Regeneron Pharmaceuticals, Inc. (REGN) Q2 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Regeneron Pharmaceuticals Q2 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Dr. Michael Aberman, Vice President Strategy and Investor Relations. Sir, you may begin.

Thank you, operator. Good morning, and welcome to Regeneron Pharmaceuticals Second 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; Murray Goldberg, Chief Financial Officer; and Robert Terifay, Senior Vice President Commercial. George Yancopoulos, our Founding Scientist, President of Regeneron Laboratories and Chief Scientific Officer unfortunately will not be able to join us on the call today. 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 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 June 30, 2013, which was filed with the SEC earlier 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 this call concludes, myself and Manisha from 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.

Thanks, Michael. Good morning to everyone, and thanks to so many of you who are joining our second quarter 2013 earnings call. Before I turn the call over to Bob Terifay to discuss our commercial operations and Murray to discuss our financial results, let me provide some big picture thoughts, as well as highlight the exciting clinical news and regulatory update that we reported this morning regarding EYLEA in diabetic macular edema or DME. We are very pleased with the global performance of EYLEA, including our sales in the U.S. and our partner, Bayer Healthcare Sales, outside the U.S. U.S. sales were $330 million this quarter, which represents a 70% year-over-year growth. The x U.S. launch continues to do well with net sales of $96 million. Our profit share on these x U.S. sales was $34 million and contributed $19 million to our bottom line after accounting for our repayment obligation to Bayer HealthCare for development expenses. Outside the U.S., many of our launches are under way, and we look forward to the continued roll out across the EU and other countries around the world. Beyond the x U.S. launch, new indications represent the next leg of growth for EYLEA. To that end, we launched into the Central Retinal Vein Occlusion, also known as CRVO market, in the United States in September of last year, and we recently announced that the European Committee for Medicinal Products for Human Use or the CHMP issued a positive recommendation for EYLEA for macular edema following CRVO. We also reported positive Phase III data for EYLEA in the MYRROR trial in myopic choroidal neovascularization or mCNV, and our partner, Bayer HealthCare, expects to file for regulatory approval in Asia later this year. We also expect to report top line data from the VIBRANT trial of EYLEA in branch retinal vein occlusion, or BRVO, later this year. The most recent news, however, on the indication front for EYLEA, as I'm sure you're all aware, is that this morning, we and Bayer HealthCare announced positive Phase III data from the VISTA and VIVID Phase III trials in diabetic macular edema. We plan to file for regulatory approval in both the U.S. and EU by the end of the year, which is approximately 1 year ahead of schedule in the United States. As we detailed in our press release this morning, both the 2 milligram every 4-week dose and the 2-milligram every 8-week arms of the VISTA and VIVID trials achieved the primary endpoint of improved visual acuity of 1 year compared to laser photocoagulation therapy. Importantly, both EYLEA dosed monthly and dosed every other month following 5 monthly injections demonstrated similar improvements in visual acuity. In the VIVID-DME trial and x .S. trial after 1 year, patients receiving EYLEA 2 milligrams monthly had a mean change from baseline in best corrected visual acuity of 10.5 letters with a P less than 0.0001 and patients receiving EYLEA 2 milligrams every other month after 5 initial monthly injections had a mean change from baseline of best corrected visual acuity of 10.7 letters to be also less than 0.0001, and this was compared to patients receiving photocoagulation, with a mean change from baseline and best corrected visual acuity of only 1.2 letters. In the VISTA-DME trial, a primarily North American trial, after 1 year, patients receiving EYLEA 2 milligrams monthly had a mean change from baseline best corrected visual acuity of 12.5 letters, P less than 0.0001, and patients receiving EYLEA 2 milligrams every other month after 5 initial monthly injections had a mean change from baseline in best corrected visual acuity of 10.7 letters, P also less than 0.0001 compared to patients receiving laser photocoagulation who had a mean change from baseline in best corrected visual acuity of just 0.2 letters. In these trials, EYLEA was generally well-tolerated with a similar overall incidence of adverse events, ocular serious adverse events and non-ocular serious adverse events across the treatment groups and the laser control group. Arterial thromboembolic events, as defined by the Anti-Platelet Trialists' Collaboration, which included nonfatal stroke, nonfatal myocardial infarctions and vascular deaths, also occurred at similar rates across the treatment groups and the laser control group. Adverse events were typical of those seen in other studies in patients with diabetes receiving intravitreal anti-VEGF therapy. The most frequent ocular treatment emergent adverse events observed in the VIVID and VISTA trials included conjunctival hemorrhage, eye pain and vitreous floaters. The most frequent non-ocular treatment emergent adverse events included hypertension and nasopharyngitis, which occurred with similar frequency in the treatment groups and the laser control group. As in wet AMD, we believe that the every-other-month dosing could provide an important potential benefit to patients and physicians. There were a number of secondary endpoints and analyses that were conducted, which strongly support the primary results, and we look forward to presenting a more complete data set at upcoming medical conferences. Now turning to the regulatory aspect. As we indicated in this morning's press release, we now plan to submit applications for regulatory approval both in the U.S. and outside the U.S. later this year. In the U.S., this represents an approximately 1 year acceleration from our previously anticipated submission date. The decision to file for regulatory approval in the U.S. based on a 1-year primary endpoint rather than the typical 2-year primary endpoint was made following extensive discussions with the FDA. DME represents a significant market opportunity, one that many believe could be as large as, if not larger than, the market opportunity in wet AMD, and Bob Terifay will provide additional details on the DME market opportunity. Before turning over to Murray and Bob, I would like to discuss our late-stage pipeline, which we believe will drive long-term growth. On that front, our 2 Phase III programs, alirocumab for hypercholesterolemia and sarilumab for rheumatoid arthritis, have continued to make good progress. ODYSSEY is a broad Phase III program for alirocumab. It includes over 10 clinical studies that are currently ongoing. Today, we announced another Phase III study for alirocumab called ODYSSEY CHOICE, and we intend to initiate for the end of the year. This critical trial will study alirocumab dosed every 4 weeks, all other ODYSSEY trials studied every 2 weeks dosing, and we remain confident that every 2-week dosing will provide the majority of patients with the preferred convenient patient-friendly option. We want, however, to be able to provide patients and physicians a once-monthly dosing regimen if desired. Later this year, we expect to report top line data from the Phase III ODYSSEY MONO trial. It's important to remember, while this will be the first Phase III data to be reported from this class of antibodies with approximately 100 patients, the MONO trial is only a small piece of the ODYSSEY clinical program with the majority of our trials leading out in 2014. Our Phase III sarilumab program is ongoing, and we expect to report initial data earlier next year from the Phase III MOBILITY trial. We also started 2 new Phase III rheumatoid arthritis trials with sarilumab this quarter, the COMPARE and ASCERTAIN trials, and we'll soon initiate our first trial with sarilumab outside of rheumatoid arthritis, the Phase II statin trial of sarilumab in noninfectious uveitis. Turning to our earlier stage pipeline, this quarter saw the presentation and publication of data from our IL-4R inhibitor, dupilumab, in the New England Journal of Medicine. It is not common for a Phase II trial to be published in the New England Journal of Medicine, and we believe this highlights the excitement generated from this potentially novel approach to treat allergic-type disease. We believe that blocking the interleukin 4 and interleukin 13 pathways with dupilumab could be an effective mechanism to treat multiple allergic conditions, and that we may have the ability to impact one of the fundamental drivers that could have applicability in the growing epidemic of allergic diseases. Of course, we need to test this in larger studies, and to that end, we and Sanofi now have 2 Phase IIb trials of dupilumab that are ongoing, one in allergic asthma and the other in atopic dermatitis, and look forward to results in these trials in the future. Turning to our early-stage programs. This quarter, we moved 2 new antibodies both against undisclosed targets into the clinic, and discontinued the development of 1 early-stage antibody. In addition to our 3 marketed products: ARCALYST, EYLEA and ZALTRAP, we now have a total of 12 antibodies in clinical development. We take pride in our science-first approach and the fact that all 12 of our pipeline antibodies have originated from in-house Regeneron research. With that, let me turn the call now over to Bob Terifay, our Senior Vice President of Commercial, who will elaborate on our commercial activities; and finally, Murray Goldberg, our Chief Financial Officer, who will discuss our financial performance during the first quarter of 2013. Bob?

