Regeneron Pharmaceuticals, Inc. (REGN) Q3 2013 Earnings Report, Transcript and Summary

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 Robert E. Landry - Chief Financial Officer and Senior Vice President of Finance

Adnan S. Butt - RBC Capital Markets, LLC, Research Division Jason Kantor - Crédit Suisse AG, Research Division Andrew R. Peters - UBS Investment Bank, Research Division Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division Jim Birchenough - BMO Capital Markets U.S. Steve Byrne - BofA Merrill Lynch, Research Division Terence C. Flynn - Goldman Sachs Group Inc., Research Division Robyn Karnauskas - Deutsche Bank AG, Research Division Ying Huang - Barclays Capital, Research Division Christopher Mortko Carter L. Gould - JP Morgan Chase & Co, Research Division

Good day, ladies and gentlemen, and welcome to the Regeneron Pharmaceuticals Third Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to your host, Dr. Michael Aberman. Please go ahead.

Thank you, Stephanie. Good morning, and welcome to Regeneron Pharmaceuticals Third 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; George Yancopoulos, Founding Scientist, President of Regeneron Laboratories and Chief Scientific Officer; Bob Landry, Chief Financial Officer; and Bob 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 include forward-looking statements about Regeneron. Such statements 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. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in such statements. A 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, and Form 10-Q for the quarter ended September 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. In addition, please note that 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 at www.regeneron.com. 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 to everyone, and thanks for joining us on our third quarter 2013 earnings call. We are pleased to announce another quarter of strong earnings. Our third quarter non-GAAP net income rose to $277 million or $2.40 per diluted share, primarily as a result of continued growth of EYLEA, both in the United States and globally. You will hear more details about our financial performance from Bob Landry, our new Chief Financial Officer, who is participating on his first quarterly conference call. As previously announced, Murray Goldberg, who has served as our Chief Financial Officer for almost 2 decades, has transitioned out of the position as CFO in anticipation of his retirement at the end of 2014. Murray's contribution was vital for the transformation of Regeneron from a development stage biotechnology company to one of the largest biotechnology companies in the world. For that, as well as for his wisdom and friendship, we will be forever grateful. That said, Bob brings with him a strong set of skills and a breadth of domestic and international financial expertise that is critical as we continued to grow as a commercial enterprise, especially as we expand outside the United States. You will be hearing from Bob shortly. Turning to our top line. EYLEA continued to grow in the United States during the third quarter, with net sales of $363 million, a 49% increase from the third quarter of 2012 and a 10% sequential quarter-over-quarter increase. EYLEA also performed well outside the United States, with x U.S. sales in the third quarter of $125 million, which represents sequential quarter-over-quarter growth of about 23%. Bayer HealthCare is still in the early process of rolling out EYLEA around the world, so we can expect continued growth in the x U.S. sales and profit. You will hear more about EYLEA's commercial performance from Bob Terifay. Before turning the call over to my partner and Regeneron's Chief Scientific Officer, George Yancopoulos, who will discuss our pipeline in greater detail, let me make a couple of quick comments about our research accomplishments since last quarter. The last few months have been very productive. On today's call, you will hear from George about our multiple Phase III data readouts and new potential indications for EYLEA, reports of the first Phase III results of alirocumab, our investigational LDL cholesterol-lowering antibody, the progress with our Phase III program with sarilumab, our IL-6 receptor antibody for rheumatoid arthritis, as well as exciting Phase III results with dupilumab, our IL-4 receptor antibody that was currently being studied in asthma, atopic dermatitis and now nasal polyposis. I would specifically like to highlight that we announced today the submission of the supplemental BLA for EYLEA in the diabetic macular edema or DME indication. This substantial progress would not be possible without the efforts of a large number of dedicated and incredibly talented people at Regeneron. That is why I am particularly proud that Science Magazine just announced that Regeneron is once again the #1 place to work in the worldwide biopharmaceutical industry. I would like to take a moment to congratulate my colleagues at Regeneron and thank them for the efforts they have put forth. With that, let me turn the call over to George who will discuss our pipeline in greater detail. He will be followed by Bob Terifay, our Senior Vice President of Commercial; and then Bob Landry, our Chief Financial Officer. George?

