Good morning, ladies and gentlemen, and welcome to the Regeneron Pharmaceuticals conference call to discuss the fourth quarter and yearend 2012 financial results. (Operator Instructions) 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.

Good morning and welcome to Regeneron Pharmaceuticals' fourth quarter and full year 2012 conference call. An archive of this webcast will be available on our website, under events and presentations for 30 days. Joining me on the call today is Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; George Yancopoulos, Founding Scientist, President of Regeneron Labs and Chief Scientific Officer; Murray Goldberg, Chief Financial Officer; and Robert Terifay, Senior Vice President, Commercial. After our prepared remarks, we'll 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 businesses, sales forecasts, financial forecasts, 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, 2012 which we will be filing with the SEC tomorrow and Form 10-Q for the quarter ended September 30, 2012. 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 calls. 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. Len Schleifer.

Thank you, Michael, and good morning everyone. 2012 was a good year for Regeneron, as it marked our transformation from a development stage company to a profitable biotech company, driven by the highly successful launch of EYLEA or aflibercept injection, one of the top product launches in the history of our industry. With fourth quarter EYLEA U.S. net sales of $276 million, and 2012 full year U.S. EYLEA net sales reaching $838 million. We are pleased to report that fourth quarter '12 was our fourth consecutive profitable quarter with non-GAAP net income of $171 million or $1.47 per diluted share, and full year non-GAAP net income of $530 million or $4.66 per diluted share. As a reminder, non-GAAP net income excludes non-cash compensation expense, non-cash interest expense and non-cash income taxes, all of which Murray will discuss in greater detail later. The ability to deliver such strong earnings with over $0.5 billion of non-GAAP profit in the first full year that EYLEA was on the market, while continuing to invest in our robust pipeline highlights the unique business model we have created at Regeneron. The EYLEA launch continues to go very well and we expect strong growth in the U.S. in 2013, as Bob Terifay will describe in more detail. As we announced earlier in the year, we estimate full year 2013 EYLEA U.S. net sales will grow approximately 50% to between $1.2 billion and $1.3 billion. Outside the U.S., our partner Bayer HealthCare has launched EYLEA across multiple geographies, including Japan, Australia and several countries in Europe and South America. In the fourth quarter, the first quarter of sales, Bayer recorded ex-United States EYLEA net sales of approximately $19 million. We will not comment on the details of the ex-U.S. launch on this call, as that should be left…

Thanks, Len. 2012 was also a good year for Regeneron's research and development organization, and I will highlight a few accomplishments and upcoming milestones from our pipeline. For EYLEA, as you just heard from Len, we received approval and an additional indication in 2012, macular edema following central retinal vein occlusion. We also initiated an additional trial in patients with macular edema following branch retinal vein occlusion, and we fully enrolled our U.S. and ex-U.S. Phase 3 DME trials. We look forward to getting the topline results from the one-year primary endpoint for the ex-U.S. DME Phase 3 trial, VIVID-DME by the end of the year. As a reminder, for DME in the EU, a one-year primary efficacy endpoint is required for regulatory approvals. While in the U.S. it has been a two-year efficacy endpoint. Turning to Regeneron727, our PCSK9 antibody targeting lowering of LDL cholesterol, for which we have just had the generic name approved alirocumab. In 2012, we presented and published positive Phase 2 data and subsequently initiated a 22,000 patient Phase 3 program ODYSSEY, which includes an 18,000 patient cardiovascular outcomes trial. While the majority of the Phase 2 results will emerge in 2014, we now expect the first Phase 3 trial in the program ODYSSEY MONO to have data available in the third quarter of 2013. While this is a small trial in a monotherapy setting, it will represent the first Phase 3 trials results for PCSK9 program. In 2012, we also fully enrolled the first of our Phase 3 trial for sarilumab, our IL-6 receptor antibody called the SARIL-RA-MOBILITY trial. We initiated an additional Phase 3 trial SARIL-RA-TARGET, and will shortly initiate additional Phase 3 trial in the SARIL-RA program. Just last month, we announced that we have positive proof-of-concept data for our IL-4 receptor…

