Regeneron Pharmaceuticals, Inc. (REGN) Q1 2012 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Regeneron Pharmaceuticals' Conference Call to discuss the first quarter 2012 financial results. My name is Kevin and I will be your coordinator today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Dr. Michael Aberman, Vice President of Strategy and Investor Relations for Regeneron. Please proceed, Dr. Aberman.

Thank you, Kevin. Good morning, and welcome to Regeneron Pharmaceuticals' First Quarter 2012 Conference Call. An archive of this webcast will be available on our website under the Events and Presentations page for 30 days. Joining me on the call today is Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; George Yancopoulos, Chief Scientific Officer and President of Regeneron Research Labs; Murray Goldberg, Chief Financial Officer; and Robert Terifay, Senior Vice President, Commercial. After our prepared remarks, we will open the call for Q&A. I would also like to remind you that remarks made on this call that are not historical in nature may be forward-looking statements about Regeneron and are subject to a number of risks and uncertainties. Actual events and our actual results may differ materially. Such remarks may include but are not limited to those related to Regeneron and its products and business, sales forecast, financial forecast, development programs, collaborations, finances, regulatory matters, intellectual property and competition. All of which involve a number of risks and uncertainties. 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 or SEC, including its Form 10-K for the year ended December 31, 2011, and Form 10-Q for the quarter ended March 31, 2012, which we filed this morning. Regeneron does not undertake any obligation to update publicly any forward-looking statement whether as a result of new information, future events or otherwise unless required by law. GAAP and non-GAAP measures will be discussed on today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of these measures to GAAP are available in our financial results press release, which can be accessed on our website. Once our call concludes, the IR team will be available to answer further questions. With that, let me turn the call over to our President and Chief Executive Officer, Dr. Leonard Schleifer.

