Ladies and gentlemen, thank you for standing by, and welcome to the Regeneron Pharmaceuticals Third Quarter 2020 Earnings Call. [Operator Instructions] I would now like to hand the conference over to your speaker Justin Holko. Please go ahead, sir.

Thank you, Deborah. Good morning, good afternoon and good evening to everyone listening around the globe. Thank you for your interest in Regeneron Pharmaceuticals, and welcome to the third quarter 2020 conference call. An archive of this webcast will be available on our website. Joining me on the call today are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. Dr. George Yancopoulos, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Senior Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Commercial -- 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 today's 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, financial forecasts and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, as well as intellectual property, pending litigation, other proceedings 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, including its Form 10-Q for the quarterly period ended September 30, 2020, which has been filed with the SEC today. Regeneron does not undertake any obligation to update 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. Dr. Leonard Schleifer.

Thank you, Justin, and thanks to everyone joining today's call. In the third quarter, Regeneron delivered another strong financial performance of double-digit top and bottom line growth while achieving numerous milestones in our research and development pipeline and making remarkable progress against COVID-19 with our novel antibody cocktail. Importantly, our growth and financial strength is being fueled by an increasingly diversified set of revenue and earnings streams while we invest in R&D for the long term. Furthermore, our results show the importance of products that meaningfully address serious medical needs and have the power to transform lives even during a pandemic. EYLEA is a great example. EYLEA Global net sales were $2.1 billion in the quarter and grew 9% compared to the same period last year. In the U.S., sales rebounded from second quarter COVID lows to $1.3 billion and grew 11% versus prior year. The efficacy, safety and convenience that EYLEA offers in protecting eyesight had proven to be highly valued by treating physicians and their patients as the product again outperformed the anti-VEGF market for retinal diseases. Next, we continue to build momentum with Dupixent as we in Sanofi recorded our first ever quarter of more than $1 billion in sales. This milestone speaks to the power of Dupixent across a broad array of type 2 inflammatory diseases and to our team's ability to execute despite COVID-19. Adding to this momentum, we've recently announced results from another successful Phase III trial, this time in pediatric asthma. We are eager to submit these data for regulatory review and expect that Dupixent will remain a robust and durable growth driver for years to come. In oncology, we are solidifying our leadership position in cutaneous squamous cell carcinoma. Additionally, the FDA has granted priority review for our regulatory filings in lung…

Thanks, Len. And as Len just pointed out, we are advancing programs across all stages of our diverse and growing portfolio. With the pandemic unfortunately still raging and even escalating, we know there's a lot of focus on COVID 19, and we will start with our REGN-COV2 program. From the beginning, there was a lot of attention to our efforts against the coronavirus because of our success using a similar approach with Ebola. As you just heard from Len, we received FDA approval for our Ebola cocktail that our team delivered, validating our approach for not only this, but other deadly infectious diseases and particularly COVID-19. We're investigating REGN-COV2, our antibody cocktail for COVID-19 in infected patients as well as for prevention in several ongoing clinical trials. Earlier this year, we released a descriptive analysis of the first 275 patients in the REGN-COV2 seamless Phase II/III trial in ambulatory patients. Importantly, we obtained insights into the natural history of COVID-19 from these early data. Large numbers of patients normally generate their own antibodies against the virus early on, and this robust endogenous immune response is associated with rapid clearance of the virus and decreased need for medical attention. That's why most patients do so well. However, some patients are slow to mount an immune response and are at higher risk for attended medical visits. In line with this observation, our initial analysis show that providing our exogenous antibody cocktail did not provide much benefit to the fast responders, but it benefit those who did not mount their own immune responses efficiently, allowing REGN-COV2 to clear virus more rapidly and decrease the need for future medical attention in these otherwise slow responders. Last week, we provided important updates from this ongoing study in ambulatory COVID-19 patients. In a formal statistical way,…

