Ryan Crowe:

Thank you, Shannon. Good morning, good afternoon and good evening to everyone listening around the world. Thank you for your interest in Regeneron and welcome to our Second Quarter 2024 Earnings Conference Call. An archive and transcript of this call will be available on the Regeneron Investor Relations website shortly after the call ends. Joining me on today's call are Dr. Leonard Schleifer, Board Co-Chair, Co-Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Board Co-Chair Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President of Commercial; and Chris Fenimore, Senior Vice President and Chief Financial Officer. After our prepared remarks, the remaining time will be available for your questions. We anticipate today's call will last approximately 60 minutes. I would like to remind you that remarks made on today's call may include forward-looking statements about Regeneron. Such statements may include, but are not limited to, those related to Regeneron and its products and business, financial forecast and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange commission, including its Form 10-Q for the quarter ended June 30th, 2024, which was filed with the SEC this morning. Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP financial measures will be discussed on today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our quarterly results press release and our corporate presentation, both of which can be accessed on the Regeneron Investor Relations website. Once our call concludes, Chris and the Investor Relations team will be available to answer any further questions. With that let me turn the call over to our President and Chief Executive Officer, Dr. Leonard Schleifer. Len?

George Yancopoulos:

Thank you, Len. Starting with DUPIXENT. Regarding COPD, data from our second confirmatory trial, NOTUS was featured as a late-breaking presentation at the American Thoracic Society Conference and simultaneously published in the New England Journal of Medicine. In NOTUS, DUPIXENT reduced exacerbations by 34%, while significantly improving lung function confirming the unprecedented results from the previously reported Phase III BOREAS trial. Based on data from NOTUS and BOREAS, DUPIXENT was recently approved by the European regulatory authorities for eosinophilic COPD patients uncontrolled on maximum standard-of-care inhaled therapy. Additional submissions are under review with other regulatory authorities around the world, including in the US, China and Japan. Beyond COPD later this year, we are looking forward to data readouts from Phase III studies of DUPIXENT in chronic spontaneous urticaria and bullous pemphigoid. Seven years after its initial FDA approval and with approval in seven different indications around the world DUPIXENT continues to deliver potential new approvals for additional important disease indications. Regarding our small pilot study to potentially eliminate severe food allergies using our innovative approach that combines DUPIXENT and linvoseltamab or BCMA by CD3 bispecific, we continue to expect to see initial data by the end of this year. On itepekimab, our IL-33 antibody in development for certain COPD patients, our two Phase III studies are now fully enrolled, study readouts and regulatory submissions for our second therapeutic candidate for this devastating disease are expected in the second half of next year. Moving to oncology and starting with fianlimab, our LAG-3 antibody in combination with LIBTAYO, at the upcoming ESMO meeting in September, we look forward to presenting longer-term follow-up on the metastatic melanoma cohorts from our first-in-human study. Responses have continued to deepen with the proportion of complete responders and median progression-free survival continuing to improve. These results strengthen our view that fianlimab and LIBTAYO may be the most promising immunotherapy combination in clinical development. As we recently announced, we are looking forward to the Phase III readout in this melanoma setting next year, which could position fianlimab and LIBTAYO as a new standard-of-care in melanoma and eventually potentially other cancer settings. Additionally, we hope to gain insights into the antitumor activity of this combination in non-small cell lung cancer later this year. We are also advancing fianlimab development to earlier lines of therapy with proof-of-concepts in perioperative non-small cell lung cancer and perioperative melanoma now underway with additional indications likely to follow. On to bispecifics for solid tumors. Our costimulatory bispecific antibodies are being tested in numerous studies, including as monotherapies as well as in combination with CD3 bispecifics and with LIBTAYO. At the ASCO Conference, we presented results for our EGFR by CD28 bispecific in combination with LIBTAYO. In microsatellite stable colorectal cancer tumor historically unresponsive to immunotherapy, EGFR by CD28 in combination with LIBTAYO demonstrated encouraging antitumor activity with an overall response rate of 20% in patients without liver metastases. Regarding safety, to-date, we have not observed severe immune-related adverse events with this agent at our recommended Phase II dose. Dose expansion cohorts testing EGFR by CD28 plus LIBTAYO continue to enroll in various solid tumors, including non-small cell lung cancer with or without EGFR mutations, microsatellite stable colorectal cancer, head and neck, squamous cell carcinoma and others. On to our PSMA by CD28 costimulatory bispecific, which has already demonstrated promising activity in late-line prostate cancer when combined with LIBTAYO. We have now initiated combination treatment of our PSMA by CD28 costim bispecific with our PSMA by CD3 bispecific, which based on preclinical studies may maintain the efficacy of served with the LIBTAYO combination that may improve the safety and tolerability profile. We are also testing PSMA by CD28 in other cancers. Next, to our bispecifics for hematology oncology, the linvoseltamab or BCMA by CD3 bispecific, an oral presentation at the European Hematologic Association Conference we presented updated pivotal data, which continue to demonstrate a potentially best-in-class profile in late-line myeloma in terms of efficacy, safety, dosing as well as hospitalization burden. As we expected, responses continue to deepen with longer follow-up. At 14-month median follow-up of 117 patients, 50% achieved a complete response or better with an objective overall response rate of 71%. Additional studies of linvoseltamab are now also underway in earlier stages of myeloma and in precursor conditions such as smoldering myeloma and monoclonal gammopathy of unknown significance or MGUS. Developing linvoseltamab in earlier-line myeloma settings presents an important opportunity for us to help patients and their physicians in these diseases, which currently have complex treatment paradigms. Touching on our nononcology hematology pipeline, as highlighted previously, later this year, we are anticipating proof-of-concept results for our two Factor XI antibodies in the setting of prevention of venous thromboembolism after knee replacement surgery. The study for the antibody targeting the Factor XI A2 domain is now fully enrolled and we expect to present results at a medical meeting in the second half of this year. Interim Phase II results for our second Factor XI antibody which targets the catalytic domain are expected by the end of this year for internal analysis. We have also started an additional proof-of-concept study to further evaluate the two antibodies profile for thrombosis prevention in patients, who have a peripherally inserted catheter. Results of these studies will inform whether to proceed to registrational studies with one or both of these antibodies by next year. Moving to obesity. Our most advanced approach is designed to address the potential negative consequences of widespread use of GLP and GIP receptor agonists. As has been widely reported, the profound weight loss caused by these agents unfortunately, it can also result in substantial loss of muscle, which is particularly concerning older obese patients. Our myostatin antibody when combined with semaglutide with or without our active NA antibody, may protect against this muscle loss as previously demonstrated in nonhuman primates. Part A of our COURAGE Phase II study testing a higher dose of trevogrumab or myostatin antibody in healthy subjects has now been successfully completed with no new safety signals identified. Part B of the study, which evaluates our muscle preservation antibodies in combination with semaglutide and obese participants has started enrolling patients assuming a reasonable pace of enrollment, we continue to expect to report top line results, including changes in body weight, fat mass and muscle mass by the second half of 2025. I will conclude with our genetics medicines efforts. At the ASGCT Conference, we presented updated data from our DB-OTO gene therapy program for genetic hearing loss due to mutations of the otoferlin gene. The first child treated with this therapy, an 11-month old girl, who is profoundly deaf at baseline had hearing in the normal range by 24 weeks after treatment. Also initial hearing improvements were observed in a second child dose at 4 years of age at a 6-week assessment with additional follow-up plan. As of July, we have dosed five patients in our study and we are on track to enroll several more patients this year. We also look forward to bringing additional otoferlin gene therapy programs to the clinic in the coming years with the potential to address more common forms of monogenic hearing loss. Regarding our Intellia collaboration, transthyretin amyloidosis with cardiomyopathy, the world's first Phase III program for in vivo CRISPR-based therapy is enrolling at a rapid pace indicating considerable interest from investigators and patients. In addition, we are also on track to be the first to use CRISPR technology to insert a corrective gene in vivo for a deficiency disease, hemophilia B. As noted previously, we have enrolled initial patients in the leading portion of this trial and first patient should be dosed soon. Our siRNA collaboration with Alnylam has not only demonstrated successful silencing of genes in the liver, but also for the first time for siRNA in the brain. This opens up opportunities for us to go after other disease-causing genes in the brain. A study of ALN-SOD in ALS patients with SOD1 mutations recently initiated. Other CNS-directed siRNA programs are expected to enter the clinic shortly, including targeting HTT for Huntington's disease, synuclein for Parkinson's and tau for Alzheimer's and other neurodegenerative diseases. Additionally, with regard to our C5 program, our innovative approach involving the first combination of an antibody together with an siRNA both targeting the same molecule is progressing well and we are expecting to present updated data for initial potential indication, paroxysmal nocturnal hemoglobinuria by the end of this year. We're also looking forward to starting our Phase III program in geographic atrophy in the second half of this year. In summary, we continue to drive forward our innovative development pipeline and anticipate reading out several pivotal and proof-of-concept data sets over the next 12 to 18 months. Our early research efforts continue to be productive with multiple novel programs potentially advancing to the clinic over that same time frame. And with that I will turn the call over to Marion.

Chris Fenimore:

Thank you, Marion. My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis unless otherwise noted. Regeneron delivered strong double-digit top and bottom line growth in the second quarter. Total revenues increased 12% year-over-year to $3.5 billion, primarily driven by strong execution of the ongoing EYLEA HD launch in the US, higher Sanofi collaboration revenue and continued global sales growth from LIBTAYO. Second quarter diluted net income per share grew 13% from the prior year to $11.56 on net income of $1.4 billion. Second quarter revenues from our Sanofi collaboration grew to $1.1 billion, primarily composed of our share of collaboration profits of $988 million, which increased by 32% compared to the prior year driven by DUPIXENT's continued volume growth and improving margins. Reimbursement from manufacturing and commercial supply, the other component of Sanofi collaboration revenue was $157 million, taking into account increased volumes, offset by manufacturing efficiencies, we continue to expect reimbursement for manufacturing and commercial supply in 2024 to be comparable to 2023 on a full year basis. The Sanofi development balance was approximately $2 billion at the end of the second quarter, reflecting a reduction of approximately $190 million from the end of the first quarter. We continue to anticipate this balance will be fully reimbursed to Sanofi by the end of 2026. Moving to Bayer. Second quarter ex-US net sales of EYLEA and EYLEA 8 mg were $908 million, up 8% on a constant currency basis versus the prior year. Total Bayer collaboration revenue was $375 million, of which $353 million related to our share of net profits outside the US. Now to our operating expenses. Second quarter R&D expense grew 10% year-over-year to $1.1 billion, reflecting continued investments to support our robust pipeline, including late-stage oncology and hematology programs. We continue to make thoughtful investments to enable us to move quickly into Phase III programs is supported by data readouts anticipated over the next 12 to 18 months. SG&A grew 19% from the prior year to $666 million in the second quarter, primarily driven by investment to support the launch of EYLEA HD as well as our ongoing international commercial expansion. Second quarter gross margin and net product sales was approximately 89%, which reflected ongoing start-up costs for our fill/finish manufacturing facility. Now to cash flow and the balance sheet. Regeneron generated approximately $1.6 billion in free cash flow through the first six months of 2024 and ended the quarter with cash and marketable securities less debt of approximately $14.8 billion. We repurchased approximately $900 million of our shares through the first six months of the year and had approximately $3.6 billion available for repurchases as of the end of the second quarter. Finally, we have made some minor changes to our full year 2024 financial guidance. We have updated our 2024 gross margin guidance and now expect gross margin to be approximately 89%, primarily reflecting anticipated changes in product mix as well as higher non-product specific costs, including start-up costs for our fill/finish facility. A complete summary of our latest full year guidance is available in our press release issued earlier this morning. In summary, Regeneron delivered outstanding results in the second quarter and is well positioned to continue to drive growth in the near and long-term. With that, I'll pass the call back to Ryan.

Operator:

[Operator Instructions] Our first question comes from the line of Tyler Van Buren with TD Cowen. Your line is now open.

Ryan Crowe:

Marion?

Ryan Crowe:

That's right. Okay. Thank you, Marion. Let's move to the next question please.

Evan Seigerman:

Hi, guys. Thank you so much for taking my question and always congrats on the progress. I want to touch on your work in obesity specifically with leptin. Can you just walk me through some of the rationale of moving this to a Phase II? I know that leptin had been kind of controversial, clearly, you saw some interesting data in earlier trials. But why do you want to add this on top of say, tirzepatide, versus using triple agonist that Lilly is doing some of the other trials. Thank you so much.

Ryan Crowe:

Thanks, George. Let's move to the next question.

Brian Abrahams:

Hey, good morning. Thanks for taking my question and congratulations on the quarter and all the progress. On linvo, as you prepare for the potential launch there, I'm curious the feedback you're getting on how docs may position it relative to existing therapies, how much appreciation there is out there for the efficacy and administration advantages that you cited in your slide? And maybe you could also elaborate a little bit more on some of the issues with the third-party facility and they're confident if that's resolved. Thanks.

George Yancopoulos:

Yes, I'll start and then I'll hand it over to Marion. But as we summarize and we've detailed and as we'll continue to be presented, the efficacy data with our bispecific continues to look like it is leading the field as the data matures, and patients continue on treatment, they continue to progress to deeper and deeper responses and where now we have complete response rates at 50% with, we believe, best-in-class PFS and overall survival type numbers. This is obviously really important because what cancer treatment is all about is trying to eliminate the cancer and getting long-term durable responses and survival in the patients. And we would imagine that this is exactly what patients and physicians are focused about. Other aspects of our profile, we also believe in terms of safety and our dosing schedule and hospitalization burden also, we believe, are best-in-class. In terms of how Marion believes the physician community is appreciating the data, I'll ask Marion to comment on that.

Leonard Schleifer:

Yes, I would just add, this is Len. I would just add that we're not limiting ourselves, obviously, just to the last line. We are trying to move this aggressively either in monotherapy or in combinations to much early lines of therapy. The rule of thumb has been in cancer that you tend to get more responses as you move to earlier lines. But this would be quite remarkable given what George just told you about the amount of responses we're seeing in the last line. So we're very excited about moving this forward and we'll go -- we'll keep you updated as we do that.

Brian Abrahams:

Sure. Absolutely.

Operator:

Our next question comes from the line of Cory Kasimov with Evercore ISI. Your line is now open.