Thank you, Len, and a very good morning to everyone who has joined us today. As Len said, the R&D team at Regeneron has continued to be very productive. We reported the positive Phase III results for EYLEA from the VISTA and VIVID trials in diabetic macular edema. And as we announced today, we recently submitted the supplemental BLA to the FDA for the DME indication. This submission is approximately one year ahead of our original plans. Outside the United States, our partner, Bayer HealthCare, also expects to submit their application for regulatory approval in DME by year end. We also reported positive Phase III data with EYLEA from the VIBRANT trial in macular edema following branch retinal vein occlusion or BRVO. The VIBRANT trial is the eighth positive Phase III study of EYLEA and was the first study to compare EYLEA against an active laser comparator in this indication. We intend to submit an application for regulatory approval in the BRVO indication in the coming months. If approved in both the DME and BRVO indications, EYLEA will have received regulatory approval in 4 different indications in the United States. Our late-stage pipeline beyond EYLEA has continued to advance. Last month, we reported positive top line data from ODYSSEY MONO, the first Phase III trial of alirocumab, our investigational PCSK9 antibody for lowering LDL or the bad cholesterol. We are developing alirocumab in collaboration with Sanofi. Not only was this the first Phase III study to read out from our overall 23,000-patient ODYSSEY program which consists of 12 trials, but it was also the first Phase III study from this entire class of investigational PCSK9 antibodies to report data. It is very gratifying to us that just as we were the first company to report the first human data for this potentially important new class of antibodies, we were also the first to report Phase III data from this entire class. All the trials in the ODYSSEY program, with the exception of ODYSSEY outcomes and the recently announced ODYSSEY CHOICE 1, are fully enrolled, and we expect to report data from these trials in 2014. As we have said before, together with Sanofi, we are planning the initial launch towards the end of 2015, with a global rollout in 2016 subject to regulatory and pricing approvals. With regards to sarilumab, our IL-6 receptor antibody being developed with Sanofi for rheumatoid arthritis or RA, we now expect to report top line data from the MOBILITY B Phase III trial by year end. In addition to MOBILITY, sarilumab is being studied in 4 other Phase III studies in RA. Apart from RA, we're also exploring the use of sarilumab in non-infectious uveitis and have recently announced a Phase II study of sarilumab, the SATURN study, in this indication. Turning to dupilumab, our IL-4 receptor inhibitor. In October, we presented positive Phase II data in atopic dermatitis at a major medical conference. These data followed the positive Phase II data that we reported in asthma earlier this year. We are collaborating with Sanofi on developing dupilumab, which is now in Phase II clinical trials and 3 indications: Asthma, atopic dermatitis and nasal polyposis. We continue to be excited by this program and look forward to data from these studies in the future. We have a robust antibody pipeline in earlier stages of development. In total, we are now developing 13 fully-human monoclonal antibodies, 7 of which are in collaboration with Sanofi. This quarter, we independently advanced a new antibody combination into the clinic. With that overview, let me now turn the call over to Bob Terifay who will provide further details on the EYLEA commercial landscape in the third quarter.

