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Edited Transcript of REGN earnings conference call or presentation 6-Nov-18 1:30pm GMT

Q3 2018 Regeneron Pharmaceuticals Inc Earnings Call

TARRYTOWN Nov 8, 2018 (Thomson StreetEvents) -- Edited Transcript of Regeneron Pharmaceuticals Inc earnings conference call or presentation Tuesday, November 6, 2018 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* George D. Yancopoulos

Regeneron Pharmaceuticals, Inc. - President, Chief Scientific Officer & Director

* Leonard S. Schleifer

Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director

* Manisha A. Narasimhan

Regeneron Pharmaceuticals, Inc. - Head of IR

* Marion E. McCourt

Regeneron Pharmaceuticals, Inc. - Senior VP & Head of Commercial

* Robert E. Landry

Regeneron Pharmaceuticals, Inc. - Senior VP of Finance & CFO

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Conference Call Participants

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* Carter Lewis Gould

UBS Investment Bank, Research Division - Large Cap Biotech Analyst

* Christopher Joseph Raymond

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* Cory William Kasimov

JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst

* Geoffrey Craig Porges

Leerink Partners LLC, Research Division - Director of Therapeutics Research, MD & Senior Biotechnology Analyst

* Gregory Harrison

* Matthew W. Luchini

BMO Capital Markets Equity Research - Analyst

* Terence C. Flynn

Goldman Sachs Group Inc., Research Division - MD

* Ying Huang

BofA Merrill Lynch, Research Division - Director in Equity Research

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Presentation

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Operator [1]

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Welcome to the Regeneron Pharmaceuticals Q3 2018 Earnings Conference Call. My name is John, and I'll be your operator for today's call. (Operator Instructions) Please note, the conference is being recorded. And I will now turn the call over to Manisha Narasimhan, Head of Investor Relations.

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Manisha A. Narasimhan, Regeneron Pharmaceuticals, Inc. - Head of IR [2]

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Thank you, John. Good morning, and welcome to Regeneron Pharmaceuticals Third Quarter 2018 Conference Call. An archive of this webcast will be available on our website under Events for 30 days. Joining me on the call today are Dr. Lenoard 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, Senior Vice President and Chief Commercial Officer. After our prepared remarks, we will open the call for Q&A.

I would also like to remind you that remarks made on this call today include forward-looking statements about Regeneron. Such statements may include, but are not limited to, those related to Regeneron and its products and business, financial forecasts and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, intellectual property, pending litigation and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, or SEC, including its Form 10-Q for the quarter ended September 30, 2018, which was filed with the SEC earlier 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 in today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our financial results press release, which can be accessed on our website.

Once our call concludes, Bob Landry and the IR team will be available to answer further questions.

With that, let me turn the call over to our President and Chief Executive Officer, Dr. Len Schleifer.

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Leonard S. Schleifer, Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director [3]

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Thank you, Manisha does such a fabulous job in Investor Relations, we should, at least, get her name right. It's Manisha Narasimhan.

Good morning to everyone who has joined the call. In the third quarter, we generally delivered record financial results, an important pipeline progress. EYLEA sales continue to grow. For the first time, U.S. EYLEA net quarterly sales surpassed $1 billion. Also, for the first time, third quarter worldwide DUPIXENT sales exceeded $0.25 billion. And DUPIXENT was recently approved for -- as its second major indication. Additionally, we launched Libtayo, our first approved immuno-oncology therapy.

For EYLEA, we significantly strengthened the franchise through a recently expanded label for less frequent dosing and the potential for a new indication in diabetic retinopathy. And we expect to advance a high-dose formulation of aflibercept into the clinic in the first half of next year.

Libtayo, our first commercial entry into the exciting and fast-evolving area of immuno-oncology, is the foundation upon which we intend to build with multiple additional agents and approaches in many different cancer settings. We have described DUPIXENT as a pipeline in a product and it is living up to that potential. Compared to other approved biologics for asthma, DUPIXENT has a differentiated profile and label. The recent asthma approval, together with the ongoing robust launch in atopic dermatitis, positive Phase III results in chronic rhinosinusitis with nasal polyps and positive Phase II results in eosinophilic esophagitis validate the scientific hypothesis that the IL-4/IL-13 pathway is responsible for a spectrum of allergic or type 2 diseases. You'll hear more from Marion about the launch of DUPIXENT in asthma and atopic dermatitis, and George will update you on our clinical programs.

We've continued to make steady progress with our other commercialized products. From PRALUENT, our LDL cholesterol-lowering PCSK9 antibody, we anticipate that the U.S. treatment guidelines for lipid lowering will be updated shortly. We hope the updated guidelines will facilitate greater access and support increased use of the PCSK9 class. Although it gets drowned out in the debate about drug prices, the fact remains that cardiovascular disease is the number one cause of death in the United States and high LDL cholesterol is a major cause of cardiovascular disease.

Our earlier pipeline continues to progress. At the beginning of the year we set a goal of advancing 4 to 6 new molecules into clinical development. I'm happy to report that to date, we've already advanced 4 new molecules into clinical development. These include a bispecific antibody for ovarian cancer, a new antibody for pain, a leptin receptor agonist and an antibody to CTLA-4. We also expect to advance into the clinic by year-end a BCMAxCD3 bispecific antibody for multiple myeloma. We now have 7 approved drugs, and our clinical pipeline has 20 private candidates, standing a range of therapeutic areas. All of these molecules were discovered by our scientists.

With that, I will now turn the call over to George.

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George D. Yancopoulos, Regeneron Pharmaceuticals, Inc. - President, Chief Scientific Officer & Director [4]

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Thanks Len, and a good morning, everyone. I'd like to begin with EYLEA. In August, our supplemental biological application, or sBLA, which approved for EYLEA dosed every 12 weeks up to 1 year of effective therapy in wet age-related macular degeneration, or wet AMD. EYLEA is now the only anti-VEGF drug for the treatment of wet AMD that offers the flexibility to optimally treat patients regardless of whether they require fixed-interval dosing of 4, 8 or 12 weeks. In September, the FDA accepted our sBLA for EYLEA in diabetic retinopathy, with an action date in May 2019. This sBLA was based on the data from the Phase III PANORAMA study, which investigated the use of EYLEA in patients with mildly-severe to severe non-proliferative diabetic retinopathy without diabetic macular edema. Positive 6 months top line results from PANORAMA were announced in March 2018.

