Regeneron Pharmaceuticals Q1 2024 Earnings Call Transcript

Participants

Corporate Executives

• Ryan Crowe, Investor Relations
• Leonard S. Schleifer, Board co-Chair, President and Chief Executive Officer
• George D. Yancopoulos, Board co-Chair, President and Chief Scientific Officer
• Marion McCourt, Executive Vice President, Commercial
• Chris Fenimore, Senior Vice President, Finance and Chief Financial Office

Analysts

Presentation

[Operator]

Welcome to the Regeneron Pharmaceuticals First Quarter 2024 Earnings Conference Call. My name is Josh, and I will be your operator for today's call. [Operator Instructions].

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

[Ryan Crowe, Investor Relations at Regeneron Pharmaceuticals]

Thanks, Josh. Good morning, good afternoon and good evening to everyone listening around the world. Thank you for your interest in Regeneron and welcome to our first quarter 2024 earnings conference call. An archived and transcript of this call will be available on the Regeneron Investor Relations website shortly after the call ends. Joining me on today's call are Dr. Leonard Schleifer, Board Co-Chair, Co-Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Board Co-Chair, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President of Commercial; and Chris Fenimore, Senior Vice President and Chief Financial Officer. After our prepared remarks, the remaining time will be available for your questions. We anticipate today's call will last approximately 60 minutes. I would like to remind you that remarks made on today's call may include forward-looking statements about Regeneron.

Such statements may include, but are not limited to those related to Regeneron and its products and business, financial forecast and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, including its Form 10-Q for the quarter ended March 31, 2024, which was filed with the SEC this morning.

Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP financial measures will be discussed on today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our quarterly results press release and our corporate presentation, both of which can be accessed on the Regeneron Investor Relations website. Once our call concludes, Chris and the IR team will be available to answer any further questions.

With that, let me turn the call over to our President and Chief Executive Officer, Dr. Leonard Schleifer. Len?

[Leonard S. Schleifer, Board co-Chair, President and Chief Executive Officer at Regeneron Pharmaceuticals]

Thanks, Ryan. Thanks to everyone joining today's call. Regeneron is off to a strong start in 2024, reflected in our solid first quarter financial results as well as the progress we have made across our pipeline in the first four months of the year. For my remarks today, I'd like to briefly review some of our key performance drivers and then discuss a few of our more differentiated development programs, which have the potential to drive sustainable long-term growth for the company and value for our shareholders. After my remarks, George will provide an update on our pipeline. Marion will then review our commercial performance, and Chris will discuss our financial results. First quarter 2024 revenues grew 7% after excluding last year's revenue contribution from our COVID antibodies.

Growth was primarily driven by Sanofi collaboration revenues and Libtayo global net product sales, which grew by 14% and 45%, respectively. Dupixent global net product sales were $3.1 billion, up 24% reflecting strong growth across all approved indications. EYLEA HD generated $200 million in its second full quarter on the U.S. market outperforming recent launches in the anti-VEGF category. Now with the permanent J-Code in place, improving payer coverage, broad prescriber familiarity and satisfaction with the EYLEA HD clinical profile and direct-to-consumer TV promotion underway. We continue to position EYLEA HD as the new standard of care for retinal diseases. Shifting to chronic obstructive pulmonary disease or COPD where Regeneron and Sanofi have two differentiated opportunities to transform the treatment paradigm for patients living with this debilitating disease.

As announced in February, our sBLA for Dupixent for the treatment of COPD with type two inflammation was accepted by the FDA for priority review with a June 27 PDUFA date. During its review of our submission, the FDA has requested additional efficacy analyses, including an information request received earlier this week regarding subpopulations from the BOREAS and NOTUS pivotal studies. Our analyses across these requested patient subgroups indicate a consistent and clinically meaningful reduction in COPD exacerbations. While the FDA has requested these analyses to be submitted by the end of May, we anticipate providing them substantially sooner. We and Sanofi are confident that these additional analyses strongly support the approval of Dupixent and eosinophilic COPD. If the FDA determines that they need additional time to review these analyses, a decision on the sBLA could be delayed for up to three months.

