Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) Morgan Stanley 20th Annual Global Healthcare Conference September 12, 2022 11:05 AM ET
Company Participants
Ryan Crowe – VP of IR
Leonard Schleifer – Founder, President and CEO
Marion McCourt – EVP of Commercial
Conference Call Participants
Matthew Harrison – Morgan Stanley
Matthew Harrison
Good morning, everybody. Thanks for joining us for the next session. I’m Matthew Harrison, one of the biotech analysts here at Morgan Stanley. Very pleased to have Regeneron with us here for the next session. Just quickly before we get started, I just need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures, are available on the Morgan Stanley public website at morganstanley.com/researchdisclosures.
So with that, really pleased we have Len Schleifer, the CEO; Marion McCourt, who runs Commercial; and Ryan Crowe from IR. So really pleased to have you all here. Maybe a good place to start is obviously what came last week. It is last week, right? With the high-dose EYLEA data, so — I mean, just — how does that change your view on the long-term opportunity for EYLEA and how you think about basically investment behind that molecule now?
Ryan Crowe
Maybe before Len gets to that, I’ll just read our forward-looking statements.
Matthew Harrison
Thank you, Ryan.
Ryan Crowe
Before we get started, I would like to remind you that remarks made today do include forward-looking statements about Regeneron, and 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 materials can be found in Regeneron’s SEC filings.
And with that, Len?
Leonard Schleifer
Well, it’s good to be here. And Matthew, thanks for having us. Before we start, I really think we should give Matthew a big round of applause, which I normally don’t do because I don’t like most analysts. I’m not even sure I like Matthew, but I do like what he put out on COVID because he put out really useful information that was helpful to a lot of people. So — Thank you.
Question-and-Answer Session
Q – Matthew Harrison
Thank you, Len. Okay. EYLEA. Now you can you can get me back with something else around that.
Leonard Schleifer
Yeah, we can do battle now. EYLEA is a remarkable product. We probably injected over 50 million injections of EYLEA since it was first launched around the beginning of 2012. So a decade of experience, a decade of safety. And it has — even though it wasn’t the first, it has surely become the standard of care.
And the big advantage for EYLEA that people found in the early launch was that you could go from a monthly injection of — with Lucentis to a every two-month injection, which is a big deal for the patient. And it’s a big deal for the doctor because they can treat more patients. And injections became — if you think about it, we’re doing 50 million injections there, take it — that’s a lot of injections. So the fewer per patient means the more patients you can treat. So it’s better for the doctors, it’s better for the practice, but most of all, it’s better for the patients.
And we thought there was a bit of a fine line when we first launched, how high we should go, what kind of formulation we could get and so on and so forth. And then we worked very hard to say, well, maybe if 2 milligrams of EYLEA is good, 8 milligrams might even be better.
And could we do — and the real question is, could we get a formulation — it wasn’t so easy to get a formulation that can be given into the eye. Could we show that you had the same basic vision as you did with 2 milligrams EYLEA, but that you could do it less frequently, and perhaps most importantly, you could do it safely. And I think that’s really what the data showed.
So where does that take us? I think it could take us — we hope that EYLEA has the potential, now 8 milligrams, to become the new standard of care. And it’s sort of debunks, I think, some of the myths out there, perhaps out whether you could have gotten more out of the anti-VEGF, which people said you couldn’t have. Of course, you could. It’s just a matter of how you did it. And whether Ang2 has much value since George Yancopoulos at Regeneron invented COV2 [ph], we had a lot of thought about that. We don’t think that was the big advance. And so we’re excited.
Matthew Harrison
And look, obviously, biosimilars and potential biosimilar competition is on everybody’s mind. So how should — I guess, how should we think about I’m trying — I’m not going to say a lot about this, but how should we think about commercial strategy, right? I mean, can you find which everybody — you just get new starts? Like, how do you — I mean, I know the data is new, but I think everybody sort of wants to know your thoughts on that.
Leonard Schleifer
Yeah. I don’t think we should get into tipping our commercial strategy. Marion, I won’t put you on the spot. I can tell you that Marion has been thinking and planning about this with the team. There are a lot of things to consider in terms of competition. What is your product? How good is your product? How differentiated is it? What are the regulatory hurdles for biosimilars? What are the intellectual property hurdles for biosimilars? What are the technical hurdles for biosimilars?
