2023-03-15 11:39:06 ET
Regeneron Pharmaceuticals, Inc. (REGN)
Barclays Global Healthcare Conference
March 15, 2023 9:00 a.m. ET
Company Participants
Ryan Crowe - Vice President of Investor Relations
Robert Landry - Chief Financial Officer
Conference Call Participants
Carter Gould - Barclays
Presentation
Carter Gould
[Technical difficulty] -- Barclays Global Healthcare Conference. My name is Carter Gould, senior biopharma analyst, here at Barclays. I am pleased to welcome Regeneron Pharmaceuticals to the stage to help us kickoff the day. Joining me on stage, Robert Landry, CFO of Regeneron, as well as Ryan Crowe, VP of IR. Before we get started with Q&A, Ryan is going to appease the lawyers, and then Bob should make some opening comments.
Ryan Crowe
Thank you, Carter. Just very quickly, I'd like to remind you that remarks made today may include forward-looking statements about Regeneron, and 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 description of material risks and uncertainties can be found in Regeneron's SEC filings. Regeneron does not undertake any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Bob?
Robert Landry
Great, thanks, Ryan. And good morning, Carter thanks for having us here. We always look forward to coming to this conference. So, I'm just going to open it up, maybe three minutes of just kind of what's happened in the quarter to date, and then we'll talk about a couple of catalysts that are coming. And then I'm sure Carter will dig a little deeper into those items.
So, we did get acceptance of our filing with regards to the 8 mg Aflibercept. That came in. It came with a June, end of June PDUFA date, which was obviously very positive on our end with regards to that fast approaching. With regards to Bayer, so we do collaborate highly with Bayer ex-U.S. So, Bayer has made the submissions with regards to the EU on the 8 mg. And then they also just did the Japanese filing. And again, Japan is a fairly large market for us on the ex-U.S. market on that front. With regards to Dupixent, there is always something happening with Dupixent. So, again [technical difficulty] we got our sBLA accepted by the FDA in CSU indication.
And then in Europe, they approved EoE in the first quarter, which was a positive. And we continue to wait. We do have CA, which talks to the safety of Dupixent all the way up to five years [in AD] (ph). So, we expect to get that by the end of the month. And then with regards to Libtayo in our non-small cell lung cancer we did, in Europe, get CHMP approval for PD-L1 positive indication on that, that should be coming shortly on that. So, again, a pretty busy, pretty positive first two-and-a-half months. With regards to catalysts, so, and again in know Carter will dig deep. The biggest catalyst has to be the BOREAS trial which is coming with regards to COPD. It's a gigantic indication. We're hoping it's a type-2 disease that we can cure with COPD -- with Dupixent, and we'll find that out shortly.
We also have bispecific information coming with our [bispec] (ph) platform, that's going to be with PSMA drug. We did show some prostate information at ASCO earlier. So again, we look forward for further readouts on that. Regards to hem/onc, so we have our CD20xCD3 in non-Hodgkin lymphoma, and then we have in multiple myeloma our BCMA. So, we're going to have -- you know, continue to press with those forward and hope to have readouts on that. We are in collaborations with Alnylam. And again, I believe is Alnylam is here with regards to APP. And again we're hoping, in the first-half of the year, that we get a readout in terms of whether or not siRNA can make any head roads into [CNS] (ph), which would really kind of opening up a ton of opportunities.
And probably last, but not least, again we'll be -- the, hopefully, successful launch of 8 mg aflibercept on June 27, pending FDA approval. So, again, a lot of near-term catalysts on the horizon.
Okay, Carter, next to you.
Question-and-Answer Session
Q - Carter Gould
Perfect, thanks. So, before we get into all the juicy margin questions, we're going to test you on your pulmonology boards here. So, maybe first coming back to BOREAS, and I think when you guys talked about the Phase 2 interim portion of it, you talked about the high bar you set given the outlay you were going to need for the Phase 2. So, can you help frame how we should think about deferral, I know you're not going to get into specifics or at least you haven't to date, but maybe just help put some color on that course?
