Good day, and thank you for standing by. Welcome to the Regeneron Pharmaceuticals Third Quarter Earnings Conference Call. . I would now like to hand the conference over to your speaker today, Justin Holko, Vice President of Investor Relations. Please go ahead.

Thank you, Didi. 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 2021 Conference Call. An archive of this webcast will be available on our website. Joining me today on the call are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive 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 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 forecast and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and 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 period ended September 30, 2021, which we filed with the SEC earlier 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. Len Schleifer.

Thank you, Justin. And before I begin my remarks, let me just note that this may be Justin's last call, it may not be, at least in the position of IR. He is making a transition. He has decided he wants to make the news, not just report and explain the news and he is moving over to our commercial organization. So we're very excited, but we're not letting him go until his replacement is fully in place. So you may hear more from Justin in this role what you may not. He -- Justin has done a remarkable job. He is quick to point out to me that when he joined the company, the stock was only around $300. And now he says it's significantly higher. Justin, we thank you for your great service. Turning to our business, we turned in another strong performance in the third quarter, which was marked by significant double-digit top and bottom line growth and continued operating leverage. This was more possible as a result of the truly exceptional execution by our colleagues across the entire company from R&D to production, commercial and support teams despite the challenges that we all faced imposed by the COVID-19 pandemic. Our core business of EYLEA, Dupixent and Libtayo, all contributed solid underlying growth. Additionally, we secured a third supply agreement with the United States government for REGEN-COV, our investigational antibody cocktail for treating and preventing COVID-19 in certain populations with initial deliveries fueling additional growth momentum in the quarter. In R&D, our broad and growing pipeline, which now includes more than 30 clinical stage candidates with many more expected to enter the clinic in short order continues to advance new innovations to secure our long-term growth potential. Importantly, our pipeline continues to be largely composed and comprised…

Thank you, Len. I'll pick up where you left me with the REGEN-COV story. As Len mentioned, our robust COVID-19 development program involving more than 25,000 people to date has provided compelling evidence that REGEN-COV has the potential to be used for various prevention and treatment applications from pre-exposure prophylaxis to treating hospitalized patients. In the United States, REGEN-COV is currently authorized under an EUA and also being reviewed for full FDA approval for the treatment and prevention of COVID-19 in certain patients with an action date of April 13, 2022. At Regeneron, we all appreciate that widespread vaccination is the best way to broadly protect as many people as possible from COVID-19. But recent research also reveals some important gaps in coverage provided by the vaccines, leaving some individuals uniquely vulnerable, particularly the several million immunocompromised people in the United States alone who remain prisoners of the pandemic. First, many of the immunocompromised population respond sub-optimally or not at all to vaccination, even after booster shots. Second, breakthrough infections in the general population still occur after vaccination, meaning that immunocompromised people will continue to be at risk of encountering infected individuals even within a highly vaccinated population. Therefore, we believe that REGEN-COV could be of particular importance for these immunocompromised individuals who remain unprotected and also are at highest risk for developing the most severe COVID-19 disease. This includes people with certain hematologic cancers, for example, lymphomas, leukemias and myeloma and people who take certain immunosuppressive medicines for diseases such as multiple sclerosis, in rheumatoid arthritis, for organ transplant recipients and for those with primary immunodeficiencies. In the United States, Regeneron submitted data and a request to the FDA to expand the existing emergency use authorization of REGEN-COV to include chronic prevention back in April. Further reflecting Regeneron's commitment…

