Regeneron Pharmaceuticals Inc (REGN) — Q4 2016 Transcript

Thank you, and good morning, everybody. I hope you are all staying safe if you are on the East Coast. Welcome to the Regeneron Pharmaceuticals fourth quarter and full year 2016 conference call. An archive of this webcast will be available on our website under Events and Presentations for 30 days. Joining me on the call today are: Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Founding Scientist, President and Chief Scientific Officer; Bob Terifay, Executive Vice President, Commercial; and Bob Landry, Chief Financial Officer. After our prepared remarks, we will open the call for Q&A. I would also like to remind you that remarks made on this call include forward-looking statements about Regeneron. Such statements may include, but are not limited to, those related to Regeneron and its products, product candidate and businesses, sales and expense forecasts, financial forecasts, development programs, collaborations, finances, regulatory matters, coverage and reimbursement matters, intellectual property, litigation matters and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in such statements. A more complete description of these and other material risks can be found in Regeneron’s filings with the United States Securities and Exchange Commission or SEC, including its Form 10-Q for the year ended December 31, 2016, which was filed with the SEC later today. Regeneron does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed on today’s call. Information regarding our use of non-GAAP financial measures and a reconciliation of these measures to GAAP are available in our financial results press release, which can be accessed on our website at www.regeneron.com. Once our call concludes, Bob Landry and the IR team will be available to answer further questions. With that, let me turn the call over to our President and Chief Executive Officer, Dr. Len Schleifer.

Thank you, Michael. Very good morning to everyone, and I echo Michael’s sentiment here on the East Coast. I hope you are all safe from the storm. 2016 was an important and eventful year for Regeneron and one where we achieved significant progress on the commercial, research and development fronts. We currently have eight late-stage Phase III programs and a total of 16 product candidates in clinical development. Our science-driven approach has remained unchanged. As we look at 2017, we remain confident that we are well-positioned to reap the benefits of our long-standing scientific endeavors. We expect new major drug approvals in the United States this year. First, we are anticipating regulatory action in the United States at the end of March for dupilumab, or Dupixent, our breakthrough IL-4, IL-13 blocker for moderate to severe atopic dermatitis. We believe that, if approved, Dupixent will change the way doctors are able to treat their moderate to severe atopic dermatitis patients. Secondly, we expect regulatory action by the FDA for sarilumab, our IL-6 receptor antibody for the treatment of rheumatoid arthritis. We are happy to report that just last week sarilumab, now also known by its brand name Kevzara, was approved by Health Canada. Strong preclinical data as well as our positive findings from our studies in atopic dermatitis, asthma and nasal polyps indicate that IL-4 and IL-13 signaling is a key pathway driving many allergic conditions and diseases. You will hear further details from George about our dupilumab development program. We are keenly focused on ensuring that the anticipated Dupixent launch in the atopic dermatitis indication is a success by all metrics. I personally, in addition to the teams at Regeneron and Sanofi, have engaged in fruitful discussions with payers, and we remain optimistic that Dupixent, the breakthrough product, will receive good formulary coverage when approved for the treatment of moderate to severe atopic dermatitis. We will also be working rapidly to advance dupilumab in asthma. If the readout from the ongoing Phase III study is positive, we anticipate making a U.S. regulatory submission in the fourth quarter of this year. Combined with our other ongoing and planned studies of dupilumab in allergic diseases, we believe that this product candidate has the potential to gain approval in multiple allergic disorders. EYLEA remains an important product for the company, and we continue to defend and extend the franchise by focusing on new indications like nonproliferative diabetic retinopathy and combination studies with Ang2. Bob Terifay will discuss this further on the call. For the full year 2017, we expect U.S. EYLEA net sales year-over-year percentage growth to be in the single digits. As we further diversify our product-related revenue streams, we do not plan to provide EYLEA product sales guidance after 2017. Turning to Praluent. This has been a terrific week for patients with high LDL cholesterol. First, the LDL hypothesis was validated for PCSK9 inhibitors with positive outcomes data reported by a competitor. We look forward to completing our own outcome study towards the end of this year. Second, just yesterday evening, we were granted our request for a stay of the injunction pending the appeal. Praluent will continue to be available to patients in the United States, meaning that patients and doctors will continue to be able to choose the best PCSK9 inhibitor for their needs, including the use of a low 75 milligram option which only Praluent provides. We remain committed to ensuring that patients who can benefit from Praluent will continue to have access to this innovative therapy. As for the ongoing litigation, we strongly believe that the controlling law and facts support our position that Amgen's asserted patent claims are invalid, and we look forward to pursuing our appeal over the coming months. Finally, before I turn this over to George, I want to note that we have started to recognize students in our first year as sponsors of the 75-year-old Science Talent Search, the most prestigious high-school talent competition. As many of you know, this program was previously sponsored by Intel and before that by Westinghouse. Over the last few weeks, we were excited to recognize our first group of 300 Regeneron Science Talent Search Scholars and 40 finalists. We believe programs like this are essential to ensuring a strong science talent pipeline for generations to come. With that, I’d like to turn the call over to George.

