Regeneron Pharmaceuticals Q2 2022 Earnings Call Transcript

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Provided by Quartr
August 2, 2022

There are 12 speakers on the call.

Operator

Welcome to

Speaker 1

the Regeneron Pharmaceuticals Second Quarter 2020 Earnings Conference Call. My name is Bella, 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 today's conference is being recorded.

Speaker 1

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

Speaker 2

Thank you, Bella. Good morning, good afternoon, and good evening to everyone listening around the globe. Thank you for your interest in Regeneron, and welcome to our Q2 2022 earnings conference call. An archive of this webcast will be available on our Investor Relations website shortly after the call ends. Joining me today are Doctor.

Speaker 2

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.

Speaker 3

I would also like to

Speaker 2

remind you that remarks made on this call today include forward looking statements about Regeneron. Such statements may include, but are not limited to, Those related to Regeneron and its products and businesses business, financial forecasting 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 And with that, I'll turn it over to the financial results. Thank you, sir.

Speaker 2

Thank you, sir. Good morning, everyone. Regeneron does not undertake any obligation to update any forward looking statements whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non GAAP measures will be discussed in today's call. Information regarding our use of non GAAP financial measures And a reconciliation of those measures to GAAP is available in our financial results press release, which can be accessed on our website.

Speaker 2

Once our call concludes, Bob Landry 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 Doctor. Len Schleifer. Len?

Speaker 4

Thank you, Ryan, and thank you to everyone joining today's call. Regeneron had a strong second quarter with notable execution across R and D, commercial and business development functions. Total revenues increased by 20% when excluding contributions from our COVID antibody cocktail, with net sales for EYLEA, Dupixent and Libtayo each reaching new all time quarterly highs and growing by double digit year over year on a constant currency basis. In addition to exceptional commercial execution, we made significant pipeline progress with 3 regulatory approvals, 2 accepted regulatory filings and one positive Phase 3 readout. We also completed the acquisition of CheckMate Pharmaceuticals and the 3rd quarter purchase of worldwide rights to Libtayo from Sanofi, both of which we believe will strengthen our oncology franchise in the near, medium and long term.

Speaker 4

We also reported today preliminary, but promising anti tumor activity and safety data for REGEN5678, Our PSMA by CD28 co stimulatory bispecific in combination with Libtayo In patients with advanced metastatic castrate resistant prostate cancer. George will have more to say on this shortly, But we believe this represents an important step towards validating our co stimulatory approach to fighting cancer And potentially advancing the science of immuno oncology. Turning to our commercial performance. In the 2nd quarter, EYLEA global net sales grew 13% at constant exchange rates to 2,500,000,000 In the U. S, EYLEA net sales were $1,600,000,000 up 14% year over year And outperforming anti veg up category growth of approximately 8%.

Speaker 4

Despite new competition, EYLEA's share was approximately Half of the anti VEGF category and 75% among branded agents, affirming its status as the gold standard Anti VEGF therapy. We believe ofliberstat represents a significant potential growth opportunity going forward, Given favorable demographic trends as well as the potential for aflibercept 8 milligrams to augment the category and complement our retinal franchise. Regarding our investigational ofaflimbosep 8 milligrams, the goal of our clinical program is to evaluate Where the visual acuity among wet AMD and DME patients can be maintained or improved compared to EYLEA While extending the interval between doses, equally important is maintaining the high bar for safety that has been set by EYLEA over the past 10 years, 55,000,000 injections worldwide and 8,000,000 patient years of experience. We anticipate pivotal results in late quarter 3 or early quarter 4 and with supportive data a BLA submission completed by early 2023. Dupixent continued to grow at a remarkable pace After 5 years and more than 450,000 patients treated since launch, in quarter 2 global net product sales were $2,100,000,000 an increase of 43% at constant exchange rates compared to last year, Reflecting Dupixent's differentiated clinical profile and ability to effectively treat more and more patients with the Type 2 inflammatory diseases where Dupixent is approved.

Speaker 4

In the U. S, we saw growth across all indications, including initial contributions from atopic dermatitis in patients as young as 6 months to 5 years of age And from eosinophilic esophagitis, both of which are indications approved by the FDA during the Q2 and represent the 1st approved Systemic treatment options for these patients. We hope to add a 3rd, 1st in class indication for Dupixent later this year in patients with prurigo nodularis, which is currently under priority review with the FDA. In oncology, Libtayo net product sales grew 25% globally at a constant currency to $141,000,000 in the Q2 of 2022, including 17% growth in the U. S, driven by non melanoma skin cancer indications and monotherapy non small cell lung cancer.

Speaker 4

We have long believed that the key to fully unlocking the opportunity in oncology is through differentiated combinations, With Libtayo possibly serving as our foundation for many of them. That belief was the basis for acquisition of the global rights to Libtayo. We plan to invest further in Libtayo based combinations, pairing it with promising candidates In our oncology pipeline such as LAG-three antibody, freanolumab and our many investigational bispecifics as well as with candidates from external collaborations. We continue to make progress with these Libtayo combinations and intend to share initial data in the second half of this year from our emerging oncology pipeline, which George will discuss in more detail. Regarding the FDA's review of our Libtayo chemo combo supplemental BLA for the treatment of non small cell lung cancer, We are pleased with the progress that we have made as the FDA continues its review.