Thank you, George. Our third quarter business performance demonstrates the strength of our commercial portfolio. We are executing well on our in-line brands and are maximizing opportunities for diversified and sustainable growth through ongoing launches. First, I will highlight recent achievements with REGEN-COV, our COVID-19 antibody cocktail, which is available in the U.S. under emergency use authorization by the FDA. In the third quarter, U.S. net sales were $677 million, primarily based on the initial deliveries of our third government agreement, which was announced in mid-September. Demand for REGEN-COV accelerated sharply over the third quarter as this promising treatment option continues to help fight the surge in COVID-19 cases. REGEN-COV is increasingly seen as standard of care for outpatient treatment and post-exposure prophylaxis in appropriate patients. Our field educators continue to support key stakeholders in health care systems at administration sites. While COVID-19 cases have thankfully decreased over the last several weeks, demand for REGEN-COV remains high with many patients receiving treatment. REGEN-COV has broad therapeutic application in current and potential future integrations across the spectrum of disease from pre-exposure prevention to hospitalization. We look forward to the FDA's decision on our application for a full approval expected in April of 2022. Beyond REGEN-COV, we delivered strong growth from our core business in the third quarter. Starting with EYLEA, third quarter global net sales grew 15% year-over-year to more than $2.4 billion. In the U.S., net sales grew 12% year-over-year to nearly $1.5 billion based on category recovery and EYLEA's competitor share gains. EYLEA secured nearly 50% of the overall category and over 75% of the branded category based on our overall platform of efficacy, safety and convenience. There are positive early indicators from our unbranded direct-to-consumer campaign that educates patients with diabetic eye disease on the importance of vision…

Thank you, Marion. My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis where applicable. In the third quarter, Regeneron once again delivered strong top and bottom line growth on increasingly diversified revenue streams with contributions from REGEN-COV in our robust core business. For the third quarter, total revenues grew 51% year-over-year to $3.5 billion. Total diluted net income per share grew 84% year-over-year to $15.37 on net income of $1.8 billion. Excluding revenues related to the COVID-19 antibody cocktail, total revenues grew 18% versus the prior year. Starting with REGEN-COV. In the third quarter, we recognized $677 million of U.S. net sales, which consist largely of the initial deliveries of approximately 300,000 doses to the U.S. government under the new 1.4 million dose contract as announced in September. Our collaborator, Roche, record sales of the COVID-19 antibody cocktail known as Ronapreve outside the U.S. In accordance with our Roche agreement, as a true-up payment for global profits, we recorded an additional $127 million as Roche collaboration revenue. In the fourth quarter, we expect to deliver approximately 800,000 doses of REGEN-COV in the U.S. out of which, Roche will supply approximately half of these doses. We will record all REGEN-COV U.S. net product sales. Given the mix of manufactured product supply to the market by Roche and Regeneron, the true-up payment for global profits is expected to result in 0 Roche collaboration revenues in the fourth quarter. The remaining doses from the U.S. government contract are expected to be delivered in the first quarter of 2022. I will now move to our Bayer collaboration. Ex-U.S. EYLEA net product sales reported to us by Bayer worth $931 million for the third quarter of 2021, representing growth of 19% on a reported basis and 18% on a…

Thank you, Bob. Didi, that concludes our prepared remarks. We'd now like to open the call for Q&A. . Please go ahead, Didi.

. Our first question comes from Geoff Porges of SVB Leerink.

Congratulations on the really remarkable results and the outlook. George, perhaps I could ask you about the costims. We've been wondering when we're going to see the first data for the CD28 costims. Could you clarify exactly what we should expect to see next year? And from which combinations? And then just related to that, just these coming up, and there's a lot of discussion about 4-1BB. Could you clarify why you chose to pursue CD28 for your costims rather than 4-1BB?

Yes. As we indicated, we'll be hopefully providing data in the coming year, and it all depends on how the trials progress. Obviously, one has to deal with combination trials where one is dose escalating. And so those are what are limiting getting to effective doses and so forth. In terms of the choices, it all dependent on the science. Our various studies preclinically and in humanized animal models, which show that it was, in our minds, it made most sense to initiate our efforts with the CD28 costim approach.

Our next question comes from Chris Raymond of Piper Sandler.

I guess maybe more of a macro question. I know the ink is hardly even dry, I guess, on some of the prescription drug pricing framework negotiations and the write-up that's a company that from Congress. But this is something I'm sure you guys are watching closely. And obviously, any changes to Medicare Part B is potentially impactful to your business. Just any thoughts here on the impact to EYLEA, especially when considering the cap on out-of-pocket spending that's been proposed and discussed?

