Regeneron Pharmaceuticals Inc (REGN) — Q4 2021 Transcript

Thank you, Michelle. Good morning, good afternoon, and good evening to everyone listening around the globe. Thank you for your interest in Regeneron, and welcome to the fourth quarter 2021 conference call. An archive of this webcast will be available on our website. Joining me on the call today are Dr. Len Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open up the call for Q&A. I'd also like to remind you that remarks today may on today's call include forward-looking statements about Regeneron. Such statements may include, but are not limited to those related to Regeneron and its products and business, financial forecasts and guidance, development programs and related anticipated milestone, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings 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 that statement. 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, including its Form 10-K for the period ended December 31, 2021, which we are planning to file with the SEC early next week. Regeneron does not undertake any obligation to update 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 in today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our financial results press release, which can be accessed on our website. 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.

Thanks, Mark, and thanks to everyone joining today's call. The fourth quarter of 2021 capped off a terrific year for Regeneron. Our performance was driven by strong execution across the organization, despite the ongoing challenges posed by COVID-19. We're all proud of the incredible work and dedication of our employees who continuously deliver on our mission to bring important medicines and novel medical breakthroughs to patients in need. Throughout 2021, we delivered strong top and bottom line growth. Revenues, excluding our COVID antibody cocktail, grew 19%, a testament to our diversified and strengthening core business. Our innovative and world-class pipeline advanced across a wide variety of diseases. We also unveiled initial clinical data and pipeline advancements from our Regeneron Genetics medicines portfolio, which has the potential to unlock significant long-term value. Additionally, we returned substantial cash to shareholders in the form of share buybacks. In '21, we spent approximately $1.7 billion repurchasing over 3 million shares. For EYLEA, 2021 global sales grew 19% to $9.4 billion. Even after 10 years on the market and millions of injections later, we continue to view EYLEA as an enduring product, with significant future opportunity, despite new market entries. In the second half of the year, we look forward to the results from our Phase III aflibercept 8-milligram high-dose program. If those data continue to support that aflibercept 8 milligrams provides extended dosing duration without compromising on safety and efficacy, aflibercept 8 milligrams has the potential to complement and enhance our retinal franchise. With Dupixent, we are delivering on a goal of transforming the treatment of type 2 inflammatory diseases. 2021 global sales of Dupixent were $6.2 billion, representing 53% growth for the year. Looking ahead, Dupixent's outlook is bright. There are significant opportunities to increase market penetration rates in approved indications, and we are in the midst of a wave of new data submissions and launches in potential new indications, further fueling Dupixent's growth. In oncology, Libtayo continues to thrive in the approved non-melanoma skin cancers. We look forward to potential Libtayo plus chemotherapy approval later this year in the broader population of non-small cell lung cancer patients. Our oncology footprint continues to expand. We have advanced many candidates and combinations into the clinic with a range of antibodies, bispecifics and co-stimulatory bispecifics across many cancer settings. This year, we look forward to sharing what we hope will be groundbreaking data in difficult-to-treat solid tumors, such as prostate cancers and ovarian cancers, both of which are conditions with historically low response rates to immunotherapy. We also remain encouraged in the progress of our maturing CD3 bispecifics. We are confident in the overall safety and efficacy profile for odronextamab, our CD20xCD3 bispecific. We are forging ahead with REGN5458, our BCMAxCD3 bispecific, which we believe will play an active role in the treatment of multiple myeloma given its competitive profile. Last but not least, we are immensely proud of our rapid response efforts against COVID-19. In 2021, REGEN-COV, our antibody cocktail, was administered to millions of people globally, making a major impact during the darkest days of the pandemic. Based on preclinical data, we recently announced that REGEN-COV is highly unlikely to be active against the Omicron variant. Appropriately, the FDA amended the emergency use authorization for REGEN-COV, limiting its use in the U.S. in light of the Omicron variant being dominant. Regeneron remains committed to helping fight the COVID-19 pandemic. We are progressing next-generation antibodies that are active against Omicron, Delta and other variants of concern. We are scaling up manufacturing efforts and completing the necessary requirements to begin clinical trials for next-generation candidates in the coming months. Concurrently, we are working closely and collaboratively with the FDA and other global regulatory authorities to establish and define clinical pathways to bring additional safe and effective monoclonal antibody treatment options to patients as quickly as possible. As one of the leaders in the fight against COVID-19, our VelociSuite platform of technologies makes us uniquely positioned to promptly develop and deliver potentially life-saving medicines. As the COVID-19 story transforms from pandemic to endemic, we believe there will remain a significant opportunity to use our next-generation monoclonals as a prevention for those immunocompromised individuals who do not respond adequately to COVID-19 vaccines. In addition, monoclonal antibody therapy is likely to play an ongoing role in treatment for infected individuals. In conclusion, 2021 was another high-performance year for Regeneron. With strong commercial results from our in-line marketed products, 30-plus pipeline candidates progressing through clinical trials, our discovery efforts firing on all cylinders, a growing portfolio of highly productive external collaborations and our strong financial position with over $12 billion in cash and marketable securities, Regeneron is extremely well positioned for the future. Now I will turn the call over to George.

