Welcome to the Regeneron Pharmaceuticals Q2 2019 Earnings Conference Call. My name is John 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 [Operator Instructions] Please note the conference is being recorded.And I will now turn the call over to Justin Holko..

Thank you, John. Good morning, good afternoon, and good evening to everyone listening around the world. Thank you for your interest in Regeneron Pharmaceuticals and welcome to the second quarter 2019 conference call. An archive of this webcast will be available on our website.Joining me today are Dr.

Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Founding Scientist, President, and Chief Scientific Officer; Marion McCourt, Senior 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 our remarks made on the call today include forward-looking statements about Regeneron.

Such statements may include, but are not limited to, those related to Regeneron and its products and business, financial forecasts and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, and pending litigation and competition.Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement.

A more complete description of these and other material risks can be found in Regeneron’s filings with the United States Securities and Exchange Commission, including its Form 10-Q for the quarterly period ended June 30th, 2019, which has been filed with the SEC today.Regeneron does not undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events, or otherwise.

In addition, please note that GAAP and non-GAAP measures will be discussed on today’s call.Information regarding our use of non-GAAP financial measures and 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. Before we begin, I'd like to extend a warm welcome to Justin who joined us earlier this summer after completing a 19-year training program at Merck and has immediately hit the ground running here at Regeneron.

We're thrilled to have him as part of the team and we worked hard to make his first quarter a straightforward one.Thanks to everyone for joining the call and turning to our business. We had a great quarter actually marked by top and bottom-line growth as well as important advances across our innovative R&D engine.

Sales at Regeneron products including those recorded by our partners grew 32% compared to the second quarter of 2018.EYLEA global net sales grew 13% to $1.9 billion including U.S. EYLEA net sales growth of 17% to $1.16 billion.

The diabetic retinopathy approval in May continues to build upon EYLEA's leadership position in treating retinal diseases including Wet, age-related macular degeneration, diabetic macular edema, and retinal vein occlusion. We are also pleased to announce that our antibody collaboration with Sanofi achieved profitability this quarter.

We expect profits to continue to increase driven by growth in Dupixent as well as discipline cost management across the collaboration to stem losses from Praluent by better aligning investments with revenues.Dupixent is fulfilling its potential to improve the lives of patients by transforming the treatment of a variety of Type 3 allergic diseases.

Global net sales are now annualizing at more than $2 billion. Patient initiation in the U.S. are growing and many ex-U.S. launches are just beginning.Building on this commercial momentum in June, we received the FDA approval for Dupixent in chronic rhinosinusitis with nasal polyposis.

In the EU Dupixent was approved in May for severe asthma in adults and adolescents and as we announced this morning was just approved for atopic dermatitis in the adolescent patients.We also announced today the strong positive results of our Phase 3 study in children aged 6 to 11 with severe atopic dermatitis.

We are enthusiastic about the current and future prospects of Dupixent as a treatment directed at the underlying cost of allergic diseases. Additionally, we are making significant progress towards our goal of building a leading presence in immuno-oncology.The U.S.

and EU approvals for Libtayo in advanced cutaneous squamous cell carcinoma are just the beginning.

Our clinical efforts, which now includes multiple different immuno-oncology programs are studying a wide variety of potential drug candidates in several difficult-to-treat cancers including non-small cell lung, cancer basal cell carcinoma, cervical cancer, ovarian cancer, non-Hodgkin's lymphoma, multiple myeloma and prostate cancer.Beyond Oncology, we continue to novel programs forward throughout early and late-stage development.

George will speak to a few of these programs and additional data readouts are expected later this year. We have made critical advances that have led both to top line and bottom line growth, but we recognize that these advances maybe overshadowed by the current policy debates on the affordability and accessibility of innovative medicines.

We continue to work with policymakers to develop responsible solutions that address affordability and accessibility, while preserving incentives to develop transformative treatments of the future.Now, I'll turn the call over to George..

Thanks, Len. Let me begin with EYLEA, the market leader based on its ability to improve vision across multiple retinal diseases along with its safety profile established by over 25 million injections.

In addition to EYLEA's indication for the treatment of wet AMD or macular edema following retinal vein occlusion and for diabetic macular edema or DME, the FDA label for EYLEA was expanded in May to include diabetic retinopathy without centrally involved AME based on the panorama study.In this diabetic retinopathy setting our updated label shows that EYLEA demonstrated an 85% to 100% reduction in the incidence of vision-threatening complications.

In addition, we are awaiting FDA action on our resubmitted filing for the EYLEA prefilled syringe.In terms of our future innovation in retinal disease, we are planning to initiate clinical programs with a higher dose formulation of aflibercept in wet AMD and in DME by the end of 2019.

These studies will test higher doses of aflibercept in 12 and 16-week regimens compared to the recommended EYLEA regimen of two milligrams every eight weeks.

Beyond aflibercept, we are continuing preclinical development of a new VEGF blocker, gene therapy, and other novel approaches including with our new collaborators at Alnylam.I'd like to now turn to DUPIXENT, our Breakthrough Therapy that has already benefitting many patients in a wide variety of atopic and/or allergic diseases.

As Len mentioned, we achieved several important regulatory milestones.

Beyond the highlighted approvals, an opinion by the European Committee from Medicinal Products for Human Use or CHMP for chronic rhinosinusitis with nasal polyposis is anticipated by the end of 2019.And just this morning we announced positive results of the Phase III trial in severe pediatric atopic dermatitis patients aged six to 11 years which we intend to submit to regulators in the coming months.