Thank you, George, and good morning, everyone. In the United States, as Len mentioned earlier, EYLEA net sales to distributors in the third quarter were $363 million. Year-to-date, net EYLEA sales were slightly over $1 billion. We continue to see strong physician usage of EYLEA, and we've raised our full year net sales forecast between $1.35 billion and $1.375 billion. Sales growth was anticipated to be somewhat tempered during the Thanksgiving and end of year holidays when patients are likely to postpone visits to their doctors. Inventory held by distributors remains at the 1- to 2-week range. Although at the end of the third quarter, there was a slight increase in inventory days relative to the second quarter. To help provide more detail on the market dynamics, we will be sharing with you data from our market research survey that we conducted in the third quarter. As before, these data come from physician-based questionnaires, in this case, from 167 representative physicians. I will share with you the numbers as they were reported in the survey, which was conducted in the third quarter. But I'd like to remind you that these numbers are physician-reported estimates based on our survey. Let me begin with the wet AMD indication. In the third quarter, physicians recorded that EYLEA had a 26% market share on wet AMD, with ranibizumab having a 25% share and off-label bevacizumab having a 48% share. Approximately half of the patients treated with EYLEA were patients continuing from prior quarters, 1/4 for patients switching from other anti-VEGF therapies and 1/4 for patients new to therapy. Physicians report that wet AMD patients on EYLEA received treatment with a longer dosing interval compared to ranibizumab and bevacizumab. EYLEA patients received an intravitreal injection on average approximately every 8 weeks compared to patients receiving ranibizumab who were treated with a dosing interval of approximately 6 weeks and patients on bevacizumab who were treated with a dosing interval every 6 weeks. Turning now to the second indication where EYLEA is approved in the United States. Macular edema following central retinal vein occlusion data from our market research survey suggests that during the third quarter, EYLEA achieved a 40% share of the approved anti-VEGF products in this indication. Highlighting that we are gaining momentum in this indication, 32% of our business in this indication came from new patients. Turning now to our x U.S. EYLEA business where we split profits with Bayer HealthCare. Third quarter EYLEA net sales were $125 million. Bayer HealthCare reported that the majority of these sales continue to come from Japan and Australia. As reported by Bayer, EYLEA market share is 48% in Japan and 43% in Australia. At the end of the third -- as of the end of the third quarter, EYLEA has received regulatory approval for the treatment of wet AMD in over 50 countries. EYLEA has also been recommended for approval in the EU in the macular edema following CRVO indication. For the remainder of the year, we expect Bayer HealthCare to embark on additional launches in both of these indications, following regulatory and pricing approvals. Just this week, in fact, EYLEA received pricing approval for wet AMD in France. As Len and George mentioned earlier, we've submitted a supplemental BLA for EYLEA in the diabetic macular edema indication. We reported positive Phase III data from 2 trials earlier this year. We believe the DME market opportunity to be quite significant. There are 570,000 patients in the United States presenting with clinically significant diabetic macular edema each year. Currently, it is estimated that 228,000 patients are treated with anti-VEGF therapy. Our market survey indicates the physicians intend to grow their use of anti-VEGF therapy in DME by 30% over the next year. We've recently also reported positive data for EYLEA from the Phase III VIBRANT trial in macular edema following branch retinal vein occlusion or BRVO. It is estimated that approximately 78,000 patients are treated with anti-VEGF therapy for macular edema following BRVO in the United States each year. Turning to ZALTRAP or ziv-aflibercept, Sanofi reported sales of $18 million for the third quarter. We expect continued x U.S. launches over the course of this year. With that, let me turn the call over to our Chief Financial Officer, Bob Landry.