Thank you, Len. I will begin by discussing our new monoclonal antibodies for COVID-19. As Len noted, we are quickly developing next-generation antibodies that maintain effectiveness against Omicron and other variants of concern. We foresaw the possibility of the virus mutating in early 2019 and initiated the creation of extensive virus-neutralizing antibody candidates from human survivors and our VelocImmune mice. We have consistently assessed and updated this pool and now possess next-generation candidates that effectively neutralize Omicron and other notable variants based on preclinical studies. We are set to start clinical trials with the first of these candidates in the coming months. Additionally, we are in talks with the FDA about ways to expedite the development program for monoclonal antibodies, given the ongoing unmet need and demand for these treatments, especially considering future potential virus variants. As Len emphasized, we believe monoclonal antibodies will play a crucial role in treating and protecting the millions of immunocompromised individuals in the U.S., and we are dedicated to pursuing a development pathway that facilitates this in the near future. Moving on to ophthalmology, at the upcoming Angiogenesis meeting, we will share the final Phase II results of the aflibercept 8-milligram CANDELA study in patients with wet AMD. In this trial, aflibercept 8 milligrams, administered on the same protocol-specified schedule as the currently approved EYLEA 2-milligram, met its primary safety endpoint, showing numerically better results for the 8-milligram dose compared to the 2-milligram dose. These Phase II findings instill confidence that the upcoming Phase III outcomes could demonstrate that the higher 8-milligram aflibercept dose can at least match the efficacy and safety of EYLEA, with the added benefit of more convenient dosing. Now turning to Dupixent, having built on its remarkable clinical successes across various allergic or type 2 inflammatory diseases, the recent second Phase III trial in prurigo nodularis has met its primary and key secondary endpoints, making Dupixent the only systemic medication to showcase this success in this specific condition. These results align with the first Phase III study, where 60% of Dupixent patients achieved the primary endpoint reduction compared to 18% of placebo patients at 24 weeks, with nearly three times as many Dupixent patients experiencing reduced skin lesions compared to placebo. Prurigo nodularis becomes the sixth disease for which Dupixent has shown substantial benefits for patients, providing strong evidence that the IL-4 and IL-13 pathways inhibited by Dupixent play crucial roles in the type 2 inflammation common to all these diseases. We recognize the extraordinary potential of Dupixent to greatly benefit numerous patients across this diverse range of clinical conditions, alongside its well-established safety profile, and highlight how Dupixent fulfills its promise of delivering a pipeline through a single product. At the upcoming AAAAI meeting, besides other significant Dupixent updates, we will present critical results from recent top-line studies in eosinophilic esophagitis, or EOE, and from the first chronic spontaneous urticaria, or CSU, study. EOE is a complex condition, and we are eager to present these findings to the scientific community and patients. Our first regulatory submission for EOE in adolescents and adults is in progress, with submissions for prurigo nodularis also commencing in the early part of this year. The flow of clinical data related to Dupixent is expected to continue. We plan to report results from another Phase III study in CSU, this time focused on patients previously treated with omalizumab, as well as for the chronic cold-induced urticaria indication later this year. These cases present tougher treatment challenges and establish a higher standard for Dupixent. We look forward to the outcomes of these crucial studies. Now turning to oncology, specifically Libtayo, our oncology portfolio is making progress with pivotal readouts and regulatory filings for Libtayo, as well as anticipated data readouts for our bispecific products and multiple forthcoming milestones with new pipeline entrants. As Len stated, the Libtayo chemotherapy combination for non-small cell lung cancer patients is currently under FDA review, with a PDUFA date set for September 19, 2022, which could potentially cater to a larger patient population with lung cancer. In