Speaker 4

However, we recently were that an FDA travel complication relating to scheduling a routine clinical trial site inspection in Eastern Europe We'll likely delay their decision until after our September 19 PDUFA date. While any delay is disappointing, A new site inspection date has been scheduled. Therefore, we do not expect a lengthy extension of the review period and we do not expect it to meaningfully impact our launch Assuming FDA approval. We continue to actively work with the FDA, believing the ongoing review is Otherwise progressing well and all other elements of the review remain on track. Regarding our COVID-nineteen response, Regeneron remains committed To combat antivirus by developing additional novel antibodies, we continue to work with the FDA to establish a regulatory pathway for these antibodies, which could potentially serve an important role in protecting immunocompromised individuals who do not respond adequately to COVID-nineteen vaccines, as well as treating infected patients for whom all antiviral therapy is not appropriate.

Speaker 4

In closing, As I reflect on our performance during the first half of the year, I am very proud of our numerous achievements, which were only made by the dedicated Regeneron employees around the world. Together, we have continued to serve patients in need, while We are excited about the increasing commercial momentum for our core products and the important progress we have made in advancing our pipeline. Our strategy continues to focus on investing in our internal R and D capabilities, while exploring potential collaborations that will enable us to fully realize the power of our science. We remain confident in the strategy and in our growth prospects as well as in our ability to deliver breakthroughs to patients and value to shareholders. Now, I'll turn the call over to George.

Speaker 3

Thanks, Lynn. I will start with ophthalmology. We are looking forward to the upcoming Phase 3 readouts of afliparcept 8 milligram in patients with diabetic macular edema and in wet age related macular degeneration. Photon in patients with DME and Pulsar in Patients with wet AMD will test whether patients treated with 8 milligram dose every 12 weeks or every 16 weeks can achieve Non inferior best corrected visual acuity at week 48 compared to the currently approved EYLEA 2 milligram dosed every 8 weeks. Unlike studies from other sponsors in which patients were assigned to a dosing interval based on disease activity assessment Following the loading phase, patients enrolled in the photon and culture studies were randomized at baseline into 1 of the 3 treatment groups, which we believe will allow us to determine whether extent dosing can truly be achieved.

Speaker 3

If the studies are positive and the high safety standard established with EYLEA is maintained, We believe aflibercept 8 milligram would represent a significant clinical advance for patients and we would target a U. S. Regulatory filing by early 2023. Moving to Dupixent, which continued to deliver notable milestones in the Q2 of the year. Dupixent was recently approved in children with atopic dermatitis as young as 6 months old, making Dupixent the 1st and only biologic medicine approved to treat atopic dermatitis from infancy through adulthood.

Speaker 3

Manny will talk more about this as well as about our recent earlier than expected FDA approval for a brand new gastroenterology indication, Eosinophilic esophagitis or EOE. Since receiving approval in adults and adolescents aged 12 and over, we have Reported positive data in pediatric patients with EOE as young as 1 year of age. Our Phase 3 study in children 1 to 11 years of age met the primary endpoint With 68% of patients on the higher Dupixent dose and 58% on the lower Dupixent dose achieving histological disease remission compared to 3% of children On placebo at 16 weeks, EOE symptoms can be difficult to assess in these young patients. However, We also observed a numerical improvement in the OE symptoms score. In an exploratory analysis, we recorded 3.1% increase from baseline in body weight For 8 percentile for the higher dose group compared to 0.3% in placebo.

Speaker 3

These data will be discussed with the regulatory authorities Starting with the FDA later this year. Regarding approvals for new indications expected in the near future, for prurigo and Agilaris, We received a PDUFA action date from the FDA of September 30, and the European Commission's decision is expected in the first half of twenty twenty three. Also in the first half of next year, we are also looking forward to the readout of the first Dupixent study in chronic obstructive pulmonary disease or COPD. Moving on to Libtayo and oncology. As Len mentioned, we are excited to have acquired Sanofi stake in Libtayo, thereby gaining exclusive worldwide rights to a PD-one inhibitor review as foundational for our oncology franchise, which has the potential to be utilized in numerous combinations with other candidates in our pipeline, such as our co stimulatory bispecifics, Our CD3 bispecifics and novel checkpoint inhibitors such as fiamelimab.

Speaker 3

Regarding such combinations, I'd like to provide a brief update on our first clinical data from our costimulatory pipeline involving REGEN5678, Our PSMAxCD20 cost inventory bispecific in combination with Libtayo. This combination is being studied In patients with advanced metastatic castrate resistant prostate cancer, who have previously progressed on multiple anti androgen therapies. These patients unfortunately have a poor prognosis with approximately 1 to 2 years of life expectancy and with limited treatment options. Metastatic, chastrate resistant prostate cancer is considered an immunologically cold tumor and is largely resistant to immune checkpoint inhibitor With large trials of PD-one antibodies showing monotherapy response rates in the single digits. As just announced today by Merck, the challenge of metastatic castrate resistant prostate cancer In terms of the lack of efficacy for checkpoint inhibitors used in standard ways is emphasized by the failure of their large Phase 3 trial in earlier stage of this disease.

Speaker 3

Our COSTIN program was designed to innovatively enhance responsiveness In these types of cold tumor classes such as prostate cancer and essentially turn these cold tumors into hot tumors. I remind you of the extensive preclinical data we have published supporting this hypothesis. Since 2019, we have been in careful Dose escalation for this prostate cancer program in close collaboration with the FDA. In our study, patients Are dosed weekly with REGEN5678 in every 3 weeks with Libtayo. However, first dose of Libtayo is not codenstern until week 4, Permitting a period of PSMA by CD28 leading to evaluate monotherapy safety and efficacy.

