Welcome to the Regeneron Pharmaceuticals Q4 2016 Earnings Conference Call. My name is Nicole, 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 Dr. Michael Aberman.

Dr. Aberman, you may begin..

Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; 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 include forward-looking statements about Regeneron.

Such statements may include, but are not limited to, those related to Regeneron and its products, product candidate and businesses, sales and expense forecasts, financial forecasts, development programs, collaborations, finances, regulatory matters, coverage and reimbursement matters, intellectual property, litigation matters 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 such statements.

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 year ended December 31, 2016, which was filed with the SEC later today.

Regeneron does not undertake any obligation to update publicly 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 on today’s call.

Information regarding our use of non-GAAP financial measures and a reconciliation of these measures to GAAP are 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, Michael. Very good morning to everyone, and I echo Michael’s sentiment here on the East Coast. I hope you are all safe from the storm. 2016 was an important and eventful year for Regeneron and one where we achieved significant progress on the commercial, research and development fronts.

We currently have eight late stage Phase III programs and a total of 16 product candidates in clinical development. Our science driven approach has remained unchanged. As we look at 2017, we remain confident that we are well-positioned to reap the benefits of our long-standing scientific endeavors.

We expect to new major drug approvals in the United States this year. First, we are anticipating regulatory action in the United States at the end of March for dupilumab, or Dupixent, our breakthrough IL-4, IL-13 blocker for moderate to severe atopic dermatitis.

We believe that, if approved, Dupixent will change the way doctors are able to treat their moderate to severe atopic dermatitis patients. Secondly, we expect regulatory action by the FDA for sarilumab, our IL-6 receptor antibody for the treatment of rheumatoid arthritis.

We are happy to report that just last week sarilumab, now also known by its brand name Kevzara, was approved by Health Canada. Strong preclinical data as well as our positive findings from our studies in atopic dermatitis, asthma and nasal polyps indicate that IL-4 and IL-13 signaling is a key pathway driving many allergic conditions and diseases.

You will hear further details from George about our dupilumab development program. We are keenly focused on ensuring that the anticipated Dupixent launch in the atopic dermatitis indication is a success by all metrics.

I personally in addition to the teams at Regeneron and Sanofi have engaged in fruitful discussions with payers, and we remain optimistic that Dupixent, the breakthrough product, will receive good formulary coverage when approved for the treatment of moderate to severe atopic dermatitis. We will also be working rapidly to advance dupilumab in asthma.

And if the readout from the ongoing Phase III study is positive, we anticipate making a U.S. regulatory submission in the fourth quarter of this year. Combined with our other ongoing and planned studies of dupilumab in allergic diseases, we believe that this product candidate has the potential to gain approval in multiple allergic disorders.

EYLEA remains an important product for the company, and we continue to defend and extend the franchise by focusing on new indications like nonproliferative diabetic retinopathy and combination studies with Ang2. Bob Terifay will discuss this further on the call. For the full year 2017, we expect U.S.

EYLEA net sales year-over-year percentage growth to be in the single digits. As we further diversify our product related revenues stream, we do not plan to provide EYLEA product sales guidance after 2017. Turning to Praluent. This has been a terrific week for patients with high LDL cholesterol.

First, the LDL hypothesis was validated for PCSK9 inhibitors with positive outcomes data reported by a competitor. We look forward to completing our own outcome study towards the end of this year. Second, just yesterday evening, we were granted our request for a stay of the injunction pending the appeal.

Praluent will continue to be available to patients in the United States, meaning that patients and doctors will continue to be able to choose the best PCSK9 inhibitor for their needs, including the use of a low 75 milligram option which only Praluent provides.

We remain committed to ensuring that patients who can benefit from Praluent will continue to have access to this innovative therapy.

As for the ongoing litigation, we strongly believe that the controlling law and facts support our position that Amgen's asserted patent claims are invalid and we look forward to pursuing our appeal over the coming months.

Finally, before I turn this over to George, I want to note that we have started to recognize students in our first-year as sponsors of the 75-year-old Science Talent Search, the most prestigious high-school talent competition. As many of you know, this program was previously sponsored by Intel and before that by Westinghouse.

Over the last few weeks, we were excited to recognize our first group of 300 Regeneron Science Talent Search Scholars and 40 finalists. We believe programs like this are essential to ensuring a strong science talent pipeline for generations to come. With that, I’d like to turn the call over to George..

Thank you, Len, and a very good morning to everyone who was joined us today. I’d like to begin with Dupixent, our IL-4, IL-13 blocker. I share Len’s excitement about this molecule and its potential use, not only in moderate to severe atopic dermatitis, but also in various other allergic conditions.

As Len mentioned, Dupixent is on track towards the end of March for an expected regulatory approval in the United States for moderate to severe atopic dermatitis in adults. You will hear more about our ongoing launch preparations from Bob Terifay.

In the fourth order of 2016, the marketing authorization application for Dupixent in this indication was accepted for review by the European Medicines Agency or the EMA. Dupixent has received breakthrough designation in both the adult and pediatric atopic dermatitis application.

In the latter, we expect to initiate a Phase III study in adolescent patients between ages of 12 and 17 in the first quarter and in the second quarter another Phase III study in younger patients between the ages of six and 11.

Scientific evidence indicates that the IL-4/13 pathway is essential not just in atopic dermatitis but also in a wide spectrum of allergic diseases. With that hypothesis we're exploring the use of dupilumab in multiple allergic conditions.