Thanks, Michael, and good morning to everyone. Before I get to the meat of today's call, on the occasion of today's milestone for Regeneron, I would like to say a few thank yous, as surely many thanks are owed to many, many people. I offer these thanks on behalf of both me and my good friend George Yancopolous. As most of you know, George is the lead inventor of EYLEA and is in fact responsible for our entire pipeline of technologies. George and I embarked on this professional partnership and exciting journal -- journey together many years ago with the firm belief that good science would lead to good drugs. I believe we were right although predicting the exact timing of things, as you well know, can be rather challenging. In any case, we owe great depths of gratitude to all of our colleagues over the years who have dedicated themselves to bringing drugs to patients, as well as the thousands and thousands of patients who have volunteered for our clinical studies. We also are greatly indebted to the physicians in the medical community for helping us with all of our clinical trials and for the partnership we have had with the FDA as we navigated the development process. Finally, thanks to our partners and all of our shareholders who have believed in us and help finance our efforts. Now back to business. Today, we are happy to report a very successful quarter and a true milestone for Regeneron as it was the first quarter in our history that we achieved profitability, both on the GAAP and non-GAAP basis as a result of product sales. This achievement was driven by the continued strong launch of EYLEA in the United States. EYLEA's unique product profile, as the only FDA-approved treatment for wet AMD labeled for less than monthly dosing that showed clinically equivalent efficacy to monthly ranibizumab, continues to resonate with patients and their caregivers, physicians and payers. As a result of this strong launch and first quarter sales of $124 million, we are increasing our full year U.S. EYLEA net sales forecast to between $500 million and $550 million. Meeting of this forecast would place EYLEA among the most successful biotech product launches. Given this new forecast, as well as our strong profit margin and the terms of our agreements with collaborators who fund a large portion of our R&D expenses, we also now believe we will achieve non-GAAP profitability for the full year 2012. Before we get into some of the details behind the launch and our updated forecast, let me highlight some other important accomplishments during this quarter. Turning first to our late-stage assets, the FDA recently granted priority review status to the ZALTRAP BLA for the treatment of previously treated metastatic colorectal cancer. We now expect 3 FDA decisions for our drug candidates in the second half of this year. ARCALYST for the prevention of gout flares in patients initiating uric acid lowering therapy, which has a PDUFA date of July 30; ZALTRAP for the treatment of previously treated metastatic colorectal cancer, which has a PDUFA date of August 4; and EYLEA for the treatment of central retinal vein occlusion or CRVO, which has a PDUFA date of September 23. Our regulatory department has never been busier with the FDA on these applications, as well as preparing for the upcoming ARCALYST Advisory Committee Meeting scheduled for May 8. Turning to our antibody pipeline, we have seen significant interest in the scientific and clinical communities in our potentially first-in-class lipid-lowering PCSK9 antibody, REGN727, which is part of our collaboration with Sanofi. During the quarter, we saw a Phase I data published in the New England Journal of Medicine and Phase II data presented at the annual meeting of the American College of Cardiology, including during a late-breaking clinical trial session. The data, which showed up to a 72% decrease in LDL cholesterol or bad cholesterol when adding REGN727 on top of existing statin therapy was encouraging to us and to many of the expert cardiologists who are seeing the data for the first time. This high level of interest was also evident in the broad media coverage of these publications and presentations. As we have discussed previously, Regeneron 727 demonstrated acceptable profile in these studies, acceptable safety profile in these studies. Now there's much -- still much work to be done in our anti-PCSK9 program as the data we presented were from Phase II trials. As such, we and Sanofi look forward to initiating our full Phase III program to further evaluate the efficacy and safety of 727 later in the second quarter, following feedback from U.S. and European regulatory agencies. Another positive development from our pipeline this quarter was the FDA Advisory Committee's unanimous vote in favor of the ongoing development of anti-nerve growth factor, anti-NGF, agents in pain associated with osteoarthritis. We believe it could be an important role for these agents in the treatment of this pain and we hope to be able to provide an update on the development plans for our NGF antibody REGN475 in the next few months after discussions with the FDA. As a reminder, Regeneron now has sole rights to REGN475 with a royalty obligation to Sanofi. With that, let me turn back to the EYLEA launch, which, we can report, continues to exceed expectations. Net product sales to our distributors for the first quarter 2012 were $124 million, which includes a modest increase in our distributors' inventory of about $10 million. This implies approximately $114 million in sales to healthcare providers. Market research suggests the strong launch have been driven by several factors, including the high market awareness of EYLEA; physician and patient's belief in the value of achieving clinically equivalent efficacy to monthly ranibizumab, with less than monthly dosing; and their experience with EYLEA since the launch; also, the favorable perception of Regeneron as a pharmaceutical company; the belief that we are a different kind of company; that we listen to and deal openly and candidly, that the patient physician and payer communities is an important factor. As we've reported before, another important factor contributing to the strong EYLEA uptake is that we are penetrating both the community of patients who are initiating therapy for wet AMD for the first time, as well as patients switching from existing therapies, as I will describe in a moment. So let me turn to some of the metrics that we can share about the launch. Our market research has been relatively consistent with what we have seen from survey work done outside the company, such as the never-ending surveys reported by the investment community. Specifically, our survey data suggested approximately 40% of EYLEA patients are new to anti-VEGF therapy. This means that about 60% of EYLEA use has come from patients switching from other therapies. Importantly, prior Lucentis users account for the majority of switches at roughly 60%, but prior Avastin users are an important contributor at roughly 40%. The most common reason physicians report for why they switch patients to EYLEA are continued retinal edema despite treatment with Lucentis or Avastin and non-optic [ph] response to existing therapy and a desire to have less frequent injections and/or office visits. In terms of our field force, we've been very pleased by the effectiveness and the reception they have received from the retinal community. As expected at this stage in the launch, we have seen rapid growth in the number of retinal practices ordering EYLEA and our distributors have now shipped EYLEA to more than 70% of the practices known to us to have used Lucentis in the past. While the launch is going well, reimbursement concerns remain an issue for many doctors, particularly while we wait for a permanent J code, which we expect to be assigned in January 2013. Meanwhile, extended terms are available to physicians' offices to allow ample time for them to receive reimbursement for EYLEA. We also expect reimbursement concerns to be alleviated by 2 recent developments. Since April 1, hospital outpatient facilities have been able to use a temporary C code for EYLEA, which automates the reimbursement process for this group of users. In addition, EYLEA has been assigned a Q code that goes into effect this July. A Q code is a temporary but specific code for EYLEA that can be used more broadly than the C code and which results in automated reimbursement. We believe that this will help streamline reimbursement process as we await the assignment of a permanent J code. As we've said before, we have seen reimbursement for more of the regional Medicaid carriers, secondary and supplemental insurers, commercial payers and private payers. We have also seen broad adoption by hospital formularies. As indicated in EYLEA we are increasing our full year 2012 EYLEA net sales forecast from $250 million to $300 million to $500 million to $550 million. So let me spend a few moments on this updated forecast. There 3 types of patients that will influence our continued sales and growth. The first is the new patients who are naïve to therapy, the second is new patients to EYLEA who are switching from existing anti-VEGF therapy and the third are patients who have already been started on EYLEA or continuing patients. For the first group, new naïve patients, we expect continued growth as some practices who have only started trying EYLEA expand into more patients, as well as continued growth in the early adopters. Here, reimbursement issues will remain a tempering factor. For the second group, new switches, we expect continued growth but there is some uncertainty as to how big this patient population is. For both of these new patient groups, given a 70% level of penetration of physicians' offices, we can also now expect a slowdown in the rate of new account growth. Lastly, other patients who are already switched and started on EYLEA. Our market research suggests that the majority of these patients will be treated with 3 initial monthly doses followed by less frequent dosing regimens. On the one hand, continued patient use of EYLEA provides an ongoing source of revenue but the switch to last week of dosing and potential discontinuations may moderate growth. The bottom line is that it's important to remember that EYLEA has been on the market for less than 6 months so we are really still in the early stages of this product launch with many uncertainties. In the first quarter, our surveys suggest that EYLEA is capturing approximately 10% of the anti-VEGF market for wet AMD, including off-label Avastin, which accounts for approximately 60% of that market. We believe there is room for continued growth as many of the practices that have ordered EYLEA have ordered only limited quantities and could increase the use as they gain experience and are reassured that there will be no major reimbursement issues. That said, there are factors, such as the switch by existing EYLEA users to less frequent dosing regimens, as I discussed a moment ago, that could moderate growth. Beyond the wet AMD launch in the United States, later this year, we expect an FDA decision on our supplemental BLA to expand the use of EYLEA to CRVO and by the healthcare plans to launch EYLEA into international market. With that, I would now like to turn the call over to Murray Goldberg, our Chief Financial Officer, who will review our first quarter financial results.