So Chris, you're right. The ink isn't dry. Some of the bill has been written in disappearing ink and some is in changing ink, but -- so it's hard to get a fix on it. I would say -- as I understand the bill and based on the most recent update, the cap on expenditures is limited to Part D, as in David, drugs. So it would not affect Part B, as in boy. I think I've got that right as I said -- as you said, the ink is really not dry. I will say that, generally speaking, it is quite remarkable just from my personal perspective, that the industry that is most responsible for getting the country in the world out of the pandemic in as best shape as we can is the source of such great attack. But fortunately, I think that some rational heads have prevailed and the most draconian ideas have been written in that disappearing ink.

Our next question comes from Yaron Werber of Cowen and Company.

Congrats on the team on a great quarter. Really just a quick one actually on the pozelimab and cemdisiran combo. I'd already mentioned some potential combo treatment studies, PNH and MG. Again, some of the other C5s, really kind of wanted to ask a little bit about how you're thinking about real-world use of this one. I know there's a lot of movement in -- especially the MG space. Is this something that we should expect to compete maybe more with Soliris? Or are you thinking a little bit further up the line against IVIG or some of the FcRns? Just kind of want to get your thoughts there.

Yes. I mean we are hoping that this is going to turn out to be the best-in-class in terms of efficacy and also in terms of convenience for these disease categories. So yes, we're thinking about and depending on how the landscape evolves, that, that could be the opportunity that we would be going after.

Our next question comes from Josh Schimmer of Evercore ISI.

For the high-dose aflibercept Phase III studies, what signals are you looking for a potential filing as OCD sickness benefit alone insufficient to move forward. Is that going to be under a new BLA or an SBLA? And as such, how do you think that would fall under proposed drug pricing legislation and whether it would reset the clock for that product?

Yes. I'll comment on the regulatory assets and George can comment maybe on the design aspects. But at the moment, we don't think this would be a new BLA, and this would be part of the -- this would likely be an SBLA, George?

Yes. Basically, we are, as you said, we're looking, of course, to look at differences in terms of anatomic improvements, but the trial is a noninferiority study. Where we're going to be testing is whether patients that are being treated at a dramatically increased interval do as well as regular dose EYLEA had an 8-week interval. So it's going to depend on hopefully seeing that substantially higher numbers of patients are going to be able to be treated at extended dose intervals compared to the 2-milligram dose while achieving similar visual acuity effects.

Our next question comes from Carter Gould of Barclays.

Excellent results, guys. I wanted to ask on REGN14256, I guess, the new running partner for imdevimab. And if development was really in response to a specific shift you're seeing in the variants or lower efficacy? Or if you were looking to optimize on other domains? And I guess, in responding to that, could you also address kind of your expectations for running studies, conducting studies with a, I guess, a lower background rate of hospitalization?

Yes, all good and somewhat complicated questions. Right now, obviously, as we've said, our cocktail remains active against all the known variants of concern that have emerged and created issues for other antibodies and so forth. However, we want to be prepared. So we're creating a complementary cocktail that if ever variants would arise that would raise problems for our current cocktail, we would have a complementary cocktail that the way we designed it would hopefully be unaffected by the same types of mutations. So it's to be prepared for that possibility that as the virus continues to evolve, we might need a cocktail that might not be sensitive to the same mutations as the first cocktail. But the current cocktail is still active against the variants of concern. Yes. There's a lot of questions in terms of how to design the study, where to do it, depending on rates of hospitalization and rates of infection. So these are the complications that we've had to navigate throughout this pandemic, as you might remember. And throughout this pandemic, we have managed to carry out the largest COVID-19 program for treatment and for prevention using antibodies. And we hope that, that all the knowledge that we gained from learning how to navigate changing, fluctuating infection rates and hospitalization rates and so forth, we can continue to take advantage of that and continue to carry out our program efficiently and as quickly as possible.

