Regeneron Pharmaceuticals Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 2, 2024

There are 12 speakers on the call.

Operator

Welcome to the Regeneron Pharmaceuticals 4th Quarter 2023 Earnings Conference Call. My name is Shannon, and I will be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded.

Operator

I will now turn the call over to Ryan Crowe, Senior Vice President, Investor Relations. You may begin.

Speaker 1

Thank you, Shannon. Good morning, good afternoon and good evening to everyone listening around the world. Thank you for your interest in Regeneron and welcome to our Q4 2023 Earnings Conference Call. An archive and transcript of this call will be available on the Regeneron Investor Relations website shortly after the call ends. Joining me today are Doctor.

Speaker 1

Leonard Schleifer, Board Co Chair, Co Founder, President and Chief Executive Officer Doctor. George Yancopoulos, Board Co Chair, Co Founder, President and Chief Scientific Officer Marion McCourt, Executive Vice President and Head of Commercial Bob Landry, Executive Vice President and Chief Financial Officer and Chris Fenimore, Senior Vice President and Controller. As many of you already know, Bob will retire from Regeneron After our Form 10 ks is filed next week and Chris has been appointed to become Regeneron's next CFO upon Bob's retirement. After our prepared remarks, the remaining time will be available for your questions. We anticipate today's call will last approximately 60 minutes.

Speaker 1

I'd like to remind you that remarks made on today's call may 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 forecast and guidance, development programs and related anticipated milestones, 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 ks for the year ended December 31, 2023, which we expect to file with the SEC on Monday, February 5. Regeneron does not undertake any obligation to update any forward looking statements whether as a result of new information, future events or otherwise.

Speaker 1

In addition, please note that GAAP and non GAAP financial measures will be discussed on today's call. Information regarding our use of non GAAP financial measures A reconciliation of those measures to GAAP is available in our quarterly earnings results, press release and our corporate presentation, both of which can be accessed on the Regeneron Investor Relations website. Once our call ends, Bob, Chris and the IR team will be available to answer any further questions. With that, let me turn the call over to our President and Chief Executive Officer, Doctor. Len Schleifer.

Speaker 1

Len?

Speaker 2

Thank you, Ryan, and thank you to everyone joining today's call. Q4 2023 capped another strong year for Regeneron, And Bob will walk you through our financial results. For my remarks today, I'd like to briefly look back at 2023 and then discuss what's to come in the year ahead. 2023 was another remarkable year for Regeneron, highlighted by several significant achievements that better position the company to deliver sustainable growth and long term shareholder value. At the start of the year, We identified 5 key strategic imperatives.

Speaker 2

1st, obtaining FDA approval and successfully launching EYLEA HD. We did encounter a minor delay when we received a complete response letter in late June due to an issue at a 3rd party filler. But this was quickly remedied and EYLEA HD was granted approval in mid August. With what we believe to be a best in class potential clinical profile, EYLEA HD is poised to become the new standard of care for patients with wet age related macular degeneration and diabetic eye diseases. The launch is off to a great start, which Marion will discuss in a few minutes.

Speaker 2

2nd, we had to defend our intellectual property related to EYLEA. We presented our best case and prevailed in district court, which found that one of EYLEA's formulation patents was both valid and infringed by a biosimilar of flivroset manufacturer. This favorable decision may have broad implications and could result in a delay to biosimilar of Flimrstat launches. 3rd, we and our collaborator Sanofi needed to continue driving Dupixent growth, not only by further penetrating previously approved indications, by also reaching even more patients suffering from other diseases driven by Type 2 inflammation. In 2023, we did both.

Speaker 2

Dupixent global net product sales grew by 34% on a constant currency basis to $11,600,000,000 Dupixent led in new to brand prescription share in the United States across all five of its approved indications. We also had a major breakthrough in chronic obstructive pulmonary disease or COPD. In March, we reported strong data from the Borreas study, which enrolled COPD patients with uncontrolled moderate to severe disease and evidence of Type 2 inflammation. The FDA granted breakthrough therapy designation during the summer, but required additional evidence of efficacy to support a regulatory filing. Based on this feedback, we and Sanofi decided to conduct an interim analysis on the replicate NOTICE study, which read out similarly compelling results, enabling our December SPLA submission and a potential U.

Speaker 2

S. Launch for this indication as early as mid-twenty 24. 4th, we continued making progress toward our long term goal of becoming a global leader in oncology. 2023 was highlighted by our regulatory submissions for linvoseltamab, our BCMA by CD3 bispecific in myeloma and ogenextimab, our CD20xCD3 bispecific in lymphoma, while continuing to advance other opportunities in solid tumors. And finally, we needed to advance our early stage pipeline.

Speaker 2

And over the course of 2023, we presented intriguing proof of mechanism or proof of concept data across hematology and genetic medicines as well as other areas including obesity with data from non human primates. Many of these early programs, which George will run through in a few minutes, represent 1st or best in class opportunities that we believe can drive long term growth for Regeneron. Accomplishments in 2023 have put us in a position of strength entering 2024. For this year, one of our strategic imperatives is continue driving commercial execution, especially the ongoing launch of EYLEA HD with the goal of accelerating the pace of conversion from other anti VEGF agents. Another important launch milestone was achieved last month When the Center for Medicare and Medicaid Services assigned a permanent J code for EYLEA HD that will go into effect on April 1, 2024, at which point a potential reimbursement concern for physicians will be removed.