Let me begin with asthma, positive data from our previously reported first pivotal study of dupilumab in persistent uncontrolled asthma, which has also been published in the New England Journal of Medicine, demonstrated that in all patients, regardless of their allergic classification, treatment with dupilumab resulted in improvement in both lung function as measured in FEV1 and exacerbations.

In the overall population patients treated with the 300 milligram every other week dose had a 15% improvement over placebo in the FEV1 measure and a 75 % reduction in exacerbations. The most common adverse event associated with treatment in this study was injection site reaction.

In our opinion efficacy in all comers rather than only in those with allergic classifications could be an important differentiating feature of the product profile, particularly in a competitive indications such as asthma. As a reminder, the approved biologics in asthma are indicated only for patients with allergic classification.

Our large second pivotal study LIBERTY ASTHMA QUEST, a Phase 3 study in adults and adolescent patients with uncontrolled persistent asthma is fully enrolled. We expect to report topline data later this year with a regulatory submission to follow in the fourth quarter.

Additionally, in the first quarter of 2017, we expect to initiate a Phase 3 study of uncontrolled persistent asthma in pediatric patients between the ages of 6 and 11. Following quickly behind the atopic dermatitis and asthma indications are additional indications for dupilumab.

These include nasal polyps where we're currently enrolling patients in two separate Phase 3 studies. The next indication is eosinophilic esophagitis where we expect to report in the first half of 2017 topline data from our Phase 2 study.

We continue to explore the role of dupilumab in new indications and plan to initiative a Phase 2 study of dupilumab in food allergies in the second half of 2017. We are pleased with the advances in our late stage pipeline.

Just last week's sarilumab, our IL-6 receptor antibody now known as Kevzara, was approved by Health Canada for the treatment of rheumatoid arthritis. Kevzara is fill-and-finish at Sanofi's facility in Le Trait, France.

As we’ve mentioned before, this facility is being inspected this quarter and subject to a successful completion of the inspection we plan to resubmit the BLA for sarilumab to the FDA in the first quarter with an expected two-month review cycle.

Our Phase 3 NGF antibody program with fasinumab is also advancing and we along with our collaborator, Teva, look forward to initiating additional Phase III studies in both osteoarthritis pain as well as the chronic lower back indication. REGN2222, our program for respiratory syncytial virus is also moving ahead.

We expect the ongoing study to be completed by the end of the year. Moving now to EYLEA. We are conducting two Phase III studies in EYLEA in combination with nesvacumab, our antibody to Ang2. Both these studies, one each in wet AMD and in DME, are fully enrolled. The efficacy and safety data from both these studies will be analyzed at 36 weeks.

While there is greater preclinical support for Ang2 compared to our PDGF program, which we are no longer pursuing as we’ve mentioned before, EYLEA sets a very high bar for efficacy in these disease indications. We look forward to seeing the data from our Phase II studies with Ang2 in the second half of this year.

PANORAMA, our Phase III study of EYLEA in patients with nonproliferative diabetic retinopathy without diabetic macro edema, continues to enroll patients. Turning now to Praluent, our PCSK9 antibody for lowering LDL cholesterol. The ODYSSEY OUTCOMES trial, our 18,000-patient cardiovascular outcome study of Praluent, is ongoing.

This is an event-driven study, and we expect it to be completed by the end of 2017. We expect that positive outcomes data will increase the uptake of PCSK9 antibodies in appropriate patients. We are pleased with the progress that we’re making with our immuno-oncology portfolio.

REGN2810, our PD-1 antibody, continues to advance, and we are currently enrolling patients in a potentially pivotal study in cutaneous squamous cell carcinoma. In addition, we also plan to initiate in the first of the year a clinical study in basal cell carcinoma.

Beyond terminal cancers, we plan to initiate in the first half of the year a clinical study for our PD-1 antibody in non-small cell lung cancer. Our second checkpoint inhibitor, REGN3767, an antibody to LAG3, has also entered the clinic. We will be studying it both as monotherapy as well as in combination with our PD-1 antibody.

Let me also update you on progress of our bispecific platform. Our lead program, CD20 by CD3 antibody, is currently in the clinic both as monotherapy and also in combination with our PD-1 antibody.

We believe we now have a dosing schedule for the CD20 by CD3 bispecific antibody and look forward to expanding the number of patients treated with that dosing regimen.

Lastly, I am happy to report that REGN2477, our Activin A antibody for the treatment of the rare disease fibrodysplasia ossificans progressive, or FOP, is completing a Phase I study in healthy volunteers. And there we expect to begin a Phase II trial in FOP patients later this year.

We also recently initiated a combination Phase I trial in healthy volunteers of Regeneron 2477 with TREVOGRUMAB, our antibody of GDF8 for skeletal muscle diseases.

Before I turn over to Bob Terifay, want to add my congratulations to the 300 Regeneron scholars and 40 Regeneron finalists in the Science Talent Search, but also add congratulations to every high school student who did a science project and applied. These are scientific leaders of the future, who we hope are going to change and save our world.

With that, let me turn the call over to Bob Terifay..

Thank you, George, and good morning, everyone. Fourth quarter U.S. EYLEA or aflibercept net sales grew 15% year-over-year. Net U.S. EYLEA sales in the fourth quarter were $858 million and full-year 2016 sales were $3.32 billion. Net ex-U.S.

EYLEA sales in the fourth quarter were $496 million, which represents 20% growth year-over-year unadjusted for currency fluctuations. Net ex-U.S. EYLEA full-year 2016 sales were $1.87 billion. In 2016, global net sales of EYLEA exceeded $5 billion.

