Michael Aberman - Vice President of Strategy & Investor Relations Leonard S. Schleifer - Co-Founder, Chief Executive Officer, President, Executive Director and Ex Officio Member of Technology Committee George D. Yancopoulos - Chief Scientific Officer, Executive Vice President, Director, Ex Officio Member of Technology Committee and President of Regeneron Research Laboratories Robert J. Terifay - Senior Vice President of Commercial Murray A. Goldberg - Chief Financial Officer, Senior Vice President of Finance & Administration and Assistant Secretary

Jim Birchenough - BMO Capital Markets U.S. Robyn Karnauskas - Deutsche Bank AG, Research Division Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division Adnan S. Butt - RBC Capital Markets, LLC, Research Division Steve Byrne - BofA Merrill Lynch, Research Division Jason Kantor - Crédit Suisse AG, Research Division Terence C. Flynn - Goldman Sachs Group Inc., Research Division Ying Huang - Barclays Capital, Research Division Joseph P. Schwartz - Leerink Swann LLC, Research Division John L. Newman - JMP Securities LLC, Research Division Kumaraguru Raja Biren Amin - Jefferies & Company, Inc., Research Division Edward A. Tenthoff - Piper Jaffray Companies, Research Division Philip Nadeau - Cowen and Company, LLC, Research Division Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division

Good morning, ladies and gentlemen, and welcome to the Regeneron Pharmaceuticals conference call to discuss the first quarter 2013 financial results. My name is Kevin, and I'll 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, operator. Good morning, and welcome to Regeneron Pharmaceuticals' First Quarter 2013 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; Dr. George Yancopoulos, Founding Scientist, President of Regeneron Laboratories and Chief Scientific Officer; Murray Goldberg, Chief Financial Officer; and Robert Terifay, Senior Vice President, Commercial. After our prepared remarks, we will open the call for a question-and-answer period. I'd 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 and expense 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 filing with the United States Securities and Exchange Commission, or SEC, including its Form 10-K for the year ended December 31, 2012, and Form 10-Q for the quarter ended March 31, 2013, which we expect to file with the SEC later today. 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. Len Schleifer.

Thank you, Michael, and good morning, everyone. I appreciate the opportunity to review the results of the first quarter and also provide our outlook for the rest of the year. Before we get started, however, it feels as though we need to pause and catch our breath. This has not only been quite a year for Regeneron, but quite a week as well. Just in the last few days, we became a newly minted member of the S&P 500 Index; a potential competitor to our EYLEA franchise had a significant setback; we acquired full rights to 2 important pipeline assets to support our goal of expanding and protecting our EYLEA franchise in retinal diseases; we reported strong quarterly results; and our stock price and market capitalization both hit all-time highs. Having paused to recognize the recent milestones, it's also appropriate to remember that the fundamental mission of Regeneron is to use innovative science and technology to bring important new medicines to patients in need. Now before we get into some additional details of this quarter, which will be provided by George, Bob and Murray, it is worth taking a broader perspective of Regeneron as that may help you to better understand why we are so excited about our future prospects. We think of Regeneron in terms of 3 critical aspects of our enterprise: one, our growing global EYLEA franchise; two, our unique business model based upon highly leveraged partnerships; and three, our extraordinarily productive research and development capabilities and associated pipeline that serves as the foundation for everything we accomplish at Regeneron. I would like to briefly highlight some important aspects of each of these 3 critical pillars of Regeneron. First, our global EYLEA franchise represents a strong growth opportunity for Regeneron. We are 18 months into our commercialization of…