Thank you, Len, and good morning, everyone. EYLEA sales continue to show strong physician-demand growth both in the United States and outside the United States. In the United States, net sales to distributors in the second quarter were $330 million. Inventory held by distributors remains at the 1- to 2-week range, although there was a modest reduction in inventory in Q2 relative to the first quarter. We continue to see strong physician usage of EYLEA, and we have raised our full year net sales forecast to between $1.3 billion and $1.35 billion. Our qualitative market research, which comes from physician-based questionnaires that was conducted in the second quarter, indicates that in terms of eyes treated, EYLEA now represents almost half of the U.S. wet AMD market for approved products, with approved products accounting for more than half of the overall marketplace. As discussed in our first quarter call, due to the recent sequester-related decrease in Medicare reimbursement for Medicare Part B or buy-and-bill drugs such as anti-VEGF agents, our research suggests financial concerns amongst some retinal specialists, which favors the use of off-label bevacizumab. Once again, based on qualitative market research, in the second quarter, approximately 60% of the EYLEA-treated eyes were continuing on EYLEA from previous months. 18% were switches from bevacizumab and ranibizumab, and 21% were new to anti-VEGF treatment highlighting that the pool of patients available for switching is reaching steady-state levels. New patients represented a larger share than switch patients in EYLEA market share for the first time. In our survey, physicians report positive clinical responses to EYLEA that meet or exceed their expectations in 72% of treated eyes. In the majority of the remaining patients, it's too early to assess response to therapy. From the survey, physicians now estimate that wet AMD patients on average achieve a dosing interval of 7.2 weeks for EYLEA, as compared to 5.4 and 5.9 weeks with ranibizumab and bevacizumab, respectively. In the macular edema following CRVO indication, for which EYLEA has received regulatory approval in the United States, our qualitative market research indicates that during the second quarter, EYLEA achieved a 40% share of the approved anti-VEGF products, with approved products accounting for 45% of the overall marketplace. In our survey, physicians reported positive clinical responses to EYLEA in CRVO that meet or exceed their expectations in 69% of treated eyes. Again, in the majority of the remaining patients, it's too early to assess response to therapy. Turning now to our x U.S. EYLEA business, where we split profits 50-50 with Bayer HealthCare, second quarter EYLEA net sales were $96 million. While at the end of the second quarter, EYLEA was available in 29 countries, second quarter sales were primarily from Japan, Australia and Germany. Bayer reports that current market share is 56% in Japan, 48% in Australia and 22% and growing in Germany. Over the course of 2013, we expect Bayer HealthCare to embark on launches in additional countries as regulatory and pricing approvals for EYLEA wet AMD are achieved. More recently, we're pleased with the positive recommendation and reimbursement decision from the U.K.'s NICE, along with a positive statement from The Royal College of Ophthalmologists, in which they said, "The advantage of EYLEA over existing treatment is its longer duration of action in the eyes, which can lead to fewer intraocular injections." In addition, an application for marketing authorization for EYLEA for the treatment of macular edema following CRVO received a positive opinion for approval by the European CHMP. Additional applications in macular edema following CRVO are pending in Japan and other regions. Furthermore, Bayer HealthCare intends to file x U.S. marketing applications for EYLEA in Myopic CMV before year-end. Let's spend a moment to discuss the DME market opportunity if EYLEA is approved for marketing in that indication. In the United States alone, there are 570,000 patients diagnosed with clinically significant diabetic macular edema. Currently, 40% of these patients are treated with an anti-VEGF agent, which continues to grow each quarter since the launch of ranibizumab for that indication in 2012. Moreover, we expect -- we estimate that almost half of the DME patients may have bilateral disease, therefore, the market opportunity for EYLEA DME could be at least as large as the opportunity in wet AMD. Finally, turning to ZALTRAP or ziv-aflibercept, Sanofi reported sales of $19 million for the quarter, which is up 32% from the first quarter of 2013. This growth is driven primarily by growing sales in the first quarter of full launch in Germany and the United Kingdom. We look forward to continued s U.S. rollouts for launch over the course of 2013. With that, let me turn the call over to our Chief Financial Officer, Murray Goldberg.