Speaker 2

We also need to continue to drive Dupixent growth in its currently improved indications as well as from the potential FDA approval and launch in COPD with an eosinophilic phenotype. If approved, Dupixent would represent the 1st meaningful advance in over a decade for the 300,000 patients in the United States suffering from this form of COPD and would be the first ever biologic approved for COPD. In oncology this year, aside from continuing to build on the success of Libtayo in non melanoma skin cancers And non small cell lung cancer, we're excited about the potential launches of odeoniximab and Limboceltamab, the latter of which has the potential to be the best in class bispecific for myeloma. We also expect to make significant advances across our pipeline in 2024 with key readouts for fianlimab or LAG-three antibody in combination with Libtayo in metastatic melanoma and non small cell lung cancer. Libtayo in adjuvant cutaneous squamous cell carcinoma and our Factor XI antibodies in thrombosis, which may inform pivotal studies.

Speaker 2

We also plan to initiate clinical trials in obesity, geographic atrophy, Hemophilia B and severe food allergies in addition to expanding early studies of our CD28 co stimulatory bispecific programs in solid and hematologic malignancies. In closing, we had a strong 2023 and are poised to deliver in 2024 and beyond. Our pipeline of over 30 clinical programs is delivering important and differentiated innovations. Our commercial team is executing well And we continue to look at ways to efficiently deploy capital to drive shareholder returns over time. Before I hand it over to George, I want to take a moment to thank Bob Landry for his many contributions to Regeneron over his 10 years as our Chief Financial Officer.

Speaker 2

In addition to helping fortify Regeneron's financial strength and discipline, Bob has been an incredible mentor to many of Regeneron's current and future leaders, helped drive our financial results over the past decade and work tirelessly to ensure we have the resources needed to help improve the lives of patients around the world. Bob, on behalf of the entire Regeneron family, thank you and we wish you continued good health and happiness. As we first announced back in September upon Bob's retirement next week, Chris Fenimore will become the CFO of Regeneron. We all look forward to working closely with Chris in his new role, knowing he brings a similar rigor and depth of financial knowledge that will ensure continuity and collaboration across the organization. With that, I'll now turn the call over to George.

Speaker 3

Thanks, Glenn. That was really an impressive overview, I have to say. 2023 was another year of first delivered by Regeneron as well as together with our collaborators, all of which have the potential to change the practice of medicine. Starting with inflammation and immunology. As you heard from Len, we are planning yet another launch for Dupixent, This time in eosinophilic COPD, which would represent the 6th disease that this remarkable medicine is approved to treat and the 5th for which it would be 1st in class.

Speaker 3

Dupixent's transformative potential in COPD It's based on the unprecedented results from our 1st Phase 3 trial, Boreas, which would then confirm by our 2nd Phase 3 trial notice, demonstrating that Dupixent treated patients had a 34% reduction in the annualized rate of moderate to severe COPD exacerbations IL-thirty three blocking antibody, the pivotal ARO-five twelve studies passed an interim futility analysis last year. The studies are now on track to complete enrollment in 2024 with an anticipated readout in 2025. If the Phase 2 results from these studies even approach the Phase 2 data reported in former smokers where a 42% reduction in annualized exacerbation rate was observed, idotetimax has the potential to further transform the treatment paradigm for COPD. Later this year, we are planning on testing an innovative new treatment approach for severe food allergies using a combination of transient BCMAxCD3 bispecific intervention in patients receiving Dupixent therapy. As many of you know, allergic responses are driven by pathologically high levels of the immunoglobulin E or IgE.

Speaker 3

This is why many say the E in IgE stands for evil. About 40 years ago, it was that interleukin-four and interleukin-thirteen were the switch factors required for switching to IgE production. Based on exciting preclinical data, including in non human primates as well as human data, Our innovative approach has the potential to reverse severe allergies by first eliminating the long lived plasma cells that serve as an IgE reservoir with the BCMAxCD3 followed by blocking of de novo immunoglobulin class switching to IgE with the Dupixent. We are looking forward to starting a small proof of concept study, which will inform next steps for this program. We believe this approach has to benefit the millions of people suffering from severe allergies who are at constant risk.

Speaker 3

As tragically highlighted just last week by the widely reported death of yet another young person unknowingly exposed to a food allergen. Moving to oncology. Libtayo is the leading PD-one antibody for non melanoma skin cancers, including metastatic cutaneous squamous cell carcinoma or CSCC and basal cell carcinoma. We are looking forward to potentially expanding the currently approved CSCC indication to include adjuvant CSCC and we expect results from potentially pivotal interim analysis in this setting in the second half of the year. Regarding Libtayo combinations, our most advanced is the combination with our LAG-three antibody cenlimab.

Speaker 3

As a reminder, our early clinical data in 3 separate first line metastatic melanoma cohorts demonstrated potential for best in class efficacy when compared cross trial with the approved anti LAG-three PD-one combination product, Highlighted by objective response rates greater than 60% and estimated median progression free survival of longer than 15 months. These early clinical data suggested that the leptiofilumab combination may be one of the most exciting examples of a checkpoint inhibitor combination With clinically meaningful benefit and with the safety profile that is similar to that seen with anti PD-one monotherapy. We are expecting a potentially pivotal initial readout from our first line metastatic melanoma trial by the end of this year. We also anticipate Phase 2 data in non small cell lung cancer in late 2024. On to bispecifics, Starting with solid tumors.

Speaker 3

In the dose escalation trial of our EGFR by CD28 cost inventory bispecific Combined with Libtayo, we have observed promising activity in microsatellite stable colorectal cancer with higher doses of the costin. In terms of safety, so far we have not seen an increase in immune related adverse events with viscosity. Based on these encouraging early data, which will be presented at a scientific forum later this year, we will be initiating expansion cohorts across several solid tumors in the first half of the year. In 2024, we are also planning to provide updates for our MUC16xCD3 and MUC16xCD28 programs in advanced ovarian cancer. Next, our bispecific for hematology oncology.

