Welcome to
the Regeneron Pharmaceuticals Second Quarter 2018 Earnings Conference Call. My name is Sylvia and I'll 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 Please note that this conference is being recorded. I will now turn the call over to Manisha Narasimi, Head of Regeneron's Investor Relations.
You may begin.
Thank you, Sylvia. Good morning, and welcome to Regeneron Pharmaceuticals 2nd quarter 2018 conference call. An archive of this webcast will be available on our website under Events for 30 days. Joining me on the call today are Doctor. Leonard Schleifer, founder, president and chief executive officer, Doctor.
George Ancopolis, founding scientist, President and Chief Scientific Officer Marion McCourt, Senior Vice President, Head of Commercial And Bob Landry, Senior Vice President and Chief Financial Officer. After our prepared remarks, we will open the call find 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 product and business, financial forecast and guidance, development programs and related associated milestones, collaborations finances, regulatory matters, intellectual property, pending litigation and competition. Each forward looking statement is subject to risks and uncertainties fees 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, or SEC, including its Form 10 Q for the quarter ended June 30, 2018, which will 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 at regeneron.com. Once our call concludes, Bob Landry and the IR team will be available to answer further questions. With that, Let me turn the call over to the President, Chief Executive Officer, Doctor. Len Schleifer.
Thanks, Manisha, and good more to everyone who's joined us on today's call and webcast. Regeneron delivered a strong second quarter as measured both by R and D progress as well as our financial results reflecting our commitment to discovering important new drugs and translating those discoveries into successful commercial products Our pipeline now has 19 drugs or drug candidates in development with particularly good progress in allergic diseases and cancer George will update you on our R and D efforts and highlight some notable progress across our pipeline. Our commercial efforts are focused on market leading Eylea, the ongoing launches of Dupixent, Kevzara and Praluent, and our ongoing launch preparations for cemiplimab, our PD-one inhibitor in cutaneous squamous cell carcinoma. Marion will update you on our progress. Operationally, we had a record performance on both the top and bottom line.
Bob will review these results. Now I'd like to turn the call over to George.
Thanks, Len, and good morning to everyone. Let me begin by updating you on the status of Eylea. Our regulatory submission for Eylea dose every 12 weeks in neovascular age related macular degeneration or wet AMD is currently under FDA review within PDUFA date of August 11th. Yesterday, there, which commercializes Eylea outside the United States, announced that the European Commission has approved a new treatment approach enabling early extension of the injection interval for patients with wet AMD. The new approach is based on the results from the Ultera study, in which after 52 weeks, 50% of patients had their next regularly scheduled IV injection and an interval of 12 weeks or more with many patients achieving an interval of 16 weeks.
The maximum interval allowed in the study. Study participants gained an average of 9 letters, including 50 percent of patients who gained 10 or more letters of vision at week 52. These results were largely maintained during the second year of the study. These data have not been submitted for review to the FDA. We would also like to report some recent success with higher dose formulations of aflibercept in preclinical studies, which we hope to advance into the clinic in 2019.
Turning now to our immunology and inflammation programs. Dupixent, our interleukin-four and interleukin-thirteen blocker is approved for atopic dermatitis and is an under investigation for other allergic diseases also known as atopic or Type 2 inflammatory diseases. Including asthma, nasal polyps, eosinophilic esophagitis, as well as food and inhaled allergies. Dupixent is approved for the treatment of adults with atopic dermatitis and later this year, we expect a supplemental biologics license application or SBLA for adolescents with atopic dermatitis based on the positive top line data we announced in May. These data will be presented in more detail at a medical conference next month.
Dupixent is also under regulatory review for asthma in adults and adolescent. In addition, we are conducting pediatric studies in both atopic dermatitis and asthma. Later this year, we are expecting pivotal results from our Phase III studies in nasal polyps and we will be initiating our Phase III program in eosinophilic esophagitis as well as earlier clinical programs in both peanut allergy continues to support our hypothesis that interleukin-four and interleukin-thirteen are the central drivers of allergic disease. Our interleukin-thirty three program complements Dupixent and has potential both as monotherapy and in combination with Dupixent. Intelukin-thirty three may be an important target in certain inflammatory diseases and is supported by evidence from work done at our Regeneron Genetics Center.
We are currently investigating this molecule in asthma and atopic dermatitis. Now I'll turn to immuno oncology. Which continues to be an area of enormous focus for us. Our BLA for semiplimab in cutaneous squamous cell carcinoma is currently under regulatory review and the PDUFA date is in October. If approved, this will be the 3rd PD-one antibody to gain regulatory approval and the first in cutaneous squamous cell carcinoma, where we have observed response rates that have been among the highest reported with a PD-one antibody for a solid tumor.
Regulatory application for cemiplimab and cutaneous squamous cell carcinoma are also under review outside the United States. Non small cell lung cancer is an important development opportunity for cemiplimab. Despite many efforts in the field, there is currently only one PD-one antibody approved in 1st line non small cell lung cancer and less than half the patients respond. We are pursuing a broad development strategy in lung cancer that encompasses patients with both low Beyond first line non small cell lung cancer, we also have ongoing studies in other solid tumors, including second line non small cell lung cancer, 2nd line cervical cancer and basal cell carcinoma. Based on our review of recent data from competitor PD-one's in non small cell lung cancer, We plan on increasing the size of our ongoing monotherapy phase 3 study and expect it to read out in 2020.
