Regeneron Pharmaceuticals Q3 2021 Earnings Call Transcript

Quartr
Provided by Quartr
November 3, 2021

Key Takeaways

  • 51% revenue growth year-over-year to $3.5 billion in Q3, with net income per share up 84%, powered by strong execution across EYLEA, Dupixent and Libtayo.
  • Secured a third US government agreement for REGEN-COV with ~300,000 doses delivered in Q3, generating $677 million in US net sales and a full FDA review under priority with an April 2022 action date.
  • High-dose aflibercept met its primary end point in a Phase 2 wet AMD study, and two Phase 3 trials evaluating 12- and 16-week dosing are fully enrolled with results expected in H2 2022.
  • Dupixent net sales rose 55% to $1.7 billion, driven by positive Phase 3 data in infants with atopic dermatitis, eosinophilic esophagitis, prurigo nodularis and chronic spontaneous urticaria, plus an expanded asthma label for ages 6–11.
  • Achieved first-in-human systemic CRISPR gene knockout results in collaboration with Intellia for TTR amyloidosis, with plans to advance over 30 clinical-stage candidates—including a C5 antibody+siRNA combo entering Phase 3 in myasthenia gravis.
AI Generated. May Contain Errors.
Earnings Conference Call
Regeneron Pharmaceuticals Q3 2021
00:00 / 00:00

There are 17 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Regeneron Pharmaceuticals Third Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Justin Halkow, Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you, Didi. Good morning, good afternoon and good evening to everyone listening around the globe. Thank you for your interest in Regeneron Pharmaceuticals, and welcome to the Q3 2021 conference call. An archive of this webcast will be available on our website. Joining me today on the call are Doctor.

Speaker 1

Leonard Schleifer, Founder, President and Chief Executive Officer Doctor. 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 the call for Q and A. I would also like to remind you that remarks made 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 milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings and competition.

Speaker 1

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 Q for the period ended September 30, 2021, which we filed with the SEC earlier today. 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 A reconciliation of those measures to GAAP is available in our financial results press release, which can be accessed on our website.

Speaker 1

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, Doctor. Len Schleifer.

Speaker 2

Thank you, Justin. And before I begin my remarks, let me just note that this may be Justin's last call. It may not be, at least in the position of IR. He is making a transition. He has decided he wants to Make the news, not just report and explain the news, and he is moving over to our commercial organization.

Speaker 2

So we're very excited, but we're not letting him go until his replacement is fully in place. So you may hear more from Justin in this role or you may not. Justin has done a remarkable job. He is quick to point out to me that when he joined the company, the stock Turning to our business, we turned in another strong performance in the Q3, which was marked by significant double digit top and bottom line growth and continued operating leverage. This was all possible as a result of the truly exceptional execution By our colleagues across the entire company from R and D to production, commercial and support teams, Despite the challenges that we all faced imposed by the COVID-nineteen pandemic, our core business of EYLEA, Dupixent and Libtayo All contributed solid underlying growth.

Speaker 2

Additionally, we secured a 3rd supply agreement With the United States government for REGEN COV, our investigational antibody cocktail for treating and preventing COVID-nineteen in certain populations, with initial deliveries fueling additional growth momentum in the quarter. In R and D, our broad and growing pipeline, which now includes more than 30 clinical stage candidates with many more expected to enter the clinic in short order, continues to advance new innovations to secure our long term growth potential. Importantly, our pipeline continues to be largely composed and comprised of internal innovation, but increasingly it is supplemented by external relationships that bring in novel modalities including CRISPR and siRNA creating unique treatment options and combination approaches as George will outline momentarily. In the Q3, beginning with EYLEA, global net Sales of EYLEA were $2,400,000,000 growing 15% compared to the prior year. U.

Speaker 2

S. EYLEA sales grew 12%, reflecting recovery of the anti VEGF category and share gains as the leading anti VEGF treatment for retinal diseases. We see the strength of EYLEA and opportunity for steady growth continuing despite potential upcoming competition from which we currently do not see any disruptive or game changing new entrants to the anti VEGF space for treating retinal diseases. Dupixent continues to be remarkable in delivering commercially and clinically across a wide spectrum of type 2 inflammatory diseases. In the 3rd quarter, global net sales grew 55% to $1,700,000,000 Growth contributions from inside and outside of the United States continued to improve operating leverage and our alliance with Santa Fe.

Speaker 2

Moreover, we announced positive results from 4 Phase 3 registrational studies in recent months, 1 in very young children with atopic dermatitis and 3 in the potential new indications of eosinophilic esophagitis, pririgo nodularis and chronic spontaneous urticaria. In October, the FDA expanded our asthma label to include Children aged 6 to 11, a testament to not only the efficacy, but also the safety of Dupixent in the chronic treatment of Type 2 inflammatory disease. With several other disease opportunities in clinical development such as COPD, The expansion possibilities are significant for this remarkable medicine that is already changing the lives of 100 of 1000 of patients. In oncology, Libtayo global net sales were $120,000,000 and grew 24%. Despite the challenges imposed on the oncology market by COVID-nineteen, we're working hard as the leader in cutaneous squamous cell carcinoma and progressing in our basal cell carcinoma and lung cancer launches.

Speaker 2

We are also preparing for potential launch in 2022 in the much larger opportunity of Libtayo combined with chemotherapy in non small cell lung cancer. REGENCO continues to grow in importance with increased utilization in the treatment of COVID-nineteen. The FDA has accepted under priority review our biologic license application for the treatment and prophylaxis of COVID-nineteen in certain patients. We are also on review to expand the emergency use authorization for REGEN COB in certain hospitalized patients and for pre exposure prophylaxis. Outside of the United States, our antibody cocktail has received a full approval in Japan, is conditionally approved in Australia and the U.