hematology, we presented promising data for REGN5458, our BCMAxCD3 bispecific, at the American Society of Hematology Annual Meeting, with safety data showing no cases of grade 3 or higher cytokine release syndrome thus far and robust efficacy results. We see potential in our investigational agent to be competitive in this indication. We plan to explore this product for earlier lines of myeloma therapy, in combination with standard treatments, and are enthusiastic about combining it with a suitable co-stimulatory bispecific to enhance response rates. Odronextamab, our CD20xCD3 bispecific, exhibits potential for a best-in-class efficacy profile in both follicular lymphoma and diffuse large B-cell lymphoma, and our refined step-up dosing strategy may alleviate safety concerns while reducing hospitalizations related to cytokine release syndrome. Regarding our bispecifics for solid tumors, we are noting early signs of activity for our MUC16xCD3 bispecific monotherapy aimed at advanced ovarian cancer, and we are eager to share these initial findings later this year. Besides monotherapy, the MUC16xCD3 bispecific is also being tested in combination with Libtayo and in a pioneering combination trial involving a MUC16xCD28 bispecific. These combinations are in preliminary stages and moving through dose escalations. Later this year, we hope to disclose initial data for an innovative biparatopic METXMET antibody studied in advanced non-small cell cancer patients with MET protein alterations. The early signs of clinical activity we have observed with the naked METXMET bispecific antibody, particularly in MET-overexpressing patients, provide positive indications for our follow-on products, including the METXMET bispecific antibody drug conjugate, which is currently enrolling patients in a Phase I study. We are also optimistic about our early-stage EGFRxCD28 co-stimulatory bispecific program for lung and other cancers. For prostate cancer, we expect initial results from our first co-stimulatory bispecific PSMAxCD28 later this year, which is progressing through dose escalation in combination with Libtayo. We are eager about the potential of our diverse oncology portfolio, which includes multiple Phase I, II, and III assets, as many begin to believe the future will involve effectively targeted combinations of immunotherapy agents. Concluding with our efforts in Regeneron Genetic medicines, we and our collaborators have made notable advancements in expanding the scope and scale of our innovative work in genetic medicines. Concerning our siRNA collaboration with Alnylam, ALN-HSD is advancing through trials with healthy volunteers, and initial data in NASH patients are expected by mid-year. With the C5 siRNA and antibody combination, another first of its kind, healthy volunteer data were showcased at ASH, revealing pharmacokinetic and pharmacodynamic outcomes supportive of the monthly subcutaneous dosing chosen for pivotal studies. Phase III investigations of this combination for paroxysmal nocturnal hemoglobinuria, or PNH, have also commenced. In PNH, we plan to examine our combination in both treatment-naïve and switched patients versus standard care therapies, including ravulizumab and eculizumab. Moreover, Alnylam has recently announced the submission of the CTA application for ALN-APP, the industry's inaugural investigational RNAi therapeutic aimed at CNS diseases. This treatment will be evaluated for the relatively rare condition driven by amyloid precursor protein, called cerebral amyloid angiopathy, or CAA, as well as in early-onset Alzheimer's disease. Finally, in the upcoming quarter, we and Intellia will provide an update on our joint TTR CRISPR-based knockout program for transthyretin amyloidosis. This will include additional interim clinical data from the polyneuropathy arm of the ongoing Intellia 2001 Phase I trial. We have also broadened the study to include patients with transthyretin amyloidosis with cardiomyopathy, which we believe will encompass an even larger patient population. We are extremely enthusiastic about our extensive and diverse pipeline of siRNA candidates that we are advancing with Alnylam, targeting the liver, brain, and eye, alongside our CRISPR-based methods in collaboration with Intellia and our viral-targeted gene delivery initiatives, such as those with Decibel. Although it is still early, we believe these groundbreaking techniques have the potential to transform medical practice. I will now hand the call over to Marion.