Thank you, Bob, and good morning. Len and Bob have already provided the highlights of EYLEA sales in the U.S. and the rest of the world. So I'll go directly to the second quarter P&L. Total revenues in the second quarter were $458 million, including U.S. EYLEA net sales of $330 million and ARCALYST net sales of $4 million. Non-GAAP net income was $198 million or $1.73 per diluted share compared to $1.78 per diluted share in the first quarter of this year. The decrease is primarily due to 2 $10 million license payments we made to Sanofi in May that I'll describe later, and royalty expense related to the Genentech license settlement that we entered into also in May. Bayer HealthCare collaboration revenue was $31 million. This includes $19 million from our share of x U.S. profits, including royalties in the case of Japan on total x U.S. EYLEA sales of $96 million. It is also net of the $15 million payment to Bayer HealthCare in the quarter for reimbursement of development expenses that they previously funded. Bayer HealthCare collaboration revenue also includes cost sharing of ongoing EYLEA development expenses, reimbursement of other Regeneron EYLEA expenses and amortization of upfront and milestone payments. Total Sanofi collaboration revenue was $86 million for the quarter. This includes reimbursement of our R&D expenses for preclinical and clinical development within our antibody collaboration and amortization of payments previously received from Sanofi, less our share of the losses associated with ZALTRAP. ZALTRAP net sales in the second quarter were $19 million compared to $14 million in the first quarter of 2013. ZALTRAP is now approved in 30 countries around the world, and commercialization activities are underway and commercialization and pre-commercialization expenses are being incurred. Our share of ZALTRAP losses in the quarter was $8 million. As we've said before, we do not expect ZALTRAP to be profitable to Regeneron in the near term due to our obligation to repay Sanofi from our 50% share of ZALTRAP profits for 50% of ZALTRAP development expenses that they have funded. At the end of 2012, that repayment obligation was $419 million. Sanofi collaboration revenue in the second quarter was also reduced by 2 one-time $10 million upfront payments that we made to Sanofi relating to the acquisition of full lines to the PDGFR antibody and to the Ang2 antibody in ophthalmology. Non-GAAP cost of goods sold was $27 million in the second quarter compared to $29 million in the first quarter. Included in COGS is our royalty obligation to Genentech related to U.S. sales of EYLEA. As in prior quarters, COGS continued to average less than 10% of product sales. Let me also highlight a new line in our income statement, cost of collaboration manufacturing. Previously, this have been combined with cost of goods sold because it was not very large. Cost of goods sold is the manufacturing costs, including royalties, of goods that we sell and that are included in our net product sales line, namely, U.S. EYLEA and ARCALYST. Cost of collaboration manufacturing is the manufacturing cost, including royalties, that we directly incur related to goods that we manufacture and that are sold by our collaborators, specifically, ZALTRAP and EYLEA outside the United States. This is not the total manufacturing cost of these products since we only provide the bulk material, and our collaborators incur additional costs such as for finishing and packaging. While cost of collaboration manufacturing includes our manufacturing costs for making both material that our collaborators sell, this line item currently consists primarily of royalties that we are obligated to pay, including the Genentech royalty that we pay until around mid-2016 on sales of EYLEA that is manufactured in the United States, but sold outside the United States. Since we just signed the Genentech royalty agreement relating to x U.S. sales this past May, the second quarter cost of collaboration manufacturing also includes some catch-up royalties for EYLEA sales outside the U.S. prior to the second quarter. Going forward for the next couple years, we expect cost of collaboration manufacturing to average around 7% to 8% of total ZALTRAP and x U.S. EYLEA sales. Approximately half of the cost of collaboration manufacturing is reimbursed to us by our collaborators through the collaboration revenue line. Non-GAAP SG&A expense in the second quarter was $56 million compared to $51 million in the first quarter. We are revising our non-GAAP SG&A expense guidance for 2013 to $225 million to $250 million, up from the previously provided range of $215 million to $235 million. Non-GAAP R&D expense for the second quarter was $160 million compared to $154 million in the first quarter. This included unfunded R&D expenses of $46 million compared to $44 million in the first quarter. As a reminder, unfunded R&D is the difference between our total non-GAAP R&D expense, and the amount that is reimbursed by our collaborators. We expect unfunded R&D expenses to increase in the second half of the year for several reasons, including the potential for us to begin to share Phase III costs for alirocumab and the cost of advancing our own unpartnered programs. That said, we are updating our full year 2013 non-GAAP unfunded R&D expense guidance to $225 million to $275 million, down from the prior $275 million to $325 million. As a reminder, non-GAAP SG&A and R&D expenses exclude non-cash share-based compensation expense. As I mentioned, for the second quarter of 2013, we reported non-GAAP net income of $198 million or $1.73 per fully diluted share. Non-GAAP EPS excludes non-cash share-based compensation expense, non-cash interest expense related to our senior convertible notes and non-cash income tax expense, and is based on approximately 115 million fully diluted outstanding shares. A full reconciliation of all the adjustments to GAAP earnings are set out in our earnings release. Turning now to taxes. For GAAP accounting purposes, in the second quarter, we recorded $60 million in income taxes, representing an effective tax rate of just over 41% for the quarter. For the rest of the year, we expect the GAAP tax rate to also be in the low 40% range. As we've stated before, we do not expect to pay significant cash taxes through at least 2014. At the end of the second quarter, we had $711 million in cash and marketable securities and $768 million in trade account receivable primarily related to EYLEA sales for a total of about $1.5 billion. With that, I would now like to turn the call back over to Len.