Thank you, George. Our third quarter commercial results reflect a solid execution across our core brands, EYLEA, Dupixent and Libtayo. We remain confident that the competitive strengths of our growing and diversified commercial portfolio will carry us through and beyond the COVID-19 environment. I'm going to begin with EYLEA, which grew 9% year-over-year to approximately $2.1 billion in global net sales. In the U.S., EYLEA grew 11% year-over-year with net sales of more than $1.3 billion as the anti-VEGF demand recovered. In the U.S., EYLEA outperformed the category with shared gains from both branded and unbranded competition. In fact, EYLEA's share of the branded U.S. category grew to more than 70% for the quarter based on volume, and EYLEA remains the #1 prescribed anti-VEGF therapy in wet AMD and diabetic eye disease. Patient volume increased as those who delayed treatment earlier this year have returned to retina offices. EYLEA's market-leading clinical profile offering dosing flexibility, real-world experience and established safety led to a quicker recovery and stronger growth across all indications than the competition. EYLEA's flexible 12-week dosing regimen in wet AMD and the newly launched prefilled syringe also support EYLEA's market-leading value proposition. We are monitoring the recent spike in coronavirus cases across the country. In some hotspots, retina offices are beginning to see some modest reductions in patient volume, which may impact future EYLEA demand. That said, retina offices have become highly effective in managing their patients in this environment compared to the early days of the pandemic. In summary, EYLEA had an impressive quarter. Turning next to Libtayo. Third quarter global net sales grew to $96 million. In the U.S., net sales were $72 million with consistent and steady volume growth aided by the gradual reopening of infusion centers and an increase in breadth of prescribing. Libtayo…

Thank you, Marion. For the third quarter of 2020, Regeneron delivered strong based growth on both the top and bottom lines, resulting from continued execution across all aspects of our business. Improving Dupixent profitability and contributions from additional revenue sources highlight the continued diversification of our business. For the third quarter, total revenues grew 32% year-over-year to $2.29 billion, driven by strong U.S. EYLEA growth and higher Sanofi collaboration revenues as a result of increased Dupixent sales and achievement of a $50 million sales milestone. Non-GAAP diluted net income per share grew 25% year-over-year to $8.36 on non-GAAP net income of $961 million. Since Marion discussed our U.S. EYLEA results, I will start with our Bayer and Sanofi collaborations. Starting with the Bayer collaboration. Ex U.S. EYLEA net product sales reported to us by Bayer were $780 million, representing a growth of 7% on a reported basis, compared to the prior year and a 22% improvement from second quarter 2020 lows. Total Bayer collaboration revenue was $300 million, of which we recorded $288 million for our share of net profits from EYLEA sales outside the U.S. Total Sanofi collaboration revenue was $353 million in the third quarter. Our share of the profits from the commercialization of non-IO antibodies was $213 million. This compares favorably to profits of $94 million in the prior year, which was primarily driven by higher Dupixent profits. We also recognized a $50 million milestone payment from Sanofi as a result of Dupixent, Praluent and Kevzara ex U.S. sales achieving $1 billion in the trailing 12-month period. Next, we announced in July a $450 million supply agreement with the U.S. government for batches of REGN-COV2. We record sales as batches are supplied to the government. In the third quarter of 2020, under this agreement, we recorded an…

Thank you, Bob. Deborah, that concludes our prepared remarks. We'd now like to open the call for Q&A. We have more than 20 callers in the queue. So to ensure that we are able to address as many callers as possible, we will answer one question from each caller before moving to the next. Please go ahead, Deborah.

[Operator Instructions] And we'll go with our first question. We've got Carter Gould with Barclays.

I guess for George and Len, clearly, a lot of enthusiasm around the potential for the costims as we look to some of those readouts. I guess when we look to 2021, are we going to have a clear signal if these are living up to their promise in 2021? I know moving through some of these dose escalations takes time, but do you guys have confidence we'll be in a position to have a clear read on if they're living up to their hype next year?

