Welcome to the Regeneron Pharmaceuticals First Quarter 2018 Earnings Conference Call. My name is Jason and I will be your operator. At this time all participants will be in a listen-only mode. Later, we will have a question-and-answer session. Also, please note this conference is being recorded. And I will now turn the call over to Manisha Narasimhan, Head of Investor Relations. You may begin.

Thank you, Jason. Good morning and welcome to Regeneron Pharmaceuticals first quarter 2018 conference call. An archive of this webcast will be available on our website under events for 30 days. Joining me on the call today are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Founding Scientist, President and Chief Scientific Officer, Marion McCourt, Senior Vice President and Head of Commercial; and Bob Landry, Senior Vice President and Chief Financial Officer. 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 today include forward-looking statements about Regeneron. Such statements may include but are not limited to those related to Regeneron and its products and business, financial forecast and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, intellectual property, pending litigation 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 that statement. 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-Q for the quarter ended March 31, 2018, which will be filed with the SEC later today. Regeneron does not undertake any obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our financial results press release, which can be accessed on our website. Once our call concludes, Bob Landry and 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, Manisha. Good morning to everyone who has joined us on today's call and webcast. In my prepared remarks, I will focus on Regeneron's high level strategy. George will provide details on how our R&D prowess enables and supports that strategy. Marion will update you on the status of our commercialization efforts which will drive the realization of our strategy. And Bob will recap our financial results. Let me begin with EYLEA. EYLEA has been a very successful product both in terms of how much value it brings to patients with vision threatening retinal diseases, as well as how many value it brings to our business. Since approval in late 2011, EYLEA has taken over as the market leading FDA approved anti-VEGF agent for retinal diseases. More than 15 million doses of EYLEA have been administered globally since launch. During the first quarter of 2018, global net sales of EYLEA were $1.6 billion. Clearly, at the moment, EYLEA is our most important product and naturally many of our shareholders have questions about the sustainability of the EYLEA franchise over the near and long term. We believe that while competition is expected in the anti-VEGF space around late 2019, the therapeutic profile of EYLEA sets a very high bar and there were no products in late-stage development to our knowledge that are likely to have substantially differentiated product profile from EYLEA. In addition, we see significant opportunities for growth based upon the aging of the population as well as the unfortunate but dramatic increase in the prevalence of diabetes. While EYLEA is well-penetrated in wet age-related macular degeneration, there remains a large untapped opportunity in diabetic eye disease. That is why we are focused on expanding our indications in diabetic retinal diseases. Currently, EYLEA is indicated for the treatment of…

Thank you, Len, and a good morning to everyone. The first quarter of 2018 has been very busy and productive from an R&D perspective, and I will provide some of the key highlights. Beginning with EYLEA, we reported positive data from the Phase 3 PANORAMA study in diabetic retinopathy. In this study, at 24 weeks, 58% of patients receiving EYLEA experienced a two-step or greater improvement from baseline on the Diabetic Retinopathy Severity Scale, compared to 6% of patients receiving sham injection, with a p-value of less than 0.0001. No new safety signals were observed. Importantly, this was the first time that any therapy demonstrated the ability to reverse disease progression in a study specifically designed to evaluate patients with moderately severe to severe non-proliferative diabetic retinopathy without diabetic macular edema. We will continue to evaluate these patients for longer durations to determine whether EYLEA treatment can prevent progression to neovascular vision-threatening complications and also to diabetic macular edema. We expect to make a regulatory submission in the United States later this year. In March, at the Annual Meeting of the American College of Cardiology, we reported positive data from the 18,000 patient cardiovascular outcome study of Praluent, which compared Praluent to maximally-tolerated statins. These data showed that Praluent significantly reduced the risk of major adverse cardiovascular events or MACE in these high risk patients and was associated with a lower rate of all-cause death. Safety was consistent with previous trials and no new safety issues were observed. In a pre-specified analysis, the patients with baseline LDL cholesterol levels at or above 100 milligrams per deciliter, experienced a more pronounced benefit from Praluent, reducing their risk of MACE by 24% and their risk of death from coronary heart disease by 28%. In additional post-hoc analyses of this pre-specified group, Praluent…