EYLEA is the market leading product among FDA-approved anti-VEGF agents for all of its approved indications in the United States. EYLEA will continue to be a major revenue driver for Regeneron over the years to come.

Our quarter-over-quarter EYLEA sales growth has slowed, reflecting normal market dynamics for a more mature product that has been on the market for over five years with no price increase since launch.

We continue to focus our promotional efforts and the clinical efficacy and safety of EYLEA and our development efforts on potential new indications and new combinations. The next potential driver for EYLEA growth could be an indication for non-proliferative diabetic retinopathy which is currently in Phase III development.

Our fixed combination program for EYLEA and nesvacumab, our angiopoietin 2 inhibitor is currently in Phase II clinical development. Turning now to Praluent, or alirocumab, as reported by Sanofi, net sales in the fourth quarter were $41 million worldwide, with the U.S. accounting for $33 million of the total.

Full year net sales were $116 million with the U.S. accounting for $94 million. We are pleased that the Federal Court has suspended the injunction on Praluent sales, marketing and manufacturing. Therefore, we will continue our efforts to grow Praluent sales and alleviate reimbursement roadblocks.

Remember, Praluent is the only PCSK9 inhibitor that offers a low-dose option. Most of our sales are for the low dose 75 milligram dosage form. Outside of the United States, Praluent has proved in 45 countries. Reimbursement decisions by individual country, region and institutional pricing and reimbursement authorities are gradually evolving.

We are currently preparing for the potential approval and launch of Dupixent or dupilumab with an FDA PDUFA date of March 29, 2017. Sanofi Genzyme and Regeneron have fully hired and trained our field teams. At launch, our field teams will call on 4,500 dermatologists and 1,200 allergist, who currently comprise biologic therapies.

These are the physicians who will most likely be comfortable with prescribing a biologic for atopic dermatitis. We estimate that approximately 300,000 atopic dermatitis patients have exhausted all approved therapies and have failed or are unable to tolerate unapproved use of immunosuppressant therapies.

We have been working with payers to ensure that these patients have access to treatment. As Len mentioned, our discussions with payers are proceeding well and we're optimistic that we can work productively to ensure that patients get appropriate and rapid access to this breakthrough product after approval.

In anticipation of early demand, we have established a reimbursement access services and patient support center, which will be ready to help patients from day one of launch. Our pre-commercialization efforts have been focused on educating physicians, patients and payers on the unmet medical need in moderate-to-severe uncontrolled atopic dermatitis.

It’s devastating impact on patients’ lives and the role of chronic underlying systemic inflammation as etiology. This unbranded education has been provided at major medical meetings through digital media and through print media. Our launch materials and programs are preliminarily prepared pending approval and receipt of our final label.

We filed a regulatory application for Dupixent in the EU in the fourth quarter of 2016. Pending a favorable inspection in the first quarter of 2017 of Sanafi’s fill-and-finish facility in Le Trait, France, we intend to quickly re-file our Kevzara or sarilumab BLA with the FDA with the potential approval in the second quarter of 2017.

Sanofi Genzyme and Regeneron have hired and trained our filed teams who will call on over 6000 rheumatologists responsible for the vast majority of biologics prescriptions for rheumatoid arthritis.

As with Dupixent, we have also been working with payers to ensure that patients have access to Kevzara and we have established a reimbursement access services and patient support center pending regulatory approval.

Our pre-commercialization efforts have been focused on demonstrating the central role of interleukin-6 in rheumatoid arthritis to rheumatologists. Our preparation for a potential launch is in place pending approval and final labeling. Kevzara achieved its first approval in Canada earlier in 2017.

The European marketing authorization application, or MAA, for Kevzara is currently under review by the EMA with a potential decision on the application expected in mid-2017. With that, let me turn the call over to our Chief Financial Officer, Bob Landry..

Thanks, Bob, and good morning to everyone. Overall, we delivered solid fourth quarter financial results. In the fourth quarter of 2016, we earned $3.04 per diluted share from non-GAAP net income of $343 million. For the full year 2016, we earned $11.32 per diluted share from non-GAAP net income of $1.32 billion.

This represents a year-over-year increase in non-GAAP diluted EPS and net income of 36% and 37%, respectively, for the fourth quarter and a year-over-year increase in non-GAAP diluted EPS and net income of 39% and 40%, respectively, for the full-year 2016.

Regeneron’s fourth quarter and full year 2016 non-GAAP net income primarily excludes non-cash share-based compensation expense and includes the income tax effect of non-GAAP reconciling items. A full reconciliation of GAAP to non-GAAP earnings is set forth in our earnings release.

All of the financial guidance mentioned on this call today and in our fourth quarter 2016 earnings release issued earlier this morning assumes that Praluent will remain on the market throughout 2017.

Total revenues in the fourth quarter of 2016 were $1.23 billion and $4.86 billion for the full year 2016, which represented year-over-year growth of 12% for the three months and 18% for the full year.

Net product sales were $863 million in the fourth quarter of 2016 and $3.34 billion for the full year 2016 compared to $750 million in the fourth quarter of 2015 and $2.69 billion for the full year of 2015.

EYLEA net product sales in the United States were $858 million in the fourth quarter of 2016 and $3.32 billion for the full year of 2016 compared to $746 million in the fourth order of 2015 and $2.68 billion for the full year of 2015, which represented an increase of 15% and 24%, respectively.