Just a couple of weeks ago, we announced positive data from the 1-year time point from this same study. On the primary endpoint at 1 year after initial monthly dosing period followed by every 8- or every 16-week treatment, 80% and 65% of patients, respectively, experienced a 2-step or greater improvement from baseline on the diabetic retinopathy severity scale compared to only 15% of patients receiving sham injections. The results were highly statistically significant with the p-value less than 0.0001.

Regarding the 2 key secondary endpoints, which achieved statistical significance based on the prespecified hierarchical analysis compared to sham injection, treatment with EYLEA reduced vision-threatening complications by 82% to 85%, and the development of center-involved diabetic macular edema by 68% to 74%. Diabetic retinopathy is the leading cause of blindness in working age adults in the United States.

What is perhaps underappreciated is the rate at which nonsystematic patients can develop serious complications that threaten their vision. Strikingly, within the first year PANORAMA, more than 1/3 of previously asymptomatic diabetic retinopathy patients who were treated with EYLEA went on to develop vision-threatening complications or diabetic macular edema. EYLEA markedly reduced these complications and reversed the anatomic severity of the disease. These results underscore the potential value of earlier intervention in diabetic retinopathy.

In addition to data from our PANORAMA study, the government-funded Diabetic Retinopathy Clinical Research Network is conducting its own Phase III study of EYLEA in diabetic retinopathy. This study, known as protocol W, is ongoing.

Turning to the competitive landscape. In our view, there isn't any product in the near term that can have a substantially different safety and efficacy profile compared to EYLEA. EYLEA is approved in a number of retinal diseases and has demonstrated safety and efficacy with over 20 million doses administered worldwide. It doesn't appear that any potential near-term engines can provide substantially different dosing flexibility, duration or visual gains than are already achievable with EYLEA. Nevertheless, we believe that higher dose formulations of aflibercept might provide additional or longer-lasting benefit and thus, we're advancing this program into clinical development in 2019.

I'd now like to turn to DUPIXENT, our antibody that blocks the interleukin-4, interleukin-13 pathway that we are investigating in multiple allergic diseases. Just a couple of weeks ago, DUPIXENT was approved by the FDA for its second major indication, asthma in adults and in adolescents. DUPIXENT is approved for 2 important types of patients with uncontrolled asthma, those with moderate-to-severe disease with eosinophilic phenotype and those who require oral corticosteroids to manage their disease. With DUPIXENT, the newest biologic-approved for the treatment of asthma, we have demonstrated an unprecedented profile. As noted in our label, in our pivotal studies of patients with moderate-to-severe eosinophilic asthma, we reduced severe exacerbations by up to 67% compared to placebo, and increased FEV1, a measure of lung function critical in asthma, by 29% to 33% compared to 14% to 16% from placebo. In addition, DUPIXENT is the only biological approved for oral corticosteroid-dependent asthma regardless of the eosinophilic phenotype and the only asthma biological that offers patients self-administration.

The U.S. launch in asthma is under way, as you will hear from Marion. A regulatory application for asthma is currently under review by European regulators. We expect a decision in the second quarter of 2019. In terms of ongoing clinical development of DUPIXENT in asthma, we're currently enrolling patients between the ages of 6 and 11 years and are planning a separate Phase III study in patients aged 6 months to 5 years.

In October, we announced that the 2 Phase III studies of DUPIXENT in chronic rhinosinusitis with nasal polyps, DUPIXENT significantly reduced nasal polyps' size, nasal congestion severity and need for systemic corticosteroid and/or surgery. Patients with inadequate control of disease struggle with pain, nasal discharge, the inability to smell and difficulty breathing. The current standard of care, which includes the use of oral and intranasal corticosteroids -- often, along with surgery, is often inadequate. These are the first pivotal trial results in chronic rhinosinusitis with nasal polyps showing the interleukin-4 and interleukin-13 are key drivers of this disease.

Of note, more than 3/4 of patients in these trials also suffer from other type 2 inflammatory conditions, including asthma, allergic rhinitis and NSAID-exacerbated respiratory disease. In a prespecified group of patients with comorbid asthma, DUPIXENT significantly improved lung function asthma control, providing the first evidence that DUPIXENT can treat inflammation from the upper to the lower airway in the same patient. Detailed results for the nasal polyp studies will be presented at a future of medical conference. We intend to make a regulatory submission to the FDA in this indication the first quarter of 2019.

DUPIXENT has now demonstrated late-stage safety and efficacy in 3 allergic or atopic or type 2 inflammatory diseases, atomic -- atopic dermatitis, asthma and now, chronic rhinosinusitis with nasal polyposis. As we've observed in our studies, patients with one such condition often suffer from allergic diseases as well -- other allergic diseases. We are committed to extending DUPIXENT's approval into younger age groups and geographies, and broadening it to additional type 2 allergic indications.

In atopic dermatitis, we recently reported positive data from Phase III study of DUPIXENT in adolescents with moderate-to-severe atopic dermatitis. These results were the basis of a regulatory submission in the U.S. for patients between the ages of 12 and 17 years. This morning, we announced that the FDA has accepted for prior review the sBLA for DUPIXENT in adolescent patients 12 to 17 years of age with moderate-to-severe atopic dermatitis whose disease was inadequately controlled with topical therapies or for whom topical treatment was medically inadvisable. Currently, there are no FDA-approved systemic biologic medicines to treat adolescents with moderate-to-severe atopic dermatitis. The target date for the FDA decision is March 11, 2019. We're also currently conducting studies in younger patients between the ages of 6 months and 5 years as well as in patients between the ages of 6 and 11 years.

In terms of other diseases, we initiated our Phase II/III study of dupilumab in adults and adolescents with eosinophilic esophagitis. We've also recently started our Phase II study of dupilumab in peanut allergy. This program is being conducted in collaboration with Immune Therapeutics. A Phase II study of dupilumab for grass allergy is currently under way and a Phase II/III study in COPD is being planned.