Thank you, George. Our fourth quarter business performance demonstrated the strength and resilience of our in-line brands and creates a foundation for commercial success as we prepare for future launches. Starting with EYLEA. We recently announced fourth quarter U.S. net sales of $1.55 billion and $5.79 billion in 2021. This represented 17% year-over-year U.S. growth for the full year, which is noteworthy for a brand 10 years post launch. EYLEA reached record share across all approved indications and is the recognized leader in a category that continues to grow due to favorable demographic trends. EYLEA remains physicians' top choice for patients with indicated retinal diseases due to its demonstrated efficacy, safety, dosing flexibility and unsurpassed real-world experience, with more than 40 million administered injections worldwide. We are also excited about ongoing strategic initiatives that position our retinal franchise for future growth, such as our educational efforts in place across existing indications where many patients don't receive the treatment they need. Beyond EYLEA, we are encouraged by promising early results for high-dose aflibercept 8 milligrams, which, if supported by Phase III clinical results, potentially represents next-generation treatment for a range of eye diseases. Turning to Libtayo, where global net sales in the fourth quarter were $121 million, in the U.S., net sales reached $81 million. In advanced cutaneous squamous cell carcinoma, which currently drives the majority of performance, Libtayo is the number one systemic treatment, and we saw steady growth as the market continued its post-COVID recovery. In advanced basal cell carcinoma, Libtayo is also rapidly being established as standard of care in patients who have progressed or are inappropriate for hedgehog inhibitors, building on our strength in non-melanoma skin cancers. In advanced non-small cell lung cancer, we are making progress in the launch of our monotherapy indication with a steadily growing prescriber base. There is also significant opportunity in the chemotherapy combination setting. And if approved, Libtayo would be available for a much broader range of first-line lung cancer patients than for monotherapy alone. Our experience is that medical oncologists consider combination treatment first and reserve monotherapy for a much smaller group of patients, which, in part, has limited Libtayo uptake in lung cancer to date. Briefly turning to our cardiovascular franchise. Evkeeza, our treatment for patients with HoFH, was successfully launched in 2021 and is already the standard of care. We continue to see initiations in both switch and category naïve patients. In 2021, we focused on employing innovative efforts to identify patients not currently diagnosed with HoFH. On to Dupixent, which grew 51% in global net sales in the fourth quarter year-over-year to $1.77 billion, and in the U.S., net sales grew 46% to $1.35 billion. Dupixent is well positioned for ongoing rapid growth based on significant unmet need in existing and potential new disease areas, with anticipated expansion into even younger age groups and new geographies worldwide. In atopic dermatitis, prescribing trends are strong across the spectrum of moderate to severe disease. Dupixent is healthcare specialists' first-line systemic treatment of choice due to several highly differentiating product characteristics, including its dual anti-IL-4 and IL-13 mechanism of action, compelling efficacy and rapid symptom relief, well-established safety profile, with no risk of serious infections due to immunosuppression and clinical data in children as young as six months. If approved, we look forward to expanding Dupixent's skin indications to include babies and young children with atopic dermatitis as well as two new dermatologic indications. There are no currently approved biologic medicines for prurigo nodularis, where we estimate approximately 75,000 patients may benefit from Dupixent in the U.S. alone. We're also progressing an important opportunity to help chronic spontaneous urticaria patients. Dupixent is also steadily growing in the highly competitive asthma space. We see ongoing potential to differentiate Dupixent in moderate to severe disease through its competitive profile, including a broad label that allows use in uncontrolled steroid-dependent patients, regardless of their eosinophil levels, as well as use in patients as young as six years of age. Dupixent is also the preferred treatment of ENTs and allergists in chronic rhinosinusitis with nasal polyps, regardless of prior surgery and contributes meaningfully to our business. We are also progressing our launch plans for eosinophilic esophagitis, a gastrointestinal disease with substantial unmet need. We estimate at least 50,000 patients in the U.S. could benefit from Dupixent if approved. We've received positive feedback from key opinion leaders on the strength of our data and lack of suitable treatment alternatives for this serious disease. In summary, in 2021, our commercial team delivered strong growth across the portfolio. Our momentum and new launch opportunities position us well for future growth. Now I'll turn the call over to Bob.