During the fourth quarter of 2016, EYLEA experienced a small increase in U.S. distributor inventory levels as compared to the third quarter 2016, yet remained within our normal one- to two-week targeted range.

Additionally, we experienced a slight increase in our EYLEA gross to net percentage as a result of an increase in the proportion of Medicaid patients treated with EYLEA. Ex-U.S. EYLEA sales were 496 million in the fourth quarter of 2016 as compared to $413 million in the fourth quarter of 2015, representing a 20% increase on a reported basis. Ex-U.S.

EYLEA sales for the full-year 2016 were $1.87 billion compared to $1.41 billion for 2015 representing a 33% increase on a reported basis. Sales growth on an operational or constant currency basis were consistent with our reported sales growth.

In the fourth quarter of 2016, Regeneron recognized $165 million from our share of net profits from EYLEA sales outside the United States and $649 million for the full year of 2016. Total Bayer collaboration revenue for the fourth quarter of 2016 was $181 million and $744 million for the full year of 2016.

Total Sanofi collaboration revenue was $131 million for the fourth quarter of 2016 and $659 million for the full-year of 2016.

The Sanofi collaboration revenue line item primarily consists of reimbursement of Regeneron incurred R&D expenses, reimbursement of Regeneron incurred commercialization related expenses and our share of profits or losses in connection with commercialization of antibodies.

In the fourth quarter of 2016, our share of losses in connection with the commercialization of Praluent and pre-commercial activities and cost in connection with Kevzara and Dupixent was under $126 million and was a loss of $459 million for the full-year 2016. This can be found in table four of our earnings release.

Netted within these losses were the global sales of Praluent for the fourth quarter of 2016, as recognized by our partner Sanofi of $41 million and $116 million for the full-year 2016. Turning now to expenses, non-GAAP R&D expenses were $404 million for the fourth quarter 2016 and $1.64 billion for the full-year.

Our non-GAAP unreimbursed R&D expense which is calculated as the total non-GAAP R&D expenses less R&D reimbursements from our collaborators was $240 million for the three months ended December 31, 2016 and $882 million for the full-year of 2016.

Our press release includes all the information that is required to calculate unreimbursed non-GAAP R&D expenses.

I’d like to note that our non-GAAP unreimbursed R&S expenses came in below our 2016 guidance due to less spending than forecasted in our sarilumab and dupilumab programs and lower operating expenses than forecasted in our Rensselaer manufacturing facility.

For 2017, we’d like to reiterate our previously provided guidance for non-GAAP unreimbursed R&D to be in the range of $950 million to $1.025 billion. Next, non-GAAP SG&A expenses were $252 million for the fourth quarter of 2016 and $947 million for the full-year of 2016.

Non-GAAP SG&A came in below 2016 guidance largely due to lower than expected fourth quarter spending on Praluent as well as the delayed Kevzara launch. We continue to expect non-GAAP SG&A expense in 2017 to be in the range of $1.175 billion and $1.250 billion.

The increase in our forecasted 2017 non-GAAP SG&A expense is primarily driven by the anticipated launches of Kevzara and Dupixent as well as an increase in commercialization related expenses for EYLEA.

Sanofi reimbursement of Regeneron commercialization related expenses, a line item found within Sanofi collaboration revenue, was $97 million for the fourth quarter of 2016 and $322 million for the full year of 2016.

We expect Sanofi reimbursement of Regeneron commercialization related expenses in 2017 to be in the range of $400 million and $450 million.

Turning now to taxes, our effective tax rate for the fourth quarter and full-year 2016 was approximately 26% and 33% respectively as compared to approximately 32% and 48% for the fourth quarter and full-year 2015.

As a reminder, due to the adoption of accounting standards update 2016-09 the utilization of excess tax benefits in connection with employee exercises as stock options is now reflected in our effective tax rate.

These deductions as well as a change in geographic mix of earnings, were the primarily drivers of the reduction in our effective tax rate in 2016 as compared to 2015. For the full-year of 2017, we are guiding our effective tax rate to be in the range of 32% to 38%.

From a cash flow and balance sheet perspective, we ended the fourth quarter of 2016 with cash and marketable securities of $1.9 billion. Our capital expenditures for the full-year of 2016 were $512 million.

As we enter 2017 we expect our capital expenditure levels to be lower than the previous two years as is reflected in our 2017 guidance of between $375 million and $450 million. The principal driver of these forecasted lower capital expenditures is decrease spending on the renovation of our Limerick manufacturing facility.

Other 2017 capital expenditures include the expansion of our laboratory space within our Tarrytown New York facilities and expanding and renovating a portion of our manufacturing facilities at our Rensselaer, New York facility.

As highlighted in our third-quarter 2016 conference call, we did take the opportunity in the fourth quarter of 2016 to repurchase for $401 million all of our remaining outstanding warrants that we issued in 2011 in connection with our convertible debt. Additionally, our remaining outstanding convertible senior notes were settled on October 1, 2016.

In total, our full year 2016 cash flow statement reflects the use of funds of $656 million in connection with the reduction of outstanding warrants and repayment of the convertible senior notes, which will not recur in 2017.

Additionally, in December of 2016, we entered into a purchase agreement with affiliates of BioMed Realty to purchase the properties located at our headquarters in Tarrytown, New York, for $720 million.

We intend to finance this acquisition with new lease financing where we plan to assign some or all of our rights under the purchase agreement, including the right to take titles to the facility to an affiliate of Bank of America who will become the legal owner and lessor of the facility.