Robert Landry
Sure. So, again, what Carter is talking to, in June of 2020, we did get interim data on the first trials, the BOREAS trial for COPD. And again, these are being run by Sanofi in the Alliance. And it was kind of a no-go assessment. And they decided, again they were blinded to the information. It was an independent data monitoring committee that came back. And based upon the thresholds that were there basically gave both parties the thumbs up to go. When that happened, we immediately launched, I would say, at risk trial number 2 Phase 3, which is the [NOTICE trial] (ph). And then, Ryan, maybe touch upon what the -- between the utility in the analysis we saw.
Ryan Crowe
So, we started BOREAS without the benefit of knowing what Dupixent would do in Type 2 COPD. We didn't run a Phase 1 or Phase 2 study in the population. We reused a comorbid nasal polyps population to see a signal, move quickly into Phase 3. So, that's why this interim analysis is very important. And before we began BOREAS, we set a pre-specified threshold whereby we would either achieve it and move forward with the second Phase 3 or stop the study. So it was -- I would put the bar at somewhere between a futility analysis, which was kind of the bare minimum you would need to move forward, and on the other end, a positive Phase 2. We think we've set the bar sufficiently high such that it would warrant further investment in the large Phase 3 study. And with that blinded decision by the DMC we move forward notice.
I'd add that there was no stopping criteria as part of this interim analysis, so there was no way that we would have known -- we don't know what the bar -- we don't know how much we achieved the bar by and it wouldn't have stopped regardless. It was going to move forward and run to the full 52 weeks.
Carter Gould
Okay. So, the data came out. And shortly right after the world changed.
Ryan Crowe
Correct.
Carter Gould
And we've seen additional data come out in the COPD population thereafter that we saw the exacerbation rates drop during COVID as, presumably, a lot of these patients were sort of hiding out in their homes. How does that complicate the Phase 3's -- I'm sure you made assumptions around event rates and there's reasonably -- they're going to be meaningfully lower. They should affect both arms, but in terms of just teasing out a signal, how does that complicate or not the odds here?
Ryan Crowe
It's well-documented, as you said, Carter, that COPD exacerbation rates were depressed during the lockdown periods of the pandemic. We saw that as everybody else has. But I think we are confident that the studies are adequately powered to be tacked a treatment effect. And to your point about placebo, and it should also affect the placebo arm in the same that it would the Dupixent arm. So, my belief is that if there is really any disease modifying activity with Dupixent, that it will be demonstrated despite potentially a lower than assumed exacerbation rate for the overall population.
Carter Gould
Okay. And when we think about when we get this press release, historically, you guys have done a pretty good job of putting in data into these press releases for us to evaluate. This seems a little bit different in that you have notice going on in the background. Is that reason why we may get less data than usual given the similarities in trial design?
Ryan Crowe
I think we have a reputation of being very transparent in allowing all readers to kind of assess the strength of the data in the press release form, and then obviously moving forward with scientific presentations to give the full detail. But we tend to provide more detail than less. With this trial, obviously, we're partnered with Sanofi, and I -- obviously the details of the press release are still being determined. But I would think, at minimum, we would at least provide the magnitude of the reduction in exacerbations, the primary endpoint for the study, and potentially more. And I don't think that notice ongoing, and it's still enrolling patients. But I don't think that will really impact our decision on the level of detail.
Carter Gould
Okay.
Ryan Crowe
The patients, obviously, are blinded. The investigators will be blinded. All site personnel are blinded. So, I think maintaining that blind in notice will be sufficient to make sure we don't bias the study even with the BOREAS results.
Carter Gould
Okay. And should we still think that both these studies will be required for approval? I know the guidance documents leave the door open for potentially filing on a single study if the results [indiscernible]?
Robert Landry
Yes, well, Carter, our base case is that you're going to need both. I mean if we're pleasantly surprised, well, that would be great. But we are simply going to need both the file.
Carter Gould
Okay. Last question on the pulmonology side here, what should we -- what's the potential read-through from BOREAS and NOTICE to the IL-33 study, different populations but relative to underlying assumptions or any other sort of mechanistic read-through that may or may not apply here?
Ryan Crowe
Yes, a different and broader population, Carter. Obviously, the Dupixent focusing only on the type 2 phenotype versus IL-33, at least our studies, AERIFY-1 and AERIFY-2, which we're focusing on both type 2 and non-type 2 patients. I think probably more important than any read-through from BOREAS and NOTICE is actually the Phase 2 data that we've already generated for Itepekimab, which I believe we published in 2021, which showed in non-smokers a 42% reduction in exacerbation, which is a huge result. There was not that same treatment effect in current smokers though. And that Phase 2 study informed how we designed AERIFY-1 and 2, we are only looking at non-smokers -- former smokers, and of course we'll look at both type 2 and non-type 2 patients in that study. And data is expected, I believe, next year, and then with a potential filing, assuming supportive data, in '25.