Thank you, Len, and a very good morning to everyone who has joined us today. I’d like to begin with Dupixent, our IL-4, IL-13 blocker. I share Len’s excitement about this molecule and its potential use, not only in moderate to severe atopic dermatitis, but also in various other allergic conditions. As Len mentioned, Dupixent is on track towards the end of March for an expected regulatory approval in the United States for moderate to severe atopic dermatitis in adults. You will hear more about our ongoing launch preparations from Bob Terifay. In the fourth quarter of 2016, the marketing authorization application for Dupixent in this indication was accepted for review by the European Medicines Agency or the EMA. Dupixent has received breakthrough designation in both the adult and pediatric atopic dermatitis application. In the latter, we expect to initiate a Phase III study in adolescent patients between ages of 12 and 17 in the first quarter and in the second quarter another Phase III study in younger patients between the ages of six and 11. Scientific evidence indicates that the IL-4/13 pathway is essential not just in atopic dermatitis but also in a wide spectrum of allergic diseases. With that hypothesis, we're exploring the use of dupilumab in multiple allergic conditions. Let me begin with asthma, where positive data from our previously reported first pivotal study of dupilumab in persistent uncontrolled asthma, which has also been published in the New England Journal of Medicine, demonstrated that in all patients, regardless of their allergic classification, treatment with dupilumab resulted in improvement in both lung function as measured in FEV1 and exacerbations. In the overall population, patients treated with the 300 milligram every other week dose had a 15% improvement over placebo in the FEV1 measure and a 75% reduction in exacerbations. The most common adverse event associated with treatment in this study was injection site reaction. In our opinion, efficacy in all comers rather than only in those with allergic classifications could be an important differentiating feature of the product profile, particularly in competitive indications such as asthma. As a reminder, the approved biologics in asthma are indicated only for patients with allergic classification. Our large second pivotal study LIBERTY ASTHMA QUEST, a Phase III study in adults and adolescent patients with uncontrolled persistent asthma is fully enrolled. We expect to report topline data later this year with a regulatory submission to follow in the fourth quarter. Additionally, in the first quarter of 2017, we expect to initiate a Phase 3 study of uncontrolled persistent asthma in pediatric patients between the ages of 6 and 11. Following quickly behind the atopic dermatitis and asthma indications are additional indications for dupilumab. These include nasal polyps, where we're currently enrolling patients in two separate Phase 3 studies. The next indication is eosinophilic esophagitis, where we expect to report in the first half of 2017 topline data from our Phase 2 study. We continue to explore the role of dupilumab in new indications and plan to initiate a Phase 2 study of dupilumab in food allergies in the second half of 2017. We are pleased with the advances in our late-stage pipeline. Just last week's sarilumab, our IL-6 receptor antibody now known as Kevzara, was approved by Health Canada for the treatment of rheumatoid arthritis. Kevzara is fill-and-finish at Sanofi's facility in Le Trait, France. As we’ve mentioned before, this facility is being inspected this quarter and subject to a successful completion of the inspection, we plan to resubmit the BLA for sarilumab to the FDA in the first quarter with an expected two-month review cycle. Our Phase 3 NGF antibody program with fasinumab is also advancing, and we, along with our collaborator, Teva, look forward to initiating additional Phase III studies in both osteoarthritis pain as well as the chronic lower back pain indication. REGN2222, our program for respiratory syncytial virus is also moving ahead. We expect the ongoing study to be completed by the end of the year. Moving now to EYLEA. We are conducting two Phase III studies in EYLEA in combination with nesvacumab, our antibody to Ang2. Both these studies, one each in wet AMD and in DME, are fully enrolled. The efficacy and safety data from both these studies will be analyzed at 36 weeks. While there is greater preclinical support for Ang2 compared to our PDGF program, which we are no longer pursuing as we’ve mentioned before, EYLEA sets a very high bar for efficacy in these disease indications. We look forward to seeing the data from our Phase II studies with Ang2 in the second half of this year. PANORAMA, our Phase III study of EYLEA in patients with nonproliferative diabetic retinopathy without diabetic macular edema, continues to enroll patients. Turning now to Praluent, our PCSK9 antibody for lowering LDL cholesterol. The ODYSSEY OUTCOMES trial, our 18,000-patient cardiovascular outcome study of Praluent, is ongoing. This is an event-driven study, and we expect it to be completed by the end of 2017. We expect that positive outcomes data will increase the uptake of PCSK9 antibodies in appropriate patients. We are pleased with the progress that we’re making with our immuno-oncology portfolio. REGN2810, our PD-1 antibody, continues to advance, and we are currently enrolling patients in a potentially pivotal study in cutaneous squamous cell carcinoma. In addition, we also plan to initiate in the first half of the year a clinical study in basal cell carcinoma. Beyond terminal cancers, we plan to initiate in the first half of the year a clinical study for our PD-1 antibody in non-small cell lung cancer. Our second checkpoint inhibitor, REGN3767, an antibody to LAG3, has also entered the clinic. We will be studying it both as monotherapy as well as in combination with our PD-1 antibody. Let me also update you on the progress of our bispecific platform. Our lead program, CD20 by CD3 antibody, is currently in the clinic both as monotherapy and also in combination with our PD-1 antibody. We believe we now have a dosing schedule for the CD20 by CD3 bispecific antibody and look forward to expanding the number of patients treated with that dosing regimen. Lastly, I am happy to report that REGN2477, our Activin A antibody for the treatment of the rare disease fibrodysplasia ossificans progressive, or FOP, is completing a Phase I study in healthy volunteers. There, we expect to begin a Phase II trial in FOP patients later this year. We also recently initiated a combination Phase I trial in healthy volunteers of Regeneron 2477 with TREVOGRUMAB, our antibody of GDF8 for skeletal muscle diseases. Before I turn over to Bob Terifay, I want to add my congratulations to the 300 Regeneron scholars and 40 Regeneron finalists in the Science Talent Search, but also add congratulations to every high school student who did a science project and applied. These are scientific leaders of the future, who we hope are going to change and save our world. With that, let me turn the call over to Bob Terifay.