We and our partner, Sanofi, are preparing for launch that many pulmonologists, respiratory key opinion leaders and their patients are eagerly anticipating. If approved Dupixent will be the only biologic therapy for COPD and the first new treatment approach for this disease in more than a decade. There is a high unmet need in COPD with type two inflammation with approximately 300,000 eligible patients in the United States and another approximately 300,000 eligible patients in the EU and Japan, where we are also seeking regulatory approvals. Turning to itepekimab our IL-33 antibody, which is being evaluated in former smokers with COPD regardless of eosinophil phenotype. We remain on track to report results and enable potential global regulatory filings in the second half of next year. Itepekimab can potentially address up to one million patients in the G7 countries, while China also represents a significant opportunity.

We are very excited about potentially bringing these important new therapies with COPD patients while expanding our commercial respiratory franchise. In a moment, George will describe another key opportunity in our pipeline involving Dupixent in combination with our BCMAxCD3 bispecific antibody linvoseltamab which we believe has the potential to address any severe allergy and allow the millions of severe allergy sufferers to stop living in fear of an accidental exposure. Moving from linvoseltamab in severe allergy to its differentiated opportunity in multiple myeloma where it is currently under FDA and EMA review in the relapsed refractory setting.

In our registration-enabling data set, while cross trial comparisons caveat supply, we believe linvoseltamab represents a best-in-class opportunity because it has the highest objective response rates and complete response rates at similar follow-ups observed across the BCMA bispecific class to date requires the least number of days in the hospital compared to other drugs in the category and is the only BCMA by CD3 agent currently under review or are already approved by the FDA that evaluated every four-week dosing. If approved, we believe these are all important considerations for patients, caregivers, providers and payers that could drive linvoseltamab adoption.

In closing, I'm excited and energized by the differentiated opportunities in our pipeline, which now has over 35 programs in clinical development spanning many distinct therapeutic areas. Our commercial team continues to execute well and is building momentum in competitive categories, and we continue to deploy capital with the goal of driving shareholder returns over time.

With that, I'll turn the call over to George.

[George D. Yancopoulos, Board co-Chair, President and Chief Scientific Officer at Regeneron Pharmaceuticals]

Thanks, Len. Since Len covered the status of the Dupixent and itepekimab programs in COPD in great detail, I'd like to start with a bit more about our innovative treatment approach for severe allergies, a first-ever combination of an immunomodulatory antibody that is DUPIXENT with a bispecific antibody. Despite the remarkable benefit demonstrated by DUPIXENT across multiple diseases characterized by allergic or type two inflammation, DUPIXENT alone does not immediately reverse severe allergies by itself. These allergies are caused by high levels of an immunoglobulin class known as IgE made by long-lived plasma cells. This has caused some to refer the E in IgE as E for evil. Although DUPIXENT will prevent formation of new IgE plasma cells, it does not eliminate those that have already formed.

Regeneron scientists have shown that these allergy causing IgE plasma cells can be rapidly eliminated with a short course of treatment with our bispecific antibody known as linvoseltamab. While Dupixent treatment will then prevent these cells from returning as recently highlighted in our publication and Science Translational Medicine. We have commenced our proof-of-concept clinical trial to explore the potential for this combination approach to eliminate severe food allergy. We are hoping to see initial observations from this small study later this year, which will inform next steps. Moving on to oncology and libtayo combinations. Early clinical results of our LAG-3 antibody fianlimab in combination with libtayo suggest that these antibodies represent one of the most promising checkpoint inhibitor combinations in clinical development.

Recall, fianlimab libtayo demonstrated potential for best-in-class efficacy in first-line metastatic melanoma with objective response rates of approximately 60% across three independent cohorts from our first-in-human study with a safety profile that is similar to that seen with anti-PD-1 monotherapy with longer-term follow-up, these initial responses continue to deepen, including patients converting into complete responses. We look forward to presenting updated results from these expansion cohorts in the second half of this year. Encouraged by these initial results, last year, we initiated a Phase II/III study of the combination of fianlimab and libtayo in first-line metastatic melanoma. This study is enrolling faster than expected and will now be conducted solely as a Phase III study with the final analysis to be reported during 2025.