Speaker 3

Earlier today, we announced the first clinical data from 33 patients across 8 dose levels, which showed dose dependent anti tumor activity. The key efficacy endpoint in the study is objective response rate defined as a greater than 50% decline of prostate specific antigen or PSA from baseline and or tumor shrinkage. PSA is a protein produced by the prostate gland and by prostate tumors and is thus commonly used as a biomarker To diagnose and follow-up prostate cancer, as many metastatic, castration resistant prostate cancer patients Have disease limited to bone lesions and cannot be assessed by conventional resist criteria. Preliminary data from the ongoing dose escalation portion of the trial Across 8 dose level cohorts in a total of 33 patients showed dose dependent anti tumor activity as assessed by PSA values. At the 5 lowest dose levels, which our preclinical models predicted might be sub therapeutic, there was almost no evidence of any antitumor activity with only 1 of 17 patients showing a decrease in PSA.

Speaker 3

There were no greater than grade 3 greater or equal to grade 3 immune related adverse events or IRAEs at these doses. The lack of antitumor activity among these patients was consistent with the approximate 6% response rate reported in other trials with anti PD-one monotherapy. At the next three dose levels, we began to see clear evidence of dose dependent anti tumor activity, which was generally seen within 6 weeks of starting the combination treatment. At dose level 6, 1 of 4 patients Experience a 100% decrease in PSA and a complete response in target lesions based on resist criteria. The patient discontinued therapy due to a Grade 3 immune related adverse event of the skin that was considered to be a recurrence of a pre existing condition and has since resolved with treatment per investigator report.

Speaker 3

Despite termination of the treatment, He has maintained his 100% decrease in PSA and complete response in target lesions for approximately 10 months to date per investigator report. We continue to see antitumor activity at the next dose level or dose level 7 and in our 8th and most recent dose level, 3 out of 4 patients had dramatic and rapid PSA reductions, 2 with greater than 99% reductions and 1 with an 82% reduction. Of the 2 patients with greater than 99 percent PSA reductions, one experienced a Grade 3 case of mucositis, which has resolved And the other experienced a Grade 3 case of acute inflammatory demyelinating polyrhagulopathy, which is ongoing. In terms of safety, very importantly, no Grade 3 or higher IRAEs were observed in patients without Anti tumor activity and the occurrence of IRAEs was correlated with anti tumor activity. This is consistent with previous trials with anti PD-one immunotherapy, wherein IRAEs have been reported to occur at a higher rate in responding patients.

Speaker 3

No grade 4 IRAEs were greater than or equal to grade 2 cytokine release syndrome have been observed in the trial to date. There was one death that was considered unrelated to treatment. In this trial, IRAEs are being treated according to standard management practices used for checkpoint inhibitors.

Speaker 5

We are

Speaker 3

planning on sharing more detailed data from this study at an upcoming medical meeting. Let me remind you that through extensive preclinical research, We had hypothesized that augmenting T cell co stimulation alongside PD inhibition could be a key to turning immunologically cold tumors hot. These preliminary data for our PCMAxCD28 co stimulatory bispecific provide the first clinical evidence Supporting the promise of our broader pipeline of cost inventory bispecifics in diverse solid tumors as well as hematologic malignancies. By combining these costimulatory bispecifics with Latao or with our CD3 bispecifics, we have the opportunity to create novel therapeutic synergies to address some of the most difficult to treat cancers. We look forward to partnering with the oncology community on this ambitious and potentially groundbreaking efforts.

Speaker 3

In addition to these exciting early data, we anticipate several important oncology milestones in the second half of the year. At the upcoming ESMO conference, we will provide updates on fialumab, our LAG-three antibody in combination with Libtayo In a Phase 2 cohort of metastatic melanoma that will hopefully confirm the encouraging combined efficacy that we previously reported in this setting. In addition, we will present initial data for uvamatinib, our MUC16xCD3 bispecific in metastatic ovarian cancer, We'd like to remind you that we have also combination studies ongoing with both costimulatory bispecifics and Libtayo. We will also report initial data for our met by met bispecific and advanced met altered non small cell lung cancer as well for Libtayo monotherapy in neoadjuvant Cutaneous squamous cell carcinoma. Moving on to our hematology pipeline.

Speaker 3

Ogenexdemab has the potential to be the 1st seed20x seed3 bispecific to be approved for both major types of advanced B cell lymphomas that is both follicular lymphoma and diffuse large B cell lymphoma. Based on interim data from a cohort of patients dosed with our recently modified step up regimen, We believe ogeneximab may have the lowest rates of grade 3 or higher cytokine release syndrome for this class of bispecifics In follicular lymphoma and diffuse large B cell lymphoma, while still maintaining the efficacy profile previously reported. We look forward to presenting these updated data and potentially submitting a BLA for both indications in the second half of this year Pending feedback from the FDA. We also plan to share updated data for our BCMAxC3 bispecific study in relapse We're refracting multiple myeloma by the end of the year. Pending regulatory feedback, we are planning to submit for regulatory approval in 2023.

Speaker 3

An umbrella study in multiple myeloma investigating BCMA by CD3 in combination with various standard of care products and investigational candidates Is now open to enrollment, while we plan to initiate an additional study in earlier lines of multiple myeloma later this year. As you can see, the pace of innovation in our oncology pipeline has been accelerated, building upon Libtayo as a foundation with data readouts for novel mechanisms for cancer indications that historically have not responded to immunotherapy. Including with our Regeneron Genetics Medicines, where we and Collaborative continue to progress our pipeline and discovery engine. Our siRNA collaboration with Alnylam, a non alcoholic steatohepatitis or NASH contains product candidates addressing various targets, Including those discovered by the Regeneron Genetics Center. First data in NASH for ALN HSG are anticipated this fall.

