Welcome to the Regeneron Pharmaceuticals Q3 2017 earnings conference call. My name is Paulette, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Manisha Narasimhan, Head of Regeneron Investor Relations. You may begin.

Thank you, Paulette. Good morning and welcome to Regeneron Pharmaceuticals' third quarter 2017 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 CEO; Dr. George Yancopoulos, Founding Scientist, President, and Chief Scientific Officer; Bob Terifay, Executive Vice President, Commercial; and Bob Landry, 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; sales and expense forecasts; financial forecasts; 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 September 30, 2017, which was filed with the SEC this morning. 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 those measures to GAAP is available in our financial results press release, which can be accessed on our website at www.regeneron.com. 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, and a very good morning to everyone who has joined us on the call and webcast today. In my remarks, I'd like to focus on to EYLEA and Dupixent, which are two important near-term drivers of our business, and also cover some of our late-stage pipeline progress. EYLEA is a very important franchise to Regeneron and has continued to perform strongly in the third quarter, with 12% year-over-year growth in the U.S. and 20% year-over-year growth outside the United States. We are committed to maintaining our leadership in retinal diseases. Today, I want to talk specifically about our long-term strategy to drive EYLEA growth. Our EYLEA sales are primarily derived from two large and distinct vision-threatening retinal diseases, age-related macular degeneration, also known as a wet AMD, and diabetic macular edema or DME. Wet AMD represents approximately 70% of our U.S. EYLEA net sales and continues to grow as the population ages. There are approximately 1 million patients with wet AMD in the United States, and about 60% of them receive anti-VEGF therapy. Our goal in wet AMD is to ensure that patients are optimally treated to achieve the best visual outcomes, and as importantly, maintain these vision gains over the long term, using regular treatment in accordance with the label indication. Our DME business represents approximately 25% of our U.S. EYLEA net sales and has been growing steadily. We expect it to be an important driver of future growth. EYLEA is currently the branded anti-VEGF market leader in diabetic macular edema. This position was strengthened by data from Protocol T, which was an NIH-sponsored comparative effectiveness study in which diabetic macular edema – and demonstrated that EYLEA treatment resulted in significantly greater gains in visual acuity than both Lucentis and Avastin treatments as well as significantly…

Thank you, Len, and a very good morning to everyone who has joined us on the call. As Len mentioned, EYLEA continues to be a leader in the retinal disease space, with a number of important near-term opportunities. First, we expect to have our supplemental BLA for every 12-week dosing of EYLEA in wet AMD filed by the end of this year. Echoing Len's thoughts, let me also update you on the potential opportunity for EYLEA in diabetic eye disease. In our original pivotal studies in DME, we demonstrated superiority of EYLEA to laser in terms of visual acuity and other outcomes. In the government-sponsored Protocol T study, EYLEA was demonstrated to be superior in terms of visual acuity to the other commonly used anti-VEGF agents at the one-year primary endpoint. In these studies, in addition to these endpoints, EYLEA demonstrated a two or more step improvement in the diabetic retinopathy severity score, or DRSS, suggesting activity in both proliferative and non-proliferative diabetic retinopathy. Consistent with this, as Len mentioned, positive data from the third-party CLARITY study in patients with proliferative diabetic retinopathy were recently published in The Lancet. The medical urgency in this setting is reflected by the fact that the vast majority of proliferative patients are currently treated with pan-retinal photocoagulation laser therapy, or PRP, which has been the standard of care in this indication for almost four decades. CLARITY compared EYLEA to PRP and showed that patients treated with EYLEA gained approximately four letters in visual acuity compared to patients treated with laser. This was the first time that an anti-VEGF agent has demonstrated superiority to laser treatment in patients with diabetic retinopathy without macular edema. According to this published study, compared to PRP, EYLEA lowered the rate of new or increasing vitreous hemorrhage by about 50%…

