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

Good morning, everybody. I'm Chris Schott, diversified biopharma analyst at JPMorgan, and it's my pleasure to be introducing Regeneron this morning. Representing the company, we have the company's cofounders, CEO, Len Schleifer; as well as CSO, George Yancopoulos. 2022 was obviously a very successful year for Regeneron with the company making significant progress across its core drivers as well as its pipeline, and we're very much looking forward to an update as how the team is thinking about 2023 and beyond. So with that, I'll turn it over to Len.

Hello, and good morning to everybody. It is really good to be here face-to-face. There I say virus to virus or variant to variant. I hope not. Anyway, we've got a lot we want to cover. So I'm going to jump right in. I'm Len Schleifer, and this is our forward-looking statement. We'll be making a bunch of forward-looking statements. So check out our filings. There's risks associated with them and read this, please, when you look over raw material. So in 2022, we had 3 imperatives that we had to accomplish. First of all, we had to figure out what is our long-term strategy for EYLEA. And I think when you look at the data with us and when we saw the data and we've disclosed, it really -- 8 milligrams or high dose aflibercept really positions our retinal franchise for prolonged leadership. We're very excited about the data. In fact, the data turned out better than I think our high expectations. The second thing we had to do is continue to demonstrate that DUPIXENT should be the leader and should continue to grow as the leader in type 2 inflammatory or allergic diseases. There was talk about competition with oral JAKs and what have you. But DUPIXENT has really shown its colors in 2022. Let me just emphasize, for example, on the safety side, the FDA has approved our drug for children as -- infants really as young as 6 months. That really speaks a lot to the safety of our product. And it is the leading drug and it's now approved in 5 different type 2 allergic diseases and with more to come. So we accomplished what we wanted to. That's the result of great collaboration and partnership with Sanofi, and that product continues just to drive forward, and I think it has a great future. The third thing we needed to do was really convince ourselves, convince the scientific community and then obviously convince you that our oncology efforts were going to bear fruit. We've had a long-term strategy that George will get into in more detail, but we've always believed that Libtayo was foundational. Our PD-1 inhibitor was foundational to that strategy. So we acquired back half of the rights that we had licensed, so we now owned and control that product. So we could put it together and we were able to put it together with really very promising data, both in the LAG3 space and in a co-stimulatory space which we'll talk a lot about in this presentation. Finally, we have been trying to do our part to serve COVID, as you know, early on, we were able to really through herculean effort, get a monoclonal antibody out there, a cocktail of monoclonal antibodies that could address a treatment paradigm for COVID. We did this in record time, and it worked great for a while. But like many of these antibodies that have come forth, and now all of them, in fact, the virus has out smart at them. The virus has mutated in a way that the antibodies that you might make, even in response to being infected with the virus or you might make in response to a vaccine or you might get from us all seem to be now being evaded by the latest strains that are taking over, such as the XPB. The team has been hard at work and I think we have hit sort of a jackpot antibody that George is going to tell you now about that we're going to push forward very rapidly. So let me get into a little bit more detail on these topics. First of all, EYLEA. Look, EYLEA is just an amazing product. If you think about it, it is growing year-over-year at 8%, and this is more than a decade into the product. We anticipate, based on preliminary numbers for the end of the year, about $6.3 billion in sales in the U.S. We are the category -- branded category leader with a 75% approximate branded market share. The fourth quarter, everybody has been fussing a little bit about this morning. The sales of EYLEA were a little bit less than we expected. This was -- the sales were negatively impacted by a short-term shift to off-label Avastin. This was associated with the temporary