Thank you, Bob, and good morning to everyone. It's truly my pleasure to be participating for the first time as Regeneron's CFO. Regeneron is at a very exciting stage in its evolution, and I'm pleased to be a part of it. I look forward to getting to know and working with many of you in the coming weeks, months and years. I'll now talk briefly about our performance in the third quarter, and I'll provide some color on the remainder of 2013. We are very pleased with our third quarter results. We earned $2.40 per diluted share from non-GAAP net income of $277 million, which represents a 27% increase versus the 3 months ended September 30, 2012. Just to remind everyone, non-GAAP EPS excludes noncash share-based compensation expense, noncash interest expense related to our senior convertible notes and noncash income tax expense and is based on approximately 116 million fully diluted outstanding shares. A full reconciliation of all the adjustments to GAAP earnings are set out in our earnings release. Total revenues in the third quarter were $597 million, which represented growth of 40% versus the quarter ended September 30, 2012. Net product sales were comprised of $363 million for U.S. EYLEA sales and $4 million in ARCALYST sales; in total, $367 million for the third quarter of 2013. As Len mentioned, U.S. EYLEA sales grew 10% sequentially quarter-over-quarter and approximately 50% year-over-year. In addition to the sales growth, we were the beneficiary of a slight increase in wholesaler inventories this quarter. X U.S. EYLEA sales were $125 million and represented a 23% improvement versus the quarter ended June 30, 2013. As a reminder, revenue from x U.S. EYLEA sales is recorded by Bayer HealthCare. You may notice a slight difference between what we are reporting as x U.S. EYLEA sales and what Bayer HealthCare previously reported. This is due to Japan where Santen Pharmaceuticals commercializes EYLEA under a co-promotion relationship with a subsidiary of Bayer HealthCare. Our royalty in Japan is based on end use of sales reported by Santen, so we're using an x U.S. sales number that includes Santen's end user sales of EYLEA in Japan. Bayer HealthCare, however, reports their net sales to Santen rather than sales by Santen, so there are going to be differences each quarter between those numbers. Note that on this basis, second quarter x U.S. sales were $120 million -- $102 million compared to $125 million in the third quarter. Our share of a net profit from x U.S. EYLEA sales in the third quarter was $46 million. This includes royalties that we received on EYLEA sales in Japan. After deducting $14 million in the quarter for reimbursement of development expenses at Bayer HealthCare previously funded, EYLEA x U.S. profit contributed $32 million to our Bayer HealthCare collaboration revenue. Adding the cost sharing of ongoing EYLEA development expenses, reimbursement of other Regeneron EYLEA expenses, amortization of upfront and certain milestone payments and $45 million in substantive milestone payments this quarter, total Bayer HealthCare collaboration revenue was $89 million in the third quarter compared to $27 million in the third quarter of last year. As a reminder, during the third quarter of 2012, x U.S. sales of EYLEA had not yet commenced, but there was a $15 million milestone payment. The $45 million of milestone payments that we recognized in the third quarter 2013 consisted of a $15 million milestone related to EYLEA approval in the EU and the CRVO indication and 2 sales milestone payments that were $15 million each, relating to aggregate net EYLEA x U.S. sales. We anticipate earning another $15 million sales milestone payment in the fourth quarter based on continued x U.S.EYLEA sales growth script. Beyond 2013, we could earn up to $90 million in additional x U.S. EYLEA sales milestones, which we expect to earn in full by approximately the end of 2015. Total Sanofi collaboration revenue was $134 million for the quarter and represents an 8% decrease versus the 3 months ended September 30, 2012, primarily driven by a $50 million substantive milestone payment received in 2012 related to U.S. regulatory approval of ZALTRAP, offset by an increase in R&D and reimbursement for the 3 months ended September 30, 2013. As explained on previous calls and as outlined in our 10-Q, the Sanofi collaboration revenue includes primarily reimbursement of our R&D expenses for pre-clinical and clinical development within our antibody collaboration and amortization of payments previously received from Sanofi, less our share of the losses associated with ZALTRAP. Global ZALTRAP net sales in the third quarter, as reported by Sanofi, were $18 