Thanks, Murray. The second quarter was another exciting quarter at Regeneron with strong EYLEA growth, driven by the continued growth in the United States and the ongoing successful x U.S. launch. New indications for EYLEA continue to build momentum with the diabetic macular edema data and regulatory update highlighting the future opportunities. And of course, our pipeline continues to march forward with the first Phase III data of alirocumab, our LDL lowering antibody, expected later this year. I would now like to turn the call back over to Michael.

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

[Operator Instructions] And the first question is from Terence Flynn of Goldman Sachs.

I just had a question on DME. I guess, can you tell us what percent of patients had vision gain in this study? Or can you say if it was at least as good as Lucentis? And then any commentary on current off-label use of EYLEA for DME?

Yes, on the second, we really don't have any information. We don't promote, and we don't really even track any off-label use of a product. As far as the first one, the investigators want to present the details of the study at the upcoming scientific meetings. I can say that the endpoints like you're talking about, strongly correlate, obviously, with best corrected visual acuity. So the results are strong, and we look forward to presenting them to -- later this year at a medical conference.

Can I ask one follow-up?

Yes, go ahead.

On PCSK9, I noticed you guys are moving to once-a-month schedule now as well which is on par with Amgen. Just what drove the change in your thinking there? Because I know you guys had focused on the every other week for a while, but just curious what data drove that decision.