Speaker 3

We are progressing a second target, PNPLA3 into the clinic later this year and we have recently identified an additional Novel promising target for NASH, Side B. As we just published in the New England Journal of Medicine, We found unprecedented association of very rare SiP loss of function variance with lower risk of liver disease. In the largest association study examined protection from liver disease ever described, individuals with loss of function side B variant At about 53% lower risk of developing non alcoholic fatty liver disease and about 54% lower risk of developing non alcoholic cirrhosis, Regeneron and Alnylam are developing siRNA therapeutic candidate leads to advance to the clinic. And with that, I will turn the call over to Marianne.

Speaker 6

Thank you, George. Regeneron's commercial business achieved another Strong quarter demonstrating durable growth across our brands. We're building on the momentum of in line brands including EYLEA, Dupixent and Libtayo and also accelerating the potential across our portfolio from new and anticipated future launches. Let me start with Eylea. 2nd quarter global net sales grew 13% year over year at constant currency to $2,500,000,000 In the U.

Speaker 6

S, EYLEA net sales exceeded $1,600,000,000 a 14% year over year increase driven by prescribing demand with strong demand continuing into the Q3. EYLEA year over year growth significantly outpaced the category, gaining competitive share and further enhancing EYLEA's position as the anti VEGF agent of choice for retinal disease. We continue to see durable growth Based on patient flow and new patient starts, ongoing demographic trends such as the aging population and prevalence of diabetes support anticipated mid to high single digit category growth for the foreseeable future. In diabetic eye disease, increasing diagnosis rates are also driving strong growth for EYLEA. With more than 55,000,000 injections worldwide since launch and well over 1,000,000 injections in the U.

Speaker 6

S. Alone in the Q2 of 2022. Physicians continue to recognize and prefer EYLEA's differentiated efficacy and safety profile. We are confident in our ability to continue to build on our leadership over the long term. Pending FDA approvals, There are potential incremental opportunities for EYLEA, including extending the dosing interval up to 16 weeks for diabetic retinopathy and treating preterm infants suffering from retinopathy of prematurity.

Speaker 6

In addition, our flubricep 8 milligram program has garnered significant enthusiasm from the retinal community and has the potential to significantly enhance the anti VEGF treatment paradigm. Turning now to Libtayo. Global net sales in the 2nd quarter grew 25% at constant currency to $141,000,000 with U. S. Net sales of $91,000,000 Libtayo continues to grow across all approved indications, including Non melanoma skin cancers, where Libtayo is the leading immunotherapy treatment.

Speaker 6

In monotherapy, non small cell Lung cancer, we are generating increased utilization across a broader number of prescribers. We are launch ready for the potential chemotherapy combination approval, which will significantly expand the patient opportunity and physician choice for Libtayo in treating lung cancer. Regeneron's full ownership of Libtayo presents many exciting opportunities across our current and future oncology portfolio. Key thought leaders recognize our growing commitment to oncology and have high interest in the potential for Libtayo combinations to meaningfully advance the standard of care In many cancer indications, we are taking a measured approach to expanding our global commercial footprint in key international markets To maximize the impact of our innovations to patients and Regeneron, these capabilities and infrastructure will support Libtayo in over And now turning to Dupixent. In the 2nd quarter, global Dupixent net sales grew 43 year over year at constant currency to $2,100,000,000 Dupixent's performance was fueled by strong uptake across all indications with recent launches performing well across new diseases, age groups and geographies.

Speaker 6

In the U. S, Dupixent net sales grew 38 percent to $1,580,000,000 We continue to expand Dupixent's leadership position as the first Alliant systemic treatment in atopic dermatitis. There's robust demand for Dupixent across the spectrum of moderate and severe disease as well as across age groups. With the recent approval in children as young as 6 months, Dupixent is the 1st and only biologic medicine approved to treat moderate to severe Atopic dermatitis from infancy through adulthood and the launch in our youngest patients is off to a very strong start based on initiations. We are also preparing for the potential approval next month in paraganaudularis, a dermatologic condition where approximately 75,000 U.

Speaker 6

S. Patients have no FDA approved medicines and are most in need. In asthma, Dupixent is the number one biologic Prescribed by both allergists and pulmonologists, we continue to see strong growth in new patient starts and total prescriptions, driven by Dupixent's differentiated profile, unique mechanism of action, ease of prescribing, broad label and demonstrated efficacy and safety. In nasal polyps, robust demand continues with Dupixent capturing majority of market share and increased prescribing from ENTs. In the field of esophagitis, our 1st gastroenterology indication, Dupixent is the only approved medicine for adults and children aged 12 and above.

Speaker 6

Early launch indicators have been favorable with encouraging adoption from both allergists and gastroenterologists. In addition, we are expanding our outreach to educate patients and caregivers about Dupixent as a new therapeutic option that provides meaningful symptom relief. Turning now to Dupixent and markets outside the U. S, in the Q2, net sales grew 61% on a constant currency basis to $510,000,000 driven by robust growth across all indications. Regeneron continues to expand our presence in key international markets To bring Dupixent to patients, in summary, Dupixent is transforming the type 2 inflammatory disease landscape and has significant growth potential ahead driven by further penetration in existing indications as well as from potential future indications.

Speaker 6

In conclusion, our commercial execution delivered solid results for the Q2, bringing our life changing medicines to even more patients, Our in line brands continue to perform well and new launches provide additional opportunities for sustainable long term growth. Now, I'll turn the call to Bob.

Speaker 7

Thank you, Marion. My comments today on Regeneron's financial results and outlook will be on a non GAAP basis unless otherwise noted. Regeneron's outstanding performance continued in the Q2 as our core business maintained a Strong growth trajectory and we have leveraged our strong financial position to complete 2 business development oncology transactions. Excluding global revenues related to the COVID-nineteen antibody cocktail, 2nd quarter total revenues increased 20% year over year to $2,900,000,000 demonstrating continued momentum across our business. 2nd quarter total diluted net income per share was $9.77 on net income of 1,100,000,000 Beginning with collaboration revenue and starting with Bayer.