Thank you, George, and good morning, everyone. Fourth quarter U.S. EYLEA or aflibercept net sales grew 15% year-over-year. Net U.S. EYLEA sales in the fourth quarter were $858 million and full-year 2016 sales were $3.32 billion. Net ex-U.S. EYLEA sales in the fourth quarter were $496 million, which represents 20% growth year-over-year unadjusted for currency fluctuations. Net ex-U.S. EYLEA full-year 2016 sales were $1.87 billion. In 2016, global net sales of EYLEA exceeded $5 billion. EYLEA is the market leading product among FDA-approved anti-VEGF agents for all of its approved indications in the United States. EYLEA will continue to be a major revenue driver for Regeneron over the years to come. Our quarter-over-quarter EYLEA sales growth has slowed, reflecting normal market dynamics for a more mature product that has been on the market for over five years with no price increase since launch. We continue to focus our promotional efforts on the clinical efficacy and safety of EYLEA and our development efforts on potential new indications and new combinations. The next potential driver for EYLEA growth could be an indication for non-proliferative diabetic retinopathy, which is currently in Phase III development. Our fixed combination program for EYLEA and nesvacumab, our angiopoietin 2 inhibitor is currently in Phase II clinical development. Turning now to Praluent, or alirocumab, as reported by Sanofi, net sales in the fourth quarter were $41 million worldwide, with the U.S. accounting for $33 million of the total. Full year net sales were $116 million with the U.S. accounting for $94 million. We are pleased that the Federal Court has suspended the injunction on Praluent sales, marketing and manufacturing. Therefore, we will continue our efforts to grow Praluent sales and alleviate reimbursement roadblocks. Remember, Praluent is the only PCSK9 inhibitor that offers a low-dose option. Most of our sales are for the low dose 75-milligram dosage form. Outside of the United States, Praluent has been approved in 45 countries. Reimbursement decisions by individual country, region, and institutional pricing and reimbursement authorities are gradually evolving. We are currently preparing for the potential approval and launch of Dupixent or dupilumab with an FDA PDUFA date of March 29, 2017. Sanofi Genzyme and Regeneron have fully hired and trained our field teams. At launch, our field teams will call on 4,500 dermatologists and 1,200 allergists, who currently comprise biologic therapies. These are the physicians who will most likely be comfortable with prescribing a biologic for atopic dermatitis. We estimate that approximately 300,000 atopic dermatitis patients have exhausted all approved therapies and have failed or are unable to tolerate unapproved use of immunosuppressant therapies. We have been working with payers to ensure that these patients have access to treatment. As Len mentioned, our discussions with payers are proceeding well, and we're optimistic that we can work productively to ensure that patients get appropriate and rapid access to this breakthrough product after approval. In anticipation of early demand, we have established a reimbursement access services and patient support center, which will be ready to help patients from day one of launch. Our pre-commercialization efforts have been focused on educating physicians, patients and payers on the unmet medical need in moderate-to-severe uncontrolled atopic dermatitis. It’s devastating impact on patients’ lives and the role of chronic underlying systemic inflammation as etiology. This unbranded education has been provided at major medical meetings through digital media and through print media. Our launch materials and programs are preliminarily prepared pending approval and receipt of our final label. We filed a regulatory application for Dupixent in the EU in the fourth quarter of 2016. Pending a favorable inspection in the first quarter of 2017 of Sanofi’s fill-and-finish facility in Le Trait, France, we intend to quickly re-file our Kevzara or sarilumab BLA with the FDA with the potential approval in the second quarter of 2017. Sanofi Genzyme and Regeneron have hired and trained our field teams who will call on over 6,000 rheumatologists responsible for the vast majority of biologics prescriptions for rheumatoid arthritis. As with Dupixent, we have also been working with payers to ensure that patients have access to Kevzara, and we have established a reimbursement access services and patient support center pending regulatory approval. Our pre-commercialization efforts have been focused on demonstrating the central role of interleukin-6 in rheumatoid arthritis to rheumatologists. Our preparation for a potential launch is in place pending approval and final labeling. Kevzara achieved its first approval in Canada earlier in 2017. The European marketing authorization application, or MAA, for Kevzara is currently under review by the EMA with a potential decision on the application expected in mid-2017. With that, let me turn the call over to our Chief Financial Officer, Bob Landry.