We're also reviewing any implications that these developments may have our larger lung cancer program. We recognize how quickly the field of immuno oncology is evolving and are committed to being at the leading edge. Despite all the advances in the treatment of cancer, many patients still remain without effective treatment options. In addition to use as monotherapy, we expect cemiplimab to meet the foundation upon which we build combination therapies to address a variety of tumor types. To that end, we have 2 additional checkpoint inhibitors lag3 and CTLA-four in clinical development.
We're also exploring our checkpoint inhibitors in collaborative combinations with vaccines and cell therapy approaches. Our proprietary bispecific antibody platform is another key component of our immuno oncology strategy. We are investigating our bispecific antibodies single agents in combinations tools within immuno oncology enables us to choose the best ones for each particular disease. Our lead bispecific program is a wholly owned CD20 CD3 molecule, which has validated the concept and given us confidence in the platform as a whole. We remain very encouraged by the strong response rates that we have observed to date in both indolent and aggressive non Hodgkin's lymphoma and expect to advance this program into registrational studies in 2019.
Additional studies and data from this program will be presented at a medical conference later this year. We are also advancing additional bispecific candidates into clinical development. Our MUC16 by CD3 bispecific for ovarian cancer has entered clinical development and our BCMA by CD3 bispecific for multiple myeloma We'll enter the clinic later this year. These bispecifics will be studied both as monotherapy and in combination with some simple math. Early next year, We expect to advance into clinical development and entirely new class of bispecific antibodies, which we will study in combination with the CD3 class of bispecific as well as with semiplimab.
Turning now to fasinumab, our nerve growth factor antibody for pain. We are continuing patient enrollment in the Phase III osteoarthritis program. Following an evaluation by an independent data monitoring committee, we We are moving forward with only the lower dose regimens in this program. We anticipate sharing top line efficacy results from our first Phase III osteoarthritis study later this quarter. Now I'd like to provide a brief update on 3 of our wholly owned earlier stage programs.
Let me begin with our C5 antibody. Our goal is to provide patients with a convenient, self administered, subcutaneous dosing option that doesn't require a high volume delivery device. And we have made significant progress toward this goal. In our phase 1 study based on both pharmacokinetics and ex vivo pharmacodynamic assays, subcutaneous dosing regimen achieved the blood levels that we believe will be sufficient to prevent hemolysis in patients with paroxysmal and nocturnal hemoglobinuria or PNH. We expect to report the full data in upcoming medical conference and plan to initiate phase 2 studies for PNH in early 2019.
Another exciting early stage molecule is our antibody to active NA, which we are investigating vacants progress. We are pleased that enrollment in our potentially pivotal study is proceeding according to plan. We're also studying our active and A antibody in combination with our myostatin body in the setting of muscle atrophy and wasting. Where in early studies, we demonstrated an approximately 8% increase in muscle mass. We plan to initiate by year end the first of multiple phase 2 studies to ascertain whether this increase in muscle mass translates into functional and or metabolic benefits.
We currently have 19 product candidates that are in various stages of clinical development. Each of these was discovered by us in our laboratories in Taritown, New York. I'm pleased to say that we remain on track for the goals that we laid out at the beginning of the year to advance 4 to 6 new product candidates into the clinic in 2018. Just in the first half of the year alone, we have advanced 3 new molecules into clinical development. With that, I'd
2nd quarter were $1,660,000,000, an increase of 13% year over year. In the U. S, EYLEA continues to be the market leading anti VEGF for retinal diseases. In the 2nd quarter, U. S.
IDEA net sales were 992,000,000 which represents 8% growth year over year. Based on net sales, Eylea currently has approximately 70% of the overall branded U. S. Anti VEGF market. We are committed to maintaining our market leadership position with Eylea and we've identified meaningful growth opportunities.
While Eylea is well penetrated in wet AMD, there remains a large opportunity in diabetic eye disease. Less than 20% of patients diagnosed with clinically significant diabetic macular edema currently receive anti VEGF therapy, and many others with diabetic macular edema are not even diagnosed, approximately 25% of current business is attributed to use in patients with a diabetic macular edema. Additionally, we expect the market to grow in wet AMD because of the aging population and in diabetic retinal diseases due to retinal disease or wet AMD is treated with optimal therapy, which in the vast majority of cases is anti VEGF therapy, To that end, in the coming weeks, we will be launching an initial branded television campaign for Eylea and DME in multiple U. S. Test markets.
Another important potential growth driver for Eylea is through gaining approval and additional retinal diseases and expanding the label. We have submitted an SBLA for Eylea in diabetic retinopathy population. It's estimated that there are approximately 3,500,000 people in the U S, who are diagnosed with a diabetic retinopathy without DME. Of these, approximately 1,000,000 patients have the greatest disease burden and are at risk for vision threatening complications. Earlier this year, we reported positive top line data from the Phase III PANORAMA study of Eylea in diabetic retinopathy, and we expect to report top line 52 week data later this year.