I would like to remind you of the tremendous unmet need in this population.On average, the children on our study had nearly 60% of their body covered with lesions and had suffered from this disease for most of their lives leaving the children and their families devastated and without much hope.Not only did DUPIXENT dramatically reduce skin involvement as measured by EASI score by an average of about 80%, it also improved measures of anxiety, depression, and health-related quality of life for both the children and their families.The study also confirmed DUPIXENT's established safety profile and once again, numerically reduced skin infections.

We are deeply committed to bringing DUPIXENT to patients suffering from a range of Type 2 inflammatory diseases driven by the interleukin-4 and interleukin-13 team pathways.With that goal in mind, we are actively enrolling patients in Phase III studies in the eosinophilic esophagitis and chronic obstructive pulmonary disease or COPD.

As a reminder, we are also exploring the effectiveness of DUPIXENT in allergy desensitization settings such as for grass and peanut allergy.While allergy immunotherapy can be effective in the long-term, many patients can't complete the prolonged time course required for success because of allergic reactions which can be severe.

We recently completed a small Phase IIa trial with about 25 patients per treatment arm, testing whether DUPIXENT could improve the safety, tolerability, and efficacy of subcutaneous immunotherapy or SCIT therapy for grass allergy.

The preliminary results of this study showed that about 30 patients discontinued therapy in the SCIT group, mostly due to clinically meaningful allergic reactions compared to only a single patient who discontinued SCIT when combined with DUPIXENT and not due to an allergic reaction.And in the primary efficacy analysis, there was no difference in terms of reduction of the allergic symptoms with SCIT or in the combination.

Thus we are encouraged by the potential of DUPIXENT to increase the tolerability of SCIT therapy and we're looking forward to presenting the results at a future medical meeting.Earlier this quarter, we reported that Regeneron 3500, our interleukin-33 antibody made primary and secondary endpoints in a proof-of-concept study in moderate-to-severe asthma patients, showing that Regeneron 3500 may provide an alternative therapeutic option for asthma.

Although the Regeneron 3500 results were numerically lower than those for the DUPIXENT calibrator arm.In addition, the combination of Regeneron 3500 and DUPIXENT did not demonstrate increased benefit compared to DUPIXENT monotherapy in this trial, although the study was not power to this comparison.

In addition, the next 12 months, we're expecting interim results from the Phase 2 Regeneron 3,500 studies in COPD and in atopic dermatitis.I will now shift gears to our immunotherapy efforts to treat cancer. Starting with Libtayo.

Last month, our PD-1 antibody was approved in the EU for adults with metastatic or locally advanced cutaneous squamous cell carcinoma, who were not candidates for curative surgery or curative radiation making Libtayo the first and only approved medicine of any kind for patients with advanced CSCC in the U.S.

and Europe.With the goal of making Libtayo available from a broader population of CSCC patients, we started Phase 3 study in adjuvant CSCC. In addition to an ongoing investigator-initiated study, our study in the neurological setting is scheduled to start in the fourth quarter.

Additionally, our pivotal study of Libtayo in basal cell carcinoma, the most common skin cancer is expected to read out in the first half of next year.Moving on to non-small cell lung cancer, we are pleased by the enrollment for our Libtayo monotherapy Phase 3 trial in high PD-L1 expressors.

We have commenced enrollment in part two of our other Phase 3 lung cancer study, which will compare Libtayo plus chemotherapy to chemotherapy alone regardless of PD-L1 status or histology.Beyond checkpoint inhibition, our investigational bispecific antibody franchise consists of two broad categories based on the T-cell receptor to which the bispecific bind.

The CD3 molecule or the CD28 customers are bispecifics. In total, we now have four bispecifics under clinical investigation. Our CD20xCD3, BCMAxCD3, MUC16xCD3 and notably the newest was addition of our first co-stimulatory bispecific PSMAxCD28.

Additional candidates are expected to enter to clinic in the upcoming months and years.In June, we presented updated efficacy and safety data for Regeneron 1979, our CD20xCD3 bispecific. Regeneron 1979 continues to show high response rate in heavily pretreated non-Hodgkin's lymphoma patients.

In particular, we observed complete responses in four out of seven diffused large B-cell lymphoma or DLBCL patients treated with Regeneron 1979 doses 80 milligrams or higher.Notably, four of these had failed prior CAR-T therapy, and two of which achieved complete responses.

Regeneron 1979 has demonstrated manageable tolerability with no discontinuations to the syndrome or neurotoxicity to date. Recruitment for a potentially pivotal Phase 2 trial for Regeneron 1979 is now ongoing.

The multi-arm study will enroll several disease-specific cohorts of relapsed refractory non-Hodgkin's lymphoma patients including follicular lymphoma, DLBCL, and other non-Hodgkin's lymphoma subtypes.Our two other CD3 bispecific antibodies MUC16xCD3 for platinum-resistant ovarian cancer and BCMAxCD3 for relapsed or refractory multiple myeloma are in clinical studies that are actively enrolling patients.

We plan to present preliminary BCMAxCD3 data by the end of 2019.Finally, recruitment is ongoing for the first co-stimulatory candidate Regeneron 5678, which binds prostate-specific membrane antigen or PSMA on tumor cells, as well as the CD28 co-stimulatory molecule on T cells.Based on preclinical evidence, we are hoping to see synergy of our co-stims with Libtayo in disease settings, such as prostate cancer, that have proven resistant to immunotherapy alone.

If successful, this innovative approach could open up the possibility of immunotherapy to a large number of patients who do not currently have this option.In addition, we expect a number of updates related to other programs emerging for our pipeline.

