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

Great. Good afternoon, everyone. Welcome, again, to Cowen's 42nd Annual Healthcare Conference. Thank you very much for joining us. My name is Tyler Van Buren. I'm a senior biotech analyst at Cowen. For our next session, we have a fireside chat with Regeneron. And it is my pleasure to introduce Bob Landry, the Chief Financial Officer and Executive Vice President of Finance; and Neil Stahl, the Executive Vice President of R&D. Bob and Neil, it's a pleasure to have you. Thank you very much for being here.

Tyler, thanks for the invite. Always happy to be invited to the Cowen conference. Let me begin with our forward-looking statement. I'll get into some kind of opening remarks, and then we'll jump right into questions for Neil and myself. So again, to remind the audience, remarks made today 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 at the Regeneron's filings within the United States Securities and Exchange Commission. Regeneron does not undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise. So let me make some opening remarks. And then like I said, we'll dive right in. So for those of you that follow Regeneron, you know what I'm going to say that we're coming off an excellent year in 2021, highlighted by just tremendous growth for EYLEA. I think 17% growth levels having been on the market for 10-plus years, really, really astonishing. Dupixent continues to do great. Contributions from REGEN-COV and our efforts against COVID and just the broad advancements in our diversified pipeline. So really across the board with really, really strong execution. 2022 is off to a fast start. In February, we've read out encouraging data from our Phase II 44-week trial of Aflibercept and data from the larger Phase III studies, as people know, is expected in the second half of this year. We continue to expand the potential indications for Dupixent with potential approval for EoE and prurigo nodularis this year, helping to deliver on the promise. As you've heard us say many times, Dupixent is a pipeline and a product. We also continue to advance our novel immuno-oncology efforts with the regulatory decision on Libtayo in combination with chemo. That's coming, I believe, the third week of September in first-line lung cancer, and we look forward to sharing data across our solid tumor bispec programs later this year that I'm sure we'll get into on the call. In addition, you may have seen we and our partner Intellia publicized updated data for NTLA 2000, which showed deep and sustained reduction in the disease-causing protein. These efforts show the increasingly fruitful efforts being brought to bear by our partnership with Intellia and Alnylam in underpinning our Regeneron Genetics Center efforts. And again, 2022 is set to be a very exciting year for Regeneron on many fronts and, Tyler, with that, let's start the Q&A.

Fantastic. Thanks very much for that introduction, Bob. Before I get started, I want to also mention to the audience that you can submit questions by the web portal or e-mail me at [email protected], and I'll do my best to get it asked. Now with that, let's go ahead and start with EYLEA given the recent Vabysmo launch. EYLEA has been absolutely bulletproof since its launch. On the other hand, we've got survey results that will show the panel tomorrow morning that show that physicians are expecting a significant decline over the next 5 years. So I know you're not counter detailing per se, but can you remind us what kind of commercial tactics you're able to deploy as the Vabysmo launches here?

Yes, Tyler, let me touch upon that again. The commercial team, I'm not going to go too in-depth they'd kind of ring my neck if I gave them all the details with regards to exactly the commercial tactics that we're doing. But we're going to kind of follow the knitting that has made us really, really successful coming off of the 2021 numbers, I mentioned. So as you know, I mean, EYLEA continues to be the gold standard since its launch. And over the last decade, we have amassed really important clinical experience in safety, with an emphasis on safety. I think we did in excess of 40 million doses that continue to support our first-line use of EYLEA. Our commercial team, hats off, they've been kind of laser-focused on driving EYLEA growth and market leadership. In 2021, we're coming off of a 2% share gain. Net sales grew an impressive 17% year-over-year in the U.S. Volume was up 20%. We continue to drive further growth in diabetic eye disease. Some of you out there may have seen our consumer DTC campaign that we initiated, I think, in the second half of 2021, and it's continuing the first quarter of 2022, and this is again to educate physicians and patients on the urgency with regards to the diabetic eye disease to ensure that you get treated. We are seeing early positive indications from that campaign. While it's early days, with the competitive launch, I mean we do not view faricimab as game-changing or disruptive. I mean that's commentary that we've said. KOL excitement on recent launches, whether it be the port delivery of faricimab, appears to be somewhat muted. People know that kind of the clinical trial design. It was a little bit gained. That's what happens in this space. And I think all of this was even brought to further light with the Kodiak trial failure that we've seen. A couple of other thoughts. The trial design that came about from faricimab resulted in a complex administration dosing section in the label, which we think, and we're hearing it's difficult for physicians to identify which patients to extend and it could be confusing the payers for reimbursement. We're talking this morning on a bunch of one-on-one calls that the CST curves clearly tell us there is no durability advantage for faricimab, particularly the year 2 data Q8 arm and DME or the FDA-approved package to Q8 and Q12 arms in wet AMD. Statements in the label. I don't know if people saw that, but that came out last week as part of the approval package. It talks about the kind of trial design and maybe the somewhat flaws that are in there, it limits the ability to draw comparisons against EYLEA. And what we think is that it weakens promotional claims. Ang2 remains unknown in terms of what that did to the product. People know that Ang2 was developed by Regeneron many, many years ago. In fact, I think Neil was a participant in that in we've always thought that it wasn't going to show a benefit, and that actually somewhat came through in terms of the notes that were issued that there wasn't a direct correlation on that. And again, the sustainability of the Q16-week dosing interval cannot be determined based on the year 1 data alone. Again, that came out in kind of publicized information last week. So let me stop there for now, Tyler.