Our regulatory submission for Eylea dosed every 12 weeks is currently under FDA review. As George mentioned earlier this week, European regulators approved Eylea for an extended dosing regimen in wet AMD. We have also recently submitted and SBLA for Eylea in a prefilled syringe with potential launch in 2019. Turning now to Dupixent, global net sales in the second quarter of 2018 as reported by our collaborator Sanofi were $209,000,000. In the U.
S. Net sales in the second were $181,000,000. Approximately 50,000 patients have been prescribed Dupixent since launch in the U. S. Underlying U.
S. Demand for Dupixent is strong with total prescriptions, up approximately 27% sequentially from the last quarter. New patient starts, another indicator of demand and average weekly MBRx in the second quarter were approximately 5 to new patients, excluding the holiday week. Overall, patient refill and persistence rates remain high, especially in comparison to other biologics. Dupixent prescribers remain highly satisfied frequently referring to Dupixent as a drug transformational to the lives of their patients and their treatment practices.
In the U. S, over 11,000 healthcare providers have prescribed Dupixent through the second quarter with depth of prescribing continuing to increase. Of our unbranded disease state awareness campaign and plan to roll out a branded Dupixent television campaign in the coming weeks. Outside the U. S, the launch of Dupixent and atopic dermatitis is underway in multiple major markets.
During the second quarter, Dupixent was approved and launched in Japan, with additional launches anticipated in other countries over the remainder of 2018 and thereafter. Beyond adult atopic dermatitis, we look to the FDA's decision on Dupixent for moderate to severe asthma in adults and adolescents with a PDUFA date of October 20th. Based on our clinical data, we believe that Dupixent offers a differentiated profile for among biologics for asthma, with a substantial decrease in exacerbation rate and consistent in clinically meaningful improvement in lung function. There remains significant unmet need in uncontrolled asthma, which accounts for an estimated 20% of diagnosed asthma patients, Currently, there are approximately 900,000 patients in the U. S.
Who are treated for uncontrolled moderate to severe asthma who would be considered appropriate biologic therapy candidates. However, fewer than 10% of these patients are currently treated with a biologic In addition, we also anticipate meaningful opportunities for Dupixent in adolescent and pediatric atopic dermatitis pediatric asthma, nasal polyps, and the synophilic esophagitis, which are all at late stage development. Global net sales in the 2nd quarter for Praluent is recorded by Sanofi were $74,000,000, representing a 61% increase of 61% compared to the second quarter of 2017. Earlier this year, we reported positive data from the Odyssey heartiovascular outcome study and have made a regulatory submission in both the U. S.
And Europe. Over time, as outcomes data are potentially and as guidelines are anticipated to change, we expect commercial uptake to be positively impacted. We continue to engage in discussions with payers to simplify utilization management criteria and to improve access for patients and returned for flexible patient prescribing and more affordable patient access. We're pleased that Praluent was chosen as the exclusive PCSK9 inhibitor on the Express Scripts National Formulary. The agreement took effect on July 1st, so it is too early for us to assess the impact.
This is a competitive space With many decisions yet to be made, we continue to engage with other payers and remain committed to minimizing barriers related to access and affordability Moving to KUZARA. Global net sales is recorded by Sanofi were $24,000,000 in the second quarter as demand improved. Within the IL-six subcutaneous class, Kevzara now has approximately 26% of dispensed MBRx share and 10 filled pen and is now the only biologic RA therapy in the U S that is available in a button free pen. The Kevzara prefilled pen is uniquely activated by pressing the pen against the skin. Data have shown that pens are preferred over syringes by RA patients taking chronic subcutaneous injections.
Along with its differentiated clinical profile, KEVZAR is positioned to be the preferred biologic for those patients who are who are inadequate responders or intolerant to TNF antibodies. We continue to improve market access with an estimated 92% commercial lives having coverage. I'd now like to turn to cemiplimab, our PD-one antibody. We are preparing for an anticipated approval and launch of cemiplimab in advanced cutaneous squamous cell carcinoma later this year. If approved, this will be the 3rd PD-one antibody to market, but the first for cutaneous Gamous cell carcinoma.
Our PDUFA date is in October 2018, and we expect a decision by the European Medicines Agency in the first half of twenty nineteen In the U. S, our specialized field based oncology team is trained and prepared for launch. Commercial supply is ready to ship immediately following approval As a reminder, Semiclimab is a collaboration product with Sanofi where in the U S, we will take the commercial lead and record sales. Now, I'll turn the call over to Bob.
Thanks, Marion, and good morning, everyone. As Len referenced at the start of this call, Regeneron had strong top and bottom line financial results. Today, I'll discuss the details of our second quarter 2018 financial results as well as highlight changes to our full year 2018 guidance line items. $624,000,000. These results represent a 31% and 28% year over year increase in our non GAAP diluted EPS in net income, respectively.
Total revenues grew 9 percent year over year to 1,610,000,000, continued drivers of this growth are performance of Eylea both in the U. S. As well as ex U. S. And a decrease in the loss in connection with commercialization of antibodies resulting from higher Dupixent sales, which was partially offset by no longer having a contribution from Sanofi in connection with the discovery and preclinical development agreement that ended in December 2017.
