Welcome to the Regeneron Pharmaceuticals Fourth Quarter 2021 Earnings Conference Call. My name is Michelle, and I'll 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 Mark Hudson, Director of Investor Relations. You may begin.

Thank you, Michelle. Good morning, good afternoon, and good evening to everyone listening around the globe. Thank you for your interest in Regeneron, and welcome to the fourth quarter 2021 conference call. An archive of this webcast will be available on our website. Joining me on the call today are Dr. Len 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 up the call for Q&A. I'd also like to remind you that remarks today may 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 milestone, 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-K for the period ended December 31, 2021, which we are planning to file with the SEC early next week. 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.

Thanks, Mark, and thanks to everyone joining today's call. The fourth quarter of 2021 capped off a terrific year for Regeneron. Our performance was driven by strong execution across the organization, despite the ongoing challenges posed by COVID-19. We're all proud of the incredible work and dedication of our employees who continuously deliver on our mission to bring important medicines and novel medical breakthroughs to patients in need. Throughout 2021, we delivered strong top and bottom line growth. Revenues, excluding our COVID antibody cocktail, grew 19%, a testament of our diversified and strengthening core business. Our innovative and world-class pipeline advanced across a wide variety of diseases. We also unveiled initial clinical data and pipeline advancements from our Regeneron Genetics medicines portfolio, which has the potential to unlock significant long-term value. Additionally, we returned substantial cash to shareholders in the form of share buybacks. In '21, we spent approximately $1.7 billion repurchasing over 3 million shares. For EYLEA, 2021 global sales grew 19% to $9.4 billion. Even after 10 years on the market and millions of injections later, we continue to view EYLEA as an enduring product, with significant future opportunity, despite new market entries. In the second half of the year, we look forward to the results from our Phase III aflibercept 8-milligram high-dose program. If those data continue to support that aflibercept 8 milligrams provides extended dosing duration without compromising on safety and efficacy, aflibercept 8 milligrams has the potential to complement and enhance our retinal franchise. With Dupixent, we are delivering on a goal of transforming the treatment of type 2 inflammatory diseases. 2021 global sales of Dupixent were $6.2 billion, representing 53% growth for the year. Looking ahead, Dupixent's outlook is bright. There are significant opportunities to increase market penetration rates in approved indications, and we…

Thanks, Len. I'll start by briefly addressing our novel monoclonal antibodies for COVID-19. As Len mentioned, we are rapidly developing next-generation antibodies that retain potency against Omicron and other variants of concern. Early in 2019, we anticipated that the virus would mutate and, thus, began generating large pools of virus-neutralizing antibody candidates from both human survivors and our VelocImmune mice. We have continually evaluated and refreshed this pool and now have next-generation candidates that, based on preclinical studies, effectively neutralize Omicron and other variants of concern. We're on track to initiate clinical trials with the first of these in the coming months. In addition, we are in discussions with the FDA regarding how to streamline the development program for monoclonal antibodies, considering the unwavering unmet need and demand for these medicines, especially with potential future virus variants in mind. As Len already highlighted, since we believe that monoclonal antibodies will continue to play an especially important role in the treatment of future protection of the several million immunocompromised people in the United States alone, we are committed to undertaking a development pathway that will make this possible in the near future. Moving on to ophthalmology. At the upcoming Angiogenesis meeting, we will present the final Phase II data from the aflibercept 8-milligram CANDELA study in patients with wet AMD. In this study, aflibercept 8 milligram, given at the same protocol-specified dosing schedule, as currently approved EYLEA 2-milligram met its primary safety endpoint, with measures of drawing numerically favoring the 8-milligram dose over the 2-milligram dose. These two -- these Phase II results give us more confidence that the upcoming Phase III readouts has a potential to show that the higher 8-milligram aflibercept dose can at least match the efficacy and safety of EYLEA, but with more convenient dosing. Moving on…