Speaker 7

2nd quarter 2022 ex U. S. EYLEA net product sales were 870,000,000 up 13% on a constant currency basis versus Q2 2021. Total bearer collaboration revenue was 358,000,000 of which $340,000,000 related to our share of EYLEA net profits outside the U. S.

Speaker 7

Total Sanofi collaboration revenue was 6 $178,000,000 in the Q2 of 2022, improved 55% from the prior year, driven by Dupixent. Finally, we recorded Roche collaboration revenue of $8,000,000 related to Roche's sales of ronaPrieve outside the U. S. We expect to record additional revenue from this collaboration in the Q4 of 2022. Moving now to our operating expenses.

Speaker 7

R and D increased 7% year over year to $690,000,000 driven by higher headcount in cost to support our expanding pipeline, partially offset by lower development costs for Virgin Cove. In the Q2 of 2022, acquired IPR and D was 197,000,000 which includes a previously disclosed $195,000,000 charge related to our acquisition of CheckMate Pharmaceuticals. SG and A expense increased 14% year over year to $418,000,000 primarily due to costs related to growth initiatives for EYLEA And higher headcount to support our growing organization. Cost of goods sold decreased 73% year over year to $137,000,000 primarily due to sales of REGEN COVE in the prior year that did not reoccur. Finally, the Q2 2022 effective tax rate was 13.6% compared to 17% in the prior year.

Speaker 7

The lower rate is partially related to the non recurrence of REGEN COB sales. Shifting now to cash flow in the balance sheet. Year to date in 2022, Regeneron has generated $2,400,000,000 in free cash flow and ended the Q2 of 2022 with cash and marketable securities Less debt of $11,300,000,000 We continue to deliver on our capital allocation priorities, Completing our acquisition of CheckMate Pharmaceuticals, the first acquisition in Regeneron's history and the purchase of Sanofi stake in Libtayo. In addition, we repurchased approximately $400,000,000 of our shares in the Q2 of 2022, bringing our year to date total through July to over $1,100,000,000 We continue to be opportunistic buyers where we see dislocation between our stock price and our intrinsic valuation. I will now discuss updates to our full year 2022 guidance driven by the closing of the Libtayo transaction.

Speaker 7

We're updating full year R and D expense guidance to be in the range of $3,100,000,000 to $3,240,000,000 An increase of $170,000,000 at the midpoint from our previous guidance. Approximately 1 third of the increase is driven by Regeneron now recording all R and D Thanks for Libtayo, which was previously shared with Sanofi. The remaining 2 thirds reflects the recording of our full 50% share of antibody collaboration And as incurred, beginning in Q3 of 2022, previously, our share of antibody collaboration expenses was only partially expensed in the period incurred with the remaining share added to the antibody collaboration development balance. We were updating full year SG and A expense guidance to be in the range of 1.7 $4,000,000,000 to $1,840,000,000 The updated range reflects the inclusion of 100% of Libtayo commercial expenses, which were previously shared with Sanofi net of anticipated synergies. We are also updating full year gross margin guidance to be in the range of 92% to 93%.

Speaker 7

The more favorable gross margin is due to the removal of the payment of Sanofi's share of U. S. Libtayo gross margin that was previously recorded in this slide. A complete summary of our latest full year guidance is available in our press release issued earlier this morning. Let me conclude by highlighting 4 important financial modeling Considerations related to the Libtayo transaction.

Speaker 7

1st, effective July 1, Regeneron will record 100% of the global Libtayo net product sales. We previously recorded only U. S. Libtayo net product sales. 2nd, the Libtayo upfront payment milestones and royalties Will be recorded as an intangible asset on the balance sheet and amortized through cost of goods sold over the useful life of Liftyo.

Speaker 7

This amortization expense will be excluded from non GAAP results. 3rd,

Speaker 3

as you may recall, We will

Speaker 7

now pay 20% of our share of antibody profits to reduce the antibody development balance instead of the previous 10% arrangement. The quarterly development balance repayment going forward will be reflected in our P and L as incremental antibody R and D expense I mentioned earlier when discussing revised R and D guidance with the remainder coming in the form of a reduction to antibody collaboration revenue. Therefore, the reduction to antibody collaboration revenue will be less than 20% of our share of antibody profits. As a result of the development balance repayment step up, we expect to shorten the period to fully repay the development balance resulting in an earlier and very significant inflection in collaboration profits in the outer years. Finally, in the Q3 of 2022, We will record a one time development balance repayment per the Libtayo transaction agreement of approximately $55,000,000 in addition to our regular quarterly repayments, which will be recorded as a deduction within the antibody collaboration revenue line.

Speaker 7

In conclusion, Regeneron is performing well and we continue to make investments in our business supported by our strong financial position to drive sustainable long term growth. With that, I will pass the call back to Ryan.

Speaker 2

Thank you, Bob. Bella, that concludes our prepared remarks. We'd now like to open the call for Q and A. With Several callers in the queue and to ensure we are able to address as many questions as possible, we'll answer one question from each caller before moving to the next. Bella, please go ahead and

Speaker 1

Please stand by while we compile the Q and A roster.

Speaker 8

And our first question comes from

Speaker 1

the line of Mohit Bansal from Wells Fargo. Your line is now open.

Operator

Yes. Thanks for taking my question and congrats on the quarter and data. Maybe a question on high dose EYLEA DME trial, especially with the loading dose sticking to that. So if you go back in the memory lane, it Seems like the use of 5 loading doses only came along after the DRCR protocol because I couldn't find anything which In the history, we suggest that you should use 5 loading doses. So could you please talk a little bit about that?