EYLEA net product sales in the United States grew 8% to $92,000,000 compared to $919,000,000 in the second quarter of 2017. U. S. Eylea distributor inventory experienced a modest de in the quarter as compared to the first quarter of 2018 yet remained within our normal 1 to 2 week targeted range. U.
S. EYLEA's gross to net percentage remained relatively constant compared to both the second quarter of 2017 and first quarter of 2018, In the 2nd week of June 2018, we increased the existing Eylea discount offered to physician practices regardless of volume. Ex U. S. EYLEA net product sales, which are recorded by our collaborator months ended June 30, 2018, representing an 18% operational and 23% reported increase on a year over year basis.
We remain encouraged by continued ex U. S. EYLEA growth. Through the 1st 6 months of 2018, ex U. S.
EYLEA net sales increased 26% on a reported basis versus the comparable period in 2017. Total Bayer collaboration revenue for the 3 months ended June 30, 20 grew 25% year over year to 263,000,000, of which 246,000,000 was derived from the share of net profits from Eylea sales outside the U S. The $264,000,000, which represents year over year growth of 29% compares favorably against the $191,000,000 realized for the 3 months ended June 30, 2017. Total Sanofi collaboration revenue was 238,000,000 the second quarter of 2018 compared with $222,000,000 for the second quarter of 2017. Total Sanofi collaboration revenue line item primarily consists of reimbursement of Regeneron incurred deferred revenue from the immuno oncology upfront payments, partly offset by our share of losses in connection with the commercialization of antibodies.
The year over year increase in Sanofi revenue as of the second quarter 2018 included a $53,000,000 decrease in our share of losses in connection in immuno oncology. Offsetting these revenue increases is the 2017 expiration of the discovery and preclinical development agreement Under which we recorded $44,000,000 of revenue in the second quarter of 2017 compared to no revenue this quarter. Additionally, during the second quarter of 2018, we realized $29,000,000 less reimbursement of Regeneron research and development expenses under the antibody license and collaboration agreement from decreased reimbursement levels for Dupixent versus second level, second quarter 2017. In the second quarter of 2018, we recognized a loss of $69,000,000 in connection with the commercialization of antibodies, compared to a loss of 120 was primarily attributed to higher global net sales partly offset by an increase in both Dupixent and Kevzara commercialization expenses. I want to make a few comments regarding our sanofi and Regeneron have ongoing worldwide product launches for Dupixent Kevzara and Praluent.
We are pleased that the Alliance is beginning to realize profits in certain markets and indications such as with Dupixent for atopic dermatitis in the U. S. However, we are still incurring necessary launch for new indications in new markets and these expenses continue to weigh on the alliance's profitability. In the first half of twenty eighteen, the alliance incurred significant expenses related to the expected US asthma launch in addition to other ex US launch and pre launch spend across the Alliance portfolio. For the second half of twenty eighteen, the collaboration is expecting to launch in approximately 30 new markets across the Alliance portfolio as well as incur pre launch expenses for additional markets and indications expected to launch in 2019 and beyond We and Sanofi are working diligently to ensure we continue to for the second quarter of 2018 as compared to $440,000,000 for the second quarter of 2017.
The increase in non GAAP R and D expense was the result of continued late stage clinical developments for cemiplimab in Fosinumab programs and higher R and D headcount and facility related costs partially offset by a decrease Our non GAAP unreimbursed R and D expense, which is calculated as the total GAAP R and D expense less R and D reimbursements from our collaborators was $286,000,000 for the 3 months ended June 30, 2018 compared to $196,000,000 for the 3 months ended June 30, 2017, Almost half of this year over 17. The remaining increases were primarily driven by higher research and development activities for partnered and wholly owned programs. Our press release includes the information required to calculate unreimbursed non GAAP R and D expense. Primarily due to previously announced modifications to our ongoing NGF program, we are lowering and tightening our full year 2018 guidance for non GAAP undreimbursed R and D expense to be in the range of $1,210,000,000 to $1,260,000,000 from our previous guidance of $1,230,000,000 to 1,310,000,000 Non GAAP SG and A expense was ended June 30, 2017. The higher SG and A expenses in the second quarter of 2018 were primarily due to an increase in commercialization related expenses for Eylea and pre launch expenses for cemiplimab and Dupixent in adult and adolescent asthma.
Given year to date activity and projected second half twenty eighteen spend, we are tightening full year 2018 non GAAP SG and A expense to be $1,340,000,000 to 1 point $39,000,000,000 from $1,325,000,000 to 1.395000000000. Sanofi reimbursement of Regeneron commercialization related expenses, a line item found within Sanofi collaboration revenue was $106,000,000 for the second quarter of 2018, We are tightening our full year 2018 guidance for reimbursement of Regeneron commercialization related expenses to be $455,000,000 to 485000 from $450,000,000 to $485,000,000. Before turning to taxes, in the second quarter of 2018, we realized $34,000,000 of other income within the other income and an expense line item. This was partly driven by the recognition of unrealized gains on equity securities due to the adoption of ASU 2016-01 in 2018. This is compared to having reported $24,000,000 of other expense in the second quarter of 2017, which was primarily attributable to the loss on extinguishment of debt that we realized related to last year's Tarrytown lease transaction.