Speaker 2

K. And has emergency or temporary pandemic authorizations currently in place in more than 40 other countries. REGEN COVE has the potential for a broad range of prevention and treatment applications from pre exposure prophylaxis to treatment of infected hospitalized patients. Given the anticipation of new COVID infections over time, increased utilization of REGEN COV in appropriate cases and the need for prophylaxis in immunocompromised individuals, we anticipate an ongoing role for REGENCO. If global demand warrants, we have the capacity to produce between 4000000 to 5000000, 1.2 gram doses in 2022, excluding any further supply contributions from Roche.

Speaker 2

To conclude, as we close out 2021, Our growth momentum is strong and our outlook for continued growth fueled by the breadth and depth of our pipeline is bright. Now, I will turn the call over to George.

Speaker 3

Thank you, Len. I'll pick up where you left me with the Regen Cove story. As Len mentioned, our robust COVID-nineteen development program involving more than 25,000 people to date has provided compelling evidence that Regen Co. Has the potential to be used for various prevention and treatment applications from pre exposure prophylaxis to treating hospitalized patients. In the United States, Regen Cove is currently authorized under an EUA and also being reviewed for full FDA approval for the treatment and prevention of COVID-nineteen in certain patients with an action date of April 13, of 2022.

Speaker 3

At Regeneron, we all appreciate that widespread vaccination is the best way to broadly protect as many people as possible from COVID-nineteen. The recent research also reveals some important gaps in coverage provided by the vaccines, leaving some individuals uniquely vulnerable, particularly the several million immunocompromised people in the United States alone, who remain prisoners of the pandemic. First, many of the immunocompromised population respond sub optimally or not at all to vaccination even after booster shots. 2nd, breakthrough infections in the general population still occur after vaccination, meaning that immunocompromised people will continue to be at risk of encountering infected individuals even within a highly vaccinated population. Therefore, we believe that regen COVID could be a particular importance These immunocompromised individuals who remain unprotected and also are at highest risk for developing the most severe COVID-nineteen disease.

Speaker 3

This includes people with certain hematologic cancers, for example, lymphomas, leukemias and myeloma and people who take certain immunosuppressive medicines for diseases such as for the full sclerosis and rheumatoid arthritis for organ transplant recipients and for those with primary immunodeficiencies. In the United States, Regeneron submitted data and a request of the FDA to expand the existing emergency use authorization of REGEN COV to include chronic prevention back in April. Further reflecting Regeneron's commitment to the immunocompromised, we recently began a big trial to Optimize Regen Co prophylaxis in this population, including evaluation of extended dose. Our current Regen Coke cocktail retains potent activity against all known variants of interest, including the Delta variant. However, the virus continues to mutate and evolve.

Speaker 3

And thus, as we have previously discussed, we are advancing a novel anti spike protein antibody cocktail into clinical development. We have done so proactively in the case that a novel innovative antibody cocktail that retains potency against new potential variances acquired in the future. Moving to ophthalmology. We reported encouraging top line data of high dose of Flibercept in the Phase 2 Candela study in wet AMD. This small proof of concept study met its primary efficacy endpoint, a higher proportion of patients in the 8 milligram offlibercept group There were no safety signals observed in the comparison to the currently approved EYLEA 2 milligram dose.

Speaker 3

2 large Phase 3 trials in wet AMD and DME Evaluating the high dose of Flubracet in dosing intervals of every 12 weeks and every 16 weeks are fully enrolled and are expected to report results in the second half of 2022. These Phase 3 data will be crucial to understanding overall efficacy, safety and convenience of high dose oflubracet. Moving on to Dupixent, the remarkable clinical success of Dupixent across so many different allergic or Type 2 inflammatory diseases validates our early and long standing hypothesis that these conditions are all driven by over activation of the same fundamental immunologic pathway that is the interleukin-four thirteen pathway, which is effectively blocked by Dupixent. Whether the disease manifests As asthma or chronic rhinosinusitis with nasal polyps in the airways, as atopic dermatitis or prurigo non gilaris in the skin, As eosinophilic esophagitis in the GI tract, our clinical data have demonstrated an important impact of Dupixent on these many conditions that initially did not seem related. In only the past few months, Dupixent demonstrated positive results in 4 separate pivotal studies.

Speaker 3

This is a tremendous accomplishment stemming from the vision and dedication of our team and is Great news for patients suffering from these Type 2 inflammatory diseases. In a recent Phase 3 trial in atopic dermatitis In infants and children as young as 6 months of age, Dupixent met all primary and secondary endpoints as well as a lower observed rate of skin infections in the Dupixent group compared to placebo. Detailed results from this trial will be presented at a future medical meeting and data will be submitted to the FDA by the end of this year. These data reinforce the well established efficacy and safety profile of Dupixent with over a quarter 1000000 patients treated to date. We also reported recent Phase 3 data with Dupixent in eosinophilic esophagitis or EOE, a progressive disease that damages the Esophagus and impairs the ability to swallow.

Speaker 3

More than a third of the patients in our trial had manifestations of this disease so severe that they previously had to undergo endoscopic dilation of the esophagus for symptomatic relief. In our study, patients taking weekly Dupixent had an approximate 24 point improvement on the 0.84 dysphagia symptoms questionnaire, representing a 64% improvement compared to a 14 point improvement for placebo. This update reinforced previously reported Phase 3 For which the 52 week follow-up results were recently presented at the United European Gastroenterology Week Virtual 2021 Congress. Completion of our regulatory filing for EOE in adolescents and adults is planned for early 2022. We also recently reported positive results for Dupixent from our Phase 3 trial in yet another inflammatory skin condition known as prurigo nodularis, An under diagnosed disease characterized by extreme itch and skin nodules.