Thanks, Len, and good morning to everyone. The first quarter of 2013 continued to be a busy time for the research and development teams at Regeneron. Let me begin with EYLEA, which is now approved for 2 indications in the United States, wet AMD and macular edema following CRVO. As you just heard from Len, our partner, Bayer HealthCare, expects to continue filing and receiving x-U.S. approvals for EYLEA in both of these indications in a growing list of countries. A Phase III trial of EYLEA in patients with macular edema following branch retinal vein occlusion, or BRVO, is fully enrolled, as are 2 Phase III trials in DME. We and Bayer HealthCare expect top line 1-year results from the x-U.S. DME trial before year-end. As a reminder, outside the United States, DME approvals have been based on 1-year data, in contrast to the United States, which has required 2-year efficacy data. Our third Phase III trial in DME was initiated early this year in Russia and Asia and is enrolling patients. We and Bayer HealthCare expect to report top line data from our Phase III study in EYLEA in myopic choroidal neovascularization, or mCNV, in the next few months, which could form the basis of regulatory filings outside of the United States. Turning to our Phase III antibody pipeline and starting with, alirocumab, our PCSK9 antibody, which is in clinical development for lowering LDL cholesterol. Our broad Phase III ODYSSEY program is ongoing. And as previously announced, we expect top line results from the first Phase III trial, ODYSSEY MONO, in the third quarter 2013. As a reminder, the ODYSSEY MONO trial is comparing alirocumab monotherapy to ezetimibe in patients with hypercholesterolemia. Data for the majority of the Phase III trials for alirocumab, excluding the ODYSSEY outcomes trial, are…

Thank you, George, and good morning, everyone. The EYLEA franchise is not only doing very well but is also well positioned for continued growth, both in the United States and outside the United States. In the first quarter, we continued to witness strength in the uptake of EYLEA in the U.S. wet AMD market, both in terms of patients new to anti-VEGF therapy, as well as those switching from bevacizumab or ranibizumab. As a reminder, we received a permanent J code effective January 1 of this year. Our qualitative market research, which comes from position-based questionnaires and was conducted in the first quarter, indicates that in terms of eyes treated, EYLEA now represents 24% of the U.S. wet AMD market, ranibizumab represents 30%, and bevacizumab represents 46% of the market. This suggests that EYLEA hold a 44% share of the on-label wet AMD market. In the first quarter, 59% of EYLEA-treated eyes were eyes continuing on EYLEA from previous months, 25% were switches from bevacizumab and ranibizumab, and 16% were new to anti-VEGF treatment. Drilling down further, these market research data show that EYLEA, in the first quarter in 2013, garnered 24% of wet AMD eyes which were new to therapy, and 58% of eyes which were switched from previous therapies. Of these switches, 55% were from bevacizumab, and 45% were from ranibizumab. In our survey, physicians report positive clinical responses to EYLEA that meet or exceed their expectations in 70% of treated eyes. In a majority of the remaining patients, it's too early to assess response to therapy. Physicians now estimate that wet AMD, on average, patients -- wet AMD patients, on average, receive 7.5 doses of EYLEA in their first year of therapy, including 3 initial monthly doses, and 5.4 doses in the second year of therapy. In…

Thank you, Bob, and good morning. I'm very pleased to discuss our financial results for the first quarter of 2013. As you heard from Len earlier on the call, the first quarter of 2013 was another strong quarter, with total revenue of $440 million and non-GAAP net income of $201 million or $1.78 per diluted share compared to $1.47 per share in the fourth quarter last year. The increase in our earnings was primarily driven by strong EYLEA sales performance in the United States. We are also pleased that sales of EYLEA outside the U.S. contributed to our bottom line for the first time. Outside the U.S., we are entitled to 50% of profits on EYLEA sales, except for Japan, where we receive a royalty on sales. As you heard, we reported $314 million in net U.S. EYLEA sales, and Bayer HealthCare reported net x-U.S. EYLEA sales of $65 million for the quarter. For the full year, we now forecast net U.S. sales of $1.25 billion to $1.325 billion. EYLEA inventory levels in the U.S. continue to equal about 1 to 2 weeks of sales. ARCALYST, or rilonacept, net sales in the first quarter were $5 million, similar to sales in prior quarters. Turning to collaboration revenue. Bayer HealthCare collaboration revenue was $15 million for the first quarter. Included in this line are a net profit of $6 million from x-U.S. EYLEA sales after repaying $13 million of development expenses that Bayer HealthCare has previously funded, amortization of upfront and milestone payments and cost sharing of current EYLEA development expenses. All of these will be detailed in our 10-Q that we expect to file later today. Sanofi collaboration revenue was $99 million for the first quarter. This includes reimbursement of our R&D expenses for preclinical and clinical research within our…