Thank you, Len, and good morning, everyone. As you might imagine, I'm particularly pleased to discuss our financial results for the first quarter of 2012, the first time in Regeneron's history that we reported a profitable quarter on an operational basis. Total revenues in the first quarter were $232 million. This includes $124 million of EYLEA net sales and $4 million of ARCALYST sales. The gross-to-net adjustment for EYLEA sales were similar to last quarter at approximately 7.4%. Sanofi collaboration revenue was $85 million for the first quarter of 2012, which was similar to the first quarter last year. This item includes Sanofi's reimbursement to us for antibody and ZALTRAP R&D expenses that we incurred, offset by approximately $4 million in pre-commercialization expenses for ZALTRAP that Sanofi incurred and that we reimbursed them for. Our reimbursement at Sanofi is accounted for as contra revenue. Looking forward in 2012, this line will include growing pre-commercial expenses for ZALTRAP in preparation for a potential launch in a variety of countries at the end of this year and next year. Our share of these pre-commercialization expenses will potentially be at least partially offset by an approval milestone. Bayer collaboration revenue was about $12.5 million in the first quarter, and represents Bayer's cost sharing of some of the EYLEA development expenses that we incurred. As EYLEA launches globally, this item will also include our share of the profits and losses from commercialization outside the United States, as well as potential approval and sales milestones from Bayer. Cost of goods sold in the first quarter was $12.3 million or about 9.6% of net product sales. This includes an accrual for royalties payable to Genentech under the license and partial settlement agreement that we signed in December relating to ophthalmic sales of EYLEA in the United States. Non-GAAP research and development expense was $128 million for the first quarter this year compared to $122 million in the first quarter last year. The increase in R&D spending was driven primarily by higher R&D headcount and activities, partly related to our antibody collaboration with Sanofi and partly related to our own internal R&D efforts. To provide some perspective on the amount that we spend on internal R&D program expense, which excludes non-cash compensation expense, Sanofi reimbursed $84 million of this expense and Bayer reimbursed another $10 million. So our first quarter net R&D expense was $34 million this year compared to $31 million last year, that almost 75% of our R&D expense in the first quarter was reimbursed by our collaborators. A similar percentage was reimbursed for all of 2011. Our net R&D expense primarily represents spending on ARCALYST, on antibodies not in the Sanofi collaboration, some EYLEA clinical costs and investment in new discovery technologies. We anticipate that this net R&D expense will trend upward through the remainder of 2012 and could increase even faster as antibodies outside the Sanofi collaboration, such as our NGF antibody Regeneron 475, moved into advanced stage clinical trials. Let me also point out that not reflected in the $128 million total R&D number is the considerable spending by Sanofi and Bayer on our collaboration programs that does not flow through our income statement. In 2011, that averaged around $50 million a quarter. Non-GAAP SG&A expenses were $46 million for the first quarter. These SG&A expenses include the fully burdened cost of the EYLEA field force. While we do not expect EYLEA selling expenses to vary significantly quarter-to-quarter this year, in the event that ARCALYST is approved for the prevention of gout flares and patients initiating of uric acid lowering therapy, we anticipate that SG&A expenses could increase by $20 million to $30 million in the second half of the year to support the launch. This would bring full year non-GAAP SG&A to $180 million to $210 million, with the higher end of that guidance reflecting the potential ARCALYST launch in gout. As a reminder, non-GAAP R&D and non-GAAP SG&A expenses exclude non-cash share-based compensation expense. Turning with some delight to the bottom line, we reported non-GAAP net income of $40 million or $0.37 per diluted share for the first quarter of 2012. Non-GAAP net income excludes non-cash share-based compensation expense and non-cash interest expense related to our convertible notes. On a GAAP basis, we also had a profitable quarter with net income of $12 million or $0.11 per diluted share. As you will note, despite turning profitable for the quarter, we have not provided for a tax liability as we have released a portion of our full valuation allowance against our large balance of net operating loss carryforwards and other tax credits. When we transition into showing consistent profits, we will provide more guidance on the accounting treatment of these NOLs and tax credits. On a cash basis, we do not anticipate that we will have a cash tax liability for at least several years. Our non-GAAP fully diluted average shares outstanding in the first quarter were approximately 112.5 million shares and include about 14 million shares attributable to stock options and restricted stock that are accounted for using the treasury methods and about 5 million shares associated with our convertible notes that are accounted for using the if-converted method. With that, I'll turn the call back to Michael.