closing early in the fourth quarter of a fund that provides patient co-pay assistance. But our recent data has suggested that now that this co-pay assistance is back and available that the shift is reversing. And we ended December, the late part of December with the latest data we have with a consistent 75% branded category share. So EYLEA is doing great. But the long-term future of EYLEA really, we think, is in the data for 8 milligrams. I can tell you now that we did submit in December, the BLA 4 or 8-milligram flipper set. We believe it has the potential to become the next generation standard of care. We're starting to plan for prelaunch efforts anticipating, hopefully, approval sometime in the early second half of this year. If you look at the data, and I must admit we were really surprised. And even the KOLs, the pundits, everybody said, well, if you could get 35% of patients on the 8-milligram dose, 35% if they could maintain intervals at greater than 12 weeks, you could have a really big product. If you look at that, we got 93%. More than 90% of people who were randomized to 8 milligrams were able to maintain dosing intervals of 12 weeks or more in our DME study. That was also true in our AMD study, once again, staggering results compared to the expectations greater than 80% maintaining intervals of greater than 12 weeks. So these data were really quite spectacular. From our perspective, we don't use that word too often, but they really exceeded, I think, everybody's expectations. Just to put it in a little bit of perspective, and these are cross-trial comparisons. We don't have any head-to-head data. So you should take this with some caveat, but the data are what the data are and you can't manufacture data unless you do studies. If you look on the left side of the slide, the green represents patients in our DME study who were maintained on Q16 week dosing through the end of the 48-week experimental period. That's almost 90%. On the right side of the slide, you can see that that's a much smaller number we're able to be maintained on that 16-week interval in the faricimab Vabysmo studies. I mean these are staggering differences, different trial designs. You can hear arguments, well, is it really the drug or you did a different trial, we could or we should or we might or we didn't. But whatever it is, our data, I think, are really resonating well with the experts that we've shown it. It's also true in the AMD study, where once again, nearly 80% maintained 16-week intervals with only a little bit more than 45% in the faricimab studies. So we think these data say that the 8-milligram aflibercept has the potential to become the standard of care. Let me turn to DUPIXENT, which as you know, we're in a collaboration with Sanofi. In the first 9 months of the year, global product sales grew 41%, exceeded $6 billion, we had lots of regulatory progress. We had new approvals. We've got approvals in younger age groups, as I mentioned, as young as 6 months, approvals in eosinophilic esophagitis, prurigo nodularis and we haven't sBLA submitted for chronic spontaneous urticaria. These new approvals represent a big new opportunity. I think if you attend Sanofi's talk, you'll hear a little bit more about what this means. But this is sort of a representation of our journey that we have taken with DUPIXENT, starting with atopic dermatitis, working our way through many opportunities really some -- if you talk to some experts and you say, how do you define a type 2 allergic disease? Some experts will say, well, if it responds to DUPIXENT. So it sort of becomes a standard, if you will, of type 2 allergic diseases. There's an opportunity to expand even further into COPD both with our IL-33 antibody as well as with DUPIXENT, data coming up on DUPIXENT in the not-too-distant future thing has crossed there, significant additional opportunity the product. Let me just close by saying in my part of my remarks is that oncology was something we've made a long-term investment in. We've got finally Libtayo, our foundational drug approved for all people with non-small cell lung cancer in combination with platinum-based chemotherapy. And it's only 1 of 2 antibodies, obviously, Keytruda being the other that's approved, irrespective of the PD-1 expression levels of histology. So we're excited about the possibilities for Libtayo. But what we're most excited about is what Libtayo can do in combination. Let me turn it over to George, who's going to tell you a lot more about this and some of our other work. George?