Thanks, Marion. My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis where applicable. Regeneron's fourth quarter capped off a strong year. In the quarter, we delivered top and bottom line growth driven by strong execution within our core business. Fourth quarter total revenue grew 104% year-over-year to $5 billion. Excluding revenues related to the COVID-19 antibody cocktail, total fourth quarter revenue grew 17% year-over-year to $2.7 billion, demonstrating continuing strength of our core business. Fourth quarter total diluted net income per share was $23.72 on net income of $2.7 billion. Starting with REGEN-COV. In the fourth quarter, we delivered the remaining 1.1 million doses from our September 2021 U.S. government supply agreement and recognized $2.3 billion of U.S. net sales. In accordance with our global collaboration with Roche, the amount of manufactured products supplied by each party to the global market resulted in the recognition of a true-up payment related to Roche's share of profits. As a result, in the fourth quarter, we recognized a $260 million charge in cost of goods sold and recorded no Roche collaboration revenue. As mentioned, we completed all deliveries under the September 2021 U.S. government supply contract in the fourth quarter. With the FDA's recent amendment to REGEN-COV's emergency use authorization, we do not expect to record any U.S. REGEN-COV sales in the first half of 2022. I will now move to our collaborations, starting with Bayer. Fourth quarter 2021 ex-U.S. EYLEA net product sales reported to us by Bayer were $934 million, growing 9% on a reported basis and 12% on a constant currency basis. Total Bayer collaboration revenue was $372 million, of which we recorded $354 million for our share of net profits from EYLEA sales outside the U.S. Total Sanofi collaboration revenue was $518 million in the fourth quarter of 2021. Despite seasonally higher fourth quarter operating expenses, our share of profits from the commercialization of Dupixent and Kevzara was $388 million, which compares favorably to our share of profits of $230 million in the fourth quarter of last year. Moving now to fourth quarter 2021 operating expenses. R&D decreased slightly to $639 million primarily due to lower spending on REGEN-COV development as compared to the fourth quarter of 2020. SG&A expense increased 30% year-over-year to $495 million primarily due to costs related to growth initiatives for EYLEA and higher head count-related costs. Cost of goods sold were $559 million primarily related to REGEN-COV manufacturing costs and, as I mentioned earlier, the recognition of the $260 million true-up payment to Roche for their share of profits related to the COVID antibody cocktail. Finally, the fourth quarter 2021 effective tax rate was 12.7%. Shifting now to cash flow and the balance sheet. For the year, Regeneron generated $6.5 billion in free cash flow and ended the year with cash and marketable securities less debt of $9.8 billion. In the fourth quarter 2021, we exhausted the remaining balance on our $1.5 billion share repurchase authorization. And in November, we announced a new $3 billion share repurchase authorization. Across both, we've repurchased approximately $850 million of shares in the fourth quarter of 2021. We continue to be opportunistic buyers where we see dislocation between our stock price and our intrinsic valuation. Now let me conclude with our initial 2022 outlook and guidance. As I mentioned earlier, we do not expect to record any U.S. REGEN-COV sales in the first half of 2022. For U.S. Praluent throughout 2021, we observed significant category and competitive pressures. We expect these pressures to accelerate throughout 2022. And now for our 2022 expense guidance. For R&D, we forecast our 2022 R&D expense to be in the range of $2.8 billion to $3 billion. As we highlighted throughout 2021, critically important development programs are advancing in 2022, including the late-stage randomized studies versus branded comparators for the LAG3 Libtayo combination, BCMAxCD3 and C5 programs in development expenses to advance next-generation antibodies against COVID-19. For SG&A, we forecast our 2022 SG&A expense to be in the range of $1.65 billion to $1.77 billion. Based on our initial plan, we expect SG&A expenses to be spread evenly across the quarters in 2022. For COGS, we forecast 2022 product gross margin on our percentage of net product sales to be between 90% and 92%. We expect cost of collaboration manufacturing to be in the range of $750 million to $830 million driven by continued growth in our Dupixent franchise. And finally, we anticipate our 2022 effective tax rate to be in the range of 13% to 15%. A complete summary of our full year guidance is available in our press release issued earlier this morning. In conclusion, our core business continues to advance and strengthen. With growth continuing across our existing portfolio and investments in our R&D engine supported by our strong balance sheet, we remain well positioned for sustainable long-term growth.