Thank you, Murray. That concludes our prepared remarks. We'd now like to open the call to Q&A. I would like to give as many people a chance to ask questions as possible. [Operator Instructions] Our team will be available in our office after the call for follow-up questions. Thank you, and Kevin, if you could now please open the call for questions.

[Operator Instructions] Our first question comes from Robyn Karnauskas of Deutsche Bank.

I guess, the key question I have for you is you talked a lot about the 70% penetration into new physician offices. But it really implies that you're really being used in a fraction of patients. Can you give some color on where you think EYLEA is being used amongst the doctor community? Is it in more large practices or the community practice is starting to use EYLEA more? And where do you think the growth will come from?

Bob, do you want to comment on that?

So we're actually seeing a very good distribution of EYLEA use in all types of practices. The large volume practices, the academic practices, as well as a number of practices who don't broadly use Lucentis who have used and have switched from Avastin to EYLEA. So we're very encouraged about the use. As Len pointed out, what we're still waiting to see, and reimbursement is one of those hurdles, physicians are holding back a little bit on how much EYLEA they use, but we do have very good penetration in all segments.

Our next question comes from Jason Kantor with RBC Capital Markets.

Can you give us some sense of how you're thinking now that you've done this AMD launch, how you're thinking about the CRVO launch and how much is that is built into your guidance and how you're thinking about that relative to the rapid uptake in AMD?

Right. So just on the guidance, our guidance, I think, should be viewed, for the most part, as our wet AMD guidance. Bob, do you want to comment about the launch of CRVO, if we were to get it labeled this year?