Thank you, George. We're very pleased with the rapid acceptance of EYLEA and the successful U.S. launch. In fact, according to our calculations EYLEA represents the third most successful launch in the history of the U.S. biopharmaceutical industry. This success is a reflection of the truly differentiated product profile for EYLEA as well as the strong execution by our commercial team, both in the field as well as inside in supporting roles. In the fourth quarter, we continued to see strong uptick for EYLEA, despite some challenges that we face that included Hurricane Sandy on the East Coast and the Thanksgiving and Christmas holidays. During the fourth quarter, overall penetration of EYLEA into the wet AMD market continue to grow both in terms of newly treated patients as well as those switching from bevacizumab and ranibizumab. Based on the updated qualitative market research surveys that we conducted during the fourth quarter, in terms of unit volume, bevacizumab represented 47% of treated eyes, ranibizumab 30%, and EYLEA captured approximately 22% of the wet AMD market. Of the patients, who were newly treated with EYLEA approximately 65% were new to anti-VEGF therapy and 35% were switches from existing therapy. Importantly, during the fourth quarter we continue to gain new accounts, many of them were previously mainly bevacizumab users. Also during the fourth quarter, we saw the beginning of our penetration into the macular edema following central retinal vein occlusion or CRVO market. Our qualitative market research during the quarter suggest that we gained 10% of the CRVO market at the end of 2012. We hope to continue that momentum in CRVO throughout 2013. As a reminder, our market research is based on position questionnaires, and therefore is qualitative in nature. Patient access remains very important for Regeneron. Our EYLEA 4U program has…

Thank you, Bob, and good morning to everyone. I'm very pleased to discuss our financial results for the fourth quarter and full year 2012. As Len noted at the outset of this call, but certainly warrants repeating, the fourth quarter of 2012 was our fourth consecutive profitable quarter with non-GAAP net income of $171 million or $1.47 per diluted share. Full year non-GAAP net income was $530 million or $4.66 per diluted share. This strong bottomline performance was driven by U.S. EYLEA net sales of $276 million in the fourth quarter and $838 million for the full year. EYLEA inventory held by U.S. distributors at the end of the year was consistent with prior quarters at about one to two weeks of sales. Sanofi collaboration revenue was $105 million for the fourth quarter and $424 for the full year. The Sanofi collaboration revenue line includes reimbursement of our R&D expenses for pre-clinical and clinical research within our antibody collaboration and any ZALTRAP R&D expenses, recognition and/or amortization of upfront and milestone payments, and our share of the profit or loss associated with the ongoing launch of ZALTRAP. In the fourth quarter of 2012, Sanofi reported $23 million of ZALTRAP net sales in the U.S., and the Sanofi collaboration revenue line included a $6 million loss for us, associated with global pre-marketing activities and the U.S. launch of ZALTRAP. For the full year 2012, ZALTRAP U.S. net sales were $32 million, and the Sanofi collaboration revenue line included a $26 million loss for us, associated with global pre-marketing activities and commercialization of ZALTRAP. Our share of loss in 2012 was more than offset by a $50 million milestone payment we received in August 2012 related to ZALTRAP approval in the U.S. As a reminder, we do not anticipate a meaningful positive…

Thanks, Murray, Bob, George. To wrap it up, 2012 was a great year, but we believe the future will be bright with the expansion of EYLEA globally ahead of us, and a robust product pipeline advancing. With that, let me turn the call back to Michael for the question-and-answer portion of the call.

Thank you, Len. That concludes our prepared remarks. We'd now like to open the call to Q&A. As we'd like to give as many people a chance to ask questions as possible, we do request you limit yourself to one question. As a reminder, our team will be available in our offices after the call for follow-up questions. Thank you. Operator, you can now open the call for questions.

(Operator Instructions) Our first question comes from the line of Robyn Karnauskas with Deutsche Bank.

A question around market trends, you mentioned that Avastin now is about 41% of eyes, EYLEA 22%, I think you said Lucentis 37%. In the previous data set, these were up, there was EYLEA 20%, Avastin 50%, and Lucentis 30%. So I'm trying to understand has there been a shift according to your market research of Avastin to Lucentis, and have you seen any impact from compounding pharmacies in the New Year?