Thank you, George. Our fourth quarter business performance demonstrated the strength and resilience of our in-line brands and creates a foundation for commercial success as we prepare for future launches. Starting with EYLEA. We recently announced fourth quarter U.S. net sales of $1.55 billion and $5.79 billion in 2021. This represented 17% year-over-year U.S. growth for the full year, which is noteworthy for a brand 10 years post launch. EYLEA reached record share across all approved indications and is the recognized leader in a category that continues to grow due to favorable demographic trends. EYLEA remains physicians' top choice for patients with indicated retinal diseases due to its demonstrated efficacy, safety, dosing flexibility and unsurpassed real-world experience, with more than 40 million administered injections worldwide. We are also excited about ongoing strategic initiatives that position our retinal franchise for future growth, such as our educational efforts in place across existing indications where many patients don't receive the treatment they need. Beyond EYLEA, we are encouraged by promising early results for high-dose aflibercept 8 milligram, which, if supported by Phase III clinical results, potentially represents next-generation treatment for a range of eye diseases. Turning to Libtayo, where global net sales in the fourth quarter were $121 million, in the U.S., net sales reached $81 million. In advanced cutaneous squamous cell carcinoma, which currently drives majority of performance, Libtayo is the #1 systemic treatment, and we saw steady growth as the market continued its post-COVID recovery. In advanced basal cell carcinoma, Libtayo is also rapidly being established as standard of care in patients who have progressed or are inappropriate for hedgehog inhibitors, building on our strength in non-melanoma skin cancers. In advanced non-small cell lung cancer, we are making progress in the launch of our monotherapy indication with a steadily growing prescriber…

Thanks, Marion. My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis where applicable. Regeneron's fourth quarter capped off a strong year. In the quarter, we delivered top and bottom line growth driven by strong execution within our core business. Fourth quarter total revenue grew 104% year-over-year to $5 billion. Excluding revenues related to the COVID-19 antibody cocktail, total fourth quarter revenue grew 17% year-over-year to $2.7 billion, demonstrating continuing strength of our core business. Fourth quarter total diluted net income per share was $23.72 on net income of $2.7 billion. Starting with REGEN-COV. In the fourth quarter, we delivered the remaining 1.1 million doses from our September 2021 U.S. government supply agreement and recognized $2.3 billion of U.S. net sales. In accordance with our global collaboration with Roche, the amount of manufactured products supplied by each party to the global market resulted in the recognition of a true-up payment related to Roche's share of profits. As a result, in the fourth quarter, we recognized a $260 million charge in cost of goods sold and recorded no Roche collaboration revenue. As mentioned, we completed all deliveries under the September 2021 U.S. government supply contract in the fourth quarter. With the FDA's recent amendment to REGEN-COV's emergency use authorization, we do not expect to record any U.S. REGEN-COV sales in the first half of 2022. I will now move to our collaborations, starting with Bayer. Fourth quarter 2021 ex-U.S. EYLEA net product sales as reported to us by Bayer were $934 million, growing 9% on a reported basis and 12% on a constant currency basis. Total Bayer collaboration revenue was $372 million, of which we recorded $354 million for our share of net profits from EYLEA sales outside the U.S. Total Sanofi collaboration revenue was $518…

Thanks, Bob. Michelle, that concludes our prepared remarks. We now like to open up the call for Q&A. Please go ahead, Michelle.

Our first question comes from Evan Seigerman with BMO. Your line is open.

You touched on your solid tumor oncology franchise, specifically the METXMET in MUC16xCD3 bispecifics that we're supposed to get this year. Can you elaborate a little as to kind of what we should be expecting with these data readouts and how that could inform potentially pivotal trials or a registration path?

Yes. These are both being evaluated in late-stage patients who have essentially failed all existing therapies. And obviously, the excitement would be if one saw evidence of convincing objective responses that were durable in these settings, then those would certainly inform how would we move forward on these. And we've already announced that we've been observing encouraging early signs of efficacy, and we will be elaborating on these and giving the details in these future presentations.

Our next question comes from Carter Gould with Barclays. Your line is open.

Maybe I'll just take on the elephant in the room. For Len and Marion, would love to get your thoughts on -- as you think about the EYLEA franchise in the context of what looks like a very accommodating label on faricimab and their pricing, as we think about the implications for your high-dose label and commercial positioning.