Thanks, Bob, and good morning to everyone. Overall, we delivered solid fourth quarter financial results. In the fourth quarter of 2016, we earned $3.04 per diluted share from non-GAAP net income of $343 million. For the full year 2016, we earned $11.32 per diluted share from non-GAAP net income of $1.32 billion. This represents a year-over-year increase in non-GAAP diluted EPS and net income of 36% and 37%, respectively, for the fourth quarter and a year-over-year increase in non-GAAP diluted EPS and net income of 39% and 40%, respectively, for the full-year 2016. Regeneron’s fourth quarter and full year 2016 non-GAAP net income primarily excludes non-cash share-based compensation expense and includes the income tax effect of non-GAAP reconciling items. A full reconciliation of GAAP to non-GAAP earnings is set forth in our earnings release. All of the financial guidance mentioned on this call today and in our fourth quarter 2016 earnings release issued earlier this morning assumes that Praluent will remain on the market throughout 2017. Total revenues in the fourth quarter of 2016 were $1.23 billion and $4.86 billion for the full year 2016, which represented year-over-year growth of 12% for the three months and 18% for the full year. Net product sales were $863 million in the fourth quarter of 2016 and $3.34 billion for the full year 2016 compared to $750 million in the fourth quarter of 2015 and $2.69 billion for the full year of 2015. EYLEA net product sales in the United States were $858 million in the fourth quarter of 2016 and $3.32 billion for the full year of 2016 compared to $746 million in the fourth quarter of 2015 and $2.68 billion for the full year of 2015, which represented an increase of 15% and 24%, respectively. During the fourth quarter of 2016, EYLEA experienced a small increase in U.S. distributor inventory levels as compared to the third quarter 2016, yet remained within our normal one- to two-week targeted range. Additionally, we experienced a slight increase in our EYLEA gross to net percentage as a result of an increase in the proportion of Medicaid patients treated with EYLEA. Ex-U.S. EYLEA sales were $496 million in the fourth quarter of 2016 as compared to $413 million in the fourth quarter of 2015, representing a 20% increase on a reported basis. Ex-U.S. EYLEA sales for the full year 2016 were $1.87 billion compared to $1.41 billion for 2015, representing a 33% increase on a reported basis. Sales growth on an operational or constant currency basis were consistent with our reported sales growth. In the fourth quarter of 2016, Regeneron recognized $165 million from our share of net profits from EYLEA sales outside the United States and $649 million for the full year of 2016. Total Bayer collaboration revenue for the fourth quarter of 2016 was $181 million and $744 million for the full year of 2016. Total Sanofi collaboration revenue was $131 million for the fourth quarter of 2016 and $659 million for the full year of 2016. The Sanofi collaboration revenue line item primarily consists of reimbursement of Regeneron incurred R&D expenses, reimbursement of Regeneron incurred commercialization-related expenses and our share of profits or losses in connection with commercialization of antibodies. In the fourth quarter of 2016, our share of losses in connection with the commercialization of Praluent and pre-commercial activities and costs in connection with Kevzara and Dupixent were under $126 million and were a loss of $459 million for the full year 2016. This can be found in table four of our earnings release. Netted within these losses were the global sales of Praluent for the fourth quarter of 2016, as recognized by our partner Sanofi, of $41 million and $116 million for the full year 2016. Turning now to expenses, non-GAAP R&D expenses were $404 million for the fourth quarter 2016 and $1.64 billion for the full year. Our non-GAAP unreimbursed R&D expense, which is calculated as the total non-GAAP R&D expenses less R&D reimbursements from our collaborators, was $240 million for the three months ended December 31, 2016 and $882 million for the full year of 2016. Our press release includes all the information that is required to calculate unreimbursed non-GAAP R&D expenses. I’d like to note that our non-GAAP unreimbursed R&D expenses came in below our 2016 guidance due to less spending than forecasted in our sarilumab and dupilumab programs and lower operating expenses than forecasted in our Rensselaer manufacturing facility. For 2017, we’d