We think we’ve really advanced the ball a lot that makes it technically harder. It makes it harder for a lot of other reasons. And if Marion were still inclined, which I hope she’s not, we’ve got a pretty good strategy on how to take advantage of that because if all goes well, we should have this — if the FDA agrees, we should have this approved well before our initial exclusivity lapses in mid-’24 for [indiscernible].
Matthew Harrison
Okay. And then I guess the key thing is — so new BLA presumably means new J-code which means different product in the eyes of insurers. Is that the way investors should be thinking about this product?
Marion McCourt
I would say that It’s early days. And we’ll go through the regulatory process and then the regulatory process, obviously, the CMS process and J-code. But — yes, that is the belief that the product is one that would be potentially characterized as having a separate BLA.
Matthew Harrison
And so then how do you protect this product from an IP perspective? And I think that’s obviously the question in terms of how long that could last. Obviously, if you get a new BLA, there’s certain regulatory exclusivity associated with that, but is there a strategy in terms of longer protection?
Leonard Schleifer
Yeah. I mean we have a large patent portfolio, which we’re not going to discuss here today, probably there’s a different forum for that, that covers both our basic processes, our formulations, our dosing and so forth. And new stuff issued as well as pending that covers our 8 milligrams.
The regulatory — it’s probably unlikely that we get a whole new 12-year exclusivity. But the biosimilar regulations — in order to become a biosimilar, you have to actually have a drug at the same dose, same concentration, and show certain comparability, safety and so forth.
So usually, that’s a multi-year process. If you think about it, people have been starting the 2-milligram process several — three-four years ago. So you do get that aspect of it. You get the intellectual property, you get the technical hurdles. We think this is at a very good chance of lengthening our exclusivity with EYLEA.
Not to mention, you have to make this product and be convinced. Like this is — biosimilars in the eye are not the same thing as biosimilars under the skin as a subcutaneous injection or intravenously. You’re putting something in the eye, which is the most sensitive place for things to go wrong. And you saw what happened with other products when things go wrong, it’s not a very pretty outcome.
Matthew Harrison
So I guess last question here is just around impact of the IRA and how you’re thinking about that with respect to EYLEA specifically. And I guess, broadly, how 8 mgs may or may not — I don’t think anybody knows what to think about, let’s call it, new product —
Leonard Schleifer
Yeah, I mean the regulations have to be interpreted, have to be administered. But as we see it, we don’t see inflation reduction. That should be — that the IRA you’re referring. The inflation reduction, we don’t see it having a significant impact on EYLEA, the way we interpret at this point.
Matthew Harrison
And can I ask a broader question about that, which is —
Leonard Schleifer
No. Yes, you may. Go ahead.
Matthew Harrison
As you’ve seen the text of that act, I mean, I think this is a question people are asking a lot of companies, does that change your capital allocation priority? So that changed the kinds of drugs you want to invest in? Does that change the indications you’re thinking — does it have any strategic implications for the — for your business?
Leonard Schleifer
That’s a great talking point, okay, that people have used, but I don’t subscribe to it. We have never let commercial considerations, profitability, margins, any of that influence our development decisions. We have chased the science as far and wide as we can chase it. And we have chased — trying to do what’s right and best for patients.
Under some environment, you’ll make a little less money. Under other environments you make a little more money. But that should never be a barometer in which you decide whether or not to pursue something. Geez, I’m not going to cure Alzheimer’s because it’s going to be subject to the IRA. I mean — come on. That’s not the way one normally operates.
And the rhetoric aside, I think most people in this industry are making decisions seem to do it that way. They try and — some people have a much more rigorous process. Regeneron does not have a rigorous NPV process because what we believe is the assumptions. We work in the realm of certainty of 0.001. I can tell you that the NPV calculations are nowhere as close.
Matthew Harrison
We know how you feel about NPV calculations.
Leonard Schleifer
Exactly. So we don’t use them. We follow the data.
Matthew Harrison
Since we have you here, I know you’re excited about some of the advances you’re making in oncology, especially with the recent co-STEM [ph] data. So maybe just talk to people about why you’re excited about the co-STEM data, especially given it’s an early data set?
Leonard Schleifer
Yeah. So — let’s back up and think about what’s going on. What we’re trying to do is getting a T cell — a killer T cell to kill a tumor cell, right? And what has to happen for the — for that process to occur? Really kind of three things have to occur. The T cell has to recognize the tumor cell, right? It has to be attracted to it so that it can say, this is the cell I want to kill. It has to receive this so-called signal two because the system is sort of protected. It’s almost — think of it as two locks getting into the safe. It’s a pretty important stuff that’s inside that killer T cell, and you don’t want it released. So there is a second signal that has to happen naturally.