Yes. So if you look at the cholesterol-lowering market historically, you can go to many a cocktail party, and some of these say, why take Lipitor, I take Crestor, I take 10 milligrams, I take 20 milligrams. That tends to individualize therapy and titrate therapy in this area. So we thought that since our drug could perform for many patients on an every monthly dosing regimen, we have that data -- it's not new data. It's based on the data we had from our earlier pre-Phase III work. We thought it made sense to include some of that in our Phase III package, so that overall, doctors and patients would have a good choice of regimen and doses and titrate-ability, et cetera. So nothing really new there. Our drug has always been had -- the same PK as we've always had, obviously, and we expect that we should be able to have Q4 week dosing for many of the patients who would be good, but for those who need more, we'll have the Q2 week.

And is that the same formulation? You'll be using the same device?

Yes, we're not going to get into all the details because this is pretty highly competitive, but we think our delivery systems will be a competitive asset. We have a partner who's delivered lots of products. And they deliver more, injected insulin probably than anybody else in the world, as far as I know, and so this is an important part of our program.

The next question is from Chris Raymond of Robert Baird. Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division: So I'm kind of intrigued, Bob mentioned an inventory reduction at distributors, is it possible you could maybe give us a little bit more detail around exactly what that in dollar terms that impact was? And I guess, sort of, should we expect to see a benefit or some impact in Q2 -- or, I'm sorry, in Q3?

Yes, it's hard to predict how the fluctuations will go from quarter-to-quarter even from week-to-week. I think Bob mentioned that in this particular quarter, we still had inventory that was in the 1- to 2-week range with a modest drawdown of inventory. Can't tell how or what our distributors will do so we really can't predict that. Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division: And okay, and if you're taking follow-ups, can I ask one?

Go ahead. One follow-up. And Michael?

Len's a softy.

I'm easy. I'll take as many questions you like. Michael's tough within the limit, but future questions, it's only one. You can get a follow-up. Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division: Just a quick one here. So despite our calculation, it looks like DSOs actually went up slightly, Q1 to Q2. Can you maybe talk a little bit about -- I know you've been talking about titrating down your terms. Can you maybe give us some color on the dynamics there and when we should expect to see that start to move down?

Yes, well, the day sales outstanding going up because we have -- the sales have been going up through the quarter. We did adjust the terms down earlier in the year, and that will start to flow through later in the year. The terms are still a bit long so it'll take a while for that to show up but we -- by the end of the year, the day sales should go down for that reason because of the lower terms.

Yes, the next question is from Steve Byrne of Bank of America.

So, Bob, if I understood the data you're provided in your market research correctly, it sounds like Avastin's share of wet AMD is less than 50%, and in the balance, Lucentis still has more share than EYLEA. If I heard that correctly, and we assume Avastin was roughly 2/3 of the market 2 years ago, it would suggest you've taken more share from Avastin than Lucentis, and is that what you would have expected, say, 2 years ago? And what do you think is leading to the stickiness of Lucentis?

Right, so good question. Bob will elaborate on it. But the quick response is that I don't think your premise is quite accurate. If you look even at Roche's call, they show their graph of Lucentis uptake in the United States. And when we came to market, that turned down quite significantly, and they mentioned that only because of DME approval did it turn up. So I would say we took market both from the Avastin market as well as from the Lucentis market. Some of the stickiness with Lucentis, obviously, it's a product that's been around for a while so people are using it. They stick on it. The others, they do have a rebate program, which we don't have, which could be, we think, influencing the marketplace quite seriously. So those are the facts. Bob, anything to add on that?

No, I'll just say that Len is right on. We actually are basically at a 50-50 split with Lucentis right now. We have taken significant share away from them, but we've also been successful in penetrating the Avastin market, and we expect wet AMD to continue to grow in the United States.

Yes, the next question is from Jim Birchenough of BMO Capital Markets.

Just a quick 2 part question. Just to follow-up on the prior question, is there anything that you're considering in your own rebate program trying to get into that other 50% of the Lucentis share? It seems like that's a big part of the stickiness, and now that things are starting to stabilize, I'm wondering if you'd consider a rebate program? And on DME, just wondering if the dynamic that's allowed you to file a year ahead of schedule might also allow for a more rapid review, i.e. a Priority Review?

Right, good question and a good way to get around Michael's ban on 2 questions, ask one 2-part question. I'm all for it, Jim. As far as the first question goes, I don't think it'd be appropriate on this call to discuss our commercial strategies and some of the details on what we're going to do. It's a competitive marketplace out there. As far as the acceleration and the potential for priority review, obviously, Priority Review is something that you apply for at the time of your submission. We did that for age-related macular degeneration. We made our case, and we'll make our case again, of course, but that's up to the reviewers at the FDA so it's a little bit -- it's way too early to speculate. As far as the decision to move from the 2-year endpoint to a 1-year endpoint, that is something that came after substantial discussions with the agency. I must say we've been dealing with the agency -- I've been dealing with them for several decades now, and they continue to demonstrate that they are a science-based and evidence-based agency, and that our discussions with them were working through what's the data, what's the science, what's best for patients. I think they had that same goal in mind as we did, and so that's how we arrived at our decision to file a year early.