By the end of 2019, we are planning to present our C5 antibody data in patients with paroxysmal nocturnal hemoglobinuria, or PNH.

By the end of this year, we also expect readout of our ANGPTL-3 antibody Phase 3 study in homozygous familial hypercholesterolemia, as well as a readout of our Activin-A antibody pivotal study in the rare disease Fibrodysplasia Ossificans Progressiva, or FLP.

Phase 3 studies of fasinumab, our advanced candidate for osteoarthritis pain are now fully enrolled and data are expected during 2020.Finally, we just celebrated the fifth anniversary of The Regeneron Genetics Center. To date, we have sequenced 700,000 individuals linking their exome data with detailed medical records.

We continue to be excited about our ongoing effort here, including our work to sequence the U.K.

Biobank database in collaboration with a consortium of leading biopharma progress.Mining of The Regeneron Genetics Center database had already discovered and/or validated a number of genetic drug targets across several human diseases, which are positively impacting our clinical development efforts.With that, I'll now turn the call over to Marion..

Thank you, George. In the second quarter, we executed well across our portfolio of existing lines of business and recent launches. Starting with EYLEA. Global net product sales grew 13% year-over-year to $1.9 billion. In the U.S.

net product sales grew 17% year-over-year and 8% quarter-over-quarter to $1.16 billion.EYLEA growth is driven by share gain and market expansion, underpinned by the aging population and increase in diabetes prevalence. In the branded U.S. anti-VEGF market, our share increased to 71% of net product sales.

In the quarter, a temporary shortage of Avastin in select geographies modestly impacted EYLEA net sales.EYLEA continues to help patients with a diabetic eye disease and this represents an important growth opportunity for the brand. In mid-May, the FDA approved EYLEA to treat all stages of diabetic retinopathy and our launched commence immediately.

For this indication, EYLEA is the only anti-VEGF for approved with two dosing options, allowing doctors to customize treatment to their patients' needs.Our comprehensive plans to develop EYLEA's position in the diabetic retinopathy market are underway.

We begin educating both physicians and patients upon approval encouraging early intervention for appropriate patients and ensuring EYLEA is the first-line anti-VEGF treatment.

It's early days in the launch, but we're pleased with feedback from retina specialists and we're seeing positive early interest and uptake among major practices.We are investing in EYLEA's commercial platforms to advance our market-leading position across all indications, including wet AMD, DME and in diabetic retinopathy.

Our expanded and realign sales force has a dual focus of growing both the diabetic eye disease market and our core wet AMD business.Robust engagement efforts with the retinal community, messaging both EYLEA's clinical and real world experience are well under way.

Additional outcomes in safety remain the standards by which therapies are compared and EYLEA's rapid and sustained outcomes in improving and protecting vision are unsurpassed.We're committed to further strengthening our leadership position for EYLEA through continued innovation including in dose and delivery.

Pending FDA approval the EYLEA prefilled syringe will be launched in 2019.I'd now like to turn to Libtayo. The launch in continuous squamous cell carcinoma or CSCC continues to gain momentum. And in the U.S. net product sales were $41 million for the quarter.

Brand awareness within the medical community is growing demonstrated by the breadth of prescribers at major cancer centers and community practices around the country.

Since launch, we made further progress in establishing Libtayo as the standard-of-care in advanced CSCC across all lines of therapy.Market research indicates more than three times as many CSCC patients are now receiving an anti-PD1 or PD-L1 treatment compared to before Libtayo's approval. We believe Libtayo is poised for continued growth.

We have broad payer access and a QA recommendation from the National Comprehensive Cancer Network. Libtayo is the only checkpoint inhibitor to have this designation in CSCC.Additionally, ex-U.S.

launches in CSCC are underway and we look forward to data that could expand the potential of our dermatologic oncology portfolio into earlier stages of CSCC and beyond.Moving to Praluent, in the second quarter, global net sales were $74 million. In the highly competitive U.S.

market, we remain focused on patient affordability and physician ease of prescribing. We are working closely with our collaborator Sanofi to greatly improve brand profitability.Turning to KEVZARA, in the second quarter, global net sales were $59 million. In the U. S.

KEVZARA continues to make headway in the IL-6 subcutaneous class with an estimated 47% share of new patients-dispensed KEVZARA or NBRx and 29% share of total scripts or TRx.Now for DUPIXENT, which is transforming the lives of patients suffering from Type 2 inflammatory diseases, atopic dermatitis, asthma, and now chronic rhinosinusitis with nasal polyposis.

Global net product sales in the second quarter were $557 million. In the U.S., net product sales reached $455 million, representing 151% year-over-year growth.Total prescriptions or TRx in the U.S. grew approximately 30% compared to the first quarter.

This was driven by continued growth in approved indication, adult atopic dermatitis and asthma, as well as the launch in atopic dermatitis for adolescents.Weekly new-to-brand prescriptions or NBRx for the second quarter averaged approximately 1,200 patients per week, up from 950 in the prior quarter.

This momentum is further evidence of the positive impact of our commercialization strategy and execution across all approved indications.As we mentioned last quarter, prescribing continues to grow in adult atopic dermatitis as more moderate patients are just prescribed DUPIXENT and more healthcare professionals gain brand experience.

Our recent launch in adolescence is going well. As a reminder, DUPIXENT is the first biologic approved for adolescents many of whom remain uncontrolled using topical therapies.Market reaction has been extremely positive. Target physicians are prescribing and excited about the results they're seeing.

There's significant uptake of both dermatologists and allergists and we're making meaningful inroads in reaching target pediatric dermatologists and pediatric allergists. In addition, market access coverage is already at or near levels of the adult population.Asthma is a significant opportunity and DUPIXENT is well-positioned for continued growth.

