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

Great. Good morning. Thanks, everyone, for joining us. Really pleased to have the Regeneron team with us. We have Bob Landry, CFO; and we have Marion McCourt, Head of Commercial; and Ryan Crowe, Investor Relations. With that, Ryan, I'm going to turn it over to you.

Thanks Salveen. Great to be here. Just wanted to remind everyone that today's presentation will include forward-looking statements about Regeneron and actual results may differ materially from those presented in those forward-looking statements. A full recital of risks and uncertainties associated with Regeneron can be found in our SEC filings located on our website. With that, over to Salveen.

Salveen, I was going to do some just introductory comments, kind of fill people in on where we've been in the first half of the year. As you may know, we have a lot of second half catalyst. We'll get into all that with Q&A between Marion, myself and Ryan. So it seems like ages ago, but we -- as you may know, we had a very strong first quarter. We issued in early May. I believe we were kind of revenue growth of 17%, back out with REGEN-COV sales that we had in 2021, we would have been 25%, bottom line with 16%. Our core products, EYLEA, again, never took a price increase. We did 13% in Q1 year-over-year. Total EYLEA Global was 11%, and then DUPIXENT continues to do fantastic and I'm sure we'll get into a lot of commentary there, where it did 43% year-over-year. As you know, we partner that with our alliance partner, Sanofi. With regards to the pipeline. So we've had a bunch of recent approvals, particularly with DUPIXENT. And what we like about them is they're all kind of coming early particularly EoE, which came 2 months early. So we did get approval for DUPIXENT within the EoE indication that was roughly about a month ago. And we just got moderate to severe AD for peds. Again, these are the 6-month old to 5 years in age. And as you know, we're going after kind of age group by age group by age group by age group, and similar to that, about 1.5 months or 2 months ago within the EU, we got asthma approval in DUPIXENT for the 6- to 11-year olds. So again, I look at it as kind of peeling the onion with regards to more and more treatable patients that are getting into kind of the paradigm here. We Have our Libtayo-chemo combo coming up September 19 PDUFA date, which is very exciting. And we'll probably get into a lot here is the -- we announced Phase II data with regards to EYLEA high-dose of aflibercept 8 mg. So I'm sure we'll get into that. We do have 2 important Phase III readouts coming out in the second half of the year. From a capital allocation point of view, we did end up buying Checkmate Pharmaceuticals about a month ago, which for the 30 years that we've been in existence, actually going out and buying a company on the Nasdaq. It's a little bit out of character and we can get into some of that. And we also recently signed -- we're basically taking back the remaining 50% of Libtayo worldwide that we did not otherwise own. So we entered into a contract with Sanofi. We had a specific Investor Day a couple of weeks ago, regarding that. And finally, before I hand it back to Salveen with regards to catalyst, so a lot of second half catalyst. I mentioned EYLEA 8 mg coming probably more in the September, October time frame. And then we have a lot on IO, whether it be MUC16xCD3. We have our MET X MET. We have our PSMAxCD28, which will give people a glimpse on kind of the Signal 2 coasting that we've been talking about. And we have LAG3 readouts coming. I think the first one, maybe in neoadjuvant breast cancer as part of the I-SPY trial that's being done by a third-party for us. So there is a lot happening within the walls of Tarrytown. So Salveen with that, I will hand it over to you for Q&A.

Maybe we'll just start with some big picture questions before we go into the pipeline. So BD, 2 questions here. Does the acquisition of Checkmate signal a change in how you're thinking on your strategy there going forward? And then just talk about the -- maybe also talk about the Libtayo acquisition here for the remaining stake and what that means for your IO strategy? And the importance you're placing there and when we could start to see value from that effort?