Thank you, George, and good morning, everyone. EYLEA, or aflibercept, continues to be the market-leading product among FDA-approved anti-VEGF agents for all of its approved indications in the United States. U.S. EYLEA sales grew 12% year over year in the third quarter of 2017 in a market that grew by about 11%. Ex-U.S. sales grew by 20% year over year in a market that grew 13%. As was summarized by Len and George, we look forward to the potential of expanding the use of EYLEA in diabetic eye diseases, which we feel is a substantial potential opportunity. Turning now to the recent launch of Dupixent or dupilumab in the United States for the treatment of adults with moderate to severe atopic dermatitis, global sales for Dupixent in the third quarter were $89 million. This number almost entirely represents sales in the United States, since Dupixent only recently received regulatory approval in Europe at the end of September. We're pleased with the way the U.S. launch is tracking across a number of important metrics, and the commercial organizations are focused on delivering a successful launch. Let me begin with the physician perspective. As of last week, over 7,000 healthcare providers had written prescriptions for Dupixent for adult patients with moderate to severe atopic dermatitis. The prescription trajectory, as measured by total prescriptions, has remained strong and is trending ahead of comparable biologic launches in dermatology. In terms of new patient starts, as assessed by new-to-brand prescriptions, we've seen on average approximately 750 new patients prescribed Dupixent each week and approximately 500 new patients starting therapy each week since the early part of the launch. Importantly, of the patients who have started on Dupixent, over 90% renewed their prescription, suggesting a high degree of patient and physician satisfaction. On the market access…

Thanks, Bob, and good morning, everyone. Regeneron posted strong third quarter 2017 financial results. These positive results were driven by continued growth in our global EYLEA franchise, a strong U.S. Dupixent launch, and a significant contribution of revenue from both our Sanofi and Bayer collaborations. During today's call I'll discuss each of these matters in addition to highlighting changes to our full year 2017 guidance line items. In the third quarter of 2017, we earned $3.99 per diluted share from non-GAAP net income of $470 million. This represents a year-over-year increase in non-GAAP diluted EPS and net income of 27% and 29% respectively. Regeneron's third quarter 2017 non-GAAP net income excludes non-cash share-based compensation expense, including the income tax effect. A full reconciliation of GAAP to non-GAAP earnings is set forth in our earnings release, which can be found on our website. Total revenues in the third quarter of 2017 were $1.5 billion, which represents year-over-year growth of 23% compared to the third quarter of 2016. Net product sales were $957 million in the third quarter of 2017 compared to $857 million in the third quarter of 2016, which represents year-over-year growth of approximately 12%. EYLEA net product sales in the United States were $953 million in the third quarter of 2017 compared to $854 million in the third quarter of 2016, which represents an increase of 12%. For the nine months ended September 30, 2017, EYLEA net product sales in the United States were $2.73 billion versus $2.47 billion for the nine months ended September 30, 2016, an increase of 11%. We are reaffirming our estimated full year 2017 U.S. EYLEA net product sales growth guidance of approximately 10% over 2016. As a reminder, this is the last quarter where we will be providing U.S. EYLEA net sales guidance.…

Thank you, Bob. Paulette, we'd now like to open the call for Q&A. In the interest of time, we request that you limit yourself to one question. We will be available in the office after the call for follow-up questions.

Thank you. We will now begin the question-and-answer session. And our first question comes from Chris Raymond from Piper Jaffray. Please go ahead.

Hey, thanks for taking the question, just a question on the Dupixent prescriber base, if you don't mind. I just noticed in previous communications you guys had talked about an initial target base I think of 7,000 derms with previous biologic experience. I think I heard today Bob talk about having 7,000 doctors write a script for the drug. So maybe can you just talk about that mix? Is that current 7,000 base, is that the initial target, or were there others that you maybe didn't expect? And maybe talk about the road in front of you here in terms of getting other docs to prescribe the drug. Thanks.

So, Chris, you're correct. Our original target audience were physicians who have written a biologic for psoriasis in the past, and that was slightly over 7,000 patients. What we have found when we've gone out to the dermatologist offices is there are other dermatologists in those offices who take an interest in atopic dermatitis patients and have started to use the product. For the future, what we anticipate is that we will see other prescribers as patients become aware through our direct-to-consumer campaign on the severity of the condition and the need to seek out a dermatologist, and that there could be an increased urgency to treat over time.

Operator, next question, please.

Our next question comes from Geoffrey Porges from Leerink. Please go ahead.

Thank you very much and thanks for all the color on the call. A number of things, but perhaps we could talk. You suggested your product lifecycle management strategy for EYLEA alluded to on the call. But is there anything you could talk about first with respect to the pre-filled syringe offering for EYLEA? And then secondly, do you have anything in mind that you could do with Dupixent, given how important it's going to be to the company to reduce the dosing frequency with the product in some new formulation or preparation? Thanks.

Right. Thanks, Geoff. So I probably don't want to get into Dupixent given the competitive aspect of that space, but we continue to look at all sorts of different ways to create value. We can assure you of that. In terms of EYLEA and the pre-filled syringe, we had two issues. Genentech was ahead of us with the pre-filled syringe, and now they're fully launched. But I think as you saw in Bob's report, our market share was steady, and so that has not really created a problem for us. Nevertheless, we're still moving forward with ours, and I think we expect to have a filing perhaps sometime in the first half of next year or so. It's a complicated business, the pre-filled syringe, because of the sterilization requirements when you're dealing with eye diseases that took Genentech, I don't know, quite a long time to get there, and we hope to be not too far behind them.