I can let Bob comment and Robyn thanks for the question. But before he does, just to really emphasize the point, these are qualitative research and they're not really intended to be able to track precisely market share from survey to survey into overtime. And Bob, you want to elaborate on that?

Yes, I agree, Len. The way we do the survey is we try to pick a representative sample of 200 retinal specialist but we do vary it as we go out overtime. So it's very hard to trend specific numbers. What I could tell you is that it does seem that Avastin sales are slowly declining with the launch of EYLEA. I don't think you can read that Lucentis is growing from Avastin sales. I think it was just the distribution of physicians that we had in the surgery. In terms of the compounding question, we do see physicians are concerned. There are some safe there where the physicians are having to write prescriptions or spreadsheets with all the patients for whom compounded Avastin is being used but there has been no major market shift as of yet.

I just want to make sure. I think you mentioned some of those numbers wrong. So just I want to clarify what our survey results were, it was 47% for bevacizumab, 30% for ranibizumab and 22% for EYLEA.

Our next question comes from the line Adnan Butt with RBC Capital Markets.

A bit more on guidance, if you can. Can you tell us, what share you expect from wet AMD and CRVO and maybe you can shed some light on CRVO. Do you expect similar dynamics to the wet AMD market there?

Bob, do you want to take that?

Let's start with the CRVO. We expect to see a slower uptick in CRVO. We're not seeing as many switches in the CRVO market and part of that maybe related to our labeling, which calls for monthly dosing in CRVO but we do expect to see continued growth in CRVO, just at a slower pace than wet AMD. In terms of giving market share guidance, we're not doing that at this time.

Our next question comes from the line Jason Kantor with Credit Suisse.

One of the things on your guidance, just want to understand your R&D and SG&A expense part of it. You kind of had big step ups in Q4 for both, and I'm wondering if those are sort of new going-forward levels to expect or if there is some aspect of the expense that was increased in Q4? And then if you could also quantify a little bit better on a quarterly or annual basis, what that 20% of the Phase 3 cost of ODYSSEY might look like?

So Murray will handle some of the guidance questions, which I think he may have covered in his talk and he can elaborate on it. As far as the expense is specifically related to the ODYSSEY trials, we're really not in a position to talk about, that's kind of competitive information.

Also, how much that will cost us really depend on what trials are ongoing and how fast they are enrolling patients and what those costs are. We will try to incorporate some estimates into guidance, but we don't really have specific numbers on that that we can share with you at this point. The reasons for that you are expecting increases in 2013, as I highlighted with EYLEA, now that's a two Phase 3 DME programs are fully enrolled. So those expenses have picked up in the BRVO trial is at Phase 3. That is also moving ahead. And then we have these other antibodies that are earlier stages, that are unpartnered, that will be eating up those expenses on our own as well as some investment and technologies. In terms of the fourth quarter run rate, I indicated that the un-reimbursed R&D was $48 million for the fourth quarter. If you annualize that you'd get to roughly $200 million, but we've actually guided to a full year 2013 of $275 million to $325 million. So we're actually expecting an uptick from what we saw in the fourth quarter.

Our next question comes from the line of Terence Flynn with Goldman Sachs.

I was just wondering if you could remind us the DME trials about the design, of the different dosing arms and how we should think about, I guess, the importance of the every other months arms, just given how Roche centers for DME? And then the second question I had was REGN1500, is that the VEGF-antibody that you guys are developing or is it going after a different target?

In terms of the trial design for the DME trial, these are trials versus laser and there is two different dosing arms for EYLEA and every four week dosing arm as well as an every eight week dosing after a loading dose. Was your another question regarding the DME? Again, the European trial has a primary endpoint at one-year and U.S. trial was designed with the two-year primary endpoint.

I guess, just wondering how important, I guess the every eight-week dosing arm is in your opinion given kind of the pricing dynamics in DME with Lucentis?

Again, I think, we designed the trial to have both arms. Obviously, we demonstrated clinically equivalent efficacy in the wet AMD setting, we'll have to wait and see what the DME data show. I think it is little premature to talk about our strategy there; a, before we see our data; and b, before we launch in that indication. And you had a second follow-up question?