We view our interleukin-33 program as a complement to DUPIXENT. The Regeneron Genetics Center, in collaboration with Geisinger Health System in the U.K. Biobank, has confirmed and extended observations linking the interleukin-33 pathway to both COPD and asthma. We're studying our interleukin-33 antibody both as monotherapy as well as in combination with DUPIXENT and asthma where we have 3 trials in progress and in COPD, where we have 1. We plan, by year-end, to initiate 2 Phase II studies in atopic dermatitis: 1 will be anti-IL-33 monotherapy; and the other will combine anti-IL-33 with DUPIXENT.

I would now like to switch to the very exciting field of immuno-oncology, which continues to be an area of focus for us and where we have recently made important strides. At the end of September, Libtayo, the brand name of cemiplimab-rwlc, became not only the first PD-1 antibody approved by the FDA for the treatment of advanced cutaneous squamous cell carcinoma or CSCC, but the first treatment of any kind ever approved for this cancer. The response rate for this very high unmet need cancer setting were among the highest ever reported for a PD-1 treatment in a solid tumor. Outside the United States, a regulatory application for Libtayo is being reviewed by the European Medicines Agency, with the decision expected in the first half of 2019. There are currently no EMA-approved treatments for advanced cutaneous squamous cell carcinoma.

As we have stated before, we consider non-small cell lung cancer to be an important potential indication for Libtayo. Our Phase III program in non-small cell lung cancer is enrolling as planned. Based on our review of emerging data in this evolving field, and as we had indicated on our last quarterly call, we have double the size of our trial comparing Libtayo monotherapy to chemotherapy in PD-L1 high patients, from 300 patients to approximately 700 patients. We're also conducting Phase III studies of Libtayo and second-line non-small cell lung cancer and in combination with chemotherapy and with an anti-CTLA-4 antibody in the first line. While these studies are being conducted with a commercially available CTLA-4 antibody, I'm pleased to report that our own CTLA-4 antibody is now in clinical development.

Turning now to our bispecific antibody platform. The leading program here is our fully owned CD20xCD3 antibody. Next month, at the Annual Meeting of the American Society of Hematology, or ASH, we will be presenting additional data in B-cell malignancies.

Our second bispecific antibody to enter the clinic targets MUC16 and CD3 for ovarian cancer. By year-end, we expect our BCMAxCD3 bispecific antibody to enter clinical development for the treatment of multiple myeloma. We've also announced that we will be addressing an entirely new class of bispecifics into the clinic starting the first half of 2019.

Continuing on the theme of immuno-oncology. In the third quarter, we entered into a collaboration with bluebird bio to discover, develop and commercialize new CAR-T and other cell therapies for cancer. This collaboration represents a great example of 2 companies with synergistic technologies, working together to try to make a significant advancement in the field.

Moving on. Our late-stage pipeline has made progress, and I would like to focus on a few programs. In the third quarter, we announced positive top line efficacy data for fasinumab, our Nerve Growth Factor, or NGF, antibody in patients with chronic pain from osteoarthritis of the knee or hip. The study met both co-primary endpoints and all key secondary endpoints at week 16, showing that we can achieve efficacy with low doses that mitigate treatment associated with arthropathy at least during the study period. We have 3 Phase III studies with fasinumab ongoing in osteoarthritis, including our long-term safety study.

As most of you know, pain represents an area of high unmet need. To that end, we've recently advanced another molecule for pain into clinical development, a fully human antibody to the GFR alpha-3 neurotrophic factor receptor.

Our clinical programs in cardiovascular metabolism are moving ahead. We're enrolling Phase III studies of PRALUENT in adults with homozygous familial hypercholesterolemia in addition to pediatric studies in heterozygous and homozygous familial hypercholesterolemia. We recently received regulatory approval for PRALUENT as a treatment of patients with heterozygous familial hypercholesterolemia, undergoing at risk. And finally, FDA has accepted for review an sBLA for PRALUENT potential treatment of reduced major adverse cardiovascular events with the target action date of April 28, 2019.

Alirocumab, our anti-CTLA-3 antibody is in a Phase III clinical development study in homozygous familial hypercholesterolemia, whereas received orphan and breakthrough designations. We're also enrolling patients in a Phase II study of alirocumab in heterozygous familial hypercholesterolemia and refractory hypercholesterolemia and another Phase II study in severe hypertriglyceridemia. In terms of our other clinical programs in December, at the annual ASH meeting, we will also be presenting additional data from our wholly owned C5 antibody program. We expect to initiate a Phase II study of the subcutaneously administered molecule in patients with paroxysmal nocturnal hemoglobinuria or PNH, in the first half of 2019.

Another exciting molecule in our pipeline is our Activin-A antibody, where we currently have a potentially pivotal Phase II study ongoing in a rare disease called fibrodysplasia ossificans progressiva.

Finally, I would just like to highlight, within the next 3 months, our Regeneron Genetics Center expects to hit the 500,000 mark of human sequence, a milestone few, if any centers, have ever achieved.

With that, I would now like to turn the call over to Marion.

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Marion E. McCourt, Regeneron Pharmaceuticals, Inc. - Senior VP & Head of Commercial [5]

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Thank you, George, and good morning, everyone, I'd like to start with EYLEA, where global net sales in the third quarter were $1.68 billion, an increase of 11% year-over-year. U.S. net sales of EYLEA were $1.02 billion, a 7% year-over-year increase. This increase was driven by overall market growth in both wet AMD and DME, position preference and the aging population as well as the increase in the prevalence of diabetes.

Based on net sales, EYLEA currently holds about 70% of the overall branded U.S. and anti-VEGF markets. In an effort to educate consumers and raise brand awareness and interest, we recently launched a pilot EYLEA DTC campaign for approved indications in selected markets. Beyond the approved indications of wet AMD, DME, retinal vein occlusion and diabetic retinopathy with DME, we see potential opportunity for EYLEA in diabetic retinopathy. As you just heard from George, we recently reported positive data in this indication and expect a regulatory decision in the U.S. in May of next year. Following this potential approval, we plan to initiate a focused campaign to drive adoption in this large untapped indication. Additionally, in August, we announced that the FDA approved an sBLA for EYLEA for a modified every 12-week dosing schedule for wet AMD after 1 year of effective treatment. This makes EYLEA the only approved anti-VEGF drug for wet AMD with 4-, 8- and 12-week dosing, specifically referenced in its label.