Operator, next question, please.

Our next question comes from Ying Huang from Bank of America Merrill Lynch. Please go ahead.

Hi, good morning. Thanks for the question and congrats on the quarter. I have another question on Dupixent. Right now, Sanofi commented that most of the patients on Dupixent are the severe patients with atopic dermatitis. When do you think this drug can penetrate into the moderate patient segment? And then also, are you planning to increase investment in Praluent, now that the court gave you a favorable ruling, or do you have to wait until you have the ODYSSEY OUTCOMES?

Bob?

So with regards to Dupixent, Sanofi was correct. What we're seeing is that physicians are initiating Dupixent therapy in the patients with severe atopic dermatitis. Now what is encouraging is that the patients are responding. So even in those very, very severe patients, we're getting a good response. We do anticipate that physicians will become more and more comfortable with using a biologic for a condition they have not used one for before, which is atopic dermatitis, and that we should see expansion into moderate AD over the next several months. That should also be helped by our direct-to-consumer campaign. With regards to investment in Praluent, I think we've been very prudent this year. We have managed our investment, focused in on where we can best get business, which is primarily on education, and will continue to be modest on our spend until we get the ODYSSEY OUTCOMES data and we move forward with the court case.

Operator, next question, please.

Our next question comes from Robyn Karnauskas from Citi. Please go ahead.

Hi, guys. Thank you. So I just wanted to ask a little bit about the top line (46:20). I thought you guys did a great job articulating the EYLEA business and how it can grow. For just the next leg of growth, maybe talk a little bit about how you envision your checkpoint drug being a next leg of growth and what has to happen for that to succeed. Thanks.

Robyn, I didn't. I'm not sure I heard the question. Were you asking about the immuno-oncology program? Is that what your question was about?

Policy program (46:47), how do you see that being a next leg of growth? And what has to happen and how do you see that playing out over the next few years? How do you see that shaping up?

Okay, George may have some comments on it. But I think the most important thing that he pointed out to me in some of his remarks is that despite all the effort, despite everybody viewing this as an incredibly crowded space, there's only one anti-PD-1 or PDL-1 that's been approved in front-line/first-line lung cancer. And that is the biggest opportunity of all, which we are now busy enrolling a study in that indication in the greater than 50%. Beyond that, of course, combinations and George mentioned LAG-3 and bispecifics, and I think we have some pretty encouraging bispecific data coming up at the next meeting.

It's just worth noting, obviously, it's going to be a long-term growth opportunity over we think a long period of time. By adding additional opportunities to it and combining things, we think we have one of the strongest portfolio of combination opportunities that we've already started studying in the clinic, and more will follow. But even the very first indication should not be underestimated. If you look at the cutaneous squamous cell carcinoma, there's enormous need there. And the actual – it is actually – the number of cases is huge, and it's been largely ignored because the vast, vast majority of them can be treated surgically. But because there's something on the order of 1 million or 2 million cases, and even though something like over greater than 95% are treated surgically, that still leaves an opportunity of unresectable or metastatic disease, which is on the order of magnitude of melanoma. And like I said, I think it was largely ignored by the community because of the perspective that though it was one of the, if not the most common cancers afflicting patients, the vast, vast majority are treated successfully with these Mohs type surgeries and so forth. So the important thing to recognize is, even that first opportunity, there's a lot of need there. There's a lot of patients who are failures or cannot be treated with surgery. And that opportunity is on the order of magnitude of melanoma, which as we know was a huge growth driver for the two original PD-1 agents.

Operator, next question, please.

Our next question comes from Matthew Harrison from Morgan Stanley. Please go ahead. Matthew K. Harrison - Morgan Stanley & Co. LLC: Great, thanks for taking the question. I guess I was hoping you could talk a little bit about PANORAMA and just talk to us about – you obviously outlined the size the markets for wet AMD and DME. How do you view diabetic retinopathy relative to the size of those other markets, and how do you see that being a growth driver for EYLEA, if you were to have a successful study? Thanks.