George Yancopoulos:

Yes. So very importantly, what we've done is we've created antibodies that split the mechanism of action. One affects the activation domain, the other the catalytic domain. We have developed in both these classes, the only ones in class or the best-in-class type of antibodies, which are best at actually hitting and inhibiting that target based on all of the signs, a huge amount of genetics in part fortified by our own Regeneron genetics efforts and so forth, it suggests that these two approaches will allow us to separate and optimize optimum efficacy and optimum safety. So it's quite possible that we might actually move forward with both of these antibodies for different target populations in some of which where efficacy is the primary driver and others where safety might be most important. So they're very unique in their mechanisms of action. They really are exploring this target both much more precisely by splitting the mechanism of action, but also more powerfully than competitors that have antibodies that can do one or the other of these things. So we're very excited about these programs. As we said, we have some proof-of-concept studies ongoing and we hope by the end of the year to be able to announce the directions we may be taking either or both of these antibodies going forward in the future.

Operator:

Our next question is from the line of Chris Raymond with Piper Sandler. Your line is now open.

Marion McCourt:

Sure. I'm very, very happy to comment. So certainly, for a portion of the market, fee-for-service Medicare patients, there's open access and freedom of prescribing for physicians. If we go to those areas of the market where there's a payer impact, our teams have successfully opened access for EYLEA HD in a way that covers over 80% of patient lives. So certainly, significant progress has been made and we continue to work through situations where physicians might be having some utilization management or step edits I will share that those are often easily managed when the physician and office staff provide information. But overall, the takeaway message should be that EYLEA HD has a very strong payer coverage. And again 80% of the market where reimbursement is in place.

Operator:

Our next question comes from the line of Akash Tewari with Jefferies. Your line is now open.

George Yancopoulos:

Yes. Well, once again, what we focused on is creating individual reagents that allow us to best dissect the pathway and separate out which are the most important players. As you're aware, other people, for example, are using an antibody that blocks all the pathways, not only the two that we've targeted, but about 20 others that are irrelevant for muscle and we know are known to have a variety of other potential side effects and adverse effects. So we targeted the two muscle specific pathways in this whole mechanism. And what we want to see is which one might have the best efficacy to safety profile that we believe is very important. Once we determine that, we may move forward with either one or both of these antibodies in combination with the weight loss agents or we also have been developing in our pipeline, a variety of unimolecular solutions that will allow a single molecule to do whichever one of these multiple pathways we want to attack in addition to the weight loss pathway. So what we're hoping to do is by dissecting the pathway as precisely and scientifically as possible, allow us to choose between the unimolecular solutions that we can have to follow on. That said, remember, it's not just a matter of amplifying the weight loss because with more weight loss, regardless of pathway you use, you can throw on the GLP-1 agonist, you can throw on GPR antagonist, you can lay on additional pathways. The more rate loss and the more rapidly occurs, which is what patients want, out of necessity because you're mimicking the starvation to get the pathway, it inevitably leads to muscle loss because of why, because of activation of these very pathways that we're looking at. So any approach right now that focuses on rapidly causing weight loss will of necessity because it plugs into evolutionarily conserved pathways of necessity will result in profound lean body and muscle loss, which can be a huge detriment to these patients especially the older obese patient. And by invoking these agents blocking these specific pathways, we may be able to do two things. We may block this associated necessarily evolutionary conserved muscle loss that accompanies rapid and profound weight loss while also perhaps increasing the amount of fat loss, which is what you specifically want to lose. This is what we've now shown in preclinical studies, including through nonhuman primates and these studies that we're embarking on right now should tell us whether all of these pathways, which are incredibly evolutionarily conserved will indeed pertain in humans and whether we really can optimize not only the weight loss, that's not what's important, but optimize particularly fat loss while maintaining the muscle. And we believe we're the only ones who are properly precisely interrogating the pathways and we'll be able to dissect them to decide on which exactly is the best, safest pathway to give the best benefit to the patient.

Operator:

Our next question comes from the line of Chris Schott with JPMorgan. Your line is now open.

George Yancopoulos:

I think that it's all going to be a matter of the benefit to risk profile once again. And this is what, as I've said in these other programs we're focusing on. We believe, based on all the data that we've shown, that we may have a very safe way of eliminating the actual cells that are causing all these allergic responses and then very safely keep them from coming back by giving one of the world's historically most safe biologics, which is DUPIXENT. Of course, we have to prove this in patients. And so we are starting in the most severe food allergy patients. And in these patients where they have, for example, very high unmet need, very high risks and so forth, it warrants undertaking this approach. The more effective it is, but more importantly, the safer we can prove it is then the broader the population can go. And in fact, if ultimately, we really have a very safe way of eliminating all allergy inducing cells and then preventing their rebound. And remember, particularly, most of these patients are also suffering from other allergic diseases, some of them may already be indicated for DUPIXENT. So you're giving them a drug which may actually be helping them anyway and has been shown to be quite safe in terms of as almost any biologic goes. We may be able to go into milder and milder allergy patients. So we can start and we are starting with the most severe patients we're seeing in these patients with a high unmet need, whether this approach is both effective, but also safe and how safe it is and the safer it is, we can broaden wider and wider. There's also ultimately no need to be limited to food allergies, you can actually eliminate essentially all allergies from the most serious to the most mundane, but it depends on the benefit risk and the safety, which is what we're testing in these initial studies. And for the initial studies, we're taking the most severe food-allergic patients who have a very high unmet need and very high risk profile depending on how it goes there, we can broaden to milder and milder types of disease.

Ryan Crowe:

Thanks, Len and George. Let's move to the next question, please, Shannon.

Tim Anderson:

Thank you very much. I have a question on EYLEA and this DOJ investigation into the marketing practices that emerged since April, where they assert that you guys violate the False Claims Act. Can you provide an update on kind of what happens from here, specifically in the interim and out of prudence, has Regeneron changed any of its marketing practices since April. And is that having any impact even on prescribers. I asked because on Slide 6, you mentioned, other market dynamics that resulted in lower volumes and lower price. I am just wondering what those where.

Ryan Crowe:

Let's move to the next question, please.

David Risinger:

Yes. Thanks very much. So Regeneron is obviously a tremendous R&D leader, but there's also substantial innovation happening outside of the company, and the company has a tremendous balance sheet that it's not really putting to work. So my question is, is there an opportunity to leverage Regeneron's eye disease commercial presence by acquiring novel potential blockbuster therapies for severe eye disease. And if so, does the company see any opportunities in the near to medium term to do so? Thanks very much.

Ryan Crowe:

Thanks, Len. Let's move to the next question please, Shannon.

Salveen Richter:

Good morning. Thanks for taking my question. On the Factor XI programs here, could you speak to the potential commercial opportunity that are represented and what the future development plans look like here? Thank you.

Leonard Schleifer:

Just to amplify a little bit of what George said the direct oral anticoagulant market is a very, very large market. It's about a $20 billion market. if you could bring to part of that market, most of that market or some fragment similar efficacy, but with a better safety profile then you really have a big opportunity here. So that's what we're sort of focusing on. Can we deliver with one or the other antibody in the proper setting, as George was suggesting a same or better efficacy, but with a better safety profile. If we can give you that, if we can give patients that, then we will be able to really have a big large market opportunity.

Ryan Crowe:

Okay. Thank you. Let's move to the next question please, Shannon.

Carter Gould:

Good morning. Congrats on the quarter. I appreciated the earlier commentary from Len on the pre-filled syringe effort, I guess, but for Marion and the team, just the confidence that the high dose launch momentum won't be disrupted by the relative near-term disadvantage of VABYSMO having a pre-filled syringe and if you wanted to give more specificity on your own time lines, that would be appreciated. Thank you.

Ryan Crowe:

Okay. Thank you. We have time for two more questions, please, Shannon.

Unidentified Analyst:

Hi. This is Chris on for Terence. Just one question from us about EYLEA HD. Given what you have seen in the market dynamics in 2Q. How should we think about the pace of conversion for the second half of 2024?

Marion McCourt:

I would just say that as I commented earlier, we're very pleased in our progress in the EYLEA HD launch.

Operator:

Our last question is from the line of Mohit Bansal with Wells Fargo. Your line is now open.

Marion McCourt:

So it's always a combination of initiation for EYLEA HD of switch patients and then, of course, naive patients. So I'd mentioned the profile today of switch patients to EYLEA HD, which is very encouraging comes not surprisingly from EYLEA because it's the largest product in the category, secondarily from faricimab. And then the third source of switch patients would be avastin and then there's everything else. But what's really encouraging, as I mentioned in the quarter, is that the utilization among treatment-naive patients doubled from the prior quarter. So we'll continue to see an ongoing combination as does every product potentially, if it's got the right profile in the category, but the evolution of prescribing to EYLEA HD is progressing very well.

Operator:

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Ryan Crowe:

Thanks, Josh. Good morning, good afternoon and good evening to everyone listening around the world. Thank you for your interest in Regeneron and welcome to our first quarter 2024 earnings conference call. An archived and transcript of this call will be available on the Regeneron Investor Relations website shortly after the call ends. Joining me on today's call are Dr. Leonard Schleifer, Board Co-Chair, Co-Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Board Co-Chair, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President of Commercial; and Chris Fenimore, Senior Vice President and Chief Financial Officer. After our prepared remarks, the remaining time will be available for your questions. We anticipate today's call will last approximately 60 minutes.

George Yancopoulos:

Thanks, Len. Since Len covered the status of the Dupixent and itepekimab programs in COPD in great detail, I'd like to start with a bit more about our innovative treatment approach for severe allergies, a first-ever combination of an immunomodulatory antibody that is DUPIXENT with a bispecific antibody. Despite the remarkable benefit demonstrated by DUPIXENT across multiple diseases characterized by allergic or type 2 inflammation, DUPIXENT alone does not immediately reverse severe allergies by itself. These allergies are caused by high levels of an immunoglobulin class known as IgE made by long-lived plasma cells. This has caused some to refer the E in IgE as E for evil. Although DUPIXENT will prevent formation of new IgE plasma cells, it does not eliminate those that have already formed.

Ryan Crowe:

Thank you, Chris. This concludes our prepared remarks. We will now open the call for Q&A to ensure we are able to address as many questions as possible, we will answer one question from each caller before moving to the next. Josh, can we please go to the first question?

Colin Bristow:

Congrats on the quarter. A question for George. George, there's a lot of interest, obviously, in your muscle sparing obesity program. I was wondering if you could speak to how you think this will differentiate versus competitor muscle-sparing programs and then within that, what will you be specifically paying attention to whenever Len decides to disclose the bimagrumab Phase II data?

Operator:

Our next question comes from Evan Seigerman with BMO Capital Markets.

George Yancopoulos:

Well, just to remind you, if you look at our paper where we did the nonhuman primate studies and so forth, is the first thing we're going to be looking for is there is the very real possibility of increased weight loss. And that might be the simplest regulatory endpoint of all. After that, if we don't see that, but we see better quality of weight loss, that could be manifested in a variety of ways, though we, of course, recognize that those would perhaps create more complicated ways of being regulated. So obviously, if you increase the fat loss while preserving muscle you should have dramatic benefits in metabolic parameters, which are often used in the field, particularly in people with diabetes and so forth as well as ultimately in terms of function by having maintenance of function as opposed to losing function and maintaining those sort of functional endpoints.

Operator:

Our next question comes from Christopher Raymond with Piper Sandler.

Marion McCourt:

Sure. So let me take the inventory item first, and then I'll come back to the overall marketplace. But this was in aggregate. As I mentioned, in the quarter, we saw a reduction in wholesaler inventory broadly of about $40 million. So that reflects market-wide. But that was a combination of 2 elements. It was a sequential drawdown of EYLEA inventory that was partially offset by a modest increase in EYLEA HD inventory ahead of the permanent J-Code on April 1. And then I would share on the overall market in all the categories where we participate, we're always very conscious of the segmentation of the market, targeting the market, what's occurring in terms of customer base and certainly, our strategies and our approach to the marketplace is reflective of that. And the range of customers we have, as you point out, in retina and how that market has evolved over time. And I think our commercialization approach has been very effective in addressing that market evolution.

Salveen Richter:

With regard to the COPD program here, it doesn't seem like this is an approvability question. So could you just speak to whether restrictions to specific subpopulations could be possible, albeit noting that you had a subpopulation analysis that was consistent with the broader data.

Operator:

Our next question comes from Tyler Van Buren with TD Cowen.

George Yancopoulos:

These are great questions. We hope from the first few patients if the results are as dramatic as they are in the preclinical studies that we'll be seeing meaningful indicators that we are really reversing severe food allergy. Of course, the first thing and the most important biomarker, as I said, is this evil immunoglobulin IgE, which you can both measure, but they are also routinely tested using these skin prick tests, which are how people are actually evaluated for allergies.

Ryan Crowe:

George, can you comment? I think they also want to know how long you have to stay on IgG...

Operator:

Our next question comes from Terence Flynn with Morgan Stanley.

George Yancopoulos:

Right. That's a great question. Obviously, the thing that gets us excited about our program compare to the field is that we've seen levels of activity that haven't been seen in the other LAG-3 programs, particularly in melanoma. If that's true in melanoma, there would be hope that this would be seen broadly in other settings and indications. We are certainly excited to see the follow-up details on the BMS story with potential activity in a specific subpopulation that will certainly help point us in our own studies to see what we're seeing within that subpopulation that they are talking about as well as more broadly. But of course, the hope, as I said, is if it is indeed more active in one setting such as melanoma, the hope is it will be broadly more active across other cancer settings as well. So we are excited to see follow-up on their data. We're excited to see follow-up on our data, both in melanoma and in our lung studies.

William Pickering:

I had a follow-up on the food allergy program. Could you comment on the dose of linvoseltamab that you'll be testing as compared to the myeloma setting? How -- what gives you confidence in the safety profile and if a patient misses a Dupixent dose, would they then need to start over again with linvo?

Operator:

Our next question comes from Carter Gould with Barclays.

George Yancopoulos:

That's a phenomenal question. And first of all, let me remind you that with our long-term collaboration and recent acquisition of 2seventy. 2seventy had exactly the sort of CAR-T programs that you're referring to in lupus and other autoimmune settings, which we are now obviously pursuing together with them but that is one of the reasons why we were excited about turning the collaboration into a situation where we brought all the expertise and the scientists and leadership from 2seventy in-house because we're doing exactly what you suggested. We're hoping to actually literally look in side-by-side studies, how CAR-T approaches in these settings of autoimmune, severe autoimmune disease like lupus and so forth, compare directly head-to-head to our bispecifics. And as you are sort of suggesting, you would think that there would be really little reason to think that the CAR-T solutions would be preferable in this setting, both in terms of off-the-shelf mess and the ability to eliminate the normal cells.

Brian Abrahams:

Congrats on all the progress. I know docs are really excited for Dupi and COPD, but it is a new space for biologics. So I'm curious, the amount of education you think is going to be required and how this might affect the initial uptake trajectory. And then how you're thinking the introduction of other biologics, which have also been showing promise might impact the overall long-term market here in Dupi's positioning?