I'd like to spend a moment discussing our prefilled syringe for EYLEA. As previously announced, we received a Complete Response Letter from the FDA. We remain confident that we will be able to satisfy the agency's request, which included the completion of usability study evaluating a single injection in approximately 30 patients. We plan to make a regulatory submission in the first half of 2019. Our launch time lines for the prefilled syringe have not changed, and we continue to be on track for an expected 2019 launch.

Turning now to DUPIXENT. Global net sales in the third quarter of 2018, as reported by our collaborator, Sanofi, were $263 million, including $220 million in U.S. Let me start with DUPIXENT in atopic dermatitis. Underlying U.S. demand for DUPIXENT remained strong, with total prescriptions, or TRx, up approximately 17% quarter-over-quarter sequentially. Prescriber depth and breadth continues to improve, with now over 12,300 healthcare providers having prescribed DUPIXENT to over 60,000 patients.

Despite the strength of this launch, the vast majority of patients with moderate-to-severe atopic dermatitis have not been treated with DUPIXENT. Educating patients about DUPIXENT as a potential new treatment is an important area of focus. To this end, we recently launched a national-branded television campaign and are encouraged by the early results. Outside the U.S., the ongoing launch of DUPIXENT in atopic dermatitis is progressing well. As George announced, the sBLA for DUPIXENT in adolescents with atopic dermatitis has been filed and granted Priority Review by the FDA with an action date in March 2019. If approved, this will allow the benefits of DUPIXENT to be extended to patients as young as 12 years of age. We estimate that the number of adolescent patients is about half that of the adult atopic dermatitis population. In addition, we've also submitted an application for our 200-milligram auto injector for DUPIXENT.

Turning now to asthma, which is the most recently approved indication for DUPIXENT. As you heard from George, we believe DUPIXENT is a highly differentiated biologic for the treatment of asthma. The launch is under way and feedback from positions has been positive. We've only been in the market for a couple of weeks now, so it is too early to provide any detailed launch metrics. We estimate there are approximately 775,000 to 900,000 adult and adolescent patients in the U.S. with moderate-to-severe asthma that have uncontrolled persistent symptoms that despite standard-of-care therapy may be suitable for treatment with a biologic therapy. Currently, only about 11% of these patients are treated with a biologic. One of the key considerations for physicians treating asthma patients is to limit or avoid the use of oral steroids to control the disease. We estimate that the oral corticosteroid-dependent population represents approximately 25% to 30% of the approximate 775,000 to 900,000 patients with uncontrolled persistent asthma eligible for a biologic. DUPIXENT is a nonsteroid treatment option for these patients. With that in mind, we're optimistic about the asthma launch, with the goal of making DUPIXENT a preferred first-line biologic for indicated patients with moderate-to-severe asthma. Early efforts to engage both allergists and pulmonologists are well under way, and the reception has been positive. Many allergists are already familiar with DUPIXENT in atopic dermatitis, and these doctors are also treating patients with asthma. We're actively working at educating and creating awareness of DUPIXENT's differentiate profile with pulmonologists. We look forward to providing further updates on the launch in the months ahead.

I'd now like to turn to Libtayo, our PD-1 antibody. On September 28, the FDA approved Libtayo for the treatment of patients with metastatic cutaneous squamous cell carcinoma or locally advanced CSCC who are not candidates for curative surgery or curative radiation. We continue to expect a decision by the European Medicines Agency in the first half of 2019. The launch of Libtayo is a major milestone and the first step in our goal of establishing Regeneron as a major player in the immuno-oncology space. Upon FDA approval, the oncology sales force quickly mobilized to make Libtayo the standard of care for CSCC by engaging medical oncologists and most surgeons, targeting centers specializing in skin cancers.

So far, feedback from medical community has been positive. On October 24, Libtayo was included in the updated National Comprehensive Cancer Network, NCCN Guidelines for CSCC. Libtayo received a 2A evidence rating, the only systemic therapy with an NCCN rating in CSCC. From a payer's standpoint, we've been successful in establishing broad access in reimbursement coverage, so patients in need can get access to the treatment quickly. Recall that CSCC is the most common form of skin cancer and is responsible for an estimated 4,000 to 8,000 deaths each year in the U.S. It currently accounts for approximately 20% of all skin cancers in the U.S., with a number of newly diagnosed cases expected to rise annually. We look forward to providing further update on the launch at a later time.

Switching to PRALUENT. Global net sales in the third quarter recorded by Sanofi were $80 million, representing a 62% increase compared with the third quarter of 2017. We've submitted data from the cardiovascular outcome study to regulatory agencies in U.S. and the EU and anticipate decisions in the second half of 2019. We are also expecting that the lipid-lowering treatment guidelines in the U.S. will be updated shortly. These updated guidelines may facilitate greater access and support, increased use of the PCSK9 inhibitor class. We're continuing payer engagement and remain the exclusive PCSK9 inhibitor on the Express Scripts national commercial formulary. Based on net sales, our market share in the U.S. has grown significantly since the addition to the ESI formulary, up to 40% in the third quarter, with the number of prescriptions continuing to increase steadily.

Moving to KEVZARA. Global net sales as recorded by Sanofi were $25 million in the third quarter as demand improved. Within the IL-6 subcutaneous class, KEVZARA now has 42% of dispensed NBRx share and 20% share of TRx.

I'll now turn the call over to Bob.

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Robert E. Landry, Regeneron Pharmaceuticals, Inc. - Senior VP of Finance & CFO [6]

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Thanks, Marion, and good morning, everyone. I'm pleased to report both solid top line results and strong operational performance for the third quarter of 2018. We are encouraged by EYLEA and DUPIXENT sales growth, progress across our portfolio and improvement in our operating leverage as reflected in the reduction of our full year 2018 expense and tax guidance line items.

For the third quarter of 2018, we earned $5.87 per diluted share on non-GAAP net income of $675 million. These results represent a 47% and 44% year-over-year increase in our non-GAAP diluted EPS and net income, respectively. Total revenue grew 11% year-over-year to $1.66 billion, driven by performance of U.S. EYLEA, revenue increases for both the Sanofi and Bayer collaborations in growth within other revenue. EYLEA net product sales in the United States grew 7% to $1.02 billion compared to $953 million in the third quarter of 2017. U.S. EYLEA distributor inventory decreased in the quarter as compared to the second quarter of 2018, yet remained within our normal 1- to 2-week targeted range.