Thank you, Len. I want to start by reminding everyone of the keys to the Regeneron approach. When we founded the company, coincidentally, it was exactly 35 years ago yesterday. We had the goal of using the power of science and genetics to repeatedly bring new medicines to patients. We soon realized that to do this, we had to revolutionize the technologies that could actually deliver new medicines and in particular, create turnkey therapeutics delivery platforms. Our TRAP platform yielded EYLEA and some more minor successes. We then utilize our proprietary mouse genetics technologies to produce arguably the most valuable platform that produces fully human antibodies, notably our velocity in mouse with a genetically humanized immune system that has delivered 7 FDA approved or authorized medicines, including DUPIXENT that you just heard about and Libtayo. Many people realized how innovative we were in our early years. But what I am proudest of, is that we have not lost our edge in innovation, but instead continually push that edge further and further forward. We have evolved our biologics platforms. So we are now leaders not only in the human antibody arena but with bispecifics and co-stimulatory bispecifics. And over the last few years, we are becoming leaders in genetic medicines, starting with our Regeneron Genetic Center 8 years ago, leading to several successful collaborations in a series of novel experimental turnkey therapeutic modalities from siRNA to CRISPR-based gene knockout and insertion to viral-based gene therapy. We're a very unique and rare company for our size whose innovation is still driving and filling its pipeline. And on this slide, we list significant pipeline advantages during '22. Some of which were just highlighted by Len. I'm going to focus on our advances in immuno-oncology, where we think our pipeline can meaningfully advance the standard care in multiple tumor types. This Slide 18 delineates our immuno-oncology strategy, which is built on our turnkey therapeutics platforms that yield several different classes of therapeutics including our immunobodulating checkpoint inhibitor antibodies, our CD3 bispecifics in our co-stimulatory bispecifics, all of which were prospectively designed to be flexibly combinable in potentially synergistic manners. All these classes were initially validated using our proprietary and highly predictive genetically humanized mouse models. And over the last few years, each class has been individually clinically validated in human trials. Most recently, we have been -- we have seen early clinical confirmation of the power of combinations of these classes and I will focus on some of this recent combination data. Slide 19 lays out our various stage clinical programs, which we have for each class as individual agents as well as some combinations. I'll now focus on recent data for 2 of these specific exciting combinations. Our PSMA by CD28 costim bispecific, combined with cemiplimab and in metastatic castrate-resistant prostate cancer, and fianlimab, our LAG3 antibody in combination with cemiplimab in metastatic melanoma. Starting with our PSMA by CD28 combination. Last August, we announced the first clinical data in metastatic castrate-resistant prostate cancer patients, a tumor considered immunologically cold and largely unresponsive to PD-1 monotherapy. We helped combining costim bispecifics with PD-1 could confer responsiveness to such cold tumors. At the 5 lowest combination doses there was almost no evidence of clinical activity, as you see on the upper right. But at dose level 6 to 8, as seen in the bottom right, we began to see clear evidence of dose-dependent antitumor activity. Importantly, grade 3 or higher immune-related adverse events only occurred in patients with antitumor responses. On Slide 22, we provide some incremental updates on this data. On the left, you can see grafts depicting PSA responses in 3 of the 4 patients at our highest dose. In these patients, the PSA tumor biomarker continued to rise during the 3-week PSMA by CD28 monotherapy leading. And soon after, concomitant administration of Libtayo, you can see dramatic PSA reductions, exactly as we predicted from our clinical studies. In terms of longer-term follow-up, we can report on our first responding patient or our index patient, who also experienced a dramatic reduction in PSA shortly after Libtayo code administration at week 3, as you see for these 3 patients. But this index patient discontinued treatment after 7 weeks due to an immune-related adverse event. The AE has resolved, and he has not received any subsequent [ prostate ] cancer treatment, yet his complete response has endured for over 1.5 years. His PSA remains below detectable levels, his soft tissue lesions disappeared and his most recent bone scans normalizing with a negative PSMA PET scan, a truly remarkable success for a patient previously thought to be terminal and nonresponsive to PD-1 immunotherapy. These very encouraging initial data for our PSMA by CD28 co-stimulatory bispecific provide the first clinical evidence supporting the promise of this exciting and entirely new class of immunotherapies. This slide provides our already extensive list of clinical or near clinical costim bispecifics and their various ongoing or upcoming combination trials. We not only have the ability to combine these with Libtayo, as I just showed for PSMA by CD28, but with our CD3 bispecifics. Such combos have profound activity preclinically. As I already mentioned, we have validated our CD3 bispecifics as individual agents in the clinic, many with first-in-class or best-in-class activity. But we now have the ability to take these to the next level by combining them in a logical manner with our costim bispecifics. Along these lines, we anticipate dosing our first DLBCL lymphoma patient with our CD22 by CD28 costim in combination