Speaker 3

The trial met its primary and all key secondary endpoints in comparison to placebo, including reduction in itch from baseline at 12 24 weeks, achieving clear skin and improvements in quality of life. A second trial in Porrigo Nodularis is fully enrolled and is expected to readout in the first half of twenty twenty two with regulatory submissions planned for the same year. If all these exciting Phase 3 data lead to regulatory approvals, Dupixent would be approved for 6 different allergic or Type 2 inflammatory disease indications, including patients as young as 6 months. Moving to Libtayo in oncology. Positive Phase 3 data of Libtayo in combination with and first line advanced non small cell lung cancer were presented at the ASMO 2021 meeting.

Speaker 3

These data mark Libtayo as one of only 2 PD-one or PD L1 inhibitors to demonstrate positive Phase 2 results in first line non small cell lung cancer irrespective of histology, both as monotherapy and in combination with chemotherapy. These Libtayo studies were conducted in a patient population that included difficult to treat disease characteristics that reflects everyday clinical practice. We are rapidly progressing towards regulatory submission for the Libtayo chemotherapy combination across histologies and PD L1 expression levels, which could unlock an opportunity to help a larger population of lung cancer patients. Turning to hematology. At the upcoming American Society of Hematology Annual Meeting for ASH, we will provide updates to our developing hematology portfolio.

Speaker 3

In an oral presentation, we will provide a data update for our potentially registrational first in human trial of REGEN-five thousand four hundred and fifty eight, Our BCMAxCD3 bispecific antibody testing in patients with heavily pretreated multiple myeloma. Regen 5,458 could be a major advance in treatment of patients who have failed several prior lines of therapy, but the potential utility of our Bcimane targeting bispecific is not limited to this patient population. We will discuss our data and further development plans at our virtual ASH Investor and Vet scheduled for Monday, December 13. Regarding arginestimab, our CD20xCD3 bispecific, we are pleased with recruitment in our Potentially pivotal trial since the partial clinical hole was lifted earlier this year. Exploration of subcutaneous formulation of udroniximab is on track to start by the end of this year.

Speaker 3

We are planning to initiate border Phase 3 programs in 2022. Our bispecific development program for solid tumors is progressing with our unique approaches including the MUC16xCD3 bispecific as monotherapy in ovarian cancer as well as in combination with Libtayo or with our MUC16xCD28 costim. In addition, we expect to have initial data with our PSMAxCD28 costim with prostate cancer in 2022. We are also excited about our eGFRxCD20 co stim clinical program across multiple EGF high cancer settings including lung cancer as well as our clinical stage met by met bispecific and our met by met antibody drug conjugate presenting a new foray for Regeneron into the realm of drug conjugates linked to our potentially best in class bispecific antibodies. In conclusion for oncology, we are approaching an important new phase for Regeneron.

Speaker 3

We have several novel Phase III programs in clinical development with more expected in the coming months. We also have large Phase 3 studies planned such as our LAG-three Libtayo combination for first line advanced melanoma against the pembrolizumab monotherapy comparator as well as large registrational programs for our hematology oncology bispecifics. We're excited about the potential that these important investments in our portfolio may bring to patients. I would like to conclude with our Regeneron Genetics Medicines and our collaboration updates. We are uniquely positioned to combine products of our established biologics portfolio in emerging findings from our genetics medicine efforts.

Speaker 3

As part of our collaboration with Alnylam, we are looking forward to multiple updates on our C5 program. At the already mentioned ASH meeting, we will show 1st in human data For our C5 antibody pozelumab in combination with the C5 inhibiting siRNA, cindisiran, We will present initial results in healthy volunteers, which supports development of this first of its kind combination of an antibody and an siRNA therapeutic. Early data on siRNA monotherapy mediated C5 knockdown did not achieve complete terminal complement blockade, which is necessary for adequate disease control in PNH or paroxysmal nocturnal hematuria. Adding the antibody specific for the same target protein could provide patients with a lower dose therapy and a more convenient extended dosing regimen, while providing more complete C5 inhibition, resulting in better efficacy and less breakthrough hemolysis. We have also recently initiated a Phase 3 Testing the C5 antibody and siRNA combination in myasthenia gravis.

Speaker 3

For PNH starting next year, We are planning to test our combo in both naive and switch patients tested against standard of care therapies, including rivolizumab and eculizumab. This study has the potential to show true benefit of the combination approach for the treatment of this disease. Also in collaboration with Alnylam, some of our initial genetic target discoveries are reaching the stage of clinical readouts For nonalcoholic steatohepatitis or NASH, a disease we're finding compelling treatment options has been difficult. We're using the siRNA approach to silence a gene we identified as a potential target. Recall, we discovered that people with a protective 17b13 gene variant have a 30% to 70% lower odds of chronic liver disease.

Speaker 3

Our collaborator Alnylam will Initial healthy volunteer safety data for the Alnylam HSD, the HSD17b13 targeting sRNA at their upcoming R and D Day later this month. Finally, in October, the Regeneron Genetics Center published a manuscript in nature, which highlighted achievement of the milestone of sequencing almost 500,000 exomes from the U. K. Biobank database. This nature paper for the first time describes rare variants of genes that could be potential drug targets for diseases such as hypertension, diabetes, asthma and others.