And by the way, this is an all natural design, really to fight viruses. That was the main system that the T cell system did. And what happened is, very simply, a virus would get inspected in the cell. It would be broken. It’s proteins that it made with peptides. The peptides would be placed on the surface of the cell that the virus is infecting. The T cell receptor, okay, would bind to that. And then another signal, a costimulate would stimulate, let’s say, CD28.
And then when all that’s going on, the system evolves so as not to kill the body, which is to put in a brake. So I think what our philosophy is, is that one has to take advantage of all the systems if you’re going to make something happen, like you’re going to actually kill a tumor in a meaningful way. And that’s what our animal data. We think we do have really special models.
That’s what our animal data showed that if you just gave a killer T cell to, let’s say, a prostate cancer model, nothing really happened. But if you were able to direct it to that call and provide a co-stimulatory factor and deal with the break, there were a lot of amazing things that actually happened. And that’s what happened in our trials that we had very, very advanced prostate cancer patients who had sky-high levels of PSA. And we were able to direct the T cells and activate this signal two with the CD28. Remarkably enough, nothing happened, just like the animal models predicted.
But when you took that brake off, wow, all of a sudden, you were getting unprecedented results. people talk about PSA going down by 50%. We had patients — basically, when they responded, they went down 100%, 99%. And so — this was quite amazing. And the other thing that was really amazing about these data is that the toxicity with significant was restricted to the people who are responding.
So if you think about drug development, the worst thing you want to do is — if you have 100 people and you can save 10, you certainly don’t want to do something bad to the other 90 who you’re not helping, right?
That makes a very bad therapeutic index. But if you’re within the 10 and maybe there’s some bad stuff that happens, but those are all the people that are getting the benefits, then you have this great match of the risk/reward can be calculated. And when we showed this, the prostate cancer experts, they were just blown away, frankly. They had never seen anything like this. They felt we’d have to manage and learn to manage and we’re working on some of the toxicity.
But you have people going down 100%. You had the PSA, their bony lesions no longer there. One patient had to come off the drugs and then 10 months later for a side effect — 10 months later, they still will have total suppression of their disease.
It was really an aha moment for us because it’s what we expected would happen. Mind you, this may be the first time. We have to double check this, and you’re good at looking at these things up. So maybe we [indiscernible] a sign.
I don’t know of another case where you had two drugs that had no activity. Normally, you combine drugs with some activity and you see some more activity. Here, we had two drugs with no activity to combine to have dramatic activity. It’s really quite remarkable. And I think this proof of concept changes everything in this field about going after solid tumors. We’ve got three of them in the clinic. We got a host more behind it.
And I think our strategy is right. Some people say, well, why didn’t you pursue just your CD20 by CD3? You’re the first, maybe other people are trying to get ahead of us. That linear approach, that linear thinking is maybe what dominates some companies.
But it’s certainly not how George Yancopoulos and the team at Regeneron work, massively parallel processing, thinking about all the things you need in the toolbox to deal with cancer cells, whether it’s bispecifics that are directing CD3, whether it’s a costim, whether it’s taking off the brake with anti-PD-1 or anti-LAG3 or whether it’s the MET that causes internalization better than any known reagent, things like that. When you have a whole portfolio you can do really quite remarkable things, and that’s what we’re starting to see.
Matthew Harrison
So a couple of follow-ups. So the first one is on safety. Is there a mechanistic reason that toxicity is only observed in patients that are responding? Because I think the first question people ask is, okay, that’s great that we saw it in the small number of patients, but is that going to be what plays out in a larger number of patients.
Leonard Schleifer
It’s a fair question. I think the serious toxicity is going to be restricted to those people who are having response, whether it’s up — right now, it’s 100% correlated, whether it stays at 100%, I’m not sure. But when you see something at 100%, even in these small numbers, it tells you that they’re going to be highly correlated.
And mechanistically, it does make sense. You are activating the T cells, the side effects are probably a result of some cross reactivity of other antigens expressed by the tumor cells that are occasionally seeing the skin or the liver and so forth. So mechanistically, it does make sense. Whether it holds perfectly — nothing will hold at 100%, but I think it’s going to be very highly correlated.