Thank you, Murray, Bob, George and the rest of the team. We are proud of what we have accomplished so far this year but also recognize that we must keep innovating. With that goal in mind, we will continue to invest in our R&D and our technologies and strive to deliver on our pipeline. We look forward to upcoming commercial, regulatory and clinical milestones in the remainder of this year. Thank you all for joining us this morning. And with that, let me turn the call back to Michael.

Thank you, Len. That concludes our prepared remarks. We'd now like to open the call to Q&A. [Operator Instructions] Our team will be available in our office after the call for follow-up questions. Thank you. And operator, if you could please open the call for questions.

[Operator Instructions] Our first question comes from Jim Birchenough with BMO Capital.

Question on the opportunity around potential penetration of the Avastin base. Is there any way you can quantify the number of physicians you'd characterize as Avastin prescribers, what the pace of conversion has been? Maybe describe what you're seeing in terms of any disruption on the increased scrutiny? And if you have any insights into how this legislation or draft legislation might proceed, that would be helpful.

Let me address -- this is Len. Let me address the legislation part first, and then I'll turn the market dynamic question over to Bob. In terms of legislation, all we know, thus far, is that there's been a lot of interest in this area for the obvious reason that many Americans were killed and thousands were put at risk from the problems at compounding pharmacies. And this catastrophe has certainly caught the attention of the FDA and people in Congress. We know recently that the Senate Health Committee seemed to draft a bipartisan bill that will, I'm sure, be marked up and changed, et cetera. But as it stands now, it would seek to regulate compounding pharmacies, including those who would repackage sterile products such as Avastin for distribution around the country to be used in injections. And as I said during my prepared remarks, we feel strongly that choice is fine, multiple choices are good for patients and doctors, but there should only be one standard -- one quality standard for a drug that's going to be injected in a high-risk area like the back of the eye. And that standard should be regulated under GMP, we believe, by the FDA. Bob, any comment? Are you seeing anything on the market dynamics?

Yes. So in terms of the compounding legislation and its impact on physician prescribing, so far, it has had very little impact on physicians moving away from Avastin. That said, we have seen the market shifting away from Avastin towards the branded products since the launch of EYLEA. And on average, we see about 10 to 12 accounts -- new accounts that come to EYLEA each week that are generally smaller accounts that were using Avastin, were not using Lucentis and now have -- our sales representatives have been working with them, helping them figure out how to deal with the distribution and the carrying costs, et cetera. And so we are seeing an increase in our penetration of the Avastin market, but it is not related to the compounding.

Our next question comes from Robyn Karnauskas with Deutsche Bank.

I guess, first, could you comment a little bit about your announcement today about working on a deal with Sanofi on PDGF and ANG2? And I was just trying to think about, what are your thoughts on potential uses? Are you starting to combine it, create the combined formulation with EYLEA? And then for the EU market, would you have to work out an agreement with Bayer, and how would that occur? What would be the timeline for that occurring?

Thanks for the question, Robyn. Let me just deal with some of the deal-related questions. Both of these antibodies were discoveries that came out of our labs, but they were partnered with, part of our Sanofi relationship. I think Sanofi and Regeneron got together and thought that it made sense, given our EYLEA franchise and the potential of combining these drugs with EYLEA, that we would be able to regain sole rights to those programs for use in ophthalmology. Under our deal that we did with Sanofi, we have the right to partner with anybody, and that would include our partner Bayer, and we don't have anything further to say about that at this time. Now as far as the technical reasons why you want to study these molecules and how you study them, George, do you want to comment on that?