Speaker 3

And with that, I will turn the call over to Mary.

Speaker 4

Thank you, George. Our Q3 business performance demonstrates the strength of our commercial portfolio. We are executing well on our in line brands and are maximizing opportunities for diversified and sustainable growth through ongoing launches. First, I will highlight Recent achievements with REGENCOV, our COVID-nineteen antibody cocktail, which is available in the U. S.

Speaker 4

Under emergency use authorization by the FDA. In the Q3, U. S. Net sales were $677,000,000 primarily based on initial deliveries of our 3rd government agreement, which was announced in mid September. Demand for REGEN COV accelerated sharply over the Q3 as this Promising treatment option continues to help fight the surge in COVID-nineteen cases.

Speaker 4

REGEN COV is increasingly seen as standard of care for outpatient treatment and post exposure prophylaxis inappropriate patients. Our field educators continue to support key stakeholders in healthcare systems and administration sites. While COVID-nineteen cases have thankfully decreased over the last several weeks, demand for REGEN COV remains high with many patients receiving treatment. REGEN COV has broad therapeutic application in current and potential future indications across the spectrum of disease from pre exposure prevention realization. We look forward to the FDA's decision on our application for a full approval expected in April of 2022.

Speaker 4

Beyond REGEN COVE, we delivered strong growth from our core business in the Q3. Starting with EYLEA, 3rd quarter global net sales grew 15% year over year to more than $2,400,000,000 In the U. S, net sales grew 12% year over year to nearly $1,500,000,000 based on category recovery and EYLEA's competitor share gains. EYLEA secured nearly 50% of the overall category and over 75% of the branded category based on our overall platform of efficacy, safety and convenience. There are positive early indicators from our unbranded direct to consumer campaign that educates patients with diabetic eye disease on the importance of vision care.

Speaker 4

Retina specialists have applauded our efforts encouraging diabetic patients to seek EYLEA's competitive profile coupled with favorable underlying demographic trends give us confidence in Regeneron's ongoing leadership position in retinal diseases. Turning to Libtayo, global net sales were $120,000,000 In the U. S, net sales reached $78,000,000 despite continued COVID impacts on new patient starts. With new indication launches at early stages, the vast majority of sales came from advanced cutaneous squamous cell carcinoma or CSCC where Libtayo is the number one systemic treatment. Building on our success in CSCC, we are quickly establishing Libtayo as standard of in advanced basal cell carcinoma for patients in the second line setting or where a hedgehog inhibitor is not appropriate.

Speaker 4

In lung cancer, we are working to secure physician experience with Libtayo as a competitive monotherapy treatment option. We look forward to the potential chemotherapy combination approval, which would unlock the much larger group of first line patients eligible for anti PD-one. Briefly turning to Abeza, which is now being used to treat more patients than the prior standard of care, We continue to see initiations in both switch and new to category patients, illustrating how our innovative patient identification efforts can be used to support those with HoFH and in the future other rare diseases. And finally to Dupixent, in the Q3, global net sales grew 55% year over year to $1,700,000,000 and U. S.

Speaker 4

Net sales grew 48% to 1,300,000,000 This growth was driven across all approved indications with new patient starts above pre COVID levels. In atopic dermatitis, prescribing trends are strong across the spectrum of moderate to severe disease, including adolescent and pediatric patients. Dupixent continues to capture market growth based on well established efficacy and safety, breadth of current indications and unmatched physician and patient experience. There continues to be substantial potential growth in atopic dermatitis, including in children as young as 6 months in age and more broadly in dermatology with new potential indications of chronic spontaneous urticaria and prior nodularis. In respiratory disease, Dupixent continues to surpass recent competitive biologic launches.

Speaker 4

In asthma, we see ongoing potential to differentiate Dupixent through its competitive profile and label expansion as the market recovers from COVID when asthma related emergency room visits were down nearly 50 Our launch in pediatric asthma is underway, extending this treatment option to 75,000 children in the U. S. Who suffer from this often debilitating disease. Dupixent's label was also recently updated to include an additional marker of Type 2 inflammation called FeNO, which extends the eligible population beyond those with high eosinophilic levels. In addition, Dupixent can be prescribed for steroid dependent asthma regardless of the synophil levels.

Speaker 4

In nasal polyps, we continue to see growth with Dupixent leading the market despite new competition. Dupixent continues to be the preferred choice of ENTs and allergists regardless of prior surgery. In summary, our commercial team continues to deliver strong growth across the portfolio with differentiated brands, Ongoing and potential future launches, we remain on track for long term growth. 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 where applicable. In the Q3, Regeneron once again delivered strong top and bottom line growth on increasingly diversified revenue streams with contributions from REGEN COVE in our robust core business. For the Q3, total revenues grew 51% year over year to $3,500,000,000 Total diluted net income per share grew 84% year over year to 15 point and $0.37 on net income of $1,800,000,000 Excluding revenues related to the COVID-nineteen antibody cocktail, total revenues grew 18% versus the prior year. Starting with REGEN COVE, in the Q3, we recognized $677,000,000 of U.

Speaker 5

S. Net sales, which consists largely of the initial deliveries of approximately 300,000 doses to the U. S. Government Under the new 1,400,000 dose contract as announced in September, our collaborator Roche record sales of the COVID-nineteen antibody cocktail known as RonaPrieve outside the U. S.

Speaker 5

In accordance with our Roche agreement, as a true up payment for global profits, we recorded an additional $127,000,000 as Roche collaboration revenue. In the 4th quarter, We expect to deliver approximately 800,000 doses of REGEN COV in the U. S, out of which Roche will supply approximately half of these doses. We will record all REGEN COV U. S.