Yes, the next question is from Ying Huang of Barclays.

Congratulations on the DME data. So Len, can I ask a 3-parter question here?

Ying, it's okay, with me, Michael...

Guys, we have a lot of people who want to get through so be really mindful of your colleagues.

Yes, there you go.

So firstly, I want to ask about the safety here. Obviously, you see a lack of imbalance in the arterial events here, but specifically, what about the CV death? And then how much does that lack of safety signal between the 2 different dosing arms play into the decision of FDA allowing you to file based on 1-year data?

Right. So yes, you're asking for some detail on the APTC deaths, if I heard you, Ying. Well, look, looking at deaths was very important, given the safety findings that were found with the other approved anti-VEGF agents to treat DME, and we did not find any dose-dependent increase in deaths with EYLEA in these results, and specifically, the number of APTC-defined deaths where the same in all arms with 2 APTC deaths in each of the study arms, including the laser pulling the data across the 2 studies. So 2, 2 and 2 APTC deaths. So we're very pleased with that, and so we'll see whether or not that gets us any differentiation or not.

And then also, can you outline the opportunity for EYLEA in DME here in terms of, obviously, your growth for your franchise in the U.S. market?

Right. So diabetes is a big problem. There's 25 -- no, there's about 25 million people in the United States who have diabetes and maybe 2 million people are going to be diagnosed each year with that. If you're over age 65, you've got about a 25% chance of having diabetes so diabetes itself is a big problem, and there's probably several million or more people who have diabetic retinopathy and somewhere between the 0.5 million and 1 million people who have diabetic macular edema and many of them need treatment in both eyes. So this could be a very significant market opportunity for us, but more importantly, it's a potential for us to bring a new therapy to patients who really have a need. Diabetic-related eye disease is the most common cause of blindness in young people, and diabetic macular edema is the main cause of blindness in diabetics. So we're thrilled that we might be able to bring something to patients as additional choice for this disease. Bob, do you want add anything there?

No, I think it's a significant growing market opportunity. About 280,000 patients are treated each year with anti-VEGF agent. That keeps growing quarter-over-quarter. And we're very encouraged by the results of our studies, which indicate that patients can be dosed every other month with this disease where compliance is a challenge and many of the people are still in the workplace, and so this may be a new treatment option that's convenient for patients if it does get approved.

The next question is from Robert Karnauskas of Deutsche Bank.

This is Alethia Young, in for Robyn. I just want to get a little bit more flavor on we're -- looking at the Avastin and the sequester, do you think there's still an opportunity to take share in Avastin beyond the sequester, and kind of can you talk about that U.S. opportunity there?

Yes, I think the physicians initially did not understand the adjustments to reimbursement that occurred to the sequester so I think there was some confusion over the previous quarter. People are starting to figure out the reimbursement situation, and there's -- the market research indicates there's still an opportunity to take share from Avastin.

The next question is from Jason Kantor of Crédit Suisse. Jason Kantor - Crédit Suisse AG, Research Division: Most of my EYLEA questions have been asked, but I just wanted to see, can you give us any idea about what the indications your new drugs that you put into the clinics are going after. And now that the 1 drug fell out of the clinic, can we learn anything about what that was and what your decision process was to take that out of the clinic?

Yes. So Jason, we don't like to get into the specifics of a very early-stage pipeline because it really doesn't generate much value in the investment community at this point, but it's important for our long-term strategy, and what targets we choose is a fairly competitive area. I can say that the good news about Regeneron is that we have plenty of drug candidates to put into the clinic, to choose from, and plenty in the clinic to keep us fully occupied. So we're able to make decisions if we see something that doesn't look good, doesn't do what we hoped it might, then we'll kill it. And we, of course, would rather kill these things early, which we can do privately and rather than have public funerals when you're in Phase II or Phase III. So I mean, having a big pipeline and a robust research organization, I mean, George Yancopoulos and his team are perhaps the most prolific research organization in the biotechnology industry by many metrics. So we continue to benefit from that, and we hope to continue over the long haul. Jason Kantor - Crédit Suisse AG, Research Division: Well, if I can't get you to talk about the undisclosed stuff, can you talk about the rationale from moving sarilumab into non-infectious uveitis and what the timing is there?

Well, I can tell you that the rationale is that non-infectious, meaning it's not caused by infection, inflammation of the eye, primarily uvea, is an important disease that we think could be driven by inflammatory cytokines, such as interleukin 6, and we've got some data to support that. And we think we've got a clinical trial that is getting underway that will be able to give us a good answer whether that this is a good area. Remember, uveitis is one of those diseases that you do see -- occasionally, you see it in children, in syndromes associated with rheumatoid arthritis, without it, it could be autoimmune. So there's a pretty good rationale and other data that we have on this.

