Good morning. Welcome to day two of the Barclays Global Healthcare Conference. My name is Carter Gould, Senior Biopharma Analyst here at Barclays. I'm pleased to welcome Regeneron Pharmaceuticals to the stage to help us kick off the day. Joining me on stage, Robert Landry, CFO, of Regeneron, as well as Ryan Crowe, VP of IR. Before we get started in the Q&A, Ryan's going to appease the lawyers, and then Bob's gonna make some opening comments.
Thank you, Carter. Just very quickly, I'd like to remind you that remarks made today may include forward-looking statements about Regeneron, each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in such statements. A description of material risks and uncertainties can be found in Regeneron's SEC filings. Regeneron does not undertake any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Bob?
Great. Thanks, Ryan. Good morning, Carter. Thanks for having us here. We always look forward to coming to this conference. I was gonna open it up maybe three minutes of just kind of what's happened in the quarter to date, and then we'll talk about kind of a couple of catalysts that are coming, and then I'm sure Ryan, Carter will dig a little deeper into those items. We did get acceptance of our filing with regards to the 8 mg aflibercept. That came, and it came with a June, end of June PDUFA date, which was, you know, obviously very positive on our end with regards to that fast approaching. With regards to Bayer, we do collaborate EYLEA with Bayer ex- U.S.
Bayer has made the submissions with regards to the EU on the 8 mg. They also just did the Japanese filing. Japan is a fairly large market for us on the ex-U.S. market on that front. With regards to DUPIXENT, there was always something happening with DUPIXENT. We got our sBLA accepted by the FDA in CSU indication. In Europe, they approved EoE in the first quarter, which was a positive. We continue to wait. We do have CHMP approval with regards to the tiniest kids. You know, these are the six month-old, which talks to the safety of DUPIXENT all the way up to five years in AD. You know, we expect to get that by the end of the month.
With regards to LIBTAYO in our non-small cell lung cancer, we did in Europe get CHMP approval for PD-L1 positive indication on that. That should be coming shortly on that. Again, a pretty busy, pretty positive first kind of two and a half months. With regards to catalysts. Again, I know Carter will dig deep. You know, the biggest catalyst has to be the BOREAS trial, which is coming with regards to COPD. It's a gigantic indication. We're hoping it's a type 2 disease that we can cure with COPD with DUPIXENT, and we'll find that out shortly. We also have bispecific information coming with our bispecific platform that's gonna be with PSMA drug. We did show some prostate information at ASCO earlier. Again, we look forward for further readouts on that.
With regards to Hematology/Oncology, we have our CD20xCD3 in non-Hodgkin lymphoma, and then we have in multiple myeloma, our BCMA. We're gonna have, you know, continue to press those forward and hope to have readouts on that. We are in collaborations with Alnylam, and again, I believe Alnylam is here with regards to APP. Again, we're hoping in the first half of the year that we get a readout in terms of whether or not siRNA can make any head roads into CNS, which would really kind of open up a ton of a ton of opportunities. Probably last but not least, again, will be, you know, the hopefully successful launch of 8 mg aflibercept on June 27th, you know, pending FDA approval. Again, a lot of kind of near-term catalysts on the horizon. Okay, Carter, next to you.
Perfect. Great. Before we get into all the juicy margin questions, we're gonna test you on your pulmonology boards here. Maybe first, coming back to BOREAS, and, you know, I think when you guys talked about the phase II interim portion of it, you talked about the high bar you set, given you know, the outlay you were gonna need for the, for the phase III. Can you help frame how we should think about the hurdle that was set there? I know you're not gonna get into specifics, or at least you haven't to date, but maybe just help kind of put some-.
Sure.
color on that for us.
Again, what Carter is talking to is in June of 2020, you know, we did get interim data on the first trial, the BOREAS trial for COPD. Again, these are being run by Sanofi in the alliance, and it was kind of a no-go assessment. They decided, you know, again, they were blinded to the information. It was an independent, you know, data monitoring committee that came back and based upon the thresholds that were there, basically gave both parties the thumbs up to go. When that happened, we immediately launched, I would say, at-risk, you know, trial number two, phase III, which is the NOTICE trial. By the way, Ryan, maybe touch upon what the, between the futility and-
Sure.
the analysis we saw.