million. We recognize $7 million as our share of the losses in connection with the commercialization of ZALTRAP around the world. Let me reiterate what we have previously said. We are not expecting 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 the cumulative ZALTRAP development expenses that they have funded. Turning to expenses. Non-GAAP cost of goods was $28 million in the third quarter 2013 compared to $20 million in the third quarter 2012. Included in COGS is our royalty obligation to Genentech related to U.S. sales of EYLEA, which remains in place until second quarter 2016. As in prior quarters, COGS continues to average less than 10% of product sales. Cost of collaboration manufacturing, which is relatively new line item in our P&L, came in at $10 million for the 3 months ended September 30, 2013. The cost of collaboration manufacturing includes our manufacturing costs for producing bulk material that our collaborators sell. This line item also comprises royalties that we are obligated to pay, including the Genentech royalties that we will pay until second quarter 2016 on sales of EYLEA that is manufactured in the U.S. but sold outside the U.S. This is not the total manufacturing cost of these products. About half of the cost of collaboration manufacturing is reimbursed to us by Sanofi and Bayer HealthCare through the individual collaboration revenue lines. Non-GAAP SG&A expense for the third quarter 2013 was $80 million compared to $56 million in the second quarter 2013 and $40 million for the third quarter 2012. The increase in non-GAAP SG&A was largely driven by contributions we made for not-for-profit foundations that assist patients' pay for their medications. We are not expecting to see this same G&A expense level in the fourth quarter, but do expect to be on the top end of our previously provided guidance for full year GAAP SG&A expense of $225 million to $250 million. Non-GAAP R&D expense for the third quarter of 2013 was $196 million compared to $160 million in the second quarter, an increase of 23%. During the third quarter, Sanofi and Bayer HealthCare reimbursed us a total of $141 million in R&D expenses. As a reminder, we record the R&D activity incurred in connection with our Sanofi and Bayer arrangements as a component of our R&D expenses, and record their reimbursement to us within the Bayer and Sanofi collaboration revenue line items. The unreimbursed net R&D expenses for the third quarter 2013 after the reimbursement by Bayer and Sanofi were $55 million compared to $46 million in the second quarter. The increase in unreimbursed R&D this quarter was due primarily to higher R&D expenses on unpartnered early-stage antibody programs. We are tightening our full year 2013 non-GAAP unreimbursed R&D expense guidance to $225 million to $250 million from the previous range of $225 million to $275 million. This full year unreimbursed R&D guidance assumes fourth quarter unreimbursed R&D of $80 million to $105 million, which would be significantly higher than prior quarters. This is primarily due to the terms of our antibody collaboration with Sanofi, which requires that following the first positive Phase III results for an antibody in the collaboration, we are responsible for 20% of the subsequent Phase III development costs for that antibody. Therefore, following the positive results from ODYSSEY MONO, which were reported last month, we are now paying for 20% of the Phase III expense for alirocumab. Additionally, within the fourth quarter, we expect to incur unreimbursed antibody discovery research expenses beyond $160 million per year that is reimbursed by Sanofi. While we are not prepared to provide specific unreimbursed R&D guidance for next year at this time, assuming continued success of the pipeline, including sarilumab and our unpartnered antibodies, we expect the quarterly rate of unreimbursed R&D to continue to grow during 2014. We anticipate providing further financial guidance at the JPMorgan conference in January 2014. As a reminder, non-GAAP SG&A and R&D expenses exclude noncash share-based compensation expense. Turning now to taxes. For GAAP accounting purposes, in the third quarter, we recorded $84 million in income taxes, representing an effective tax rate of approximately 37% for the quarter. As we've stated before, at this current time, we do not expect to pay significant cash taxes through at least 2014, and as such, our non-GAAP earnings currently exclude any income taxes. At the end of the third quarter, we had $775 million in cash and marketable securities and $856 million in trade account receivables, primarily related to EYLEA sales. With that, I will now turn the call back over to Len