Mohit Bansal:

I have a question on itepekimab so in our conversation and literature search, it suggests that there may be a potential for disease modification with some kind of remodeling at this mechanism. Just wanted to see if you think that is possible? And what markets would you be looking forward to in the Phase III trial beyond exacerbation when the data come.

Operator:

And our last question comes from Chris Schott with JPMorgan.

Leonard Schleifer:

Mary can take the question on the launch and everything. I mean, obviously, the MRD negativity as endorsed by that panel gives an opportunity to get these kinds of drugs to patients earlier in a variety of settings. So we are looking forward to applying that approach in our future studies as we move towards earlier in different lines of therapy. Marion on the launch?

Ryan Crowe:

All right. Thanks, Len and Marion, and thanks to everyone who dialed in for your interest in Regeneron. We apologize to those remaining in the queue that we did not have a chance to hear from. As always, the IR team here at Regeneron is available to answer any remaining questions that you may have. Thank you once again, and have a great day.

Ryan Crowe:

Thank you, Shannon. Good morning, good afternoon, and good evening to everyone listening around the world. Thank you for your interest in Regeneron, and welcome to our fourth quarter 2023 earnings conference call. An archive and transcript of this call will be available on the Regeneron Investor Relations website shortly after the call ends. Joining me today are Dr. Leonard Schleifer, Co-Chair, Co-Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Co-Chair, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; Bob Landry, Executive Vice President and Chief Financial Officer; and Chris Fenimore, Senior Vice-President and Controller. As many of you already know. Bob will retire from Regeneron, after our Form 10-K as filed next week, and Chris has been appointed to become Regeneron's next CFO upon Bob's retirement. After our prepared remarks the remaining time will be available for your questions. We anticipate today's call will last approximately 60 minutes. I'd like to remind you that remarks made on today's call may include forward-looking statements about Regeneron. Such statements may include, but are not limited to, those related to Regeneron and its products and business, financial forecast and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2023, which we expect to file with the SEC on Monday, February 5. Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP financial measures will be discussed on today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our quarterly earnings results press release and our corporate presentation, both of which can be accessed on the Regeneron Investor Relations website. Once our call ends, Bob, Chris and the IR team will be available to answer any further questions. With that, let me turn the call over to our President and Chief Executive Officer, Dr. Len Schleifer. Len?

George Yancopoulos:

Thanks, Len. That was really impressive overview I have to say. 2023 was another year of first delivered by Regeneron as well as together with our collaborators, all of which have the potential to change the practice of medicine. Starting with inflammation and immunology. As you heard from Len, we are planning yet another launch for Dupixent, this time in eosinophilic COPD, which would represent the sixth disease if this remarkable medicine is approved to treat and the fifth for which it would be first-in-class. Dupixent’s transformative potential in COPD is based on the unprecedented results from our first Phase 3 trial BOREAS, which would then confirm our second Phase 3 trial notice demonstrating that Dupixent treated patients had a 34% reduction in the annualized rate of moderate to severe COPD exacerbations [Technical Issues] IL-33 blocking antibody. The pivotal AERIFY-1 and 2 studies passed an interim futility analysis last year. The studies are now on track to complete enrollment in 2024 with an anticipated readout in 2025. If the Phase 3 results from these studies even approach the Phase 2 data reported in former smokers where a 42% reduction in annualized exacerbation rate was observed, itepekimab has the potential to further transform the treatment paradigm for COPD. Later this year, we are planning on testing an innovative new treatment approach for severe food allergies using a combination of transient BCMAxCD3 bispecific intervention in patients receiving Dupixent therapy. As many of you know, allergic responses are driven by pathologically high levels of Immunoglobulin E or IgE. This is why many say the E in IgE stands for evil. About 40-years ago, it was discovered that interleukin-4 and interleukin-13 were the switch factors required for switching to IgE production. Based on exciting preclinical data including in non-human primates as well as human data, our innovative approach has the potential to reverse severe allergies by first eliminating the long lived plasma cells that serve as an IgE reservoir with the BCMAxCD3 followed by blocking of de novo immunoglobulin class switching to IgE with Dupixent. We are looking forward to starting a small proof-of-concept study, which will inform next steps for this program. We believe this approach has the potential to benefit the millions of people suffering from severe allergies, who are at constant risk. As tragically highlighted just last week by the widely reported death of yet another young person unknowingly exposed to food a allergen. Moving to Oncology. Libtayo is the leading PD-1 antibody for non-melanoma skin cancers, including metastatic cutaneous squamous cell carcinoma or CSCC and basal cell carcinoma. We are looking forward to potentially expanding the currently approved CSCC indication to include adjuvant CSCC and we expect results from potentially pivotal interim analysis in this setting in the second-half of the year. Regarding Libtayo combinations, our most advanced is the combination with a LAG-3 antibody fianlimab. As a reminder, our early clinical data in three separate first line metastatic melanoma cohorts demonstrated potential for best-in-class efficacy when compared cross trial with the approved anti-LAG-3 PD-1 combination product, highlighted by objective response rates greater than 60% and estimated median progression-free survival of longer than 15 months. These early clinical data suggested that the Libtayo fianlimab combination maybe one of the most exciting examples of a checkpoint inhibitor combination with clinically meaningful benefit and with the safety profile that is similar to that seen with anti PD-1 monotherapy. We are expecting a potentially pivotal initial readout from our first line metastatic melanoma trial by the end of this year. We also anticipate Phase 2 data in non-small cell lung cancer in late 2024. Onto by specifics, starting with solid tumors. In the dose escalation trial of our EGFR by CD28 costimulatory bispecific combined with Libtayo, we have observed promising activity in microsatellite stable colorectal cancer with higher doses of the costim. In terms of safety, so far, we have not seen an increase in immune related adverse events with this costim. Based on these encouraging early data, which will be presented at a scientific forum later this year, we will be initiating expansion cohorts across several solid tumors in the first-half of the year. In 2024, we are also planning to provide updates for our MUC16xCD3 and MUC16xCD28 programs in advanced ovarian cancer. Next, a bispecific for hematology oncology. For linvoseltamab, our BCMAxCD3 bispecific for multiple myeloma, FDA acceptance of our BLA submission is expected later this month and the EMA recently accepted our MAA submission. These submissions were supported by potentially best-in-class profile in late line myeloma in terms of efficacy, safety, dosing, as well as convenience. The confirmatory Phase 3 study, as well as studies in earlier stages of myeloma and pre-malignant disease are enrolling or will soon begin enrolling patients. For odronextamab, our CD20xCD3 bispecific for non-Hodgkin's lymphoma, the FDA decision for our BLA is expected by its March 31 PDUFA date and the new decision is expected in the second half of the year. In terms of additional recent news for our oncology and immunology pipeline, this week, we announced the formation of Regeneron Cell Medicines unit and that we are acquiring full development and commercialization rights for 2Seventy Bio's pipeline of investigational immune cell therapies. We have worked with 2Seventy since 2018 on many of these programs and are excited about the opportunity to continue advancing our collective efforts. After deal closing, certain 2Seventy employees will join Regeneron Cell Medicines and continue to work on addressing cancer and other serious diseases in novel ways including by combining Regeneron's antibody capabilities with CAR-T therapies. Moving from immunology and oncology to obesity and metabolic diseases. Despite all the enthusiasm surrounding GLP-1 agonist for obesity, it has been increasingly recognized that the profound weight loss is accompanied by substantial muscle loss accounting for up to as much as 40% of the weight loss. This potentially irretrievable muscle loss can be catastrophic for patients and may even lead to major public health concerns in the future. We have previously shown that our antibodies targeting myostatin in Activin A have the potential to preserve and grow muscle in human trials. Based on these data as well as additional data in obese non-human primates, we believe that inhibiting these pathways on top of GLP-1 receptor agonism has the potential to achieve comparable overall reductions in body weight, but with improved quality of weight loss resulting in more fat loss, while preserving or actually increasing muscle mass. In mid-2024, we plan to start our first clinical trial to evaluate the combination of our muscle preservation antibodies in combination with semaglutide. Also in 2024, we are anticipating proof-of-concept data for our Factor XI antibodies in the setting of prevention of venous thromboembolism after knee replacement surgery. Based on preclinical and healthy volunteer data, our antibody approach demonstrated more complete Factor XI blockade, compared to competing approaches in development for coagulation disorders and the program is on rapid path to a registrational trial starting late this year or early next year. We will now conclude with our efforts in genetic medicines. Our siRNA collaboration with Alnylam has demonstrated successful silencing of genes in the liver and for the first time for siRNA in the brain. Proof of principle was achieved for and ALN-APP last year and we are anticipating additional data from that program this year, including from patients who have received multiple doses. Based on this success, we are looking forward to new siRNA programs targeting CNS diseases entering the clinic this year such as ALN-SOD for ALS patients with SOD1 mutations. Our collaboration with Intellia on CRISPR gene editing continues to advance, where we together produced the first example of CRISPR-based gene editing of a pathological gene in human beings. This initial program for our lead indication of TTR amyloidosis with cardiomyopathy is now in the first in-vivo CRISPR program clear to enter Phase 3 studies in the United States. Together with Intellia, we also hope to be the first to use CRISPR technology to insert a corrective gene for deficiency disease. We recently achieved IND clearance for our CRISPR-based gene insertion programs for Factor IX and initiated the leading portion of the clinical trial to evaluate it as a potential cure for hemophilia B. Moving to genetic hearing loss, we were the first U.S.-based company to announce hearing restoration in a young child suffering from genetic hearing loss after treatment with our novel gene therapy approach. We're excited by these early results for this ultra-rare disease and look forward to advancing to the clinic additional programs to potentially address more common forms of monogenic hearing loss. These data represent validation of our viral-based gene therapy program, in this case, locally delivered to the cells of the inner ear. Beyond these efforts, we have made significant investments in leveraging our monoclonal and bispecific antibody expertise to use these agents to systematically deliver virally based genetic based payloads directly to specific tissues in the body non-amenable to local delivery, such as to muscle and the central nervous system. Based on encouraging preclinical data, we will be progressing these approaches to the clinic in the coming years. Finally, concluding with another notable first-in-class program involving a combination of an siRNA with an antibody, in this case to block the C5 complement target. Normally, one needs very high levels of infused antibody to achieve sufficient efficacy because of high target levels regarding C5, but our siRNA co-treatment dramatically lowers C5 target burden allowing lower and more convenient antibody dosing. We recently shared encouraging initial data from a Phase 3 study in patients with PNH, which supported our hypothesis that this combination approach could provide better efficacy and control of breakthrough hemolysis with more convenient dosing, and building on these data we continue to enroll our Phase 3 studies in PNH and myasthenia gravis. We are also planning to extend this combination approach to geographic atrophy and dry AMD. While this combination is expected to have manageable systemic toxicities, including elevated risk of infections, we believe that our approach has several potential advantages over recently approved complement inhibiting agents for GA, which are delivered directly into the eye and have resulted in rare but serious cases of retinal vasculitis, sometimes resulting in permanently impaired vision. In conclusion, Regeneron's R&D engine continues to grow and deliver many firsts, including differentiated early, mid, and late-stage opportunities and we're looking forward to additional progress in 2024. Before I turn the call over Marion, I would like to add my thanks and appreciation to Bob for his many years of devoted efforts and leadership, and welcoming and look forward to adding Chris Fenimore to our leadership team. With that, I will turn it over to Marion.

Bob Landry:

Thank you, Marion. My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis unless otherwise noted. Regeneron ended 2023 with strong performance in the fourth quarter. Excluding contributions from Ronapreve, total revenues increased 14% year-over-year to $3.4 billion, primarily driven by sales growth and margin expansion from Dupixent, the launch of EYLEA HD and strong sales growth from Libtayo. Fourth-quarter diluted net income per share was $11.86 on net income of $1.4 billion. Moving to collaboration revenue and starting with Bayer. Fourth quarter 2023 ex-U.S. EYLEA net product sales were $890 million, up 4% on a constant currency basis versus the prior year. Total Bayer collaboration revenue was $377 million, of which $345 million related to our share of EYLEA net profits outside the U.S. Total Sanofi collaboration revenue grew 19% in the fourth quarter of 2023 to $993 million. Excluding a $50 million sales milestone recorded in the fourth quarter of 2022, Sanofi collaboration revenue grew 26%. Our share of collaboration profits was $886 million, an increase of 43% versus the fourth quarter of 2022, driven by Dupixent's continued volume growth and improving margins. Reimbursements from manufacturing of commercial supply, a component of Sanofi collaboration revenues declined 36% versus the prior year due to the implementation of a new higher-yielding manufacturing process. At the end of 2023, the Sanofi development balance was $2.33 billion reflecting a net decrease of $534 million, compared to the balance as of December 31, 2022. Recall, this decrease is primarily recorded as a reduction to our share of collaboration profits. We continue to expect this balance to be fully reimbursed in the next few years, which would result in a significant step-up in our Sanofi collaboration profits. Other revenue was $213 million in the fourth quarter of 2023, up 66% versus the prior year, primarily driven by higher royalties from Novartis on sales of Ilaris and an increase in our share of ARCALYST profit from Kiniksa. The increase in other revenue also reflects higher reimbursements for increased shipment volumes of ex-U.S. commercial supplies of Praluent to Sanofi. Moving now to our operating expenses. Fourth quarter 2023 R&D expense grew 13% year-over-year to $1.03 billion, which reflects continued investment in our growing pipeline. R&D growth was primarily driven by higher headcount and related costs, funding of our advancing late-stage programs and increased clinical manufacturing activity. SG&A grew 7% from the prior year to $622 million in the fourth quarter reflecting higher headcount and related costs and higher commercialization expenses, including costs to support the launch of EYLEA HD in pre-launch activities for anticipated 2024 hem-onc product launches. Fourth quarter COCM declined 12% from the prior year quarter to $210 million. Recall that we are reimbursed for these costs. Now to cash flow in the balance sheet. In 2023, Regeneron generated $3.9 billion in free cash flow ending the year with cash and marketable securities, less debt of approximately $13.5 billion. In 2023, we repurchased over $2.2 billion of our shares with approximately $1.5 billion remaining authorized for repurchase as of December 31, 2023. Since we began repurchasing our shares in 2019, we have bought back approximately $12 billion worth and plan to continue to make opportunistic repurchases. Now moving to our financial guidance for 2024. Note that these guidance ranges do not assume the completion of any business development transactions that were not completed as of today, including our recently announced agreement to acquire preclinical and clinical programs from 2seventy Bio. Starting with R&D expense in 2024, which is anticipated to be in the range of $4.3 billion to $4.5 billion, as George just discussed and as we highlighted at the J.P. Morgan Conference, our pipeline continues to expand with a growing number of registration-enabling studies ongoing or expected to initiate this year. These include potentially pivotal studies for Fianlimab, Phase 3 studies in earlier lines of odronextamab and linvoseltamab in our C5 programs. In addition, we expect to bring 8 to 10 new molecules into the clinic in 2024. We expect 2024 SG&A spending to be in the range of $2.5 billion to $2.65 billion. This reflects increased promotional activities for the ongoing launch of EYLEA HD, investments to support two anticipated hem-onc product launches and higher headcount to support our growing organization inclusive of our ongoing international expansion. COCM is expected to be in the range of $850 million to $910 million. This range reflects lower drug substance manufacturing cost for Dupixent, offset by higher Dupixent volumes and higher production costs for other collaboration products including EYLEA HD for Bayer. Recall, we are reimbursed for COCM expenses, and as a result, we expect reimbursement from Sanofi, which are recorded as a component of Sanofi collaboration revenue to be slightly lower in 2024, as compared to 2023. We expect the 2024 gross margin on-net product sales to be in the range of 89% to 91%. We also expect our effective tax rate to be in the range of 10% to 12%. Finally, we expect capital expenditures to be in the range of $825 million to $950 million, which reflects the expansion of our R&D facilities at our Tarrytown, New York headquarters as well as the continued expansion of our manufacturing capabilities, including ongoing construction of our fill-finish facility in Rensselaer, New York. In addition to our full-year guidance, we expect U.S. net product sales of Praluent to be lower in 2024, as compared to 2023 due to changes in payer coverage. We also expect 2024 net product sales for Inmazeb to be in line with 2023 revenues with nearly all 2024 revenues expected to be recorded in the fourth quarter. Finally, we anticipate other revenue in 2024 to be in line with 2023, with the second half expected to be higher than our first half. Overall, Regeneron performed well in 2023 and our continued investments position the company to drive long-term shareholder value. Before I conclude, I'd like to sincerely thank Len and George for their kind words. It has been an honor to serve as Regeneron's CFO for these past 10-years and I have appreciated all of my interactions with each of you in the investment community. I wish Chris Fenimore much success in this role and have the utmost confidence that he and the rest of the management team will continue to deliver breakthrough medicines for patients and value to shareholders. Thank you and I wish you all continued success. With that, I will pass the call back to Ryan.