The CRVO is a much smaller market than the wet AMD market. It's -- about 30,000 patients in the United States have central retinal vein occlusion. The length of treatment of patients with CRVO could be much shorter. Some patients stop treatment at 6 months, although recent studies have shown that there are patients who will continue to benefit from anti-VEGF therapy for over a year. So we see the CRVO opportunity as an opportunity to broaden the label, to have the product more firmly established on formularies. Clearly the product will offer benefit to those patients who need it in CRVO but the real market opportunity will continue to be wet AMD.

Our next question comes from Chris Raymond of Robert Baird. Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division: Just another question on the launch, and maybe launch. Just curious if you have any visibility into the dynamics of patients transitioning from the Q4 week dosing, the loading dose, to the Q8 week dose. I'm sure you know some have -- worried about sort of hitting a wall of sorts. Our checks kind of indicate that maybe that's already started and maybe well underway. I wonder if you could maybe give some color as to what you're seeing.

Yes. We don't have patient level information on dosing. From surveys, what we hear is that the majority of docs use the 3 loading doses and then switch over to some less frequent regimen. Many will use the label, we hope, which is Q8 weeks but some continue to use on their own PRN or treat and extend. Obviously, the more difficult patients that start, who -- for example, some who might not have been able to even get by with monthly dosing of the anti-VEGF as some of these patients may stay on monthly dosing of our drug, which is of course also in our label. I think some of our highest utilization is in more rural areas where people have to travel far for their appointments and so the 2 -- the every 8 week dosing is appealing in those types of settings.

Our next question comes from Jim Birchenough with BMO Capital.

I wanted to drill down on the switch business and I'm just wondering if you have any metrics on what the switch opportunity is, if you think about the type of patients that are being switched, which the feedback we're getting is patients that have persistent fluid on monthly Lucentis and Avastin, and if you think about what's the proportion of the market that could be switched and when you think about what's already been switched. I'm trying to get a sense of what's in front of us in terms of new switch, if you could maybe give us some detail on that.

So maybe I'll ask George to comment on what's known from the data in terms of -- in some of the larger trials where a fraction of people still have fluid at the end of a treatment.

So it seems from the large studies that even with monthly Lucentis use, up to 30% to 40% of the patients do not achieve complete anatomical control and correction. And the numbers actually from the CATT are even far higher for Avastin. So it seems as if there are a substantial proportion of the patients who might be able to benefit from a more potent anti-VEGF agent.

If I could, can I follow up on that?

Yes, go ahead, Jim.

Yes, I'm just trying to understand these buckets, new naïve, new switch, already switched and just get a sense of what's the new naïve patient pool, what's the new switch patient pool and what's the already switched patient pool, just so we can get a sense of what's in front of us in terms of growth opportunity.

Yes, I might tell you that it, yes, in most surveys and most prescription audits, will show that in any given month, about 25% of eyes are new to anti-VEGF therapy. So 75% are continuing on anti-VEGF therapy. It's important that when we think about the switch market, there was a pent-up demand. There were a number of people who were coming in even more frequently than monthly due to edema and those patients were switched to EYLEA very, very quickly. So that's one of the reasons we’re being cautious and not overestimating what the switch potential for the rest of the year is. We're encouraged by the switches we've seen, but there was a group of patients that were waiting for something new. We could tell you that of our switches, 60% of them came from Lucentis and importantly, 40% of them came from Avastin. We anticipate to continue to see switches. We just don't know at what rate.

Our next question comes from Terence Flynn with Goldman Sachs.

Just wondering if you can comment at all on monthly trends, March relative to February and then maybe anything in April relative to March that you're seeing, because as I run through the numbers, it seems like you saw a decent acceleration in March and I was wondering if there's anything that's driving that or if that's accurate.

Yes, we don't -- we're not able to comment on week-to-week, month-to-month beyond the quarter trends. We have to leave up that -- you'll have to figure that one out on -- by yourself. Even if we have data available for you today, the reliability early in the launch of all of this is -- you see fluctuations and I don't want to comment on what we're actually seeing, other than to say that I think we've taken a pretty careful look and try to model this in a number of different ways. We try to take into account the switches, the dosing reductions, we've tried to take into account discontinuations, share of new patients, et cetera, et cetera, et cetera. And you can build very complicated models or we can -- or you try to make more simplified models. But however we do it, we think that our guidance of $500 million to $550 million is the best bet one can make with the data we have on hand.