Regeneron1500?

No, that's not our PDGF antibody.

Our next question comes from the line of Chris Raymond with Robert Baird.

I know you're probably not going to be interested in going into too much detail on this, but have you had any discussions with Sanofi since the HSR notice. And can you give us any color on what they perhaps might have communicated to you, as what their intensions are going forward?

And my answer is, I'm not really interested in going into too much detail on that. It might be worth just taking this moment to explain that some of the HSR rules are somewhat outgained. But it might be worth just explaining as we understand and in terms of general, that the basic point is that when you want to acquire a stock in a company, if the stock that you own plus the stock that you want to acquire is over a certain threshold and that threshold is $500 million as adjusted, I believe it's $700 million now, you need to file a pre-action notice with the government and get approval. It's an odd thing, because it doesn't matter the fact that the stock wasn't valued $500 million or $700 million, as the case maybe when they've bought it, even they it we'd appreciate it if they wanted to buy anymore shares, even a single share they needed to file this notice and get approval. I hope that clarifies at least in mechanics.

So I wondered if you could also maybe give us an update on the status of the VEGF, PDGF combo as it relates to with the opt-in rights that Sanofi has on that drug. Where does that stand?

I think what we've said, all the antibodies and their collaboration are subject to opt-in we're happy to move forward either with or without Sanofi and depending no matter how that goes?

They have no rights to EYLEA just to clear.

Our next question comes from the line of Jim Birchenough with BMO Capital.

I'm going to push my luck with the two-part question, but just the quick question from your survey. Do you have a sense of what market share you have in the frontline setting for the treatment naïve patients? And then the second part of the two-part is, could you maybe just discuss the competitive landscape as you see it. Your thoughts on the competitive risk from the DARPin, but more broadly, whether you guys are considering any BD activity to try and stay on top of the emerging anti-VEGF therapy that might be competitive?

Let's take it in reversal. In terms of BD activity, I would say in a global sense, we look at all kinds of activities from discovery and development internally to BD to making sure that we're staying at the front of this obviously very important area. As far as how we view the DARPin's out there, George, you want to comment on that?

Obviously, the DARPins are a long way off and there has been very little real data available on them. I guess, a lot of people were disappointed at this weekend the Angiogenesis meeting at Bascom Palmer that the investigators were allowed to really speak any further beyond the easy published data, but they did review to published data to see whether there was really any evidence in the publications to support the possibility that the anti-VEGF DARPin would have any advantages compared to existing agents. I guess the conclusions that were reached at the presentation at the Angiogenesis meeting is that it didn't seem that they had any advantages, for example, the published data supporting the half life when interpreted by the investigators suggested that if anything, the half life was the same or actually shorter then some of the existing agents out there? And of course, we already know that they had some safety issues in their early studies and until yearend, hundreds if not thousands of patients, one can't really assess the actual safety situation. So as I said, obviously it's very setting. There is a lot of question. We're following it very interested fashion. But as Len said, I mean, we not only have following outside developments, but we believe we have a lot of internal efforts that will keep us state-of-the-art and the leader in this field.

And now, there was a question on Jim or Bob, do you have any comment on whether or not our frontline market share, we have any information on that, I don't know if we have granularity on that?

Yes. So we're very encouraged. Our new business is ticking up quite well. We had a 20% market share in the new segment in the fourth quarter.

Overall, unit volumes including Avastin and Lucentis.

Our next question comes from the line of Yaron Werber with Citi.

I'm going to ask you kind of a two questions. One, Lucentis had a label change, literally just very recently, where they are talking about PRN dosing after three months, but the label does sort of call out to be sub-optimal. What are you hearing from (inaudible) is that in any way probably you think will gain a little traction. And then secondly, just I'm not sure if you can help us understand in the guidance, how many injections you're kind of baking in this year versus last year?

So I don't think we can give you the specifics on the number of injections that are in our models. So you'll have to fly that, when you sell for your own. In terms of the recent Genentech label, you're correct, that the label, they did get a PRN dosing, that was specifically called out that it was not as effective compared to monthly dosing. And then it required regular assessment. By comparison of course, not that you can't compare a product profiles per se, but you can compare labels. And our label says that you can with every other month dosing after loading those there is no monitoring requirement. And you had clinically equivalent efficacy. So we're very pleased with where our label is.