Please see our 10 Q for more details on the year over year change. 18 was 16% compared to 26% for the second quarter 2017, driven primarily by the enactment of the Tax Cuts and Jobs Act which lowered the U. S. Corporate tax rate. The rate was also impacted by improved results from our international operations as compared to the second quarter of 2017 as we continue to assess the full impact of the new tax law, including some one time items we now expect our full year 2018 effective tax rate to be in the range of 13% 16% from our previous guidance few years, our effective tax rate will be in the mid to high teens.
Given the recent passage of the new tax law, we are still awaiting regulatory or our future effective tax securities of $3,700,000,000 and generated in excess of $800,000,000 of free cash flow for the 6 months ended June 30, 2018, We calculate free cash flow as net cash provided by operating activities less capital expenditures. Our capital expenditures for the 3 months ended June 30, 2018 were $112,000,000 and totaled $191,000,000 for the 6 months ended June 30, 2018. We are tightening and lowering our full year 2018 prior range of $420,000,000 to 4
Thank you, Bob. Sylvia, this concludes the end of our prepared remarks. We would now like to open the call for Q
and you. And our first question comes from Robin Karnauskas from Citi.
And just one question, given the data is coming up soon in a pain in OA, maybe you could help us understand a little bit and you're just, you have the low dose. What would be clinically meaningful data and the OA market is very complex So maybe help us understand some of the market, sat around where this, where this drug might be used within this population? Thanks.
Thanks Rob and Sling. I think what we've said about this program all along, is that We would anticipate based on the data we have and the compelling program that the efficacy, that's been demonstrated is good efficacy and would on efficacy considerations alone be a useful addition to the therapeutic commentary in osteoarthritis, especially as non opiate pain, a new pain class. The so we're anticipating that the Phase III data we have should show some efficacy, but obviously we have to see it. The safety, of course, the long term safety, which won't be answered from this study because this study is not our long term safety is something that we can only wait for the data. As you know, we lowered the dose to a dose that the independent committee felt was appropriate to continue So we're pleased with that and our competitive program is continuing, but it's all going to have to wait till we really have long term data to know just exactly the promise of this program.
So I think it remains a high risk, a high reward program. George, I don't know if you want to add anything
I think you covered it all.
Sylvia, next question please.
Our next question comes from Chris Raymond from Piper Jaffray.
Hey, thanks. So Roche has talked about their Lucentis prefilled syringe as a sort of a key component of driving market share gains. And I think as they put it sort of across all lines of therapy. So I understand you guys filed an SBLA for similar device last quarter, I think, for Eylea, but you're probably talking about a 2019 launch. So just maybe talk about the competitive dynamic, I guess, between now and then.
And first of all, is it your view that this a big differentiator for Roche as they're saying? And are there any counter measures you can employ between now and then? Thanks.
Yeah. I think that we have not seen this as a big shift in market share Maybe Marion wants to go into depth on that.
Sure. Happy to, in fact, in the fairly comprehensive survey data, we use a physician for cribing, it would suggest that we're continuing to see share growth with EYLEA opposite Lucentis. And certainly over the, the lifecycle of the brand as, you know, EYLEA has grown, we've taken equal share without 20 market share points, both from LaScentis and from Avastin. So while we do think having a prefilled syringe available. And as I mentioned in my comments, that will be, later in 2019 potentially, we believe having that extension, that line extension in that delivery system will be helpful to physicians.
We don't see it as in any way a negative to our current profile in marketplace as we're competing. And certainly the performance we're showing, the share growth we're showing and the preference clearly in, in physicians prescribing for, for wet AMD with, with Eylea is important as it is in DME. Operator, next question please.
Our next question comes from Ying Huang from Bank of America Merrill Lynch.
Hey, good morning. Thanks for taking my question. Maybe I want to ask one on the PD-one program in non small cell lung cancer. You talk about the rationale behind the increase in enrollment? Is it driven by powering increase?
Is it driven by, assumption of compared to RMA or whatever you learned from the Merck program. And then also the availability of Keytruda in certain it, would that affect your enrollment in this program or not? Thank you.
Yes, I think you did a good job. Answering your own question. Certainly the original smaller study the positive study within with the PD-one antibody in 1st line lung small cell, the data look more robust than the second study. Clearly the agent is very active, but the relative effect compared to control was not quite as robust in the second study. And so we adjusted based on our power calculations and based on those results, the size of our what's available, where, and what the standard of care is in different territories in terms of where we carry out our studies and how we enroll them.
So, yeah, that's about it.
Operator, next question please.
Next question comes from Geoffrey Porges from Leerink. Are
you on mute?
Hi, there. Sorry about that. Congratulations on results. A couple of financial questions for Bob. Bob, could you just confirm what free cash flow was in Q2?
I think gave us number the first half of the year. And then what's driving the change compared to Q1. But more importantly, as we look to the commercialization of cemiplimab, Are you going to have a second, collaboration losses line that you report? And related to that, as your financial reporting gets more and more complicated, is there anything you think that you can do to simplify it so that investors really understand the value, and what the outlook is because we're getting more and more of these collaborations and more and more costs and sort of puts and takes in each of those lines, and the variance in terms of consensus sations is all over the place. So, have you thought about any way in which you can simplify things?