Thanks, Bob, and thank you, everyone else. I'd like to close the prepared remarks by highlighting a few things. Our business continues to perform well. We believe that EYLEA has room to grow, both through approval and additional indications, such as DME, BRVO, as well as the continued geographic expansion that is still in the early stages. Over the mid to longer term, we expect our broad pipeline of antibodies, such as alirocumab, sarilumab and dupilumab, to drive continued growth. As Bob Landry mentioned, with the success in our pipeline, including the positive Phase III data with alirocumab, but also our own growing pipeline of wholly-owned antibodies, such as PDGF in ophthalmology, we expect our unreimbursed R&D expenses to increase in the fourth quarter of this year, as well as in 2014. We feel confident in our approach and our broad pipeline that gives us multiple shots on goal. We look forward to discussing new molecules and technologies that are currently in earlier development and that we hope will advance soon. I would like to now turn the call back over to Michael Aberman for questions and answers.

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

[Operator Instructions] Our first question comes from Adnan Butt with RBC Capital Markets.

The question I'm getting most frequently, and perhaps you can address this, is on outcomes and data being needed for the alirocumab study. And what gives you confidence that it will not be acquired first? And then can you explain a bit about your labeling strategy? Will it be initial targeted label then going over time? And which region do you expect to [indiscernible] first?

Okay. Thanks [indiscernible]. And then George, do you want to deal with the regulatory question there?

Yes. We've had extensive discussions with the FDA. And as we noted, it's our understanding that assuming that the data is robust and that safety data is hopefully quite clear cut that all we'll need to do is to be substantially involved in executing our outcome study to be considered for approval. So we will not need to have an outcome study result at that time.

And as far as your question on the label, we don't have any comment specifically on the label, but we will say that we have a very broad program that we believe covers just about everything one could think of in terms of the types of patients, the relative risk, the relative cholesterol, whether they have familial disorders, whether they've had a previous event and so forth. And we have dosing choices as well and we have a well-controlled, long-term safety aspect of the program, which we think is very important. So we are very pleased with the program as it's designed and how it's being conducted together with Sanofi.

Our next question comes from Jason Kantor with Crédit Suisse. Jason Kantor - Crédit Suisse AG, Research Division: I'm wondering if you could give us a synthetic quantification of the inventory impact in the quarter, either in terms of dollars or days. And in your survey, are you seeing that you are already having current use in DME? And if so, how much of your sales are in the DME indications?

All right. So the second question, we don't track our off-label uses, we don't reward on it. And so we really don't have any information for you on that. In terms of the inventory, we're not going to get into the -- how many minutes, hours, days or what-have-you of extra inventory we have, but it was just a slight increase on a relative magnitude. I think was on the order of slightly less than the increase was in the previous quarter.

Our next question comes from Matthew Roden with UBS.

This is actually Andrew Peters in for Matt. A quick question on the PCSK9 program. In the Phase II, you guys ran fixed dose studies, but in the Phase III, you're looking at more of an up-titration, 75 up to 150. So it seems like you're looking at optimizing the LDL goal instead of maximizing the reduction. I was wondering if you could just go through the rationale there as it relates to whether you think there's a linear risk reduction with LDL or is it more about just reaching goal.

Well, I think the point is, is that physicians in this area are used to and like options for treating their patients. We have a very robust program which examines both fixed dosing in very large numbers of patients, as well as up-titration strategies. And I think, together, the collection of all of these studies are going to offer physicians and patients a large number of choices to satisfy what the individual patient's needs and what the individual doctors think that, that patient's needs are. So we'll have the ability if that patient needs it to drive the LDL down as quickly and as far as possible. In other settings where -- and that may not be needed, they could have a choice of a lower dose. And in even our program, we can allow for monthly dosing and so forth. So it's all about options and flexibility for the patients.

Our next question comes from Chris Raymond with Robert Baird & Co. Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division: Just doing some calculation, looking at your last couple of quarters of DSOs, it looks like the number is leveling off here a bit. I know -- or I think I've heard you guys talk about changing the terms perhaps at the beginning of the year, and I know you don't want to give a lot of detail on that, but can you maybe talk a little bit about when we might start to see that DSO number start to trend down?

Yes, we don't comment on these commercial terms. It's in the competitive environment, sorry.

Our next question comes from Jim Birchenough with BMO Capital.

Just following up on some market trends. One, wondering if there's anything that you guys are planning to do or already doing to compete against the Lucentis discount program that might be your own discount program or sampling. Just wondering what you can do to eat in to that 24% share that they're retaining. And in DME, wondering how you think about position against the Lucentis 0.3 milligram dose, which is lower priced, and whether you need to discount in DME to gain meaningful market share.

Yes. Some of those details are obviously part of our competitive strategy that we really don't want to get into. We will say that based on what we've heard presented at medical meetings and the advisory panel, the reason for the lower dose of Lucentis in DME had to do primarily with this question of this dose-dependent safety question around deaths at a higher dose. We don't have a dose-dependent increase in that, and we studied the same doses we had in AMD. So we'll have to see whether or not that provides an advantage to patients or not. We don't have a head-to-head study, so we can't make a comparison about that. As far as the rebate program and things like that, we're not going to get into. I don't know, Bob, if you want to add anything about sampling or anything else you want to...