As disclosed in our last earnings call, commencing in the second week of June, we increased the existing EYLEA discount that we offered to physician practices regardless of volume. As a result, there was a slight degradation in EYLEA's gross-to-net percentage in the third quarter of 2018 compared to both the third quarter of 2017 and first half of 2018.

Effective October 1, 2018, we started shipping and recording U.S. net sales of Libtayo. As a reminder, for Libtayo, in the U.S., we are the commercial lead and will record product sales. Sanofi has exercised its option to co-promote Libtayo in the U.S.

Ex U.S., EYLEA net product sales, recorded by our collaborator Bayer, were $655 million for the 3 months ended September 30, 2018, representing a 20% operational and 16% reported increase on a year-over-year basis. Total Bayer collaboration revenue for the 3 months ended September 30, 2018, grew 12% year-over-year to $264 million, of which $243 million was derived from the share of net profits from EYLEA sales outside the U.S. The $243 million, which represents year-over-year growth of 18%, compares favorably to the $205 million realized for the 3 months ended September 30, 2017.

Total Sanofi collaboration revenue was $256 million for the third quarter of 2018 compared to $245 million for the third quarter of 2017. The year-over-year revenue increase was driven by 3 factors: first, we realized a $59 million decrease in our share of losses in connection with the commercialization of DUPIXENT, PRALUENT and KEVZARA; second, higher Sanofi R&D reimbursement revenue associated with our increased investment in immuno-oncology; and third, higher Sanofi commercialization reimbursement revenue associated with increased investment in commercialized products. Offsetting these 3 factors is the 2017 expiration of the Sanofi antibody discovery and preclinical development agreement, under which we recorded $38 million of revenue in the third quarter of 2017 compared to no revenue this quarter.

In the third quarter of 2018, we recognized the loss of $39 million in connection with the commercialization of products from the antibody license and collaboration agreement with Sanofi, which compares favorably to a loss of $98 million in the third quarter of 2017 and a loss of $69 million in the second quarter of 2018. The lower share of loss versus the third quarter of 2017 was primarily attributed to higher global net sales of DUPIXENT and PRALUENT and continued cost containment for PRALUENT, partly offset by an increase in DUPIXENT commercialization expenses. Despite incurring necessary launch expenses for new indications in new markets, from a financial standpoint the alliance had its best performing quarter. While we experienced improved operating leverage in the third quarter of 2018, we expect the alliances' financial results to remain variable for the next few quarters as we continue to incur launch expenses for new indications in new markets. Compared to the third quarter of 2018, we are expecting a higher alliance loss in the fourth quarter of 2018 in connection with the commercialization of these antibodies.

Before turning to expenses, I'm going to briefly comment on our third quarter 2018 other revenue. In the third quarter of 2018, other revenue was $117 million versus $62 million in the third quarter of 2017. This increase was primarily driven by the recognition of a higher amount of deferred revenue from Teva and Mitsubishi Tanabe, including amounts related to the recognition of a portion of the $60 million and $20 million development milestones achieved from Teva and Mitsubishi Tanabe, respectively, in the third quarter of 2018.

Other revenues also increased from the recognition of revenue related to our agreement with Biomedical Advanced Research Development Authority, or BARDA, to develop, test and manufacture an antibody therapy for the treatment of Ebola virus infection. As a reminder, you can find a summary of the components of other revenue in the MD&A section of the 10-Q.

Non-GAAP R&D expenses were $497 million for the third quarter of 2018 as compared to $460 million for the third quarter of 2017. The increase in non-GAAP R&D expense was the result of an increase in Libtayo clinical cost and higher R&D headcount and facility-related cost, partly offset by a decrease in DUPIXENT development cost. 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 $311 million for the 3 months ended September 30, 2018, compared to $227 million for the 3 months ended September 30, 2017. As highlighted earlier, $38 million of this increase is attributable to the expiration of the Sanofi antibody discovery and preclinical agreement at the end of 2017. The remaining increases were driven by our share of higher immuno-oncology clinical costs and R&D activities associated with the growing number of wholly owned programs. Our press release includes the information required to calculate unreimbursed non-GAAP R&D expense.

We are lowering and tightening our full year 2018 guidance for non-GAAP unreimbursed R&D expense to be in the range of $1.19 billion to $1.225 billion from our previous guidance of $1.21 billion to $1.26 billion. Non-GAAP SG&A expense was $326 million for the third quarter of 2018 as compared to $259 million for the 3 months ended September 30, 2017. The higher SG&A expenses in the third quarter of 2018 were primarily due to an increase in contributions to independent not-for-profit patient assistance organizations and higher launch expenses for Libtayo and DUPIXENT in adult and adolescent asthma.

We are lowering and tightening our full year 2018 non-GAAP SG&A expense to be $1.33 billion to $1.37 billion from $1.34 billion to $1.39 billion. Based on this revised guidance, we expect a higher SG&A spend level in the fourth quarter of 2018. This higher spend is driven by EYLEA expenses, including DTC and DUPIXENT expenses, including DTC and patient support programs.

Sanofi reimbursement of Regeneron commercialization-related expenses, a line item found within Sanofi collaboration revenue, was $107 million for the third quarter of 2018. We are lowering and tightening our full year 2018 guidance for reimbursement of Regeneron commercialization-related expenses to $430 million to 5 -- $455 million from $455 million to $485 million. For the 3 months ended September 30, 2018, as compared to the same period in 2017, non-GAAP cost of goods sold declined principally due to better cost absorption at our Limerick, Ireland commercial manufacturing facility. Cost of collaboration and contract manufacturing increased due to higher sales volumes of both EYLEA outside the U.S. and Sanofi collaboration antibodies as well as the recognition of manufacturing costs associated with our agreement with BARDA. These increases were partially offset by lower validation cost at our Limerick facility.

Turning now to taxes. Our effective tax rate in the third quarter 2018 was 6.5% compared to 31.3% for the third quarter 2017, driven primarily by the enactment of the Tax Cuts and Jobs Act as well as onetime tax benefits associated with tax planning in connection with this act. Our tax rate continues to benefit from the Federal tax credit for research activities, stock-based compensation and income earned in foreign jurisdictions with tax rates lower than the U.S. The third quarter of 2018 also included a GAAP income tax benefit of $11.9 million that was an adjustment to the provisional amount recorded as of December 31, 2017 for the U.S. Tax Reform Act, which was related to the remeasurement of the company's U.S. net deferred tax assets.