DUPIXENT's differentiated clinical and safety profile continues to support uptake. The asthma biologic market has expanded 13% since Dupixent's launch demonstrating our ability to compete and grow this market. Allergists, who have experienced using Dupixent in atopic dermatitis now also see its benefit for their asthma patients.

Prescribing more – prescribing among pulmonologists is also increasing and they are highly receptive to Dupixent efficacy, use in steroid-dependent patients, and self administration.And finally, in late June Dupixent became the first biologic medicine approved as an add-on maintenance therapy treatment for adults with an adequately controlled chronic sinusitis with nasal polyps.

This indication is yet another first-in-class opportunity for Dupixent given the high unmet need.In the U.S.

up to 90,000 adults with chronic rhinosinusitis with nasal polyps are considered uncontrolled despite the prior surgery or systemic corticosteroid use and about 55,000 patients are those that had prior surgery.Importantly, many patients with this disease have other Type 2 inflammatory diseases like asthma.

In our two Phase 3 clinical trials almost 60% of patients also had asthma, which was improved with the Dupixent treatment. Our commercial efforts are focused on EMTs, and allergists and we're having constructive payer discussions.

While early in the launch, we believe this will be a meaningful growth opportunity for Dupixent and we look forward to providing future updates.In closing, we're excited about our near-term performance and confidence that our ongoing commercialization efforts will drive long-term growth across core brands and ongoing launches.Now, I'll turn the call over to Bob..

Thanks Marion. For the second quarter 2019, Regeneron executed well and delivered solid financial results on both the top and bottom lines. And as Len stated, we are pleased that the Sanofi antibody collaboration has reached commercial profitability.

Total revenues for Regeneron grew 20% year-over-year to $1.93 billion driven by continued growth of our core brands EYLEA and Dupixent.Non-GAAP diluted net income per share grew 10% year-over-year to $6.02 on non-GAAP net income of $690 million.

Our second quarter GAAP results were impacted by both the Alnylam upfront payment and the equity investment.In addition to Marion's earlier comments about EYLEA, I want to highlight two additional items related to U.S. EYLEA net sales for the quarter. First, inventory movements were immaterial in the quarter. Second, U.S.

EYLEA net sales were impacted by an increase in sales related deductions.Moving to our collaboration revenue line items. Starting with payer, ex-U.S. EYLEA net product sales, which are reported to us by Bayer were $715 million representing a 7% reported and a 13% constant-currency basis increase year-over-year.

Total Bayer collaboration revenue for the second quarter of 2019, grew 10% year-over-year to $289 million of which $269 million was derived from our share of net profits from EYLEA sales outside the U.S.For the Sanofi collaboration, we generated significantly improved results.

Total Sanofi collaboration revenue was $349 million, up 47% year-over-year. This increase was primarily driven by improved profitability in the Sanofi antibody collaboration.

In the second quarter of 2019 Regeneron recognized a profit of $39 million in connection with the commercialization of non-I/O antibodies compared to a loss of $69 million in the second quarter of 2018.Profitability came from higher global net product sales of Dupixent, partly offset by an increase in commercialization-related expenses to support ongoing Dupixent launches.

Based on our current projections, we anticipate increasing profitability from the commercialization of non-I/O antibodies going forward.Turning now to expenses.

Non-GAAP R&D expenses were $589 million for the second quarter of 2019, compared to $470 million for the second quarter 2018 and essentially flat compared to the $583 million recognized in the first quarter of 2019, driven by continued investment in our research platform and pipeline.Our non-GAAP unreimbursed R&D expense, which is calculated as the total non-GAAP R&D expense, less R&D reimbursements from our collaborators, was $423 million for second quarter 2019 compared to $286 million for the second quarter 2018 and $419 million for first quarter 2019.The year-over-year increase is primarily driven by higher spend associated with our earlier-stage pipeline, clinical trial and manufacturing costs to support ongoing development programs and lower Sanofi reimbursement as a result of the amended Immuno-oncology Discovery and Development Agreement.

Based on the current progress in our R&D pipeline and outlook for the remainder of the year, we are tightening our previous full year 2019 guidance for non-GAAP unreimbursed R&D to $1.625 billion to $1.71 billion.Next, non-GAAP SG&A expense was $375 million for the second quarter of 2019 a 16% year-over-year increase driven by commercialization-related expenses to support ongoing Dupixent launches and EYLEA's recent launch in diabetic retinopathy.

We are tightening our previous full year 2019 guidance for non-GAAP SG&A to $1.53 billion to $1.58 billion.Sanofi reimbursement of Regeneron commercialization-related expenses, a line item found within Sanofi collaboration revenue was $123 million for the second quarter of 2019.

We are lowering and tightening our previous full year 2019 guidance for Sanofi reimbursement of Regeneron commercialization-related expenses to $500 million to $530 million.Turning now to taxes. For the second quarter, our GAAP effective tax rate was 14.1%. We are reaffirming our full year 2019 GAAP effective tax rate guidance of 11% to 13%.

To assist with modeling, principally, due to the Alnylam $400 million upfront exclusion from non-GAAP earnings, the full year 2019 non-GAAP tax rate will be higher than our full year 2019 GAAP effective tax rate.Turning next to our balance sheet and cash flow. Regeneron ended the second quarter with cash and marketable securities of $5.55 billion.

Through the first six months of the year, we generated free cash flow of $916 million. We calculate free cash flow as net cash provided by operating activities less capital expenditures.Capital expenditures were $95 million for the quarter and $169 million year-to-date.