Well, it all depends on, as you said, these dose escalation studies, how they progress and proceed, we certainly hope that we will be getting signals of efficacy sooner rather than later, but it all depends on the clinical development and how that all goes. But we remain incredibly enthusiastic and excited about this class, and we're investing enormously. As I said, we have pairs of CD3 and CD28 bispecifics for numerous different cancers, not only the ones that are already in the clinic, but ones that will be entering into the pipeline over the next year or 2 or 3. So we're very excited about this class and the potential of combining them with the 2 sets of bispecifics as well as with the PD-1.

And your next question comes from Chris Raymond with Piper Sandler.

Just on REGN-COV2. Just wondering if you could walk through the biology behind why there would be a safety signal in these vented or high-flow oxygenated patients. I mean, I guess, especially given how clean it looked in mild-to-moderate cases, is there some threshold of viral load? Or is it underlying overactivation of the immune system that's driving this problem? And can you maybe describe the ADEs, please?

So first of all, we should point out that we remain blinded to what's going on in those 2 cohorts that were paused. They weren't halted, they were paused so that the IDMC could evaluate the ongoing patients and then decide what to do going forward. We do not know whether there really is any safety signal. And as you said, I think theoretically, there is not really a great deal of rationale why there might be a safety signal there. You could come up with all sorts of complicated scenarios to explain it. But until we're unblinded to the data, until we really get to look at it, at this point, it could simply be that there's lack of efficacy or maybe even early trends which will reverse. So as you said, theoretically, it does not make a great deal of sense. I think the whole concept of what they call ADE or antibody-dependent enhancement, is something that does not look like it's really playing a role in this disease. So we remain hopeful that there is not going to be a safety signal and eventually, at least in some subset of these patients, even the hospitalized patients that we may provide a benefit.

Your next question comes from Evan Seigerman with Crédit Suisse.

I'll limit it to one. So in the 10-Q, you listed the EUA for the AB cocktail during this quarter. Is this official guidance from the FDA? And any idea as to what patient population that this EUA would be granted for?

So it's Len. We have said that we are focusing on the patient population where the data comes from, which is outpatients who have the best baseline characteristics, which would make us think that they would benefit the most, whether that's risk factors or high viral titer or eventually perhaps low antibodies. Those are the sorts of patients we are focused on as an outpatient. There is no PDUFA time line for the EUA. We expect action in the relative near future, but there's no guarantee that will come. The FDA is doing a very careful analysis. We can tell from the kinds of questions we're getting. And we hope that it will be -- reach a successful conclusion. But we don't know the time line because there are no specific time lines. We do know they're working just about as hard as we can imagine and have seen the FDA work. So we're hopeful soon, we'll get an answer.

Your next question comes from Yatin Suneja with Guggenheim Partners.

Question is on EYLEA. Obviously, a very solid quarter. Can you maybe just give us some sense on the relative contribution from AMD versus other indication? How the market share is evolving in DME? What level of penetration you have achieved? And then obviously, COVID is spiking in the Q4...

Well, you have to ask one question. So far you're up to 3. Marion can handle the first one.

I'll do -- I will do my best. And first, let me comment that in the times of pandemic, there probably was more of an impact on patients with diabetic eye disease not either receiving a diagnosis or coming in for treatment, but were starting to see recovery in that. I'm pleased to report that on the split of use of EYLEA by indication, we are approaching 60% for wet AMD, which means over 40% of our business is coming from other indications inclusive of the diabetic eye disease. So on balance, we continue to see diabetic eye disease as our largest future opportunity going forward, but we are the market-leading anti-VEGF therapy across all indications.

Your next question comes from Yaron Werber with Cowen.

Just a quick follow-up on the REGN-COV2. The ongoing studies, George, are still across all patients, not just seronegatives. You clearly saw activity in seronegatives. Lilly sort of, obviously, both with their single and combo, really didn't see the same data. So any explanation to that? And why are you still sort of doing studies across all patients?

Yes. I'm not sure what you mean by Lilly didn't see the same thing. They didn't actually look for where their effect was. And right now, the way the program works is, we are not having any evidence of any untoward effect and maybe just a very small benefit in the seropositive patients who have their own antibodies. I think that if one could actually do point-of-care testing, which is unfortunately, at this moment, not immediately available in most cases. Once the drug might be available, let's say, under an EUA, you might want to limit it to patients based on those characteristics. However, because the benefit/risk does not have any evidence of negative untoward effects in those individuals, one could just treat the entire population, even though the benefit is mostly driven by those who, as we described, are seronegative, have higher viral loads and/or have high risk factors.