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

Your Santen partner in Japan has reported the penetration in wet AMD with EYLEA, is I think somewhere in the 25% range, after just a couple of months. Is that pace in line with your expectations? And maybe moreover is it specific to the demographics there or do you think that there is some broader conclusion about markets where you don't have much meaningful off-label of Avastin using the potential for EYLEA to penetrate?

The only thing I can say that is I'll give you qualitative answer. I know you've kind of asked the semi-quantitative question, but the qualitative answer is that Santen is an extremely good partner for Bayer and Regeneron in Japan. Obviously, they are a top ophthalmology company with a lot of reach to the physicians. So we're excited about how the launch is going and you'll get a little bit more color on that I think from Bayer.

Our next question comes from the line of Geoff Meacham with JPMorgan.

Just on the PCSK9. I know it's competitive. What your competitors recently talked about not needing outcomes data for approval but needing it for a broader physician adoption. I just wanted to get your guys perspective on that when you think about the opportunity in this market?

So yes, you're correct and that competition the as well as we have stated that we do not believe the results of an outcome study are required for approval for a cholesterol lowering indications. But you're also correct that if you and you look back to the statins, if you have and if and when you can get in the label outcomes data, obviously that becomes more compelling to physicians in terms of uptake. But I think that there is a sufficient unmet medical need here in terms of the millions of patients who either can't tolerate statins or can't get the goal at statins and who need more cholesterol lowering, that we're excited that this presents a very strong opportunity for our product.

Our next question comes from Phil Nadeau with Cowen.

My question is actually on sarilumab. Could you give us some sense of when we're going to see the Phase 3 data from that compound and what data you think you need to produce in order for it to get good acceptance in what's your relatively product field?

As we mentioned the MOBILITY trial is fully enrolled. That's our first Phase 3 trial. I think we expect those data probably towards early '14, is the timeline there. As you know, we've announced initiation of additional trials with sarilumab. We think we have a very robust program. And while it's crowded field, we do believe if you look at how the IL-6 class is doing, I mean we do think the class matters. And recently our competitor Roche reported very great sales from Actemra. I think you'll see these classes is gaining acceptance as a very important treatment paradigm for patient too remove arthritis. So we're excited to unveil our complete Phase 3 program, which you should see relatively soon and at that time we can discuss in more detail what the package will look like.

Our next question comes from the Ted Tenthoff with Piper Jaffray.

One quick question and I know we'll see a lot more detail in the K tomorrow, when it comes to recognition of the Bayer overseas sales and the offset, will all of that be included in the collaborative revenue line overall. Is that were all of that's going to tucked in?

Yes, Ted. The sales doesn't show up anywhere in our income statement. Our share of the profits is one of the components of the Bayer collaboration revenue line and we've detailed that as I said in the 10-K and in future quarterly filing. But that's our share of the loss and then in the case of EYLEA our share of the profits, and then from that we subtract our repayment obligation to that particular quarter will be the net profits that we will recognize that will be part of the collaboration revenue line for Bayer and then the detailed and the breakout of that would be in the MD&A.

And Murray, since I have you, can you repeat what you said about R&D guidance for 2013?

We said that the un-reimbursed R&D expense would range between $275 million to $325 million is our current best estimate.

Our final question comes from Biren Amin with Jefferies.

Just wanted to maybe ask you if you could share with us how we should think about the price of EYLEA in the European market?

That's a question that's not easily answered because it's not one market and there is many geographies and different pricing and discounts and what have you. And it's frankly quite complex, but back to Bayer, when they do their call coming up in not too distant future.

So with that let us conclude. Let me once again say, how pleased we were to transform the company to a profitable company and return somewhat value in terms of rewarding our shareholders, but we have a lot of exciting things to look forward to. And we're hard at work trying to continue to execute. So thanks for your time and have a great Valentines Day.

Ladies and gentlemen, that does concludes your conference. You all may disconnect and have a good day.