked up and -- I mean, I'm happy that it does because I would agree. There is an enthusiasm, not because it's just another indication. It's because when we do the sizing, the EoE current U.S. market size, 160,000 patients and currently treated, and there's 50,000 that have failed multiple treatments. So you could look at that size and compare it to what we currently have indications on. But we think it's a little bit more like nasal polyps, where it was the same thing where nasal polyps was our third indication in -- the market size wasn't super large relative certainly to AD and asthma, which we were coming off of. But as I constantly get reminded from Marion, it kind of punches above its weight belt with regards to -- there seem to be kind of more patients coming to allergists and ENTs, than we thought for nasal polyps. So we're kind of just kind of carrying over that understanding, Chris, that we think it's going to be the same thing with EoE. And as Len always says, early indications are that we're getting a lot of GI docs. GI docs are pretty damn anxious on this thing, and that's kind of one of the indications that we're getting in terms of -- there seems to be kind of getting built up excitement around this. And our data is really good on it, and there's really no other treatments that are out there. So all those things coupled I'm happy that our enthusiasm is getting picked up because again, like nasal polyps, I think this is going to be a use kind of above and beyond what the normal patient numbers were currently tell you.

Yes. Great. Okay. So I guess I'd be remiss if I didn't ask a CFO question of you. And let's just maybe talk about use of cash. So you guys obviously have quickly built up a pretty nice cushion here, $9 billion, I think in net cash, that works out to about [indiscernible] share. And then by our math, as we have a model, you'll have over $10 billion by the end of the year. I know this is our numbers, right? You haven't guided to this. And even with the $3 billion share repurchase at least as we have it modeled that net cash number could be $13 billion-ish by the end of next year. So whether we're right or wrong, obviously, there's a lot of flexibility. And I know you guys have been relatively active on the business development front with these technology deals, the siRNA, CRISPR, et cetera, but not with late-stage or in-line products. And so at what point, I guess, does it even happen where we see -- you start to balance out the business development efforts in terms of later-stage stuff or find some other use for this growing cash level there?

Yes, Chris, let me touch upon that. And it's probably and I think I've mentioned this before. But we never say never. But again, I mean, we are not actively seeking to do a kind of transformational M&A deal. We kind of continue to do tuck-ins. Tuck-ins with technologies are nice, tuck-ins where it's technologies where what we don't have, and we think we have targets that may not be open for kind of antibody treatments and stuff like that. We kind of really like that deal. And kind of the Decibel extension [indiscernible] whatever name [indiscernible] it used to be [indiscernible]. I mean those are kind of 2 examples of granted, they're small, but we always have our antenna up, and I like the fact that you do say and it's acknowledged by you that we've been active in that space. So the strength of our balance sheet -- I mean, it does afford us a lot of optionality, and it does provide us tremendous flexibility. And if we see an opportunity that makes scientific or strategic sense, we're going to go after it. But again, it's not in our DNA to compete in auctions, kind of late-stage development Phase III-type transactions. Len would say -- he said it to me and said it to our Board, our need to solve will never be as great as the next guy, and you can fill in who the next guy may be. And therefore, we'll always find it difficult to kind of win in those situations. So we've stayed away from them, and we will probably continue to stay away unless something is so glary, that it makes sense. And then we've been having a lot of discussions with the Board regarding cash accumulation. And I hear you, the $3 billion is kind of a drop in the bucket. But I do like investors to be aware that we have been active. And in fact, we've been really active in this space. In the last 2 years, we've purchased back over $10.5 billion with $7.5 billion of being completed to date. So I don't think any of our peers are doing anything like that with regards to returning cash to shareholders. So our eyes are open in this space, and we get it. I mean we are accumulating cash at a very quick note.

Awesome. Well, I have to apologize to everybody. I've got a bunch of questions online here. But unfortunately, I'm getting the high sign that we need to wrap it up. So -- but thank you, Vesna and Bob, for the time. Obviously, a lot going on. So thanks for taking time out of your busy schedules to do this with us.

Thanks, Chris.

Thank you, Chris.