Speaker 3

For levoseltamab, our BCMAxCD3 bispecific for multiple myeloma, FDA acceptance of our BLA submission is expected later this month and the EMA recently accepted our MAA submission. These submissions were supported by potentially best in class profile in late line myeloma in terms of efficacy, safety, dosing as well as convenience. A confirmatory Phase 3 study as well as studies in earlier stages of myeloma and pre malignant disease are enrolling or will soon begin enrolling patients. For odranexamab, our CD20xCD3 bispecific for non Hodgkin lymphoma, The FDA decision for our BLA is expected by its March 31 PDUFA date and the U decision is expected in the second half of the year. In terms of additional recent news for our oncology and immunology pipeline, this week we announced the formation of Regeneron Cell Medicines Unit and that we are acquiring full development and commercialization rights for 270 Bio's pipeline of investigational immune cell therapies.

Speaker 3

We have worked with 270 since 2018 on many of these programs and are excited about the opportunity to continue advancing our collective efforts. After deal closing, certain 270 employees will join Regeneron Cell Medicines and continue to work on addressing cancer and other serious diseases in novel ways, including by combining Regeneron's antibody capabilities with CAR T therapies. Moving from immunology and oncology to obesity and metabolic diseases. Despite all the enthusiasm Surrounding GLP-one agonist for obesity, it has been increasingly recognized that the profound weight loss is accompanied by substantial muscle loss accounting for up to as much as 40% of the weight loss. This potentially irretrievable muscle loss can be catastrophic for patients and may even lead to major public health concerns in the future.

Speaker 3

We have previously shown that our antibodies targeting myostatin and active NA have the potential to preserve and grow muscle in human trials. Based on these data as well as additional data in obese non human primates, We believe that inhibiting these pathways on top of GLP-one receptor agonism has the potential to achieve comparable overall reductions in body weight, but with improved quality of weight loss resulting in more fat loss while preserving or actually increasing muscle mass. In mid-twenty 24, we plan to start our first clinical trial to evaluate the combination of our muscle preservation antibodies in combination with semaglutide. Also in 2024, we are anticipating proof of concept data for a Factor XI antibodies in the setting of prevention of venous thromboembolism after knee replacement surgery. Based on preclinical and healthy volunteer data, our antibody approach demonstrated more complete Factor XI blockade compared to competing approaches in development for coagulation disorders.

Speaker 3

And the program is on rapid path to a registrational trial starting late this year or early next year. We'll now conclude with our efforts in genetic medicines. Our siRNA collaboration with Alnylam has demonstrated successful silencing of genes in the liver and for the first time for siRNA in the brain. Proof of principle was achieved for ALN APP last year And we are anticipating additional data from that program this year, including from patients who have received multiple doses. Based on the success, we are looking forward to targeting CNS diseases entering the clinic this year such as ALN SOD for ALS patients with SOD1 mutations.

Speaker 3

Our collaboration with Intellia on CRISPR gene editing continues to advance where we together produced the first example of CRISPR based gene editing of a pathological gene in human beings. This initial program For our lead indication of TTR amyloidosis with cardiomyopathy is now in the first in vivo CRISPR program clear to enter Phase 3 studies in the United States. Together with Intellia, we also hope to be the 1st to use CRISPR technology to insert a corrective gene for deficiency disease. We recently achieved IND clearance for our CRISPR based gene insertion program for Factor IX and initiated the lead in portion of the clinical trial to evaluate it as a potential cure for hemophilia B. Moving to genetic hearing loss.

Speaker 3

We were the 1st U. S. Based to announce hearing restoration in a young child suffering from genetic hearing loss after treatment with our novel gene therapy approach. We're excited by these early results for this ultra rare disease and look forward to advancing to the clinic additional programs to potentially address more common forms of monogenic hearing loss. These data represent validation of our viral based gene therapy program, In this case, locally delivered to the cells of the new year.

Speaker 3

Beyond these efforts, we have made significant investments in leveraging our monoclonal and bispecific antibody expertise to use these agents to systematically deliver virally based genetic based payloads directly to specific tissues in the body non amenable to local delivery such as to muscle and the central nervous system. Based on encouraging preclinical data, we will be progressing these approaches to the clinic in the coming years. Finally, concluding with another notable first in class program involving a combination of an siRNA with an antibody in this case to block the C5 complement target. Normally, One needs very high levels of infused antibody to achieve sufficient efficacy because of high target levels Regarding C5, but our siRNA co treatment dramatically lowers C5 target burden allowing lower and more convenient antibody dosing. We recently shared encouraging initial data from a Phase 3 study in patients with PNH, which supported our hypothesis that this combination approach could provide better efficacy and control of breakthrough hemolysis with more convenient dosing.

Speaker 3

Based on building on these data, we continue to enroll our Phase 3 studies in PNH and myasthenia gravis. We're also planning to extend this combination approach to geographic atrophy and dry AMD. While this combination is expected to have manageable Systemic toxicities including elevated risk of infections, we believe that our approach has several potential advantages over recently improved complement inhibiting agents for GA, which are delivered directly into the eye and have resulted in rare, but serious cases of retinal vasculitis, sometimes resulting in permanently impaired vision. In conclusion, Regeneron's R and D engine continues to grow and deliver many firsts, including differentiated early, mid and late stage opportunities and we are looking forward to additional progress in 2024. Before I turn the call over to Marion, I would like to add my thanks and appreciation to Bob for his many years of devoted efforts and leaderships and welcoming and look forward to adding Chris Fenimore to our leadership team.

Speaker 3

With that, I will turn it over to Mary.

Speaker 4

Thanks, George. Our business delivered strong results in the Q4 and for the year. Over the course of 2023, we successfully launched EYLEA HD, grew Dupixent across approved type 2 inflammatory diseases and expanded Libtayo's presence in lung and non melanoma skin cancers. We look forward to several potential approvals this year in new therapeutic categories, including in COPD with Dupixent and in hematologic oncology using new treatment modalities. I'll start with our retinal franchise.