Sure. So the first question, does it change our approach, kind of I would say no. I mean our capital allocation policy is pretty clear. First and foremost, we invest in ourselves. Organically, we have a great return on invested capital, and we're going to continue to do that and make sure that's fully funded. From the BD side, and I think Checkmate kind of checks the box and help on intended not only did we get an asset that's working in this by [ dupilumab ], but there's also a little bit of technology play in that. So Salveen, we're still very much into technology and modalities with kind of Intellia and Alnylam being the perfect example in terms of getting CRISPR and siRNA technology. As our Regeneron Genetics Center continues to be prolific in spinning out targets, all the targets are not always set to be cured by antibody treatment. So therefore, we're going to have to go after other modalities and technologies. And that's what we did, and that's what we're going to continue to do. With regards to Sanofi and the IO, so I won't get into the pure economics on it, but big sizable transaction for Regeneron. And really, we're looking at it as 3 things. The first thing is to continue to optimize what we currently have, and Marion's team is doing a very good job on that. And whether that be basal cell or CSCC, where I believe we're leaders in both of those indications. And then as I mentioned, we are in mono non-small cell lung, but we are looking for approval in September with regards to chemo combo. So goal number 1 is to continue to optimize it. And we're also -- we have a ton of combinations coming, right? So we felt that by buying back the remaining economics from Sanofi is that we will get -- we'll be able to realize, obviously, more profits on all the IO combinations that are coming. We currently have, I think, 20-plus Libtayo plus some other IO in the clinic as we currently speak. And we do have a high conviction that we are going to get success out of that pipeline. I can't specifically pick the ones. It's going to be X, Y or Z, but again, we wouldn't do that transaction unless we had high conviction with regards to it. And then third thing and probably a byproduct is -- this is going to get us into the global arena. Now again, Marion and myself will be selective with regards to where we go, where it makes sense, but it will allow us to kind of get our footprint out there. As you may know, we've done that recently with regards to the co-commercialization of DUPIXENT within certain international markets, this will actually get us into a larger clinical regulatory commercial footprint ex-U.S. as kind of keys to the transaction.

Can you frame for us how you're thinking about drug pricing developments just given the increased focus on that recently?

Yes, that's. Salveen, I think the word that's out on the street is that it's been dormant for a while. And I think that what's coming back seems to be kind of unappreciated. Now again, our investor base in the health care companies that are out there have already enough to think about. But Senate majority leader and Senator, Joe Manchin, I mean they are having discussions with regards to what will build back better look like? Will it be in a lesser form -- but it looks as if that's getting a little bit of steam. And again, I don't need to tell the audience that all of that resonates really well in the poles. And certainly, with the midterm elections coming up, the Democrats will be looking for wins that can be. And so to the extent, that they can kind of get this back on track with the willingness of Senator Joe Manchin, having a scaled down, Build Back Better law, but tying into it the climate issues and a budget deficits and the other things that are going to go with it. With regards to Regeneron stance, certainly, people know, I think we have the second largest Part B drug out there currently right now. The Build Back Better rule that came, it had a lot of nuances that were really tough to interpret. So I'm not going to stand here and kind of predict with regards to how we think it's going to impact Regeneron. I will say Regeneron as a company, and this has always been kind of founder led and through the Board led, the goal is to make sure that from a medical reimbursement that obviously those type patients have the lowest amount of out-of-pockets they can have. But at the same time, you need to continue to incentivize innovation. So that's kind of the platform that we always and have strongly believe in going forward and Salveen, we'll see what comes back on this kind of modified smaller Build Back Better Act.

So let's move to EYLEA. Just given the recent launch of [indiscernible] and the upcoming launch of biosimilars in July and Lucentis as well with the biosimilar incentives. Could you just give us an overview of the your, I guess, the current and future competitive dynamics across the VEGF category?