I'm going to let George talk about PANORAMA and why we have a reasonably high degree of confidence in that study in just a second. I just want to say, in terms of the market opportunity, the lowest hanging fruit obviously is the proliferative diabetic retinopathy because people recognize that as really vision threatening, and most people get some sort of the laser that's been going on for decades, as we mentioned. So it's hard to know exactly how many people are there, but that represents a pretty big opportunity. And with this CLARITY study that was published in The Lancet, where you not only saw better visual acuity outcome in the year, you saw less hemorrhages. You saw less macular edema, less of the complications that you're so worried about, which is why you want to treat proliferative diabetic retinopathy. But beyond that, even the treatment of severe diabetic retinopathy, which is non-proliferative, is really in its infancy. There isn't quite the same perceived urgency there. But I think if we can show that we can reverse that, I think that's going to maybe change people's view on whether or not people should get treated or should they wait, which is the current thing, wait for them to get the complications. Perhaps it is better to treat it early, and now George can comment a little bit about on the study itself and why...

I think Len made all the important points, and let me just echo. The most important point is that where the need right now in diabetic retinopathy is perceived as the most urgent is in proliferative eye disease, there are roughly 0.5 million such patients in the United States. And 80% or 400,000 of them receive ablative laser therapy, the most serious of laser therapies. And now with the CLARITY data, one has a head-to-head comparison showing by every measure, from visual acuity to, just as importantly, halving the risk of developing vitreal hemorrhages, reducing by almost two-thirds the risk of developing macular edema, this is something that I think patients deserve to have access to and deserve to get in this setting, because without ablating their retinas, they can have better vision and better outcomes and avoid catastrophic events like vitreal hemorrhages. I think that the 2 million or so people who have diabetic retinopathy that's considered a little less urgent, I think that this could be an important advance for those patients as well, and already, all the existing data suggest that. But I think that there will be probably slower uptake. It will be a longer haul to change the practice of medicine there, where many of those patients are treated with a wait-and-see attitude because they haven't had a drug like EYLEA thus far. But I really do think in proliferative eye disease, 500,000 patients, those patients deserve to get a therapy that's been shown in a head-to-head study to be so substantially beneficial, not only in terms of visual acuity, but in terms of preventing catastrophic outcomes, which is why they're treated so urgently with ablative therapy.

And just the last point on that, Robyn, is that the competitive environment is less acute there obviously because the near-term competition hasn't begun any diabetic macular edema studies. And by the way, in our DME studies, we looked at the same endpoint for the patients with diabetic retinopathy in our PANORAMA study because our DME studies were in patients with diabetic retinopathy, but we were treating their DME. Their diabetic retinopathy improved just the way we hope and expect that it will improve in PANORAMA, which is what the FDA just asked us to do, is to do a study in patients without the DME component. And that's why we have some, I would say, reasonably high confidence in that study.

Paulette, next question, please.

Our next question comes from Cory Kasimov from JPMorgan. Please go ahead.

Hey, good morning, guys, and thanks for taking my question. I was curious. For asthma, how important do you think baseline eosinophil counts will be when thinking about which patients to prescribe Dupixent in the real world? Thanks.

Let's just review what the facts are. If you look at our data, and you can't make these cross-study comparisons and take them overly seriously. But if you look at our data, we enrolled a very broad population, but the drug works better the higher your eosinophil count is. And if you look in our highest eosinophilic count, you saw, I would argue, some of the best data that's been presented with any of the biologics, including a robust very significant effect on exacerbations as well as the effect on lung function. But we also were able to enroll a very broad population in all three of our studies, so we would hope and argue that it doesn't really matter. If you're worried about treating the eosinophilic type, which has more exacerbations and may represent the more urgent need, we think our drug will offer a terrific opportunity, especially with the differentiating factors that we talked about around pulmonary function. And if you happen to have another allergic disease, and these things do run in packs and happened to also have severe atopic dermatitis or moderate to severe, you'd get two treatments for the cost of one. But of course, we also think about that across the broad spectrum. Ours is the first biologic to be studied across that consistently in all of our trials. So no matter how you look at our data, we like it. We and Sanofi are very pleased with the data.

Maybe just to put it into a little bit of context, as Len said, we did three pivotal studies. And in the overall population, as Len said, it's hard to compare across studies, but I don't think anybody would argue that in the overall population, even in the worst of the three studies in terms of the numbers, they look quite comparable to the high eosinophilic groups for either approved biologics or for near-term biologics that are coming down there. And obviously, we also have even better data in the high eosinophilic patients. And as Len said, I think the most important differentiator also has to be, not only do we have comparable results to what others have in the high O's in the overall population, but we have these lung function results. And I think that this has been just, as we tried to communicate during our prepared remarks, this has been somewhere where the field has been going away from, only because biologics to date have not been doing such a good job. If you remember the way Xolair got approved, up until that point, lung function was the standard for approval. But because Xolair had no effect on lung function, they switched the focus to these exacerbations, which obviously are very important and so forth. But if you know anybody with asthma, you know that the thing that they suffer from and they worry about on a day-to-day basis is the shortness of breath that they can suffer from with a little bit of exercise or some other trigger that they might be suffering from. And I think it's really important to recognize that the results on lung function are really impressive, not only on the overall population, but even more impressive in the high eosinophilic population. So once again, I think if anybody honestly looks at the data and looks at the effects, not only in the overall population, not only on exacerbation, but also on lung function, you would think that this is the treatment that patients deserve to be given to benefit their condition, and not only in the high eosinophilic patients but the overall population.