Speaker 4

In January, we announced 4th quarter combined U. S. EYLEA HD and EYLEA net product sales of $1,460,000,000 In its 1st full quarter, EYLEA HD net product sales were 100 $23,000,000 based on growing demand and positive early physician experience. EYLEA HD is already being used across a broad range of patient types, including those switching from EYLEA, other branded agents or Avastin, as well as modest but increasing use in treatment naive patients. In the Q4, EYLEA HD and EYLEA Together secured 49% of the anti veg def category share despite increasing competition and changing market dynamics.

Speaker 4

This share gain was driven by the differentiated efficacy and safety profile of our medicines as well as a short term disruption in compounded Avastin due to a quality issue at a large supplier that has since been resolved. Since launch, we have made significant progress in securing access and reimbursement for EYLEA HD. More than 2 thirds of eligible lives are now covered with the vast majority having first line or single step edit access. Medicare fee for service, which represents approximately 45% of total category use, claims are being paid across 100% of jurisdictions using a miscellaneous J code. Looking ahead in 2024, We remind you that the Q1 is typically impacted by payer reauthorizations and that EYLEA HD will remain subject to a miscellaneous J code.

Speaker 4

However, in late January, we achieved another important launch milestone with CMS' assignment of a permanent J code for EYLEA HD that will go into effect on April 1. This will provide additional reimbursement confidence for those physicians hesitant to prescribe before a permanent J code based on their negative experiences with other new eye disease medicines. Overall, we are very excited about the future of our retinal franchise. We continue to see physicians prescribe EYLEA HD in both treatment experienced and treatment naive settings as EYLEA is increasingly recognized as the new standard of care. Now to Dupixent.

Speaker 4

For Q4 2023, global net sales grew 31% on a constant currency basis to $3,200,000,000 and U. S. Net sales grew 28 percent to $2,500,000,000 With more than 800,000 patients on therapy worldwide, Dupixent is one of the most important biologic medicines for patients across the spectrum of diseases. Additionally, it continues to have significant growth potential based on new and upcoming indications. In the U.

Speaker 4

S, DUPIXENT leads new to brand prescription share across all five approved indications, an important leading indicator for future growth. In addition, Dupixent already leads total prescription share in 4 or 5 approved indications and we are approaching share leadership in biologic asthma. In atopic dermatitis, Dupixent's largest indication, physicians continue to prescribe Dupixent as a therapy of choice. Despite increased competition over the course of 2023, 4th quarter Dupixent new to brand prescription share in AD modestly increased sequentially compared to the Q3 2023, driven by its differentiated mechanism of action, clinical results and trusted safety profile including approval in patients as young as 6 months of age. Dupixent's U.

Speaker 4

S. Label was recently with efficacy and safety data for patients with moderate to severe hand or foot atopic dermatitis. Dupixent is the only biologic medicine with data in the label supporting use for this subset of patients with this hard to treat disease. Beyond atopic dermatitis, growth also continues in asthma and nasal polyps, both of which are already blockbuster indications. The recent launches for acinophilic esophagitis known as EOE and Praggan Onjularisk further contributed to Dupixent's performance and represent indications of significant growth potential.

Speaker 4

In EOE, which prior to Dupixent's approval had no FDA approved treatments, nearly 25,000 patients and the U. S. Alone have already initiated therapy on Dupixent. The FDA's recent approval of Dupixent in pediatric EOE extends this indication patients as young as 1 year of age were approximately 20,000 children in the U. S.

Speaker 4

Being treated for EOE with unapproved therapies. Patient initiations also continue to accelerate in Proaginantularis solidifying Dupixent as the standard of care for multiple dermatologic conditions. In summary, Dupixent is delivering on its potential as one of the most important biologic medicines of our generation with significant remaining opportunity for growth. We anticipate bringing Dupixent to many more patients this year across approved indications. The pediatric EOE launch is already underway and we are actively preparing to launch Dupixent in a synophilic COPD pending potential FDA approval later this year.

Speaker 4

And finally to Libtayo, 4th quarter global net sales grew 43% year over year on a constant currency basis to $244,000,000 with U. S. Net sales of $155,000,000 Libtayo continues to lead the category in non melanoma skin cancers And we've made progress in penetrating the non small cell lung cancer market. In 2024, we expect continued growth across all indications, advancing our goal to exceed $1,000,000,000 in annual Libtayo net sales. In conclusion, 2024 provides the opportunity to further build Regeneron's market leading positions with our medicines across even more therapeutic areas.

Speaker 4

Now I'll turn the call over to Bob.

Speaker 5

Thank you, Marion. My comments today on Regeneron's financial results and outlook will be on a non GAAP basis, unless otherwise noted. Regeneron ended 2023 with strong performance in the Q4. Excluding contributions from RanaPrive, Total revenues increased 14% year over year to $3,400,000,000 primarily driven by sales growth and margin expansion from Dupixent, the launch of EYLEA HD and strong sales growth from Libtayo. 4th quarter diluted net income per share was 11.86 dollars on net income of $1,400,000,000 Moving to collaboration revenue and starting with Bayer.

Speaker 5

Q4 2023 ex U. S. EYLEA net product sales were $890,000,000 up 4% on a constant currency basis versus the prior year. Total Bayer collaboration revenue was $377,000,000 of which $345,000,000 related to our share of EYLEA net profits outside the U. S.