Great. So the recent Phase II CANDELA presentation at Angiogenesis highlighted the durable -- potentially durable drying benefit of the high-dose EYLEA also showed encouraging retinal thickness and visual acuity results up to 44 weeks, with 52% specifically, being maintained without requiring PRN or rescue treatment. So in the Phase III PHOTON and PULSAR studies that are reading out later in the year, is the goal essentially to replicate this and to maintain 50% patients at Q12 weeks or greater? Or what are the goals of those trials?

Okay. Well, first of all, before I answer your question, I just wanted to give a shout out to International Women's Day today. And I'm not sure if anybody else has done so, but it's a very noteworthy event. And in my opinion, every day should be International Women's Day. Our Phase II trial was not designed to test visual acuity because it was too small. And so it was just designed to do 2 things, to see if we could get a higher percentage of patients to get dry corneas, dry retinas during the study over the longer dose interval and also to evaluate the safety of the higher dose. And I think that data showed pretty well, both at the 16-week time point and the 44-week time point that the higher dose maintained better drying than the lower dose. And they were controlled. So the low dose did control the high dose. So it was a valid comparison between the 2. Regardless that it wasn't set up to measure visual acuity, there was a numerical advantage to the 8 mg group. So that was good. So in terms of the Phase III studies, we have arms in the Phase III studies that are both Q12 week and Q16 week. And so we're looking to see whether or not that the -- a larger fraction of patients can succeed in the longer dosing interval in the longer -- in the high dose group. So that's the goal of them. And I think Bob already mentioned some of the flaws with faricimab in terms of it didn't look like it maintained drying for longer than 8 weeks during those studies. And so I'm not sure that we have a bar to reach with faricimab, and we'll see what our data reads out to later this year.

Okay. Great. Thanks for that, Neil. Let's maybe move to Dupixent. The product continues to be an absolute beast. So can you give us a sense of the breakdown of sales in the currently approved indications between AD, asthma and CRS with nasal polyps. And how do you expect that to change over the next 5 years?

Sure. I love the terminology of being in beast mode here like a Seattle Seahawks running back. Just to kind of reset everybody with regards to Dupixent. So Dupixent achieved in Q4 global sales of 1.8%, and you can annualize it out, and it's roughly a $7.1 billion run rate, and it's achieving growth rates of 46% and 81% in the U.S. and ex-U.S., respectively, compared to full year 2020. So as I echo those numbers, that is kind of beast mode like numbers. So Tyler, thanks for the reference. Now Tyler, we don't usually provide the current breakdown of sales and the approved indications, but it is fair to say most sales come from AD, but all indications are growing rapidly. Regarding your question on my 5-year prediction, well, that's a tough one, particularly with new indications, hopefully coming, including EoE and prurigo nodularis, which should be this year and then bullous pemphigoid in eventually COP, and that would even split the pie even more into more pieces. So the breakdown is going to be kind of nuanced. Here's the one big takeaway I want people to get. And they may realize it or maybe may not have realized it is Dupixent as it currently stands, and I'll reference the U.S. adult AD market. It currently has a penetration of 7.9%. And as I said earlier, AD is the biggest indication within Dupixent right now. So again, you can kind of do the math here, where the current penetration is 7.9%. Sanofi on its most recent earnings call last month talked about their desire to get the AD penetration number to 25% to 30%. So that's kind of our goal, right? So just math-wise, if we're at 7.9% now, you can correlate it to the numbers that I read, and AD is the largest indication. We anticipate AD will stay the largest indication. Now the goal between the 2 companies is to get that 8% penetration number to a 25% or 30% kind of annual number, which we're going to be working vigorously to try to achieve that.