Yes. Just -- so just to amplifying on what George said, Yaron, and he said it, I just think it's worth repeating that we did see an effect in the overall population. It's just, as he said, that effect was driven by the people who needed the antibody and that they hadn't mounted their own immune response. That observation, which is something that the team predicted, which is that people who mounted their own immune response wouldn't benefit so much from giving them more of an antibody makes perfect sense. And those that hadn't mounted their own immune response would benefit much more also makes perfect sense, and that is exactly what they saw. And you even see it in the placebo-treated patients that if you don't have antibodies, you start with a very high viral load. If you do have antibodies, you're already 3 logs lower. So all of the biology that George and the team predicted and described was borne out in a very exciting way. So I think it's just a matter of where you see the effect being driven by, not whether or not you can treat an entire population.

And I'm sure, by the way, if Lilly did the same detailed analysis, they would see that their benefit would also be driven by the same sets of patients. They just didn't do those analyses.

Next question please.

Next question comes from Geoffrey Porges with SVB Leerink.

Just a follow-up question on COV2. I'm just not sure how this is going to work. We can't even execute testing in this country reliably. So how are you going to screen the individuals who aren't mounting an immune response on an outpatient basis and then initiate treatment on an outpatient basis? It's just confusing. So help us understand that. And would it be sensible to treat everybody going to hospital for elective procedures of any kind or something else along those lines? It's just a little confusing how you're going to use this medicine.

Right. I think what -- as we just said, and as Len amplified on, the effect is seen in the overall population. It's just driven by those individuals who have the characteristics that we described. The notion is that just as in the clinical studies, it could be given to all of the eligible outpatients because there is no risk to be -- to the individuals who won't benefit the most. So I think that -- the strategy, of course, I think, would be taken would be to limit the drug right now without doing any of the advanced screening and so forth. But to the people who are at the highest risk of progressing to needing medical attention, give it to those people, irregardless if you don't have the point-of-care testing, irregardless of their baseline viral load or their antibody status. In the future, if such testing became available, then you might not want to waste the drug on the people who might not benefit. But initially, I think it would be given to the people who are at the highest risk of developing complications with the goal of preventing those. As we showed in the study, you will reduce dramatically the need for further medical attention. If you give it to individuals and the higher risk the population that you give it to, the NMT goes down. But the only reason really to limit it at this point is because there's going to be limitations for the amount of doses available to treat.

Yes. Let me just also add to that, Geoff, 2 things. First of all, as -- I think George pointed out in his presentation when we first disclosed this data. There's a very high correlation between the baseline viral load and whether or not you have antibodies. It's -- on average, you're 3 logs higher if you don't have antibodies and viral load. So you could use viral load. And everybody who's going to get treated has a viral load test. They have a PCR test. It's reported as -- back as positive, but there's actual cycle time. So I think the testing of reporting -- a testing doesn't necessarily have to change, perhaps the reporting has to change in terms of what your cycle time is. A very low cycle time, meaning very high viral load predicts low or no antibodies. So that could be used, as George said, to screen patients. The second thing is our partner, Roche, is really one -- probably is the leading company for testing. They have a platform for antibodies that can test hundreds of millions of people per quarter, and it's deployed in, I think, like 70,000 different points of care. So we're working with them to see whether that test can be validated with our dataset or not. So I think there are lots of ways to get at this. You could use -- you can treat everybody, obviously, limiting to the people who have risk factors or you could start to narrow it down to people who have high viral load, low cycle time or eventually with our partners' capabilities, people who at point-of-care have no antibodies. So I think there's a lot of flexibility. It's just that we don't have all this buttoned down in this emergency situation. And it will probably evolve fairly quickly if we get an EUA.