Appreciate it.
Yes, Jeff, I'll take the last question first. And, you know, as you know, just kind of giving the dialogue we've had. I mean, Len is constantly challenging me and my team to obviously make these things interpretable in which the true value of the company out by looking at financial statements. There's no doubt it's complicated. We do our best, inclusive of documents we post at the JP Morgan meeting in January with regards to getting into detail with regards to the modeling.
We will continue to do that and continue to take your concerns under consideration with regards to that. And with regards to cash flow, there is a pretty big difference between Q1 and Q2. I think you meant Q1 2018 versus Q2 2018. We had no tax payments in the first quarter of 2018. And we did in the quarter 2 of 2018, which is why we had $800,000,000 in total roughly 500, 300 split something along that line.
With regards to cemiplimab, we are still under discussions with regards to exactly how we're going to show that Jeff, and we'll put more out at that time at a later date.
Thanks. Next
question comes from Matthew Harrison from Morgan Stanley.
Great. Good morning. Thanks for taking the questions. If I could ask maybe a question on the C5 and that you talked about. Can you just talk about when you talk about blood levels sufficient, are you comparing this to Soliris or Alexion 1210 and what's your view on sort of how the market's going to develop and what you think is the appropriate bar to look at as you develop this fuel?
Thanks.
Yes. Well, we're talking about our evaluation based on our assays of our molecule compared to what's known in the public domain, as well as using our own pharmacodynamic assays and measures of how well we're doing at inhibiting complement. So it's integrating all of that data. What we see that's important out there is to provide patients with a convenient home self administered subcutaneous regimen that makes their life a lot easier and that keeps their disease in better control with less breakthrough. So we're trying to make their lives easier and better while delivering better disease control.
That's our goal.
So just to be very clear in case the people are familiar with what George was saying. We not only measure our blood levels to determine whether we achieve what we wanted. We take the blood out of patients and do an ex vivo assay to see whether that blood can suppress in a standard assay for complement activation. And we achieve the blood level that fully suppresses that. Of course, that's not quite the same thing as doing disease, but it's what we expect and hope it will be a good predictor.
Operator, next question please.
Our next question comes from Josh Schimmer from Evercore ISI.
Hey, thanks for taking the questions. 2 quick ones. First, it looks like the commercial JV with Sanofi may have been trending towards declining loss, but based on the commentary and the guidance correct that you expect that trend to reverse temporarily towards greater losses in the second half of twenty eighteen? If so, when do you expect it to return to improving the losses and eventually become profitable? And then quickly on the C5 antibody, what do you anticipate the dosing agency will be for the subcu injection?
Thanks.
Josh, I'll take the first question and we're not going to give guidance with regard when we think the collaboration is going to turn profitable. And yes, directionally in the second quarter, to your point, it is trending in the right direction. Again, my comments that were made with regards to 2nd half spend, you know, we are going to be entering a very crowded very competitive asthma class and we need to ensure, you know, given the strength of our antibody that we have enough support that Marion has enough support with the Sanofi Alliance behind this to ensure that it is a very, very successful launch and we come out of the gates, you know, very strong right away. And again, you know, we're not going to give in terms of quarterly or our profitability guidance on that note.
So as far as the dosing interval prescribed, typically one likes to think that the minimum acceptable interval, although obviously there is insulin others way more than that would be a weekly dosing and that's what we're able to achieve in our study. Whether we can go longer than that, we'll just have to see as we get more into this. But right now, we our comments reflect a weekly subcutaneous dosing regimen that we intend to move forward.
Our next question comes from Carter Gould from UBS. Good
morning. Thanks for taking the question. I guess for Len and George, You mentioned you hired those to Flibercept and moving forward with that. How fast do you think that could potentially get on the market? And any indication from your initial work you can get the treatment interval out to?
Thank you.
Yes. I think it's a little bit too early to go to that Carter. Obviously, we have a tremendous amount of experience doing these types of studies, both from the preclinical and the clinical We've worked diligently to come up with a higher dose formulation, and we I think that, that, is something that would extend the half life to competitive field. We probably want to comment much more about that.
Operator, next question please.
Our following question comes from Phil Nadeau from Cowen and Company.
Good morning. Thanks for my question and congrats on the progress. Question on Dupixent reimbursement. Can you talk about any trends, notable trends that you saw in Dupixent reimbursement? In atopic dermatitis in Q2, was there anything that, ease that allowed the new prescriptions to grow so significantly?
And then as you prepare for the launch of Dupixent in asthma, what are you doing to ensure access to patients as that launches? Thanks.
So before Marion addresses the access issue, I just want to say what we continue to hear and we maybe didn't mention enough is that the feedback from patients continues to be really, really satisfying and makes us and we sort of reminds us why all of us are doing what we're doing people who are miserable with this disease, have felt and told us that it was life changing for them. And so I've said on previous calls, it is nice that the data that you saw and we saw in our clinical trials seems to be translating very well in the real world where patients are experiencing on an individual basis the kind of a benefit that the data that we achieved in the controlled setting would have predicted. So that is very nice. And both the doctors and the patients are extremely satisfied. And as I said before, thank goodness, we've also seen no new side effects to concern people.