Operator

And also, What is the realistic utility of 4th and 5th loading dose, even for standard dose EYLEA, especially in the context of 1 year long trial? Thank you.

Speaker 3

Yes, those are really interesting questions and they get into the detail of very specific points of the regimen. Many of these, as you point out, have not been directly studied in sort of head to head studies. So, well, we would have Maybe offline discuss some of these issues, but as I said, details that would require a lot of experimentation to maybe answer.

Speaker 2

Thanks, George.

Speaker 3

Thanks, George. Can we go to the next question, please?

Speaker 1

Your next question comes from the line of Evan Seyckeerman from BMO Capital. Your line is now open.

Speaker 8

Hey guys, thank you so much for taking my question. I'd love for you to expand on kind of some of the next steps for 5, 6, 7, 8. What do you want to see in additional Cohort 8 patients And even at potentially higher dose cohorts to move into a registrationally directed trial? Thank you.

Speaker 3

Yes. No, thanks. We are obviously very excited about these data that have been long been coming as you all know. We had to go through a very careful dose escalation starting with very low doses. But what we've now seen at The dose level 6, 7, and 8 have really been very exciting.

Speaker 3

I think that what we're going to be doing is we're going to be continuing to expand the number of patients at these dose levels. We're going to continue to evaluate the tumor activity as well as the safety, and we hope that we're going to see that the Responses remain profound and durable, while the safety, hopefully, most of them will resolve And we managed well. And if we continue down that path, we will, as you say, also continue to explore other dose levels and so forth. But the level of tumor activity and balanced by The safety of that that we're seeing on doses are occurring now at levels where we think that And they could be providing a new standard for benefit risk for this population. I think that it's important To point out and remind everybody, I mean, I said it, but just to say it again, the IRAs were only seen in the patients who had profound Anti tumor activity, that is the patients who didn't benefit did not really indicate in terms of higher level IRAs to have A significant safety concern.

Speaker 3

And that is of course what you want to see. But the patients who have the benefit that the safety is limited to those, You're not doing harm to the patients that you're not benefit. Okay. I guess we're ready for next question. Thanks, George.

Speaker 3

Bella, next question please.

Speaker 1

Your next question comes from the line of Tyler Van Buren From Cowen, your line is now open.

Speaker 4

We don't hear the question, but maybe we could take the opportunity to amplify even a little further and repeat what George said about the safety and the one thing

Speaker 5

Can you hear me? Sorry, it cut out.

Speaker 3

Yes. This is Tyler.

Speaker 5

Good morning. Thanks very much for taking the question. I wanted to

Speaker 3

ask about Pulsar and Photon, just a follow-up. Can you elaborate on the decision to randomize patients to the 12 week and 15 week ARMs prior to assessing their response for loading doses? Since patients can only be rescued during that 1st year or move down in dosing interval and not moved up to a less frequent regimen even though they might be Doing well. Doesn't this make the comparison to the revised Motenaya Lucerne studies difficult? And given this, how do you expect to communicate the data to the physicians When we see it?

Speaker 3

Well, we estimate we were somewhat confused by the whole of the business data And it's meaning and it's intent because of the confusing study design. We're basically only after you see how well You then shift them. So if you take your best patients and you shift them for example to a Q12 or Q16 regimen and you say, oh, X percent of patient consensus regimen, you're not really understanding how good your drug is and what percent of the patient can actually achieve that dosing regimen. We know and we've already published on this that patients who do well can be dramatically extended. We're trying to answer a very Different question, which we think is going to be very, very important to the community, which is whether you can truly achieve Extended dosing.

Speaker 3

And whether you can prospectively put people into these dosing regimens and get substantial numbers of them To stay at the dosing regimen because we're giving the higher dose of EYLEA, which we believe has this ability to maintain more patients At these longer intervals. So we really believe that this would represent a significant clinical advance And we also clarify how to use these drugs as opposed to the prior somewhat confusing approaches.

Speaker 2

Thanks, George.

Speaker 5

Okay. That's helpful. And just a brief follow-up. In year 2,

Speaker 4

we're going to

Speaker 5

be able to be

Speaker 3

We have to

Speaker 5

move on. I'm sorry, Tyler.

Speaker 3

Bella, can we go to the next question? We'll deal with that privately, Tyler, sorry.

Speaker 1

Sure. And your next question comes from the line of Salveen Richter from Goldman Sachs. Your line is open. Good morning. Thank you for taking our question.

Speaker 1

This is Andrea on for Salveen. Can you walk us through how to think about implications from Medicare negotiation provision to high dose EYLEA, given that there is no distinct IP there, but there will be a biosimilar for the regular dose by mid-twenty 4? Thanks so much.

Speaker 4

It's a complicated question that until we see the final language In the statute, how it's interpreted and how it's actually implemented as to whether and how we file for the high dose, Whether or not there will be separate considerations for high dose versus the standard dose EYLEA. If there was if it turns out that there are separate we get a separate BLA, Obviously, you get I can't remember what the statute says now 11 or 12 years before this comes into play. And based on our current understanding of the bill, we believe that a new BLA would constitute a new biologic product and therefore The 8 millivarians would not be subject to price negotiation in years. But we have to see what the final bill looks like And how it's interpreted. So we're as anxious to see some of that as U.

Speaker 4

S. O'Vie. And so we will Keep you informed about thinking as the bill is finalized and starting to be interpreted.

Speaker 2

Thanks, Glenn. Bella, next question please.

Speaker 4

Yes. See some of that As you are told, Dean, so we will keep you informed about thinking as the bill is finalized and starting to be interpreted.

Speaker 2

Thanks, Glenn. Bella, next question please.