Operator:

Thank you. [Operator Instruction] Our first question comes from the line of Tyler Van Buren with TD Cowen. Your line is now open.

Marion McCourt:

Sure, Tyler. I'm happy to answer. So, as I mentioned, we're very encouraged by the early performance of EYLEA HD in the market and a number of factors early are driving that success. First, it's the clinical data, which is now showing in the actual market real-world setting the efficacy, safety, and durability of EYLEA HD, all very important factors. As we look to the future, physicians will build upon their early experience, and as I mentioned that experience is coming from conversion patients from branded agents broadly, Avastin and also in some cases naive patients but going forward, I would share that in addition to ongoing experience and confidence, the reimbursement consideration is very, very important for physicians, and some are hesitant to prescribe a product that doesn't have a permanent J-code. So we do look forward to that occurring April 1 and beyond based on CMS's recent update. And then in addition to reimbursement confidence, we've made progress certainly in payer coverage. We anticipate making more. And certainly, the experience in market to date with EYLEA HD has been very favorable for physicians. And that is the, probably, the most important, those differentiating characteristics of the product.

Operator:

Our next question comes from the line of Brian Abrahams with RBC Capital Markets. Your line is now open.

George Yancopoulos:

Okay. Well, let me start with the latter first, in terms of muscle preservation. Other people have related approaches, but we're the only ones, we're the ones who discovered that there are two key ligands or growth factors that control muscle size

Operator:

Our next question comes from the line of Mohit Bansal with Wells Fargo. Your line is now open.

Marion McCourt:

Sure, Mohit. So there is variation between quarters and years as it relates to anti-VEGF category growth. Overall, though, the category is healthy from a growth standpoint, unfortunately, based on the number of individuals with diabetes or diagnosed with diabetes. On a brighter note, aging population is good. So overall, we see it as healthy category growth. But there is variability. And as an example, there has been some decline by a couple of points between last year and this year overall.

Operator:

Our next question comes from the line of Christopher Raymond with Piper Sandler. Your line is now open.

Leonard Schleifer:

Yes. I'm not sure we want Marion to get into the details of our strategies, pricing, rebates, things like that. But we can say, Marion, you could add thoughts, that we view it as a very competitive marketplace. There has been some price erosion on some of the products in the marketplace. We're starting at a new point with EYLEA HD. We think we priced it well. It was received well. It was intended to match on a yearly basis. And so we think the actual price point was fine. I don't know if Marion wants to add anything at all, but we don't like to comment specifically on those competitive dynamics.

Ryan Crowe:

Okay, all right next question please Shannon.

Colin Bristow:

Hey, good morning and thanks for taking the question. And all the best in the future, Bob. Maybe a couple more on the muscle sparing myostatin program. I'm curious, George, what are your thoughts around the potential concerns of myostatin targeting, increases or preserves muscle volume, but the muscle is less functional. And then any thoughts on the regulatory pathway that you would utilize for these muscle sparing assets? Thank you.

Ryan Crowe:

Thanks, George. Shannon, next question.

Evan Seigerman:

Hi guys, I have one final question for Bob. So Bob, you've done an outstanding job managing the financials of the business and helping drive shareholder returns over the past decade. Looking ahead, how do you believe Regeneron can best use its rapidly growing cash balance to further drive investor returns in the next decade of Regeneron? And thanks for everything, Bob.

Ryan Crowe:

Thank you, Bob. Next question, please, Shannon.

Salveen Richter:

Thank you. Good morning. And Bob, you truly will be missed, and enjoy the next stage of life here. With regard to your GA program, can you outline what's contributing to your confidence in the systemic approach here, and what data you've seen to support it given the move from animal models to Phase III?

Ryan Crowe:

Thanks, George. I think we have time for two more questions.

David Risinger:

Yes, thanks very much. And first, I wanted to offer my congrats as well and best wishes to you, both Bob and Chris. So I have a commercial question on linvoseltamab, please. It's clearly generated best-in-class results and a more attractive profile for patients. But Regeneron has to displace the incumbents. So could you discuss your plans to convert prescribers to linvoseltamab?

Leonard Schleifer:

No, I just wanted to give a little history, David. You actually were around. You may even have asked the exact question, I'm not sure. when we were launching EYLEA and we had to displace Lucentis by the behemoth Roche. There are some lessons in there that it can be done with starting with a really good molecule, as you described, one that is potentially be best-in-class and then strong execution at the commercial front. We've done it. We're not afraid of the 800-pound gorilla. We hope to put that gorilla on perhaps a weight loss program and get in there and show them what we can do, Marion, any comments. I just want to put that historical perspective out there.

Ryan Crowe:

Okay. Thanks, Len and Marion. Shannon, last question, please.

Carter Gould:

Good morning. Thanks for taking the question. I'll echo all the prior comments about Bob, and best of luck. Maybe just on the 2seventy deal, Len and George. How should we think about this? Was this more about sort of protecting the rights of the assets that you already kind of partnered on, or really around sort of getting access to that manufacturing facility? And does that have implications then as we think about your business development going forward and maybe change kind of your willingness to move further down that path of cellular therapies?

George Yancopoulos:

Yes. We're excited about the existing programs. But what we're even more excited about is as we know that the history of many diseases, but cancer in particular, is about combination approaches. And thus far, even in the setting of this collaboration, the CAR T space has been separate from the biologics space. And even though we were working together as separate companies, it was a little harder to really move forward in an expedited fashion the incredible opportunities that I believe that we have to combine what we think is the largest and most exciting portfolio of biologics in immunotherapy, together with cell therapy approaches. Nobody else has really tried that. Nobody else has really led that. Now that we're really together all in with our new selected colleagues from 2seventy and their capabilities, we believe that we will now have the first opportunity to really try this new set of combination approaches against cancer. That is, combining our large portfolio of biologics in the immunotherapy space with their cell therapy capabilities and expertise, that brings a whole new level of combinations to the immunotherapy field. We believe we will be alone in that capability until somebody else tries to copy us and do what we're doing here. And that's what we're really excited about, in addition to just moving forward the existing cell therapy programs that we've been working on them for five years or more.

Operator:

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Ryan Crowe:

Thank you, Shannon. Good morning, good afternoon and good evening to everyone listening around the world. Thank you for your interest in Regeneron and welcome to our third quarter 2023 earnings conference call. An archive and transcript of this webcast will be available on our Investor Relations website shortly after the call ends. Joining me on today's call are Dr. Leonard Schleifer, Board Co-Chair, Co-Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Board Co-Chair, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open the call for Q&A. I would like to remind you that remarks made on today's call may include forward-looking statements about Regeneron. Such statements may include, but are not limited to those related to Regeneron and its products and businesses -- business, financial forecast and guidance, revenue diversification, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings, and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, including its Form 10-Q for the quarterly period ended September 30, 2023, which was filed with the SEC this morning. Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our financial results press release and our corporate presentation, both of which can be accessed on our website. Once our call concludes, Bob Landry and the Investor Relations team will be available to answer any further questions. With that, let me turn the call over to our President and Chief Executive Officer, Dr. Leonard Schleifer. Len?

George Yancopoulos:

Thanks, Len. I'd like to start with our recent data update for EYLEA HD. At the EU Retina Meeting last month, we presented the two-year results from the PULSAR study in wet AMD, which demonstrated that the vast majority of EYLEA HD patients randomized to 12 and 16 week dosing intervals continue to sustain vision and anatomic improvements through 96 weeks. 78% of all EYLEA HD patients were able to maintain at least every 12-week dosing intervals for the entire two-year period, with 88% assigned to at least every 12-week dosing by the end of the two-year period. Similarly, 70% of patients randomized to every 16-week dosing at baseline were able to maintain at least that interval through two years with 78% assigned to at least every 16-week dosing at week 96. Moreover, during the second year, many patients met the criteria for extension to even longer dosing intervals, with 47% meeting the criteria for at least 20-week dosing intervals, including 28% who were eligible for 24-week dosing intervals. The safety profile of EYLEA HD remain consistent with EYLEA, sustaining vision and anatomic improvements while maintaining such extended dosing intervals over two years in both wet AMD and DME is a remarkable advancement for the patients and their physicians. We believe that these results give EYLEA HD the potential to become the new standard of care for these retinal diseases. Moving to our immunology and inflammation pipeline. On Dupixent in COPD, our first pivotal study BOREAS met the primary and all two secondary endpoints in a previously unprecedented success for a biologic in a Phase 3 study in patients with uncontrolled COPD and evidence of Type 2 inflammation. Based on recent feedback from the FDA, in addition to the positive results from the BOREAS study, a positive interim analysis of the replicate Phase 3 NOTUS study would enable an sBLA submission. The independent data monitoring committee will conduct an interim analysis of the NOTUS study later this year. Itepekimab, our anti-IL-33 antibody, the Phase 3 AERIFY-1 and 2 studies remain on track for readout and potential regulatory submissions in 2025, both itepekimab and Dupixent could transform the treatment paradigm for COPD by leveraging their distinct mechanisms of actions in reducing different types of inflammation that contribute to COPD disease progression, and we look forward to the results of these studies. Moving to oncology and combination with Libtayo. We remain on target and are currently enrolling our pivotal study of Libtayo combined with our LAG-3 antibody, fianlimab, in first-line metastatic melanoma. We believe this combination may provide a significant advance for patients in this setting based on our encouraging earlier-stage studies. At the annual ESMO meeting, we presented data from the Phase 2 trial of neoadjuvant Libtayo treatment for resectable cutaneous squamous cell carcinoma or CSCC, which demonstrated event-free survival for the vast majority, 89% of the patients at one year. It is also noteworthy that of the 51% of patients who had a pathological complete response, none have since experienced disease recurrence. These results add to the growing body of evidence of Libtayo and other checkpoint inhibitors may have utility in earlier stages of CSCC and other malignancies. To further explore this, we are conducting a Libtayo trial in adjuvant CSCC for patients at heightened risk. We're also evaluating the combination of the Libtayo and fianlimab in adjuvant melanoma, and plan to initiate a study of this combination in the perioperative melanoma setting as well. On to bispecifics. First in hematology oncology. We are pleased that odronextamab, our CD20xCD3 bispecific, was recently accepted for review by both the FDA and European regulatory authorities in relapsed/refractory follicular bone and diffuse large B-cell lymphoma. Based on the pivotal Phase 2 data from the ELM-2 study, we have initiated a robust OLYMPIA Phase 3 development program, investigating odronextamab as monotherapy as well as in combination with current standards of care in earlier lines of follicular lymphoma and DLBCL. We are looking forward to the pivotal data presentations from ELM-2 later this year. We're also on track to submit our regulatory application for linvoseltamab, our BCMAxCD3 antibody for relapsed/refractory multiple myeloma by the end of the year. This bispecific may potentially offer best-in-class efficacy and convenience. The LINKER-MM3 confirmatory Phase 3 study evaluated linvoseltamab monotherapy compared to a standard of care regimen is enrolling and studies in earlier lines of multiple myeloma and other plasma cell diseases will be enrolling soon. Finally, in addition to the ongoing Phase 1 combination study of odronextamab in our CD22xCD20 co-stimulatory bispecific, we're also on track to initiate a study of linvoseltamab with a corresponding co-stimulatory bispecific next year. Next, on to bispecifics for solid tumors, which are being investigated in combination with Libtayo and other modalities. At ESMO, we shared initial clinical data for the combination of ubamatamab, our MUC16xCD3 bispecific with Libtayo in advanced ovarian cancer. In these early data, promising durable responses were observed with ubamatamab monotherapy as well as encouraging combination activity with Libtayo with evidence of turnaround responses after initial progression on monotherapy leading in multiple patients upon addition of the Libtayo. A randomized Phase 2 expansion study is ongoing to evaluate two active monotherapy doses of ubamatamab, with the lower dose also tested in combination with Libtayo in order to optimize dosing and evaluate the potential added activity of Libtayo. In addition, we're exploring ubamatamab in multiple rare cancers that are known to express high levels of MUC16. In terms of our co-stimulatory bispecifics for solid tumors, we are currently exploring multiple different CD28 co-stimulatory bispecific antibodies in early clinical trials in a variety of tumor settings in combination with Libtayo with corresponding CD3 bispecifics. We are continuing development of our PSMAxCD28 co-stimulatory bispecific in advanced prostate cancer, focusing and identifying the window of opportunity for maintaining the remarkable antitumor activity observed with this treatment so far while minimizing serious toxicity. In order to explore this, we have expanded enrollment in the PSMAxCD28 monotherapy cohort, and we'll soon initiate cohorts in which investigators will have an option of adding a low dose of cemiplimab to the PSMAxCD28 treatment in certain patients. Moreover, we plan to initiate a trial combining PSMA/CD28 with PSMA/CD3 since, based on preclinical data CD28 costims with appropriate CD3 bispecifics may yield antitumor activity without severe immune-mediated adverse events. We also hope to progress an additional prostate specific CD3 bispecific toward the clinic in the next year, which we may also combine with our PSMA costimulatory biospecific. In terms of our MUC16xCD28 costim in combination with LIBTAYO in ovarian cancer, we are planning on presenting initial data by the end of the year. Regarding our EGFRxCD28 costim in combination LIBTAYO, we are planning on presenting updated dose escalation data in 2024. We will soon commence enrollment across eight tumor specific expansion cohorts in the study, including colorectal cancer with or without liver metastases, as well as EGFR mutant non-small cell lung cancer. Now, to genetic medicines. We and Intellia recently announced expansion of our research collaboration to include Regeneron’s proprietary antibody target delivery technology with the goal of expanding the reach of in vivo gene editing to neurological and muscle diseases. The aim of this expanded collaboration is to address a current bottleneck in genetic medicines, the inability to deliver a genetic payload beyond the liver. Our proprietary pre-clinically validated antibody directed AAV approach will initially test two in vivo non-liver targets. Additionally, we and Intellia announced FDA clearance to start a pivotal Phase 3 trial of NTLA-2001 for the treatment of ATTR amyloidosis with cardiomyopathy, the first time an investigational in vivo CRISPR-based gene therapy editing is clear to enter late stage clinical development in the United States. The trial is expected to initiate by year end 2023. Moving to our Alnylam collaboration. Alnylam recently presented updated interim ALN-APPI data in early onset Alzheimer’s disease. Updated data show that single doses of ALN-APPI achieved sustained robust reduction in APP-alpha and APP-beta measured in the CSF up to 10 months after administration, as well as reduction of amyloidogenic peptides implicated in Alzheimer’s disease and in cerebral amyloid angiopathy. Alnylam has also announced that a first patient has been redosed with ALN-APPI in the multi-dose portion of the study currently proceeding outside of the United States. We and Alnylam plan to initiate additional clinical programs for neurodegenerative diseases, including for amyotrophic lateral sclerosis, next year. Finally, I would like to highlight DB-OTO, our otoferlin gene therapy Regeneron’s first clinical program for genetic hearing loss, which we developed over the last few years in collaboration with Decibel Therapeutics, a company we recently acquired. Last week, we announced the first preliminary results from this trial. A child who received an intraocular injection of DB-OTO in one ear experienced improvements in hearing tests in that ear through week six compared to baseline, including both auditory brainstem responses as well as behavioral audiometry. We are looking forward to continuing evaluation of this innovative approach in the ongoing trial for the ultra-rare otoferlin and gene related hearing loss, as well as in other planned clinical programs which include more common forms of genetic hearing loss. In conclusion, Regeneron’s R&D engine continues to grow and deliver differentiated late and early stage opportunities, and we are looking forward to progress in the remainder of this year and looking ahead to 2024. With that, I will turn it over to Marion.