Sure. Happy to, Salveen. And I'll start off with reminding everybody that EYLEA has been in a competitive market for years now with low-cost alternative, branded competition. You no doubt recall and Bob just mentioned our first quarter results that were very strong for EYLEA. Certainly, we are the standard of care, I would even say, gold standard of care worldwide, we have close to or actually over now 50 million injections of EYLEA. I mentioned all this backdrop because there's a tremendous amount of experience with EYLEA in the marketplace. There is breadth of dosing, there's ability to treat and extend. There's confirmed safety, which we've seen now so many products, where efficacy or safety have not panned out either in the real-world setting or in some of the clinical evaluations that are taking place, in fact, being to your point, we saw just in the last 2 weeks, a couple of the products that potential or potentially biosimilar candidates to Lucentis have been delayed. So we'll continue to work very hard on our positioning commercially and clinically and from a study standpoint, with EYLEA. We have great understanding of the marketplace and ability to help in service and education to our customers. As we look to the future, we certainly have great aspiration for our own aflibercept 8-milligram product, which we think has the potential. And of course, we're awaiting additional Phase III data results later this year, but potentially to have all the advantages of EYLEA and offer safety, the clinical efficacy, but also the ability to treat and extend to even longer dosing intervals. I'd remind everybody today with EYLEA because we're living in the market as it exists right now that with treat and extend, we do have patients, obviously, that started 4 weeks, go up to 8 weeks often and sometimes in their second year of treatment going out to 12 weeks as well. But we'll stay very close to the competitive environment. I'll finish up my answer with just a couple of numbers for you. When you look at overall market share today in the U.S. marketplace, EYLEA has about half the overall anti-VEGF category market share. And then in the branded category, we are about 75% of the market.

And how is [indiscernible] launch impacting EYLEA at this point? Do you have any clarity there?

EYLEA's performance is very, very strong. I always think it's best for my competitors, all of whom I respect and think make us better as an organization. But I would ask probably to them, it's probably very early days in their launch.

Could you walk us through what a successful readout would look like for the high-dose data that's coming in the second half?

Sure. Let me take that one. We're running 2 Phase III studies, PHOTON, which is in diabetic macular edema patients. That's the study that Regeneron is running. And then PULSAR, which is the wet AMD study that Bayer, our international commercialization partner, is running. It's evaluating 8-milligram aflibercept dosed at every 12 weeks and every 16 weeks against EYLEA's current dosing regimen, which is QA. All of these are after a loading dose series. The primary endpoint is noninferiority on change from baseline and best corrected visual acuity at week 48. And essentially, we're looking for non-inferiority there, if not better. So we -- the goal is somewhat simple. It's -- let's maintain, if not improve, vision and anatomical control while maintaining efficacy, but with fewer injections. That's the goal of the study and, of course, maintaining efficacy is also critically important given this deal has seen as safety issues in the past. So we're very optimistic about it and believe that we have a good likelihood of success.

Could you speak to that optimism? What have you learned from the Phase II data that reads through here? And maybe you could talk about the study changes as well?

Well, so CANDELA was the Phase II study that we ran, and it was -- it evaluated 8-milligram aflibercept in wet AMD patients dosed up to Q12, every 12 weeks versus 2 milligrams of aflibercept, the EYLEA current dose. And we saw a very encouraging efficacy there. I think the average number of letter improvement for patients on high dose was 8 versus about 5 for patients on 2 milligrams. The -- about half of 8-milligram patients improved by 10 or more letters versus only about 1/3 for the 2-milligram patients. There's also better drying in the macula for patients on 8 milligrams versus 2. So all of the kind of efficacy endpoints trended in the right direction. And again, because it's power for noninferiority, you don't even need to show numerical improvement. You just need to be as good as. On safety, we saw almost exact very consistent event rates and really no concerns. There are no new signals as well. So that certainly gives us a lot of optimism and hope for a positive result in Phase III.

And I guess, any differences, in particular when you think about the stringency for the PRN period?

Yes, there is some rescue differences in between the Phase II and the Phase III design. For Phase II CANDELA, there were assessments every 4 weeks after week 16 and patients could be dosed as low as Q4 in that study. In Phase III, we will be evaluating patients in the high-dose arms every 8 weeks. And that's as frequent as dosing that can be in the high dose arms.