Speaker 1

Yes. Your next question comes through the line of Matthew Harrison from Morgan Stanley. Your line is now open.

Speaker 9

Great. Good morning. Thanks for taking the question. I was wondering if you could comment maybe a bit more broadly on CoStim's and how the impact of today's data makes you think about Investment in additional tumor types or a broader investment across co stims and other combinations? Thanks very much.

Speaker 3

That's a great question. I think you bring up a great point. And I think those of us who have been in this field now, We're of course so excited by the early promise of immunotherapy checkpoint inhibitors and particularly PD-one Antibodies. But of course, over the years, it's been recognized that only Small percentage of tumors, even in responding, even in the most responsive cancers, not all the patients respond. And for many tumor classes, As we just saw with Merck's announcement of their failure today, in many classes, there's almost no detectable activity.

Speaker 3

So the Holy Grail in the field that people have been looking for is an answer to the question of How do you activate immunotherapy in all of these cold tumors, which is unfortunately the vast majority Cancers, both solid tumors and hematologic malignancies. And so we went down this path based on the science That we could add the second signal, signal 2, to the first signal that could activate T cells. And these preliminary data suggest that that hypothesis might be right and that we are on the way to this Holy Grail This is we believe very early data. We have a long way to go, but it's a spectacular indication that we have done Well, we are in the midst of doing and on the path doing exactly what we set out to do, which is to turn immunotherapy cold tumors into hot tumors With dramatic anti tumor activity. And the implications here based on all the preclinical data suggest that this is going to be broadly applicable.

Speaker 3

And as you all know, we have been developing a very broad costimulatory pipeline across many, many tumor classes And several of them are already in the clinic. I mentioned we have the prostate data. We have ongoing studies with the costum oral variant cancer. We have other postings that are in the clinic for and we have other postings that are going to be entering into the clinic Over the next short period of time, these are going to cover all sorts of cancers from the lung cancers, that don't respond To hematologic malignancies and so forth and so on. So we really think that this could be Groundbreaking and taking immunotherapy now to the next level where all of us in the field were hoping it was going to go With the early advances with checkpoint inhibitors and have been frustrated over the obviously the last decade or so that we haven't been able to get there.

Speaker 3

This may be the way to get there for the field. We have a very broad pipeline of cost inventory bispecific. By the way, we believe this validates The concept of the combinations not only with Libtayo and the PD-one class, but also with our CD3 class of bispecifics because It suggests that the preclinical data, which is so strongly supported now with this clinical data, might also be very predictive for that class. So a lot of exciting possibilities across very broad areas, diverse solid tumors, hematological malignancies. This is I think could represent the next breakthrough for immunotherapy.

Speaker 4

Yes. And Matthew, it's fine. Let me just add What George said in terms of the investment side, we're prepared and we're able to make the investment across many different areas that George is talking about And having under one roof all the agents, owning all of Libtayo, having the variety of costims, Having a variety of the CD3 bispecifics and having all that knowledge, we think and the ability to invest Puts us in a really terrific position. It is early going. We have to work through the safety.

Speaker 4

But to me, it's sort of reminiscent of Once you start to see the excitement around the CAR T cells. And the CAR T cells actually provide a pretty good lesson And that they give very high levels of activity response rate, 75% in some tumors or higher. And when you get those very high response rates, you also got very high levels of these immune reactions. You had in the And you look at the labels, you'll see 25% grade 3 neurologic adverse events and a whole bunch of other, Not to mention all the cytokine release syndrome. So I think that this is sort of an equivalent stage.

Speaker 4

We've got this tiger by the tail, I really believe. And George has described it well. And the amazing thing that should be echoed is that the preclinical data Was extremely valuable. So Regeneron is not a company that just has all these molecules that we've acquired from others. These are homegrown molecules, Home tested, home validated, etcetera.

Speaker 4

There's a whole collection. We couldn't be more excited. I could keep going on, but maybe I'm getting waived off. We should take the next question. No, I just want to add

Speaker 3

and build on what lends itself. I think just like you said, in some ways, the CAR Ts in terms of High efficacy, particularly in hematologic malignancies because that's where it's seen. High efficacy is seen along with The AEs and some of the responding patients, that's a good analogy. But I do have to point out the many differences. These are off the shelf reagents, okay, which God forbid, if there is a safety issue can be stopped.

Speaker 3

And it's much easier as we're already demonstrating to create a whole pipeline across a whole variety of broad cancers. And unlike the CAR T world right now anyway, these are dramatic effects in solid tumors, Which were never really seen before by any other modality. So this is actually pretty exciting. There are analogies there in terms of Dramatic efficacy, but also very important differences here that establish this As a potential breakthrough new class.

Speaker 2

Okay. Thank you, George and Len. Next question please, Bella.

Speaker 1

Sure. Your next question comes from the line of Tim Anderson with Wolfe Research, your line is open.

Speaker 2

Thank you. A question on the 5,678 data. You reported out 1 CR, but no other response rate data using RECIST criteria. So I'm wondering if there's anything else you can say about tumor shrinkage Beyond that 1 CR in those upper 3 cohorts. And then to clarify, you mentioned a host of grade 3 AEs in the press release.

Speaker 2

And some of those to me don't seem like the classic immune related AEs. So are you I'm hoping you can clarify which of those you

Speaker 3

I think we've given a lot of detail And we're going to be giving a lot more details obviously in upcoming meetings. Suffice it to say that, as I mentioned, For most of these patients, actually many of these patients, they don't have lesions outside of the bone, which is why we use PSA as the indicator of total disease activity because you don't have that many lesions. Okay. So that's one point why we're focusing on the PSA. We do believe that many of the Our RAEs are the sort of RAEs that you do see with both PD-one therapy and as Glenn mentioned also with CAR T therapy.