Carter Gould
Okay, great. And we will pivot here to some of the other topics. There's certainly no shortage of topics here. Maybe -- so, Bob and I have a bit of a routine on, when we go through the earnings notes, it's like what does EYLEA print, where does Dupi print, and my third thing I always look at is where are Dupi margins. And, inevitably, they outperform out expectations. And then I ask Bob what does this mean about going forward. And he cautions me a little bit, and then they [go out] (ph) again the next quarter. So, in 4Q, I think if just look kind of the evolution of Dupi margins relative to, say, the start of 2021, a meaningful expansion there. And this is even before we get sort of the process improvement. So, can you maybe -- to what extent is that a fair kind of stable base today to think about that expansion, and any additional color as we think about Dupi margins going forward?
Robert Landry
I think what Carter didn't say, after each call I get a data boy, with the margins going up, being able to meet his models. Yes, the first couple of years with the Alliance launch, it was just difficult with regards to kind of show leverage. It just wasn't there. And then, as you know, we did kind of DPC for the first time, that was a big flood of DPC across asthma and AD within the U.S. markets. And the margins weren't just popping as much as we thought. But I think within the last -- certainly within the last 18 months, we've had really good progression with regards to margins.
I think in Q4, year-over-year for Q4 was like a 900 basis point margin improvement, which again which is showing the leverage that we have, right? We have the necessary sales forces; we're in the necessary countries. And we're just kind of laying on new indications. Like I said, we just got the EoE indication approved in the first quarter in Europe. And again, that's proven to be a much bigger indication in the U.S. than we ever thought it was going to be. So, I think that we are at steady state, and I would love for the margins and I expect the margins to continue improve year-over-year.
Now, we have also being saying that on top of that -- on top of the normal course, we have done something that we normally do with our antibodies. In which, we try to look for yield improvement. Can we get better cell lines than we currently have? So, we launched the product with Sanofi with a C2 cell line. But that didn't stop the group enteric count. So, we have a group specifically designed for this. They predicate yield improvement. So, we have come up with a C3 cell line. And it's being approved by both the FDA and in Europe. And again, we are getting it approved throughout the other countries in the world.
And what this does compared to the C2 line with regards to bulk drugs, we get three times better yield with regards to active proteins in the number of doses per batch, right? So, the same cost per batch C2 versus C3. But I am getting three times as many doses as a result of that. Now, you will begin to see some of that kind of come through in the second quarter of 2023 as we kind of start to make the switch from the C2 cell line to the C3 with regards to the bulk drug. And probably by the end of the year if things go right, probably 50% of the products of what we sold will be through this C3.
So, again 2024 will the big driver. But, you will begin to see hints certainly in the second-half of the year with regards to cost of goods sold. The other beautiful thing that it does particularly because of the volume that Dupixent is creating under the C2, it really helps with regards to capital expenditures, right? We don't need to put in more 10k capacity with regards to production because we are getting three times better yield that of the same 10k capacity. So, it's really, really been a bonus for us. And again, Sanofi and Regeneron look forward to the fruits of that with regards to margin expansion going forward.
Carter Gould
Great. Maybe moving on to high-dose Eylea, you touched on at the start sort of a shorter turnaround time on the review. Can you talk through the implications of that for the launch and potential J code coming earlier as well just sort of the importance or I guess the lot of importance of J code during that initial couple of months?
Robert Landry
Let me touch upon in beginning and Ryan will take the back half of that. So, as we mentioned while we filed at the end of December, we got it accepted the filing in end of February. We are expecting kind of a late August launch with regards to the timeframe. And we are using a priority review voucher that we got for Inmazeb, which was our Ebola drug when that was approved. And we were very pleased to see that upon the letter that came back to us that they were looking at the 8 mg as kind of a non new molecular entity which basically had a 10-month review time. You put on the four month PVB shortening, and then, you get six months, right? So, you go from end of December to end of June, which was really kind of -- was positive news. We thought we could have the possibility. But, it was fantastic that it was kind of cemented with the FDA letter.