Okay. And in terms of the emerging expansion opportunities, whether it's EoE, PN, or CSU. I'm assuming it's going to be EoE or PN, but which is the most exciting to you?

I mean I would say that we're excited about anywhere that we can expand Dupixent and relieve people's serious diseases. And so we have really great efficacy here in EoE and PN. And so we're excited to offer that drug to all the patients that need it. The other thing, of course, is that sometimes these diseases coexist with other type 2 diseases. And since Dupixent has shown a broad treatment of those diseases, there's the opportunity to really cure multiple problems that they had. In terms of CSU, it didn't work in the late-stage failures, but it did work in the earlier-stage naive patients. And so we're looking at that carefully to see if we're going to move forward to extend into that as well.

And Tyler, I would just add. Out of the indications coming, we've been getting a lot of kind of notifications and questions, the GI docs really waiting for EoE. I really haven't seen that on the other indications. Maybe we're getting that for AD when we launched way back when. But the kind of demand coming from EoE seems to be kind of heightened on just a lot of doc inquiries around country, just waiting for when this gets approved because, as you know, there's really not a good treatment out there at all for those patients that are currently suffering.

Okay. That's good to hear. In terms of the Amgen's TEZSPIRE launch, how significant of an impact do you expect that to have with dupi in asthma?

Yes. Well, we had looked at -- this is for TSLP blockade, and we had looked at that a lot of Regeneron, but we just didn't see that it had the breadth of activity as blocking the IL-4 receptor. However, it does show activity here. And it may be that it's going to initially fit into low EOs patients that are not on steroid treatment, we'll have to see. And it's a smaller fraction. It could easily coexist with a lot of other drugs. So we're gratified by the breadth of the Dupixent treatment. As I mentioned, there are comorbidities, and so it does offer patients relief from numerous things.

Okay. Great. Let's move to the COVID antibody front. So related to the development of the next-gen antibodies that land into the clinic in the coming months, you stated that they'll be active against all current previous and potential future variants of concern. So can you elaborate on how this is possible? I'm assuming you're targeting conserved regions like Sotrovimab, but would love to hear more about the strategy.

Right. So using our VelociSuite technologies, we actually have isolated thousands and thousands of antibodies just to get the first cocktail, which worked against every variant up until Omicron. While that was going on, we actually had gone back to the drawing board and gotten a lot more antibodies. And so we have a whole cadre of antibodies that are effective against Omicron. And we also have some antibodies that are against the more conserved sites. The wrap on those is that they're not as potent. So I think right now, we're going to stick with receptor-biding domain antibodies that are active against Omicron and every known variant of concern. And so those are ready to go and we're just in talking to the FDA about what they're going to want to see in terms of clinical trials. We have the Lilly experience that they did, which was a little while ago. And so as soon as we get agreement with them, we'll be able to move forward.

Can you give us -- I understand you may just finish your discussions with regulatory authorities, but can you give us any general sense in what a trial nowadays might look like? Is it dependent on another variant wave to come? And when these next-gen antibodies could potentially reach the market?

Right. So I can't really speculate since we're in discussions with the FDA right now. There are no imminent variants, although there are some that are lurking out there. So hopefully, we don't have to face that again, but we'll see if that happens, and we'll see what the FDA has for us. If all they want is something relatively simple, like animal data and virology in humans, then that could be accomplished relatively quickly if we can find patients that have disease.

Got it. All right. Now let's move to Libtayo. The dermato-oncology launches continue to go well. But do you expect to make significant progress throughout the year in the initial approved lung cancer indication of PD-L1 high patients? Or will we need to wait for the chemo combo in September?