Yeah. We started BOREAS without the benefit of knowing what DUPIXENT would do in type 2 COPD. We didn't run a phase I or phase II study in the population. We used a comorbid nasal polyps population to kind of see a signal move quickly into phase III. That's why this interim analysis is very important. Before we began BOREAS, we set a pre-specified threshold whereby we would either achieve it and move forward with the second phase III or stop the study. I would put the bar somewhere between a futility analysis, which was kind of the bare minimum you would need to move forward. And the other on the other end, a positive phase II.
We think we set the bar sufficiently high such that it would warrant further investment in the large phase III study. With that blinded decision by the DMC, we move forward with NOTICE. I'd add that there was no stopping criteria as part of this interim analysis. There was no way that we would have known. We don't know how much we achieved the bar by, and it wouldn't have stopped regardless. It was going to move forward and run to the full 52 weeks.
Okay. The data came out and, you know, shortly right after the world changed.
Correct.
We've seen additional data come out of the COPD population thereafter that we saw exacerbation rates drop during COVID as presumably a lot of these patients were sort of hiding out in their homes. How does that complicate the phase III? I'm sure you made assumptions around event rates, and there's a reason to believe they're going to be meaningfully lower. It should affect both arms, but in terms of just teasing out that signal, how does that complicate or not your, you know, the odds here?
Yeah. It's well documented, as you said, Carter, that COPD exacerbation rates were depressed during the lockdown periods of the pandemic. We saw that as everybody else has. I think we are confident that the studies are adequately powered to detect a treatment effect. To your point about placebo arm, it should also affect the placebo arm in the same way that it would the DUPIXENT arm. My belief is that if there is really any disease-modifying activity with DUPIXENT, that it will be demonstrated despite potentially a lower-than-assumed exacerbation rate for the overall population.
Okay. When we think about when we get this press release, historically, you guys have done a pretty good job of putting in data into these press releases for us to evaluate. This seems a little bit different in that you have NOTICE going on in the background. Is that reason why we may get less data than usual, given, you know, the similarities in trial design?
You know, I think to your I think we have a reputation of being very transparent and allowing all readers to kind of assess the strength of the data in a press release form, and then obviously moving forward with scientific presentations to give the full detail. We tend to provide more detail than less. With this trial, obviously, we're partnered with Sanofi, and obviously, the details of that press release are still being determined. I would think at minimum, we would at least provide the magnitude of the reduction in exacerbations, the primary endpoint for the study, and potentially more. I don't think that NOTICE ongoing and it's still enrolling patients, but I don't think that will really impact our decision on the level of detail.
Okay.
The patients obviously are blinded. The investigators will be blinded. All site personnel are blinded. I think maintaining that blind and NOTICE will be sufficient to make sure we don't bias the study even with the BOREAS results.
Okay. Should we still think that both of these studies will be required for approval? I know the guidance documents leave the door open to potentially filing on a single study if the results are robust.
Yeah. Carter, our base case is that you're going to need both. I mean, if we're pleasantly surprised, well, that'd be great. We are assuming we're going to need both for final.
Okay. Last question on the pulmonology side here. What's the potential read-through from BOREAS and NOTICE to the IL-33 studies? Different populations, but, relative to, you know, underlying assumptions or any other sort of mechanistic read-through that may or may not apply here.
A different and broader population, Carter, obviously, the DUPIXENT focusing only on the type 2 phenotype versus IL-33, at least our studies, AERIFY-1 and AERIFY-2, which are focusing on both type 2 and non-type 2 patients. I think probably more important than any read-through from BOREAS and NOTICE is actually the phase II data that we've already generated for dupilumab, which I believe we published in 2021, which showed in non-smokers a 42% reduction in exacerbation, which is a huge, huge result. There was not that same treatment effect in current smokers, though. That phase II study informed how we designed AERIFY-1 and II. We are only looking at non-smokers or former smokers. Of course, we'll look at both type 2 and non-type 2 patients in that study.
And data is expected, I believe, next year, and then with a potential filing, assuming supportive data in 2025.
