All right, pretty sure you can do that in your sleep now, Ryan. Chris, so I think we were just talking about a month into the new role. Your predecessor was there for a decade-plus in that role. As we think now about you taking on this role, do you think about any sort of shifts in priorities or shifts in how you view capital allocation?
Sure, and thanks for the opportunity to be here and have us. So I've been with Regeneron for 20 years. I started out, I ran our financial planning and analysis function, and then about 7 years ago, our former CFO tapped me on the shoulder and said, "Just from a career development perspective, I thought it would be good for me to get some controllership experience." So I've been the corporate controller up until appointment as CFO for the past 7 years. I've worked closely with Len and George for these past 20 years. I understand their philosophy is how they like to manage the business, so I don't expect to see any significant changes in terms of my perspective, sitting in the seat as the CFO. From a capital allocation perspective, I think you'll find that the messaging will be fairly similar.
Our prioritization is effectively to ensure that we're investing in our own internal R&D engine and making sure that we're making, obviously, wise decisions as we allocate capital to those initiatives. We've been fairly active on the BD front, and by BD, historically, we've done a lot of partnering transactions. You'll see that we'll continue to do a few of those a year where we find complementary technologies and platforms with other businesses that we think mesh well with what we want to get done from a strategic perspective. Most recently, we started to do some acquisitions. You saw that with Checkmate Pharmaceuticals. You saw that with Decibel Therapeutics. And most recently, we announced the acquisition of the R&D programs of 270 Therapeutics. So those have been fairly modest in terms of size from an acquisition perspective.
We have the ability with our balance sheet, obviously, to do things that are larger. We haven't found anything to date that we've thought was interesting, but we have the flexibility with our balance sheet and, obviously, our cash flow to do things if it makes sense.
Okay. Maybe sort of the question that naturally follows now is that despite robust increases in R&D sort of year-over-year, the growing cash position, even in spite of those investments, the question around potentially paying a dividend does come up. We've seen other large-cap companies, albeit outside of biotech, sort of re-rate with the introduction of a dividend, bring in new investors, obviously with Meta. How are you guys sort of grappling with that question, if at all, at this point?
So internally, we did an analysis in 2023 about whether or not it made sense for us to initiate a dividend. We actually brought in some outside firms to help us with that analysis. The conclusion of sorting through that was it just wasn't the right time in 2023 to think about starting a dividend, but I think the emphasis is at that point in time, it was not the right thing to do. We'll continue to evaluate it and see whether or not it makes sense. We've talked pretty openly about this development balance that we have with Sanofi. The balance, as of the end of the year, was $2.3 billion. We paid down just over $500 million over the course of 2023. We will continue to pay that down over the next couple of years.
One of the inflection points for thinking about a dividend might be once that balance is paid off. We'll continue to monitor and see what the right thing to do is.
Okay. There are a few things that get me as excited as Sanofi collaboration accounting, but we can, and I'm serious. But maybe to circle back on this question, though, is Regeneron's pace of R&D growth has been pretty substantial. I mean, the R&D expense is almost 2X kind of what it was at the start of the decade. Is there just a natural limit on how much you can kind of continue to inflect in R&D growth going forward, just given there's only one of George and Len?
Sure. So if you look at our guidance for 2024, it's about a 12% increase year-over-year when you look at the midpoint. We obviously have a fairly rigorous process in terms of what we decide to invest in and what we want to take forward. That increase is reflective of just an advancement of the portfolio. So if you look at a lot of our assets moving into phase three, or are in phase three, such as fianlimab, our Hem-Onc portfolio assets, we're advancing our Regeneron genetic medicine portfolio with our partners at Alnylam and Intellia. And we're just starting to, obviously, bring forward a lot of things into phase two this year and the likes of Obesity and Factor XI and things like that.
One of the things in our business and the portfolios of that size is, obviously, the spend is spread over years in a lot of these programs, and things kind of roll off of being advanced in late stage, and things roll off, so we can manage it that way. As we look at some of the other things in the portfolio as they advance, we're not necessarily averse to looking at partnership opportunities for commercialization and/or development expenses. That might be of a size or a risk profile that we might want to look to the outside and help fund some of those things. We'll continue, obviously, actively manage the growth and make sure we're investing and allocating the capital wisely.