But just to simplify, initially, we believe it will be used in the overall population based on risk factors with that regard to serology or viral load. And as Len said, eventually, as these approaches evolve and change, it may allow targeting of the drug to those who might even benefit the most.

Next question please.

Your next question comes from Cory Kasimov with JPMorgan.

I have plenty more on COV2, but given the number we've already had there, I'll change the subject. I want to ask Bob about the R&D spend and really thinking about trends going forward. So in terms of the investment you're making on the antibody cocktail, how long do you expect this to kind of persist for? And just kind of overall, wondering if you can give us any sneak peak into 2021?

Sure. Thanks, Cory. Let me see if I can give you a little bit of color. So as I said in our prepared remarks, we're not going to provide 2021 R&D guidance today. We do expect that next year's R&D expenses will be higher to support pretty much everything that George said with regards to the expanding pipeline, early stage assets, the partnerships with Alnylam and Intellia, which are really starting to blossom and certainly our ongoing COVID-19 efforts. If you look at 2020, where we sit right now, we anticipate spend of approximately $400 million on our efforts against COVID-19 within the year of 2020. So if you back that spend out from our full year 2020 non-GAAP R&D guidance midpoint, our underlying growth rate in R&D spend, excluding the COVID program efforts, is trending about 15% higher than our 2019 as our -- as we move forward. So Cory, I would use that kind of as a stake in the ground in terms of where we're going to go. I mean, certainly, our COVID-19 spending is going to continue on. People can see on clinicaltrials.gov the extent of the programs that we have, trials that we have going, that will play a factor into 2021.

Next question please.

Your next question comes from Robyn Karnauskas with Truist.

Another one on COV2. So just because it seems like this pandemic is just getting much worse in the United States and globally, can you talk about your efforts to expand manufacturing next year beyond the 300,000? And then I was just curious, given how profile it was that the President and others got a different combination therapies, can you biologically talk about your thoughts on should this drug be combined with Dex or other drugs immediately upfront biologically? And when would you just start like maybe a combo trial that would sort of evaluate that, sort of really make sure that this is a cure rather than just reducing the viral load and reducing time to recover in some patients?

Right. George can -- sorry, I was going to say, George can deal with that. I was going to just deal quickly with the manufacturing question, which is we are scaling up and we expect to be able to make substantially more next year than we were able to make this year. Obviously, we'll have a full year of manufacturing, which we didn't -- we did not have a full year of manufacturing to deliver the 300,000 doses. And we expect to have more facilities that are now operational and dedicated, plus we expect to multiply that with our partner, Roche, who really has been a terrific partner so far. And they, as you know -- because we see their might because we compete with them in many fronts, they're really sophisticated in the biologics space with their Genentech history and the manufacturing capacity. And they're working very hard to bring online very enhanced and large manufacturing capacity. I'll let George deal with the question about combination therapy.

Yes. I think the most important thing to note is because the mechanism of action, our treatment is just an antibody that is essentially analogous to the endogenous antibodies that many of the individuals are making. As I described, we're just providing it to those people who are either slow or failing to make their own antibodies. There's no expectation and no mechanistic rationale for any safety interactions of concern. There should not be any reason why you couldn't mix this with essentially any drug that doesn't have untoward side effects because all we're doing is giving you more of the antibodies that your body normally makes. So that said, you could theoretically combine our treatment with any other treatment without any reason to believe that there would be negative interactions. I remind you that right now, where our data stands and where we are -- we have filed for the EUA is in the outpatient setting, where these other modalities are not being given at this point. So it's going to take future studies plus analyses in the hospitalized patients where you look at patients who had combination therapies to determine whether patients who have these combinations do better than patients who just receive one or the other therapy alone. But in the outpatient setting, right now with our data, it will be our antibody because those are not patients where remdesivir or dexamethasone is currently a standard of care.

Next question please. Next question.

Alethia Young with Cantor.

I just want you guys to talk a little bit about the potential growth opportunity you see there. Obviously, you've had incredible launch so far, but you've gone deeper into commercial marketing and DTC. And I just kind of want to think about how do you drive deeper penetration into biologics, both -- biologic market, both in ADN and also -- sorry, asthma?