The next question is from Adnan Butt of RBC Capital Markets.

And since I like Michael, I will ask one question, but I'll make it a pointed one. So for alirocumab, do you expect less variability in this every 4-week trial and is that enough to get it added to the label or will you need more?

Yes, I think that, obviously, we're doing the study as we hope that this will be sufficient to get us to the label. There are lots of ways to look at success in treating patients with cholesterol. The endpoint, the area under the curve, how many patients hit their goal, and I think that this is -- this isn't a disease where you have to get it right immediately. It's not like you're treating an acute myocardial infarction, where if you mess up, it's an enormously bad consequences to a patient. Here, you want to get it right, and doctors want to make sure they get the right and the most convenient and the most compliant doses. So I think our strategy's a good one here.

But Len, there is one thing. We are not abandoning every 2-week dosing regimen. The research shows that every 2 weeks is right now favored by patients and physicians. It's not seen as inconvenient. We just wanted to offer another treatment option with the monthly dosing.

Yes, the next question mission is from Huron Weber of Citi.

This is Kumar, in for Huron. So what is the status of the FDA clinical hold on the anti-NGF antibody? And once the hold is lifted, what are the next steps?

Right. So the only thing we can say at this point is that Pfizer's had a conversation with the FDA that they relayed to the public on their call that suggested after they finish completing some preclinical data, they'll be able to come off clinical hold, and they expect to be in the Phase III program some time, I think, in the first part of next year. We don't have any specific information. We are still on clinical hold at this time, but obviously, we'll keep you advised and how discussions go and what progress we're making in that area.

Yes, the next question is from Josh Schimmer of Lazard Capital Markets.

For EYLEA in DME, maybe you can discuss reasons to expect either the same or different levels switching from Avastin and Lucentis to EYLEA as compared what you've experienced in the AMD setting?

Well, it's obviously hard to predict. We do hear that patients are not always satisfied with their current treatments. We did have anti-VEGF experienced patients in our trials so we know that you can safely switch, at least, that's what the data to us shows. Obviously, we have to submit all those to the agency, but I imagine that there'll be a pent-up demand for that as well. I think you saw that the launch of Lucentis in DME, notwithstanding the fact that Avastin was treating people, there was very brisk uptake it seemed there based on what you can glean from the Genentech close information. Still, I'm optimistic about that. Bob?

There are patients, including in our trial, that were not doing well on other therapies that were switched, and seem to have done well, and so I think there will be a marketplace for us when we launch.

Is that unmet need comparable between DME and AMD...

I think it's too early to speculate on that.

The next question is from John Newman of JMP Securities.

Most of my questions have been answered, but I just wanted to ask, are you still maintaining the same timing in terms of when you will put your PDGF antibody into the clinic?

Yes, guidance hasn't changed on that. We hope to get, I think, later this year going on the eye studies with either the Ang2 and/or the PDGF this year.

The next question is from Matthew Harrison of UBS.

I was wondering if you could talk a little bit about compounding and if you're seeing any share shift related to Avastin there, and then maybe your opinion on the bills that are in Congress right now and their potential impact.

Yes, so there's really -- there's no obvious sea change with people who have massively left Avastin to go to either Lucentis or EYLEA. The -- it seems like the based on surveys, the market share for Avastin has somewhat stabilized at around half the market. As far as predicting what this Congress will do, it's extremely difficult. There are many bills out there, the Senate health bill, there's some House bills. We believe it's been our position that at the end of the day, patients can have a choice. Doctors can have a choice. They should have choices, but there shouldn't be a hidden choice in choosing one product which has a higher quality than another. And that we believe that -- so therefore, all products sold should meet the same FDA-mandated standards in terms of quality. Beyond that, and we hope that that's what the legislation will advance, and that's been our position on this both publicly and in discussions we've had in Washington. So just to state it succinctly, we believe in choice. We have no problem with patients choosing Avastin, choosing Lucentis, choosing EYLEA, but we believe in a single standard so that patients don't have to worry about quality of the product they choose.

Next question is from Geoff Meacham of JPMorgan. Anupam Rama - JP Morgan Chase & Co, Research Division: This is Anupam Rama, in for Geoff Meacham. I think you mentioned that the dosing interval was 7.2 weeks for EYLEA. Just wondering if you could help us put that into context of what you've been seeing over the last several quarters and how that's impacted sort of quarter-over-quarter growth that you're seeing in the U.S. and what you expect the dosing interval will sort of may trend in the future.