Okay. Great. Maybe switching to the product side a little bit. Obviously, the EYLEA HD launch is ongoing. We're just in the midst of our retinal panel that I walked from here and heard encouraging commentary in terms of EYLEA HD. But maybe from your vantage point, how the launch is going and to the extent you can frame for folks sort of the impact from the readout coming shortly.
Yeah. I'm going to turn it over to Ryan. I mean, I think the initial response was that the launch is going exceedingly well, but I don't know if you want to talk about some of the specifics.
Yeah, I think that's right. I think our view is it's going really well, and it certainly compares favorably to the competitor launches that have occurred in the recent past. Probably as exciting as the revenue performance has been the enthusiasm in the market around the profile of the product where retinal specialists and patients are seeing efficacy and safety in line with EYLEA, but with longer dosing intervals, which has always been the goal of this program and what we saw in the clinical studies. So when you have a profile like that, I think that immediately is a draw to patients and prescribers. I'd add that recently, we've passed the 100-vial threshold for orders, and that is a significant milestone for some prescribers who want to see real-world safety in the marketplace.
So that's something we recently surpassed, and I think further solidifies the profile that is comparable to what we saw in the trials. I guess lastly, the J-code, which will come in just a few weeks now, we think will reinforce the confidence to prescribe because reimbursement risk is seemingly eliminated once that goes into place. So that's the next inflection for the ongoing launch here of HD, and we're very excited to see it advance.
Maybe where do you guys sort of sit with the prefilled syringe timeline-wise and how many if you have a view on how that compares to your most relevant competitor in the marketplace today?
Yeah. Prefilled syringe, obviously, is preferred by prescribers. I think over 90% of EYLEA administrations are done with the prefilled syringe today. Prefilled syringe for HD is a very high priority for us. We're working on it. We don't have a launch timing to share today, but we're certainly focused on getting it to market as quickly as possible.
Okay. After 4Q, there was a number of questions around just the pricing headwinds the class as a whole is facing. It's no surprise here that rebates are relevant to the commercial landscape. Any comments there, Ryan?
I think the competitiveness of the market really ramped up a couple of years ago with the introduction of FirstMab and then ranibizumab and then biosimilars, and with it came pressures on price. You can see that reflected in the ASP data that CMS publishes every quarter, and we've seen anywhere between 50-150 basis points sequential declines in price over that period. So that's sort of been the trend. We don't want to forecast what that could look like in the future for competitive reasons, but that's sort of the environment that we're operating in, and we certainly want to remove any disincentives from using a flavor sample product in the market vis-à-vis others.
Okay. We're not going to get out of the EYLEA, especially without facing one IRA question. From a CFO role, when you think about just the uncertainty that comes with the IRA landscape while you're trying to make decisions around advancing a pipeline in those investments, how are you sort of grappling with that? Where do you anchor when there's so much uncertainty over what implementation will look like? I know the rulemaking has given you some clarity on what things could look like. At the same time, EYLEA is a big line item for CMS.
It is, and obviously, we're paying attention very closely to what's going on there. Even you saw the State of the Union address this issue. It's obviously top of mind for a lot of folks in Washington. We have to run the business and obviously do what we can to make sure that that future revenue growth and opportunities for our shareholders are there, and we're obviously following things very closely. I don't know, Ryan, if you want to sort of talk about the specifics of the IRA.
Yeah. Currently, we have the statute, and then we have Part D guidance. What's missing is Part B guidance to be applicable to EYLEA HD and many other products. The guidance with Part D seems to be a bit of a departure from how the statute reads. We're interested in the interpretation that the CMS has of the statute for Part B products. We certainly are planning for multiple different scenarios, but to Chris's point, we've got a business to run and a brand to manage, two brands to manage, and we're focused on that right now.
Okay. Great. Maybe we'll switch gears to Dupixent. I was only modestly joking when I made my joke about Sanofi collaboration accounting, but the margin improvement has been pretty impressive. Part of that is COGS, part of that is scale. On the COGS side, kind of help frame sort of what inning we are in the improvement on that side of the equation.
Sure. If you look at what we book in terms of our Sanofi collaboration profits, that margin increased about 300 basis points in 2023. That was largely attributable to a new manufacturing process for Dupixent, which is a higher-yielding manufacturing process. Had a significant improvement on COGS. The bulk of that phase-in happened for the most part in 2023. There's a few markets where that phase-in will continue in 2024, so we might see some incremental improvement in 2024, but I think it'll be fairly modest. And then as you think prospectively about the brand and the profitability, obviously, just as the sales increase, we also hope to get just sort of leverage of the operating expenses relative to increasing sales.