Speaker 5

Total Sanofi collaboration revenue grew 19% in the Q4 of 2023 to $993,000,000

Speaker 6

Excluding a $50,000,000

Speaker 5

sales milestone recorded in the Q4 of 2022, Sanofi collaboration revenue grew 26%. Our share of collaboration profits was $886,000,000 an increase of 43% versus the Q4 of 2022, driven by Dupixent's continued volume growth and improving margins. Reimbursements for manufacturing of commercial supply, a component of Sanofi collaboration revenues declined 36% versus the prior year due to the implementation of a new higher yielding manufacturing process. At the end of 2023, the Sanofi development balance was $2,330,000,000 reflecting a net decrease of $534,000,000 compared to the balance as of December 31, 2022. Recall, this decrease is primarily recorded As a reduction to our share of collaboration profits, we continue to expect this balance to be fully reimbursed in the next few years, which would result in a significant step up in our Sanofi collaboration profits.

Speaker 5

Other revenue was $213,000,000 in the Q4 of 2023, up 66% versus the prior year, primarily driven by higher royalties from Novartis on sales of Alaris and an increase in our share of Arcolis profit from Kynitska. The increase in other revenue also reflects higher reimbursements for increased shipment volumes of ex U. S. Commercial supplies of Praluent to Sanofi. Moving now to our operating expenses.

Speaker 5

4th quarter 2023 R and D expense grew 13% year over year to $1,030,000,000 which reflects continued investment in our growing pipeline. R and D growth was primarily driven by higher headcount and related costs, funding of our advancing late stage programs and increased clinical manufacturing activity. SG and A grew 7% from the prior year to $622,000,000 in the 4th quarter, reflecting higher headcount and related costs and higher commercialization expenses, including costs to support the launch of EYLEA HD in pre launch activities for anticipated 2024 HemOnc product launches. 4th quarter COCM declined 12% from the prior year quarter to 210,000,000 Recall that we are reimbursed for these costs. Now to cash flow and the balance sheet.

Speaker 5

In 2023, Regeneron generated $3,900,000,000 in free cash flow ending the year with cash and marketable securities less debt of approximately $13,500,000,000 In 2023, we repurchased over $2,200,000,000 of our shares with approximately $1,500,000,000 remaining authorized for repurchase as of December 31, 2023. Since we began repurchasing our shares in 2019, we have bought back approximately $12,000,000,000 worth and plan to continue to make opportunistic repurchases. Now moving to our financial guidance for 2024. Note that these guidance ranges do not assume the completion of any business development transactions that were not completed as of today, including our recently announced agreement to acquire preclinical and clinical programs from 270 Bio. Starting with R and D expense in 2024, which is anticipated to be in the range of $4,300,000,000 to 4,500,000,000 As George just discussed and as we highlighted at the JPMorgan conference, our pipeline continues to expand with a growing number of registration Enabling studies ongoing are expected to initiate this year.

Speaker 5

These include potentially pivotal studies for fianlimab, Phase 3 studies in earlier lines of ogenexumab and limvaciltamab in our C5 programs. In addition, we expect to bring 8 to 10 new molecules into the clinic in 2024. We expect 2024 SG and A spend to be in the range of $2,500,000,000 to 2.65 $1,000,000,000 This reflects increased promotional activities for the ongoing launch of EYLEA HD, investments to support 2 anticipated HemOn product launches and higher headcount to support our growing organization inclusive of our ongoing international expansion. Manufacturing costs for Dupixent offset by higher Dupixent volumes and higher production costs for other collaboration products, including EYLEA HD for Bayer. Recall, we are reimbursed for COCM expenses And as a result, we expect reimbursement from Sanofi, which are recorded as a component of Sanofi collaboration revenue to be slightly lower in 2020 as compared to 2023.

Speaker 5

We expect the 2024 gross margin on net product sales to be in the range of 89% to 91%. We also expect our effective tax rate to be in the range of 10% to 12%. Finally, We expect capital expenditures to be in the range of $825,000,000 to $950,000,000 which reflects expansion of our R and D facilities at our Tarrytown, New York headquarters as well as continued expansion of our manufacturing capabilities, including ongoing construction of a fill finish facility in Rensselaer, New York. In addition to our full year guidance, we expect U. S.

Speaker 5

Net product sales of Praluent to be lower in 2024 as compared to 2023 due to changes in payer coverage. We also expect 2024 net product sales for Inmozeb to be in line with 2023 revenues with nearly all 2024 revenues expected to be recorded in the Q4. Finally, we anticipate other revenue in 2024 to be in line with 2023 with the second half expected to be higher than our First half. Overall, Regeneron performed well in 2023 and our continued investments position the company to drive long term shareholder value. Before I conclude, I'd like to sincerely thank Len and George for their kind words.

Speaker 5

Has been an honor to serve as Regeneron's CFO for these past 10 years, and I have appreciated all of my interactions with each of you in the investment community. I wish Chris Fenimore much success in this role and have the utmost confidence that he and the rest of the management team We'll continue to deliver breakthrough medicines for patients and value to shareholders. Thank you and I wish you all continued success. With that, I will pass the call back to Ryan.

Speaker 1

Thank you, Bob, and congratulations again. This concludes our prepared remarks. Will now open the call for Q and A. To ensure we are able to address as many questions as possible, we will answer one question from each caller before moving to the next. Shannon, can we go to the first question please?

Operator

Thank you. Our first question comes from the line of Tyler Van Buren with TD Cowen. Your line is now open.

Speaker 7

Great. Thanks, guys. Good morning. And I'd like to say congratulations to you as well, Bob. Wish you well during your retirement.

Speaker 7

Been a privilege to work with you. And Chris, I look forward to working with you as well. So in the opening, Len mentioned accelerating the rate of of patients from other agents to EYLEA HD. So can you discuss the different factors at play that will accelerate the rate over the year, which I assume includes the permanent J code and also the robust sampling effort that is impacting tube mix sales?