Thank you, George, and good morning, everyone. It's a pleasure to be on the call today. This is my first earnings call with Regeneron and it is a privilege to be part of this wonderful team. I'd like to start with EYLEA, where global net sales in the first quarter were $1.6 billion. EYLEA continues to be the market-leading branded anti-VEGF for retinal diseases in the United States. In the U.S., EYLEA net sales were $984 million, which represented about 70% of the overall branded market. Our dollar share of the branded market increased slightly year-over-year. Based on a survey we conducted in the first quarter, we estimate that currently about 70% of U.S. EYLEA net sales come from wet AMD and about 25% from DME, with the balance coming from other smaller indications. With the aging of our population and the dramatic increase in the prevalence of diabetes, we expect significant future market growth. Looking ahead, we see two major opportunities to grow the EYLEA franchise. The first is through additional indications such as diabetic retinopathy where we recently reported positive Phase 3 data from the PANORAMA study and expect to make a regulatory submission later this year. If approved in diabetic retinopathy, we expect that EYLEA could be used in the full spectrum of patients with diabetic eye diseases. Secondly, diabetic eye diseases are dramatically underdiagnosed and undertreated and even when treated, it is frequently with suboptimal therapy. This is true both for patients suffering from diabetic macular edema as well as from diabetic retinopathy. We expect that our increased provider and patient outreach in education could result in more patients with DME being diagnosed and receiving therapy in the near term and similarly impacts diabetic retinopathy following potential approval in this indication. There are also many ongoing…

Thanks, Marion, and good morning, everyone. During today's call I'll discuss our first quarter 2018 financial performance and provide updates to our full year 2018 guidance line items. Regeneron's first quarter 2018 EPS of $4.67 per diluted share on non-GAAP net income of $537 million has established a solid start for the year. These results represent a 60% and 59% year-over-year increase in our non-GAAP diluted EPS and net income, respectively. As a reminder, Regeneron's first quarter 2018 non-GAAP net income excludes non-cash share-based compensation expense and beginning in this quarter the changes in fair value of equity investments recognized in accordance with the company's recent adoption of Accounting Standards Update 2016-01. A full reconciliation of GAAP and non-GAAP earnings is set forth in our earnings release, which can be found on our website. Total revenues grew 15% year-over-year to $1.51 billion, driven by continuing strength in our flagship EYLEA franchise and higher contribution from commercialization of Dupixent. Partially offset by a lower revenue contribution from Sanofi in connection with the Discovery and Preclinical Development Agreement that ended on December 31, 2017. EYLEA net product sales in the United States grew 15% to $984 million compared with $854 million net sales in the first quarter of 2017. U.S. EYLEA distributor inventory experienced a modest increase as compared to the fourth quarter of 2017, yet remained within our normal one to two-week targeted range. Additionally, U.S. EYLEA's gross to net percentage increased compared to first quarter 2017 due to slightly higher rebate provisions for government and commercial programs. Ex-U.S. EYLEA net product sales, which are recorded by our collaborator Bayer, were $624 million for the three months ended March 31, 2018, representing an 18% operational and 29% reported increase on a year-over-year basis. In the first quarter of 2018, Regeneron recognized…

Thank you, Bob. Operator, this concludes the prepared remarks portion of our call today. We would now like to open the call for Q&A.

Thank you. And first, we have Ying Huang from Bank of America Merrill Lynch.

Hi. Good morning. Thanks for taking my questions. So maybe Len and George, since you elaborated even more about the PD-1 plans. Given the recent data from Merck's KEYTRUDA and Bristol's OPDIVO in first line non-small cell lung cancer. How do you think your molecule would behave? Is it because you're designing the molecule in such a way that it's going to be more potent even than both? Or are you trying to explore a better combination strategy for PD-1? And then a quick one on fasinumab, can you just elaborate a little more what causes the high dose to be dropped? Is it also the same side effects we see which is osteonecrosis. Thank you.

George, go ahead.

Yeah. Yeah. This is George. Thanks for the question. I think that as we try to line up, it is really pretty sobering that despite all the excitement and advances with PD-1 and PDL-1s in right now the most important setting and indication where they seem to be active in terms of the number of patients which is first line lung cancer. As we all know the data from the PD-1s has been quite disappointing. And even with OPDIVO, if you actually look at the data, it by far fails to meet the bar of KEYTRUDA. So right now, unbelievably enough, there is only one, in our opinion, clear leader in the first line lung cancer space, and what we try to explain is that we've designed a series of studies which will test whether our molecule is in that class, is in the class of KEYTRUDA. We do believe, as you said, that we have a great technology that has succeeded in the past in delivering some of the first and best-in-class molecules, this VelocImmune technology. And on top of that, as we've already described, we have this very impressive and comforting data in the squamous cell carcinoma indication which has some of the best data ever described in solid tumor settings for a PD-1 agent. So these combined to give us a lot of hope that our first-line cancer studies are going to deliver on the order of KEYTRUDA -like data which would make us basically a real major competitor in this space. So we are very excited about the opportunity and we're very hopeful that the molecule in the studies will come through. In terms of your second question about fasinumab, as you already pointed out, there's a – this is a high-risk, high-reward program as we've described in the past. It's pretty well-demonstrated that the molecule has activity, but it also has certain side effects. It's not osteonecrosis, it's more defined as rapid progression of the osteoarthritis in some patients. And this is something that obviously has been seen with this class and with our molecule before. And so what the independent data monitoring committee did was they obviously took an analysis to look at the benefit and the risk that is the therapeutic benefit compared to their analysis of the risk coming from these rapidly progressive osteoarthritis events and they decided that we should terminate the upper two doses and continue with the two lower doses. And so we are planning to modify the studies consistent with their recommendations.