Ryan Crowe
Yes, in addition to reaching patients faster which is always our goal at Regeneron, I would add that it does allow us to potentially get our permanent J code a little sooner. The way the process works for obtaining a new J code, there have certain deadlines at the beginning of every calendar quarter, and with June 27th PDUFA that now allows us to go to CMS with our application for a permanent J code by July 1st which would then make Aflibercept 8 mg eligible for, and we have hope to receive a permanent J code by January 1 had we received approval at the end of August as we had originally signaled that was going to be unlikely. And probably more in the line of getting a permanent J code April 1st. So, we get an additional - hopefully, get an additional three months with the permanent J code. But I read my remarks on this question with we don't think we need a permanent J code to really begin to meaningfully convert this market. I think KOLs, and we certainly believe that Aflibercept 8 mg is a meaningful improvement, and it could become the new standard of care in the anti-VEGF space. And, we have heard a lot of excitement in our retinal community about using the product.
So, a temporary J code would certainly allow that to happen. That should be issued within days of approval. And would enable the prescribers to gain reimbursement for the product pretty much sure that will be great. So, we -- certainly, we will not be waiting for the permanent J code. I think the launch can get a lot of traction right away.
Carter Gould
Okay. And just level of confidence you will be able to turn that around in that sort of week timeframe between PDUFA date and that one?
Robert Landry
We do. I mean Mary Ann has got a very strong team. And they know what's coming. So, it's not like it will be a surprise. And they have made commitments to company that they will turn it around by July 1.
Carter Gould
Okay. In the past, you talked about the just on high-dose Eylea pricing, I know you're not going to get into specifics, but just sort of conceptually, how should we think about that relative to standard dose and the drivers of that discussion?
Robert Landry
I started off by saying we have a lot of catalysts this year. We also have a lot of kind of major decisions. And this would rank as one of our probably top decisions in terms of just trying to price it, right. I think when you hear Regeneron, or I would hope that when you hear Regeneron, you think of us as kind of responsible pricers based upon the history that we've done in terms of launching and pricing drugs. And there should be no change with regards to the 8mg. Again, it'd be great to kind of see where the real world usage is. I mean we're not going to really have the maintenance data. The two-year data is not going to really come until August. So, we're going to have to kind of hit the road out there, see what the KOLs are thinking about and triangulate all the market access and research information that we have to kind of deliver a really on point price that's obviously fair to everyone.
Carter Gould
Okay. As we think about these two key decisions and the impact they have on your growth trajectory over the next, Dupi is going to grow regardless, but COPD would sort of turbo-charge that growth. But when we think about and you're already spitting off a lot of cash, if we then think about overlaying that with these two drivers in addition, how does that start to shift the capital allocation strategy? This is not the Regeneron of a decade ago. You guys are buying back on stock now, things we never would have thought in the past. Does that start to shift you even more buybacks, additional M&A. How do you think about that and how do these drivers kind of fit in?
Robert Landry
So again, for those that don't follow, Regeneron has an $11.6 billion kind of net cash position as of the end of the year on our balance sheet. And we get the question on capital allocation a lot. So, our answers are pretty simple. First and foremost, above everything else is we're going to continue to invest in R&D. Now secondly, we're going to complement that with partnerships and collaborations. The Decibel's, the Alnylam's, the Intellia's. We did CytomX not that long ago. Those things will continue. And then, thirdly, third on the list is a return of cash to shareholders. And we've been doing that in the form of a thoughtful buyback.
Now, to Carter's question, to the extent that we see the COPD data and now that 8 mg and it appears that our cash flow and earnings are going to be stickier kind of going out forward, we don't think we're going to kind of change that path. If you look at what we did in 2022, we basically, we went out, we brought back the rights for Libtayo, we did checkmate roughly $1.3 billion in kind of BD stuff. We did $2.1 billion of buybacks, and then we put a healthy amount of money into R&D. I think we grew year-on-year something like 24.5%, which is a big number. But again, we have a lot of things to invest in. We have a lot of assets something like with regards to new clinical trials and INDs in new therapeutic areas, something like 10 of them are happening in 2023. So, we need to keep the innovation going. Our 2022 pattern, Carter is like exactly. That's what I'd like to do in the company going forward, just as you saw us do in this past year, a little bit of everything.