Directly thereafter, we expect to lease the facility from the lessor for five years with rental payments that are expected to be lower than those under our existing headquarters’ lease and immediately accretive to Regeneron upon signing the lease At the end of those five years, Regeneron will have a few options, including extending the lease terms, purchasing the facility at a predetermined amount or selling the facility to a third party on behalf of the lessor.

This transaction is estimated to provide an average after-tax annual cash savings of $21 million during our five-year lease term, and we expect to close this transaction in the first quarter of 2017.

The contemplated lease financing will not constitute indebtedness for the purposes of our unsecured revolving credit facility and, therefore, does not adversely impact our ability to borrow under the credit facility. With that, I’d like to turn the call back to Michael..

Thanks, Bob. Operator, we can now open the call for Q&A. But I’d like to remind everybody to please limit yourselves to a single question to allow time for others to ask their questions.

Operator?.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We are standing by for questions. And our first question comes from Terence Flynn from Goldman Sachs. Your line is open, Terence..

Hi. Thanks for taking the question. Maybe just on the Ang2 Phase II trials, if you can remind us there if those are blinded or open label and then what’s the rationale to wait for the 36-week data instead of reporting the 12-week primary endpoint data? Thanks..

Well, it’s a blinded trial. It’s a single injection either with EYLEA alone or in various combination arms, and we believe that the 36-week data is going to provide us the best opportunity to really evaluate the value of adding angiopoietin-2 to EYLEA. And that’s how we’ve designed the study..

I should add that primary endpoint is 36 weeks….

All right..

Next question..

And our next question comes from Geoffrey Porges from Leerink Partners. Your line is open..

Thank you very much. So, Len, you mentioned the weather in New York and I wanted to make sure that there wasn't any snow going on in this conference call, so I have to ask you about the guidance for EYLEA.

So, you're really guiding to a significant slowdown in 2017, even compared to your growth trajectory in Q4, could you talk a little bit about the puts and takes in that guidance, particularly whether you're assuming any changes in reimbursement for Medicare Part B? And secondly, what is it that you're seeing in terms of the penetration, particularly in the DME that suggests that the product’s reaching maturity now? Thanks..

Thanks, Geoff. No slow at all. Let me just address the question -- your question and generally about our guidance here. First of all, I remind you that this will be the last year that we do individual product guidance.

I'm not a big fan of being in the forecasting business, we’re in the drug discovery, development and optimization business and forecasting is always somewhat tenuous. A lot of people have been concerned about how we get to the guidance and why is the range single digits which can be rather broad.

You have to remember, we are a science-driven company and when you look at all of the errors in the estimates of things that can go into it such as market share, anything that could happen in government policy, negotiations, our ability to hold off any growth of Avastin, any market forces that require increase gross to net.

When you put all of these puts and takes, if you will, it does become somewhat of a blizzard which obscures the landscape and it's very difficult to feel comfortable that we can make -- give you precision that you would like when there are too many estimates in there that when -- that you could -- when you put them all together, the precision is just not there.

So it is the fifth year of this products. We've grown rather substantial and we do think there’s growth also to still be had with new indications, and also, obviously, growth outside United States with Bayer. But as the year goes on we'll see how this all plays out..

Next question..

And our next question comes from Ronny Gal from Bernstein. Your line is open..

Good morning. I’m going to ask one alternate in case you cannot answer the first one. So, the first one is, in case you have the opinion from the court about the preliminary injunction, can you just give us a bit of color about this particularly what was the appellate court's opinion about the likelihood of success on the merits.

Now if you haven’t got the opinion yet, I would ask you about the Praluent trajectory and market share for 2017.

Obviously, some of your clients will be a bit worried about the potential final outcome, should we expect you guys to begin to lose a little bit of share against Repatha in that market?.

Let me deal with the opinion, the legal opinion, I think that’s what you are asking related to the injunction. By the way it was not a preliminary injunction, it was a permanent injunction, which is what you get at the end after a jury trial. A preliminary injunction is something you might get before a jury trial which was not sought in this case.

We read the opinion which is available online I think you can probably find it linked to our press release, and what the court said is that as is typical in all cases when they are determining whether to upset, if you will or put a hold on an injunction that a lower court issued, that they consider four factors, and these factors, the first factor relates to the question of whether you've made a strong showing of a likeliness to win on the underlying appeal; and the second factor has to do with whether or not you will suffer irreparable harm if you don’t get this stay during the appeal.

And third factor has to do with how this affects the other party and the fourth factor has to do with how it affects the public.

From the way that we look at the actual opinion, the court said that the first two of the factors are the most critical and that is whether Regeneron and Sanofi have made a strong showing of a likelihood of success in the merits and whether or not we would be irreparably harmed.

And they said, based on the submissions and the papers that they felt that we met that standard and we were entitled to an injunction to be stayed. So, I think that’s all we know at this point. Now, we are moving forward on a somewhat accelerated basis.

The briefing -- our opening brief on the underlying appeal that the judges were talking about when they said whether we made a strong showing of our winning on the success, that’s what they are talking about. We're going to now go, try and win on the success on the merits. I hope that answers your question..

Next question?.

Our next question comes from Mark Schoenebaum from Evercore. Your line is open..

Hey, guys. Thanks a lot for taking my question. Thanks to Michael, Manisha and Len for all your help while I was out helping out the team. I really appreciate it. And, Len, it’s great to hear your voice. I thought I’d ask a big-picture question. hopefully, I can get Len fired up here.