There's only so many Dupixent commercials you can buy.
Yeah. Exactly.
Okay. One of the questions we get all the time is sort of lifecycle planning around Dupixent. And I think if you guys rolled out a once-a-month dosing option, I think the street would rejoice. Haven't seen really any details on sort of that sort of effort. You guys have talked about the opportunity in severe allergies. So Chris, in your role, as you think about planning for potentially life after Dupixent 1.0, how are you thinking about that today? How is the team internally thinking about that?
I mean, I think it's on a number of fronts, and obviously, the internal R&D team is actively working on what might potentially be sort of lifecycle management for Dupixent. Obviously, looking at the portfolio as a whole, you mentioned sort of the allergy side of things, which George Yancopoulos is particularly excited about and really has been a focus of our internal R&D efforts. But I don't know if you want to maybe talk a little bit about it, Ryan.
Sure. I think we have a number of opportunities preclinically now that'll expand upon Dupixent, which blocks the IL-4 receptor alpha, as well as other, I'll call it, adjacent targets in the Type 2 cascade, all of which are being expedited, and we're trying to bring them to the clinic as quickly as we can. On allergy, that's a huge opportunity. Something around 10%-11% of people in the U.S. have allergies, and around half of those people have severe allergies. So we're talking somewhere in the neighborhood of 15-20 million people. It'll be interesting to see the early clinical data that we generate with the BCMA x CD3 followed by Dupixent regimen. We expect to dose first patients within the next couple of months, and the initial cohort's going to be very small, maybe a half dozen patients. But we should get our answer pretty quickly.
If you're testing once you're in the maintenance phase of this and you're not seeing IgEs expressed, then you can be pretty confident that your IgE-mediated allergies have been reversed. That's what we'll be looking for. Then if we are successful in this very early small study, we'll certainly be looking to rapidly expand it and hopefully bring it to patients quite quickly.
Okay. And Ryan, maybe follow up on that. To what extent is sort of Xolair's new approval in that setting a proxy for maybe the opportunity you're facing that's just blocking it, it's not depleting? I guess I skeptically might say the Xolair approach might be viewed as low risk from a mechanism of action standpoint.
Yeah. I mean, Xolair's mechanism essentially obliterates all IgEs, and it does it transiently, so they do end up coming back. So you're not blocking the production of them. You're just eliminating them once they're created. And if you look at the data, I think it was something around two out of three patients were able to at least have a couple of peanuts or whatever their food allergen was. It was hardly a cure, which is what we're seeking to do. So when you swing big, you can make really important advances for patients. It does carry a risk. But I think the biologic rationale here where we're ablating plasma and B cells and allowing them to be essentially, I'll call it, reconstituted under the setting of a Dupixent, which doesn't allow for IgG to IgE class switching to occur, biologically, it makes sense.
So we're going to really interrogate this hypothesis that we've had for a number of years and have seen actually replicated in some animal models, see if it manifests in people, because I think while advanced, Xolair is hardly the solution to allergies.
Okay. Maybe switching gears or sort of moving over sideways to your IL-33 program, itepekimab. And I guess first off, Chris, when we think about this and kind of how this will sit within the Sanofi collaboration, will this just sort of be another layering on of kind of Dupixent brought customer through with Dupixent and Kevzara? And maybe talk maybe Ryan or yourself can talk a little bit around how you see that coexisting with Dupixent and COPD.
Sure. So to answer your question, itepekimab is just another aspect that's part of that Sanofi collaboration. So the accounting and the treatment of it will be identical to what we do for Dupixent and Kevzara. So just think of it as aggregating the profits and the sales and the expenses of all three of those assets together. And that will then obviously lead to repayment of development balance to the extent at a faster rate to the extent of incremental profits as well. In terms of one thing that we'd have to think about is if the data's positive from the studies as they come out and we think about incremental R&D expenses, that's something that we'd have to factor into what the incremental spend would look like on the R&D front. But we now fund in real time 50% of the R&D expenses on the Sanofi collaboration.
To the extent that there are incremental expenses, that would have to be factored in.