Speaker 5

Net product sales. Given the mix of manufactured products supplied to the market by Roche and Regeneron, The true up payment for global profits is expected to result in 0 Roche collaboration revenues in the 4th quarter. The remaining doses from the U. S. Government contract are expected to be delivered in the Q1 of 2022.

Speaker 5

I will now move to our Bayer collaboration. Ex U. S. EYLEA net product sales reported to us by Bayer were $931,000,000 for the Q3 of 2021, representing growth of 19% on a reported basis and 18% on a constant currency basis. Total Bayer collaboration revenue was 3 $65,000,000 of which we recorded $351,000,000 for our share of net profits from EYLEA sales outside the U.

Speaker 5

S. Total Sanofi collaboration revenue was $582,000,000 in the Q3 of 2021. Our share of the profits from the commercialization of Dupixent and Kevlar was $387,000,000 which compares favorably to our share of profits of $213,000,000 in the prior year. We also recognized a $50,000,000 sales milestone payment related to achievement of $1,500,000,000 of ex U. S.

Speaker 5

Sales for the collaboration on a rolling 12 month basis. Moving on to operating expenses. R and D decreased slightly to $592,000,000 primarily due to lower spending of REGEN COVE development as compared to the Q3 of 2020. Next, SG and A increased 34% year over year to $391,000,000 primarily due to costs related to growth initiatives for EYLEA and higher headcount. Cost of goods sold increased versus the prior year from $122,000,000 to $224,000,000 primarily due to REGEN COV manufacturing costs.

Speaker 5

Cost of collaboration manufacturing increased 50% year over year to $214,000,000 driven by higher production to support the growing Dupixent sales. Finally, the effective tax rate was 10.8% in the Q3 of 2021. Shifting to cash flow and the balance sheet. Year to date, Regeneron has generated $4,300,000,000 in free cash flow and ended the quarter with cash and marketable securities less debt of $8,700,000,000 We continue to utilize our strong balance sheet in accordance with our capital allocation priorities of investing in internal R and D, funding strategic external R and D partnerships and returning cash to shareholders. Accordingly, in the Q3, we repurchased approximately $191,000,000 of our shares.

Speaker 5

To conclude, I'd like to provide select updates to our 2021 guidance. A complete summary of our latest full year guidance is available in our press release published earlier this morning. We are updating our 2021 gross margin guidance to be approximately 88%. This estimate is inclusive of an expected payment to Roche as a true up of global profits for the COVID-nineteen antibody cocktail, which will be reported as cost of goods sold. As a result, we expect our gross margin percentage in the 4th quarter to be the lowest of the year.

Speaker 5

We are also updating our 2021 R and D guidance to be in the range of $2,550,000,000 to $2,600,000,000 The change to the guidance Range is related to updating updated phasing of expenses and lower spend on REGEN COVE. Looking ahead, we will continue to make investments into both our commercial business and our broad pipeline for long term growth. In particular, we expect to advance critically important development programs in 2022, Including the late stage studies for the LAG-three Libtayo combo, BCMAxCD3 NC5 along with branded As George mentioned earlier in advancing programs with our collaborators. In conclusion, we're pleased with the Q3 as

Speaker 1

Thank you, Bob. Didi, that concludes our prepared remarks. We'd now like to open the call for Q and A. We have several callers in the queue, so to ensure we are able to address as many as

Operator

Our first question comes from Jeff Porges of SVB Leerink. Please proceed.

Speaker 6

Thank you very much and congratulations on the really remarkable results and the outlook. Joy, perhaps I could ask you about The cost ends, we've been wondering when we're going to see the first data for the CD28 cost ends. Could you clarify exactly what we should expect to see next year And from which combination? And then just related to that, SIFI is coming up, and there's a lot of discussion about 41BB. Could you clarify why you chose to pursue CD28 for your costims rather than 41BB?

Speaker 3

Yes. Well, as we indicated, we'll be hopefully providing data in the coming year and it all depends on How the trials progress? Obviously, one has to deal with Combination trials where one is dose escalating and so those are what are limiting getting to effective doses and so forth. In terms of the choices, it all depended on the science. Our various studies pre clinically and on humanized animal models, which showed that it was in our minds, it made most sense to initiate our efforts with the CD28 costum approach.

Speaker 1

Next question please.

Operator

Thank you. Our next question comes from Chris Raymond of Piper Sandler, please proceed.

Speaker 7

Hey, thanks for taking the question. I guess, Maybe more of a macro question. I know the ink is hardly even dry, I guess, on some of the prescription drug pricing framework negotiations and the Right up, that's, a company that from Congress, but, this is something I'm sure you guys are watching closely. And Obviously, any changes to Medicare Part B is potentially impactful to your business. Just, any thoughts here on the impact to EYLEA, especially when considering the cap on out of pocket Spending that's been proposed and discussed.

Speaker 7

Thanks.

Speaker 2

So thanks for the question, Chris. You're right, the ink isn't dry. Some of the bill has been written in disappearing ink and some is In changing ink, but so it's hard to get a fix on it. I would say that As I understand the bill and based on the most recent update, the cap on expenditures Is limited to Part D as in David drugs. So it would not affect Part B as in boy.

Speaker 2

I think I've got that right. As I said, as you said, the ink is really not dry. I will say that generally speaking, It is quite remarkable, just from my personal perspective, that the industry that is most responsible for Getting the country and the world out of the pandemic in its best shape as we can is the source of such Great attack. But fortunately, I think that some rational heads have prevailed and the most draconian Ideas have been written in that disappearing ink. Next question, please.