So the tolerability out in the real world is also very good. So from my perspective, I would guess that is probably the biggest thing that driving the continued use and growth. And of course, there is blocking and tackling that Marion can address if she likes.
Sure. Happy to. And to give a little bit more specificity on the axis for Dupixent and atopic dermatitis, among commercial payers today, we have coverage with over 90% for over 90% of covered lives. But then if we get a little bit more specific and, to give you the numbers, the percentage is about 65% of those commercial lives, have access to Dupixent following only 1 or 2 topical medications. So we've made significant progress And we did make some meaningful progress as well in the second quarter picking up another one of the major insurance companies So I think we feel really good about that progress, but, but I would also say that what, to Len's point, what is really driving the demand we're seeing such as this 27% increase in TRxs that I referenced in the quarter on quarter comparison.
And of course, the number was 25 in the quarter on quarter comparison in 1st quarter. This type of demand is becoming, is coming because of the tremendous results that physicians are seeing in prescribing. There toughest cases now moving into additionally, not only their severe, but starting to move into their more moderate cases, and the tremendous value that patients are seeing. As for asthma, we very much look forward to the launch. We certainly at the appropriate time, we'll engage in payer discussions of course, I think some of the differentiating characteristics are really important to keep in mind.
The clinical profile that George referenced and also in my comments, differentiated by our profiles. It relates to the impact we're seeing with Dupixent in moderate to severe asthma and reduction of exacerbations. And also the consistency that we see in lung function is really, really important. A second differentiating characteristic I've mentioned is that patients will be able to administer product self or at home. And that also is a distinguishing feature that is important.
So we look forward to launch. We're ready and we certainly will engage with payers at the right time. Operator, next question please.
Our next question comes from Cory Kasimov from JP Morgan.
Hey, good morning guys. Thanks for taking my question. A follow-up on Dupixent. So out of the 50,000 or so patients that have been treated with the product the commercial setting thus far. Do you have a good sense of the proportion of those that have overlapping allergic disease, comorbidities and and maybe even more specifically in terms of asthma.
I'm curious how common this is. Thanks.
Yes. I don't think we have the real world data but we know from our controlled studies, now osteo controlled studies are a collection of the moderate to severe atopic dermatitis patients And as Marion just told you, the doctors tend to provide their more serious patients or put their more serious patients on first. So what's been happening in the real world, you might think might be, patients who actually have more disease and more mobility. But in our controlled studies of the moderate to severe population on the order of 30% to 40% had comorbid asthma and 60% to 70% had at least one other comorbid allergic condition. So obviously among the atopic dermatitis population in the moderate to severe, there is a very substantial amount of comorbidity with other allergic conditions.
Our next question comes from Geoff Meacham from Barclays.
Okay. Thanks, guys. So I want to ask you on Praluent. Post Odyssey and post a price cut in some populations, how would you characterize access today versus 12 months ago? And then what do you think is the tipping point for the class overall just to expand into a broader population?
Thanks.
Thanks for the question, Jeff. I think that the answer is that access is definitely improving, in the sense that the areas that are out there. These complicated questions, requirements for documentation, etcetera, etcetera, are slowly being removed. I think we saw that would express script be where they went to a short physician at a station. I think others will be moving to it.
But the tipping point I actually think may come with sort of practice guidelines coming from a variety of sources where it is it will be, I expect, that people will, practice guidelines will demand that patients who can't get their LDL down to an appropriate level, when they have cardiovascular disease with the existing therapies, it'll be standard practice, not optional to go to a PCSK9 inhibitor. That probably will be the tipping point, but we'll see. Thanks.
Operator, next question, please.
Following questions from Matthew Luchini from BMO Capital.
Hi, good morning and thanks for taking the question. You touched on this a little bit, in the answer to one of the last questions. But I was curious if you could provide a bit more color on the types of patients that are receiving Dupixent in terms of disease severity and how you think it expansion into more moderate patients is going to evolve over the next 3, 6, 12 months? Thank you.
So I think that it's not unusual that physicians in their first experience will try some of their very, very toughest patients. That would have been in the earlier launch phase as we now see describing, depth of prescribing, TRxs and the NRx numbers that I shared, we now know that physicians and also nurse practitioners PAAs are used because they are already starting to move from severe into their more moderate patients as they evolve into a broader experience. It's hard to give you exact numbers on that that I don't have. But we are, seeing evidence through discussions and through prescribing depth. Having said that, least 300,000 to 400,000 potential patients who would have moderate to severe disease in the U S.
We really are only at a relatively small percentage of touching patients. So we have an awful lot more work to do and a lot more potential for Dupixent in atopic dermatitis?
Yes. I think that our DTC that you referenced earlier, Marion, and you're remarks should help, at least we anticipate that that should help, achieve that.
Yes. Thank you, Lynn, for the mention there. And then just to be clear, because we covered a we are going to be launching a Dupixent on air TV campaign nationally shortly. We got great response to the disease state awareness campaign as evidenced by many, many touches our websites and patients coming for additional information and even physicians mentioning that they were seeing patients, because they had been, engaged by the disease state awareness, we do think it's the right time to evolve into the branded campaign and very much look forward to having that on air so that patients are educated and we support efforts to get them the care they need.