Okay. Great. Maybe we'll pivot here to some of the other topics. There's certainly no shortage of topics here. Maybe, Bob and I have a bit of a routine on, you know, when we go through the earnings notes. It's like, you know, where does EYLEA print? Where does Dupixent print? My third thing I always look at is where are Dupixent margins? Inevitably they outperform our expectations. Then I ask Bob, "What does this mean about going forward?" He cautions me a little bit, and then they blow them out again the next quarter. In 4Q, I think if you just look kind of the evolution of Dupixent margins relative, say, the start of 2021, a meaningful expansion there. This is even before we get sort of the SOTA process improvement.
Can you maybe, you know, to what extent is that a fair kind of stable base today to, you know, think about that expansion and any additional color as we think about DUPIXENT margins going forward?
I think what Carter didn't say after each call, I get attaboy, you know, with the margins going up, being able to meet his models. Yeah, you know, the first couple of years, with the alliance launch, it was just difficult with regards to kind of show leverage. It just wasn't there. You know, as you know, we did kind of DTC for the first time. It was a big kind of flood of DTC across, you know, asthma and AD within the U.S. markets. You know, the margins weren't just popping as much as we thought. I think certainly within the last 18 months, we've had really good progression with regards to margins.
I think, you know, in Q4, year-over-year from Q4, it was like a 900 basis point margin improvement, which again is showing the leverage that we have, right? We have the necessary sales forces. We're in the necessary countries. We're just kind of laying on new indications. Like I said, we just got the EoE indication approved in the first quarter in Europe. Again, that's proven to be a much bigger indication in the U.S. than we ever thought it was going to be.
I think, you know, that we are at steady state, and I would love for the margins, and I expect the margins to continue to improve year-over-year. We've also been saying that on top of that, on top of the normal course, we've done something that we normally do with our antibodies in which we try to look for yield improvement. Can we get better cell lines than we currently have? We launched the product with Sanofi with a C2 cell line, but that didn't stop the group in Tarrytown. We have a group specifically designed for this to try to get yield improvement. We have come up with a C3 cell line, and it's been approved by both the FDA and in Europe. Again, we're getting it approved throughout the other countries in the world.
What this does, compared to the C2 line with regards to bulk drug, we get three times better yield with regards to active proteins in the number of doses per batch, right? The same cost per batch, C2 versus C3, but now I'm getting three times as many doses as a result of that. You'll begin to see some of that kind of come through in the second quarter of 2023 as we kind of start to make this switch from the C2 cell line to the C3 with regards to the bulk drug. Probably by the end of the year, if things go right, hopefully 50% of the products of what we sold will be through the C3.
Again, you know, 2024 will be the big driver, but you'll begin to see hints certainly in the second half of the year with regards to cost of goods sold. The other beautiful thing that it does, particularly because of the volume that DUPIXENT is creating under the C2, it really helps with regards to capital expenditures, right? We don't need to put in, you know, more 10,000 capacity with regards to production because we're getting three times as better yield out of the same 10,000 capacity. It's really, really been a bonus for us. Again, you know, Sanofi and Regeneron look forward to the fruits of that with regards to margin expansion going forward.
Okay. Great. Maybe moving on to high-dose EYLEA. You touched on at the start sort of a shorter turnaround time on the review. Can you talk through the implications of that for the launch, the potential J-code coming earlier, and maybe as well, just sort of the importance or I guess the relative importance of J-code during that initial couple months?
Let me touch upon the beginning, and then Ryan will take the back half of that. As, as we mentioned, right, we filed at the end of December. We got it accepted, the filing, in end of February. We were expecting kind of a late August launch with regards to the timeframe, and we are using a priority review voucher that we got from INMAZEB, which is our Ebola drug, when that was approved. We were very pleased to see that, you know, upon the letter that came back to us that they were looking at the 8 mg as kind of a new molecular entity, which basically had a 10-month review time. You put on the four-month PRV shortening, and then you get six months, right?
You go from end of December to end of June, which was really kind of positive news. We thought we could have the possibility, but it was fantastic that it was kind of cemented with the FDA letter.