Speaker 4

Sure, Tyler. I'm happy to answer. So as I mentioned, we're very encouraged by the early performance of EYLEA HD in the market and a number of factors early are driving that success. First, it's the clinical data, which is now showing in the actual market real world setting the efficacy, safety and durability of EYLEA HD all very important factors. As we look to the future, physicians will build upon their early experience.

Speaker 4

And as I mentioned, that experience is coming from conversion patients from branded agents broadly, Avastin and also in some cases naive patients. But going forward, I would share that to ongoing experience and confidence, the reimbursement consideration is very, very important for physicians and some are hesitant to private product that doesn't have a permanent J code. So we do look forward to that occurring, April 1 beyond based on CMS' recent update. And then in addition to reimbursement confidence, we've made progress certainly in payer coverage. We anticipate making more.

Speaker 4

And certainly the experience in market to date with EYLEA HD has been very favorable for physicians and that is the probably the Most important, those differentiating characteristics of the product.

Speaker 1

Thanks, Mary. And Shannon, next question please.

Operator

Our next question comes from the line of Brian Abrahams with RBC Capital Markets. Your line is now open.

Speaker 8

Hey guys, thanks for taking my question and congrats to both Bob and Chris. I was wondering if you could maybe talk a little bit about the differentiation of the emerging obesity portfolio as you move into the next wave of studies. I know a patent filing revealed that the antibody tethered GLP-one shows very competitive weight loss in animal models. So I'm wondering where you see that most, is it tolerability in biodistribution or dose frequency or somewhere else? And then I know others are pursuing myostatin as well on top of GLP-1s, just curious where do you see your biggest competitive advantage there?

Speaker 8

Thanks.

Speaker 3

Okay. Well, Let me start with the latter first in terms of muscle preservation. Other people have related approaches, but we're the only ones we're the ones who discovered that there are 2 key ligands or growth factors that control muscle size. Myostatin, myostatin 1 we call it and myostatin 2 are active in A. And we're the only ones that have specific blocking antibodies for those 2.

Speaker 3

And we are testing them together and individually. And the reason why that's important is, It's going to be a combination of both efficacy and safety that matters here. So we're going to see which approach does the best in terms of the muscle preservation in the face of the profound muscle loss that you can see with GLP-one agonist treatment, but we're also going to see the safety profiles. And I think that that's going to be so critical because safety is so And I think that that's going to be so critical because safety is so important here. Other people are just testing One of these agents alone, I believe the milestone and others are testing very broad approaches such as trying to block the receptors for these factors.

Speaker 3

The problem with the receptor blockade approach is that the receptors that are used by these factors are also used by over a dozen other ligands that have very diverse biologic functions And you can easily imagine that by blocking so many diverse functions, you might end up having all sorts of safety issues, which you're not going to want to be able to be dealing with in the setting of a treatment that's intended to optimize Obesity and body weight loss and give benefit to the patients. So our programs are very different In that, we discovered the 2 key regulators, the 2 key growth factors. We have separate antibodies blocking them both And we're evaluating them separately and together in the setting of GLP-one receptor agonist to see what gives us the best benefit visavismuscle preservation as well as safety profile. While we're doing that, as we said, we're initiating those trials this year, We are also developing unimolecular solutions. So whichever approach works best, we hope to have The possibility of having a tethered GLP-one as you put it associated with the right set of antibody molecules.

Speaker 3

So they will have the advantage of having a unimolecular solution that can provide all in one benefit in terms of providing hopefully The best convenience profile and potentially once a month dosing together with providing not only The weight loss, the profound weight loss that one is seeing with GLP-one receptor agonist, but now complemented by providing muscle prioritization, but with the safest possible approach. So we think that we have the most unique program in terms of addressing all these possibilities and we're very, very excited about these programs.

Speaker 1

Thanks, George. Sharon, next question please.

Operator

Our next question comes from the line of Mohit Bansal with Wells Fargo. Your line is now open.

Speaker 6

Great. Thank you very much for taking my question and thank you, Bob, for all your help over the years. Maybe so one question for Marion. Can you just comment on the trends in the Anti VEGF market underlying trends, I mean, is the market growing or you are growing fast as fast as in the past or is it slowing down a little bit? And in that context, how do you see the outlook for Hydro Xylia plus Xylia going forward with underlying demand out there?

Speaker 6

Thank you.

Speaker 4

Sure, Mohit. So there is variation between quarters years as it relates to anti VEGF category growth. Overall though, the category is healthy from a growth standpoint. Unfortunately, based on the number of individuals with diabetes or diagnosed with diabetes, On a brighter note, aging population is good. So overall, we see it as healthy category growth, but there is variability.

Speaker 4

And As an example, there has been some decline by a couple of points between last year and this year overall.

Speaker 1

Okay. Next question please, Shannon.

Operator

Our next question comes from the line of Christopher Raymond with Piper Sandler. Your line is now open.

Speaker 9

Thanks. Maybe just another EYLEA question. So I know you guys don't want to get sort of too granular on your pricing strategy, but we've been struck that Even with the 2 milligram format revenue contracting the last couple of quarters, our checks show that it's really not a market share issue. In fact, share of that format remains up around an all time high. So one would think that's been price erosion that's been driving that.

Speaker 9

Just understand this may be a strategy to maximize the HD launch. In broad stroke, can you talk about what we should be expecting in 2024? Do you expect further price erosion for that 2 milligram format or if things sort of leveled off?

Speaker 2

Yes. I'm not sure we want Mary to get into the details of our strategies, pricings, rebates, things like that. But we can say and maybe could add thoughts with that we view it as a very competitive marketplace. There has been some price erosion on some of the products in the marketplace. We're starting at a new point with EYLEA HD.