like to reiterate our previously provided guidance for non-GAAP unreimbursed R&D to be in the range of $950 million to $1.025 billion. Next, non-GAAP SG&A expenses were $252 million for the fourth quarter of 2016 and $947 million for the full year of 2016. Non-GAAP SG&A came in below 2016 guidance largely due to lower than expected fourth quarter spending on Praluent as well as the delayed Kevzara launch. We continue to expect non-GAAP SG&A expense in 2017 to be in the range of $1.175 billion and $1.250 billion. The increase in our forecasted 2017 non-GAAP SG&A expense is primarily driven by the anticipated launches of Kevzara and Dupixent as well as an increase in commercialization-related expenses for EYLEA. Sanofi reimbursement of Regeneron commercialization-related expenses, a line item found within Sanofi collaboration revenue, was $97 million for the fourth quarter of 2016 and $322 million for the full year of 2016. We expect Sanofi reimbursement of Regeneron commercialization-related expenses in 2017 to be in the range of $400 million and $450 million. Turning now to taxes, our effective tax rate for the fourth quarter and full year 2016 was approximately 26% and 33%, respectively, as compared to approximately 32% and 48% for the fourth quarter and full year 2015. As a reminder, due to the adoption of accounting standards update 2016-09, the utilization of excess tax benefits in connection with employee exercises as stock options is now reflected in our effective tax rate. These deductions as well as a change in geographic mix of earnings were the primary drivers of the reduction in our effective tax rate in 2016 as compared to 2015. For the full year of 2017, we are guiding our effective tax rate to be in the range of 32% to 38%. From a cash flow and balance sheet perspective, we ended the fourth quarter of 2016 with cash and marketable securities of $1.9 billion. Our capital expenditures for the full year 2016 were $512 million. As we enter 2017, we expect our capital expenditure levels to be lower than the previous two years as is reflected in our 2017 guidance of between $375 million and $450 million. The principal driver of these forecasted lower capital expenditures is decreased spending on the renovation of our Limerick manufacturing facility. Other 2017 capital expenditures include the expansion of our laboratory space within our Tarrytown, New York facilities and expanding and renovating a portion of our manufacturing facilities at our Rensselaer, New York facility. As highlighted in our third-quarter 2016 conference call, we did take the opportunity in the fourth quarter of 2016 to repurchase for $401 million all of our remaining outstanding warrants that we issued in 2011 in connection with our convertible debt. Additionally, our remaining outstanding convertible senior notes were settled on October 1, 2016. In total, our full year 2016 cash flow statement reflects the use of funds of $656 million in connection with the reduction of outstanding warrants and repayment of the convertible senior notes, which will not recur in 2017. Additionally, in December of 2016, we entered into a purchase agreement with affiliates of BioMed Realty to purchase the properties located at our headquarters in Tarrytown, New York, for $720 million. We intend to finance this acquisition with new lease financing where we plan to assign some or all of our rights under the purchase agreement, including the right to take titles to the facility to an affiliate of Bank of America who will become the legal owner and lessor of the facility. Directly thereafter, we expect to lease the facility from the lessor for five years with rental payments that are expected to be lower than those under our existing headquarters’ lease and immediately accretive to Regeneron upon signing the lease. At the end of those five years, Regeneron will have a few options, including extending the lease terms, purchasing the facility at a predetermined amount, or selling the facility to a third party on behalf of the lessor. This transaction is estimated to provide an average after-tax annual cash savings of $21 million during our five-year lease term, and we expect to close this transaction in the first quarter of 2017. The contemplated lease financing will not constitute indebtedness for the purposes of our unsecured revolving credit facility and, therefore, does not adversely impact our ability to borrow under the credit facility. With that, I’d like to turn the call back to Michael.