Tyler, clearly, I mean, we've been pleased with the progress made in Libtayo's dermato-oncology indications, both in CSCC and basal cell. I mean the data was good and what we're achieving is kind of living up to our expectations. Now -- and it should be no surprise to anybody. I mean we are frustrated. But again, we remind ourselves it's very early days with regards to the mono non-small cell lung population. So despite having impressive data, both the marketing competitive dynamics have dampened our early progress. The timing of our launch -- and again, we're not the only ones that can say this, in Q1 2021, in the midst of the pandemic, has certainly had an impact to new patient starts. As we began rolling out our ambitious efforts with Sanofi, many HCP offices remained close to the sales force. So all new introductions, all new relationships with a new sales force had to be done virtually. So that was a tough hill to climb. And again, we're not alone on that, but just to give you a little background. So even though -- despite the slow start, we are beginning to see increasing breadth of prescribing HCPs and new patient starts. We are also gaining traction with thought leaders in key accounts. Again, this takes time. These efforts are focused, like you said, on establishing Libtayo as monotherapy, but will be a very, very important foundation for our potential Q3 2022 chemo combo launch. Again, remember, investors, from a size perspective, chemo combo non-small cell lung market is about 7x larger than the mono market alone. And again, let me remind everyone that Libtayo was just 1 of the 2 PD-1s that in clinical trials provide this breadth and optionality of treatment options, both mono and chemo combo in first-line non-small cell lung in both squamous and non-squamous patients. So it's kind of early days. We're keeping our chin high. It's been a tough start with regards to mono Libtayo, but we do think the data is really, really competitive and this is a longer-term game for us.

Thinking about the chemo combo launch, obviously, being 1 of 2 drugs in a very large market is still a pretty great situation. But more specifically, how do you plan to compete with KEYTRUDA? Are you guys going to be speaking towards or marketing to the improvement that you saw in the squamous patient population and numerical improvement? Or how do you expect to compete?

So we've shown and we talk internally here that our clinical data is totally on par with KEYTRUDA. While we understand that a KEYTRUDA is the entrenched player, obviously, we knew that going in, we believe and we hear that physicians want to have a choice in their treatment paradigm. As you mentioned, there are some differentiating factors for Libtayo, including the fact that the chemo combo trial enrolled both locally advanced in metastatic disease in both squam and non-squam in all PD-L1 levels, and showed benefit across the population. I mean, notably, these enrolled patients represent a more accurate representation of what doctors see in the real world rather than what the studies have included. And probably -- and this is the kicker, probably most important, the Libtayo story is not going to stop with regards to what we currently have. It's part of a much larger oncology strategy that we deem to be foundational. And as we advance bispecs and costims combinations with Libtayo in various cancers, this should, and we're expecting this to represent a meaningful upside to Libtayo's performance on its own above and beyond what we're realizing from mono and what we're going to realize from chemo combo.

It's a great segue into the bispecific pipeline. So -- but it is a very competitive space that I think KOLs would argue still as relatively undifferentiated. So how do you expect to differentiate yourselves from here on out?

So our bispecs, we used VelocImmune and the Bi -- Veloci-Bi platforms, and we make very natural antibody-like bispecifics that have long half-lives and can be given less frequently. We also -- our whole bispecific platform is set up so that you can mix any arm with any arm out of the library and make new combinations without any muss or fuss. It's very, very simple. And so it does give us a large breadth of things to choose from. So for the ones that we've already advanced into the clinic, I think the emerging data suggests that ours are as good or better than the data produced by anybody else with the caveat that none of this is head-to-head data. And so we're trying to pick like patient populations to compare. So we'll see as the data more matures. But hopefully, we're going to get more data and actually some submission soon.

Okay. And on the solid tumor front, what bispecific programs are you most excited about? And when should we expect the next data readouts from those? I believe we should be getting some potentially later this year.

Yes. So we expect to have initial data for the MUC16xCD3, the PSMAxCD28 and the MET X MET, which are really 3 different kinds of bispecs that are all going to be interesting. The MET X MET also, there's an antibody drug conjugate version of that, that's in the clinic, but we're not going to get data for that till next year. But the first 3, we expect data to get released this year.

Just as a follow-up, are ADCs modality that you guys might look to explore more broadly? Obviously, historically, you guys haven't had a lot of ADC programs.