Certainly, I'm happy to comment. And today, certainly, we reported, as did Sanofi, very strong results for Dupixent, both in the U.S. and ex U.S. markets. The really important thing to keep in mind is while we've made certainly inroads in helping atopic dermatitis patients and patients with respiratory conditions of asthma and nasal polyps, there is still are -- in all of those indications that are currently approved, not to mention the future indications, a lot of incremental unmet need. And then beyond that, to your point of strategies and promotional platform and activities to advance the market, Dupixent has been very responsive to promotion. We've been seeing certainly uptick in new initiations and also a remarkable consistency of patients staying on therapy because of the results that they're receiving either in their skin condition or their respiratory condition. So we'll continue to do that. We're looking at a lot of different mechanisms for advancing our promotional platform. We have highly effective field teams in the marketplace. We also benefit from very strong reimbursement across indications and across age groups and certainly, we'll continue to advance on all the in-line indications we currently have, and we'll be very, very well prepared for our future indications as well.

Thanks Marion. Next question please.

And your next question comes from Ronny Gal with Bernstein.

Congratulations on the very nice quarter. My question is actually on the EYLEA, Lucentis dynamics. You've shown a 10% revenue growth. They've shown a 5% revenue decline year-over-year. So obviously, capturing share. But I was wondering about the new patient volume. If you can just share with us, if you could, kind of like where are we in terms of patient starts versus a year ago? And how far do we have to go before we come back to line? And anything you can share about pricing terms as it seemed to be -- you just commented this in the press release, if you can give us a bit more there?

Ronny, in terms of performance of EYLEA in the anti-VEGF category, as I mentioned, we are seeing a rebound in terms of patient treatment coming back into offices. We see an advance in EYLEA's performance versus a year ago. And then coupled with that, we are seeing an increment in share gain from both branded and unbranded competitors. I also mentioned, if I just put it into volume terms for you in the branded marketplace that EYLEA now approaches just over, in fact, 70% of the branded market in the quarter by volume. So we're seeing robust performance and we would attribute that to EYLEA's overall value proposition for retina specialists in choosing anti-VEGF therapy, the -- certainly, the clinical profile, efficacy profile, flexibility of dosing. Now the prefilled syringe is incredibly timely is a convenience, but also in the current environment of office throughput in efficiency, and then beyond that, the established safety.

Operator, we have time for 2 very quick questions if we could try to squeeze them in.

Your next question comes from Biren Amin with Jefferies.

Can you just talk about the competitive landscape in retina with your thoughts on faricimab, given we've -- they're going to have Phase III data relatively soon?

Sure. So I think we all learned a lot about -- I'm sorry, Len, you go first. I'll come back if you'd like.

No, no. Go ahead, Marion.

No. I was just going to comment that I think that the -- for a product entering the marketplace today, it's not assumed anymore that a safety profile will be there until the product has actual market experience. So I just would mention at the start, we always monitor competition very, very carefully, both in market currently and future competition. But certainly, EYLEA sets a very high bar in terms of the clinical profile, the safety profile and the level of experience. But Len, over to you.

No, I think you covered it. Let's go to the next question and the last question.

And your final question comes from Terence Flynn with Goldman Sachs.

This is Dan on for Terence. Just for the Phase II trial of your BCMA bispecific antibody. Just wondering if you could share any more details on the trial and if you're working to develop a subcu formulation?

Yes. I think that right now, we'll -- you'll get updates on the BCMA program at ASH. We have announced that we're going to be entering into a pivotal program very soon. And I guess it's fair to say that it makes sense that we would be developing, yes, a subcutaneous formulation.

Thanks to everyone for joining today's call. We appreciate you dialing in, knowing that many other companies are reporting today. So thank you for your attention and for your questions. Bob Landry and the IR team will be available for additional questions and calls as needed today. Thank you, everyone. Be safe.

This does conclude today's conference call. Thank you for your participation. You may now disconnect.