Carter Gould
Okay. And when we think about sort of that pace of R&D growth going forward, clearly it was sort of a transitional period here. COVID numbers were coming down. But when we think about the pace of R&D growth relative to the pace of revenue growth, particularly over the next couple of years, how should we sort of balance those R&D growth? It has been robust this as you highlighted?
Robert Landry
It has, I mean, we did surprise, I think the Street a little bit with regards to our consensus. It was a little bit higher than what they were expecting. But then again, when you hear, when you hear the innovation that's coming from us particularly, what's happening in 2023 is our collaborations that we did years ago are now kind of coming to fruition.
With regards to where we are with Alnylam, what we're going to see on Decibel, where we are in the unveiling of kind of new Intellia data, that stuff is starting to really move through the pipeline. And then, we've made no bones about it. We're going to be in oncology, we obviously bought back the rights of Libtayo. We're going to be in Heme-Onc with regards to CD20, CD3. So, we think we have a lot of things to invest in, and we've done well in the past with regards to just making sure that R&D and that our pipeline is totally fueled with regards to the necessary support. And again, it's within our kind of capital allocation. Rule number one make sure we continue to fund R&D.
Carter Gould
Okay. You touched on the early stage pipeline, and specifically, some of those partnership opportunities. We've seen larger biopharma companies go broad with a whole array of partnerships in the past. Your approach does lean pretty heavily on the RGC platform. That does seem like a pretty distinct potential advantage there. Can you talk about that distinction a little bit more, what insight RGC gives you and maybe just I don't know if there are lessons you guys have taken away from some of the past BD strategies? We've seen larger biopharmas follow, maybe like during the last decade.
Robert Landry
Yes, I think RGC is a very unique tool, distinct to Regeneron, that helps us identify targets and accelerate development of antibodies when that's the appropriate modality, but also figuring out maybe if antibodies aren't right, what the right partner could be. And certainly we've leveraged the world's largest database of exomes, over 2 million at this point that are all connected to health records, which provides us with a very rich database to find targets and address diseases that previously haven't been able to be. So, we are able to identify new targets. We discovered the hsd17b13 gene and NASH site B was another NASH discovery, a target discovery from RGC. And I guess the other was GPR75 which is an obesity gene that we're collaborating with AstraZeneca on. So, we've had a lot of success with leveraging that database. It also helps inform trial design for us and looking at the right population for a particular antibody. So, I think it is a unique tool. It's one that we're going to continue to lean on and probably even more so, develop our own capabilities in this space so that we can take those discoveries and develop products around them.
Carter Gould
Okay, maybe it was just the last minute. I wanted to come back and touch on some of the oncology portfolio you mentioned. One of the things I think we were excited to see was sort of the broadening of the LAG-3 portfolio you announced sort of certainly, I guess the initial starts of a Phase 3 program in melanoma and lung. Can you talk through kind of where else that could potentially go and if sort of that's on the table for 2023? It does -- your competitor clearly is taking a much broader approach there, the first mover advantage as well. But your Melanoma data was pretty compelling.
Robert Landry
Yes, Fianlimab as we now call it in combination with Libtayo really has generated some very, I think differentiated Melanoma data, especially when compared the combination from Bristol. You look at PFS in a -- [technical difficulty] lungs versus the data on label for LAG at 10 months, the response rates for the Fianlimab combination were in the mid to high 60s in two distinct populations, the response rate for Anti-LAG was 43%. So, really, I think, a lot more activity and that might be attributable to the admirability to dose a little higher while maintaining good efficacy and safety. So, differentiated, we think a differentiated PD-1 backbone has led to what we think is differentiated efficacy in melanoma. You mentioned lung, we are about to initiate Phase 3 studies in an Alzheimer's population, as well as one in a PD-1 high expressing population. And yes, we do have our eyes on certain other solid tumors. We haven't announced any new clinical studies or programs yet, but I think we probably are in line to do that at some point this year. So, definitely stay tuned on that.
Carter Gould
Okay. So, we're out of time. Bob, great quarter, thank you very much.
Robert Landry
Thank you.
For further details see:
Regeneron Pharmaceuticals, Inc. (REGN) Presents at Barclays Global Healthcare Conference (Transcript)