Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) Piper Sandler 34th Annual Healthcare Conference Call November 30, 2022 8:00 AM ET
Company Participants
Ryan Crowe – Vice President of Investor Relations
Robert Landry – Executive Vice President & Chief Financial Officer
Conference Call Participants
Chris Raymond – Piper Sandler
Chris Raymond
Okay. Let’s go ahead and get started. Thanks everybody for attending Day 2 of the 34th Annual Piper Sandler Healthcare Conference. My name is Chris Raymond. I’m one of the biotech analysts here at Piper. It’s my pleasure to introduce our first company for the day, Regeneron Pharmaceuticals. Joining us to my left is Bob Landry, the CFO; and to his left is Ryan Crowe, the Vice President of IR.
So as was the case yesterday and through the conference, this is a fireside chat format, so meant to be very informal. So if anybody has any questions in the audience, just I’ll be looking out for your raised hand and I’ll make sure your question gets asked and answered. So before I jump into my questions, I think Ryan might have a few Safe Harbor comments and then Bob will give a 2 or 3-minute overview of sort of level of setting where Regeneron is today and then we’ll jump into Q&A. So take it away, guys.
Ryan Crowe
Thanks, Chris. Great to be here and appreciate the invitation. Before we start, I’d like to remind you that remarks made today may 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 such statements. A description of material risks and uncertainties can be found on Regeneron’s SEC filings. Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Bob, would you like to?
Robert Landry
Sure. So Chris, nice to see you. I’ve seen you on Zoom a lot. I haven’t seen you since probably 2019. So nice to be here. Nice to be invited. And good morning, good afternoon everybody that’s on the webcast. So as Chris mentioned, before we jump into Q&A, I just — I always like to kind of level set, we have a lot of things going on just to kind of get everybody aligned before we jump into Q&A.
So we ended our third quarter. I think we released on November 3. We are very pleased with the results. Again, we’re constantly going up against REGEN-COV and Ronapreve comps from 2021. So although we were down on the top line, if you exclude Ronapreve and REGEN-COV, we were up 11% which was — we were very proud of that result. But probably as important is we had a great U.S. EYLEA print. It was kind of an all-time high. I say that only because we launched the drug in November of 2011 and here we are in third quarter of 2022, with no help from price whatsoever, kind of all volume. And again, we had the biggest print that we’ve ever had on U.S. EYLEA.
Dupixent, as you know, we’re partnered with Sanofi on that. It did fantastic, $2.3 billion for the quarter, it’s under $9 billion run rate. There are lofty expectations that have been put out there by our friends at Sanofi and maybe we’ll get into that a little bit.
And then from the development side. So we had great data with 8 mg. I’m sure Chris will get into that. Very, very pleased in terms of we were expecting xKOLs, we’re expecting X and we’re like 2x with regards to what we’re able to achieve and I’m sure we’ll get into the studies and things like that, very good. We did a nice check the box the other day with regards to — we got the FDA to kind of extend EYLEA until May of 2024. And I know people already had that kind of built in but we got the pediatric exclusivity extension on that which that was through our ROP, retinopathy of prematurity, for our infants on EYLEA. So that was certainly good.
On that front, we got chemo combo approved a little later than expected. We had a September PDUFA date. We got that roughly I think, 2 or 3 weeks ago. And again, that’s in the first line, really opens up the market, right, mono Libtayo, it’s probably a $1 billion market. We think chemo-combo. Again, we still have a mighty foe that’s in that space. It’s going to open it up 6x to 7x that. So again, really positive.
With regards to Dupixent, again, it sounds like a broken record every quarter. We got Ped’s AD. We got EoE and we got prurigo nodularis. I’m sure we’ll jump into that a little bit. Again, nice 3 indications in the U.S. Ex-U.S., we expect to get all those approved in the first half of 2023. We do have a big binary event coming with regards to COPD. We have 2 Phase III trials going in that area. And we’re going to have the first 1 to read out in the first half of 2023 and I know that, that’s high on investors’ minds.
With regards to IO, we had a good showing at ESMO. I think that was like the second week of September, where we showed our MUC16 in our LAG-3 and the neoadjuvant in CSCC. And we also showed data on PSMAxCD28. We showed more patients on that, starting to kind of unveil what we have in IO. I know it’s been a little bit of a wait and see beyond Libtayo. And again, as we’ve said, Libtayo is going to be our foundation on all these combinatorial approaches.