We haven't had them that we've released into the clinic. We've had them that we've explored at Regeneron. And the beauty of the MET X MET molecule is that it's really unique and that it locks -- it pseudo dimerizes MET without actually activating it. So it locks it into a nonactivating position, but it still causes rapid internalization. And so it's the perfect target to stick a -- of toxin on to get it rapidly inside the cell because of the unique mechanism of the molecule. So we're very interested to see how that works out, and it could lead to other programs.

How many different tumor types can you go after with that program?

I don't know the answer, but there are several that are prominent.

Okay. So I wanted to go to Regeneron genetics medicines. It seems to be an increasing focus for Regeneron in partnership with Alnylam, Decibel, Intellia, who just reported positive data, as Bob mentioned. You've listed 10 pre-IND and clinical development programs with another 30-plus in research and candidate selection phase. So I guess, do you expect to put as much effort into this aspect or emerging aspect of the business as you do with oncology? And as we look out to 2030 and beyond, should -- do you expect it to be a similar size?

Tyler, we do. The Regeneron genetics medicine, which we refer to here as RGM. It's been a focus for the past few years internally, but its components are only now becoming clearer, I think, to yourself and the investor base. I mean investors need to understand that in addition to EYLEA, Dupixent in our oncology portfolio, we also have a blossoming genetics medicine business, which we think is going to be best-in-class, and we have best-in-class partners that we're with. So as products have begun to enter the clinic, we've started to highlight this more and more. We did that at a beginning of the year conference where we had a couple of slides, and we talked to it. But we currently will have -- I believe we currently have 3, soon-to-be 4 products in the clinic under this kind of Regeneron genetics medicine heading. Using this public forum, let me give you -- talk about a couple of data points that we have. This year on RGM, we will reporting -- the reporting of the landmark TTR genome editing data in 2021. We just showed a positive data update was provided, but there's more to come, including the start of TTR-CM trial. Our C5 combo program with Alnylam will have 2 Phase III initiations, MG and PNH, and that's all coming. HSD17B13 siRNA initial data from NASH patients expected in mid-2022. The APP siRNA Phase I start for early onset Alzheimer's that some of you may have heard Alnylam talk about it at their Investor Day a couple of weeks ago is going to begin. And probably to round it out, we have the DB-OTO gene therapy, which is hearing loss. We have a Phase I/II start coming in 2022, and that's with Decibel. So we're confident that in combination with our partners, we expect these collaborations to produce numerous new programs that will form another leg of our pipeline. And you should expect that Regeneron with our collaborators will put as much effort into this genetic space as we do oncology. The difference being the 2 is that oncology is probably a little further along, but both represent really exciting opportunities.

Great. Thanks for that. I have a question from the audience, not sure to what extent you can answer it. But basically asking what plans you guys have for rapid responses against other potential pandemic viruses apart from SARS-CoV2.

Well, you know that we had spent a long time actually developing our whole rapid response capability, and we used it against Ebola and against MERS. And those 2 test cases, which turned out -- Ebola is the only approved -- we have the only approved therapeutic for Ebola, which turned out to be hugely successful. And then that really primed our efforts for CoV2. So we have actually a broad-based collaboration with BARDA, with the government to come up with proactively antibodies against the 10 worse viruses that keep them awake at night. And so that activity had been ongoing throughout, but was suspended because of the COVID emergency. So if COVID dies down, we can go back and start working on those things again, and hope we never need to use them.

Very interesting. So to wrap up, I want to ask both of you, Bob and Neil, what aspect of the Regeneron story do you believe is most underappreciated by investors?

Do you want to start, Neil?

Well, I mean, Bob was already talking about RGM, and I think RGM is just now coming on to the scene and all of these new modalities that we're working incredibly collaboratively with the other partner companies, we've learned a huge amount, and we've been working closely together and advancing them together. So I think that is a huge area. And then I think -- I hope there is an appreciation that Regeneron research is like an iceberg. So the part that you guys see above the surface is only the tip of everything that's coming behind. And so I'm sure a lot of people say that, but I hope you at least believe it from us.

And Tyler, I would say one sentence. We have many I/O combinations coming. In our animal mouse models, which in the past have been great predictors, that has us excited on the art of the possible on what we could see as we continue to read out in the second half of this year on these combo trials? And maybe with that, we should conclude.

Yes. We're up on time. Bob and Neil, thank you very much. It's a privilege to have you here. And everyone, have a great day.

Thanks for having us.

Thanks for having us.