These pivotal melanoma data will inform whether fianlimab and libtayo have the potential to emerge as a new standard of care in melanoma. Next, to our bispecifics for hematology oncology. Regarding odronextamab, our CD20 timesCD3 bispecific, as announced in March, we received complete response letters from the FDA for our BLA for relapsed/refractory follicular lymphoma and relapsed/refractory diffuse large B-cell lymphoma. The only approvability issue was related to the limited enrollment of these confirmatory trials, which we intend to address as we continue to enroll patients in these studies. The EU decision on odronextamab application is expected in the second half of this year. Moving on to linvoseltamab. As Len noted, this bispecific continues to demonstrate a potentially best-in-class profile in late-line myeloma in terms of efficacy, safety, dosing and hospitalization burden.

In an oral presentation at the recent AACR medical meeting, we presented results of an 11-month median follow-up of 117 patients. A 71% objective response rate with 46% of patients achieving a complete response or better. We are planning to present updated 14-month follow-up results at the upcoming EHA meeting in which we anticipate observing a further deepening of responses. Regarding the ongoing FDA review, we believe the confirmatory study will be sufficiently enrolled to support approval. We're also evaluating linvoseltamab in earlier stages of myeloma and in precursor conditions such as smoldering myeloma and monoclonal gammopathy of unknown significance or MGUS. Next, to bispecifics for solid tumors. Our cost inventory bispecific antibodies are being tested in numerous studies, including as monotherapies as well as in combination with CD3 bispecifics and with libtayo.

Our EGFR by CD28 bispecific in combination with libtayo, we are planning to present updated dose escalation results in an oral presentation at ASCO, most notably, in microsatellite stable colorectal cancer, a tumor historically unresponsive to immunotherapy. EGFR by CD28 in combination with libtayo demonstrated antitumor activity. Regarding safety, to date, we have not observed severe immune-related adverse events with this agent at our recommended Phase II dose. Based on these data, we are enrolling dose expansion cohorts testing our EGFRxCD28 costim bispecific plus libtayo in various cancers, including non-small cell lung cancer with or without EGF receptor mutations. Microsatellite stable colorectal cancer, head and neck squamous cell carcinoma and others. On to our PSMA by CD28 costimulatory bispecific, which is already demonstrating promising activity in prostate cancer in combination with libtayo.

We will soon initiate combination treatment of our PSMA by CD28 costim bispecific with our PSMA by CD3 bispecific, which based on preclinical studies, may maintain efficacy but with better tolerability. We're also evaluating our MUC16 timesCD28 costimulatory bispecific with ubamatamab, or MUC16 timesCD3 bispecific as well as with libtayo, or CD3 timesCD28 BCMAxCD3 costim with linvoseltamab for myeloma and our CD22 timesCD28 costim with odronextamab for lymphoma. Moving on to our classical hematology pipeline. Our C5 approach involves a first-in-class combination of an sRNA with an antibody for a more complete target blockade in our initial clinical data supports potential best-in-class efficacy in paroxysmal and external hemoglobinuria or PNH. Results from the preliminary cohort of the PNH Phase III study will be presented at the EHA conference in June with additional results expected later this year.

In addition to PNH and myasthenia gravis, which are already enrolling their respective pivotal trials, we are planning on extending the systemic combination approach to geographic atrophy in dry AMD with the first pivotal study in GA expected to get underway this year. We are also anticipating proof-of-concept data later this year for our two complementary Factor XI antibodies in the setting of prevention of venous thromboembolism after knee replacement surgery. Depending on these data, one or both of these antibodies could remain on a rapid path to registrational studies, which could begin by late 2024 or early 2025. We -- our first-in-class antibody TMPRSS6, a genetically validated target for iron overload diseases such as beta thalassemia, is also making progress. This antibody has potential to meaningfully reduce toxic organ iron in patients whom iron chelation is inadequate or intolerable.

Updated proof of mechanism data in healthy volunteers will be presented at the upcoming EHA conference. These results demonstrated deep sustained reductions in serum iron and robust induction of the liver hormone hepcidin, supporting the potential to release iron from organs. We are on track to start a Phase II proof-of-concept study in beta-thalassemia patients in the second half of the year. Moving to obesity. Our most advanced approach is designed to address potential negative consequences of widespread use of GLP GIP receptor agonist. As it has been widely reported, the profound weight loss caused by these agents, unfortunately, can also result in substantial loss of muscle, which is particularly concerning in older, obese patients. Our antibodies to myostatin-related pathways may prevent this muscle loss.