Operator, next question please.
Our following question comes from Brian Skorney from Baird.
Hey, good morning guys. Thanks for fitting me in with a couple of quick questions on the pipeline. On the BCMA, by specific antibody, just given the subpar results we've seen so far with the ADC BCMA antibody compared to the CAR BCMA, just what do you think about the bispecific pathway can make it more competitive with KAR? And I just wanted to get your thoughts on the role of IL-thirty three in COPD, versus IL-four IL-thirteen. Would it signal for 3500 make COPD a potential target for Dupixent or is there just a much better bio plausibility around IL-thirty three for COPD?
Thanks.
Yes. Well, certainly, I think there is quite a bit of data, not only from us, but from others, but certainly pre clinically, there is no question that the activity in animal models of bispecific compared to an ADC is 2 entirely different classes. And we certainly also compare them pre clinically versus CAR T approaches. And certainly the bispecific, much more closely approaches CAR T type of activity. So we are very excited about our BCMA bispecific, in terms of it now very soon.
We're going to start hopefully seeing how it's going to be performing in patients. And as I mentioned, we also have coming up combination approaches with additional classes of bispecific that will also be very relevant to the BCMA program as well as a way to potentially fine tune or amplify its activity in terms of what we see there. So we're very excited about that program. In terms of IL-thirty three n dupilumab for COPD. I think that there is a lot of questions in the field right now.
About how to pursue some of the biologics in the COPD setting and exactly what the implications are in terms of the biology, some of the genetics, what they call the so called overlap syndrome. There's a substantial number of patients with that have asthma overlap. And so there's a lot of questions there. And right now, we're really thinking about all this in terms of figuring out exactly, what we're going to
be doing also with COPD.
Operator, next question please.
Our following question comes from Terence Flynn from Goldman Sachs.
Hey guys, this is Jason Jacoby on for trends. Just another one on Dupi. So with the adolescents expansion for atopic derm next year, Can you just help us think about the potential patient numbers in the U. S. For this population versus the adult numbers, where I think you've said that's like a 3 $300,000?
Thanks.
Yes. This is Marianne. We actually have not yet given specificity on the size of the adolescent patient population. We very much look forward to the potential launch in this area, and certainly, we'll be very happy in the future to provide more insight there.
Our following question comes from Anin Dunn from Guggenheim Securities.
Hey, thanks for taking the question.
Maybe one on Eylea.
Len and George, some channel checks indicate that memories of the inflammation episode with Eylea still linger a bit. So is that resolved? Is that, Eylea inflammation right now normalized back to clinical data? And then Glenn, you have talked about the potential differences on safety. Do you think inflammation is something that could be different for Eylea versus new agents?
Yes. So as far as the increase in, intraocular inflammation, there's no, doubt that there was a spike, to the best that we could do at looking at every variable, It seemed to trace to several batches of syringes, but of course, in the absence of doing a controlled trial, one can't be certain. What we can say is that when the base the background rate typically is about 1 to 2 cases of inflammation per 10,000 injections. The marketplace notices when you get to 5 per 10,000 or 10 for 10000. They noticed it quite a lot.
And I can tell you that we spiked up above the 1 to 2 and don't think we quite got to 10, but we certainly are now back to the baseline of 1 to 2, and we monitor this very carefully. Not to break our arms patting ourselves on the back. I think that we handled that very transparently with all the various retinal associations and ophthalmologic groups. And we shared the data directly with the key opinion leaders and anybody wanted to see it. Marion's team was out there.
We got lots of positive feedback. I'm sure we lost some customers, during that, but I think that we're winning them back, because of our transparency and the fact that we've got the rate down. Now In terms of new agents, yes, inflammation could be a differentiating factor. I mean, I think I've seen rates in some of the new newer types of agents that are up to 15 per 100. 150 per 1000, 1500 per 10,000.
Remember, we're talking about in the outside, in the world, as we monitor, we're looking at rates of 1 to 2 per 10,000. So yes, if those rates don't come down dramatically, I don't think that we would be overly concerned about competitive nature. I just want to say that, to emphasize that we look very carefully at the competition We don't see anything coming along that is going to be highly differentiated from the data we've seen from our molecule. And remember, we have recently gotten a as George highlighted an approval in Europe based on a study that the FDA hasn't seen yet, but the old TARE study where we were got a label that allowed for extension of dosing into a treatment extend dosing regimen in the 1st year. Where, 57% of the people were able to get at the end of the year to an intended regimen of 12 weeks or more, and a lot of and still gaining an average of about 9 letters and many of patients achieving the interval of 4 months.
So I think Eylea has incredible profile. And it's the we don't see anything coming along that disrupts that profile. And we certainly don't see anything that can have the broad number of indications for a very long time, that we have in our emphasis on diabetes
I do think it is worth emphasizing your question, the point that you raised about how the eye is such a sensitive readout for inflammation. And obviously having the experience, the wealth of experience that we have and understanding of this and also our ability to sort of track these things and so forth. Yeah, I think it's really important. I think that if a physician is treating a patient, they have to take into account the risks and the experience and the confidence that they would have in any particular
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Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.