Operator

Thank you. Our next question comes from Yaron Werber of Cowen and Company. Please proceed.

Speaker 8

Hi, congrats to the team on a great quarter. Thanks very much for taking the questions guys. Really just a quick one actually on the pozelimab and disiran combo. I know you mentioned some potential Combo treatment studies, PNH and MG, again, some of the other C5s. Really kind of wanted to ask a little bit about how you're thinking about real world use of this one.

Speaker 8

I know there's a lot of movement in especially the MG space. Is this something that we should expect to compete maybe more with SOLIRIS? Or are you thinking a little either up the line against IVIG or some of the FcRn, just kind of want to get your thoughts there. Thanks.

Speaker 3

Yes. I mean, we are hoping that this is going to turn out To be the best in class in terms of efficacy and also in terms of convenience for these disease categories. So yes, we're thinking about and depending on how the landscape evolves that that could be the That we would be going after. Next question please.

Operator

Thank you. Our next question comes from Josh Schwimmer of Evercore ISI. Please proceed.

Speaker 9

Great. Thanks so much for taking the questions. For the high dose of flibercept Phase 3 studies, what signals are you looking for a potential filing? Is OCT thickness benefit Alone sufficient to move forward, is that going to be under a new BLA or an SBLA? And as such, how do you think that would fall under proposed drug pricing legislation and whether it would reset the clock for that product?

Speaker 9

Thank you.

Speaker 2

Yes, I'll comment on the regulatory aspects and George can comment maybe on the design aspects. But At the moment, we don't think this would be a new BLA and this would be part of the this would likely be an SBLA. George?

Speaker 3

Yes. Basically, we are, as you said, we're looking of course to look at differences in terms of anatomic improvements, But the trial is a non inferiority study. What we're going to be testing is whether patients that are being treated at a Dramatically increased interval do as well as regular dose EYLEA at an 8 week interval. So it's going to depend on hopefully seeing that substantially higher numbers of patients are going to be able to be treated at extended dose intervals compared to the 2 milligram dose while achieving similar visual acuity effects.

Speaker 2

Next question please.

Operator

Thank you. Our next question comes from Carter Gould of Barclays. Please proceed.

Speaker 10

Great. Good morning. Excellent results guys. Thanks for taking the question. I wanted to ask on REGEN14256, I guess the new running partner for imdevimab And if its development was really in response to a specific shift you're seeing in the variance or lower efficacy or if you were looking to optimize on other domains.

Speaker 10

And I guess in responding to that, could you also address kind of your expectations for running studies, conducting studies I guess a lower background rate of hospitalization. Thank you.

Speaker 3

Yes. All good and somewhat complicated questions. Right now, obviously, as we've said, our cocktail remains active against all the known variants of concern that have emerged and created issues for other antibodies and so forth. However, we want to be prepared. So we're creating a complementary cocktail that if ever variants would arise That would raise problems for our current cocktail.

Speaker 3

We would have a complementary cocktail that, the way we designed it would hopefully be unaffected by the same types of mutations. So It's to be prepared for that possibility that as the virus continues to evolve, we might need A cocktail that might not be sensitive to the same mutations as the first cocktail, but the current cocktail is still active against The variance of concern. Yes, there's a lot of questions in terms of how to design this study, We are to do it depending on rates of hospitalization and rates of infection. So these are the complications that we've had to navigate throughout this pandemic as you might remember. And Throughout this pandemic, we have managed to carry out the largest COVID-nineteen program for treatment and for prevention using antibodies.

Speaker 3

And we hope that that All the knowledge that we gained from learning how to navigate changing, fluctuating infection rates and hospitalization rates and so forth, We can continue to take advantage of that and continue to carry out our program efficiently and as quickly as possible.

Speaker 2

Let me just add to that and emphasize what George had said in his early remarks, which is that, a lot of what we see is the big future need is in the pre exposure prophylaxis. And that pre exposure prophylaxis is likely not to go away because of the Ongoing infections, the breakthrough infections that still occur in fully vaccinated people. Mind you, with the orals coming, we'll see whether they actually get The United States, they do have some safety and efficacy issues as a class so far that they have not demonstrated The comparable cross study comparisons notwithstanding the kind of efficacy that monoclonals have delivered And nor have they satisfied to many people's satisfaction, the safety concerns around Using a mutagen perhaps okay for short term, but when you're getting into longer term prophylaxis, the immunocompromised, which is Where George mentioned, we have a lot of work ongoing. It's really important to remember that we expect to have our molecules should be able to be given quite less frequently I think one might expect because you're looking at a prophylaxis mode and we think That they should, based on the evidence we have, delivered really rather remarkable efficacy in that setting as they already have So as the market transitions to a prophylaxis mode, We see an ongoing demand and need, which we're preparing to meet for monoclonal cocktail therapy.

Speaker 2

Next question, please.

Operator

Thank you. Our next question comes from Kennen MacKay of RBC Capital Markets. Please proceed.

Speaker 11

Hi. Thanks for taking the question. First, let me say to Len that I love your commentary towards political or rather governmental purchases of the REGEN COVID Antibody cocktail. Thank you for being the voice of science and reason here. Maybe for my question, I've actually really admired your BD Strategy, which shows a lot of awareness recognizing areas of expertise, but also limitations and looking to BD and partnerships and licensing To outsource the latter, I was wondering what you're really interested now on the BD front, if there are any technologies that are jumping out as additional areas of opportunity for the company.