Matthew Harrison
Okay. Okay. And then the second question is now that you have these in hand, can you accelerate this program or this group of programs?
Leonard Schleifer
I can tell you that the prostate cancer docs have asked the same question in a more demanding way. And we tend to listen to them more than we listen to you. So we’re trying to go as fast as we possibly can. It really — when you have something — I mean, it’s so amazing. You have something that takes people, and basically, shuts off the disease. You got to go as fast as you can. We’ve got to not go too fast because we do have a toxicity issue. And so we’re trying to — mind you — and I’m kidding, you guys always ask very good questions. The one question is — that we used to get all the time is — why is it taking so long.
Matthew Harrison
With bispecifics?
Leonard Schleifer
Yeah. Specifically, the CD28. Why is it taking so long? And the — it’s taking so long because we had to go — if you think about what the protocol is, we were giving three doses — three weekly doses of the CD28 bispecific, then a full dose of Libtayo or cemiplimab, okay? What you saw is that despite the full dose in the first 17 or so patients, zero responses. The full dose of cemiplimab does nothing. The low dose in combination with full dose did nothing. And it wasn’t until you got up to these higher doses — and we needed to go slowly. This was a whole new mechanism, and we needed to — it might not have worked out the way it did. And so we needed to be very careful.
So it took years to treat the cohort, get a group together, make — wait for toxicity, do another escalation dose. That was a very slow process. But I think it was warranted for the safety of the patient.
Matthew Harrison
And I guess last question is now that you sort of know where the therapeutic window is, does that mean as you move on to other targets, you could maybe avoid some of that? Or do you think because the biology may be different, you’re still going to have to go slowly?
Leonard Schleifer
Yeah, it’s a — we’re asking that question internally as we speak. The good news is we’ve sort of accelerated through some of the lower doses. We’re getting close in the ones that are already in the clinic. New ones putting in the clinic, we have to — our safety team working with the FDA will make an assessment of what’s a reasonable dose. Can we skip some of the ultra-low doses? I think it might be possible, but we’ll see what the safety team thinks and what the FDA thinks.
Matthew Harrison
Okay. So broadly — or more broadly, in oncology, you obviously have other things that are closer to market. I think if you probably survey most people — most investors, they assign fairly limited value to them. I think your view is probably different than that. So why don’t we start with a couple of those and just get your take. So Libtayo in lung cancer, I mean, I think — the Street is — they don’t know what to think about how you can take significant share there.
Leonard Schleifer
Well — look, KEYTRUDA is a very good drug from a very good company that is really taken by storm this field. And it’s going to be hard to displace them. Although we maybe can talk in a minute about some of the wins we have had, There’s always room for competition. That’s a very, very, very large space.
But the real way that you take things, for example, is you try and leapfrog. We were first in CSCC. We were first in basal cell carcinoma. We talked about really good data in the neoadjuvant, we’re working on adjuvant. We’ve got the LAG3 combination data, which is two cohorts gave — cross-study comparisons notwithstanding, best reported data so far in the naive metastatic melanoma patients.
So the skin cancer is going pretty good. We hope to do some fancy new combinations, perhaps in lung cancer. But Marion, maybe you could just comment a little bit on how that is going? And we do have a PDUFA date which may get a little delayed, we’ll see, because of the — as you know, the — as we reported, the inspections in Georgia were maybe — we’ll see how the FDA comes out on that. But Marion?
Marion McCourt
And — no, exactly. I would just comment that as we today with the lung cancer indication, it’s a monotherapy indication so that when we get our PDUFA approval, fingers crossed, soon, we’ll have the opportunity then with approval to promote for chemo combo flow [ph] and that market is seven to eight times larger than monotherapy.
The other thing for, as many know, in — when an oncologist is thinking about prescribing for a patient, they like the optionality of using chemo if they need it. So you don’t really know at the start if the patient will remain on monotherapy. Beyond that, though, I will share with you, I do see certainly encouraging signs in the market in interest of Libtayo in monotherapy today.
As our teams have been more involved with key academic centers, large community practices, we are starting to see some uptick in performance. And that is coupled with, as Len mentioned, the strong performance we see with Libtayo as standard of care now for appropriate patients with basal cell carcinoma and cutaneous squamous cell carcinoma.
So more to come. We have a lot of work to do, but we’re building a very experienced oncology team, not only in the U.S. market, but also in key markets and rest of world.