And then on ASH, we’re having an investor event. I don’t know if it’s the day of ASH sometime in the middle of December. And again, we’ll be prevalent there with regards to our CD20, CD3 and our BCMAxCD3 with regards to our hem/onc IO portfolio. So again, exciting and we’ll reveal more data there with regards to how we’re doing on our studies.
And then just 1 last word with regards to capital allocation. Again, this is a repeat of what was said in my script. We get a lot of questions on it. I’m sure Chris may question us on it. But from a capital allocation point of view, between BD deals i.e., Checkmate acquisition, albeit small but necessary and then buying back Libtayo which we did effective July 1 for $1 billion plus. And then buybacks, of which we did north of $900 million in the third quarter. I thought the price was great with regards to my intrinsic valuation in terms of what the market price was. So we were a big buyer certainly in the third quarter. And we’ve done, I think, roughly $1.65 billion to date. So the tagline is we’ve done $2.8 billion of kind of capital allocation movements in the first 9 months of 2022 which we’re proud of.
And again, like I always like to add, since November of 2019 which is when we first did our first buyback, we’ve bought back $9 billion of Regeneron stock. So sometimes, I think that gets lost a little bit on that front. So Chris, maybe a little longer than 2 to 3 minutes but necessary. So I’ll open it up to you.
Chris Raymond
No worries. Thanks. So yes, we have about 18, 19 minutes here to pack about 2 hours’ worth of questions into. So I’ll see what I can do here. But yes, lots to cover. Maybe let’s just — topic of the day, I think, for a long time to come here, it’s going to be the high dose format of EYLEA. And maybe let’s talk a little bit about the competitive dynamic. And there seems to be no degree of shyness, I guess, on either party of yours or Roche in terms of talking about the others. In the competitive dynamic but Roche particularly seems to be taking issue with the rescue and redosing criteria that was employed in the trials and the high-dose EYLEA trial, sort of saying it’s not reflective of clinical practice.
So we were at AAO. We didn’t detect that from docs. I think if anything, they were maybe taking issue with sort of the LAGs, or their perception of the LAGs criteria in DME but certainly not in AMD. But what’s your sense of this? And do you expect this to remain a counter detailing point as time goes on?
Ryan Crowe
Yes. Thanks for the question, Chris. I think what we also heard at AAO was this data is truly transformational and that high-dose EYLEA 8 milligram aflibercept has the potential to become the new standard of care, kind of taking the baton from EYLEA today. We didn’t get any feedback that the dose length — those shortening criteria was too lenient. And I don’t think it will be a counter detailing issue. I know that Roche has put out a post hoc analysis, if you want to call it that, of the proportion of patients that would have been dosed at q.12 or longer, had they used the PULSAR criteria. That’s kind of Monday morning quarterbacking, I’d say.
And it doesn’t matter because we don’t know how those patients would have done. And I’d submit they actually would have had struggled to reach noninferiority based on what the unpooled data for faricimab looks like that the FDA put in their summary review documents. So in the end, we’re very confident in the clinical profile for aflibercept 8 milligrams. I think the data really speaks for itself and we look forward to filing it with the FDA next month.
Chris Raymond
So let’s talk about maybe the environment between now and when the high-dose format becomes available, you’re going to be competing with the first-generation EYLEA with Vabysmo. And we do a decent amount of survey work. I think others do as well. But 1 of the things that has sort of been fairly consistent in the feedback is that a major source of patients that have been Vabysmo, new patients have been EYLEA and adequate responders. That’s the feedback that at least from our little corner of the world in our surveys sort of comes out. These are patients that are generally dosed more frequently, monthly, etcetera.
So I guess the question is, are you seeing this in the field and 1 of the things that we were concerned about early on was that these are patients that are disproportionately more valuable, right? The more frequently dosed. Just give us a sense maybe of the dynamic that you guys are seeing?
Robert Landry
I’ve heard the same from Roche’s commentary and we just aren’t seeing that in the numbers. When you look at our Q3 performance for EYLEA, we grew 11% in the U.S. which was much faster than market growth at 4%. So on the backdrop of a decelerating market growth, we still hit an all-time high in revenues and in share. I think where most of 5:14 faricimab’s revenues are coming from is actually Lucentis. And it’s also been a driver for EYLEA. So I think they’re maybe not seeing it the same as us. And again, we’ll just wait for more numbers to come out. So far, with the permanent J-Code, we haven’t seen any meaningful share shifts in the market and we remain confident in EYLEA remaining the standard of care until potentially high doses approval.