Thanks, Bob. Operator, we can now open the call for Q&A. But I’d like to remind everybody to please limit yourselves to a single question to allow time for others to ask their questions. Operator?

Hi. Thanks for taking the question. Maybe just on the Ang2 Phase II trials, if you can remind us there if those are blinded or open label, and then what’s the rationale to wait for the 36-week data instead of reporting the 12-week primary endpoint data? Thanks.

Well, it’s a blinded trial. It’s a single injection either with EYLEA alone or in various combination arms, and we believe that the 36-week data is going to provide us the best opportunity to really evaluate the value of adding angiopoietin-2 to EYLEA. That’s how we’ve designed the study.

I should add that the primary endpoint is 36 weeks…

All right.

Next question.

Thank you very much. So, Len, you mentioned the weather in New York, and I wanted to make sure that there wasn't any snow going on in this conference call, so I have to ask you about the guidance for EYLEA. So, you're really guiding to a significant slowdown in 2017, even compared to your growth trajectory in Q4, could you talk a little bit about the puts and takes in that guidance, particularly whether you're assuming any changes in reimbursement for Medicare Part B? And secondly, what is it that you're seeing in terms of the penetration, particularly in the DME that suggests that the product’s reaching maturity now? Thanks.

Thanks, Geoff. No snow at all. Let me just address your question and generally about our guidance here. First of all, I remind you that this will be the last year that we do individual product guidance. I'm not a big fan of being in the forecasting business; we’re in the drug discovery, development, and optimization business and forecasting is always somewhat tenuous. A lot of people have been concerned about how we get to the guidance and why is the range single digits which can be rather broad. You have to remember, we are a science-driven company and when you look at all of the errors in the estimates of things that can go into it such as market share, anything that could happen in government policy, negotiations, our ability to hold off any growth of Avastin, any market forces that require increase gross to net. When you put all of these puts and takes, if you will, it does become somewhat of a blizzard which obscures the landscape, and it's very difficult to feel comfortable that we can give you precision that you would like when there are too many estimates in there that when you put them all together, the precision is just not there. So it is the fifth year of this product, we've grown rather substantially, and we do think there’s growth still to be had with new indications, and also, obviously, growth outside the United States with Bayer. But as the year goes on, we'll see how this all plays out.

Next question.

Good morning. I’m going to ask one alternate in case you cannot answer the first one. So, the first one is, in case you have the opinion from the court about the preliminary injunction, can you just give us a bit of color about this, particularly what was the appellate court's opinion about the likelihood of success on the merits? Now if you haven’t got the opinion yet, I would ask you about the Praluent trajectory and market share for 2017. Obviously, some of your clients will be a bit worried about the potential final outcome. Should we expect you guys to begin to lose a little bit of share against Repatha in that market?

Let me address your question regarding the legal opinion related to the injunction. It’s important to clarify that it was a permanent injunction, not a preliminary one, which is the type you might secure before a jury trial, although that was not pursued in this case. We’ve reviewed the opinion, which I believe you can find linked to our press release. The court typically evaluates four factors when considering whether to overturn a lower court's injunction. The first factor assesses whether there’s a strong likelihood of success on the underlying appeal, while the second factor concerns whether we would suffer irreparable harm without a stay during the appeal. The third factor examines the impact on the other party, and the fourth looks at the public interest. According to the court's opinion, the first two factors were deemed most critical. They believed that Regeneron and Sanofi demonstrated a strong likelihood of success on the merits and would face irreparable harm. Based on the submissions, they concluded that we were entitled to have the injunction stayed. That’s the extent of our current understanding. We are proceeding at an accelerated pace with our opening brief on the underlying appeal, which relates to the judges’ remarks about our likelihood of success. Our focus will now be on winning based on the merits. I hope that addresses your question.

Next question?

Thank you for taking my question. I appreciate the support from Michael, Manisha, and Len while I was assisting the team. Len, it's great to hear from you. I'd like to ask a broad question. I saw a recent quote from President Trump, through his press secretary, indicating support for the government negotiating drug prices with manufacturers. I’d like to know your thoughts on this. Do you believe it could happen? What would it mean for the industry if it were put in place? What kind of effect do you foresee on drug prices? More generally, what do you think will happen with the current drug pricing discussions? Thank you, Len.

You're welcome, Mark. It's great to hear from you, too. I don’t have special insight into the president's thoughts, but I believe he genuinely thinks the U.S. is paying too much and isn't negotiating effectively. As he delves deeper into the policies, he may realize that we do negotiate prices for Medicare drugs, but we do it with individual Medicare carriers rather than through a single negotiator. From my perspective, there will be a more nuanced conversation where the public, and I believe the president as well, will come to understand that this is a challenging business. Innovating and discovering new drugs that can significantly impact people's lives, both in terms of lifespan and quality of life, is extremely difficult. However, it’s crucial to ensure that these drugs are accessible to those who can afford them. I believe there will be some agreement in Congress, and it will require Congressional action, to address how much individuals are paying for drugs. The co-pays or coinsurances are particularly concerning for people. People are starting to see that the government's desired financial stake in this has gone a bit too far, making it hard for them to obtain necessary medications. I anticipate some relief in that area. Ultimately, the focus may very well be on establishing standards that ensure breakthrough drugs are rewarded while preventing unjustified price increases that do not relate to innovation. We need to find ways to protect incentives for innovation. Coming back to Regeneron, I think the company is exceptionally well-positioned because the winners and losers in our industry will be those recognized as true innovators. If you can develop a product like Dupixent, which I hope will be approved by the end of this quarter, that has the potential to change lives, it will always hold value. I'll stop there and take the next question.

Next question?

Hi. Good morning. Thanks for taking my question. I have a question on EYLEA, should we assume that your market share in 2017 in AMD and DME will be relatively stable. That’s how you come to the single digit guidance, and then related to that, Novartis has a Phase III for RTH258 that’s comparing a Q3 month regimen to the Q2 month for EYLEA. I was wondering if you guys have any thought about that? Thank you.

I'm not going to delve into the specifics of how we arrived at our assumptions, because doing so can lead to many errors. It's not simply one factor influencing the situation over another. We'll keep you updated on our market share performance retrospectively, but making predictions is quite challenging. George can provide information on the Novartis trial.

Right. And we want to remind you that their study is really just intended to show that some percentage of their patients can get by with every three months dosing. And we've already shown data that shows that a substantial number of our patients can also get by with three months dosing. I think that neither they nor I are advocating three months dosing for every patient. It's just that they're trying to produce data akin to ours which actually shows that a substantial number of patients can indeed get by with every three-month dosing.