In addition to reaching patients faster, which is always our goal at Regeneron, I'd add that it does allow us to potentially get our permanent J-code a little sooner. The way the process works for obtaining a new J-code, they have certain deadlines set at the beginning of every calendar quarter. With a June 27th PDUFA, that now allows us to go to CMS with our application for a permanent J-code by July 1st, which would then make aflibercept 8 mg eligible for, and we would hope to receive a permanent J-code by January 1st. Had we received approval at the end of August as we had originally signaled, that was gonna be unlikely and probably more in the line of getting a permanent J-code April 1st. We get an additional...
hopefully get an additional three months with a permanent J-code. I'd end my remarks on this question with, we don't think we need a permanent J-code to really begin to meaningfully convert this market. I think KOLs, and we certainly believe that aflibercept 8 mg is a meaningful improvement and could become the new standard of care in the anti-VEGF space. We've heard a lot of excitement in the retinal community about using the product. A temporary J-code would certainly allow that to happen. That should be issued within days of approval and would enable prescribers to obtain reimbursement for the product pretty much right out of the gate. We certainly will not be waiting for the permanent J-code. I think that the launch can get a lot of traction right away.
Okay. Just level of confidence you'll be able to turn that around in that sort of week timeframe, between PDUFA date and that July deadline?
We do. I mean, Marion's got a very strong team, and they know what's coming, so it's not like it will be a surprise. You know, they've made commitments to the company that they will turn it around by July 1.
Okay. In the past, you've talked about the, just on high-dose EYLEA pricing. I know you're not gonna get into specifics, but just, you know, sort of conceptually, how should we think about that relative to standard dose and, you know, the drivers of that discussion?
You know what? I started off by saying we have a lot of catalysts, you know, this year. We also have a lot of kind of major decisions, and this would rank as one of our probably top decisions in terms of just trying to price it right. I think, you know, when you hear Regeneron, or I would hope that when you hear Regeneron, you think of us as kind of responsible pricers based upon, you know, the history that we've done in terms of launching and pricing drugs. You know, there should be no change with regards to the 8 mg. Again, it'd be great to kinda see what where the real-world usage is. You know, I mean, we're not gonna really have the maintenance data. You know, the two-year data is not gonna really come until August.
you know, we're gonna have to kinda hit the road out there, see what the KOLs are thinking about, and triangulate all the market access and research information that we have to kinda, you know, deliver a really on point, on point price that's, you know, obviously fair to everyone.
As we think about these two key decisions and the impact they have on your growth trajectory over the next... I mean, DUPIXENT's gonna grow regardless with COPD, but sort of turbocharge that growth. But when we think about, and y ou're already spitting up a lot of cash. If we then think about, you know, overlaying that with these two drivers in addition, how does that start to shift the capital allocation strategy? This is not the Regeneron of a decade ago. You know, you guys are buying back your own stock now, things we never would have thought in the past. Does that start to shift to even, you know, more buybacks, additional M&A? How do you think about that, and how do these drivers kind of fit in?
So, again, you know, for those that don't follow, Regeneron has an $11.6 billion kinda net cash position as of the end of the year on our balance sheet, and we get the question on capital allocation a lot. you know, our answers are pretty simple. First and foremost, above everything else, is we're gonna continue to invest in R&D. Secondly, we're gonna complement that with partnerships and collaborations. The Decibels, the Alnylam, the Intellia. We did CytomX not that long ago. Those things will continue. Thirdly, third on the list is, you know, a return of cash to shareholders, and we've been doing that in the form of a thoughtful buyback.
To Carter's question, to the extent that, you know, we see the COPD data and now that 8 mg, it appears that our cash flow and earnings are gonna be stickier kind of going out forward. You know, we don't think we're gonna kinda change that path. You know, if you look at what we did in 2022, you know, we basically, we went out, we brought back the rights for LIBTAYO. We did Checkmate Pharmaceuticals, roughly $1.3 billion in kind of BD stuff. We did $2.1 billion of buybacks. You know, we put a healthy amount of money into R&D. I think we grew year-on-year something like 24.5%, which is a big number. Again, we have a lot of things to invest in.
You know, we have a lot of assets, you know, something like with regards to new clinical trials and INDs in new therapeutic areas, something like 10 of them are happening in 2023. We need to keep the innovation going. You know, our 2022 pattern, Carter, is like exactly. That's what I'd like to do in the company going forward. Just as you saw us do in this past year.
Okay.