Indeed, our data in obese nonhuman primates show that combining semaglutide with trevogrumab, or an antibiotic targeting myostatin with or without pertuzumab, our antibody targeting active NA, or myostatin 2, demonstrated a comparable reduction in body weight at week 20 relative to semaglutide monotherapy, but with improved quality of weight loss resulting in more fat loss while preserving or even increasing lean mass. Part A of our proof-of-concept study in healthy volunteers intended to demonstrate safety of a higher dose of trevogrumab, has completed enrollment note that over 400 subjects, including healthy volunteers in sarcopenic patients have been dosed with trevogrumab throughout its clinical development with no meaningful safety or tolerability concerns observed to date.

Part B of the study, which will evaluate muscle preservation antibodies in combination with semaglutide in obese participants remains on track to start enrolling mid-year assuming a reasonable pace of enrollment, we expect to report top line results, including changes in body weight, fat mass and muscle mass in second half of 2025. I will conclude with our genetic medicines effort. At the upcoming ASGCT conference, we will present updated data from our DB-OTO gene therapy program for genetic hearing loss. The first patient treated with this therapy, a 10-month old girl who is profoundly deaf at baseline. Now at 24 weeks after treatment had hearing in the normal range and the second treated patient is following a similar trajectory of improvement through earlier stages of follow-up.

We are aiming to enroll several more patients this year, potentially enabling regulatory submissions by the end of next year, and we also look forward to bringing additional auditory gene therapy programs to the clinic in the coming years with the potential to address more common forms of monogenic hearing loss. Our collaboration with Intellia on CRISPR gene editing continues to advance. We have begun to enroll patients in the Phase III magnitude study of Intellia 2001 for a lead indication of TTR amyloidosis with cardiomyopathy. The first in vivo CRISPR program clear to enter Phase III studies in the United States. We're also on track to be the first to use CRISPR technology to insert a corrective gene in vivo for a deficiency disease.

We have now achieved clearance from both the U.S. and EU authorities for our insertion program for Factor IX, and we have already enrolled initial patients into the leading portion of this program. Moving on to our sRNA collaboration with Alnylam, which has not only demonstrated successful silencing of genes in the liver, but also for the first time for siRNA in the brain. Additionally, we're excited about potentially initiating later this year a potentially pivotal study for our ALN SOD treatment in ALS patients with SOD1 mutations.

With that overview, I will turn the call over to Mary.

[Marion McCourt, Executive Vice President, Commercial at Regeneron Pharmaceuticals]

Thanks, George. Our results in the first quarter demonstrate the strong performance of our commercial portfolio and future growth opportunity. We continue to strengthen and expand our leadership positions across our in-line brands, and we are preparing for potential upcoming launches. I'll start with our anti-VEGF franchise and the ongoing launch progress of EYLEA HD. First quarter U.S. net sales grew 63% sequentially to $200 million as real-world experience with efficacy and safety continues to grow EYLEA HD is delivering on its promise of extending the duration between treatments, but the majority of patients achieving this goal. Retina specialists are highly satisfied with EYLEA HD as demonstrated by prescribing across a broad range of patients. To date, most EYLEA HD patients are being switched from existing medicines most notably, EYLEA and faricimab, and we are also seeing an increase in treatment-naive patients.

For the quarter, EYLEA HD and EYLEA together secured 45% of the anti-VEGF category share combined U.S. net sales were $1.4 billion, which includes a reduction in wholesaler inventory of approximately $40 million. This reflects the sequential drawdown of EYLEA inventory that was partially offset by a modest increase in EYLEA HD inventory ahead of the permanent J-code on April 1. Since launch, our team has made significant progress to enhance reimbursement and market access for EYLEA HD. The permanent J-Code has increased prescribers reimbursement confidence, reflected by increased use among existing customers as well as a step-up in new customers ordering for the first time.