Leonard Schleifer
And I think there is a bit of a name recognition who is Regeneron in oncology. We’re starting to get better recognition by the breadth and depth of our pipeline. And so we convert some of that — those pipeline excitements to actual approvals, I think we’re going to be closer and closer to achieving our goal. We want to become the a or the leading company in immuno-oncology over time.
Matthew Harrison
And then last question on oncology, but I want to make sure we hit a couple on Dupixent.
Leonard Schleifer
Just that other Dupixent?
Matthew Harrison
Just that other small, tiny drug that you sell. Bispecifics, right, we’re getting closer to them, the first two coming to market. How are you thinking about that area, right? I mean there’s a couple CD19, CD20 bispecifics or is a BCMA that’s here. So just how to think about that?
Leonard Schleifer
Once again, I don’t think the package inserts for all the products have written — been written yet. And we’re a little bit behind, obviously, but not that far. But — we hope to come with maybe perhaps some of the best data in terms of the efficacy and safety aspect. So we’ll have to see how that sorts out. Plus, once we get these baseline approvals, we want to add our other reagents, which is really easy for us since this is all under one roof, whether it be a CD28, whether it be a cemiplimab/Libtayo.
So I wish we were a little bit ahead, let’s say, in some of those because we were first sort of getting in there. But I think if we get out with the best data package, then we’ll be able to do fine.
Matthew Harrison
Okay. Great. So Dupixent COPD, what are your current thoughts on that as a potential for that to read out positively?
Leonard Schleifer
I would like it to read out positively. It’s — we think that it’s well conducted. Sanofi and Regeneron have thought long and hard about this. Obviously, it’s a huge upside for the product Dupixent is a pretty remarkable product. And we’ve got some of the indications, which we’ve disclosed that there’s a pretty good chance here, but —
Matthew Harrison
If it doesn’t work, what would be your top reason you think it doesn’t work? What’s the risk that you worry about with COPD?
Leonard Schleifer
Yeah. I really don’t spend much time on that on worrying about it because that’s sort of in the oven and it will happen whether I like it or not. At this point, nothing we can do.
Matthew Harrison
OX-40, is that a real competitive threat?
Leonard Schleifer
I like Dupixent.
Matthew Harrison
OX-40 versus JAK, where do we put it in the competitive threat category?
Leonard Schleifer
Look, it is going to be hard. There will be competition to Dupixent because it’s just too big of a product doing too many things. But if you think about it, when you have a best-in-class with a long head start, with a safety record that’s — I don’t know if we’ve announced how many people we’ve treated so far, but it’s many, many, many, people. When you have a safety record, when you have atopic dermatitis, when you can treat children as young as, what…
Marion McCourt
six months.
Leonard Schleifer
Six months.
Marion McCourt
And hundreds of thousands of patients in worldwide experience, to Len’s comments.
Leonard Schleifer
Six months. That’s a big statement that regulatory authorities are comfortable with the safety profile of that drug, right? We get the six months, and we’ve seen some amazing results already. And we have nasal polyps with chronic sinusitis, eosinophilic esophagitis, that’s a big sleeper that’s really doing very well because I think it’s one of those GI indications that people just didn’t have anything to treat with. And so you don’t realize how many patients are out there. That’s getting a wide recognition now in the GI community.
Some of the other indications, which we have on file or will file — I mean, I just think that we are expanding age groups, we’re expanding geographies, we’re expanding indications, we have a lead, we have a safety profile.
And sure, there will be competition. But I don’t think any of the competition will be able to touch all the bases that we have. And if you think about it, there was huge competition in psoriasis, huge competition in rheumatoid arthritis. But the leading drug still was a very, very big drug, especially when you had so many indications and the doctor is so comfortable with it.
Matthew Harrison
And maybe just to finish this off, I think there’s a lot of visible pipeline at Regeneron. We know you’re excited about costims, but is there something else that investors are not paying attention to that you’re excited about?
Leonard Schleifer
Yeah. There were a lot of things. Should I pick one for you? Okay. I mean I think we have a very interesting early play in the heart failure arena, which nobody is paying any attention to. So more about that to come, it’s in the clinic. It seems very interesting. And it’s early going, but you asked for something exciting and early. There is something in it for you.
Matthew Harrison
Well, Len, Marion and Ryan, thanks for being here. Very nice to see you all of you. Appreciate it.
Leonard Schleifer
Thank you very much for having us.
Ryan Crowe
Thank you.
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