I just wanted to add, Ying, that I think George said it and I said it, but it's worth saying again is that the potential for combinations with our PD-1 based upon bispecifics that you're aware of as well as a new class of bispecifics that we'll talk to you about later this year in our proprietary models is pretty exciting for us. So it's not only the monotherapy, although clearly the monotherapy is a huge opportunity as evidenced by the $12 billion run rate, the majority of which is a single immune-oncology agent with or without chemotherapy in lung cancer.

Right. And when we use the term monotherapy, which is sort of – we're almost bundling monotherapy and traditional therapies like chemotherapy because as we described, many of our studies are in combination with existing therapies, and as Len said, we also have these new combination approaches that we're excited about.

Operator, next question, please.

Next we have Carter Gould from UBS.

Good morning. Thanks for taking the question. Obviously a lot of focus on Dupixent after your partner reported last week. Can you maybe just give a little more detail on the commercial dynamics you're seeing, namely persistence on therapy. And I guess for Marion, how we should be thinking about IMS data as being predictive of the trends you're seeing in the market landscape. Thank you.

Right. I'll let Marion answer that question. But I – we don't get as bogged down as you do in trying to predict the exact quarter sales. We're looking at the metrics as Marion said, is how is the launch going. And I'll let Marion reinforce her earlier comments.

Sure. So let me take, Carter, the persistence question first. And as I mentioned in two pieces, both very, very encouraging signs on persistence. First is that we see patients 90% of the time get refills after their first script. So that was one metric that I gave. The second one I gave was looking over a longer period of time of persistence and that was over the course of time since launch, patients on therapy over that duration at 83%. So two metrics, both quite encouraging. I think the other comment is you're talking about some of the other data metrics that we would say is that what we're seeing in terms of demand and performance on the product is including the NBRx profile is very consistent with our long-term growth projections for Dupixent. So, we're on pace, as I mentioned with the NBRx number or new patient scripts on a weekly basis at about 500 per week through the quarter. That's 2,000 new patients a month getting their prescriptions filled for Dupixent. And we see that as a very strong growth signal. Certainly we're going to work to continue to advance performance but we see that demand going very well at this stage.

Operator, next...

And we should just reinforce that once you try to look across other agents at what the persistent rates are over the course of the year, these numbers are really quite impressive and speak to the need and how satisfied patients are with the treatment.

Next question, please.

We have Terence Flynn from Goldman Sachs. Terence Flynn - Goldman Sachs & Co. LLC: Hi. Thanks for taking the question. Maybe as we think about your immuno-oncology strategy, when might we see some initial combo data? And really, is the big push here on the bispecifics or are you looking at other approaches as well? And then the second part of that is you guys have had a somewhat disruptive approach to pricing of your drugs. Is that how we should think about cemiplimab as well? Thanks.

Well, maybe George will take the first part and Len will take the second part. But – so this is George. Yeah. We're obviously very excited about this sort of dual opportunity of cemiplimab and of our bispecifics, both individually and in combination. But as you also just pointed out, with cemiplimab we have just with that a sort of dual approach of combining with a series of more traditional agents as I described, traditional chemo therapeutic agents, other checkpoint inhibitors including others and our own, as well as things, for example, that we're collaborating with other people such as certain types of vaccines and so forth. So that's one whole set of combination opportunities with cemiplimab. We have the bispecifics, which by themselves can be used individually or with existing therapies, but also combinations with the cemiplimab. And we, I think, have already announced that we have already started dosing patients with our first bispecific and PD-1 in combination and we hope that we'll be seeing data and be reporting on that as well. But the very exciting aspect of this for us is every one of our bispecifics can be evaluated individually but also we believe in combination with cemiplimab and other checkpoint inhibitors as well as with other agents and as well as with this new class of bispecifics that Len mentioned we will be disclosing over the course of the year.