Yes. Let me just add to that and emphasize what George has said in his earlier remarks, which is that a lot of what we see as the big future need is in the pre-exposure prophylaxis. And that pre-exposure prophylaxis is likely not to go away because of the ongoing infections, the breakthrough infections that still occur in fully vaccinated people. Mind you, with the orals coming, we'll see whether they actually get to the United States. They do have some safety and efficacy issues as a class so far. They have not demonstrated the comparable core study comparisons, notwithstanding the kind of efficacy that monoclonals have delivered nor have they satisfied so many people's satisfaction, the safety concerns around using ImmunoGen perhaps okay for short term. But when you're getting into longer-term prophylaxis of the immunocompromised, which is where George mentioned, we have a lot of work ongoing. It's really important to remember that we expect to have -- our molecules should be able to be given quite less frequently, I think, one might expect because you're looking at a prophylaxis mode. And we think that they should, based on the evidence we have, delivered really rather remarkable efficacy in that setting as they already have in the non-immunocompromised. So as the market transitions to a prophylaxis mode, we see an ongoing demand and need, which we're preparing to meet for monoclonal cocktail therapy.

Our next question comes from Kennen MacKay of RBC Capital Markets.

First, let me say to Len that I got your commentary towards political or rather governmental purchases of the REGEN-COV antibody cocktail. Thank you for being the voice of science and reason here. Maybe for my question, I have actually really admired your BD strategy, which shows a lot of awareness recognizing areas of expertise, but also limitations and looking to be in partnerships and licensing to outsource the latter. I was wondering what you're really interested now on the BD front, if there are any technologies that are jumping out as additional areas of opportunity for the company? And then sort of partial to that, whether you are at all interested in this newly emerging field of protein degradation and protein degraders, as Oncology targets?

George should take this. He's been the architect of the scientific underpinnings of our BD strategy and having a remarkable vision to be able to integrate that with our core expertise, George?

Well, yes, I think if we were looking to get into new technologies and have new relationships, I don't think we would be telling you about them at this time.

Wait, George. Could you comment on your prior strategy on how siRNA and ?

Well, I think, yes, what Len referring to is I think that the whole team, the whole company at many levels from the business development group through -- the science research folks through our premanufacturing group has done a spectacular job of pivoting us from a solely biologics company to a genetic medicines company. What we've managed to do is starting with our Regeneron Genetics Center is create what we believe is perhaps the world's most powerful technology to identify new genetic targets based on our sequencing of almost 2 million individuals, all linked to electronic digital records. That allows us to understand, we think, more powerfully than anybody else, the role of genetic variation, both in disease protection and causation, which have led to a whole series of new disease targets for both protection and causation. And for those, some of those are addressable by biologics and they're part of our existing approaches with biologics, but we had to use new approaches. And for those purposes, we started creating some of these important outside alliances and collaborations with companies like Alnylam for the siRNA approaches, we talked a little bit about and with Intellia with CRISPR-based approaches. Many of these, we've been able to build and create and take them to another level based on our very productive collaborations with these 2 great companies that we're now collaborating with. And we also invested enormously internally in terms of building our own gene therapy approaches. So we believe that we're positioning ourselves to become leaders for the foreseeable future over the next decade or so in the genetic medicine space. It's becoming an increasingly important and larger part of our portfolio. It's almost a whole separate company, we believe, in terms of the opportunities and the value that it generates. While we're maintaining our leadership position with biologics, not only with classical antibodies but also with bispecifics and all sorts of engineered formats of biologics. So I think it's been a tremendous job by our entire team and organization to essentially create this entirely new capability.

Our next question comes from Ronny Gal of Alliance Bernstein.

So following on the last question, can you comment a little bit about when we can see your first kind of CRISPR-based technology in a trial that you run coming into the clinic? Will it be in 2022 or 2023? And then with this full additional company, should we expect the R&D cost to continue to rise roughly at the rate they've historically been?