Chris Raymond
Got it. Okay. And maybe 1 more question. I get this a lot in the last couple of weeks is around the fact that Vabysmo just got their permanent J-code, October 1. Obviously, that hasn’t been reflected in a quarterly print yet. Sort of any sense you guys can talk about in terms of dynamics since that happened. I know Roche has pointed to it as a — and perhaps rightly so, is a very meaningful milestone commercially for them.
Robert Landry
Yes. Chris, I don’t want to get into kind of the first 5 weeks or — well, now first 8 weeks of the fourth quarter. But we don’t see the J-code as this huge panacea. If there was a big desire and the product was so much superior, you do find a way through temporary J-Codes and stuff like that. So I’m — we’ve been a little bit surprised in Tarrytown with regards to kind of drum roll, please, the J-Code is coming when in fact, there are — if there’s a will, there’s a way to kind of get around that and there’s been, I think, an over expectation that everything has been bottled up, waiting for this kind of onetime J-Code on October 1.
I mean, I may be proven differently on it but there are ways if there is — if the docs really have a need and want to get around it, they’re going to get reimbursed on it. I mean Roche knows that space and they know how to get reimbursed in that space. So it’s not as if they’re tipping their toe in it for the first time. So I think that’s — that would be our comment on that.
Chris Raymond
Okay. Great. So maybe 1 additional topic here on the overall market. So biosimilar use, in particular, in the OpCo [ph] space has been pretty disappointing. I guess maybe any thoughts as it relates to — we have a biosimilar, Lucentis. We have seen very little uptake of that. We’ve done our own checks and there’s been a real pushback among docs almost universally as we’ve asked the question around biosimilars. Is it safe to say, are you viewing this maybe perhaps as a read through to once there’s a biosimilar, EYLEA available?
Robert Landry
Leading into this, intravitreal injection, biosimilars in this space, it’s a different kind of therapeutic category. So prior to EYLEA going losing its regulatory exclusivity in May of 2024, I mean this is a great analog in terms of what’s the art of the possible, right? So trust me. I mean, Biogen and Samsung got approval of the first Lucentis generic. I think in June, waited for a July 1 launch. I don’t think anyone was quicker to the Biogen results than me the morning that it came out kind of scanning down. I was a little surprised they showed the number given how small it was but I was shocked on how small it was for those that don’t know, it was $700,000. And again, this is for a quarter. It wasn’t kind of approved on September 29 and this is what they did for the Q3. This is for the whole third quarter.
Coherus is coming probably a little bit more fan fair with regards to the interchangeability that they have on their drug. I think that was like an October 5 launch. We’ll have to wait and see. But you used the word disappointing today. And Chris, it’s a crazy category when you have Avastin out there at $50 a dose which is not a biosimilar and then you have biosimilars kind of entering the market. So it’s going to be an interesting analog. And I kind of agree with your sentiment in terms of how the question was asked about there doesn’t seem to be a lot of wow with regards to market share shifts. And again, Ryan alluded to it, there are tons of market share shifts for Lucentis. If you go back and look at their third quarter number and a lot of it came to EYLEA and a lot of it went to Vabysmo. I think we got 2x the amount of Vabysmo share in terms of what Lucentis shed as a result of that product.
Chris Raymond
Interesting. All right. Let’s go back to the high dose format. It’s coming obviously next year. Just to remind us maybe I get this question a decent amount because there’s been a little bit of a shift in the narrative as time has gone on. I think originally, as this was first described, it was an sBLA and then shifted to a BLA and then now using a PRV to file early. Just maybe talk a little bit about that evolution of a regulatory strategy.
Robert Landry
Yes. I mean we may have misspoke at 1 time with regards to sBLA. In Tarrytown, it’s always been a BLA. I mean we think it’s a new formulation. We think the molar. Well, we know the 8-mg molar dose is 4x greater with aflibercept than EYLEA. With regards to the volume and the milliliters, it’s different. And the safety is different with regards to this is a longer duration in which you’re going to be giving it to for 12 and 16 weeks as compared to 4 and 8 weeks. The loading doses are different with regards to DME, right? DME under 2 mg has a 5-dose loading dose. We’re going to have 3, we believe, under the 8 mg.