What are the key risks here in your to not being a successful trial?

I mean every trial has its risks. I think probably the one that we look at and say, it's a wildcard is the EYLEA 2-milligram performance. There's been a range of outcomes in the various studies that have been performed with it as the control. So you never can -- now we made -- certainly made assumptions about how we think it will perform, but I'd say, that's probably one of the areas we'll look at when we first get this readout. I don't think it's unique to the study design or anything like that. This is something that happens across clinical trials of all types, but it's 1 that we certainly will be watching.

Ryan, just going back to what's successful, how do you think about the data set in the context of Roche showing about 80% of eligible patients could extend -- they could extend treatment out to 3 months. Does that become the bar for you?

The bar. I think it's going to be very hard to make the cross-trial comparison simply because of study design. The faricimab studies, essentially were evaluated for disease control at weeks 20 and 24, and you were assigned to a treatment group based on what your assessment was at that time. There were no subsequent vision assessments through the endpoint, through the primary endpoint, which was a different endpoint from ours as well. But basically, patients may have been suboptimally treated in some of those longer duration arms and they wouldn't have been able to be rescued because there are no rescues allowed in those studies. So I think that's probably one important point to make on the design differences. The second -- again, to the primary endpoint in the faricimab studies was the average across -- average in BCVA across weeks 40, 44 and 48 for the 4 treatment arms. And I would just note that within that 3-week window or 3-, 4-week window, there were actually 2 VEGF troughs for 2-milligram EYLEA versus only 1 VEGF trough for all 3 faricimab arm. So you were further disadvantaging EYLEA without the opportunity to extend. So I think there's just some trial design differences that are going to make kind of getting to that headline number, noncomparable for us.

And just finally here, where do you stand on the IP extension?

IP for 2-milligram or 8 or both?

For both.

2 milligrams, we're still on track for pediatric extension. We're going to read out the study in retinopathy of prematurity fairly soon, and we need to submit that data by end of summer in order to qualify for the 6-month pediatric exclusivity, which would extend our regulatory exclusivity by 6 months from what it is currently at November 2023 to May of 2024. So on track for that. Again, the study doesn't need to be positive, but we need to submit the data. On 8 milligram, I think we've been pretty clear on this that we don't expect a new composition of matter patent. This is still aflibercept, but we do believe we'll be able to file it under a new BLA, which does provide us some commercial flexibility and opportunity, which I think is very important.

Right. So moving to the oncology vertical. We're going to see a slew of bispecific datasets coming in the second half. Help us understand why we should be optimistic about the outlook here for these programs and what you're most excited about?

I think -- so just to back up, obviously, Bob mentioned the chemo-combo PDUFA, which is in September. We're very excited to get it into the much larger space within lung our CD20xCD3, odronextamab, we should have potentially pivotal data reading out in the second half of this year. That certainly puts us in the game, I think. And from what we have seen from the revised loading dose regimen, we think that the safety profile will stack up very well and the early data also stacks up well. So those are kind of the early -- but looking even earlier than that, I think we're talking later this year, having presentations for our MUC16xCD3, our PSMAxCD28 bispecific as well as our MET x MET in each of those we've been in dose escalation and dose expansion. I think with PSMA, we certainly had to go very slow based on the history of that class. And probably the early cohorts were subtherapeutically dosed, just to ensure we weren't going to have an event like we saw in some of the other earlier attempts in this category. With MET X MET, this is our biparatopic antibody, which is going to -- hits 2 epitopes on the same receptor and hopefully amplifies uptake in internalization and therefore, treatment effect. We've seen early signals, they're very promising. And obviously, we've been -- we're looking going forward to put in that data out. And then MUC16xCD3 is in advanced ovarian cancer highly refractory population. Again, we've seen early signals that look interesting. And any degree of a signal in a very late line will be promising in our view.

DUPIXENT, you had a recent approval and you're going to have another PDUFA coming up, maybe frame for us how to think about the opportunities in these frontier indications? And where you see the drug going? And obviously, you've got the large indication of COPD, which is not in guidance.