Thanks, Bob. Michelle, that concludes our prepared remarks. We would now like to open up the call for Q&A. Please go ahead, Michelle.

You touched on your solid tumor oncology franchise, specifically the METXMET in MUC16xCD3 bispecifics that we're supposed to get this year. Can you elaborate a little as to kind of what we should be expecting with these data readouts and how that could inform potentially pivotal trials or a registration path?

Yes. These are both being evaluated in late-stage patients who have essentially failed all existing therapies. And obviously, the excitement would be if one saw evidence of convincing objective responses that were durable in these settings, then those would certainly inform how we would move forward on these. And we've already announced that we've been observing encouraging early signs of efficacy, and we will be elaborating on these and giving the details in these future presentations.

I'd like to address the key issue. Len and Marion, I would appreciate your insights on the EYLEA franchise, especially considering the favorable label for faricimab and its pricing. What do you think this means for your high-dose label and commercial strategy?

Yes. I'll let Marion get into the details. But we don't see faricimab as a transformative therapy of any kind, notwithstanding any label. It's very hard to see when you look at it dispassionately any scientific evidence for the contribution of Ang2 blockade. People forget, nobody has a greater interest and would love to see Ang2 blockade being a value given that George and his colleagues were the ones who discovered and cloned Ang2, the first in the world on that. But there's really no evidence that we can see where you’ve separated that out. So what we're seeing here is a higher dose of faricimab relative to Lucentis and possibly on a moral basis relative to EYLEA. We remind everybody that there are a lot of lessons learned here. One of the biggest lessons is efficacy is super important, but well beyond that is safety. Nothing right now can contradict the, I don’t know, almost 50 million injections that have been given worldwide with EYLEA. So we feel pretty good. The competition is always good. Obviously, competition is going to eat into a product. We suspect that faricimab may take a lot of the share initially from Lucentis, but we’ll see. Marion might want to elaborate.

Yes. Thank you, Len. Certainly, to give some very early market feedback, the comment that we're getting from key opinion leaders is that they don't see faricimab as a game changer and that the dosing is complex. And there are remaining questions on the clinical trial design and, of course, as Len mentioned, safety. More importantly, I'll go back over to EYLEA, where we certainly are establishing the product as standard of care and more across indications with great flexibility of dosing, indications, experience, real-world evidence, prefilled syringe and busy times. So we look forward to strong performance going forward on EYLEA, and we're very optimistic about what could be a next-generation product with our own aflibercept 8-milligram high-dose product if the Phase III data works out.

For your next-generation COVID antibody cocktail, will it be entering the clinic in the coming months? Was there a slight delay compared to the previous Q1 guidance? You mentioned the FDA is streamlining the development of monoclonal antibodies. Can you share your latest thoughts on how long it might take to reach the market? I noticed Bob indicated there won't be sales in the first half, so is there a possibility we could see something in the second half?

Yes. George can comment on what he thinks is necessary, but I just want to be clear. I don't think there's any delay, whether we come in just at the end of this quarter or early in the next quarter or thereabouts. It's tough to exactly estimate when we'll start. But we're scaling up, and we're rolling forward. George can comment on some of the global and U.S. regulatory considerations and guidances that we know about thus far.

Yes. There's not much to add. I mean, we're continuing to discuss with regulators what the program is and what the abilities as was done with vaccines to expedite the development programs compared to what was necessary for the first-generation agents developed using the same platform. So we will update that as we learn more.

George, there's some confusion, so could you clarify? Our next-generation antibody work on Omicron actually encompasses all variants. Yes, George, please proceed.

As I mentioned in my script, we have one of the largest collections of antibodies to choose from. And what we do as a variant emerges is we select new candidate antibodies that will work against the new variant, but will also retain their activity against the previous variants of concern. And that's exactly the candidates that we're advancing right now. They work against Omicron, but they work against Delta. They work against all the other variants before.

Do you think it will be effective against stealth Omicron as well?

Well, yes. Obviously, we take all these things into consideration. And so when a new variant that may be coming along that looks like it could be important, we certainly have made sure that the candidates that we're advancing now are going to be active against all of those as well.

Could you just speak to the RNAi programs? I think we're going to get first data this year from ALN-APP from that program. And how do you think about the optimization of delivery to the brain here and what we might see and how the C5 program could be differentiated?