No, I think that any discussion of rebates or sampling is competitive situation we won't disclose. I will remind you that in DME, we have every 8-week dosing in our study which is differentiating from the competition which has monthly dosing in their labeling. And that should help offset any cost concerns on an annual basis.

Yes, that's a great point, Bob. Thank you.

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

Yes. A question for Bob Terifay. Your SG&A increased sequentially. I was wondering if you increased the headcount and the sales force in -- for EYLEA.

No, our sales force has remained consistent since launch.

Our next question comes from Terence Flynn with Goldman Sachs.

Was just wondering if you could give us your take on the current version of the compounding bill that the Senate's poised to vote on this week. It seems that everyone who talks to someone in D.C. has a different interpretation.

Yes. I mean, you can imagine that we monitor that pretty carefully. And obviously, we believe that a single quality standard for all drug products, whether they're manufactured by companies such as Regeneron, or whether they are repackaged by a compounding pharmacy, patients and the physicians shouldn't have to worry that the drug is not meeting a single high-quality standard. We think that the current draft bill makes important headway in ensuring a more robust regulatory enforcement regime in the area of compounding and repackaging. And it clears the way possible legal impediments, the most important thing from our perspective. It clears away any blockage of the FDA's ability to enforce the law. And the requirement -- we believe that, that may require people to live up to FDA-mandated GMP-type standards when they repackage a drug. It sounds simple, but that process is rather complicated, and it's associated -- also, it's a risk and it needs to be properly regulated. That's our position. We think the current compounding bill will allow the FDA to do that. But of course, the bill hasn't been signed or passed just yet.

Our next question comes from Robyn Karnauskas with Deutsche Bank.

So big picture, now that we've seen some stabilization in the market a little bit that you continue to grow, I was just wondering, do you still think fears around the sequester influencing Avastin's ability to keep share? And do you think that you can actually continue to take share over time from the AMD market, specifically the Avastin segment?

Bob, do you want to comment on that?

So we have seen a stabilization in Avastin share. Remember, we started when we launched with Avastin having a 65% share of the wet AMD market, that's down to 48%, but it is starting to stabilize as some physicians with the sequester payments have chosen to use Avastin. We still think there is room to grow in wet AMD. There are patients on a continuous basis who have to be switched from their existing therapy, and we believe there's opportunity there. And we will continue to fight it out in the marketplace with the branded molecule as well. We're also quite encouraged by the growth potential in Europe where the pricing approvals are just coming.

Our next question comes from Ying Huang with Barclays.

So first of all, can you tell us exactly what you asked for in the BLA for DME? Did you ask for both every 4-week and every 8-week dosing? And then can you tell me a little bit more about the status for development for the PDGF and NH2 antibody program in AMD?

Sure. It's a little bit premature to be discussing our ask in labeling and what-have-you, but we can remind you what we did study, which usually tracks what one submits obviously. We did study a program that had a fixed dosing that -- and then it went on to every 8-week dosing. So we're obviously going to be discussing our whole data set with the FDA. George, do you want to comment a little bit our thoughts about PDGF, what we think about the program and where it's going?

Yes. Well, we are certainly hopeful that PDGF co-therapy will provide an incremental advance for patients. And on top of, of course, the anti-VEGF foundation therapy, and we think, of course, that it's going to be quite a while before we collectively as a community really understand whether it will be providing that sort of advance, that we know better than anyone a few letters difference, even in the 150-patient study, is a little hard to interpret and that you need a lot more data. But in our case, we're moving ahead. We're on schedule with the previous guidance we've given in terms of filing our IND and so forth. And we certainly think that if this co-therapy proves to have value, it'll be tremendously beneficial to the patients to have the opportunity to have a single injection coformulated product which we're hoping to be able to provide if the co-therapy is advantageous.