Speaker 11

And then sort of partial to that, whether you This newly emerging field of protein degradation and protein degraders as oncology targets. Thank you.

Speaker 2

George should take this. He's been the architect of the scientific underpinnings of our BD strategy and having a remarkable vision to be able to Integrate that with our core expertise, George?

Speaker 3

Well, yes, I think if we were looking to get into new technologies and have new relationships. I don't think we would be telling you about them at this time. Next question.

Speaker 2

Wait, George, could you comment on your prior strategy on how fRNA and

Speaker 3

Well, I think, yes, what Len's referring to is, I think The whole team, the whole company at many levels from the business development group through the science research folks through Our pre manufacturing group has done a spectacular job of pivoting us from a solely biologics company to a genetic medicines company. What we've managed to do starting with our Regeneron genetic center is create what we believe is perhaps The world's most powerful technology to identify new genetic targets based on our sequencing of almost 2,000,000 Individuals all linked to electronic digital records that allows us to understand we think more powerfully than anybody else, The role of genetic variation both in disease protection and causation, which have led to a whole series of new disease targets for both protection and causation. And for those, some of those are addressable by biologics and they're part of our existing approaches with biologics, but we had to use new approaches. And for those purposes, we started creating some of These important outside alliances and collaborations with companies like Alnylam for the siRNA approaches that we talked a little bit about and with Intellia with CRISPR based approaches. Many of these we've been able To build and create and take them to another level based on our very productive collaborations with these 2 great companies that we're now collaborating with.

Speaker 3

And we also invested enormously internally in terms of building our own gene therapy approaches. So we believe that we have positioned ourselves to become leaders for the foreseeable future over the next decade or so in the genetic medicine It's becoming an increasingly important and larger part of our portfolio. It's almost a whole Separate company, we believe in terms of the opportunities and then the value that it generates, while we're maintaining our leadership position With biologics, not only with classical antibodies, but also with bispecifics and All sorts of engineered formats of biologics. So I think it's been a tremendous job by our entire team and organization to essentially create this entirely new capability.

Speaker 2

Next question please.

Operator

Thank you. Our next question comes from Ronny Gal of AllianceBernstein. Please proceed.

Speaker 12

Good morning. So following on the last question, Can you comment a little bit about when we can see your first kind of CRISPR based technology in the trial that you run coming into the clinic? Will it be in 2022 or 2023? And then with this full additional company, should we expect the R and D cost to continue to rise roughly at the rate they have historically been? Thank you.

Speaker 3

Okay. I'll remind you that I believe we announced last quarter, our first CRISPR results, which were the first obtained by anybody in history in terms of using a systemic CRISPR based therapy to actually modify genes within human beings. It was incredibly successful study that we did in collaboration And with Intellia, it was the first ever systemic investigational CRISPR based gene knockout approach. And in the first Set of patients that we treated, we show that a single dose of this CRISPR based therapy led to very dramatic and dose dependent reductions In the target protein coming from the target gene, I think that the world view this as incredibly exciting data. I believe we announced it in June of 2021 and I think it's just the beginning of a very large program.

Speaker 3

We have about 20 preclinical Programs now under evaluation that will be rolling out in terms of going into the clinic and producing clinical results over the next Couple of

Speaker 5

years. And Ronnie, let me just kind of punctuate, right. So we'll give kind of guidance in Our 4th quarter earnings in early February, I will tell you if you look at our kind of run rate this year R and D relative to 2020, we're coming out at roughly A 7% increase if you take the midpoint of my guidance. And I guess my word of caution is a lot of that's heavy REGEN COV in 20 So we're going up against a big REGEN COV number in 2020 as compared to what we incurred in 2021. So that 7% is, I'd say, artificially light Compared to where we're going to eventually end up when we do give that guidance.

Speaker 5

So I just want to make sure people are not kind of doing same year run rates as they're seeing In 2021.

Speaker 1

Next question please.

Operator

Thank you. Our next question comes from Matthew Harrison of Morgan Stanley. Please Proceed.

Speaker 13

Thanks for taking the question. This is Charlie on for Matthew. Can you please comment on the Libtayo activities and the commercial dynamics, given the relatively modest kind of quarter to quarter growth? Thank you.

Speaker 4

Sure, Charlie. This is Mary Anne. Let me take that. First off, we have great ambition, of course, for Libtayo. As I mentioned, the bulk of our sales today are from Our launch of cutaneous squamous cell carcinoma, understandably, our more recent launches have brought us again into derm with basal cell carcinoma where Libtayo Thayo is very quickly becoming the standard of care for appropriate patients, based on its clinical profile and based Obviously, patients unfortunately fail with hedgehog inhibitors, which also can be really difficult to tolerate.

Speaker 4

So we're very pleased with how that launch is going early days. Most important, however, is our lung launch. The initial launch we have in monotherapy is understandably for a smaller target group of patients. We do believe, however, though the experience that physicians are gaining with Libtayo in First line monotherapy treatment is very, very important and bodes well for when we hopefully have the larger indication approved for chemo combo. And that as many are aware, is a much larger population of patients, perhaps 4 to 5 fold more patients.

Speaker 4

And we certainly look forward to potentially being able to launch that larger indication in lung.

Speaker 1

Next question, please.

Operator

Thank you. Our next question comes from Robin Kamaskis of Truist. Please proceed.

Speaker 14

Hi. Thanks for taking my question. I was wondering if you can satisfy a little bit of my curiosity about the new flow coming out of your Intellia partnership. I guess the first question I'd ask is in the event that they'll be hosting next year in the Q1, how much durability data might we get for TTR. And then George, you mentioned the additional indication over the next few years that you'll be going into.