As we await additional regulatory guidance and continue to assess the full impact of the new tax law, including some onetime items, we now expect our full year 2018 effective tax rate to be in the range of 11% to 13% from our previous guidance of 13% to 16%. While our effective tax rate guidance has been lowered for 2018, we expect that over the next few years, our effective tax rate will be in the mid- to high-teens.

Turning next to cash flow and the balance sheet. Regeneron ended the third quarter of 2018 with cash and marketable securities of $4.1 billion and generated an excess of $1.1 billion of free cash flow from the 9 months ended September 30, 2018. We calculate free cash flow as net cash provided by operating activities less capital expenditures. Our capital expenditures for the 3 months ended September 30, 2018 were $106 million. In total, $298 million for the 9 months ended September 30, 2018. We are lowering and tightening our full year 2018 capital expenditure guidance to $360 million to $390 million from our prior range of $410 million to $450 million.

On the BD front, as George mentioned, we entered into a collaboration with bluebird bio. In connection with the execution of the collaboration agreement, we also agreed to purchase 420,000 shares of bluebird common stock for $100 million. As part of the agreement, $37 million, the amount paid in excess of the fair market value of the shares purchased, will be credited against our funding obligation for collaboration research.

Before I hand the call back to Manisha to commence Q&A, I also wanted to highlight in an exciting announcement Regeneron made in September regarding a new agreement with the State of New York to support economic development in the capital region. Over the next 7 years, Regeneron has committed to investing $800 million to expand facilities and create 1,500 new full-time jobs in New York State. This expansion will be supported by $140 million in economic development incentives from New York State.

With that, I would like to turn the call back to Manisha.

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Manisha A. Narasimhan, Regeneron Pharmaceuticals, Inc. - Head of IR [7]

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Thank you, Bob. John, that concludes the prepared remarks. We'd now like to open the call for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question is from Geoff Meacham from Barclays.

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Gregory Harrison, [2]

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This is Greg Harrison on for Geoff. Can you talk us through the trends you're seeing recently with payer access for DUPIXENT? Have asthma patients been able to get access? And how is this prepared -- how is this compared with the launch in atopic dermatitis?

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Marion E. McCourt, Regeneron Pharmaceuticals, Inc. - Senior VP & Head of Commercial [3]

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So -- certainly it's early days, Greg, in the launch for asthma. But I can certainly report that with DUPIXENT, for the new asthma indication, we are making steady progress and very pleased with initial dialogue with payers. But I'll just remind everyone that this is only our third week in market with the asthma launch. Then as a comment, you alluded to atopic dermatitis and payer coverage. Certainly, we see the majority of the market with adequate coverage. And of course, that reflects in the uptake we're seeing with DUPIXENT performance.

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Operator [4]

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Our next question is from Carter Gould from UBS.

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Carter Lewis Gould, UBS Investment Bank, Research Division - Large Cap Biotech Analyst [5]

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I guess, when -- given all the commentary coming out of the White House around Part B proposals and HHS, just wanted to get to your latest thoughts on sort of that messaging. And anything that you guys can do to either mitigate that front on either on the -- yes, leave it there.

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Leonard S. Schleifer, Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director [6]

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Yes. Thanks for the question, Carter. Obviously, it's tough to know what's going to actually become policy given a lot of these announcements were pre-election. I do think the administration is serious about trying to do something with drug pricing. But whether or not they'll be able to get in, in a demonstration project, which covers a large fraction of the country starting in the year 2020, with international reference pricing, I think that's a wide big open, big question mark at this time.

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Operator [7]

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Our next question is from Cory Kasimov from JP Morgan.

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Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [8]

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I'm curious how you're looking at the market opportunity for DUPIXENT and moderate eosinophilic asthma population. When considering the low biologic penetration you referred to for severe asthmatics to date. So I guess, given those historic dynamics, do you think you'll be able to penetrate much of the moderate patients in the first year or so the product's launch or should we really be focused on severe?

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Leonard S. Schleifer, Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director [9]

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I'm going to let Marion answer that question after I just make one brief comment. The market has yet to see a self-administered product. And it is -- penetration is expected to be exceedingly low for the moderate population when you have to get to the doctor's office either an infusion or hang around there for half a day, et cetera, et cetera. Marion?

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Marion E. McCourt, Regeneron Pharmaceuticals, Inc. - Senior VP & Head of Commercial [10]

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Yes. So I'd add to that, that it's not unusual that physicians, and in this case, it's pulmonologists and allergists, will often use a product, DUPIXENT in this case, for asthma, on some of their tougher patients first. I'll share this, anecdotally, the reports we're getting have been very, very positive. So over time, most definitely, I think we'll have to assess not only with severe but also the moderate patients. And I think that continuum will evolve over market experience. But there are really compelling reasons why, and that relates to the clinical profile of DUPIXENT in asthma, its overall efficacy not only in exacerbations, lung function, OCS reduction and quality of life, but then also the broad category of patients that we achieved in our label. Moderate-to-severe patients, of course, EOs greater than 150, OCS-dependent, regardless of phenotype or EOs. As Len mentioned, another element that we're hearing that is just so important is that we are the only asthma biologic to offer both at-home, self-administration. And when physicians want to, they can always start a patient in the office to help educate and train them. But this is a really important factor in the ability to have broader use. And then, the other item I'd add is that, of course, with DUPIXENT, we're not launching a new product, we're launching a new indication. So allergists who already had experience with DUPIXENT. And we already have shown an established safety profile. So we're really excited about the launch. It's very, very early days. I look forward to giving you reports in the future.

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George D. Yancopoulos, Regeneron Pharmaceuticals, Inc. - President, Chief Scientific Officer & Director [11]

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And -- this is George, I just want to emphasize about the clinical profile that Marion brought up, which is that particularly for moderate patients, they still can have pretty substantial reduction in their lung functions. I mean, when you are talking about biologicals, that may be the first biological really can have clinically meaningful impact on lung function, that can really make a difference in patients' lives. And that is something that has a really potential to essentially have a real impact on patients' lives. And together with its safety profile, I think there's a lot of rationale for penetrating into the moderate population.

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Operator [12]

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Our next question is from Chris Raymond from Piper Jaffray.