Our next question comes from Steve Byrne with Bank of America.

I think I'll switch over to one of the development projects. Can you talk about why you think Sanofi would've elected not to codevelop 475 right ahead of the Adcom?

I think that's probably a question that's better directed to Sanofi. I wouldn't presume to speak for them.

And the other 2 antibodies that you have in development that they have also elected not to codevelop, was there -- do you have plans to continue with those or are the data just somewhat underwhelming?

Yes. So none of the discontinuations, as far as I recall, have anything to do with a safety concern or certainly our view of the data. They have a very deep and broad pipeline. They're going to make decisions on what they want to develop and what they don't want to develop, what it fits into what they're up to. Nobody gets all these decisions right. Obviously, I think Regeneron is in a strong enough position with its pipeline, with more than 10 different things ongoing and multiple things going in the clinic each year that we certainly don't have to continue anything that George and his team feel don't make the cut, either in terms of likelihood of technical success, safety concerns or market opportunity.

Our next question comes from Biren Amin of Jefferies. Biren Amin - Jefferies & Company, Inc., Research Division: Is your assessment that doctors are prescribing EYLEA in Medicare patients only with supplemental insurance? And would co-pay assistance by the company potentially help increase penetration in patients without supplemental insurance?

Bob, you can comment on that, but I'll say that direct co-pay insurance to Medicare patients is something that we cannot do. Bob?

So we have actually -- we've seen physicians use the product in all market segments, Medicare without a supplement, Medicare with a supplement, and we have seen significant commercial payer uptake. There are additional delays in reimbursement, often that is paperwork that's not filled out appropriately, there's also an ongoing, which in the Medicare computer database, which delays payments. But we're seeing use across-the-board. In terms of co-pay, as Len pointed out, anyone that is on a government pay program, it is not -- the companies cannot provide direct co-pay assistance. We can refer those patients to foundations, independent foundations who can help them. The company does work nongovernmental patients in states where it's allowed have a co-pay assistance program and we have seen some use of that.

Our next question comes from Mani Mohindru with ThinkEquity.

So I just wanted to drill down a little bit more on practices that were heavy -- that are heavy users of Avastin. What sort of is your ongoing market research and feedback from your field force suggesting in terms of physicians who are traditionally used to using more Avastin? How are they viewing Lucentis -- I'm sorry, EYLEA, now that it's in the market? Are you seeing that they're also using the higher adoption in those practices as well?

Yes. The interesting thing is that the switch rate from our switch patients is not -- it's less, that's 40% of our switches on Avastin, 60% are Lucentis. But it's not drastically less and especially because of the fact that you would imagine that there are some people, but not as many as you might have thought, are on Avastin because of the financial inability to afford Lucentis or afford the co-pay, but there are many who are on it for other reasons, patient and doctor choices. And obviously, we view those as a potential source for us to grow our market share as doctors get familiar with the product and I think we are seeing that. We are definitely seeing people who we -- primarily Avastin users using switches and new patients with our product. But it's still early going and as I said, our overall penetration in the entire market is only in the approximately 10% range so we have lots of opportunity. But the Avastin market is clearly something. Since it's the majority of the market, it's clearly something we are focusing our attention on. Obviously, early on in the launch, as Bob told you on our last call, we focused on calling on the people who are were using branded therapy and were high users of Lucentis and as I've said, we've penetrated about 70% of those that were known to us. But still, now there's an opportunity to continue to push not only those, but obviously the Avastin.

Our next question comes from Yaron Werber with Citigroup.

This is Kumar Raja taking in for Yaron Werber. Earlier in the year, you said that approximately 20,000 vials were shipped to the docs in 5 to 6 weeks at the quarter. Can you tell us what this number was in the last [indiscernible] March 31?

Yes. We're not going to get into the -- I'm sorry, we're not going to get into the weekly or monthly or beginning of the quarter, end of the quarter shipments.

Our next question comes from Phil Nadeau with Cowen and Company.