Good, thank you. Let me just come back to one other question that maybe we were a little bit abrupt in saying we don't comment on the DSO. I guess a point there is that we do expect that to trend down over the course of the next year as we tighten up the terms. But the specific commercial terms and the specific dates, we can't get into at this point.

Our next question comes from Yaron Werber with Citi.

This is Chris in for Yaron. Had a question on your IL-6 program. Can you comment on how you think your compound is differentiated, given that the IL-6 base is becoming increasingly competitive with Actemra just getting approved subcu recently?

George?

Yes. Well, we certainly think that the IL-6 space continues to be a very exciting opportunity. I think a lot of people believe that this target could provide a big opportunity for providing more benefit to patients. In our case, of course, we think that we'll have a convenient subcutaneous regimen that has the opportunity to be very competitive with the Actemra and the data that Actemra is producing subcutaneously. So we think that there's going to be room in this space for multiple agents, agents that will have slightly different profiles. And we're pretty optimistic that we're going to be second in class here for this very large opportunity offering, perhaps certain differentiation and advantages compared to Actemra.

Our next question comes from Geoffrey Meacham with JPMorgan. Carter L. Gould - JP Morgan Chase & Co, Research Division: This is Carter on for Geoff. My question relates to Pfizer's announcement to move their PCSK9 into Phase III studies. In their comments last week, they mentioned targeting some subsegments of the hypercholesterolemia population. Do you have any comments on this and how your clinical development program maybe addresses these segments or not?

We wish our friends at Pfizer good luck. That's all we have to say about that their program at this point.

Well, I think it's worth adding that we do think that our program is as robust and deep and targets as many interesting patient subclasses and does it as robustly as any other program that's being undertaken at this point in time.

Our next question comes from Chris Raymond with Robert Baird & Co. Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division: Just a question on the shelf. You guys are in a decisively cash flow positive position. Can you maybe talk a little bit about the logic and thinking behind filing the shelf?

Bob? Bob Landry?

Chris, it's Bob Landry. So I mean, the shelf is just kind of good everyday, housekeeping practice that we do. We've had a shelf in place that had expired in October of 2013. And again, I'd don't want anyone a kind to read into anything with regards to our future plans, with regards to the use of it. It's just good housekeeping practice to always have a shelf kind of in place and hence, the filing of that this morning.

Yes. We have no plans whatsoever to access the capital markets at this time.

Our next question is a follow-up from Adnan Butt with RBC Capital Markets.

So your friends at Genentech Roche mentioned that they expect completion in DME around midyear. So do you wish them good luck as well? Is this priority of you?

I think they were wishing us good luck. But look, all of this kind of activity, this competitive activity is great for patients. When you bring additional choices of drugs that might make a difference in these terrible diseases, I think having more than one choice and each choice having lots of robust labels is a good thing. We look forward to competing in the marketplace with Lucentis if we're lucky enough to get the drug approved sometime next year.

Our next question comes from Jason Kantor with Crédit Suisse. Jason Kantor - Crédit Suisse AG, Research Division: I was hoping that you can give us some sense of the timeline for data releases from some of your earlier-stage programs and the next data release from the PCSK9 program. And on the earlier side, I was interested in the [indiscernible] study and when you might have data from that.

Yes. We don't have any guidance for you this point on the earlier-stage stuff. We do expect on the PCSK9 lots of data next year. As you know, all of our studies, except the outcomes in the Q4 week are fully enrolled, which means we will be having lots of data and lots of it probably in the first half of next year. It's going to be a busy time for the space. We expect our competition to have lots of data, and I think everybody will be focusing on that. We do expect the additional data before the end of this year on our mid-stage -- first-stage [indiscernible] program with sarilumab. I'm not sure we're expecting any Phase II data this year with the dupilumab at this point. And that's about the status of the data flow. Lots going on, but we'll try and update you from time to time on how some of the early programs are doing, Jason. And we appreciate you paying attention to it.

All right, operator, I think that will conclude our call.

Okay. Thank you, ladies and gentlemen. That does conclude today's conference. You may all disconnect, and have a wonderful day.