Yes, and I will just say that, look, this is a hard business, and when you load of the eye with a lot of drugs, which is what they're doing, they are going to have to show that they don’t get inflammation; they are going to have to show that you don’t get hypertension systemically, which was seen in some of the earlier trials, and you just don't know, so we will have to wait and see, and we will look at their data. But as George said, I'm not sure that the way that they have set up the trials will accomplish anything more than we’ve already have data for, so we will see.

And I think one brings up an important point, I mean, they're trying to do it by putting in many, many more molecules of their agent as compared to EYLEA, and to get a rather similar efficacy bar and with that, as Len pointed out, comes additional risks that they are going to have to show that they are not actually causing.

Okay. Next question?

Thanks for the questions. Regarding sarilumab, if you receive timely approval in the US, some survey work has indicated that Kevzara, particularly in its subcutaneous form, is gaining traction and having a significant impact on Humira. I believe sarilumab notably differentiates itself from ACTEMRA and has a positive comparison with Humira, as it offers more convenient administration. Len, you've been a vocal critic of pharmaceutical pricing, and the TNF market is particularly notable for its aggressive pricing practices. While I understand you may prefer not to discuss specific pricing strategies, your approach to EYLEA's pricing was commendable. Do you think the inflammatory biologics market allows for a similar opportunity to make a strong statement, or is it fundamentally different from the market that EYLEA entered?

Yes, we believe that the ongoing price increases reflect a few factors, including some disconnect from those making these significant increases and the complexities of the rebate system, which are starting to be addressed. We have a three-part strategy for bringing Kevzara to market, which we are confident we can achieve. First, we aim to present Kevzara as a viable alternative to anti-TNF therapies, either as a first-line option or after other treatments have failed. Second, we seek to establish it as the preferred IL-6 agent, based on its product profile, although we will need to gauge doctors' reactions to this positioning. Additionally, there is a growing market for monotherapy, which we have promising data for, particularly as it involves treatments without methotrexate, a drug that isn't very favored. Lastly, we recognize the opportunity to implement more responsible pricing, which is an important aspect of our strategy at this time.

Next question?

Hi, everyone. Thank you for taking my question. I would like to ask about pricing. Have you encountered any resistance to pricing in the U.S. and Europe? You mentioned the pricing for a specific product, and you discussed how it will be positioned positively. Could you share your thoughts on the lessons learned from pricing PCSK9 and what gives you confidence in the positioning for dupilumab?

Thank you for the question, Robyn. The situation with PCSK9 will serve as an interesting case study, and there are various opinions on it. Its complexities, especially considering it was launched during the Hep C issues faced by payers and manufacturers, create a unique scenario, especially with the presence of inexpensive statins that effectively serve a large portion of the market. This is quite different from our drug, Dupixent. First, we now have outcomes data that focus on significant factors like patients' skin health and their itch, which are critical and show notable improvement. Starting with this is crucial. Additionally, we're entering a space that the FDA recognizes as a breakthrough; there's a consensus among us, the payers, and importantly, the patients and their doctors that this is indeed a breakthrough. This contrasts sharply with cholesterol-lowering medications, where the benefits are often debated. With our drug, there is a clear demand and need for it, and the data from all our trials consistently support its breakthrough status. We have had positive discussions with payers who seem open to collaborating rather than creating adversarial relationships. While it can be easy to blame each other—pharma pointing at the middlemen over prices, and middlemen attributing high prices to pharma, leaving patients confused—we prefer to work together towards delivering a breakthrough product that is fairly priced and accessible without major hurdles for those who need it. I'm optimistic, and this isn't just because of my personality; it's based on constructive engagements with senior leaders of key payers, who have responded positively to our strategy. I look forward to sharing more details with you upon the launch and ensuring this product reaches patients.

Next question?

Hi. Thank you. Maybe for George, regarding nesvacumab, considering either Phase I or biology, you mentioned that the expectations are high compared to EYLEA. Is this expectation different from what you anticipated for PDGF?

I believe the preclinical data for the PDGF class was quite weak. We have been working on that for 20 years and initially entered that program as a precaution, in case the unusual early clinical data turned out to be valid. In contrast, the preclinical data for Ang2 is much stronger, but as you mentioned, EYLEA sets a very high standard for efficacy, making it difficult for any new treatment to outperform it, especially since EYLEA effectively manages conditions such as retinal edema, which is a major cause of reversible vision loss. We are eager to test this hypothesis in patients and believe it is worth pursuing. For the sake of the patients, we hope it brings an improvement, but achieving that will be challenging given the high standard set by EYLEA.

Great. Next question?

Good morning, guys. Thank you for taking my question. Question is on Praluent. Could you guys comment maybe on how the ODYSSEY OUTCOME trial might differentiate Praluent versus Repatha? And then, George, you mentioned, you expect increased uptick after positive data in appropriate patients. Could you maybe expand on that? How do you view or how do you define that appropriate patient population? Thank you.