Speaker 2

We think if we priced it well, it was received well, it was intended to match on a yearly basis. And so we think the actual price point was fine. I don't know if Mary wants to add anything at all, but we don't like to comment specifically On those competitive dynamics?

Speaker 4

Yes. Chris, really nothing in everyone to add to that.

Speaker 6

Okay. All

Speaker 1

right. Next question please, Shannon.

Operator

Our next question comes from the line of Colin Bristow with UBS. Your line is now open.

Speaker 10

Good morning and thanks for taking the questions and all the best in the future, Bob. Maybe a couple more on The muscle sparing myostatin program. I'm curious, George, what are your thoughts around the potential concerns of myostatin targeting and increases or preserves muscle volume, but the muscle is less functional. And then any thoughts on the regulatory pathway that you would utilize for these muscle sparing assets? Thank you.

Speaker 3

Okay. So first of all, we've done extensive work in preclinical models. And these antibodies have already been in humans. We believe that our studies are actually showing That this muscle is functional and certainly very important from both the metabolic and energy expenditure point of view. So far those studies are very supportive of this whole approach.

Speaker 3

I should also say there's a variety of regulatory pathways that we're pursuing here. Obviously, the easiest which would come from the possible results that we're seeing in the animal studies is if there's incrementally more weight loss that might suffice as a regulatory strategy. Alternatively, If it's just the quality of the white loss, then we would have to show functional outcomes in terms of strength and so forth and so on. So those are still early in the thinking. We have to see from these initial studies.

Speaker 3

But as I said, If we simply see increased weight loss that would be the simplest way forward. And then you have more weight loss, but better body composition data and may also maybe better metabolic benefits, which we also see in muscle, which could also provide additional pass to approval. So it depends on those results that we're going to get from the initial studies. I should also mention, in terms of additional programs that we have In obesity, I mean, these are things that are here and now that we're doing these clinical trials and we hope to be getting results over the course of The next year, year and a half that could really inform in terms of all these questions that you have and really validate that there's real promise here. But remember, We're doing a lot of other things as well in obesity that are in earlier stages.

Speaker 3

So for example, As you probably know, we discovered a brand new promising target in obesity using our Regeneron Genetics Center, The largest big data set on the planet in terms of human sequence linked to electronic health records and identified In some ways one of the most exciting new targets in obesity that's been ever discovered. And we have a variety it's called GPR75. It was published in a prominent paper in science about a year or so ago. And we have a variety of promising and not that far away approaches from the clinic in terms of blocking this target for weight loss. And I think that we presented at JP Morgan Early preclinical data using siRNA approaches that look very exciting.

Speaker 3

I should also mention that in terms of smaller programs and so forth, We have things like a very exciting leptin receptor activating antibody that has had very promising human data as well. So there's a lot of things going on, but I think the muscle preservation program and how it goes forward is going to be very interesting to look at over the next year, year and a half.

Speaker 1

Thanks, George. Shannon, next question.

Operator

Our next question comes from the line of Evan Seigerman with BMO Capital Markets. Your line is now open.

Speaker 8

Hi guys. I have one final question for Bob. So Bob, you've done an outstanding job managing the financials of the business and helping drive shareholder returns over the past decade. Looking ahead, how do you believe Regeneron can best use its rapidly growing cash balance to further drive investor returns in the next decade of Regeneron? Thanks for everything, Bob.

Speaker 5

Evan, thanks for the question and thanks for the video that we were able to show at my retirement party. It was great. On that question, George just laid out earlier today, we have so many opportunities with regards to our kind of research and development. And again, I mean, I'm going to hand the mantle over to Chris, but his number one priority within capital allocation is to make sure that that is kind of fully funded. Len and George do a great job with regards to making sure what we're bringing into the clinic has opportunities and they're going to continue to do that and there's just a lot coming when I said kind of 8 to 10 INDs.

Speaker 5

Proud on buybacks, maybe I've kind of circled too much on that with regards to how much we bought back and at what price, but we have a good methodology here that Chris is ingrained with and he'll continue to do that. And with regards to business development, I mean, just because we can doesn't mean we're going to force something. It has to be right. It has to be a franchise, has to be modalities. You've heard George mention that has to be kind of incremental to what we currently have in the clinic here with regards to RGC and the targets we develop and all of that.

Speaker 5

So we will remain prudent on that, continue to be proud of the free cash flow that we're generating and I trust that Chris, George, Len and the Board will optimize it and put it to great use.

Speaker 2

Thank you, Bob. Next question please, Shannon.

Operator

Our next question comes from the line of Salveen Richter with Goldman Sachs. Your line is now open.

Speaker 4

Thank you. Good morning. And Bob, you truly will be missed and enjoy the next stage of life here. With regard to your GA program, can you outline what's contributing to your confidence in the systemic approach here and what data you've seen to support it given the move from animal models to Phase 3.

Speaker 3

Okay. Geographic atrophy. So basically the excitement is that as we've Show data from our combination approach, we believe that we have the most effective way of blocking the body's C5 activity. The C5, which is active in the eye is essentially all coming from the liver. And we've shown now in our PNH studies, When we reveal the data from the first portion of our Phase 3 program that it looked like we had the best in class activity in terms of decreasing the C5 activity.

Speaker 3

So if you block it at the source, then you don't have to block it in the eye. And if you block it at the source, then you don't suffer from all the concerns and side effects and so forth, that you have from having to block it in the eye. So you block it where it's coming from then you don't have to treat locally in the eye. You can avoid the local side effects. The concern with systemic blockade is it comes with increased risks of infections and so forth.