with our CD20 x CD3 bispecific in the first quarter. We also expect to update on several of these programs this year. On Slide 24, we talk about now another exciting recent advance with combination immunotherapies involving fianlimab, our LAG3 antibody in combination with Libtayo. Last year, we reported that this combination showed consistent and strong efficacy in 2 independent cohorts in melanoma and also promising early activity in an expansion cohort in non-small cell lung cancer. These data supported are initiating a robust clinical development program in melanoma, and we also plan to initiate Phase II/III studies this year in non-small cell lung cancer. This Slide 25 summarizes the combination data I just referred to, which we recently reported at ESMO, showing a second cohort in first-line metastatic melanoma that confirm the promising data we had seen with an earlier cohort. Both cohorts demonstrated overall response rates of over 60% of for the fianlimab/cemiplimab combination with pooled median progression-free survival of 24 months. These data compare very favorably to the FDA approved and now new standard nivolumab-relatlimab combination, which had an ORR of 43% in a median PFS of 10 months. Importantly, the fianlimab-cemiplimab combination had a safety profile that was comparable to anti-PD-1 monotherapy. This Slide 26 lists our upcoming oncology data readouts. As you can see, we have a busy couple of years ahead. In addition to our 2023 data disclosures, we also anticipate BLA submissions for odronextamab in 2 kinds of lymphoma as well as for linvoseltamab in myeloma. Moving now beyond immuno-oncology. And as Len mentioned, we continue to use our antibody technologies to play our part in the COVID pandemic. Despite mass vaccinations, millions of immunocompromised people in the United States alone don't adequately respond and are left vulnerable. Monoclonal antibodies could help protect and treat vulnerable patient populations like these but viral variants have rendered obsolete all previously authorized antibodies, including our REGEN-COV, which had helped so many. We have one of the most sophisticated and largest screening efforts for COVID antibodies, and we believe we have identified a 1 in a million antibody that works very differently to all prior antibodies by binding outside of the immunodominant highly variable RBD and NTD domains. These domains have been the primary site of antibody binding and correspondingly of variant mutations. We have caused the initial vaccines in previous COVID antibody therapies to lose their activities. We hope that by binding outside of these domains to a unique targeted epitope that is highly conserved with over 99.9% conservations since the beginning of the pandemic. It will lower the risk of losing activity against future variance. Importantly, this antibody known as REGN14287 demonstrates high neutralization potency against all known SARS-CoV-2 variants and lineages to date. Activities enabling clinical manufacturing have commenced, and we expect to enter clinical development later this year. Finally, I want to go back to the beginning of my section where I talked about how everything starts with our innovative turnkey therapeutics platforms and how these platforms are helping make us leaders in biologicals and in genetic medicines. Now I want to highlight how these are coming together in a novel way, using biologics to allow specific tissue targeting of genetic medicines. Major limitations of genetics medicines is delivery of the genetic payload to the cells of interest in the body. Currently, systemic delivery is largely limited to the liver and local injection is limited to a couple of sites. Regeneron has invented a proprietary approach that builds on decades of our antibody experience so as to use antibodies to deliver genetic payloads to specifically targeted cells in the body and we have validated this approach in nonhuman primate studies. With this antibody targeting technology for systemic genetic medicine delivery, we believe we can empower the winners in the gene medicine field and become a leader of ourselves in gene medicines by combining these unique targeting approaches with innovative payloads across many disease settings. This slide depicts our current stage pipeline of our approved products as well as over 30 product candidates, all of which were developed with the technology platforms I discussed earlier. As I said, a rare example where our own innovation is driving our pipeline. This indicates upcoming missions, and we have a new wave of submissions coming over the next few years. And these lists are anticipated 2023 milestones, which span ophthalmology, immunology, oncology and immunology. I wanted to close with something core to how we operate our company. Since our founding, Regeneron's mantra has always been doing well by doing good. With the mission of using signs to improve lives, we recognize that acting responsibly is crucial to ensuring that we can continue to deliver new medicines to patients and needs. Along these lines, I'd like to highlight our STEM efforts to engage and inspire the next generation of scientist entrepreneurs. Towards this end, we have committed over $100 million to support the premier high school science competitions that is the Regeneron Science Talent Search and the Regeneron International Science and Engineering Fair. These are the very competitions that got both me and Len and many of our generation our starts and signs. When they were sponsored back by Westinghouse and then Intel, we are sure that they will deliver scientific leaders of the future. With that, I thank you for your attention, and I would like to thank everyone and hand it back to Chris for the Q&A portion of our presentation. Marion our Head of Commercial, will join Len and myself for the question-and-answer period.