Well, there's a lot of very interesting biology behind the notion of combining either of these pathways with anti-VEGF pathways, particularly in the eye and for uses in the eye. And we're very excited about having the ability now to have not only potential best-in-class anti-VEGF therapy but also potential best-in-class anti-PDGF and anti-ANG2 therapies, which we can explore both on their own and also in combination and, if need be, in a rather favorable situation, of being able to combine them in a single formulation. So we're excited about the opportunity. It still is, obviously, early days, but there's a lot of interesting biology here.

Our next question comes from Chris Raymond with Robert Baird. Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division: Just kind of curious if you could expand on your comments on the sequester-related sort of headwinds. It seems this dynamic might favor Avastin over the branded therapies. But given the less frequent dosing interval for EYLEA, that should be an advantage for you guys. So maybe some crosswinds, perhaps, there? I wonder if you could maybe describe a little bit more about -- is it really all just something that favors Avastin? Or is there maybe an advantage with respect to EYLEA and Lucentis that you're seeing?

Yes. I mean, it's a little bit early to really predict this. I think it's difficult. Bob might want to comment about what some individual practices have done, but big trends, we can't speak to yet. Bob?

Many of the practices feel that they're working on a fairly thin margin in terms of their office staff that has to handle the products, the receivables, et cetera. And so that's really where the concern is, that they're just not making sufficient enough money to cover the costs of using the branded agents. So I think, largely, right now, the physicians are seeing the sequestration as something that will lead to them thinking more about using Avastin.

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

Congrats on the forward-thinking Sanofi deal. On the combination of EYLEA and PDGF, what leads the company to believe that those 2 can be combined together? Is the ANG2 a combination as well? And then for long-acting antibodies, is there anything being thought about for EYLEA to extend its interval? Or is that for future products?

So I don't think we have a comment about EYLEA specifically, but George can comment, and I didn't know whether the question was whether -- what the rationale for combination overall or combination specifically into a single syringe. But maybe he could address the rationale for both. George?

Well, as we all know, there's multiple ways that blood vessels can be triggered, can be activated, can be made to leak, can be made to grow. And certainly, there's a lot of preclinical science that implicates the PDGF pathway and the ANG2 pathways in these processes. So I think it's a very attractive position to have these combination capabilities. And certainly, because the proteins that we were talking about combining can be combined, and we have actually done it in preliminary formulation studies, the opportunity is there to combine them into a single formulation to be delivered simultaneously if the science supports that possibility.

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

Does Bayer need your DME data in the U.S. for them to file in Europe? It would seem that we're coming close to the 1 year anniversary for their trial being fully enrolled, whereas your second year anniversary might be early 2014. Do they need to wait for your data to file?

Historically, the EMA has approved Lucentis based on the results of one 1-year study. So it is possible that, based upon the first year of the Bayer study, they may be able to file. But they have not announced anything about their filing plans.

And we'll have that data later this year. And you're correct in terms of the timing, Steve.

Our next question comes from Jason Kantor with Crédit Suisse. Jason Kantor - Crédit Suisse AG, Research Division: I wanted to skip over to dupilumab and just ask how you plan to start Phase IIb trials this year. Can you give us some idea of what those trials might look like, and as well, how you'd think about the overall IL-4 [ph] program? What would the kind of market be in asthma or atopic dermatitis? And are there other indications that are related that you might also go after now that you have proof of concept with the patients?