Okay. I'll remind you that I believe we announced last quarter, our first CRISPR results which were the first obtained by anybody in history in terms of using a systemic CRISPR-based therapy to actually modify genes within human beings. It was an incredibly successful study that we did in collaboration with Intellia. It was the first-ever systemic investigational CRISPR-based gene knockout approach. And in the first set of patients that we treated, we show that a single dose of this CRISPR-based therapy led to very dramatic and dose-dependent reductions in the target protein coming from the target gene. I think that the world viewed this as incredibly exciting data. I believe we announced it in June of '21. And I think it's just the beginning of a very large program. We have about 20 preclinical programs now under evaluation that will be rolling out in terms of going into the clinic and producing clinical results over the next couple of years.

And Ronny, let me punctuate, right? So we'll give kind of guidance in our fourth quarter earnings in early February. I will tell you, if you look at our kind of run rate this year, R&D relative to 2020, we're coming out at roughly a 7% increase if you take the midpoint of my guidance. And I guess my word of caution is a lot of that's heavy REGEN-COV in 2020. So we're going up against the big REGEN-COV number in 2020 as compared to what we incurred in 2021. So that 7% is, I'd say, artificially light compared to where we're going to eventually end up and we do give that guidance. So I just want to make sure people are not kind of doing same year run rates as they're seeing in 2021.

Our next question comes from Matthew Harrison of Morgan Stanley.

This is Charlie on for Matthew. Can you please comment on the Libtayo activities and the commercial dynamics, given the relatively modest kind of quarter-to-quarter growth?

Sure, Charlie. This is Marion. Let me take that. First off, we have great ambition, of course, for Libtayo. As I mentioned, the bulk of our sales today are from our launch of cutaneous squamous cell carcinoma. Understandably, our more recent launches have brought us again into derm with basal cell carcinoma, where Libtayo is very quickly becoming the standard of care for appropriate patients based on its clinical profile and based on, obviously, patients unfortunately fail with hedgehog inhibitors, which also can be really difficult to tolerate. So we're very pleased with how that launch is going early days. Most important, however, is our lung launch. The initial launch we had in monotherapy is understandably for a smaller target group of patients. We do believe, however, though, the experience that physicians are gaining with Libtayo in first-line monotherapy treatment is very, very important and bodes well for when we hopefully have the larger indication approved for chemo combo. And that as many of you are aware is a much larger population of patients, perhaps 4- to 5-fold more patients, and we certainly look forward to potentially being able to launch that larger indication in lung.

Our next question comes from Robyn Karnauskas of Truist.

I was wondering if you can satisfy a little bit of my curiosity about the news flow coming out of your Intellia partnership. I guess the first question I'd ask is in the event that they'll be hosting next year, in the first quarter, how much durability data might we get for TTR? And then, George, you mentioned the additional indication over the next few years that you'll be going into. When are we going to be hearing about those, would we hear about a lot of them in the beginning of the year or would we hear about them over the course of the year, I know Intellia is of huge investor interest as well as mine.

I wonder if we shouldn't give Intellia the opportunity to give that kind of guidance, Robyn.

I'm sure that might be the approach.

Our next question comes from Alethia Young of Cantor.

Before you get with that question. I do think just to help Robyn out a little bit, I think one really important point is, yes, as the data continues to mature and certainly, we expect excellent duration data coming out over time and so forth. But I think we all have to recognize that this represents the first true validation of this entire field and approach. And our ability working with Intellia using our specific approach to actually turn it from dream into reality. And this obviously dramatically increases the probability of success of all of our future programs based on our collaborative technology with Intellia, including both knockout and insertion approaches, and we have to, of course, highlight and point out the lack of such proof of concept and success with any other approaches to date. And I think that, that really distinguishes our collaboration with Intellia. And obviously, should adjust the risk profile for all of our programs going forward, which, as Len said, hopefully, we and Intellia will be giving more resolution on going forward.