Bob Landry:

Thanks, Marion. My comments today on Regeneron’s financial results and outlook will be on a non-GAAP basis unless otherwise noted. Regeneron performed well in the third quarter, with execution across the business continuing to drive strong top and bottom line growth. Third quarter 2023 total revenues increased 15% year-over-year to $3.4 billion, primarily driven by sales growth for Dupixent, coupled with improving margins within the Sanofi collaboration as well as continued growth from LIBTAYO. Third quarter diluted net income per share grew 4% to $11.59 on net income of $1.3 billion. This included a $100 million acquired IP R&D charge incurred in the third quarter of 2023, which decreased growth by approximately 7 percentage points. Moving to collaboration revenue and starting with Bayer. Third quarter 2023 ex-U.S. EYLEA net product sales were $872 million, up 6% on a constant currency basis versus the prior year. Total Bayer collaboration revenue was $377 million, of which $350 million related to our share of EYLEA net profits outside the U.S. Total Sanofi collaboration revenue was $1.1 billion in the third quarter, up 50% versus the prior year, which included the final $50 million sales based milestone. Our share of profits from the commercialization of Dupixent and KEVZARA was $863 million, an increase of 57% versus the third quarter of 2022, driven by Dupixent’s continued volume growth and improving margins. As we guided last quarter third quarter reimbursements for the manufacturing of commercial supplies from Sanofi, a component of Sanofi collaboration revenues declined sequentially, primarily due to the ongoing phase in of a new higher yielding manufacturing process. In the fourth quarter, we expect a continuation of this trend with reimbursements for manufacturing of commercial supplies expected to be sequentially lower by approximately $40 million. Other revenues were $138 million in the third quarter of 2023, up 62% versus the prior year, and inclusive of $34 million of reimbursements from BARDA for ongoing development of our next-gen COVID antibody as per the agreement announced in August 2023. Moving now to our operating expenses. Third quarter 2023 R&D expense grew 17% year-over-year to $954 million, representing continued investment in our expanding pipeline. R&D growth was primarily driven by higher headcount and related costs in funding our advancing late stage pipeline as well as increased clinical manufacturing activity. SG&A grew 14% from the prior year to $534 million in the third quarter, reflecting higher headcount and related costs and higher contributions to an independent not-for-profit patient assistance organization. In the third quarter, we recorded acquired IP R&D of $100 million, reflecting the payment of a development milestone to our collaborator Alnylam, related to the Phase 1 ALN-APPI program in early onset Alzheimer’s disease. This impacted both GAAP and non-GAAP EPS by approximately $0.77. Third quarter COCM was $212 million, up 20% versus the prior year, driven by manufacturing costs associated with higher sales volumes from collaboration products, partially offset by lower Dupixent manufacturing costs. Fourth quarter COCM is expected to be the lowest quarter of the year as we continue to transition to the higher yielding manufacturing process for Dupixent. Now to cash flow and the balance sheet. Through the third quarter of 2023, Regeneron generated approximately $3 billion in free cash flow and ended the third quarter with cash and marketable securities less debt of approximately $13 billion. We continue to deliver on our capital allocation priorities, buying back $507 million and $1.9 billion of our shares in the third quarter in the first nine months of 2023, respectively, with $1.8 billion remaining authorized under our existing share repurchase program. Additionally, in the third quarter, we also announced and completed the acquisition of Decibel Therapeutics for approximately $100 million to strengthen our genetics medicine portfolio. As Len mentioned, we continue to evaluate opportunities to utilize our strong financial position and build upon our core competencies with the goal of delivering long-term shareholder value. Finally, we’ve made some minor changes to our full year 2023 financial guidance based on our year-to-date results and our latest outlook, updating the guidance ranges for SG&A, R&D, gross margin, COCM and capital expenditures. A complete summary of our latest full year 2023 guidance is available in our press release issued earlier this morning. As we approach the end of 2023, I’d like to provide some commentary on the preliminary outlook for 2024. We expect continued improvements in profitability from the Sanofi collaboration, which will continue to accelerate the paydown of the antibody development balance, which as of September 30, 2023 was approximately $2.5 billion. Once this balance is fully repaid in the next few years, we expect a meaningful step up in our share of Sanofi collaboration profits. Separately for PRALUENT, we expect significant category and competitive pressures to negatively impact U.S. sales in 2024. Moving to our operating expenses. Consistent with our capital allocation priorities, we continue to invest in our growing internal R&D pipeline to drive long-term growth. As you just heard from George, our pipeline continues to broaden, while our infrastructure to support that growth continues to expand. R&D investment in 2024 will be driven by advancing strategically important late stage programs such as our fianlimab and Libtayo combination confirmatory hem/onc studies, including an earlier lines of therapy, our expanding collaboration in genetic medicines, as well as higher clinical manufacturing costs, and the continued expansion of our R&D organization. With this in mind, we expect year-on-year R&D growth in 2024 to be in the mid-teens compared to our anticipated 2023 spend. We also expect to make additional investments in our commercial business and G&A functions to support the launch of EYLEA HD, our planned hem/onc launches and our international expansion. In conclusion, Regeneron continues to deliver strong results, and our robust financial position allows us to make strategic investments to drive this growth over time. With that, I will now pass the call back to Ryan.

Operator:

Thank you. [Operator Instructions] Our first question comes from the line of Evan Seigerman with BMO Capital Markets. Your line is now open.

Bob Landry:

Yes. Thanks, Evan. I mean, I know having dealt with you and certainly many of our investors, this is certainly an issue that we’ve been tasked to solve. Now obviously interest rates are a lot higher. So obviously what we’re returning on that is certainly much better than the kind of days of 2020 and 2021. But we kind of stick to our knitting here with regards to our capital allocations. I mean George just went through a plethora of obviously pipeline progress that we’re making. Again, first and foremost, we’re going to make sure that is fully funded to the extent possible on that. And then with regards to acquisitions, you heard with Len’s intro, I mean, we continue to look at a lot of opportunities. Certainly, the market that is out there on the biotech space is not in the greatest shape, as you know. So again, we think there are opportunities out there, but just because we have the means doesn’t mean that we’re going to kind of push into something that may not give us an optimal result. It may not be kind of we like franchises, as you’ve heard me say that before. So we need to make sure that it’s the right fit with George and the team with regards to that. So we’ll continue to do that. And you’ve seen our share repurchases of which we’re $1.9 billion through nine months. We’ve done that at a very good price with regards to how we’re buying that back. We’re very kind of scientific in our approach on that. We do think that the stock continues to be undervalued given all the pipeline progress and the catalyst that we have. So we’re going to continue to push that button going forward. So we’re going to stick to our knitting. But again, as Len kind of alluded to, we are looking at a lot of opportunities that are out there. And if the right one makes the necessary fit, then we’ll move forward. And again, you kind of saw that with Checkmate and Decibel, albeit those were smaller, but again, those were nice kind of franchise fits into the business.

Operator:

Our next question comes from the line of Mohit Bansal with Wells Fargo. Your line is now open

George Yancopoulos:

Yes. So as you sort of hinted at, what we have realized is that all of the diseases that we are treating with Dupixent really are interrelated diseases that reflect a systemic disorder that is upregulation of so called Type 2 inflammation. And in some cases it manifests in the lungs, in some cases in the skin, in some cases in the gut, and so forth all over the body, and in many cases in most patients, actually in more than one location. And so in every disease that we’re going after, including now, as you mentioned, in ulcerative colitis, we believe that there are a subset of patients who may be marked with Type 2 inflammation in their gut. We are, as you say, indicating, utilizing biomarkers that might select out these patients. And so we’re going to see whether a subset of ulcerative colitis patients are driven by this Type 2 inflammation that’s driving all the other related manifestations of this systemic disorder.

Operator:

Our next question comes from the line of Chris Raymond with Piper Sandler. Your line is now open.

Leonard Schleifer:

Yes. We’re not going to get into the details of the statistical niceties on how you do this. An alpha sparing approach is what’s typical for an interim analysis. We’ll work closely with Sanofi on how to do this in the most efficient manner possible and get to the information as appropriate when it appears.

Operator:

Our next question comes from the line of Colin Bristow of UBS. Your line is now open.

George Yancopoulos:

Yes. As you said, we’re very excited about, I guess, two of the approaches that we’ve been taking in obesity. One is our unique collection of targets that we’ve either been the first to discover, like the GPR75 genetically identified target that came from our Regeneron Genetics Center, which is a very exciting new target for obesity, as well as our new approaches such as our leptin receptor agonistic antibody. But one thing we’re doing is moving those programs forward and understanding exactly what their potential is in the field of obesity. But as you said, right now, the field which is dominated by these GLP-1 agonists also is recognizing increasing problems with this type of weight loss, meaning that about 40% of the weight loss is due to muscle loss. That means if you lose 20 pounds, eight pounds of that approximately on average, will be muscle. Most patients will never get that muscle back. This can, over time, especially if patients go off these drugs and regain the weight as fat can create potentially a very large public health problem and dilemma. So we also have been, as you pointed out, very active in the field of muscle preservation and muscle growth agents. We’ve developed some, I think, some of the most exciting candidates in the field that have the ability to do this. And we are certainly considering how to study these muscle preservation and muscle growth agents in combination with existing weight loss agents to see whether we can maintain or even grow muscle in the setting of weight loss. Hopefully, perhaps increasing the quality of the weight loss, maybe even resulting in greater weight loss. But most importantly, making sure that the patients, in terms of their muscle and so forth, do a lot better. And we will be talking about our clinical trials in this area, we hope, very shortly.

Operator:

Our next question comes from the line of Tyler Van Buren of TD Cowen. Your line is now open.

Marion McCourt:

Thanks, Tyler. So let me address the first part and the positive anecdotal case reports we’re getting back really carry across the theme of better vision, better drying than they’ve seen with other anti-VEGF products. They also comment on very frequently the tremendous confidence that they have in the safety of EYLEA and the experience over many, many years. In terms of the switches, it’s early days. We are seeing switches from EYLEA, as you would expect, and of course, we’re the category leaders. So there are more potential patients to consider as well. But we are also hearing switches from faricimab. We’re hearing also switches from Avastin and other products in the category. And the early reports have been quite encouraging. To your other part of your question related to sampling. We do have a sampling program for EYLEA HD. It’s intended to give physicians experience with EYLEA HD in an appropriate way. The program is constructed on an on demand basis. We don’t disclose the number of samples or things of that sort. And certainly that’s not what you were asking. But I can share with you that we have seen a high conversion rate from practices ordering EYLEA HD samples and then subsequently placing orders of commercial product through commercial channels.

Operator:

Our next question comes from the line of Terence Flynn of Morgan Stanley. Your line is now open.

Leonard Schleifer:

Yes. So we had a trial in West Virginia, a bench trial, and we are waiting for a decision from the Judge. It’s out of our control, and as soon as it comes, it’ll come. It’s been several months. So it could come soon or not. It’s one of those things where it’s really beyond our ability to predict and control.

Operator:

Our next question is from the line of Carter Gould with Barclays. Your line is now open.