Right. So Jason, I wouldn't have a comment on trials that haven't been announced yet. It's just -- you just have to wait. I'm sorry. As to other indications, I would say that it is exciting to us that when you take 2 diseases that superficially are not related, atopic dermatitis and, let's say, allergic asthma, and you get a proof of concept with a single drug candidate in both of those, you recognize, of course, that these are related diseases because they're both allergic-type diseases affecting different tissues, one affecting the skin and one affecting the lungs. And obviously, if one drug can have -- seem to have an important effect in both of those, then we will be looking at a lot of other tissues with the same sorts of processes maybe ongoing. So I think your insight there is good. I would just say that this is an area that we are particularly excited about. We think the prospect of fundamentally influencing these pathways is important. George, do you want to add anything about the trends of these diseases or...?

Yes. I think -- just to amplify on what Len said, I think we have made a really fundamental potential finding here, which is, as you know -- and it's all over the news, there was just a release from the Center for Disease Control yesterday. Every day, you pick up a newspaper, you hear about the increasing rates of various forms of allergic disease in the world, ranging from asthma to eczema and other type of skin allergies, to food allergies, to an assortment of other diseases that, on some level, suggest that there's some sort of allergic reaction going on. And we've long thought that the interleukin-4, interleukin-13 pathways might be critical drivers of this essentially worldwide shift towards what is known as a TH2-type phenotype. And of course, until you actually produce human data, and as Len said importantly, in not just 1 but 2 of these diseases, do you actually think that maybe it is true that this is a fundamental set of pathways that are driving this epidemic towards too much TH2 disease. And since it works in these 2 settings, we're excited about the fact that this could much broadly address other types of allergic diseases as well. So we think there's a very important potential opportunity.

Okay. And we have to do our presentation at the American Thoracic Society. When is that, Michael?

That's May 21.

Okay, great. Thanks for the question, Jason.

The next question comes from Terence Flynn with Goldman Sachs.

Just wondering, now that you have the J code in hand, if you guys are going to plan to tighten your payment terms at all to the physicians given your account receivables balance. And then the second question I had was just any update on the EYLEA litigation with Genentech, both U.S. and x-U.S.?

Yes, good questions. We probably don't want to anticipate either of those questions with answers. So we'll give you a free pass to ask a different question, Terence, if you like.

Okay, understand. I guess in terms of just the gating steps to getting the PDGF antibody into the clinic, can you guys just walk us through what else is left here and when, kind of a timeframe, to expect that might be?

Yes, we're at the end of the preclinical phase in preparing for filing of the IND sometime later this year.

Our next question comes from Ying Huang with Barclays.

I have a couple here. First of all, can you tell us how many patients do you have to accumulate in the safety database before you can file for the PCSK9 antibody with the FDA? And then secondly, can you help us understand the market opportunity for both atopic dermatitis and also asthma indications here for the IL-4 program?

Right. So it's -- in terms of the number of patients, if you look at our filings, we believe that -- you can find them on ClinicalTrials.gov -- that the aggregate of our trials will provide an adequate database for us to file. I'm not going to give you a specific number that we've discussed just for competitive reasons, but our trial is designed to meet the number and meet the requirements for demonstrating safety and efficacy. In terms of the market size for asthma, resistant asthma, allergic asthma, atopic dermatitis, at this point, we would just say they are very large market opportunities. Sorry about not being able to quantify that at this point.

The next question comes from Joseph Schwartz with Leerink.

I was wondering, how do you see EYLEA adoption patterns outside the United States comparing to what you've been able to achieve in the U.S.? Bayer obviously achieved pretty hefty market share in Japan and Australia very rapidly. Do you expect that pattern to play out in Europe and elsewhere?

We certainly hope. It's hard to predict how this is going to go. The launch is off to a great start. The IMS market share data in the countries, primarily Australia and Japan that have gotten going first, look great. There's lots of market awareness for the product. I think people are excited for the product, and we're looking forward to a successful launch. Avastin is less of a factor outside of the United States, so we're really in a head-to-head -- rather than a three-way fight, we're in a head-to-head battle with Lucentis, and so far, very good.

Our next question comes from John Newman with JMP Securities.

All of my questions have been answered.

Okay, great.