Go ahead, Alethia.

Congrats on the quarter. I just had a question about kind of, obviously, you have very robust AOE data with Dupixent. Can you just talk a little bit about how you think about the market opportunity there? And like how -- what diagnosis is like there and how you can potentially expand that?

Sure. So we're very excited about the possibility of launching Dupixent also for eosinophilic esophagitis. As George was describing, there's tremendous unmet need in the marketplace in patients who truly are suffering and often end up in the emergency room with difficult procedures to try to remedy for the short-term, some of the difficult symptoms they have. The size of patient population for those who are undergoing recurrent treatment is about 48,000. And then obviously, there are patients who are entering the system beyond that. But probably just as a starter number that 48,000 to 50,000 who have failed multiple treatments is the core group. And then we will extend beyond that to probably about another 150,000 patients with EoE, who also have earned the need of treatment. But the failure group, obviously, of 50,000 is the most severe.

Didi, we have time for two more quick questions.

Our next question is from Esther Rajavelu of UBS.

I have one on EYLEA, perhaps a multipart question. Can you give us some details on use among diabetics versus nondiabetic patients? And is the uptake among diabetics type to more consistent use among treated patients? Or are you onboarding new diabetics? And lastly, anything you can share on NPDR versus diabetic macular edema patients would be helpful as well.

Sure. So let me give you a little bit of background and some characterization. Certainly, our indications for diabetic eye disease are the fastest growing in terms of new patients proportionately coming into the treatment paradigm. We also see a growth in the diabetes treatment population for EYLEA opposite, for example, wet AMD. So now our wet AMD treatment is under 60% of the total utilization of EYLEA in the U.S. marketplace. The specific growth on diabetic eye disease by indication, it's difficult to give you the exact breakdown, but we are very optimistic on even the early efforts we see in market based on our new unbranded direct-to-consumer TV campaign, which is really educating diabetic patients broadly on the importance of having their vision checked, making sure it's part of the regular check-in as patients with diabetes have other areas that they standardly review and make sure of their care. Eye disease has often been neglected with very disastrous situations of vision loss that can't be corrected. So we see that as a really important area and one that will fuel diabetic eye disease treatment broadly. But even today, and before we embarked upon that program, we see it as a high growth indication.

Didi, we have time for one more question.

Our last question comes from Yatin Suneja of Guggenheim Partners.

Congrats on the quarter of good performance. Just quickly on the complement efforts. Can you just talk about other CNS or Neurology applications with either the monotherapy or the combination? And then with respect to the siRNA approach, could we take that -- could you take that into the eye and what the long-term vision there is?

Yes, we're not going to say too much about your first question. But in terms of your second question, absolutely. And so when we establish this relationship with Alnylam in terms of using siRNA, it was actually directed towards 3 separate areas. So really was 3 separate collaborations. The one in the first that we thought that we'd be moving the most rapidly into the clinic and that has turned out to be the case were with liver targets, both sort of more conventional targets like the C5, but also targets that were coming from our own pipeline like the HSD target that we talked about. And that -- those are all moving along forward and we think a very exciting fashion as we've discussed. Another key area that you just opened up, which is still preclinically, but we're hoping to eventually move into the clinic is targeting the eye targets with siRNAs. And that's really a very important area for us, and it was a very important separate part of the entire Alnylam collaboration. And the third really critical foundational part of our collaboration with Alnylam involved using siRNAs to target in the brain. And that's also moving forward in a very exciting fashion, and we'll be talking a lot more about that going forward. So really, it's a 3 sort of pillar program, liver targets, eye targets and CNS targets. We're very excited and moving forward on all of them. And as we had guided early on, the first set of targets, of course, would be in the liver and then we'd be moving into the other 2 areas as rapidly as possible.

Great. Thanks, everyone. That will conclude our call. Bob Landry and the IR team will be available today to answer any additional questions you may have. Thanks, everyone, and stay safe. Goodbye.

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