Marion McCourt:

Sure. So, as a quick reminder, as we get into payer mix, I’ll remind everybody that these are approximates based on typical patterns in the category. It’s a little bit different when you look at a product that just launched, but about 45% of our overall business is in Medicare fee for service. And as I mentioned to you in the call today, we’ve made great progress there, not only in coverage, which is the first step to get coverage, but then taking the extra step to make sure that claims are being paid. So we’re seeing now that 100% of Medicare fee for service jurisdictions have coverage and demonstrated paid claims. When we go over to Medicare Advantage, which is roughly about 25% of anti-VEGF category business, and commercial, which is about 20, what we’re seeing so far. And we are making good progress with payers. We’re seeing that EYLEA HD is being positioned consistently with EYLEA and other brands in the category. And there are plans, as you know, that have a step edit or utilization management. The good news is that EYLEA HD is being positioned consistently with EYLEA and other brands. We don’t see a differentiation there.

Operator:

Our next question comes from the line of Robyn Karnauskas with Truist Securities. Your line is now open.

George Yancopoulos:

Yes. Well, as you know, we had one very positive study. We had a second study that actually had a P of 0.049, but for various statistical purposes, just missed meeting its predetermined statistical hurdle. But it’s certainly all the indicators were going in the right direction. And what the FDA indicated that they wanted to see the results of our ongoing Study C, as we call it, to make their decision. And so what we’re hoping is that that study, which is in the same population of the very positive initial study, remember the second study was in these recalcitrant patients who had failed [indiscernible], among other therapies. But Study C is in the same population as our very first Study A, the very positive study. And we're hoping that if we get consistent data in that study, that the FDA will consider and look favorably upon it.

Operator:

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

George Yancopoulos:

Yes. We have a very large collection of combination opportunities that we're very excited about. The first one that we hope has a chance of really crossing the finish line in a very significant way, in a very seen population, is our combination of Libtayo in combination with fianlimab, putting together these two checkpoints, the anti-PD-1 and the anti-LAG-3. And I think in this case, we believe we have evidence that we have the best-in-class type of activity with both agents separately. And as you've hopefully seen in our earlier stage clinical trials, the data suggests that when we put them together, we really can make a remarkable advance for patients in terms of the number of patients who respond and the extent of their progression-free survival. And we're now, as we announced in a pivotal trial where we hope that we will in the – within the next year, perhaps be able to provide the results from that trial, which might confirm this remarkable advance for patients. If it works in this first-line melanoma setting, it really opens up the door to a whole series of other opportunities both in related melanoma settings, such as an even earlier stage melanoma setting such as the adjuvant and perioperative settings, but we could be moving to other cancers as well with that proof of principle. So that's the nearest term Libtayo checkpoint combination approach. As you know, with our bispecifics, the combination opportunities there are also very exciting, either with Libtayo or with each other. And we have, in that space shown that our individual agents, the important thing is we have now validated so many of our individual agents as having once again the potential for best-in-class type of activity, whether it's our agent for myeloma or our CD20 bispecific in, for example, follicular lymphoma and so forth and so on. But we're also excited about our costim bispecifics. We've released the data about the incredible efficacy in, at early stages that we see in combination with Libtayo. But that one – that one is countered by concerns with immune-mediated adverse events that we're seeing in these patients. It is hard to dramatically increase the extent of immunotherapy benefit without having it associated with increased autoimmune type reactions. We're working very hard on that, and we think, based on preclinical data that the trick may be combining our costims with our CD3 bispecifics where we don't see these dramatic potential increases in the mechanisms that may lead to immune adverse events. So in summary, our checkpoint combinations are very near-term. Our bispecifics are single agents have been validated and hopefully will be being considered by the FDA for approval in the relatively near future. And the combinations are beginning to demonstrate exciting opportunity, and we're trying to tune that in order to try to present the best efficacy safety profile for patients.

Operator:

Our next question comes from the line of Brian Abrahams with RBC Capital Markets. Your line is now open.

Marion McCourt:

Sure, Brian. So I would comment that in an increasingly competitive category, there of course, there's been some pressure on EYLEA. I'd also reflect that in 12 years in the market, it's really modest rebating and discounting if you look at the history of the brand. And of course, that on a brand that has never taken a price increase. But we will continue to be very much watching uptake of EYLEA HD, taking very responsible and appropriate and thoughtful measures on pricing. And certainly, as I reported to early days, we're making some very strong progress in the marketplace in terms of making sure that physicians gain confidence in reimbursement of EYLEA HD as they initiate patients.

Operator:

Our next question comes from the line of Yatin Suneja with Guggenheim. Your line is now open.

George Yancopoulos:

Yes. Maybe getting back to some of the comments that I made before. The collection of so-called allergic or Type 2 conditions, which Dupixent addresses, are all characterized by a systemic inflammatory problem increase in the so-called Type 2 inflammation, which if you look at the science and literature is really of this digital pathway that largely evolved and was one of the most active parts of the immune system to fight things like fecal parasites, which are really not an issue now in the developed world. This part of the immune system should essentially in the modern world be entirely quiescent. It serves almost no role. The problem is it becomes unleashed abnormally to do things that it shouldn't be doing, like fighting allergens or attacking the skin or the gut in atopic dermatitis or eosinophilic esophagitis. What Dupixent does uniquely is that it controls, and the data now demonstrate this, the incredible effect that it puts this useless angry tiger back in the cage where it belongs. And that is why it has this incredible profile of not only efficacy but safety. Because what's shutting down is it's shutting down a pathway that should be vestigial in the modern world that becomes unleashed and attacks all different parts of the body. We believe that any of this current competition that's ongoing doesn't share these remarkable features that give Dupixent its incredible broad efficacy across the spectrum of diseases with its unique safety profile. Because all of these other approaches, including, for example, the OX40 approach and so forth, are addressing different fundamental immune pathways that are important in the immune system's function to do a lot of actual useful things in the modern world, like, for example, fighting viral infections in cancer and so forth. So Dupixent really has a very unique profile, which if we can help explain and if all physicians and patients can understand it, make it the perfect drug for this condition. It uniquely blocks this digital pathway that gets out of control and appropriately and causes disease all over the body. Dupixent shuts down this what should be a vestigial pathway, and it helps disease, whether in the same patients, it could be manifesting in the skin in the lungs, in the nodes, in the gut and so forth, it shuts it down without really untoward effects with regards to the ability of the body to actually fight infections and so forth. In fact, if you look at our clinical studies and some of the data that we published, in many, if not most cases, you actually see unbelievably reduced infections in the setting of the Dupixent treatment. Because what you're doing is you're putting the bad part of the immune system back under control and you're allowing the rest of immune system to do its function. All of these other approaches are trying to attack critical parts of the immune system that have important other functions, and they don't address the widespread problem that occurs systemically and causes all of these diseases. So as you've seen already with various agents, they may work in one of Dupixent indications, but they don't work, they failed in other indications. And if they work, they also often come with the concerns about safety because they're designed to be immunosuppressive, which Dupixent is not.

George Yancopoulos:

Including in children, as we know, as young as six months is approved there where it's been demonstrating not only incredible safety but incredible efficacy.

Operator:

Our next question comes from the line of Dane Leone with Raymond James. Your line is now open.

Leonard Schleifer:

Yes. So I'll cover the patents and then Marion can cover any additional insight into the marketplace. On the patents, we're involved in litigation. There's a couple of key patents that have evolved in this case that both relate to formulation as well as dosing. On the base case is that, for us, assuming that the exclusivity will expire in May, but we will see what happens in the litigation, which could be an upside, obviously, for the franchise.

Ryan Crowe:

Thanks Marion. We'll just take our last question, please, Shannon.

Brian Skorney:

Hey, thanks for taking my question. It looks like J&J had a really good first quarter of their myeloma bispecific. So it definitely seems like there's a good demand there. But also an element of them having control of a lot of offerings for myeloma. So obviously, [indiscernible] would always dominate each in oncology, but with the initial launch of your bispecific next year. I'm just wondering what your strategy is for competing in the initial late line as a third to market? Do you think that there is differentiated enough data here to kind of take share? Or is the focus really on generating data in earlier line of combos to kind of move up market share? Thanks.

Ryan Crowe:

Okay. Thanks George, and thanks to everyone who dialed in today and for your interest in Regeneron. We apologize to those remaining in the queue that we do not have a chance to hear from. But as always, the Investor Relations team here is available to answer any remaining questions you may have. Thank you once again, and have a great day.

Ryan Crowe:

Thank you, Shannon. Good morning, good afternoon, and good evening to everyone listening around the world. Thank you for your interest in Regeneron and welcome to our second quarter 2023 earnings conference call. An archive of this webcast will be available on our Investor Relations website shortly after the call ends. Joining me on today's call are Dr. Leonard Schleifer, Board Co-Chair, Co-Founder, President, and Chief Executive Officer; Dr. George Yancopoulos, Board Co-Chair, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open the call for Q&A. I would like to remind you that remarks made on today's call may include forward-looking statements about Regeneron. Such statements may include, but are not limited to those related to Regeneron and its products and business, financial forecast and guidance, revenue diversification, development programs, and related anticipated milestones, including anticipated regulatory actions, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings, and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, including its Form 10-Q for the quarterly period ended June 30th, 2023, which was filed with the SEC this morning. Regeneron does not undertake any obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our financial results press release and our corporate presentation, 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. Len?

George Yancopoulos:

Thank you, Len. I would like to start with our recent update on aflibercept 8 milligram data in DME that Len referred to. At the Annual American Society of Retina Specialists meeting, we presented the two-year results from our PHOTON study. These data demonstrated that the vast majority of aflibercept 8 milligram patients were randomized to the 12-week and 16-week dosing intervals continued to sustain vision and anatomic improvements through 96 weeks. 89% of all aflibercept 8 milligram patients were able to maintain at least every 12-week dosing intervals for the entire two-year period, while 84% of patients assigned to every 16-week dosing at baseline, were able to maintain that interval or extend beyond it. On that point, many patients met the criteria for extension to longer intervals, with 44% meeting the criteria for greater than 20-week dosing intervals, including 27% who were eligible for 24-week dosing intervals. The safety profile of aflibercept 8 milligram remained consistent with EYLEA. Sustaining vision and anatomic improvements while maintaining such extended dosing intervals over two years is unprecedented in the field. Our results further strengthen the clinical profile of aflibercept 8 milligram and position this investigational medicine to become the future standard of care retinal diseases. Later in the third quarter, we and Bayer are planning to share initial results from the second year analysis of the PULSAR study in patients with wet AMD. Moving to our immunology and inflammation pipeline on Dupixent. We look forward to the FDA decision for our sBLA in chronic spontaneous urticaria by October 22nd, 2023, in terms of Dupixent in patients with COPD. We and Sanofi are pleased to announce that Dupixent was granted breakthrough designation for uncontrolled COPD with an eosiniphilic phenotype based on the positive results of the Phase 3 BOREAS study. Based on ongoing discussions with the FDA, we expect that in addition to the BOREAS study results, we will need to provide data from the replicate Phase 3 NOTUS study to support a BLA and such data requirements remain under discussion with the FDA. We continue to expect final results for the NOTUS study by mid-2024. Moving to Itepekimab, our anti-IL-33 antibody, which is being evaluated for COPD in former smokers. In May, Sanofi announced that the Phase 3 AERIFY-1 and 2 studies had passed an interim futility analysis. These studies remain on track for readout and regulatory submissions in 2025. Both the Itepekimab and Dupixent could transform the treatment paradigm for COPD by levering their distinct mechanism of action in reducing different types of inflammation that contribute to COPD. Moving to oncology and combinations with Libtayo. In June, in an oral presentation at the ASCO conference, we presented data for the combination of fianlimab, our LAG-3 antibody plus Libtayo, which showed consistent response rates ranging from 56% to 63% across three independent cohorts of advanced melanoma patients, including a new cohort of patients who had received prior anti-PD-1 therapy in the adjuvant melanoma setting. These response rates represent about double the rate historically seen with anti-PD-1 monotherapy in similar settings and clinically meaningful responses were observed in Post Hoc analysis of various populations of interest, including patients with poor prognosis factors and varying tumor PD-L1 expression levels. The safety profile of fianlimab and Libtayo combination in these cohorts appears to be generally consistent with the safety profile of Libtayo monotherapy and other anti-PD-1 or PD-L1 agents, except for the higher rates of adrenal insufficiency, which were Grade 2 or lower in the majority of cases, with all cases successfully managed with steroid replacement. Our fianlimab plus Libtayo Phase 3 studies in metastatic and adjuvant melanoma are enrolling patients as are the Phase 2 portions of the Phase 2/3 studies in advanced non-small cell lung cancer. Next on to bispecifics for solid tumors, which are being investigated in combination with Libtayo and other modalities. Later this year, we are planning to share initial clinical data for the combination of ubamatamab, our MUC16xCD28 bispecific plus Libtayo in advanced ovarian cancer. Last year we showed encouraging ubamatamab monotherapy data in advanced ovarian cancer and we believe that combining it with Libtayo may lead to enhanced anti-tumor activity. Moving to costimulatory bispecifics. We are currently exploring multiple different CD28 costimulatory bispecific antibodies in early clinical trials in a variety of tumor settings, in combination with Libtayo well with corresponding CD3 bispecifics in our Phase 1 study of REGN5678, our PSMAxCD28 costimulatory bispecifics in advanced prostate cancer in combination with Libtayo, which has demonstrated promising anti-tumor activity. The safety profile of this combination continues to pose a challenge, highlighted by the recently observed second Grade 5 adverse event or death. Although serious immune-mediated adverse events continued to be highly correlated to patients who experience profound responses, we have decided to discontinue enrollment of new patients with the full dose Libtayo combination and explore PSMAxCD28 combination with lower doses of Libtayo. We also will continue to explore PSMAxCD28 as a monotherapy, where we have seen anti-tumor activity in some patients and we will explore PSMAxCD28 in combination with other immunotherapy modalities. We believe our prostate cancer data support the exciting potential of costimulatory bispecifics both the challenge of focusing the response solely to the tumor. Our preclinical studies and mechanistic insights suggest the degree of immune-related adverse events seen when combining costims with PD1 blockade may depend on the particular costim target and tumor types. Moreover, combining costims with CD3 bispecifics may not result in these types of severe immune-mediated adverse events. Along these lines, our other costimulatory bispecific programs continue, including our MUC16xCD28 costim with Libtayo and MUC16xCD28 costim with ubamatamab both in ovarian cancer as well as our EGFRxCD28 costim with Libtayo in colorectal and other cancers. In these early dose-escalation studies, we have observed limited immune-mediated toxicities to-date. We are also excited about combining our costimulatory bispecifics with our CD3 bispecifics in our hem/onc programs, which continue to progress. We have initiated dosing of our CD22xCD28 costimulatory bispecifics with odronextamab, our CD20xCD3 bispecific in relapsed/refractory diffuse large B-cell lymphoma, which we hope can improve on the impressive efficacy demonstrated by odronextamab alone in that setting. In terms of odronextamab monotherapy, US and EU regulatory submissions for both relapsed or refractory follicular lymphoma and diffuse large B-cell lymphoma remain on track. Regarding linvoseltamab, our BCMAxCD3 bispecific, we recently presented updated data at the ASCO Annual Meeting demonstrating early deep and durable responses in patients with heavily pre-treated multiple myeloma, with 71% objective response rate and 59% of patients achieving a very good partial response or better at the recommended 200-milligram dose with a median follow-up of only six months, with the data potentially improving as they mature. We believe these data support linvoseltamab's best-in-class potential with differentiated efficacy, safety, hospital requirements, and favorable dosing schedule. In the fourth quarter this year, we are planning to present additional data with longer follow up and to submit regulatory applications for linvoseltamab. We also plan to start combination studies with myeloma-specific costim next year. Next to genetic medicines. In the second quarter, we and Alnylam jointly announced the first human data suggesting that a siRNA can be used to silence pathological genes in the brain, which may open up an entirely new approach to fighting back against neurodegenerative and other central nervous system diseases. We plan to initiate additional clinical programs for CNS diseases next year. As announced by our collaboration with Intellia, we plan to initiate the first in-vivo CRISPR-based Phase 3 clinical program by year-end, subject to regulatory feedback in patients with transthyretin amyloidosis cardiomyopathy. And in terms of our targeted gene delivery pipeline, we hope to initiate our first clinical program in 2024 for Hemophilia B. In conclusion, Regeneron's R&D engine continues to grow and deliver differentiated late and early-stage opportunities and we are looking forward to several important clinical milestones in the second half of this year. With that, I will turn the call over to Marion.