A little bit of everything.
Okay. When we think about sort of, sort of that pace of R&D growth going forward, clearly, it was sort of a transitional period here. COVID numbers were coming down, you know, but, you know, when we think about the pace of R&D growth relative to the pace of revenue growth, particularly over the next couple of years, how should we sort of balance those? R&D growth, it has been robust, as you highlighted.
It has. You know, I mean, we did surprise, I think, the street a little bit with regards to our consensus. It was a little bit higher than what they were expecting. Again, when you hear, you know, when you hear the innovation that's coming from us, particularly, you know, what's happening in 2023 is our collaborations that we did years ago are now kinda coming to fruition with regards to where we are with Alnylam, what we're gonna see on Decibel, where we are in the you know, the unveiling of kinda new Intellia data. You know, that stuff's starting to really move through the pipeline. You know, we've made no bones about it. We're gonna be in oncology. You know, we obviously brought back the rights with LIBTAYO.
You know, we're gonna be in Hematology/Oncology with regards to CD20x CD3. We think we have a lot of things to invest in. You know, we've done well in the past with regards to just making sure that R&D and that our pipeline is totally fueled with regards to the necessary support. Again, it's within our kinda capital allocation rule number one, make sure we continue to fund R&D.
Okay. You touched on the early-stage pipeline and specifically some of those partnership opportunities. We've seen larger biopharma companies go broad with, you know, a whole array of partnerships in the past. Your approach does lean pretty heavily on the RGC platform. Can you... I mean, that does seem like a pretty distinct potential advantage there. Can you talk about that distinction a little bit more, what insight RGC gives you and maybe just... I don't know if there are lessons you guys have taken away from some of the past BD strategies we've seen larger biopharmas follow maybe, like, during the last decade.
I think RGC is a very unique tool, distinct to Regeneron that helps us identify targets and accelerate development of antibodies when that's the appropriate modality. Also, figuring out maybe if antibodies aren't right, what the right partner could be. Certainly we've leveraged the world's largest database of exomes, over 2 million at this point, that are all connected to health records, which provides us with a very rich database to find targets and address diseases that previously haven't been able to be. We are able to identify new targets. We've discovered the HSD17B13 gene in NASH. CIDE B was another NASH discovery, a target discovery from RGC.
I guess the other was GPR75, which is an obesity gene that we're collaborating with AstraZeneca on. We're very, we've had a lot of success with leveraging that database. It also helps inform trial design for us and looking at the right population for a particular antibody. I think it is a unique tool. It's one that we're gonna continue to lean on and probably even more so develop our own capabilities in this space so that we can take those discoveries and develop products around them.
Maybe just for last minute, I wanted to come back and touch on some of the oncology portfolio. You mentioned... One of the things that I think we were excited to see was sort of the broadening of the LAG-3 portfolio. You've, you know, announced certainly the, I guess, the initial start to a phase III program in melanoma and lung. Can you talk through kind of where else that could potentially go and if, you know, sort of that's on the table for 2023? It does seem your competitor clearly is taking a much broader approach there. They're first mover advantage as well, but, you know, your melanoma data was pretty compelling.
LAG-3 fianlimab, as we now call it, in combination with LIBTAYO really has generated some very, I think, differentiated melanoma data, especially when compared to the combination from Bristol. When we look at PFS in a PD-1-naive setting, our fianlimab LIBTAYO combination in two cohorts pooled at a PFS of 24 months versus the data on label for Opdualag at 10 months. The response rates for the fianlimab combination were in the mid-to-high 60s in two distinct populations. The response rate for Opdualag was 43%. Really, I think a lot more activity, and that might be attributable to our ability to dose a little higher while maintaining good efficacy and safety.
Differentiated LAG-3, we think a differentiated PD-1 backbone has led to what we think is differentiated efficacy in melanoma. You mentioned lung. We are about to initiate phase III studies in an all-comers population as well as one in a PD-1 high expressing population. Yes, we do have our eyes on certain other solid tumors. We haven't announced any new clinical studies or programs yet, but I think we probably are in line to do that at some point this year. Definitely stay tuned on that.
Okay. We're out of time. Bob.
Great, Carter. Thank you.
All right. Thank you very much.
Thank you.