And in terms of price, Terrence, obviously and if you're thinking about trying to model our opportunity both in CSCC and how we'll compete elsewhere, first of all, I might just say in CSCC you have to think about the fact that there's a reasonable sized patient population, although it's hard to know because there hasn't been an approved treatment for advanced disease, and also you should go back and look at our data. We can remind you later, that we have very long duration of therapy and many patients still on drug as of our last update. So that plays. In terms of the actual price, we like to price towards value. These are, I think, high value molecules to patients and we'll let you know what we come out with when we do.

Operator, next question, please.

We have Geoffrey Porges from Leerink Partners.

Thanks very much and, Len, the question is, could you address some of what are now shibboleths (52:22) Regeneron? Things like no long-term guidance, no buybacks or dividends, no price increases, no product acquisitions. Given the fact that the company has lost more than 40% of its value over the last year, are you and the board reconsidering any of these sacred cows?

So let's take them one by one. I'm not sure I've got to write them down. You said product acquisitions, what else did you say, Geoff?

Price increases, buybacks or dividends, long-term guidance.

Slow down, slow down. I can't write that fast. Price increases, buybacks, go ahead.

Buybacks or dividends, long-term guidance.

Guidance. Okay. So let's take the easy ones. We have 6 approved drugs and 17 in the clinic. We have what I think of as one of the most prolific R&D engines in the industry. And we are not nearly as desperate as other companies are to fill up gaps in the pipeline, so it would be sort of senseless for us to compete in the market where people are dramatically over-paying and we have a tremendous pipeline of our own. But it doesn't mean we don't want to work with other companies. You're going to hear more opportunities for us to leverage the capabilities that we do with what other companies can do in some very exciting spaces we're working on. But in terms of just going out and buying a Phase 3 molecule that treats Parkinson's disease by some small molecule mechanism, that would just make no sense for us.

And I think as Len mentioned, Intellia and Alnylam are very interesting examples, where we are, as Len said, leveraging our internal research capabilities with something that somebody else brings to the table, which we believe is very synergistic.

In terms of guidance, we try and give guidance where the knowledge is asymmetric. But we don't think, Geoff, to be frank, it's our job to try and guess things that we don't have any more information about than you guys have, and we also don't want to spend a lot of our internal team's intellectual horsepower trying to guess what a given number of patients will be. That's kind of why you guys are overpaid. You are supposed to make those guesses. So we don't have – Bob gives a lot of guidance on things that you don't have information about and there was a ton of it in there. But to give you product guidance and make guesses, I don't know. We don't want to get in that game, because that's not what really the game that the board is in or the company. In terms of price increases, this is not an environment where you can take price increases easily. We have felt that growing by price increases is not our strategy. We'd rather grow by fundamental increase in the penetration or diversity of patients that can be on our approved drugs or bring new drugs to market, taking small price increases consistent with inflation or medical inflation is perfectly reasonable. But we don't want to be participating in the undoing of the industry, where there's so much emanate (55:37) towards us, and there's so much potential for bad government action, egregious price increases are not a strategy we think are worth the points. In terms of capital allocation, I can assure you that the financial team and the board looks at this on a regular basis. We're well aware of all the data. We're data-driven. We know what you can do with dividends, with buybacks, with acquisitions, with bolt-on acquisitions, with internal discovery, with partner discovery, keep money in the bank. We've got them all, and we study them all, and I think we'll tell you about them as our strategy does or does not evolve. I think that covers your list, Geoff.

Next question please, operator.

We have Matthew Harrison from Morgan Stanley. Matthew K. Harrison - Morgan Stanley & Co. LLC: Hey. Good morning. Thanks for taking the question. I guess, if I could just ask a couple of the underlying trends on EYLEA for the quarter, you talked about DME growth again. I mean, can you just describe how you see that market growing and is that market's growing faster or slower than the AMD market still? And then, just talk a little bit about – I mean, in past first quarters, you've seen some underlying dynamics either from patients finding it harder to get to the doctor, or things like that due to weather, maybe you could just describe if there were any of those issues in the quarter. Thanks.