Yes. I'll let Marion get into the details. But we don't see faricimab as a transformative therapy of any kind, notwithstanding any label. It's very hard to see when you look at it dispassionately any scientific evidence for the contribution of Ang2 blockade. People forget, nobody has a greater interest and would love to see Ang2 blockade being a value given that George and his colleagues were the ones who discovered and cloned Ang2, the first in the world on that. But there's really no evidence that we can see where you've separated that out. So what we're seeing here is a higher dose of faricimab relative to Lucentis and possibly on a moral basis relative to EYLEA. We remind everybody that there are a lot of lessons learned here. One of the biggest lessons is efficacy is super important, but well beyond that is safety. And nothing right now contract the, I don't know, almost 50 million injections that have been given worldwide with EYLEA. So we feel pretty good. The competition is always good. Obviously, competition is going to eat into a product. We suspect that faricimab may take a lot of the -- of its share initially from Lucentis, but we'll see. Marion might want to elaborate.

Yes. Thank you, Len. Certainly, to give some very early market feedback, the comment that we're getting from key opinion leaders is that they don't see first met via product that potentially is a game changer and that the dosing is complex. And there are remaining questions on the clinical trial design and, of course, as Len mentioned, safety. More importantly, I'll go back over to EYLEA, where we certainly are establishing the product as standard of care and more across indications with great flexibility of dosing, indications, experience, real-world evidence, prefilled syringe and busy times. So we look forward to strong performance going forward on EYLEA, and we're very optimistic about what could be a next-generation product with our own aflibercept 8-milligram high-dose product if the Phase III data works out.

Our next question comes from Tyler Van Buren with Cowen. Your line is open.

So for your next-generation COVID antibody cocktail, looks like it's -- you said it's entering the clinic in the coming months. So was there a slight delay versus the prior Q1 guidance? And you referred to FDA streamlining development of monoclonal antibodies. So can you give us your latest thoughts on how long it might take to get to market? I noticed Bob mentioned that there won't be sales in the first half, so just curious if we could see something in the second half.

Yes. George can comment on what he thinks is necessary, but I just want to be clear. I don't think there's any delay, whether we come in just at the end of this quarter or early in the next quarter or thereabouts. It's tough to exactly estimate when we'll start. But we're scaling up, and we're rolling forward. George can comment on some of the global and U.S. regulatory considerations and guidances that we know about thus far.

Yes. There's not much to add. I mean, we're continuing to discuss with regulators what the program is and what are the abilities as was done with vaccines to expedite the development programs compared to what was necessary for the first-generation agents developed using the same platform. So we will update that as we learn more.

George, there's some confusion, just so you could clarify it. Our next-generation antibody work on just -- Omicron on is a work on all of them. Yes, George, go ahead.

As I mentioned in my script, so obviously, we have one of the largest collections of antibodies to choose from. And what we do as a variant emerges is we select new candidate antibodies that will work against the new variant, but will also retain their activity against the previous variants of concern. And that's exactly the candidates that we're advancing right now. They work against Omicron, but they work against Delta. They work against all the other variants before. .

And anything -- any comment on stealth Omicron, do you think it will work there, too?

Well, yes. Obviously, we take all these things into consideration. And so when a new variant that looks like it could be coming along that might be important, we certainly have made sure that the candidates that we're advancing now are going to be active against all of those as well.

Our next question comes from Salveen Richter with Goldman Sachs. Your line is open.

Could you just speak to the RNAi programs? I think we're going to get first data this year from ALN-APP from that program. And how do you think about the optimization of delivery to the brain here and what we might see and how the C5 program could be differentiated?

Okay. So you're asking about the brain and CNS and the APP program, but you're always asking about C5. Okay. So yes, with the brain, obviously, as we all know, there have been disappointing results with antibodies that have been delivered to try to decrease APP levels. They work in a fundamentally different way. One of the problems that they cause, they cause the famous inflammatory syndrome that may complicate activity. So obviously, the hope of siRNA programs is they work by a completely different mechanism. They will actually decrease the production of APP and allowed to be cleared by normal mechanisms as opposed to letting it be made continuously at the normal rate and then trying to remove it by artificial mechanisms that they themselves may be toxic, i.e., the antibody efforts. So that's why they may be fundamentally different. Importantly, we're exploring this not only in Alzheimer's disease, as we all know. It's not as if the early results in Alzheimer's disease are going to really address the important endpoints, that is cognition and efficacy in slowing down cognitive decline and so forth. They're going to be looking at levels of biomarkers and so forth. That's why we're also excited that we are developing the same exact agent, in some ways, a much more rapidly progressing, though albeit much rare disease known as cerebral amyloid angiopathy, or CAA, because there, the ability to both look at the biomarkers, but also, more importantly, look at important efficacy parameters is going to allow us to proceed much faster and much smaller numbers of patients. And therein, we may be, over the next couple of years, able to establish both definitive efficacy, but maybe even get authorization approved in those indications, and that will certainly be quite in advance for the…

Our next question comes from Ronny Gal with AllianceBernstein. Your line is open.