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Christopher Joseph Raymond, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [13]

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Just a question on the DUPIXENT peanut allergy study or work that you're doing with Aimmune. Can you maybe talk about a little bit in detail about the objectives of this work, maybe the strategy even? I think you've talked about being able to potentially improve on Aimmune's experience in desensitizing kids during the up-dosing period. But maybe just frame for us what is -- there's obviously a lot of opportunity in food allergy not just peanut allergy. What does success look like from this initial trial? And where do you think that could take you in terms of sort of penetrating that other market -- that bigger market?

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George D. Yancopoulos, Regeneron Pharmaceuticals, Inc. - President, Chief Scientific Officer & Director [14]

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Just to get into the signs for a second. I think that everybody has to understand that the reason you have allergies is you have a certain kind of immunoglobulin known as immunoglobulin E that is bound to the surface of mast cells and basophils. And once it interacts with allergen, it clusters on the surface of these cells, resulting in degranulation, release of histamine and other allergic mediators. That's the fundamental basis of allergy. For those of you who don't know, interleukin-4 and interleukin-13 are the IgE switch factors. When you try desensitization therapy, the whole goal of that therapy, fundamentally, is to reprogram the immune system and make the immune system make good antibody, or immunoglobulin G, as in George, instead of immunoglobulin E, as in Ellen. So -- and when you are trying desensitization, you don't really have a natural way of actually impacting whether these cells that are involved in the response go to IgG or IgE. IL-4 blockade and IL-13 blockade are the fundamental drivers. So in any setting of desensitization, giving DUPIXENT should do or drive exactly the kind of reprogram that you want, that historically has been very difficult to achieve. And in animal studies, the results are pretty much black and white. So we believe that in almost any setting of desensitization, whether it be peanut, grass, whether it be with any approach, the whole goal is to stop making IgE and to start making IgG. That is exactly what DUPIXENT can do. So what we hope success in that study is faster ability to tolerate higher doses of the peanut during the whole desensitization, decrease the number of patients who have allergy-mediated side effects, mostly GI side effects that limit their ability to take or stay on the treatment. All of these will be indicators that DUPIXENT is doing exactly what we think it should be doing, which is driving more IgG and preventing the body from making the IgE and thus, reprogram the body away from allergy. And this is just the beginning. If it works in peanut, it has a signal here, it should be applicable to essentially every form of desensitization available by whatever modality.

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Operator [15]

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Our next question is from Geoffrey Porges from Leerink.

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Geoffrey Craig Porges, Leerink Partners LLC, Research Division - Director of Therapeutics Research, MD & Senior Biotechnology Analyst [16]

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Just a follow-up on DUPIXENT a little bit. Could we -- could you just address the question of the adolescent indication and what your expectations are there? And you mentioned the population. But would you expect adoption to be faster or slower there? And then, just back to the asthma launch, could you comment on whether you think this is going to be actively managed by payers, whether there'll be step edits and rebates involved? Or do you think that you're largely going to sort of be able to price more or less at the same price as you have in AD and have unrestricted access?

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Leonard S. Schleifer, Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director [17]

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Geoff, before Marion answers, we invite you to come by, we might have an antiviral antibody we can give you.

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Geoffrey Craig Porges, Leerink Partners LLC, Research Division - Director of Therapeutics Research, MD & Senior Biotechnology Analyst [18]

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I'd appreciate that.

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Marion E. McCourt, Regeneron Pharmaceuticals, Inc. - Senior VP & Head of Commercial [19]

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So addressing your comments first on DUPIXENT uptake in adolescents. Well, as I mentioned, we very much look forward to the indication in helping this group of patients with moderate-to-severe disease and the agony that goes with that, for both them and their families. We would anticipate that the uptake should be similar to potentially a bit faster than what we saw in adult atopic dermatitis. And I think it's for 2 reasons. I want to be a little conservative in saying similar but the reason why I think realistically, it might be a little bit faster for these patients is that physicians now have experience with DUPIXENT. And the product is becoming well known, just the prescribing is increasing. And for that reason, coupled by the fact that this is an alarming disease for adolescents, we believe it's very important that we get the word out quickly and there's great excitement and enthusiasm in the market for this indication for this group of patients who are truly suffering. Your second question related to asthma and payer uptake. It's very early days. This is our third week of launch so things are going well. There's been great receptivity to the clinical profile of the product. But I think I'd rather come back and give more detail on payer specificity as we have more time in market.

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Leonard S. Schleifer, Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director [20]

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I just wanted to add to the pediatric side of this is that in systemic steroids, whether they're absorbed from -- lathering lots of it on or with systemic versa treatment in adolescents during their growth spurts is a big deal. So I think that's another reason why doctors might want to move to early adoption.

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Operator [21]

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Our next question is from Matthew Luchini from BMO Capital.

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Matthew W. Luchini, BMO Capital Markets Equity Research - Analyst [22]

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Just on DUPIXENT, we've had the DTC campaign ongoing now for a little while. I was wondering if you could give us an update or your latest view on the patient mix that's currently receiving the drug for atopic dermatitis? As well as perhaps your view on current persistence or refill rates? That's something that I don't think was mentioned in the earlier marks.

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Marion E. McCourt, Regeneron Pharmaceuticals, Inc. - Senior VP & Head of Commercial [23]

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Sure. So let me take persistence and refill rates first. So the persistency that we've commented on in the past at the 12-month point being approximately 80%, continues. So we see strong persistency with DUPIXENT. Similarly, on the first script, refill is an important factor. We still see that at over 90%. So these are indicators that when patients go on DUPIXENT therapy for atopic dermatitis, they want to stay on therapy because their lives are better. The second piece you mentioned is a little bit on the DTC. I believe it was part of the question. And also the types of patients. So similar to the comment I made before, it's not unusual for physicians to start with their most severe patients but it's clearly now, we're getting penetration not only with severe but also moderate patients. And we really thought it was part of our responsibility to -- for this disease and for patients to potentially previously had given up because therapies were not really helping them at all. We thought that this product was absolutely ideal for an on-air branded campaign. We're still only in months of that branded DUPIXENT TV campaign. It was preceded as some would recall by a disease awareness campaign and we thought that was the right order to do things. We've been in national broadcast mode with the DUPIXENT TV campaign now since about the August time frame. So we're several months in. The signs we've seen so far are encouraging.