Speaker 14

When are we going to be hearing about those? Can we hear about a lot of them in the beginning of the year? Or we'll just hear about them over the course of the year? I know Intelie is a huge investor interest as well as mine. Thanks.

Speaker 2

I wonder if we shouldn't give Intelie the opportunity to give that kind of guidance, Robin.

Speaker 3

Sure. That might be a good approach.

Speaker 14

Okay. Thank you.

Speaker 1

Next question, please.

Operator

Thank you. Our next question comes from Alethia Young of Cantor. Please proceed.

Speaker 15

Hey guys, thanks for taking my question.

Speaker 3

I do think Just to help Robin out a little bit. I think one really important point is, yes, as the data continues to mature and certainly we Expect excellent duration data coming out over time and so forth. But I think we all have to recognize that this represents The first true validation of this entire field and approach, and our ability working with Intellia using our Specific approach to actually turn it from dream into reality. And this obviously dramatically increases the probability of success of all of our future programs based on our collaborative technology with Intellia, including both knockout and insertion approaches. And we have to of course highlight and point out the lack of such proof of concept and success with any other approaches to date.

Speaker 3

And I think that that really distinguishes our collaboration with Intellia And obviously, should adjust the risk profile for all of our programs going forward, which as Len said, Hopefully, we and Intellia will be giving more resolution on going forward.

Speaker 2

Go ahead, Alethia.

Speaker 15

Thanks guys for taking my question and congrats on the quarter. I just had a question about kind of obviously a very robust EOE data with Dupixent. Can you just a little bit about how you think about the market opportunity there and like how what diagnosis is like there and how you can potentially expand that? Thanks.

Speaker 4

Sure. So, we're very excited about the possibility of launching Dupixent also for synophilic esophagitis. As George was describing, there's tremendous unmet need in the marketplace, patients who truly are suffering and Often end up in the emergency room with difficult procedures to try to remedy for the short term some of the difficult symptoms they have. The size of patient population for those who are undergoing recurrent treatment is about 48,000. And then obviously, there are patients who are entering the system beyond that.

Speaker 4

But probably just as a starter number that 48 to 50,000 who have failed multiple treatments is the core group and then we will extend beyond that to Probably about another 150,000 patients with EOE, who also have are in the need of treatment, but the failure group obviously of 50,000 is the most severe.

Speaker 1

Adi, we have time for 2 more quick questions.

Operator

Okay. Our next question is from Esther Rajavelu of UBS. Please proceed.

Speaker 16

Hey, good morning. Thank you for taking my question. I have one on EYLEA, perhaps a multi card question. Can you give us some details On use among diabetics versus non diabetic patients and is the uptake among diabetics tied to more consistent use among treated patients? Or are you onboarding new diabetics?

Speaker 16

And lastly, anything you can share on NPDR versus diabetic macular edema patients would be helpful as well.

Speaker 4

Sure. So let me give you a little bit of background and some characterization. Certainly, our indications for diabetic eye disease are the fastest growing in terms of new Patients proportionally coming into the treatment paradigm. We also see a growth in the diabetes Treatment population for EYLEA opposite, for example, wet AMD. So now our wet AMD treatment is under 2% of the total utilization of EYLEA in the U.

Speaker 4

S. Marketplace. The specific growth on diabetic eye disease by indication, It's difficult to give you the exact breakdown, but we are very optimistic on even the early efforts we see in market based on our new unbranded direct to consumer TV campaign, which is really educating diabetic patients broadly on the importance of having their vision checked, making sure it's part of their regular check-in as patients with diabetes have other areas that they standardly review and make sure of their care, eye disease has often been neglected with very disastrous situations of Vision loss that can't be corrected. So we see that as a really important area and one that will fuel diabetic eye disease treatment broadly. But even today and before we embarked upon that program, we see it as a high growth indication.

Speaker 1

Didi, we have time for one more question.

Speaker 4

All right.

Operator

Our last question comes from Yatin Suneja of Guggenheim Partners. Please proceed.

Speaker 8

Thanks for squeezing me and congrats on the quarter, good performance. Just quickly on the complement effort, can you just talk about other CNS on neurology applications with either the monotherapy or the combination. And then With respect to the siRNA approach, could we take that could you take that into the eye and what the long term vision there is? Thank you.

Speaker 3

Yes. We're not going to say too much about your first question, but in terms of your second question, absolutely. And so when we established this relationship with Alnylam in terms of using siRNAs, it was actually directed towards 3 separate areas. So really it was 3 separate collaborations. The one and the first that we thought that we'd be moving Most rapidly into the clinic and that has turned out to be the case were with liver targets both sort of more conventional targets like the C5, but also Targets that were coming from our own pipeline like the HSD target that we talked about and that those are all moving along forward and we think Very exciting fashion as we've discussed.

Speaker 3

Another key area that you just opened up, which is still preclinically, but we're hoping to eventually move into the clinic is targeting the eye targets with siRNAs. And that's really a very important area for us and it was a very important separate part of the entire Alnylam collaboration. And the 3rd really critical Foundational part of our collaboration with Alnylam involve using sRNAs to targets in the brain. And that's also moving forward in very exciting fashion. And we'll be talking a lot more about that going So really it's a 3 sort of pillar program, liver targets, eye targets and CNS targets.

Speaker 3

We're very excited and moving forward on all of them. And as we had guided early on, the first set of targets, of course, would be in the liver and then we'd be moving into the other two areas as rapidly as possible.

Speaker 1

Great. Thanks everyone. That will conclude our call. Bob Landry and the IR team

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