Speaker 3

And I think we indicated every single grade 3 that we had and indicated that actually Even though these are very early data in the treatment, most of these patients, many of these are actually early resolving or resolved. And we're going to continue to follow-up these patients and look for hopefully as seen remember cohort 6 That one patient, the reason we highlighted them is they were the 1st responding patients and we've now had almost a year follow-up and we have this The only impressive durability of response there. The other cohorts are much more recently treated and that's why we're not giving that much follow-up because These are patients who are in the very early months of being treated. But obviously, you hear it in our voices probably Those of us who have commented, we think this really has the potential to be game changing, game changing for the field of immunotherapy and taking immunotherapy to the next That was also game changing for our oncology program and for our company.

Speaker 2

Thank you. Bella, next question please. I think we have time for 2 more.

Speaker 1

All right. Your next question comes from the line of Chris Raymond from Piper Sandler. Your line is now open.

Speaker 10

Hey, thanks. Maybe back to EYLEA and the high dose format for a second. So our checks have indicated a pretty good chunk of The biosimilar patients are actually EYLEA patients, specifically EYLEA patients who are on a higher frequency dose regimen. I guess maybe 2 part question here. First maybe talk about the plan to sort of mitigate this Either before the high dose format or even after.

Speaker 10

And I guess is the plan with the high dose, Yes. One would expect that switching paradigm for the high dose EYLEA would be easier than VIBISMO, is that sort of part of the plan? And then the second part is our checks also indicate surprisingly low awareness of this high dose format among docs. Are these signals at odds with what you're seeing or is that correct and outside of actually just having the data

Speaker 4

We have our question. Manny is going to answer. But by the way, We don't market products before they were approved. So it's not surprising that there is a non awareness of a product that's an investigational product. Mary can comment on that.

Speaker 6

Let me take a start on some of the situations in market and perhaps George will add to that. But first, let me comment that, obviously, we presented today very strong results on the growth of IVS standard of care in the marketplace, both in the U. S. And the worldwide information. Today in the branded category, U.

Speaker 6

S. Anti VEGF category, we have 75% of the branded market. We have approaching 50 So truly EYLEA is the standard of care. It's probably best that firstumab organization comments on where their product is being used. I'll comment anecdotally that early days the Sponsors has been fairly muted, fairly low grade use in concentrated accounts rather than market wide.

Speaker 6

As for the future, we're very excited and optimistic that the Aflubrisate 8 milligram will represent a new standard of care With true durability of dosing and the same type of efficacy and safety that we see with EYLEA. So we're really excited And certainly our clinical organization has put together trial designs that truly test the durability of the product And then we'll allow the commercial organization to determine what the best strategy is for launch, if and when we get FDA approval.

Speaker 3

All right. Let me just add to that, that it's important to point out that the reason why EYLEA has become The leading anti VEGF agent, branded VEGF agent is because it allows most of the EYLEA patients To go on longer interval dosing and have and be very satisfied with the response. Now of course, as with any disease and situation, not every patient is going to do perfectly well. And we know That there is a small percentage of patients who do need more frequent EYLEA. And of course, If one has a new untested agent that doctors haven't seen, there are hope in the place that they would first try in these small percentage of patients Who don't, who are not doing well.

Speaker 3

And of course, that's why it's being used in that setting. Now our goal, of course, With the high dose of EYLEA is to take now the best in class agent and hopefully produce even better Results in terms of allowing these small percentage of patients who have who are being dosed more frequently Or even the patients who are now on 8 week regimens or 12 week regimens to go to more extended regimen. And that's the whole point of the design in the study. So I don't think there's any Prizes that it's the small percentage of very hard to treat patients where somebody would try A non tested agent that they're hoping might work better, but we have a real logical rational way That we are now taking EYLEA, bringing forth this high dose formulation and hope to extend the benefits that we're already seeing with this Tried and true in terms of both safety and efficacy reagent and even expanded and get even for these small percentage of patients Longer dosing and even extend maybe everybody else.

Speaker 2

Okay. Thanks, George. Last question, please.

Speaker 1

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

Speaker 11

Hi, sorry. Thanks. Good morning. Thanks for taking the question. Thanks for squeezing us in.

Speaker 11

I guess, now that you fully own sort of Libtayo, can you update us on kind of where you stand on subcutaneous formulation given what Seeing data from some of your competitors there and the importance of that to kind of keep pace. And I guess looking down the road then, can you talk about feasibility of potentially co formulating Libtayo with one of these bispecifics excuse me, co stimulatories and if that's even feasibly possible recognizing it's a ways away? Thank you.

Speaker 4

You can imagine we're working on subcu. We'll give you some details, I think, down the road later this year. In terms of co formulation, we have a strong view If you're doing it for gamesmanship or patent work and all that kind of stuff, that's one thing. But we What we're more focused on is getting the optimal dose and the optimal regimen and then not likely to be the same in many of these settings. It's the only useful if you're going to try to have a single regimen that covers both.

Speaker 4

So We're a long way from worrying about that. We're far more focused on the fact that we've turned cold to hot, which is

Speaker 3

a big damn deal at least in our eyes. And obviously, it hasn't escaped yours or I'm sure anybody's attention that now with this just Appreciated new data where it looks like we're on the way of turning cold tumors to hot in combination with Libtayo. We are in retrospect very happy that we now have taken on sole ownership of Lataya.

Speaker 2

Thanks, Glenn and George. I think that's all we have time for today. Bella, could you please conclude the call?

Speaker 1

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

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Earnings Conference Call
Regeneron Pharmaceuticals Q2 2022
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