Based on our updated capital spend plan and year-to-date spending levels, we are lowering and tightening our full year 2019 capital expenditure guidance to $380 million to $420 million. In conclusion, we're very pleased with our operational and financial performance this quarter.

These financial results, along with the execution on our R&D and commercial strategies position us for continued long-term growth.With that, I'd like to turn the call back to Justin..

Thank you, Bob. That concludes our prepared remarks and we'd now like to open the call for Q& A. To ensure that we are able to address as many callers as possible, please limit your questions to one or two question. Please go ahead, John..

And thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question is from Carter Gould from UBS..

Good morning. Congrats on the Sanofi collaboration tipping over into profitability and thanks for taking the question. One for George. I want to ask around the CD20 antigen loss you observed at disease progression and some of the patients responding to 1979.

I was just interested in your current understanding of the mechanism; earlier given I believe this was rare with RITUXAN and how you see this potentially influencing how 1979 maybe positioned in the treatment paradigm? Thank you..

I have to admit I didn't quite get your question there..

Okay.

It was around the CD20 antigen loss you saw in some of the patients treated and how you see that ultimately potentially influencing how the drug gets positioned in the treatment paradigm if it potentially takes away salvage options?.

Right. Well, I think that we have seen antigen loss to both CD20 and also CD19 which has occurred. So far it doesn't seem to have in these very late-stage patients dramatically affected the response rates or the durability. So, we're seeing the rates that we responded -- we reported. So, doesn't seem it's at this point a major issue..

Thank you..

Next question John..

Our next question is from Matthew Harrison from Morgan Stanley..

Hey good morning. Thanks for taking the question. I guess I wanted to ask on the initial BCMA data that you expect to present towards the end of this year.

I mean how should we think about relevant comparisons here? Is this something you would compare against CAR-T against BiTEs, I'm just wondering how we should think about that and what the goal here is? Thanks..

Maybe George has more comments, but what I would say best thing is probably to wait for that data, but the way Sanofi and Regeneron and thinking about that in this part of the collaboration is that obviously if we can deliver anything close to what a bispecific can deliver then -- that a CAR-T can deliver, excuse me, then a bispecific being off-the-shelf and pharmaceutical like drug, pricing, consideration and things like that should obviously have a huge advantage in the marketplace.So, we would consider our competition more of things like the BiTEs and what have you.

Obviously, we have already started out with long-lasting molecules with a well-designed; we make them straightforwardly through a proprietary approach. So, we think that we can compete and what you should be looking for is what kind of activity we can deliver. So, maybe we should just wait for that..

Yes. And I think just to add that I think that obviously, we're hoping that it's going to confirm that our class of CD3 bispecifics are reproducibility sort of top-of-the-class in terms of producing the sort of efficacy that we've already seen with our CD20xCD3 bispecific.

And so that's what we're hoping for.In addition to that we just want to point out that both with our own pipeline and obviously, with our partners' pipeline, there are myriad of combination opportunities. So, it's just sort of the beginning to show the activity with the BCMA bispecific.

We can then add to it with the right set of combinations with components that both sides in the collaboration have to offer that we're very excited about, including for example our co-stims, which we have quite a few that could potentially collaborate clinically with the BCMAxCD3 bispecific..

Thank you, Matthew.

Next question?.

Our next question is from Terence Flynn from Goldman Sachs..

Hi. Great. Thanks for taking the questions. Congrats on the antibody JV profitability as well.

Maybe just two on Dupixent, first on, I was wondering if you could share your thoughts about relevant size of the 6 to 11 year-old population here at atopic derm? And then would the pace of uptake be similar or faster than what we saw with adults in your view? And then on Dupi for grass allergy thanks for the additional data, just wondering next steps there for that program, if you could give us any more color on the forward? Thank you..

So why don't we take the Dupi – Marion will take the commercial question first..

Sure. And Terence just to clarify your question on Dupixent you were talking about the European population or you were you talking about the U.S.

population?.

Sure. I mean, both would be great, but I know you got the data this morning from 6 to 11. And again, I don't think you guys have characterized how big those groups are..

Right, right. So what I wanted to share with you, obviously with the atopic dermatitis population in the U.S. for adults, we've said about 300,000 to 400,000 patients are at greatest need of therapy.

And I just want to lend the context that at this point, what we're very pleased with uptake and the difference that DUPIXENT is making in the lives of patients we've probably only so far reached about high-teens about 18% of the adult patient population.

We're excited about the adolescence launch and we're seeing nice uptake there early days, again, a lot more work to do.We haven't yet given a characterization in the size of the pediatric population, but certainly will on the future as we get further into the data readouts and preparedness for launch of that indication, which certainly I can confirm we'll be prepared to launch as soon as we have the FDA approval..

Yeah. Just a slight follow-up, the uptake of the cream –Eucrisa was fairly brisk, I think in some of the younger patients. So we think that market is really one of great unmet medical need.

And as George said, these are children we studied that had 60%, 60% of their body covered with lesions, having all sorts of effect on their mental health, their sleeping, their family, they are just building quality of life.

So I think that in the severe patients, we would expect pretty brisk uptake, but it's going to obviously take some work, because you're treating children with a biologic, we still have to constantly educate and remind people what George said in contradistinction to other Biologics, where you see an increase infection or – listen carefully George mentioned that it was actually numerically decreased consistent that we've seen this cause a severe moderately severe atopic dermatitis patients and numerical decrease.

So we think that as people get more and more and more comfortable with the safety and efficacy, this will move lower and lower down into the age groups as we get approval.