President Trump was quoted -- it was his press secretary, I think, a couple days ago, when he mentioned that he was clearly in favor of the government directly negotiating drug prices with drug manufacturers. I’d love to hear your thoughts on this.

Do you believe it? What does it mean for the sector if it were implemented? What do you think -- what kind of impact would it have on drug prices if indeed it were implemented? And, more broadly, what do you actually think is going to happen with all of this drug pricing stuff? Thanks a lot, Len..

You’re welcome, Mark. Nice to hear your voice as well. Look, I don’t have a particularly unique pipeline into what the president is thinking here. We take him at his word for what he said that he thinks that the U.S. is paying too much and is not negotiating.

I think, as he gets deeper into the policies, I think, he is going to find that in fact that we do negotiate prices for Medicare drugs. We just do it with individual Medicare carriers rather than one negotiator.

I think that my own perspective on this is that what’s going to happen here is a little bit more of a nuanced dialogue that says that the public is going to recognize and I think the president recognizes that this is a very, very hard business.

Innovating and discovering new drugs that can really change people’s lives either how long they live or what the quality of their life is -- is something that’s extremely hard to do. On the other hand, it doesn’t do us any good to do all that if we can’t get these drugs to people who can actually afford them.

Where I actually think that, there will be some consensus in Congress, which is this is going to take Congressional action, I believe, I think, there will be some consensus in trying to deal with how much of the payments individuals are making for drugs. The co-pays or coinsurances are really what I think most problematic for the people.

And that I think that people are beginning to recognize that the skin in the game that the government wanted for a lot of this has gone a little too far making it hard for people, literally to get the drugs. And I think some relief there will be forthcoming.

But at the end of the day, the attention probably will be and it's just my guess is, on somehow setting standards that breakthrough drugs ought to be rewarded and price increases that are not -- that are unrelated are uncoupled from innovation, will be pushed back on.

Anyway, at the end of the day, we're going to have to figure out how to protect incentives through innovation. And in -- not matter what we think coming back now to Regeneron, I think Regeneron is extremely well-positioned because I think the winners and losers in our space will be those that are really viewed as the true innovators.

If you can come up with a product like Dupixent hopefully which will be approved towards the end of this quarter where you can change people's lives, that is always going to get value for you. So maybe I'll just stop there and take the next question..

Next question?.

Our next question comes from Ying Huang from Bank of America Merrill Lynch. Your line is open..

Hi. Good morning. Thanks for taking my question. I have a question on EYLEA, should we assume that your market share in 2017 in AMD and DME will be relatively stable. That’s how you come to the single digit guidance and then related to that, Novartis has a Phase III for RTH258 that’s comparing a Q3 month regimen to the Q2 month for EYLEA.

I was wondering if you guys have any thought about that? Thank you..

Yeah. I'm not going to get into the granular basis of how we came up with our assumptions, Ying, because as I said, you start to add them up and you wind up with lots of errors. So, it isn’t like one thing drove it versus another.

So, we'll keep you posted on a retrospective basis, how our market share is doing, but predicting that it's just -- it's very difficult. George can address the Novartis trial..

Right. And we want to remind you that their study is really just intended to show that some percentage of their patients can get by with every three months dosing. And we've already shown data that shows that a substantial number of our patients can also get by with three months dosing.

I think that neither they nor I are advocating three months dosing for every patient. It's just that they're trying to produce data akin to ours which actually shows that a substantial number of patients can indeed get by with every three-month dosing..

Yes, and I will just say that, look, this is a hard business and when you load of the eye with a lot of drugs, which is what they're doing, they are going to have to show that they don’t get inflammation, they are going to have to show that you don’t get hypertension systemically which was seen in some of the earlier trials and you just don't know, so we will have to wait and see and we will look at their data, but as George said, I'm not sure that the way that they have set up the trials will accomplish anything more than we’ve already have data for, so we will see..

And I think one brings up an important point, I mean, they're trying to do it by putting in many, many more molecules of their agent as compared to EYLEA, and to get a rather similar efficacy bar and with that, as Len pointed out, comes additional risks that they are going to have to show that they are not actually causing..

Okay.

Next question?.

Our next question comes from Chris Raymond from Raymond James. Your line is open, Chris..

Hey, thanks for taking the questions.

So still a question for the sarilumab, so assuming you guys get a timely US approval here, some of the survey work has shown real traction for a Kevzara especially in its subque format with -- it looks like real impact on embryo and HUMIRA, so at least my view sarilumab has pretty significant differentiation versus ACTEMRA, and you have got this positive head-to-head trial versus HUMIRA, it’s more convenient administration etcetera.

So, Len, as you even mentioned on this call, you've been a pretty outspoken critic of pharma pricing and the TNF market has been one of more glaring examples of aggressive pricing practices and I know, Len, you don’t want to talk about specific pricing strategies but you guys really struck I think a great note with the pricing decision on EYLEA, would you say that the inflammatory biologics market allows a similar setup here for you to really make a statement or is that market different from the one that EYLEA launched into?.

Chris in a word, yes, we think that the constant price increases and the magnitude of them are a reflection of several things, one somewhat tone deafness on the people taking these huge increases and somewhat of complexities of the system about how all of these rebates work, and I think some of this is being unwound.

So, we do have sort of a three-part strategy if we get Kepzara to market, which we expect we will. One is to provide it as a reasonable alternative to anti-TNF therapy either in first-line or after failures. The second is to try and position it if we can as the preferred IL-6 agent based on the profile of the product.