Len, I was wondering if you could talk a little bit more about the market dynamics, looking at what Lucentis posted, which was more or less flat sales and then the big growth that you guys put out. But it does seem like the market is growing and it's still kind of unclear where are those patients coming from. Were there patients who were off therapy because Avastin and Lucentis weren't working for them or is it more rural patients who didn't want to go on Avastin and Lucentis are now coming to use EYLEA? Could you talk a little bit about what's going on in the market so much?

Sure. Well, if you do the math, about a quarter of our sales came from people who would switch from Avastin as a loss of the sales to Lucentis and it would reflect a growth of the market. Frankly, we really appreciate your surveys because we find them to be very consonant with our surveys so they serve as a nice check. But all of the work is still -- I just want to emphasize, your work, our work is still survey data and what doctors actually do, what they're going to do, what they did, that doesn’t necessarily come through entirely accurately in the surveys, so we caution everybody, just be careful with that and the most reliable information obviously is the sales number for the quarter that we've given you.

Our next question comes from Geoff Meacham of JPMorgan. Michael E. Ulz - JP Morgan Chase & Co, Research Division: This is actually Mike in for Geoff. Just had a quick question on the EYLEA launch. Just wondering if you guys have a sense of what the discontinuation rate was in 1Q?

I don't have that information available, but I'm just guessing -- frankly, I'm guessing that is pretty low because it's -- people usually try it for several months before they make a continuation or discontinuation decision, that's just a guess. Michael E. Ulz - JP Morgan Chase & Co, Research Division: Got it. And then if I can ask a quick follow-up, just curious what percentage of docs have been formerly reimbursed so far in 1Q?

We -- I don't have that information available.

Your next question comes from Jim Birchenough of BMO Capital Markets.

Just 2 quick ones, I guess. You mentioned 10% share of anti-VEGF therapy, what's your share of VEGF naïve patients? And then the second part was just, I was wondering if you can give us an update on timelines for the DME Phase III trials.

Right. So the survey -- remember, this is survey responses. It's about the same. The 10% is about the same of new patients and old -- as well as treatment experienced patients. Is that correct, Bob?

Yes, that's correct.

Okay. So survey -- that's survey data. As far as DME, that's going along very nicely. As I said, our first -- as I've said in the past, our first study is already enrolled, our U.S. study and our ex-U.S. study. I don't have the latest update, but if it's not completely enrolled, it's all but enrolled at this point. Michael E. Ulz - JP Morgan Chase & Co, Research Division: And just as a follow-up. Do you guys have any insight into what the implications of the recent Medcak [ph] meeting might be for reimbursement for the category and whether there might be some prospect for EYLEA or reimbursement in DME in advance of data? I know you can't promote to it, but any insights on the Medcak panel implications?

So I'll turn it over to Bob to give a little bit of back ground on this Medcak meeting and what implications he thinks it could have for reimbursement.

Well, first of all, as you pointed out, even if reimbursement was offered, we would not be able to or would not promote EYLEA for DME until we got FDA approval of the indication. The Medcak sort of left things with uncertainty. They went back and they're going to continue to examine the possibilities. There was no clear path decision. So right now, the individual carriers are making decisions as to what they reimburse or don't reimburse in DME. I have -- from what we've been hearing, this is probably going to be continued discussions and no firm conclusions for quite a while.

Have you seen any carrier decisions where they didn't include EYLEA reimbursement in DME?

At the present time, EYLEA is reimbursed by carriers for AMD only.

Our last question comes from Mani Mohindru with ThinkEquity.

Maybe just switching gears here and talking about ARCALYST heading into the panel on May 8. What are your expectations going into the panel in terms of outcomes and in terms of what happens with canakinumab, completely acknowledging that it's not an apples-to-apples comparison, but just wanted to get your comparison.

Right. So I think it would be inappropriate at best to lay down our expectations of how our panel is going to act, that's really their business. I know that George and the team are working hard to prepare for this. And we think we have a strong package and we think our package is distinguished, both in its indication and the -- as well as the contents of our package compared to canakinumab, but I think that the Advisory Committee is coming up in a little over a week, so we'll get to see pretty soon.

Okay. Well, thank you, operator and thank you, everyone for participating in today's call. As mentioned earlier, myself and some others from the Investor Relations team will be available for follow-up calls if you have any further questions.

Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.