Okay. In terms of the products potentially coexisting, obviously, we have dupilumab in the Type 2 COPD setting, which has an sBLA pending decision in August. No, it's June. Sorry. The PDUFA is in June for Dupixent for COPD. My apologies. But it's in a current and former smoker population with eosinophils above 300 at baseline. We estimate that population is around 500,000 patients across the G7, around 300,000 in the US. For IL-33, we're looking at it in a slightly different set of patients. We're not looking at it in current smokers at all. We didn't see any signal in the phase 2 study. What we did see was a very compelling signal in former smokers regardless of eosinophil count at baseline. In the phase 2 dataset, we saw a 42% reduction in annualized exacerbation rate among former smokers regardless of eosinophils.
That's where we think itepekimab can play if it's successful in its phase 3 studies, which we'll have data next year. That population is around a million patients across the G7. So there is an intersection of Type 2 former smokers that both dupilumab and itepekimab could potentially treat. I think what will be interesting to see is a prespecified population in these RFI studies of itepekimab, those patients with high eosinophils. How did the exacerbation rate look? How did the lung improvement look? And kind of doing a cross-trial comparison there perhaps with dupilumab in that same cohort of patients from the NOTUS BOREAS studies. So in the end, I think it rounds out a very nice respiratory portfolio. Fingers crossed for success in phase 3. We should complete enrollment maybe this year, and then hopefully have the data about a year after that.
Okay. I want to get to obesity, but one last question on IL-33. You started a study in bronchiectasis. To what extent should investors read through from that to your confidence on the COPD studies? Generally, these studies were always viewed as somewhat higher risk relative to a lot of the former immunology and what you've done. Any color there?
Yes. So kudos to you. I did notice your report came out basically in real time for when that trial got posted to ClinicalTrials.gov. And yeah, bronchiectasis, we've launched a phase 2 study largely in the belief that the symptomatology is very similar to COPD, and we have some in-house preclinical mouse data that blocking IL-33 ameliorates or eliminates that symptomatology, which is why we've decided to move forward with this rather large 300-patient phase 3 study, and we're going to look at two doses for itepekimab against placebo. So it's unclear exactly when that data will read out, but again, this would be another million patients that would be addressed in G7 in this other indication, bronchiectasis, non-cystic fibrosis bronchiectasis.
Maybe making that transition to obesity here. It seemed like a little bit more of an execution year for Regeneron on the obesity side. We did see that you moved the program into phase 2, which I would assume means the high-dose trevogrumab data in healthy volunteers looks okay. Maybe just help frame for folks over what kind of time frame we should expect to get updates on obesity and if anything, that we should expect this year.
Yeah. So Carter mentions the high-dose trevogrumab cohort. We're actually enrolling that study right now. It's a very small cohort. I think it's only 24 patients. They're only followed for 7 weeks. So that's data we think we can generate pretty rapidly, allowing us to initiate Part B of the study, which will be a four-arm study including semaglutide with trevogrumab plus or minus garetosmab around the middle part of this year. The primary endpoint is 26 weeks weight loss as well as fat loss. Those are co-primary endpoints at week 26. Assuming enrollment is relatively quick, we could expect data sometime in the first half or towards the middle part of 2025.
There is a Part C to this study, which will look at the maintenance phase where all patients are discontinued on semaglutide, and roughly half will continue on high-dose trevogrumab to see if the weight can stay off that's achieved in the first 26 weeks of the study with the garetosmab on top of the muscle preservation agents.
Okay. Last question for Chris. Regeneron looks at obesity. Is it determined to be an obesity, or is it just going to sort of take its shots with its assets in development? How critical is obesity to Regeneron as we think going forward?
I think this study that Ryan talked about is important for us to see the data. Once we see the data from that study, it'll really drive kind of how we take a strategy forward from there. It's obviously a large market opportunity, and it will inform for us whether or not we've got something there. And then if hopefully it's positive, we'll figure out how to best kind of roll forward from there and what our commitment looks like to obesity.
Okay. So you answered so efficiently. I'm going to squeeze one more in. How critical of that effort is having your own GLP-1 as part of the equation?
Well, I think there's arguments for both sides. Of course, you'd love to control the cocktail, but is it better to be kind of a free agent, so to speak, and be able to augment or improve the body composition of existing therapies out there across all of them? And so we're considering both options. We have our own internal preclinical GLP-1 program. And kind of in parallel to this important proof of concept study, we'll be advancing efforts to come up with a unimolecular solution from Regeneron while allowing the optionality to potentially partner with others, multiple others, or a single partner if that's the most appropriate strategy.
Okay. Perfect. Well, I'll have to leave it there. Chris and Ryan, thank you very much.
Thank you, Carter.