Right. Thanks, Salveen. Yes. So it's been very exciting for DUPIXENT for 5 years now with incremental indications in the last couple of weeks for no exception. We received 2 months early approval for eosinophilic esophagitis from the FDA. Our field teams are busily launching that with allergists and gastroenterologists. And I'll just share anecdotally with you, the reports have been tremendous. It's a population that has been treated for EoE in the U.S. is about 48,000, 50,000 patients, but their physicians, their specialists have had so little to offer them. We're hearing stories very quickly coming back in that these patients that have been in so difficult and had such tremendous challenges going into ERs, not being able to eat food normally that I have to say for all of us at Regeneron, it's a tremendous indication to be launching. That's a top of also fairly recently receiving the atopic dermatitis indication approval from FDA for our youngest patients, 6 months to 5 years of age. Certainly, the efficacy of DUPIXENT for atopic dermatitis has been well established now over years in the adult population and adolescent population children as young as 6, but the tremendous unmet need in these youngest patients is something that we're very, very pleased to bring to market. And certainly, there's been an awful lot of enthusiasm. It's kind of the big picture view I'll remind in atopic dermatitis even in the doubles, we've probably only tapped into about 8%, 9% of the unmet need that exists. We're also making a lot of progress with biologic asthma patients where DUPIXENT is very quickly becoming a -- or the lead product in terms of new scripts for asthma patients. We attribute that to the efficacy, the ease of use of the product. And also this added ingredient of DUPIXENT being the product that impacts Type 2 disease broadly. So it's not uncommon. For example, that patient with a eosinophilic esophagitis also has a bit of asthma or atopic dermatitis similarly in biologic asthma patients, they sometimes have atopic dermatitis. We work with each specialist group on the indication that's most relevant to them and that patients come into their practice because of that indication, but this holistic impact on type 2 disease is also very important. We have a lot of work to do with DUPIXENT. The thought leaders consider our product in our indications to be first and best in category, and we have a lot of work to do on the global scale to continue to bring the benefits of DUPIXENT to the right patients and specialists.

And then atopic dermatitis, your partner talked about going to over 25% penetration in the adult population and then in adolescents heading towards over 10%, just maybe walk us through your efforts there to kind of attain that secretion rate.

We -- as you all know, we tend to give our guidance in a different way at Regeneron, what I can assure you of is we have tremendous excitement, enthusiasm and ambition for DUPIXENT and certainly applaud our partners with some of the numbers they assigned to things, but I think for us, the element is each day, we would do everything we can to reach the right physicians and make sure that patients who are in need of DUPIXENT for their atopic dermatitis, all age groups now and eosinophilic esophagitis, asthma, nasal polyps, all these patients are suffering with such difficult chronic Type 2 conditions, but there's tremendous potential. Five years in, we're only just starting to reach the potential of the product. We have a long way to go. We were -- I have to mention on future indications, we were really excited to learn recently, too, that we potentially will have an FDA approval for the indication of prurigo nodularis in the September-ish time frame is the possible approval date. So we have many indications that we're just launching. And then we also had as you mentioned, the indications that we've been working on for some time and more and more patients are coming into the treatment continuum as we're seeing the benefits of DUPIXENT.

Bob, back to you. You talked about the multiple partnerships that you have out there and you highlighted Intellia and Regeneron. What do you think the street is missing in ascribing value to you for all these partnerships? And maybe just speak to the breadth of what you have out there?