It's always hard to know. We had a good quarter with EYLEA despite the fact that there was some transient concern about intraocular inflammation, which based on our monitoring now, has returned to background levels, and we don't seem to have had any significant impact on the business there, which we're pleased with. The product grew year-over-year. I don't think we've really yet made the big push in diabetes, because we have a good approval for DME, and patients do kind of get to the doctor, although there are a lot that don't. But we're looking to get the broader indication for diabetic retinopathy, and then in constant with that have a much bigger push to get patients to the doctor hopefully to have their diabetic eye disease treated. We do see – so we haven't seen a big growth yet in diabetes, but we still see it. I should emphasize that while I said that AMD is well-penetrated, it's still growing by demographics. We're seeing an overall growth in the AMD market, because more and more people are living longer and so there are more and more people getting age-related macular degeneration. Okay.

Operator, next question please.

We have Phil Nadeau from Cowen and Company. Phil Nadeau - Cowen & Co. LLC: Hi. Good morning. Thanks for taking my questions. Maybe to follow up on those questions, two longer-term questions on EYLEA. The first on non-proliferative diabetic retinopathy. In theory, it's a large market, although our consultants said it may be hard to get anti-VEGF adoption there. So can you talk about your plans to change the standard of care, in particular in a patient population within that larger group that would be most susceptible to anti-VEGF therapy? And then, second, on the competition you alluded to in your prepared remarks, we did see some new data from brolucizumab this week. Could you give us your perspectives on that data? Thanks.

Yeah, so in the diabetic retinopathy, the needle mover from the people we talk to will be not simply or only the important thing of improving the diabetic retinopathy, but to prevent the onset of vision threatening diabetic retinopathy, the vision threatening complications, the sight threatening. And we're going to be able to look at those data from a PANORAMA study later this year. But I do think that this is like any other market, I mean, if you go back, I remember our Chairman, Roy Vagelos, told me that when he launched the first statin, the cardiologists told him, well, there's no real need for a statin, we can control all that with diet and exercise and that was the prevailing view. So there is work that you have to do to change the practice of medicine based on data. It doesn't happen overnight. It takes really strong data, a really strong commercial effort. We're really excited how Marion has integrated so quickly into the organization and she's taken that on as something that's really important to us. So we're looking forward, over the years to come, to have success in that area. There was a recent approval by the FDA by a small company of a untethered device. That is a device that could diagnose diabetic retinopathy and whether or not you should urgently see a retinal specialist merely by – that could sit in a drug store, it could sit in your general practice office, it could sit in your ophthalmologist, it could sit with the optometrist. And it's been approved, it doesn't need a doctor to administer. You just take a non-dilated picture of the retina. And so – and they've found sort of striking data, which the FDA approved the drug on. And I think…

Yeah, I wanted to expand on one thing that Len said. And, Phil, you referred to the fact that in some ways doctors are perhaps a little cautious about treating patients with diabetic retinopathy and they have views on that. I think one key aspect of the studies that we're undertaking right now, sort of like what we did with Praluent, is to define the patients who are at the highest risk of vision threatening complications. So you might imagine that everybody, patients and doctors, would be much more interested in using a very effective preventative therapy if they knew they had a very, very high risk of having a catastrophic event that could cost them their vision. So part of the aspect of our studies is not only to show that we're effective at preventing these events, but identifying the segment of the population that is at highest need for needing such a therapy because they're at such a high risk.

Operator, next question please.

Next we have Cory Kasimov from JPMorgan.

Hey. Good morning, guys. Thanks for taking my question. Wanted to ask about how we should be thinking with regards to the reimbursement landscape with PCSK9s going forward. Should we expect more exclusive contracts with payers similar to the one announced with ESI? And maybe more broadly along those lines, are you getting the sense of how payers are thinking about the best way to define a high-risk patient population that would benefit most from Praluent? Thanks

This is obviously a highly competitive space. There's another PCSK9 inhibitor out there, obviously. So we can't sort of peel back too much, but we are excited about the fact that there is a possibility to improve the access. Make it easy for patients to get the prescription that the doctor writes, that it will be approved and make it so the patients can afford it. We also, the third pillar of all that which I don't want to get lost, is we want to make sure that there's some – a profit left for the innovators on both sides, so that we don't wind up racing to a place where there's no profit. So it's a delicate compelling marketplace. That's about all we with can say out there but we're working hard to get access and affordability.

Operator, next question please. And also in the interest of time this will be our last question. But we will be available to answer questions following this call so please send me an e-mail and we'll set some time up for a follow-up call.

We have Geoff Meacham from Barclays.

Hey, guys.

Hello?

Hello? We didn't hear you. Great last question.

Geoff, we lost you.

Operator...

Well, let me ask the question for Geoff. That was a great quarter, Len. Thanks very much for all that and it's fairly self-explanatory. All right. I think that wraps its up.

Operator, that concludes our call today.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating and you may now disconnect.