Right. So, it’s a little bit early to answer the question on how we are going to differentiate. We know that the trials are slightly designed differently in different patient populations, but we haven’t seen any data yet whatsoever; all we have heard is topline data, so we have to wait until we actually get our data and analyze carefully the data that has been presented. George, you can comment.

And just to remind you, your patient population was a higher risk population, post-acute coronary syndrome type population. So, you might expect that these patients might have both a higher risk, which is one reason why our study had less numbers of overall patients than the Repatha study, but also that you might have a different degree of benefit in these patients and that it might be represented in different components that comprised various events of interest.

In terms of appropriate questions regarding patients, I think Bob Terifay mentioned that we want individuals to be on the maximally tolerated statins before opting for Praluent to further lower their LDL, assuming they have the appropriate cardiovascular atherosclerotic disease. To get more patients through the system, I believe this will be driven by doctors. Some doctors have been waiting for outcomes and might have only prescribed it to their most severe patients with severe hypercholesterolemia, but I think that could change. As a result, we might see an increase in prescriptions. Additionally, with OUTCOMES data, payers are becoming more aware of shifts in science and may reassess the existing barriers to streamline the prescription process.

And there is one important thing though. Whenever we talk about differentiation from Repatha, we need to keep in mind that we are differentiated. This is the only molecule that has a low-dose option. There are a large number of patients receiving that low-dose option and a large number of physicians who prefer to start with that dose. That is how we conducted the ODYSSEY OUTCOMES study.

Yes. Thank you. Okay, Michael. Next question?

Hey, thanks for answering my question. It seems like the FDA has been quite stringent regarding manufacturing. I know you've addressed some issues, but could you discuss how the breakthrough designation has benefited Dupixent? Additionally, what are the remaining steps, and how confident are you about meeting the approval timeline?

I believe the FDA has been and should be stringent regarding manufacturing. We depend on our system, which includes responsible manufacturers regulating their own production and quality, as well as third-party regulators like the FDA, to maintain the quality of our drugs. We fully support this approach, and I think Sanofi does as well; they have made significant efforts to bring their plant up to the required standards. We still need to complete the routine pre-approval inspections, which are necessary before a drug can be approved, though they are not routine in the traditional sense. We have previously navigated these inspections successfully, and we feel optimistic about being prepared for them again. If all goes well, we anticipate receiving approval by the end of the quarter. As for the breakthrough status, it has been extremely beneficial. The program that Congress implemented is excellent as it draws focus, allocates staff to advance projects, and improves access to information. I believe the FDA maintains high standards for granting this status, and once awarded, they partner effectively with you. I have no complaints; I actually value a rigorous FDA because I want a high standard in place to ensure that we aren't treated like an infomercial business where anything goes without regard to the product's effectiveness.

Next question. We have time for one more question. For those of you who don't get a question today, I want to apologize. We are in the office and we made an entry, so please give us a call and we'll try to get you on the next earnings call. So, this will be the last question.

Hi. Good morning, guys. Thanks for taking my question and squeezing me in. So, relatively speaking, how do you view the market opportunity for EYLEA in non-proliferative diabetic retinopathy compared to the products currently approved indications, assuming of course you have positive Phase III data for that patient population? Thanks.

I'm glad you asked that question. In comparison, there are significantly more patients with non-proliferative diabetic retinopathy than those with proliferative diabetic retinopathy with diabetic macular edema. This opens up a larger group of patients who could potentially benefit from the drug. However, it involves persuading patients who have eye disease that hasn't yet affected their vision to receive an injection in their eye to protect their sight. This can be a barrier, but strong data can make a difference since the patient numbers are much larger. Overall, I see this as a considerable opportunity. We recognize the importance of EYLEA and are committed to defending and extending it. Additionally, we understand the significance of making our late-stage pipeline a commercial success. We have prepared extensively for what we believe could be a game-changing product. Although it's rare to find such transformative products, the team is developing a solution for allergic diseases without causing immune dysfunction, which can happen with other treatments. The ability to control the immune system effectively may allow us to develop drugs for numerous allergic disorders. We have existing drugs for atopic dermatitis, and we could potentially address asthma, nasal polyps with chronic sinusitis, food allergies, eosinophilic esophagitis, and more. Achieving this while minimizing side effects compared to anti-TNF treatments is impressive. We are very excited about our scientific advancements and the opportunities they present. We are equally determined to ensure Praluent remains a significant product, especially following the recent positive news. In a challenging pricing environment, Regeneron stands out for its innovation, which is the key to generating value. While price increases are beneficial, innovation is essential, and that is our focus. I will now turn it back to you, Michael.

Well, that concludes our call for today. We appreciate everyone calling in. Again, a couple of people have emailed me; we will call you back. If you want to hear from us, please give us an email or drop us a line, we are in the office. Operator, that concludes our call.