You're inquiring about our brain and CNS initiatives, particularly the APP program and the C5 project. Regarding the brain, we've encountered some setbacks with antibody treatments aimed at reducing APP levels. These antibodies work differently and can trigger inflammatory responses that complicate treatment. In contrast, siRNA programs represent a novel approach, aiming to reduce APP production and enable its natural clearance instead of continuously producing it and relying on potentially harmful methods to remove excess. We are not solely focusing on Alzheimer's disease; the initial results in that area won't necessarily capture the critical endpoints like cognitive function and the effectiveness in slowing cognitive decline. We will be monitoring biomarker levels instead. This is why we are also enthusiastic about developing our program for a much rarer condition called cerebral amyloid angiopathy, or CAA. In this scenario, we can assess biomarkers and, more crucially, meaningful effectiveness measures more rapidly, even with fewer patients. Over the next few years, we could potentially demonstrate definitive efficacy and possibly secure regulatory approval, significantly advancing treatment options in this realm, especially as it's the first siRNA treatment addressing these conditions. We have an extensive pipeline targeting various CNS diseases and collaborative efforts with Alnylam, including numerous genetically validated targets, both in the eye and elsewhere, such as the liver. This brings us back to your question about C5. Many are pursuing single approaches to target C5, including antibodies. However, we believe that combining an siRNA with an antibody could harness the strengths of both methods and create powerful synergies. Antibodies can significantly reduce activity levels, but the high target load necessitates administering considerable amounts frequently. On the other hand, siRNAs effectively lower the target load, although they don't fully eliminate activity, which can lead to challenges. By combining the two, we can lower the target load and potentially use a much smaller amount of the antibody to manage activity effectively. This combination is unique and holds great promise to provide optimal effectiveness while also improving convenience in dosing regimens, such as a monthly self-administered subcutaneous injection, which could transform treatment for patients. We are also extending these programs to related indications, highlighting our excitement about this combination strategy for C5 and other similar situations. Just as we are innovating in CNS and eye treatments, these advances represent significant franchise and portfolio opportunities. The potential to combine siRNA and antibody benefits could have far-reaching implications across numerous fields. Collaborating with leading companies in siRNA and antibodies positions us well to bring together the advantages of both technologies.

Can you discuss the VEGF market? It looks like we've been approaching a year of over 10% growth. I'm curious about how much of this is due to catching up versus a natural increase in the market growth rate compared to our expectations. Also, could you elaborate on the competitive dynamics in this market, such as the time required to obtain a J code and establish contracts with various practices? Essentially, how long will it take for a new competitor, whether innovative or a biosimilar, to effectively compete in this space?

Sure, I'm glad to take your question, starting with the latter part first. The ability of a competitor or a new player in the market to compete hinges significantly on how well they differentiate their product, the quality of their studies, and the level of confidence and enthusiasm from key opinion leaders regarding the product. Differentiation is crucial. With EYLEA, our growth over the past year has been substantial. We have captured not only the overall market growth but also gained market share more than any other products, bringing our market share for EYLEA close to 50% in the overall category and 75% in the branded category, with several share points gained in the past year in this large category. Now, regarding new entrants and the timing of J codes, that's an important aspect. The quality of a product, as I mentioned, impacts confidence in its performance, but it typically takes six months for a new product to acquire a permanent J code. During that time, especially for a product that is buy-and-bill, there can be concerns about reimbursement. There is a lack of experience not only with the product but also with applying for reimbursement under the J code. That timeframe is six months. Additionally, product confidence can vary based on its profile. I may have overlooked discussing the anticipated growth of the anti-VEGF category. This is somewhat complex due to recovery in the market following the COVID period. However, there is growth in the category driven by patient demographics and increased education. For instance, only about 47% to 48% of patients diagnosed with DME receive treatment, and among all DME patients, only around 25% are treated. Therefore, there remains a significant unmet need in the market, and we are committed to working hard through educational initiatives to ensure we continue to perform well across all our indications. I hope that clarifies things.

Can I just add one thing, Ronny, on that? It's just that it seems like it's been every single year for the last decade there has been a threat to EYLEA that a variety of number of people have predicted would be the next thing to displace EYLEA. And along the way, the barriers have changed. And the most important barrier that I think now exists is safety, and that safety, even for a biosimilar, the same product safety for a new product with purported differences, people have learned that the eye is a very sensitive place. And having given scores of millions of injections of EYLEA, there's a great deal of confidence out there. I think it's going to take a matter of time beyond J codes and meeting with practices before that level of confidence is significantly displaced.