So we have 2 groups of patients that are treated with EYLEA. One group of patients who were recalcitrant to previous anti-VEGF therapy, those patients are generally started off with the monthly dosing regimen and then the physicians extend the treatment interval over time, hoping to get good efficacy with the reasonable interval. The other group are those patients who were new to the therapy. Patients new to therapy generally are getting dosed closer to the every 8-week language that is in our prescribing information. The 7.2 is very encouraging in that the switch patients seem to be getting out further in the dosing interval week. We started with an interval that was about 6 weeks so we're up 7.2 now. I think you'll see in AMD that, that interval probably will stay in the 7.2- to 8-week range. So obviously, as we've stated all along, as the dosing interval increases, the number of doses per quarter do decline so we're dependent upon getting new patients into the marketplace, and that's where our success have been in this quarter.

The next question is from Joseph Schwartz of Leerink Swann.

I was wondering, do you expect your PDGF antibody to have any advantages over first-generation agents in terms of things like binding affinity or hitting more receptor subunits? Anything that can compete on use basis similar to what's driven your and Lucentis' strength versus the first-generation anti-VEGFs?

Well, I think we just have a more -- important task first is to establish whether or not anti-PDGF at all works in this setting before we decide which is the best agent. So far, there's been 1 large Phase II trial. But even in our trials, our large Phase III trials, you see several other differences that you can see early on. In trials, you see this all the time. That is you see random fluctuations. In our trial, it's interesting. We were asked about deaths, we saw 2 deaths, APTC and everything. And then in low -- 1 study, 1 low-dose group had 2 cancers, and in another adverse event, they had more of something else, and so you see these differences. And in our study, you'll see when the data comes out, the slight difference between the monthly in one study and the every other month was probably just a difference in the groups because were they were different almost from the beginning before they switched every other month. So what I'm trying to say is that job #1 is to do another robust study and see if PDGF really works. If PDGF really works, then I think the advantage that we'll have is that we hope to be able to combine it in a single syringe so it's one shot. So that's a big difference in having to give 2 shots, in our view, but still a long way to go between whether or not this is actually going to make a difference in patients.

The next question is from Biren Amin of Jefferies.

I guess just from the regulatory filing in the U.S., will FDA be requiring a 2-year update on efficacy and safety from VIVID VISTA?

Well, I don't know. We don't know what they'll require at the end of the day. What we do know is that based on discussions, we think that the 1-year data that we have from these 2 trials will be adequate for them to review our application, and hopefully we'll be able to get it approved. So I think we're intending to keep the studies going, but right now, we're expecting to submit based on the 1-year data and that we hope that, that would be sufficient, based on our discussions, for an approval...

I was going to say if I could have a follow-up, what do think are the implications of the DRCR protocol eye trial in DME?

I forgot which one eye is, but eye is the one which has early laser versus late laser. Is that the one you're referring to? I don't know them by number.

No, that's one that's comparing all 3 anti-VEGFs...

Right. Well, look, the DRCR has been an extremely good network that's done very high quality work. We work with them. That study has an interesting design to it. It is a head-to-head study that compares Avastin, Lucentis and EYLEA. But given by a regimen that probably will stress the molecules a little bit, all of them, because it's a PRN-based regimen rather than a fixed-dosing interval, so it should be interesting to see whether there are differences in the number of doses or the actual letters gained, and there's nothing like a head-to-head trial to sort that out. We hear that, that trials moving nicely, and we look forward to the results down the road.

Okay, and the last question comes from Phil Nadeau of Cowen and Company.

Bob, a question for you the DME market. In the past, we've asked physicians the number of injections for DME they give compared to the number of VEGF injectors they give for wet AMD. We get a really wide range of answers, but the median answer is like 1 DME injection for every 5 wet AMD injections. I'm curious whether in your market research, you've asked the question that way and what data you get for that question?

Phil, we read your notes. I think one of your notes was that -- says that surveys aren't worth looking at. So [indiscernible] even though, you do the men Bob does them, I'm not a big survey guy in terms of how accurate they reflect what doctors say they do versus what they're actually doing. So I think what we're going to -- I just have to wait and try and count up these injections and see what we get. I think the notion that you can treat and you're finished with diabetic macular edema is just not correct, and we just see that in all of our trials. And I think that, that may be wishful thinking out there, but we'll have to see when all the data comes up, but I wouldn't -- I would follow your own advice. I wouldn't pay that much attention to the surveys.

I pay attention to Bob's survey.

All right. So let's go to the science instead of surveys. I would say that DME is much more VEGF-driven than AMD, and so theoretically, you would need more drug to adequately manage DME. I think that's the educational thing that has to be done, is defining the adequate management of DME.

Thank you, everybody, for joining us on the call today. Again, Manisha and I are going to be available to make a call. It's probably easiest if you want a follow-up call to shoot myself an email at michael.aberman@regeneron.com or Manisha, which you can find on the press release, and we'll get back to you as soon as we can. Thank you very much.

Ladies and gentlemen, this concludes today's program. You may now disconnect. Good day.