One is for Marion. Can you talk a little bit about the VEGF market? It seems that we've been coming close to a year for a better than 10% growth. And I was wondering how much of this is catch-up versus how much of this is just higher natural market growth rate versus what we're expecting. And then can you talk a little bit about the dynamics of what it takes to compete in this market, kind of like how long to get a J code, how long to have contract with different practices? Essentially, when will -- how long will take a competitor coming online, whether innovative or biosimilar, to really be able to effectively compete in that market?

Sure. Ronny, happy to take it, and I'm going to take the end of your question first. And I first would say that a competitor or a new entrant to the market's ability to compete is really going to be based on the differentiation of their product profile, the quality of their studies and the confidence and enthusiasm that the key opinion leaders have on the product as it comes in. So I do think differentiation matters quite a lot. In the case of EYLEA, certainly, our growth in the past year has been quite pronounced. We've captured not only the market growth, but we've also captured competitive share gain more than any other products, so that our market share today for EYLEA is approaching 50% of the overall category and 75% of the branded category. And we picked up several share points in the last year in this very large category. Let me go back now to new entrants. You're asking about timing of J codes, and that is important. Quality of product, as I mentioned, reflects confidence in how well it performs, but it is a six-month period before a new product receives a permanent J code. So in that window of time, especially in a product which is buy and bill, there's always the concern on reimbursement. There's not experience, not with the product, but there's also not experience with applying for reimbursement under the J-code. That period of time is six months. And to my earlier comment, product confidence will vary based on profile. I hope I've covered, Ronny, most of what you had in that. The only thing I think I probably missed is anti-VEGF category growth going forward. That is a little bit complicated because we're comparing to recovery in the market opposite the COVID period to some extent. However, there is growth of the category because of patient demographics and because of education. I'll give you an example of patients who are diagnosed with DME, only about 47%, 48% of those patients are treated. And those are -- and of those that are diagnosed, there's only -- if you took all DME patients that exist, only about 25% of those patients are treated. So there still is tremendous unmet need in the marketplace, and we certainly will work hard through educational initiatives to make sure that we perform very well as we have been on an ongoing basis on all of our indications. I hope that helps, Ronny.

Can I just add one thing, Ronny, on that? It's just that it seems like it's been every single year for the last decade there has been a threat to EYLEA that a variety of number of people have predicted would be the next thing to displace EYLEA. And along the way, the barriers have changed. And the most important barrier that I think now exists is safety, and that safety, even for a biosimilar, the same product safety for a new product with purported differences, people have learned that the eye is a very sensitive place. And having given scores of millions of injections of EYLEA, there's a great deal of confidence out there. I think it's going to take a matter of time beyond J codes and meeting with practices before that level of confidence is significantly displaced.

Our next question comes from Robyn Karnauskas with Truist. Your line is open.

This is Nicole on for Robyn. Just a really quick question on yesterday's report, the Adicet Bio disclosing their general exercising option to license an allo CAR-T. Can you just comment on the move towards allo CAR-T and why this particular happened?

Could you repeat the end of the question? It was a little hard to hear the question.

The Adicet?

Yes. But what was the question? Can you repeat it?

Why does that matter? What's the importance of it?

So well, as you already referred to it, I mean, this is an advance in the CAR-T space because, obviously, so far, the approved approach and upcoming approaches are all dependent on giving customized individualized autologous CAR-T cells. And the results coming from this relatively novel gamma delta approach is the first gamma delta data in the world show that you could give allogeneic cells and get very remarkable -- in very small numbers, a very remarkable response rate. And so this would take the customization autologous approach and take it to the autologous to the non-autologous allogeneic way, which will really could potentially revolutionize the treatment paradigm here. And so we've been long-term collaborators with Adicet, and we're pretty excited about this allogeneic approach. And so we're investing in it.