So there’s a lot of differences where — and again, it’s never final until kind of the FDA adopts it but we’ve been in a lot of discussions with the FDA and the strong belief in Tarrytown is that this will be a BLA submission.
Chris Raymond
Okay, excellent. And then maybe the last question on the high-dose format. Obviously, a prefilled syringe is a major plus in terms of just usability and at the clinic level. Just remind us of the strategy for prefilled syringe and any barriers you think we should…
Robert Landry
Chris, we are going to try to go as quick as possible. We’re going to launch in vial. For those that don’t know, currently, the 2 mg in Lucentis is currently in a prefilled syringe. Roche’s Vabysmo is in a vial. I’m presuming that they are moving as quickly as they can to a PFS. The market has turned — it’s kind of 90% PFS. Docs are set up that way with regards to kind of preformatting a line of patients that are coming in for this treatment. It’s just a lot simpler. And it’s not easy, though, Chris, as you know, you may know better than anyone. We were late to the game with regards to getting our PFS with 2 mg. It is not an easy process but we think we have it ironed down and we will shortly follow the vial with PFS.
Chris Raymond
Excellent. Okay. Let’s shift to Dupixent just in the interest of time. So you mentioned this, Bob, in your commentary about new indications over the last couple of quarters. Help us understand maybe the opportunities for each of these and particularly the non-atopic derm ones and whether the growth that you’ve seen for Dupixent year-to-date really reflects meaningful uptake of this or if there’s a dynamic — that’s maybe going on?
Robert Landry
To go through patient numbers in Sanofi, I believe, gave this out. Dupixent is currently running, I told you a $9 billion annualized run rate off of Q3, 500,000 doses. Our 500,000 patients are currently on treatment with Dupixent across the 5 indications that we have. I alluded to, in my opening remarks, the new indications that we have. It’s kind of like building blocks, right? So you go through Ped AD. Again, we’re dosing as low as 6 months, 6 months for a biologic which for those that thought that JAKs would be a player in the AD space. You’d have to look that no one’s ever going to give a JAK to someone as low as 6 months, right? So we’re all the way down to 6 months with regards to the safety. It’s fantastic.
So for Ped AD, it’s about 75,000 patients. Prurigo nodularis, another 75,000 patients, EoE 50,000 patients. We think that’s significantly under-diagnosed. I mean there’s really no treatment for PN and EoE. So hard to figure out what the right numbers are. So again, that’s another 200,000 patients that we’ve gotten added to our current count that’s coming. And again, we got a nice uplift. We speak to the sales reps and we’re finding that EoE with regards to GI docs, they’ve been waiting for something to come for a while. It’s coming. We’re going to have Ped’s EoE, I think, coming in next year. And then certainly, with regards to Ped ADs, it’s good, Chris, like it’s taking off right away. It’s not like it’s going to be gradual. We had a decent start in Q3 as a result of the new indications, bottom line.
Chris Raymond
So maybe let’s focus a little bit on atopic derm and this has been maybe a soapbox issue of mine. I know you’re laughing because we’ve had this discussion many times offline but in the survey work that we’ve done, as a matter of practice, it’s pretty clear that derms like to combine things regardless of the disease or the indication. We’ve gotten a sense that there is a growing tendency to pull the trigger on switching to a different therapy if a patient is considered an adequate responder on Dupixent. Just natural given that there’s now options whereas before there weren’t. It’s been a fairly consistent, maybe a little bit less than 10% discontinuation rate which is great for a biologic. But I wonder if there’s a dynamic where that number could increase.
I know you guys have said, look, we’re not interested in a combination approach but just talk — and I think the other dynamic is you’ve got a real rising tide with more patients coming to therapy, more moderate patients being treated. So perhaps there’s no issue there. But I’m just wondering, as you do your long-range planning for that franchise, walk through why perhaps a combination strategy isn’t necessarily the right thing to do.
Robert Landry
Yes. I think, Chris, if we found a good combination strategy, we wouldn’t be against going after particularly with Sanofi and those that know, I mean, Sanofi has been kind of active in building up their kind of I&I moratorium behind what may be coming behind Dupixent. We just haven’t seen something that’s so kind of eye shocking. With regards to — we talked about all the indications coming that will continue to drive the growth of Dupixent. We started in AD as you’d expect on docs that go very severe, like severe moderate. So we do think we’re going to go down the continuum as docs become more and more used to Dupixent and we’ll be able to maybe start to hit a lot more of the moderate type individuals on that front.