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Operator [24]

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Our next question is from Terence Flynn from Goldman Sachs.

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Terence C. Flynn, Goldman Sachs Group Inc., Research Division - MD [25]

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I know you are unlikely to give EYLEA guidance for 2019, but maybe you could just talk about the puts and takes heading into next year? It looks like we're on track for another double-digit year of branded growth here. So just wondering if we think that, that should continue heading into '19. And then you mentioned this higher dose formulation of EYLEA. Maybe what have you learned here that drove this decision? And what would actually be required to bring that to market?

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Leonard S. Schleifer, Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director [26]

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So maybe George can take the higher dose, and then we can comment about the market.

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George D. Yancopoulos, Regeneron Pharmaceuticals, Inc. - President, Chief Scientific Officer & Director [27]

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Well, in terms of a higher dose, I guess the point is that we remain impressed with the fact that EYLEA has stood up to so much competition in that no one has really been able to come up seemingly with a fundamentally different profile in terms of benefit, effects on vision, or duration of treatment. And so we thought that it was time, especially because we've been working on this in the labs for a while, to see whether just giving a higher dose of EYLEA can actually take EYLEA past what is now, we think, the gold standard in the field and see if we could either improve the benefit and/or extend the duration of the interval. And so we're poised. We've been working on this for a while, and we're going to be putting in the clinic this year.

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Leonard S. Schleifer, Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director [28]

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Next year, 2019.

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George D. Yancopoulos, Regeneron Pharmaceuticals, Inc. - President, Chief Scientific Officer & Director [29]

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Sorry, 2019. Yes. I'm already operating in 2019.

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Leonard S. Schleifer, Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director [30]

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In terms of the market growth, we see nothing that will change the underlying demographics for -- the increase in diabetes and the increase in AMD, continuing to grow the market somewhere in the mid- to high- or low-double-digit growth over time. Those demographics do not seem to be letting up at all. Obviously, where we fit in there based on competition, what have you, we'll have to see how all that plays out, but I'll echo what George says. We haven't seen anything that's disruptive. We certainly haven't seen a drug -- even the most touted drug by the sponsor, RTH, it seems to me they have forgotten that the retinal specialists are actually some of the smartest guys out there as physicians. And they can do math and they can multiply 75% times about 50% and come up with a lot lower number than 75%. So it seems to me that EYLEA has a really good profile. In addition, what we saw in the diabetic retinopathy studies was we think quite remarkable. I think it was startling too many how many frequent it was that people untreated with asymptomatic diabetic retinopathy given placebo just watch for year and a large fraction of them, about 1/3 actually develops vision-threatening complications. And this can be dramatically prevented and reduced not only improve the diabetic retinopathy but prevent the progression of the diabetic retinopathy. And we think that, that's a big deal. It's going to take some reeducation out there of both patients and physicians, but we think that's a fundamental advance. Remember that diabetes and diabetic eye disease is one of the leading still causes -- leading causes of blindness in adults.

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Operator [31]

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And our last question is from Ying Huang from Bank of America.

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Ying Huang, BofA Merrill Lynch, Research Division - Director in Equity Research [32]

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I have one for NGF. In the recently released Phase III top line, you saw the placebo adjusted rate of adjudicated arthropathy at about 2%. And now we saw the Pfizer tanezumab at ACR showing less than 1.5% incidence of RPOA. I was just wondering whether you think that this kind of safety is acceptable for the FDA and for the treating physicians? And what's the gating factor for the long-term safety in your Phase III trial? And then next, if you could give us a little bit more color on the collaboration with bluebird, exactly what kind of target and what kind of therapy you're focusing on?

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Leonard S. Schleifer, Regeneron Pharmaceuticals, Inc. - Co-Founder, President, CEO & Executive Director [33]

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Thanks, Ying. Let me just comment on the tanezumab, and then maybe George can comment on bluebird or ask him about fasinumab. But I have to say that I think we know that in any drug dosing, any drug development program, getting the dose right is really, really important. And that becomes super important when you have a very steep dose response curve for side effects. And we think that our approach has been to really try and get that dose right. And we're hopeful that the very low dose that we got that is still able to produce what's basically so far at least best-in-class efficacy results have not stayed the course study comparisons and all that. But really good efficacy results thus far. But perhaps, as George said in his prepared remarks, we're mitigating the safety. In terms of safety, I don't think it's just going to be the adjudicated arthropathies, which -- that probably would be an acceptable level. But I also think there's a question of whether or not this event, this treatment will lead to more or less joint replacements. There's some evidence, I believe you've seen in the other development program, certainly, and hours of high doses that you would see more joint replacements. And that probably would not be acceptable. Our program is very carefully monitored by an independent DSMB, which has met recently and advised us to continue development at these low doses where we've demonstrated the efficacy. So we hope that we've got the dose right. Being first here may not be nearly as important as being right where -- because if not, we'll leave as much room for error in this program as it might be in others. George can talk about bluebird.

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George D. Yancopoulos, Regeneron Pharmaceuticals, Inc. - President, Chief Scientific Officer & Director [34]

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Just to just add to that. As you know, we are continuing our long-term safety study with NGF. And as Len said, I mean, the most important data is to see what the benefit will be compared to adverse events with, we believe at this point, since we seem to have mitigated against at least the arthropathies, the total joint replacements numbers are going to be very important. Certainly, with the competitor's program, that is a concern, and we'll have to see whether our dose gets around that. In terms of bluebird, I think, for us, this is a very exciting collaboration. Clearly, they've demonstrated and they've developed their technologies and abilities to develop these CAR-T therapies. What we bring to the table is, we bring new targets and new reagents, whether they be antibodies or T-cell receptor-related reagents that can target new targets, that can be put into and made into chimeric antigen receptors by bluebird to be put into their cells and used up via their therapeutic approach. So we're very excited about putting together our ability to bring new targets and new ways to make these chimeric antigen receptors together with their ability to take those forward and deliver them to patients. And we think this is a real synergistic collaboration between 2 companies with very complementary capabilities and we're hoping to be able to change the future there.

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Manisha A. Narasimhan, Regeneron Pharmaceuticals, Inc. - Head of IR [35]

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Thanks, George. Operator, that concludes our prepared -- our call today. I know we weren't able to get through all your questions, but please send me an e-mail and we will schedule a follow-up call with you.

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Operator [36]

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