George, maybe you want to turn to the grass allergy and what's next?.

Yeah. So as I mentioned, we were very excited by the potential of Dupixent to apparently increase the tolerability of skit therapy. I may have misspoke, obviously it was 25 patients per arm, and I said 30 patients discontinuous – 30% of the patients discontinued on SCID which is I think is about normal.

Obviously, if you do the math, that's about eight patients. That's the exact number. But in any case – so as we noted, the ability of desensitization therapy to work is real, but it takes time and it comes at the cost of tolerability and many patients not being able to get through the therapy because of the severe allergic reactions.

So it is obviously very exciting to see Dupixent have such an apparent benefit, albeit in an early study in small numbers, on the tolerability of the SCID therapy.We have a number of other ongoing programs in studying allergy and I think we're going to be looking at all these together before we come up with our formal strategy of how to go forward in this, but we do think that this is a very exciting area that can make a lot of difference to a lot of people who are suffering from allergies.

So we're pretty excited..

Great. Thank you, Terence. Next question..

Our next question is from Yaron Weber from Cowen..

Great. Thanks for taking my question and again nice results. I have – if you don’t mind, just two questions, the first one on Dupi. If you can just give us a sense across -- between asthma, AD and obviously, chronic rhinosinusitis is obviously just getting going.

But what really kind of led to the growth this quarter on a quarter-over-quarter basis?And in asthma, where are you getting the majority of sales? Is that new to Biologics, or is it switching from Biologics? And then just a question on EYLEA whether we're hearing some reports on the field that there is now a slightly higher discounting program from Regeneron about a 4% and does that jive with what you're saying? Thank you..

So before Marion tackles those question, I'll say, it is Justin's first call and maybe he's being nice to you. We said one question per. That was three. We'll let Marion give you pass on then trying to deal with each of the questions..

Sure. I'm happy to. So I'm going to start with EYLEA. And let me first comment that we believe that physicians should make this choice on which anti-VEGF therapy they want to select for their patients and certainly EYLEA is the standard of care for many prescribers. Further, I'll just say that, we really are not commenting on pricing strategy.

I'm happy to go into some of the other items as well. I'll see if I can remember the questions.We haven't given for Dupixent, we haven't. It is early days for many of our indications, so haven't given breakout of business by indication, because it would be premature.

But I think in your question, there were a couple of specifics in there that I can give you. You were asking for a characterization in asthma of the types of patients that are being prescribed Dupixent and we are getting the majority of our starts from bio naïve patients.

About 80% of our business is patients who are coming onto a biologic therapy and then, of course, the remaining are switches.The characterization I'll give you is that, certainly for the physicians who are prescribing both allergists and pulmonologists now, allergists obviously had a lot of experience with Dupixent from atopic dermatitis, but we are hearing very positive comments.

And it's the differentiation of the clinical profile, the safety, the results they're getting in terms of the patient's ability to breathe more easily, and to go about their lives in a normal way, that obviously coupled with the ability for patients to self or have at-home administration.So certainly, asthma was a major contributor to our performance in the quarter, but as was atopic dermatitis.

We continue to see substantial growth and as I mentioned earlier, there's still so much unmet need, certainly with adults. And now we're very excited to also be helping those adolescent patients who are very much in need.

So, I think I would round it all up by saying that it's the combination of medications; the expansion of our platform is DUPIXENT that is contributing to this strong second quarter performance..

Thanks Marion. And just maybe add one thing to emphasize you said the combination indications, that's really resonating well for people for example who have both asthma and nasal polyps which is very commonly coexisting or asthma and atopic dermatitis, particularly in adolescence is a common coexistent.

So, the ability to treat these comorbidities is a real advantage for our product and I think the allergists in particular who are the ones in sort of the center point seeing patients who have multiple comorbidities are really getting that..

Thanks Yaron. Next question..

Our next question is from Geoff Porges from SVB Leerink..

Thank you very and congratulations on the quarter. A lot of things that I could ask questions on, but I'll just ask one with 10 subparts. On the 1979 study George, you mentioned that is going to enroll both DLBCL and follicular lymphoma and presumably also mantle cell.

Do you envisage that it could be potentially pivotal in all those NHL subtypes? And will you be enrolling patients who are prior CAR-T failures in that trial? Thanks..

Yes. So, basically, the way our pivotal Phase II study is designed is with a number of arms actually each one dedicated precisely to exactly some of those subtypes that you're interested in.So, that yes, each one we would consider to have pending, of course, how active the data and the durability and so forth.

Each one would have registrational possibilities and we also have a -- in the pivotal Phase II, we certainly will have the late-stage follicular lymphoma patients, the late-stage DLBCL patients, but also we have a program where we're focusing an arm specifically on CAR-T failures where we think obviously in such a high unmet need population where people have failed everything, if one sees the sort of activities that we're seeing in this very small numbers of patients so far being maintained and being durable that yes, that could also be a separate approval opportunity..

That's two out of four prior CAR-T that George mentioned with complete responses was very encouraging..

Indeed..

Okay. Thank you, Geoff. Next question..

Our next question is from Cory Kasimov from JPMorgan..

Hey good morning guys. Thanks for taking my question. I recognize this is probably a difficult one to answer, but we're frequently asked, so I'll ask you.

How are you broadly thinking about the longer term outlook for EYLEA when you balance the possibilities of healthcare reform in Part B exposure pending competition Wet AMD and then your own new EYLEA launches and less exposed indications? Thanks..

Yes. Obviously, it is a difficult question to answer and we hope to give a good answer to it. Our view is more qualitative. If you look at the brand, we're seeing good growth and the good growth is not just occurring in the United States. Its occurring I think it was about 13% outside of the United States.