We’ll have to see how doctors respond to that. And by the way, there is this growing market for monotherapy, which I think as you mentioned we do have attractive data in. So, monotherapy -- that is without methotrexate, which is not the most well-liked drug, to be frank -- is a growing part of the market.

And the third part of our strategy is the one that you just referred to, which is that there is an opportunity to come up with more responsible pricing. That’s all that I should say at this point..

Next question?.

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

Hi, guys. Thank you for taking my question. So, I just want to ask another pricing question. Can you talk a little bit about if you’ve seen any pricing pushback in the U.S. and Europe? And you did mention on pricing for -- I can never pronounce it. You talked about formulary -- they will be positioned positively.

Maybe talk about how you think about the lessons from pricing PCSK9 and where you might be getting your confidence in the positioning on the formulary for [indiscernible]..

Yeah. So, a good question, Robyn, and thanks. The PCSK9 story will be a case study, and there are lots of views on this.

And the complexities in the context that they were launched following the Hep C struggles that the payers and manufactures had makes that somewhat of a unique story combined with the fact that you had a market of pennies a day fabulous statins which really could serve a lot of the market obviously.

In our drug, Dupixent, this is a whole different story. First of all, we have outcomes data now. The outcomes data are the endpoints. People’s skin and their itch is really a big deal are getting dramatically better. And I think that -- so when you’re starting with that, that’s very important.

You're also going into a field which the FDA has said it's a breakthrough, we think it's a breakthrough, I think my discussions with the payers, their people think it's a breakthrough. And most importantly, the patients and their doctors believe this is a breakthrough.

So, that’s a whole different kettle of fish than when you're dealing with a drug, for example, a cholesterol-lowering drug where people are not even sure they want to have their cholesterol lowered, or if it was any good to have their cholesterol lowered. We believe it was, of course, but there was this pushback.

Here with this drug, people want this drug, people need this drug, I think that the data are remarkable consistent across all of our trials, it really is a breakthrough. So, we have had very productive conversations meeting with payers who I think have been receptive to trying to not make is always so adversarial.

And look, we have a role, they have a role and we can spend a lot of time pointing fingers at each other, like a lot of people do, and farmers running around saying, well, the middleman has taking too much of it and the middleman is saying that the prices are too high and their patients are wondering what is hell is really going on, or we can try and work together and come up with a breakthrough product that has responsible pricing and good solid formulary access without significant barriers to the right patients getting the drug.

I am an optimist and I base that optimism not just based on my genetic makeup, but on the fact that I've actually had conversations with the most senior leaders of the most important payers and I have felt that we've gotten a very good reception to our approach.

So, I'm really looking forward to telling you the details when we launch and to getting this product to patients..

Next question?.

Our next question comes from Adnan Butt from RBC Capital Markets. Your line is open..

Thanks, Adnan..

Hi. Thanks.

Maybe for George, based on -- for nesvacumab, based on either Phase I or biology, you mentioned the bar is high versus EYLEA, but is the bar different than the bar you would have expected for PDGF?.

Well, I think that the preclinical data was just very weak for the PDGF class. We had been working on that for 20 years and largely went into that program as a defense as try to -- just in case somehow the anomalous early clinical data were proven to be true.

Ang2, the data -- the preclinical data is much stronger, but as you said, EYLEA poses such a high bar for efficacy that it’s a challenge for anything to improve it, especially EYLEA does such a good job on things like retinal edema, which is one of the major causes of reversible vision loss.

So, we're anxious to see, testing the hypothesis in patients, we think it’s worth going forward and testing it. We hope for patients’ sake that it is going to make an improvement, but like anything else, I mean it’s a high bar and it’s going to be hard to actually beat it..

Great.

Next question?.

Your next question comes from Yatin Suneja from SunTrust. Your line is open..

Good morning, guys, Thank you for taking my question.

Question is on Praluent, could you guys comment maybe on how the ODYSSEY OUTCOME trial might differentiate Praluent versus Repatha? And then, George, you mentioned, you expect increased uptick after positive data in appropriate patient, could you maybe expand on that, how do you view or how do you define that appropriate patient population? Thank you..

Right. So, it’s a little bit early to answer the question on how we are going to differentiate.

We know that the trials are slightly designed differently in different patient populations but we haven’t seen any data yet whatsoever, all we have heard is topline data so we have to wait until we actually get our data and analyze carefully the data that’s been presented. George, you can comment..

And just to remind you, your patient population was a higher risk population post-acute coronary syndrome type population.

So, you might expect that these patients might have both a higher risk which is one reason why our study had less numbers of overall patients than the Repatha study, but also that you might have a different degree of benefit in these patients and that it might be represented in different components that comprised of various events of interest..

In terms of appropriate questions -- appropriate patients, I think that was actually Bob Terifay, who had mentioned that, I think what he is saying is that, we want people to be have the maximally tolerated statins before they go on to choose Praluent to further lower their LDL, assuming that they have the appropriate cardiovascular -- atherosclerotic cardiovascular disease.

In terms of getting more patients through the system, I think this will be driven both by doctors. There are obviously some doctors who have been waiting for outcomes and, therefore, and only using, let’s say, in their most severe patients with severe hypercholesterolemia. But now I think that that may change.

So, you might get more drive and more prescriptions coming through. I also believe that with OUTCOMES data the payers are not insensitive to the change in the science, and they will evaluate this and think about the various barriers that are in place.

And I believe they may lessen some of those barriers to make it somewhat easier to get these prescriptions to go through..