We're very encouraged by EYLEA HD uptake despite a different payer market today compared to when EYLEA was launched more than a decade ago. For example, while more than 80% of medical benefit lives are now covered for EYLEA HD increases in utilization management or step edits are impacting all branded products. We are also highly focused on educating patients about the potential for EYLEA HD to deliver best in category vision and safety benefits with fewer injections. In mid-March, we began our direct-to-consumer TV campaign designed to raise brand awareness among treatment experienced and treatment-naive patients. Since initiating the DTC campaign, retina specialists have reported a significant increase in patients actively asking about and being prescribed EYLEA HD.

In summary, the EYLEA HD launch outperformed expectations, and we are on track to establish EYLEA HD as the new standard of care for retinal disease. Turning now to Dupixent. From our first quarter global net sales grew 25% on a constant currency basis to $3.1 billion. In the U.S., net sales grew 17% to $2.2 billion, driven by continued robust demand and the impact of customary first quarter seasonality dynamics, including annual resets of insurance plans. Dupixent is the clear leader in new-to-brand prescription share across all five FDA-approved indications and leads in total biologic prescriptions in four of its approved indications. More than 850,000 patients are currently on therapy worldwide and three Dupixent indications have achieved blockbuster status, atopic dermatitis, asthma and nasal polyps.

Across all three of these indications, Dupixent is competitively differentiated based on its clinical profile, depth of clinical experience and potential to be prescribed to very young patients as young as six months in the case of atopic dermatitis. We continue to see great progress with our recent launches in EoE, Dupixent's GI indication [Indecipherable] and dermatology. Patient initiations across both indications continue to reach all-time highs and in late January, Dupixent was approved in pediatric EOE, the brand's fourth pediatric indication. Early launch indicators are positive as Dupixent is transforming the standard of care for these children aged one to 11 as it has for adults and adolescents with EoE. In addition to its approved indications, there's great potential for Dupixent in an increasing list of additional type two diseases, including COPD.

If approved, Dupixent will achieve two important first, the first biologic medicine for COPD and also the first new treatment in more than a decade for this devastating disease. In the U.S., approximately 300,000 patients with uncontrolled COPD show evidence of type two inflammation. If approved, we will rapidly -- we work to rapidly establish the unique clinical benefits of Dupixent, activate physician adoption, motivate patients to seek treatment and also advance access and affordability. We are confident that COPD will drive meaningful growth for Dupixent, if approved in this indication and see an additional opportunity to address patient unmet need with itepekimab our investigational IL-33 antibody designed to help COPD patients who are former smokers. With significant runway for growth in existing and potential new indications, we are confident in Dupixent's ongoing growth trajectory.

And finally, to libtayo. In the first quarter, global net sales were $264 million, up 44% on a constant currency basis from the prior year, driven by our dual focus in skin and lung cancers. In non-melanoma skin cancer, libtayo continues to lead the immunotherapy category in CSCC and BCC with opportunity for continued market growth. In lung cancer, we are making steady progress in capturing category share in both monotherapy and chemotherapy combination patients. Our oncology team is also preparing for the upcoming August 22 linvoseltamab, PDUFA date recently to reinforces that linvoseltamab has the potential to be best-in-class for late-stage myeloma patients, and we look forward to its potential launch.

In summary, our commercial team continues to bring important medicines to patients across an expanding range of diseases. We are focused on differentiating our medicines to increase category share and drive market growth, potential upcoming launches across our portfolio, provide the opportunity to extend the benefits of our medicines to even more patients.

And with that, I'll pass the call to Chris.

[Chris Fenimore, Senior Vice President, Finance and Chief Financial Office at Regeneron Pharmaceuticals]

My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis unless otherwise noted. Regeneron delivered solid financial results in the first quarter of 2024. Excluding contributions from our COVID antibodies, total revenues increased 7% year-over-year to $3.1 billion, primarily driven by continued sales growth and margin expansion from Dupixent and strong global sales growth from libtayo. First quarter diluted net income per share was $9.55 due to higher Dupixent volumes, we expect the amount of these reimbursements to be comparable to 2023. The Sanofi development balance was approximately $2.2 billion at the end of the first quarter. We anticipate this balance will be fully reimbursed by the end of 2026, which we expect will result in a significant step-up in our Sanofi collaboration profits thereafter....

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