For a brand that's this large and this late in the class that says that the demographics that we predicted would be having a positive impact. So, I do think there is plenty of room for growth.

In terms of competition, obviously, as I think it was mentioned on the call at the end of the day vision and maintaining and improving vision is the goal of standard. It's what the FDA measures you by. I think it's what most patients care most about, and we are unsurpassed in that. Our long-term safety, I think we've given over 25 million injections.

We are expecting action on our pre-filled syringe, which we worked hard at to come up PDUFA date's coming up pretty soon.So our enormous safety database is I think work in our favor.

It is hard to do this, and if you're injecting 20 – as we said now up to 25 million injections into the eye, you have to be able to do that in a very reliable and safe way.

If you look at some of the studies out there that have been focusing on let's say dryness is also if you look at them there is some data that's worth inspecting on the reactions in terms of inflammation.

So, we also have to see how that sorts out plus we have the advantage of being able to give the dose monthly as well as every other month as well as all the indications. So I think we're well positioned from a near-term.In terms of your question about healthcare policy and overhang, obviously we watch that carefully. We're very involved in Washington.

We know what's really important to us.

We are sympathetic to the notion that some have that prices in United States are much higher and prices for the same drugs outside the United States, but we don't thing that the solution of tying prices in the United States for drug like EYLEA, where we don't control the price outside of the United States makes a lot of sense.

That would be a huge negative to the biotechnology industry as a whole because so many biotechnology companies license away their rights for survival outside the United States, and they don't control the prices.So we were happy to see in the Grassley widen compromise that that was not in there.

It almost got in there in an affirmative way that it couldn't happen that vote was 14-14. We watched that carefully. We're working at it and so we're hopeful that the policy debates that are taking place will not block innovation or rewards the good actors. We haven't had a price increase in EYLEA.

So the notion of having an inflation rebate would not affect us. So maybe that's a qualitative summary of all the things that we worry about. We worry about competition obviously, we worry about the environment, we worry about the regulatory and patent exclusivity and so forth..

Next question..

Thanks, Len. Appreciate it..

There's one item. I might pick up a one thread in the question and this was just related to EYLEA and our indications, and obviously the growing indication which recently launching in diabetic retinopathy. To date, 60% of our sales are now coming from wet AMD.

And with the expansion of our diabetes indications now over 30% of EYLEA sales are coming from the Diabetes indications, and of course recently including diabetic retinopathy and the balance for others..

And our next question is from Evan Seigerman from Credit Suisse..

Hello. Thank you so much for taking the question. And congrats on the progress. One combo for Bob and Marion. So Bob you had mentioned that there was some sort of an Avastin shortage that may have benefited EYLEA sales in the quarter.

And then more broadly speaking, how are you positioning EYLEA in light of upcoming competitive launches?.

Sure. So let me take a start and then if Bob has elements to add. So I think, first, let me talk a little bit about the second quarter. We certainly have a strong quarter. It was influenced by a few factors and let me cover those. Certainly, there's market expansion in consideration. We do see growth from our wet AMD and DME indications.

We began launching in diabetic retinopathy. As mentioned, we added customer-facing personnel to focus on our Diabetes indications.There was a modest, what we had characterized as a modest impact from Avastin shortages in some geographies in the U.S. and then as well we were up against a somewhat weaker 2018 second quarter comparison.

So I did want to give you some relative context there. I think in terms of, as we look forward, we do think that for EYLEA as a standard of care with a huge end market, it's important to look at growth rates as the average of several quarters to get a true sense of what the growth profile has looked like historically and may go into future.

And then in terms of preparation for competitive launches, we feel very well positioned to continue to perform well in the market with EYLEA and certainly we're very excited about the breadth of indications and the profile that Len just covered related to EYLEA..

Next question, please..

Our next question is from Yatin Suneja from Guggenheim Partners..

Hey, guys. Congrats on all the progress and thanks for taking my question.

The question is on REGN3500, the IL-33 antibody that you have, could you maybe talk about the development strategy there, given that Dupi monotherapy was numerically better than IL-33 across all the end points that you have elevated in the asthma trial, could you maybe comment on the areas where you think IL-30 might play a differentiated role relative to Dupi?.

Well, as you said, the hope would be that there might be, to particular patients who might better respond to, for example, or would like the alternative in IL-33 as opposed to a Dupi in asthma.

And, of course, we're also waiting for upcoming data from our atopic dermatitis program and also from our COPD program, to really understand how we're going to position this.

But we do think that this could be an important alternative option for some patients with Asthma, just based on the current data and we're waiting for more data to see how it evolves..

Thank you. Next question, please..

Our next question is from Mohit Bansal from Citigroup..

Great. Good morning and thank you for taking my question. Quick question on Praluent. Given that the challenges you are facing in the market, do you think there comes a point where you and your partner take a tough business decision? Or you think you can turn it around and achieve profitability for this drug in longer term? Thank you..

Yeah. Obviously, this is a highly competitive space. And we don't want to get too detailed about what our strategies are. Obviously, we said we're trying to match our investments appropriately. We do have some strategies. At the end of the day, heart disease is still a major killer. The PCSK9 is still a terrific drug.

So, maybe that's all we should say at this point..

Okay..

Thank you. Next question please..

Our next question is from Kennen MacKay from RBC Capital Markets..

Hi thanks for taking the question. Maybe one for George. I was wondering if you can just comment a little bit more on the high dose of aflibercept trials you're initiating and sort of how high you can go on those and really what the goals of the high dose are? Thank you..