Robert Landry:

Thank you, Marion. My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis unless otherwise noted. Regeneron's second quarter results demonstrate continued growth and strong financial performance across the organization. Second quarter 2023 total revenues increased 11% year-over-year to $3.2 billion, driven by strong Dupixent sales growth coupled with improving profitability within our Sanofi collaboration and continued momentum from Libtayo. Second quarter diluted net income per share was $10.24 on net income of $1.2 billion. Moving to collaboration revenue and starting with Bayer. Second quarter 2023 ex-US EYLEA net product sales were $886 million, up 4% on a constant currency basis versus second quarter 2022. Total Bayer collaboration revenue was $377 million, of which $350 million related to our share of EYLEA net profits outside the US. Total Sanofi collaboration revenue was $944 million in the second quarter and grew 39% versus the prior year. Our share of profits from the commercialization of Dupixent and Kevzara was $751 million, an increase of 51% from the second quarter of 2022, reflecting higher volumes and an improving margin profile for Dupixent. We expect further margin expansion from the collaboration driven by continued Dupixent global sales growth coupled with higher gross margins due to significant drug substance yield improvements resulting from dupilumab manufacturing process enhancements. These factors are also contributing to a gradual increase in the rate in which we are repaying the antibody development balance to Sanofi. Once this balance is fully repaid in the next few years, we expect a meaningful step up in our share of Sanofi collaboration profits. Recall that a portion of our Sanofi collaboration revenue was related to the manufacturing of commercial supplies, for which we are reimbursed by Sanofi. As we continue to face in the higher yield manufacturing process for Dupixent, we expect these second half reimbursements to be approximately 25% lower than the first half of 2023, with the fourth quarter expected to be the lowest of the year. Other revenues were $69 million in the second quarter, up 17% versus the prior year. We continue to expect other revenue to be higher in the second half of 2023 as compared to the first half. Recall that other revenue primarily includes reimbursements for the manufacturing of certain Regeneron discovered products commercialized by other companies, including ex-US Praluent, ARCALYST, and ZALTRAP, as well as royalties for Alaris and our share of global profits for ARCALYST. Moving now to our operating expenses. Second quarter 2023 R&D expense was $974 million, representing continued investment in our robust pipeline. Year-over-year R&D growth was primarily driven by higher headcount and related costs and funding of the company's pipeline which encompasses approximately 20 late-stage or potentially registrational studies including our ongoing aflibercept 8 mg studies. Phase 3 studies in earlier lines of therapy for our hem/onc product candidates and our advancing fianlimab development program. The increase in R&D expense was also driven in part by the impact of the 2022 amendments to the Sanofi collaboration agreements and increased manufacturing activity associated with the company's earlier-stage product candidates. SG&A was $562 million in the second quarter, reflecting the ongoing build-out of our ex-US operations following the acquisition of global rights to Libtayo last year, higher headcount and related costs, and higher contributions to an independent not-for-profit patient assistance organization. Second quarter 2023 COCM was $213 million up 44% versus the prior year driven by manufacturing costs associated with higher Dupixent volumes. As we progress the phasing of the improved manufacturing process for Dupixent, we expect COCM in the second half of this year to decline versus the first half as our unchanged 2023 COCM guidance reflects with the fourth quarter expected to be the lowest of the year. Now to cash flow and the balance sheet. In the first half of 2023, Regeneron generated approximately $2.1 billion in free cash flow. We ended the second quarter with cash and marketable securities less debt of approximately $12.6 billion. We continue to opportunistically deploy cash towards share repurchases throughout the second quarter, buying back $723 million of our shares. At current levels, we remain buyers of our shares, and as of June 30th, approximately $2.3 billion remained available for repurchases under our existing authorization. Finally, we've made some minor changes to our full year 2023 guidance ranges based on our first half results and our latest outlook for the remainder of the year. We have tightened guidance ranges for 2023 SG&A and R&D spend and provided updated guidance ranges for our effective tax rate. A complete summary of our latest full year guidance is available in our press release issued earlier this morning. In conclusion, Regeneron delivered positive financial results in the second quarter of 2023 and we remain excited for the potential upcoming launch of aflibercept 8 mg in the third quarter. With that I will now pass the call back to Ryan.

Operator:

Thank you. [Operator Instructions] Our first question comes from the line of Evan Seigerman with BMO. Your line is now open.

Leonard Schleifer:

Hi, Evan. It's Len. Thanks for your question. So just to clarify, the FDA has not classified the resubmission as Class 1 or Class 2 because they have said that the timeline for pozelimab will be governing what happens with our 8 milligrams. So let me remind you what happened, it was a pre-approval inspection for both products. The pozelimab is for our ultra-rare disease -- CHAPLE disease and it has a PDUFA date of the 20th. What the FDA has said is that they will review the remediation efforts in the context of the pozelimab BLA and therefore, whatever happens there will govern the timeline and results. And when we say we expect them to take action, we mean, we expect them to make an approval or not decision. If they find the manufacturing remediation acceptable for the pozelimab, then we think they will be in a position to promptly make a decision on approval for the 8 milligrams. Does that answer your question?

Operator:

Our next question comes from the line of Tyler Van Buren with TD Cowen. Your line is now open.

Leonard Schleifer:

Right. Great question. So we've been in very close contact with Catalent and the FDA, multiple meetings, oral, written, and so forth, and we have a clear understanding of what's required from an information point of view and from a data point of view. The submissions have been on a rolling basis that as Catalent has completed work, they've submitted data and information already to the FDA. There is very little that will be left for the last submission at the middle of August, and that's why the FDA has told us and they know what's coming that they will strive to expeditiously review that. And if they can't get that done by the few days before the pozelimab PDUFA date, they have told us that they will prioritize our review and do that as soon as possible. That's why we have confidence about this getting done in this quarter. So to summarize the data has been coming in on a rolling basis. We have everything we need, the last piece of information that we'll be rolling in and submitted by the middle of the month, the FDA will strive expeditiously to review that in time for the August 20th PDUFA date. But if not, there will be a clock extension for up to three months, but they have told us that they will prioritize our review. And that's why we believe it will get done, if not in time for the pozelimab PDUFA date in the near future thereafter.

Operator:

Our next question comes from the line of Mohit Bansal with Wells Fargo. Your line is now open.

Leonard Schleifer:

Actually, the way you should think about it, we've submitted everything we need for pozelimab except for the final remediation of the pre-approval inspection, which applies both to pozelimab and to the 8 milligram EYLEA. So it's a single pre-approval inspection same data and information required for both. Once that is in then we will have completed everything necessary for pozelimab and for the EYLEA 8 milligrams. They are linked together. The FDA has clearly stated to us that the review of this remediation in the context of the pozelimab BLA will govern what happens to the 8-milligram remediation.

Leonard Schleifer:

Hey, that's a very good point, George. So that's why the single pre-approval inspection applies to both products. It wasn't the product specifically, it was the processes and validation on the line that fills the two products. So one remediation satisfies both, all the data and information that is being submitted on a rolling basis, the last piece comes in, in the middle of August, the FDA is aware of this. They've told us in writing that they will strive to do that as expeditiously. If they get it done before the end of the PDUFA, an original PDUFA clock, that's great. If they don't, they'll consider an amendment that will set the clock back three months. But notwithstanding that three months, they've told us that they will continue to prioritize our review. So we're very pleased and we're working very hard. Catalent is working very hard, the FDA is working very hard, everybody wants this done properly and finished and properly remediated.

Operator:

Our next question comes from the line of Tim Anderson with Wolfe Research. Your line is now open.

Marion McCourt:

Sure. So, Tom, I will comment on our EYLEA performance. And as I just shared with you the performance in the quarter was strong, certainly we see EYLEA steadily as the standard-of-care in the anti-VEGF category. We continue to capture not only naïve-patients, but also another big source of business is switch patients from Avastin. Obviously, the other branded competitors are smaller in market today. But I would say that beyond your comment, probably best to get more clarification from the individuals who are commercializing faricimab in the market. But certainly, I do want you to know that we are seeing continued strength in EYLEA performance and obviously very much look forward to having the potentially game-changing opportunity of bringing aflibercept 8 milligrams into the marketplace and where the profile of efficacy, safety and durability has so many KOLs and prescribers excited based on what they've seen recently in the clinical data presented at ASRS.

Operator:

Our next question comes from the line of Chris Raymond with Piper Sandler. Your line is now open.

Marion McCourt:

So let me share first in terms of the market dynamic. I think the most exciting thing and most important thing about aflibercept 8 milligram is it gives prescribers for all of their patients whether a naïve-patient, a patient currently on EYLEA or a patient on another anti-VEGF category product, the opportunity to decide if that patient is a candidate when we launch and when we have an FDA approval, is the patient is a candidate for aflibercept 8 milligram, that does have benefit to the patient and prescriber and potentially to the office capacity and patient flow. I think it's premature to comment on the category that we're not directly involved in. We are though very focused on making sure that we are ready for launch and certainly at the proper time, educating all stakeholders on aflibercept 8 milligram once we have an approval.

Ryan Crowe:

Okay. Thanks, Marion and George. Shannon, please move to the next question.

Carter Gould:

Great, good morning. And thanks for all the transparency. Maybe switching gears a bit, in terms of the update on your costim and report of the death and the change in the dosing paradigm with 5678 in combination with Libtayo. George maybe you can speak about the implications for other combination efforts of CD28 with Libtayo, it's going to require lower dosing with those efforts with Libtayo portion and just the broader implications there and just fill your level of confidence you can kind of thread that needle in terms of the dosing levels? Thank you.

Ryan Crowe:

Thanks, George. Next question, please.

Salveen Richter:

Good morning. Thanks for taking my question and nice updates this morning. Clearly the possibility of a permanent J-code now has moved to April and it shortens the runway for patients switching from EYLEA ahead of potentially loss of exclusivity in May. So kind of a two-part question here. What are the dynamics around this and how do you, on one hand kind of maintain and grow the switch population from EYLEA? But secondly, how should we think about the uptake of high-dose EYLEA without a permanent J-code? Thank you.

Ryan Crowe:

Okay. Thanks, Marion. Shannon, please move to the next question.

Terence Flynn:

Great. Thanks so much for taking the question. Len, I know we've talked about this before, but the company has been somewhat non-traditional on pricing decisions historically. You guys priced EYLEA at a discount to Lucentis. You worked with ICER on Dupixent pricing. So just wondering why we shouldn't expect it similar approach here with high-dose EYLEA. Thank you.

Ryan Crowe:

Okay. Next question please Shannon.

Brian Abrahams:

Good morning. Thanks for taking my question. Congrats on all the progress and appreciate all the details. Maybe just another clarification on 8 milligram aflibercept. Can you characterize your level of confidence that a re-inspection would not be required? Have you had any interactions or feedback with the agency around this? And is there a defined period of time where the FDA would need to wait re-inspection or not to ensure that the remediations are sustainable before proving to BLAs? Thanks.

Ryan Crowe:

Thanks, Len. Let's move to the next question, please.

Chris Schott:

Great. Thanks so much. Can you just come back to the CD28 PSMA update? Maybe just elaborate a little bit more in terms of the approach of lowering the PD-1 exposure to address the safety issues here and taking that approach versus trying to work to further adjust the dosing of the bispecific piece of the equation? Thanks so much.

Leonard Schleifer:

I think what George said earlier, just maybe it bears repeating, is that he said that we're starting with the good position of having very impressive efficacy, one. And two side effects that for the most part in the patients who are benefiting with the efficacy, that's a very good position to begin to explore and how to get the therapeutic index or signal to noise as George calls it right.

Operator:

Our next question comes from the line of Dane Leone with Raymond James. Your line is now open.

George Yancopoulos:

Yeah. What we know right now is that we're going to need data from NOTUS. And right now, as we said, we are still in discussions on what that data could be. And so right now, we don't have any details to give you.

Operator:

Our next question comes from the line of Colin Bristow with UBS. Your line is now open.

Leonard Schleifer:

I don't think we have anything specific. This was handled by the Data Safety Monitoring Committee sort of a standard approach. We're pleased that we passed it. And we will look forward to further data at the end of the study.

Operator:

Our next question comes from the line of Brian Skorney with Baird. Your line is now open.

Marion McCourt:

Thank you, Luke. And I'm pleased to share it is demand growth. Certainly, we see continued and steady performance across our skin indications both cutaneous squamous cell carcinoma and basal cell carcinoma. In addition to that, it is exciting that we are seeing not only an increase in the number of prescribers for our lung cancer indications, but the depth of prescribing is improving and increasing in both the community and also academic settings. But that is demand based, it is not stocking based.

Operator:

Our next question comes from the line of David Risinger with Leerink Partners. Your line is now open.