Great. Thanks very much all those comments. Maybe just to kick off the Q&A, talk a bit more about EYLEA. I know you had the fourth quarter results out today. You referenced some of the short-term uptake of Avastin. Just elaborate a little bit more what the dynamics are. And I think you referenced in the comments that you're seeing some of this normalized as you're getting later in the quarter, just maybe share a bit more there?

Yes. I mean the sum and substance of it all is that the EYLEA marketplace is sensitive to co-pay assistance. And when that co-pay assistance is not available, patients are forced to go to what has been proven to be an inferior product, unfortunately, which is Avastin compounded. And they're very early in the quarter, there was a disruption in the co-pay assistance. And that quickly moved patients from branded EYLEA to Avastin, that has been resolved. They're fully back in full funding. So I think of this as a sort of a short-term blip, which should not affect the trajectory of the molecule at all. In fact, in late December, our branded market share remained at a consistent 75%. So frankly, I think this is really much to do about an unfortunate transient episode.

Absolutely. And I know you shared some of the data in the presentation. But regarding Vabysmo, share a bit more what you're seeing in the market. I know you've been -- especially when you think about the 8-milligram coming, you've got a very differentiated profile, but you seeing in the near term before that.

Marion is closest to that, so maybe she can comment.

Sure. I'm very happy to, and good morning to everybody. So I would say that the very competitive profile we see with EYLEA is the most important element. And as Len described today, the results of the year, the 8% increase in overall net sales. Now to characterize the competitive dynamic breadth of indications, our visual acuity, safety, efficacy are really what physicians are looking for, probably best to ask my competition about competitive product uptake. But I want to answer your question, we would say it's probably been low, modest at this point. And I think the issue of the sustainability, durability of efficacy is something that perhaps over time will be seen. Where the greatest enthusiasm is really is for our aflibercept 8-milligram product. So we'll look forward to additional clinical discussions, the FDA review and share with all of you that our team is really excited about potentially launching that product later in the year.

In consistent with what Marion said and we're keeping a close eye on this, we're seeing switches back from Vabysmo to EYLEA. So that's an interesting indicator.

Yes. Longer term, in terms of the growth of the overall market, anything changed in your view in terms of the sustainability of growth for the category?

No. I think what's driving the category are demographics, aging of the population as well as increase in diabetes and diabetic eye disease.

Okay. And then just -- I don't -- you're probably not going to share a full commercial strategy at this point, but just help us contextualize once 8 milligrams approved, how we can think about kind of the velocity of conversion away from the 2 milligrams. So just think about kind of later this year into '24?

So I would say we have an amazing opportunity in a market that we know very well with our EYLEA today. And when you start looking at the clinical data for aflibercept 8 milligram, it gives the possibility of patients having the same sort of clinical effect, improvement in their vision and safety but not having as many injections. And for anyone thinking about saving their vision, of course, you would have an injection in your eye. But for everyone who's involved with treatment and the providers who take care of them and the volume of patients coming into offices this ability to extend durability of product. And as we were looking at the data today, getting patients out to 12 weeks or more is really very important. So when we think about strategy and possible product uptake, we're looking at a situation where physicians could look at making a choice for initiation of therapy. They could look a choice for patients already on therapy and how we actually bring strategies into the market remains to be seen. But most important to us is that physicians are able to make the choice that's right for their individual patients and their patient characteristics.

It's a bit funny. We talk about -- we -- you constantly just talk about fewer injections, fewer injections. But what we shouldn't forget is that there have been a ton of injections, nearly 60 million injections since the launch of EYLEA. That's a remarkable testament, I think, to the product safety and efficacy.

So just to sum up on this. It seems like we had a blip in the quarter, kind of thinking out to next year, that normalizes and just kind of all speed ahead watching for the 8 milligrams. Is that a fair way to think about it?

That's a fair way to think about.

Okay. Pivoting over then to DUPIXENT. You've got a growing set of indications. Maybe just talk a bit about what you see as the biggest opportunities for growth in that asset as we think about the suite of areas you can go with this.

I'm happy to start. So I would say when we think about DUPIXENT first, think about the existing indications, think about atopic dermatitis, where even today, we haven't even begun to get into the full potential patients who could benefit from this transformational therapy. So think of adults, think of adolescents and think of our youngest patients in the more recent indication we launched for a little on 6 months and above. Which frankly is really important to the treatment atopic dermatitis because for all patients, it's an element of reassuring everyone of the safety, coupled with the efficacy of the product. And obviously, beyond atopic dermatitis, patients sometimes are troubled by more than 1 type 2 allergic disease. So that same atopic dermatitis patient might have asthma. They may have other type 2 conditions. So it's a really important element of the DUPIXENT profile. But then to your question of future growth, it is kind of a land of riches for the commercial person and my commercial team because even in this past year, recently, we launched eosinophilic esophagitis that added in a population, a very important population of about just in the U.S., about 50,000 patients. We also launched for prurigo nodularis. That was a population in the U.S. of another 75,000 patients. And the data goes on with indications coming this year. We're obviously excited about all the indications, but COPD is probably one that could have a remarkable impact on patient opportunity and making a different [ situations ] struggling with COPD. That population is about 500,000 in the U.S.