Well, obviously, from our earlier studies, we've seen that about 50% of patients can do well with a more prolonged dosing schedule that is on a 12-week interval. And so we're imagining that if we go to higher dose of aflibercept we may be able to push a higher percentage of patients to either a 12-week or maybe even a 16-week regiment.

So, we're running the studies to actually test these longer intervals and see whether the higher doses will actually do that. So, we'll see..

Great. Next question please..

Our next question is from Alethia Young from Cantor Fitzgerald..

Hey guys. Thanks for taking my question and congrats on a very good quarter. I guess I found the 18% or so number very striking about how much adults and maybe can you talk about some of the things that you're doing to drive penetration or is it the slow but sure process to get more people on the drug? Thanks..

Sure. So, I believe your question, Alethia, is in reference to the comment on DUPIXENT in adult atopic dermatitis.

And I do -- yes, just to give a context, but my comment is to make a point that while certainly many adults that had very, very difficult moderate-to-severe disease are now being treated, there is tremendous potential for us to do more with DUPIXENT to help appropriate adults in need of therapy.And to your characterization, I do think that DUPIXENT is gaining momentum in atopic dermatitis, certainly in other indications as well.

And it's not unusual for physicians first to prescribe to those patients who are their toughest patients, the most severe patients. We're seeing pickup in breadth and depth of physician prescribing of DUPIXENT and we also are seeing more moderate, moderate-to-severe patients being treated.

So, it's encouraging because DUPIXENT is helping these patients in a way that we hear time and time again is transformational to their lives and as well transformational to the lives of the physicians who are treating them..

I think we have time for two more questions John..

Our next one is from Hartaj Singh from Oppenheimer & Co..

Great. Thank you for my question. I have one question on Libtayo. You had a stronger number than we expected for the second question. I think this PD-1 had gotten some really good data and just from what we've heard is being really accepted broadly.

Can you just give us some color on the commercial rollout and how that has progressed? And any thoughts also on the lung cancer products you've got ongoing? Thank you..

So, I will give some comments related to commercial performance and with Libtayo, we certainly are making inroads to become the standard-of-care for CSCC patients as described in our label.Approximately 90% of new patient starts in CSCC within the anti-PD-1, PD-L1 class are now going to Libtayo.

Further, we had excellent payer coverage that is already been achieved and further; we'll have a permanent J code in October 1st. So, certainly, we've made a strong start in the launch of CSCC for Libtayo..

About the lung cancer, I guess, early on there were a lot of the thoughts that the PD-1 space would be commoditized and that there would be so many PD-1s and it'd be sort of boilerplates just making other one.

I think that, if one fairly looks at the data, these are not behaving the same and that's obvious for sure in the lung cancer space, where Keytruda is the unquestioned leader. And so we're very excited about the fact that, we think that our PD-1 might have very good activities already demonstrated as we've heard in certain settings.

So we're excited to see, how it's going to perform in the lung cancer setting, and whether it will be one of the rare PD-1s that can really provide a lot of benefit to patients there..

And our last question from Brian Skorney from Baird..

Hey, good morning, guys. Thanks for taking my question. Two quick ones. Obviously, bevacizumab almost prescribed VEGF therapy despite being off label. It looks like there's one company plan on actually filing at BLA next year to market a brand at bevacizumab.

How do you guys think about the market impact of an active sales force marketing bevacizumab versus more passive usage right now? And then just real quickly on Regeneron 4461. I know leptin was a pretty well researched target about a decade ago, never quite realized the terms.

Can you your thoughts on what makes targeting the receptor with your antibody attractive and how you could overcome some of the prior history? Thanks..

Sure. Just very briefly, because we're running out of time and I'll take the bevacizumab question. George, will deal with the question on the insulin – I mean, on the leptin receptor. So in terms of bevacizumab, obviously you can't have biosimilar to bevacizumab in terms of approvals, because it doesn't have any approvals.

So somebody if they want to get approvals obviously going to have do all of the different studies et cetera. And we already know that in large studies conducted independently by the government for example Protocol T bevacizumab was inferior clearly inferior to EYLEA.

So I think that the use of bevacizumab is mainly one driven by its off-label exceedingly low price. So having another competition there with or without the sales force is doctors are well aware about this, we wouldn't expect to have a major impact in the market.

George, on the leptin?.

Well, just to remind you, one of the major problems with leptin and metro leptin is it was developed was – it elicited unfortunately in quite significant percentage of patient's antibodies against the leptin. And a lot of these patients are patients who actually still have endogenous leptin activity.

So when the antibodies come on board, the patients end up not only neutralizing the injected leptin, but they endogenous leptin they end up being worse off than they were beforehand and they're also left with nothing to actually being available to treat them, because you now can't give them leptin.So of course we are pursuing our leptin receptor activating antibody in that setting, but it would also provide a better alternative and would allow broader usage.

There are other settings where one could have conceived using metro leptin except one who wouldn't have not wanted, to elicit this antibody response and have the potential to wipe out the endogenous leptin remaining activity. And so people were reticent to explore it more broadly in other setting.

So on top of that, it is one of the first examples of our new activating antibody technology that allows us to, we hope, create efficient in vivo acting – activating antibodies for growth factor and cytokine and so forth. So for all those reasons, we're pretty excited about our leptin receptor program.

But, of course, we'll be starting in the – in same sort of rare patients where leptin is mostly used right now..

I'll now turn the call back over to Justin Holko for closing remarks..

Great. Thank you, everyone, and thank you again for dialing in to the call today. The IR team will be around to answer questions later today..

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