And there is one important thing though. Whenever we talk about differentiation from Repatha we need to keep in mind that we are differentiated. This is the only molecule that has a low dose option. There are a large number of patients receiving that low dose option and a large number of physicians who prefer to start with that dose.

That is how we conducted the ODYSSEY OUTCOMES study..

Yes. Thank you..

Okay, Michael.

Next question?.

And our next question comes from Alethia Young from Credit Suisse. Your line is open..

Hey, guys. Thanks for taking my question. It seems like the FDA has been kind of tough around manufacturing and stuff. So, I know you’ve sort of addressed some things with the [indiscernible].

But maybe can you talk about how the breakthrough designation has helped with the Dupixent, and like kind of what are the remaining steps and how confident you feel about being on time for this approval?.

Yeah. I think the FDA has been and should be tough about manufacturing. We rely on our system -- both self-regulated, responsible manufacturers regulating their production and quality; as well as third-party regulators, the FDA -- to ensure the quality of our drugs. We have no problem with that at all.

And I think that sanofi doesn’t either, and they’ve worked hard now to improve and get that plant in an acceptable format. We still have to go through the routine pre-approval inspections -- routine in the sense it’s not a routine inspection; it’s routine in the sense that you have to have it before a drug is approved.

But we’ve been through those before as they have, and we’re optimistic and we have worked very hard to get ready for that and expect that we should be able to get through that. If we do, we would expect an approval by the end of the year -- the end of the quarter. Sorry.

And in terms of the breakthrough status, actually, that’s been very, very, very helpful. I think it’s a terrific program that Congress devised, because it gets the focus of the people, it gets the staffing on the project to move things along, it gets you more access, it gets your questions answered, etcetera, etcetera.

So, I do think that is a good program and my perspective on it is, they don't give that out so easily, they have high standards, and when you get it they do work well with you. So, no gripes from me. I'm not one of those people, when things don't go well, I just blame the FDA, it's just the opposite.

I want a test FDA, because I want a high bar, and want a balanced and fair playing field, but I want a high bar so that we're just not in the, if you will, as I said the other day, in the infomercial business and anything you can say is fine and doesn't matter whether the product actually works or not..

Next question. We have time for one more question. For those of you who don't get a question today, I want to apologize. We are in the office and we made an entry, so please give us a call and we'll try to get you on in the next earnings call. So, this will be the last question..

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

Hi. Good morning, guys. Thanks for taking my question and squeezing me in. so, relatively speaking, how do you view the market opportunity for EYLEA in non-proliferative diabetic retinopathy compared to the products currently approved indications, assuming of course you have positive Phase III data for that patient population? Thanks..

Yeah. Once again, I'm glad you asked the question on the way you did. On a relative basis, the number of patients is substantially higher who have proliferative diabetic retinopathy as compared to those that have proliferative diabetic retinopathy with diabetic macular edema.

And so, you open up a much larger group of patients who potentially could benefit from the drug. Of course, this is, sort of, almost treating people who have yet to realize you’re treating people who have eye disease, lots of eye disease, but it hasn't affected their vision yet.

And so, you have to convince them that to get an injection in the eye to protect their vision. I think that's somewhat of an impediment, but because -- if you have strong data, the numbers there are much, much larger. Anyway, so I think it's a big opportunity on a relative basis. Let me just close by saying that, for us, we get it.

We know how important EYLEA is, but we -- and so we're going to defend and try to extend that. We also get how important it is to make our late stage pipeline a big commercial success. And we have worked very, very hard to get ready for what we think could be a game changing -- and people like to use game changing, breakthrough, all that stuff.

But the truth of the matter is, those kinds of products don't come along that often.

Where George and his team are able to give us a weapon to address, really almost put your finger on the control system for allergic diseases and do that in a way where you don’t have the immune system dysfunction that you do when you do that, let’s say, for Type I immunologic disorders such as the anti-TNF, which do great things, if think about it, when you control the anti-TNF part of the immune system, you are able to come up with drugs that treated rheumatoid arthritis, psoriasis, psoriatic arthritis, ankylosing spondylitis, Crohn's disease.

Now that’s pretty amazing but on the other hand it came with some risk. On the other side of the immune system, if you can control that the way Dupixent seems to be able to do we might be able to have a drug that can address lots of allergic disorders not just the first one.

The way these are regulated and the way they can be promoted are only indications by indication.

But there are lots of indications here, you can think of it as we have drug for atopic dermatitis, we have a drug for potentially asthma, a drug potentially for nasal polyps with chronic sinusitis, potentially for food allergies, eosinophilic esophagitis, and so on.

And to be able to have that control, okay, without having the side effects profile that you get from the other side of the immune system, the anti-TNFs, I think it's quite remarkable.

So, we are extremely excited about that and where the science is taking us there and how the company can evolve from what are tremendous opportunities on that side of the equation and we're not giving up, obviously, we think Praluent, obviously, we're are very pleased when that came out last evening and we are going to fight very hard to get our appeal successfully and to make that an important product as well.

And our pipeline with all the things in it in a tough pricing environment, I think Regeneron is really the place to be because you get innovation and innovation is something that will always generate value. Price increases are nice but if you can’t get them you better be able to innovate and that’s our sweet spot.

So, maybe, Michael I will turn it back over to you..

Well, that concludes our call for today. We appreciate everyone calling in. Again, a couple of people have emailed me, we will call you back. If you want to hear from us, please give us an email or drop us a line, we are in the office. Operator, that concludes our call..

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