This is Nicole on for Robyn. Just a really quick question on yesterday's report, the Adicet Bio disclosing their general exercising option to license an allo CAR-T. Can you just comment on the move towards allo CAR-T and why this particular happened?

Could you repeat the end of the question? It was a little hard to hear the question.

The Adicet?

Yes. But what was the question? Can you repeat it?

Why does that matter? What's the importance of it?

This represents a significant advancement in the CAR-T field because the current and future approved methods rely on tailored, individual autologous CAR-T cells. The results emerging from this innovative gamma delta approach are the first of their kind globally, demonstrating that allogeneic cells can elicit a remarkable response rate, even in small quantities. This could shift the focus from customized autologous treatments to a non-autologous approach, potentially transforming the treatment landscape. We have been long-term partners with Adicet, and we are very enthusiastic about this allogeneic method, prompting us to invest in it.

I was hoping for one on co-stim. I know we're supposed to get some data this year. Can you just maybe help us think about dosing levels, how you're thinking about safety currently? And just in terms of initial data, what should we expect to see, whether it's just about safety or we should really start to have some idea on efficacy as well?

Yes, that's a significant question. As we know, this pathway was investigated many years ago and unfortunately resulted in serious safety issues for patients, which effectively halted progress in this area. Due to those issues and the need to reassess the use of this potent co-stimulatory pathway in combination with other immunotherapies, the FDA required us to proceed with extreme caution. Consequently, our primary concern has been safety, as the guiding principle is to first do no harm. We announced that in our ongoing dose escalation study, we have only recently reached what we believe are therapeutic dose levels. We have successfully overcome significant safety challenges that could have been detrimental to our progress. Now that we have reached potentially therapeutic dose levels, our focus is shifting towards evaluating efficacy. In some of our programs, particularly our prostate program, we are entering a context where there are generally negligible or extremely rare responses to PD-1 in carefully selected prostate cancer patients. There has been little optimism except among certain subsets of patients with specific mutations that respond to the PD-1 immunotherapy class. If we can demonstrate any responses in these challenging and difficult-to-treat patients with PD-1 alone in our combinations with our co-stimulatory therapy for prostate cancer, it would indicate that our team has devised an innovative strategy to safely leverage this well-known but risky pathway. We hope to show this year that we can achieve results without triggering the major safety concerns seen in the past. Observing any objective responses in this context would be potentially transformative. We are eager to share updates about this potential later this year.

Wondering if you could frame expectations for the pending update on your program with Intellia that we're getting here near term. What new might we see relative to last summer's preliminary data disclosure?

Yes. We don't want to get too far in front of our partner. George's remarks already indicated the kind of things we'll see, but we should leave it up to Intellia to comment beyond what George said about looking at the dose escalation and including the safety and knockdown of the TTR. But Intellia should have the benefit of making some comments.

But maybe just a couple of obvious points that's not stealing anybody's thunder. But obviously, the initial results were incredibly exciting and revolutionary. Obviously, the first systemic case CRISPR therapy, I mean, all this excitement for almost 20 years, Nobel prizes and all this, I mean, it is incredible that, together with our Intellia colleagues, this represents the first-ever systemic use of CRISPR to actually modify human genetic gene. But obviously, one of the most important things that one will see is the whole promise of this approach is duration, that is you are modifying the gene. And hopefully, you will never have to treat that patient again, okay? And that's part of the dream and the hope with these genetic cures. And so the longer you follow them up, the more you can validate the duration with, of course, the appropriate safety and continue to keep the dream alive that this whole new approach could really be game-changing for important and appropriate clinical indications.

And congrats on the progress. Maybe another one on faricimab. And given that your competitor also has Lucentis, which is facing biosimilar this year, are you seeing any rumblings of potential bundling or attractive pricing for those both products combined, that could be played as a strategy to take on EYLEA? And how much does payer versus provider matter in this market?

Sure. So at a high level, I'll share just and talk about our own business is, certainly, we have strong market understanding and we work closely with all of our customers across the market segments. When it comes to how another company might be looking at their pricing or strategy, it's probably best I let them comment. But I appreciate the interest in the category and the question.

Thanks, everyone. That concludes today's conference call, and thanks for your interest in Regeneron. The IR team and Bob Landry is here to take any questions that you may have. Everyone, have a nice day.