Our next question comes from Matthew Harrison with Morgan Stanley. Your line is open.

I was hoping for one on co-stim. I know we're supposed to get some data this year. Can you just maybe help us think about dosing levels, how you're thinking about safety currently? And just in terms of initial data, what should we expect to see, whether it's just about safety or we should really start to have some idea on efficacy as well?

Yes. That's a great question. And as we all know, this pathway was explored many years ago now and led to, unfortunately, very dramatic safety concerns to patients, and that sort of killed the field. And so because of those concerns and that we were reexploring utilization of this very, very powerful co-stimulatory pathway to add to -- in combination with other immunotherapies, the FDA appropriately asked us to move very, very slowly. So the first endpoint of most concern was the safety endpoint, of course, first do no harm. And I think that what we've announced is that in our ongoing dose escalation study, it's only been recently that we have achieved what we think are therapeutic dose potential levels. And now -- and we have -- I think the thing that we have said publicly is we successfully crossed in terms of getting to these dose levels, this very concerning and potentially game stopping safety hurdles. And so now that we're at the potentially therapeutic dose levels, we are now hoping to focus on efficacy. And remember, in several of these programs, for example, our prostate program, we're going in a setting where, at least if properly identified, there are essentially no or very rare responses to PD-1 in these types of very carefully characterized prostate patients. I mean, there has been very little hope, except for rare subsets of characterized patients that have mutations and so forth, for the PD-1 immunotherapy class. So if we can show essentially almost any responses in these types of very recalcitrant and hard-to-treat patients with PD-1 alone in our combinations with our co-stim for prostate cancer, I think there's real reason to believe that our scientists have successfully figured out a completely novel way of taking advantage of this long known, very exciting and powerful, but dangerous pathway that we may have figured out a way to take advantage of it and done it in a safe manner. So this is what we're hoping to see this year that now that we are at these levels, we've gotten there without activating these huge safety concerns that were previously seeing. Essentially seeing any objective responses in this setting would really be potentially game changing. And so we're looking forward to being able to tell you about this possibility later this year.

Our next question comes from Cory Kasimov with JPMorgan. Your line is open.

Wondering if you could frame expectations for the pending update on your program with Intellia that we're getting here near term. What new might we see relative to last summer's preliminary data disclosure?

Yes. We don't want to get too far in front of our partner. George's remarks already indicated the kind of things we'll see, but we should leave it up to Intellia to comment beyond what George said about looking at the dose escalation and including the safety and knockdown of the TTR. But Intellia should have the benefit of making some comments.

But maybe just a couple of obvious points that's not stealing anybody's thunder. But obviously, the initial results were incredibly exciting and revolutionary. Obviously, the first systemic case CRISPR therapy, I mean, all this excitement for almost 20 years, Nobel prizes and all this, I mean, it is incredible that, together with our Intellia colleagues, I mean, this represents the first-ever systemic use of CRISPR to actually modify human genetic gene. But obviously, one of the most important things that one will see is the whole promise of this approach is duration, that is you are modifying the gene. And hopefully, you will never have to treat that patient again, okay? And that's part of the dream and the hope with these genetic cures. And so this is, of course, one important thing that we hope that we'll be seeing from the follow-up data, the duration, which is what is really game changing. You can permanently cure these patients. That's the theory here by permanently changing their genes. And so the longer you follow them up, the more you can validate the duration with, of course, the appropriate safety and continue to keep the dream alive that this whole new approach could really be game-changing for important and appropriate clinical indications.

Our last question comes from Mohit Bansal with Wells Fargo. Your line is open.

And congrats on the progress. Maybe another one on faricimab. And given that your competitor also has Lucentis, which is facing biosimilar this year, are you seeing any rumblings of potential bundling or attractive pricing for those both products combined, that could be played as a strategy to take on EYLEA? And how much does payer versus provider matter in this market?

Sure. So at a high level, I'll share just and talk about our own business is, certainly, we have strong market understanding and work closely with all of our customers across the market segments. When it comes to how another company might be looking at their pricing or strategy, it's probably best I let them comment. But I appreciate the interest in the category and the question.

Thanks, everyone. That concludes today's conference call, and thanks for your interest in Regeneron. The IR team and Bob Landry is here to take any questions that you may have. Everyone, have a nice day.

This concludes the program. You may now disconnect.