I also think that you can't ignore mechanism here. There's been a lot of claims that people are getting to the fundamental mechanisms of allergic disease, and it's hard to say that you're at the fundamental mechanism of allergic disease if in one allergic disease it works and in another allergic disease it doesn't work. And it's hard to say you're getting into the fundamental basis of the allergic disease if you're only affecting part of the disease like exacerbations and not affecting lung function. It's hard to say you're getting at the fundamental part of the disease if in eosinophilic esophagitis you can lower your eosinophils but you can't improve the symptoms of the actual inflammation that's going on in the esophagus. So I think that a lot of this goes back to the choices that were made a long time ago in what is the right fundamental way to interfere with this Type 2 allergic inflammation.

And I just want to add to that. Len brings up a really good point, which is that part of our clinical development plan is actually to do studies where we show that in the same patients, we will be able to benefit multiple allergic conditions. And that is I think something that, if you know people who are suffering from any one of these severe allergic conditions, whether it's atopic dermatitis, for example, or severe asthma, they generally are suffering from other allergic conditions as well. And wouldn't it be wonderful if there was a drug that was a central driver of all of allergic disease that could benefit essentially all of the allergic manifestations in a single patient. So that is part of our clinical development plan going forward, that we are going to be doing studies to actually be able to show that, hopefully. And we don't think there's any other current biologics out there that even have the opportunity to consider the possibility of doing those studies.

Paulette, we have time for one last question.

Okay, and our last question comes from Josh Schimmer from Evercore ISI. Please go ahead.

Thanks for taking the question, just one on the IL-33 antibody. Can you elaborate on its positioning, what it brings to the table in addition to or instead of Dupixent? And is this a general area that you expect to further build the pipeline? Thanks.

I think that's a great question. Thanks for bringing it up. Obviously, we didn't have enough time to really go into everything. But this is a really exciting target for us for many reasons, one of which is a lot of the biology that our group did to understand it. But just as much is that this is a recent success for our Regeneron Genetics Center, these large-scale sequencing efforts that we've undertaken to try to see how genetic variation is associated with disease. And IL-33 is one of the exciting premier targets that has been in our minds identified and validated by the genetics, not only in this disease but in some other allergic diseases. So we've actually seen genetic evidence that if you have gain of function mutations in IL-33, it increases the chances of having some of these disease loss of function mutations are protective, and that gets us a lot of confidence. We've always been driven by genetics, but in this case, it's using the latest large-scale genetics approaches to actually identify and validate targets that gives us this confidence to move this forward so rapidly. And the thing that's very exciting to us is this is an area where we already feel we have made this advance and have this foundational treatment in dupilumab. And wouldn't it be great now if we could improve the benefit in some patients by combining it with the IL-33. And once again, we're considering doing this in multiple allergic conditions because the genetic support that this can be the case, not only in asthma, but in COPD and maybe atopic dermatitis and other settings as well.

Right. Josh, let's just close on one point that I think maybe we didn't even emphasize enough is that the other thing that's really important about dupilumab is we really do have an extensive clinical development profile from the safety point of view, and that's building every day in the commercial point of view. And going forward in this field, Dupixent has now set an extremely high bar I believe, not just on the efficacy side but on the safety side. In the rheumatoid arthritis field, people, because biologics came with a cost, are willing to accept that cost because they had great efficacy. We've got really what I think is terrific efficacy but also almost unprecedented safety that we've seen thus far in our clinical trials. We really haven't seen the kinds of immune dysfunction problems that you see when you block other angles of the immune system.

And just to add to that, again, I think this is the future. It's the future of medicine and it's the future of drug development. The genetics that we have that support our targets, for example, IL-33, not only are supporting that blocking IL-33 function or loss of function mutants in IL-33 can be protective, but they're also comforting us in terms of the safety profile going in. So genetics are really offering an opportunity to get insights before you ever do studies in humans into the future potential benefit, but also the safety profile, which is another reason why we're very excited about the IL-33.

Okay.

Paulette, that concludes our call today.

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