Yes. Salveen, I will tell you I mean I'm personally a little disappointed and maybe it's us in terms of maybe not doing a good enough job in terms of the world is like an iceberg. I mean we show the investors what we want to see at the top of the iceberg, but yet they don't see what's underneath the water in terms of how voluminous and what we have going on, and I think our efforts in Regeneron Genetics medicine. Maybe a little bit towards that, and we're doing our best to kind of enlighten everybody on just how big this can get in the breadth in just the different technologies and modalities we have. Now, I think Intellia and Alnylam are 2 perfect examples. And again, I think investors will get more clarity as kind of the year goes through. Earlier, I talked about what we have coming certainly in partnership with Alnylam and Intellia. I mean, Alnylam has their first kind of patient readout in HSD, which as you may remember, is a Regeneron Genetics target that was identified and it's in NASH. And again, it's very exciting. We've had this kind of target identified, identified and identified and to finally see the fruition of the efforts between us and Alnylam is going to be exciting, and that's kind of expect that maybe kind of late summer, late third quarter in terms of where investors will get a peak. And continuing to stay on Alnylam is we're in joint efforts. And in fact, Alnylam is leading in this kind of early onset Alzheimer's disease. You know this EOAD and the application we're going for this APP, which again, it's very exciting, and it's going to really kind of open the window with regards to can we use an siRNA bio Alnylam's technology jointly? And can we kind of target proteins to levels that will target protein associated with CNS? Can we get that to a lower level? And then what does that mean for all the other kind of genetically defined neurodegenerative diseases that may be in the class. So not only will it be about specifically APP, but I personally think it's going to be a little bit of a proof of concept in terms of using this new technology to go after CNS. And as you may know, we have an arrangement with Alnylam on CNS targets specifically with APP being the first one that is kind of coming to fruition. And now with Intellia they're presenting, I believe, at EASL on June 24, and they're going to show you more information with regards to their ATTR. I think the first one is in PN, but obviously, they've started the CM indication on that. And they're going to show, we're going to show, hopefully, longer duration, and they're going to talk a little bit about their fixed dosing approach that, that they've been talking about. So Salveen, all very exciting. And again, I'm waiting for investors maybe to see a bigger part of the iceberg that we currently -- that's currently visible.

Maybe just another question here on your COVID effort and where that stands with the next-generation work?

Yes, COVID it's quiet to investors and to the public with regards to what we're doing. But rest assured, we are still working very, very hard putting together our kind of antibody library that I'll call that we can find that's effective against not only Delta, which was the original REGEN-COV, as you may remember, but can also go against all the Omnicron variants that are coming. And then any other variance of concern. So we still have kind of the same team that's working away at this. And again, just because we're not overly vocal on it, we do think that this could be a business platform for Regeneron going forward. We do think that the endemic stage will be here for a while. And although REGEN-COV was proven and effective against Omnicron strings. We continue to see what we can develop because we do think being an antibody company that this is kind of in our wheelhouse. Vaccines are fine in the antivirals, I mean that's all fine. Kudos to the manufacturers and what they've been able to do to the population. But we strongly believe that monoclonal antibodies will have some place to play in this field. The FDA, it hasn't been an easy path, right? So we are in first-in-human with certain antibodies as we speak right now. And we're still really working through what is the path forward, particularly with an endemic in which the mutation, the variants continue to mutate. It's hard to kind of keeping up with it from a clinical development from a manufacturing point of view, but our efforts are still in the game for sure.

And lastly, what are you most excited about in the pipeline?

Yes. A lot of, certainly, the unveiling of IO is going to be interesting. We've talked a lot. We've had things in the clinic for a while. I think our investor base has been patient with regards to what's coming. There's a lot coming in the second half of the year, whether it be the kind of LAG3 melanoma data that can be shown or the PSMA, as Ryan was referring to MUC16. We're going to be filing CD20xCD3 in the clinic, hopefully by the end of this year in [ FLL ] and in diffuse large B-cell lymphoma. I mean, there was just a lot on the table as it pertains to IO. I think investors, for the most part, they can understand with regards to the pillars on EYLEA and DUPIXENT. But with regards to putting our efforts into this third pillar on IO, it's going to be interesting to kind of unveil what we truly have there in make investors aware of just a breadth of the IO combinations.

Thank you very much.

Thanks, Salveen.

Thank you, Salveen.

Thank you for invitation.