Our next question comes from Yaron Werber with Citi.

This is Kumar Raja in for Yaron Werber. Can please give us a sense of how long it will take for pricing negotiations in Europe? And do you have a sense of what -- how long it took for Lucentis?

Yes. So these are the questions that are better posed to Bayer. They should be the spokesman for that level of detail, and I'm sure they'll be happy to address them for you.

Our next question comes from Biren Amin with Jefferies. Biren Amin - Jefferies & Company, Inc., Research Division: I guess, I think you provided some pretty good color on dosing for year 1, year 2 for EYLEA. And I just want to -- thinking forward, how should we think about year 3 EYLEA dosing?

It's hard to predict. There's lots of data out there that people have tried -- try all sorts of different dosing paradigms. We kind of hope that people stick to the label. There are some people who are concerned about overtreatment. We're obviously concerned about systematic undertreatment. But I don't know we have any information yet. It's too early in our launch to know how people are going to use EYLEA. Even in the second year, we barely have people, small numbers, so it's a little bit early for that. Sorry.

The next question comes from Ted Tenthoff with Piper Jaffray.

Actually, my questions are largely answered, but if I could ask Bob to just repeat what the 1-year injection rate was. And then a kind of housekeeping one for Murray. With respect to the weighted number of shares outstanding, it looked like it decreased a little bit from year-end. Is that just an accounting thing, or how should we be thinking about that?

Yes, so Ted, we said 7.5 doses in the first year, including the 3 loads, and then 5.4 doses in the second.

That's based on physician estimates, obviously, not actual chart reviews. The technical question about shares outstanding, I think it's you.

Ted, really, it is just the accounting calculations on what gets included in dilutive, anti-dilutive in the calculation. Nothing fundamentally changed.

What is the fully diluted share count right now?

The non-GAAP was 114 million shares. That's what our calculation's done on, 114 million shares.

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

It's one for George on dupilumab. George, we've seen other IL-4s that have produced kind of unimpressive data in asthma. What differentiates dupilumab? What are you seeing either preclinically in binding affinity or half-life? Or what have you seen from these initial clinical studies that will -- that gives you confidence that this will work on top of standard of care when some of the other drugs didn't?

Thanks for that question, and we'll let George handle that.

All right, Phil. Well, we do think not all inhibitors are made the same, nor do they act the same. And as you know, all these features that you talked about, which are affinity, particularly hitting one receptor and a component of the receptor system that will block essentially with very high affinity, both cytokines, it hits both type 1 and type 2 receptors. There's a lot of differentiation on the biochemistry, which we can't get into the details here. But it's just -- I think it's a testament to the fact that if you create a good antibody with all the right properties, not all antibodies are the same, not all the technologies are the same, you may end up achieving better results in the clinic.

Our next question comes from Geoff Meacham with JPMorgan. Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division: A couple on U.S. EYLEA. For the J code, any impact in the first quarter in terms of what you're seeing from the field, the speed to get reimbursement, how that compares with last year? And then on Avastin use, you guys have talked a lot about the general trend since the launch. But curious if your market research indicated an acceleration of lower Avastin share since the last call, since some of the adverse events were first disclosed.

We'll let Bob take that.

So Geoff, as you know, we received a temporary Q code in the middle of last year, which really brought us to very fast turnaround times from the Medicare providers. So we haven't seen a dramatic change in turnaround since the J code, since we were already being pretty -- processed as a specified agent in the Medicare system since July. With regards to the Avastin, we have seen a gradual decline since launch. In the launch timeframe, we had -- Avastin had about a 60% to 65% share of eyes. And that has now come down to 46%, so it continues to go down gradually.

Okay, great. Well, let us stop by saying we appreciate your time and interest. We do appreciate this week the work of the selection committee of the S&P 500 people. We're proud to be in that group. And we look forward to continuing to update you through the rest of the year. Thank you, operator.

You're welcome. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.