Speaker 3

So we will have to come up with a strategy which we're working on to try to mitigate that in the elderly population that suffers from GA. We believe that we may need for that an approach to identify the patients who might be at risk in those settings because we certainly know that for example patients with PNH and myonyl stenographers who are immunosuppressed and so forth, not only with our agent, but certainly with this whole class of agents can suffer from serious systemic infections when you block C5. So we are coming up with a way to mitigate that in part by probably selecting out the patients who are at the highest risk. But in terms of efficacy, the fact that you block it at the source should make it much more effective than trying to block it indirectly in the eye while avoiding all of the serious local side effects you can get in the eye including this horrific retinal vasculitis which is associated with sudden and permanent blindness.

Speaker 1

Thanks, George. I think we have time for 2 more questions.

Operator

Our next question comes from the line of David Risinger with Leerink Partners. Your line is now open.

Speaker 7

Yes. Thanks very much. And first, I wanted to offer my congrats as Well and best wishes to you both Bob and Chris. So I have a commercial question on linvaceltamab, please. It's clearly generated best in class results and a more attractive profile for patients, but Regeneron has to displace the incumbents.

Speaker 7

So could you discuss your plans to convert prescribers to linvosiltimab? Thank you.

Speaker 4

Thank you, David. Before Mary and I I'm anxious to answer, but Len will of course go first.

Speaker 2

No, I just wanted to give a little history, David. You actually were around. You may even ask the exact question, I'm not sure. When we were launching EYLEA and we had to displace Lucentis by the behemoth Roche. There are some lessons in there that it can be done with us starting with A really good molecule as you described, one that has the potential to be best in class and then strong execution At the commercial front, we've done it.

Speaker 2

We're not afraid of the 800 pound gorilla. We hope to put that gorilla on perhaps a weight loss program and get in there and show them what we can do. Marion, any comments? I just wanted to put that historical perspective out there.

Speaker 4

Yes. Thank you, David for the question. And I'm going to be a bit redundant, so I'll be short. But My comment was to say, it always starts with the best in class molecule. It's about the science.

Speaker 4

And certainly, you've seen us across therapeutic areas launch into competitive categories both in the anti VEGF category and then more recently bringing great products into the marketplace. So we do look forward to this opportunity And it fits quite beautifully with our oncology team, our onc will be onc team team and certainly we will be very ready for that launch and look forward to patients with Linville.

Speaker 1

Okay. Thanks, Lynn and Marion. Shannon, last question, please.

Operator

Our last question comes from the line of Carter Gould with Barclays. Your line is now open.

Speaker 11

Good morning. Thanks for I'll echo all the prior comments about Bob and best of luck. Maybe just on the 2 70 deal, Len and George, How should we think about this? Was this more about sort of protecting the rights of the assets that you were already kind of partnered on or really around sort of getting access to that manufacturing And does that have implications then as we think about your business development going forward and maybe change kind of your willingness to move further down that path of cellular therapies? Thank you.

Speaker 2

I'll let George comment on the scientific rationale, which drives pretty much everything we do. Just to mention from a business development point of view, we have been a long standing partner with 2 70 when they were still part of Bloomberg, we've invested in them both in equity and frankly in development. So this was something that was well known. George can comment how he sees this fitting in.

Speaker 3

Yes. We're excited about the existing programs. But what we're even more excited As we know that the history of many diseases, but cancer in particular is about combination approaches. And thus far even in the setting of this collaboration, the CAR T space has been separate from the biologic space. And even though we were working together, as separate companies, it was a little harder To really move forward in an expedited fashion, the incredible opportunities that I believe that we have to combine what we think is the largest and most exciting portfolio of biologics in immunotherapy together with cell therapy approaches.

Speaker 3

Nobody else has really tried that. Nobody else has really led that. Now that we're really together all in with our new selected colleagues from 270 and their capabilities, We believe that we will now have the first opportunity to really try this new set of combination approaches against cancer that is Combining our large portfolio of biologics in the immunotherapy space with their cell therapy capabilities and expertise that brings a whole new level of combinations to the immunotherapy field. We believe we will be alone in that capability until somebody else tries to copy us and do what we're doing here. And that's what we're really excited about in addition to just moving forward the existing cell therapy programs that we've been working on them for 5 years or more.

Speaker 1

All right. Thanks, Glenn and George, and thanks to everyone who dialed in today for your interest in Regeneron. We apologize to those remaining in the queue that we did not have a chance to hear from. As always, the Investor Relations team here at Regeneron is available to answer any remaining questions you may have. Thank you once again and have a great day.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.

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Key Takeaways

  • EYLEA HD launched successfully after an FDA approval delay, capturing strong real-world efficacy and safety feedback; a permanent J-code effective April 1, 2024, is expected to remove reimbursement barriers and accelerate patient conversion from other anti-VEGF agents.
  • Regeneron secured a landmark patent victory defending EYLEA formulation IP in district court, finding one patent valid and infringed by a biosimilar maker and potentially delaying competitive launches.
  • Dupixent global sales grew 34% (constant currency) to $11.6 billion in 2023, leading new-to-brand prescription share across all five approved Type 2 inflammation indications, and Phase 3 COPD data support a potential US launch as the first ever biologic for eosinophilic COPD by mid-2024.
  • Oncology progress includes FDA/EMA filings for linvoseltamab (BCMA×CD3 in myeloma) and odronextimab (CD20×CD3 in lymphoma), best-in-class potential for LAG-3/Libtayo combinations, and formation of Regeneron Cell Medicines via the 270 Bio acquisition to combine antibodies with CAR-T therapies.
  • A deep early-stage pipeline of over 30 programs is advancing, with siRNA and CRISPR medicines moving toward CNS and TTR amyloidosis trials, a gene therapy reversing genetic hearing loss, and obesity candidates combining GLP-1 agonism with myostatin blockade to preserve muscle.
AI Generated. May Contain Errors.
Earnings Conference Call
Regeneron Pharmaceuticals Q4 2023
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