Plus we’ve — with regards to AD and it’s a little known fact that I don’t even think we’re at 10% penetration of the market. And we’re by far the market leader. So it’s amazing in terms of what’s available. So Bill Sibold from Sanofi has said the goal is to get the 25% AD penetration. Right now, in Dupixent, AD is our largest indication. And again, we’re not even at 10%. So you can imagine just the runway on that alone and it certainly helps that there’s more kind of commercial noise coming into the category, whether it be AbbVie’s Rinvoq and the commercials you may be seeing on that. We think that that’s great to the extent that the AD kind of population blows out, it’s kind of what Humira was seeing with all the competitors that they were having. The more commercials that we’re running, the more share they’re having. We’re a big believer that, that’s going to happen.
And we haven’t even talked about COPD with regards to growth. I don’t think COPD is in any models yet. Will see OPT work. What we hear is that if COPD is a type 2 disease, then it should work because Dupixent so far has been proven to cure all type 2 diseases. But that piece is unknown yet. That card will get revealed sometime in the first half of 2023. So there continues to be a long runway. We don’t give long-term prognostications on it but you could see how this is going to be a gigantic product beyond the $9 billion run rate that we’re currently at.
Chris Raymond
Awesome. Okay. We’ve got about 2 minutes left. Let me switch a little bit to the oncology side of the organization. So just maybe the CytomX collaboration, maybe walk us through the rationale of this deal, interesting approach, I guess, pursued by a number of players with certain other masking technologies. Why this deal? Why now?
Ryan Crowe
Yes, it was. I think it’s really excited about the CytomX deal and view it as a real strategic collaboration to use this masking agent that they’ve developed to help keep biospecifics from engaging with T-cells and then unleashing their payload. And that should, we think, extend the therapeutic window, reduce off-target toxicities and potentially address tumor types that really haven’t been well served by immunotherapies in the past. And I think it’s just a broader statement about the approach of BD at Regeneron. It really is a good example of bringing a platform in that can really enhance some of our core competencies. So they’re really the only company that we view as achieving proof of concept for this masking platform. And they recently, I think in August had a publication out that that’s worth a look. We certainly were intrigued by it and that was part of the reason for us working with them.
Chris Raymond
Okay. 30 seconds, 1 more question. You did touch on this a little bit, Bob, in terms of the use of cash but Regeneron still sort of stands out, I think, in terms of having a — I don’t use the word surplus, an embarrassment of wealth, I guess, in terms of $13 billion, I think, net cash. So you have done some deals. Is it safe to say that your approach to doing deals that will be fairly similar in terms of doing technology-based deals? Just sort of talk about as you guys — again, nothing specifically but just talk about how your strategy is as you look at these opportunities that seem to be out there and less and less expensive every day.
Robert Landry
Yes. I mean, Horizon got announced yesterday afternoon. I mean we’ll never do something transformative like that. It’s just we don’t like to get into bidding wars where people have a bigger war chest and they’re probably more desperate than we are. So we kind of stay away from that. But it doesn’t mean, as Chris was alluding to, I mean, we’d like technology plays like what we did with Checkmate, there’s virus-like particle that came along with the asset. We like things like that. I mean siRNA that we did with Alnylam. We like the CRISPR approach with Intellia whether TTR is the perfect target to start with. I mean we’ll see on that but we have a lot of other targets coming. So if we can find kind of platform modalities that really fit in, what never gets any attention is our Regeneron Genetics Center. I mean, we generate a lot of targets.
But sometimes we need modalities that we don’t necessarily have. I mean we’re a big antibody company and we’ll look to do BD deals that provide us modalities where we can use the targets that we’ve identified within our Regeneron Genetics Center. That’s a lot. But first and foremost, we will continue to invest in our own R&D. We like plowing our own garden. We like growing our own garden. We don’t like going to other people’s gardens and pulling up half eaten tomatoes and things of that sort. So we like what we plow ourselves organically.
Chris Raymond
Awesome. Thanks very much.
Ryan Crowe
Thank you.
Question-and-Answer Session
End of Q&A
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