George Yancopoulos:

That's a very good and fair question. And those programs are at earlier stages, so we won't know until we are more advanced, whether when we get to the same sort of efficacy type levels, do we have the same sort of immune-related adverse events associations or not. What I was referring to is in the preclinical studies, the amount of this associated T-Cell activation that can lead to these sorts of immune-related adverse events varies depending on the tumor class and on the costim itself. So based on that we would expect to see different ratios of immune-related adverse events. Those other programs though right now are all-in stages where they are in with full dose Libtayo combinations at this point.

Operator:

Our last question is from Akash Tewari with Jefferies. Your line is now open.

George Yancopoulos:

Well, what we would say is, we do think that obviously, there's a lot of focus on obesity and particularly these new agents that are causing a large amount of weight loss. But as you described is being increasingly recognized that the quality of this weight loss may prove challenging that many patients are actually losing muscle or lean body mass which is -- can be very detrimental particularly if they stay on these therapies or yoyo on and off them, that can really lead to substantial changes over-time and body composition can be very debilitating for patients. And as you said, we've had long investment in programs that can maintain muscle mass in various settings and we've shown that they can maintain or even grow muscle mass in the setting of these types of obesity treatments in our preclinical modeling. So obviously it is a very exciting opportunity to think about which is, can we combine some of our muscle preservation or growth strategies and biologics to prevent these concerning side effects that are being seen with the new class of profound weight loss agents. And so we are very actively pursuing everything that we can imagine. And hopefully, we'll be providing updates on our approaches as time goes along.

Operator:

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

Ryan Crowe:

Thank you, Josh. Good morning, good afternoon and good evening to everyone listening around the world. Thank you for your interest in Regeneron and welcome to our first quarter 2023 earnings conference call. An archive of this webcast will be available on our Investor Relations website shortly after the call ends. Joining me today are Dr. Leonard Schleifer, Co-Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open the call for Q&A. I would like to remind you that remarks made on today's call may include forward-looking statements about Regeneron. Such statements may include, but are not limited to, those related to Regeneron and its products and business, financial forecast and guidance, revenue diversification, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, including its Form 10-Q for the quarterly period ended March 31, 2023, which was filed with the SEC this morning. Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our financial results press release and our corporate presentation, 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. Len?

George Yancopoulos:

Thank you, Len. The first quarter of 2023 delivered multiple significant milestones for Regeneron and for our collaborations, from the positive DUPIXENT Phase III COPD data to progress in our oncology pipeline, as well as exciting new landmarks from our genetic medicines programs. Starting with DUPIXENT. In March, together with our Sanofi collaborators, we announced that DUPIXENT was the first immune mechanism of action treatment to produce statistically significant and clinically meaningful results in a Phase III trial for COPD in over a decade. Our BOREAS trial enrolled COPD patients with moderate to severe disease and evidence of type 2 inflammation. DUPIXENT-treated patients demonstrated a clinically meaningful 30% reduction in exacerbations, a significant improvement in lung function as well as quality of life benefits

Bob Landry:

Thank you, Marion. My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis unless otherwise noted. Regeneron performed well in the first quarter of 2023 with solid financial results. First quarter total revenues increased 7% year-over-year to $3.2 billion as DUPIXENT and Libtayo contribute to increasingly diversified revenue and earning streams. First quarter diluted net income per share was $10.09 on net income of $1.2 billion, which included a previously announced $0.42 impact of acquired IPR&D. Beginning with collaboration revenue and starting with Bayer. First quarter 2023 ex-U.S. EYLEA net product sales were $847 million, up 4% on a constant currency basis versus first quarter 2022. Total Bayer collaboration revenue was $357 million, of which $332 million related to our share of EYLEA net profits outside the U.S. Total Sanofi collaboration revenue was $798 million in the first quarter and grew 26% versus last year's first quarter, which included a $50 million sales milestone that did not recur this year. Our share of profits from the commercialization of DUPIXENT and KEVZARA was $637 million, an increase of 53% versus the prior year. We continue to see increasing profitability from our antibody collaboration and expect further margin expansion as we begin to realize drug substance yield improvements from a new Regeneron developed manufacturing process for DUPIXENT. Finally, we recorded Roche collaboration revenue of $222 million in the first quarter for our share of gross profits from ex U.S. sales of Ronapreve related to a previously signed contract. We do not expect to record any additional revenue from Ronapreve in 2023, absent a new contract. Moving now to operating expenses. First quarter 2023 R&D expense increased 28% year-over-year to $960 million as we continue to invest in our pipeline to drive organic growth. The increase in R&D was primarily driven by higher headcount and related costs and funding of the company's growing pipeline, which now encompasses approximately 35 programs in clinical development in more than 15 ongoing late-stage studies with additional study starts expected this year. These late-stage programs include our expanding fianlimab development program, upcoming Phase III studies and early reliance for our hem/onc assets, as well as ongoing development programs for DUPIXENT and itepekimab for which we now record our full 50% share of development costs as a result of the Libtayo transaction. SG&A expense increased 32% year-over-year to $515 million due to higher contributions to an independent, not-for-profit patient assistance organization, higher headcount and related costs, and the impact of the Libtayo transaction. First quarter 2023 COCM was $249 million, up 26% versus last year, due to increases in shipments of ex-U.S. commercial supplies of Praluent to Sanofi and manufacturing costs for Dupixent. Reimbursements for these production costs are recorded as part of other revenue in Sanofi collaboration revenue respectively. Shifting now to cash flow and the balance sheet. In the first quarter of 2023, Regeneron generated $1.2 billion in free cash flow. We ended the first quarter with cash and marketable securities, less debt, of $12.3 billion. We have continued to strategically deploy our cash to deliver on our capital allocation priorities, which are focused on investing in innovation, both internal and external, as well as returning capital to shareholders. We purchased nearly $700 million of our shares in the first quarter with $3.1 billion remaining under our existing authorization as of March 31. Additionally, as George discussed, we announced the collaboration with Sonoma Biotherapeutics, investing $75 million through an upfront payment and equity investment to add a new approach to our scientific capabilities. I'd like to conclude with some select updates to our financial guidance and outlook for 2023. We are updating 2023 COCM guidance to be in the range of $820 million to $880 million, an increase of $90 million at the midpoint, reflecting increased shipments of ex-U.S. commercial supplies for Praluent and DUPIXENT to Sanofi. Importantly, these anticipated incremental expenses will be reimbursed by Sanofi, generally resulting in a neutral impact to Regeneron's 2023 operating profit. Approximately half of the incremental $90 million of reimbursements from Sanofi are expected to be recorded as Sanofi collaboration revenue, with the balance recorded as other revenue. As a result, we now expect 2023 other revenue to be higher than 2022 other revenue. For modeling purposes, second quarter 2023 other revenue is expected to be the lowest of the 2023 quarters, with the vast majority of the remaining other revenue to be recorded in the second half of this year. We are also updating our 2023 gross margin to be between 89% to 91%. The change in expected gross margin is primarily driven by an unfavorable change in product mix, as well as an increase in the start-up costs associated with our new fill/finish facility located in upstate New York. Finally, we are lowering our guidance for our effective tax rate to 10% to 12%, reflecting the benefit of higher than previously anticipated stock-based compensation deductions. In conclusion, Regeneron continued to deliver robust financial results in the first quarter of 2023, and the company remains well positioned to drive further growth in the remainder of the year and beyond. With that, I will now pass the call back to Ryan.

Operator:

[Operator Instructions] Our first question comes from Mohit Bansal with Wells Fargo. You may proceed.

Marion McCourt:

Sure, very happy to comment. And as I noted, as we're reporting on the quarter performance on a sequential basis, we did see with EYLEA, if I look at a sequential quarterly basis, we did see with EYLEA a net product sales decrease of 4%. As I mentioned, it was driven by a number of factors. Certainly, competitive pressure is one, but we also reflected on while we had slightly higher demand volume. It was offset by lower sequential wholesaler inventory levels and overall tire sales-related deductions. Specifically as it relates to competitive pressure, I would say that this is overall competitive dynamic in the anti-VEGF category, not something that we would necessarily identify with a particular product, more the totality of competition. I will comment that in the quarter, we certainly maintained a 70% branded share and over at approximately, I believe it was a 46% share in the overall anti-VEGF category. So certainly standard of care with EYLEA. And very importantly, we look forward to launching aflibercept 8 milligram, as I mentioned now, is about 7 weeks away.

Robyn Karnauskas:

Just some questions on LAG-3, and thinking about the first-line melanoma market and you're going to be having data relatively soon. So what -- I guess it's a multipart question. What is the bar for success, do you think, for the combination to be competitive? And when you think about penetrating into the nivo and checkpoint monotherapy buckets for first-line melanoma, can you help us understand how big these buckets are to actually model this opportunity better?

Operator:

Our next question comes from Tyler Van Buren with Cowen. You may proceed.

Leonard Schleifer:

So on the regulatory update, we don't comment on ongoing stuff. I'd like to say we're looking forward, hopefully, to the action of the FDA on June 27 and the launch promptly thereafter. Marion, you can comment on the inventories.

Operator:

Our next question comes from Terence Flynn with Morgan Stanley.

Marion McCourt:

Sure, very happy to comment. And as we think of DUPIXENT and all the different therapeutic disease areas and specialists that we cover with some indications, there certainly is an amazing and wonderful synergy. And you give an example with COPD launch potentially. And obviously, today, we're in market with our asthma indication and with nasal polyps. As we look forward with COPD, it's a really important launch, an indication to help patients in a way potentially that, as George described, hasn't been achieved ever for this population. So we have the opportunity to use our existing footprint, specifically in covering respiratory specialists, pulmonologists. But we'll also evaluate very closely with Sanofi, as you've seen us done in dermatology indications, where we might need some additional coverage and where the synergy is adequate, and we'll be very disciplined and very thoughtful about that. But you can be assured that we'll make certain that we appropriately give commercialization effort to such an important indication of COPD.

Marion McCourt:

I'll add to the enthusiasm here too in COPD, the potential to have a second product following DUPIXENT as well. So this will be a very important future area for helping patients.

Leonard Schleifer:

Obviously, we work very closely with Sanofi and all of these. And I believe it's fair to say we're equally excited about the potential for the future of DUPIXENT in all the current and, hopefully, future indications.

Christopher Raymond:

Maybe another DUPIXENT question, if you don't mind. Leonard, I know you don't talk about regulatory interactions. But when you had the COPD data, I think the signal that I got from you guys that seemed to be pretty strong was that you were hoping to have some discussions with the agency on BOREAS alone. Just kind of -- maybe can you map out how you anticipate communicating the results of that discussion with FDA once it happens? And then maybe a second part of that question is, our KOL checks have been pretty consistent when we asked them about this data. They're very impressed. But one of the things we've heard consistently is that this cutoff or clinical is greater than 300 as sort of arbitrary and that this drug would see -- maybe add value to patients with clinical accounts as low as 200 to 250. Just maybe your thoughts on this, and how you anticipate to sort of take advantage of that.

Marion McCourt:

Len to your comment, you were talking about numbers of patients. I can fill in there that as of March worldwide, we had over 600,000 patients on DUPIXENT in 57 countries.

Operator:

Our next question comes from Brian Abrahams with RBC Capital Markets. You may proceed.

George Yancopoulos:

Well, we think that the data were really game changing. I mean this is the first time in human history that one has been able to use this very exciting siRNA technology within the brain and silence, to a very high degree, higher-than-expected levels an important pathological gene. Obviously, this could have important implications for Alzheimer's itself. But as you point out, the application goes way beyond that. To every neurodegenerative disease, there are also other types of CNS diseases as well. We have a number of programs that we're working with Alnylam. We have exclusive relationship with them on all of these CNS targets. And we're trying to expedite a lot of them based on the exciting results from this initial clinical work into the clinic. And we're also trying to expedite many of our programs that are behind as well. So we really think this opens up an entirely new way of addressing a whole assortment of brain diseases and neuropsychiatric diseases, not just neurodegenerative diseases. We're in exciting times. We have to go cautiously. We have to hope that the initial results, in terms of the safety profile and so forth, hold up. We're all in the early days, and we don't know for sure. But the low doses with which we saw this very marked reduction in the target give us a lot of hope that we can have a sufficient therapeutic window that will be applicable to these large variety of disease that could potentially be addressable by this modality.

Operator:

Our next question comes from Salveen Richter with Goldman Sachs. You may proceed.

Marion McCourt:

So Salveen, we are actively involved in all aspects of launch preparation. And certainly, that includes all elements and levers associated with premarket activities and then getting ready for the launch activities. We do have in place a very sophisticated market access, payer and pricing team. And at the appropriate times, they most definitely will be involved with payers and other organized customers that will be important in our launch efforts. Additionally, this is a customer base that we know very well from our over a decade experience with EYLEA, so we look forward to potential FDA approval and launch activities and working with all of our customer stakeholders. I'll also mention again the importance in the retinal space of the key opinion leaders and prescribers and the enthusiasm they have for a product that really can be a game changer for their patients in terms of visual acuity, duration and the safety profile they've come to know with EYLEA. So we're very enthusiastic and look forward to the launch opportunity, and we'll be ready.

Akash Tewari:

So just to clarify the moving parts on U.S. EYLEA, there was a 5% market share loss, a $70 million inventory impact and then lower price. Any color on what the net price impact was on the quarter, and how it should evolve in the back half of '23? And additionally, should we expect EYLEA market share to hold at 70% going forward, or potentially start to grow again as high-dose EYLEA launches?

Leonard Schleifer:

Obviously, as Marion mentioned, on a sequential basis, demand was modestly up. So obviously, we were offset by the factors that Marion referred to.

Chris Schott:

I just had a question on the IL-33 in COPD. I guess just the success you've had with your kind of study design and results with DUPIXENT increase at all your confidence in that program. And just, I guess, maybe just elaborate little bit on, how you see kind of those 2 agents kind of interacting as we think about the space overall?

Leonard Schleifer:

I just wanted to repeat, maybe George said it probably 2 or 3 times, but maybe it's worth saying a fourth time. And yesteryear, the way you did drug development is you identified a target based on some biology or what have you, you did your Phase I and Phase II, and you hope that Phase II was an indicator for how your Phase III was going to turn out. And obviously, that's how it is still done today. But what George mentioned is that we can layer on top of it in sort of a unique way our genetic insights and look and validate and say, is it reasonable to expect that if you block a certain target that you're going to have a beneficial effect? Is that target associated with the disease you're treating? And I know George said it 3 times, but I think it's worth saying a fourth time. That really gives you added confidence that's uniquely Regeneron in many respects, how we can get this genetic information. People ask us a lot, if you think about the number of people that have been sequenced in the world, George can comment when I'm done, I know we've sequenced a large part of them and coupled that with all this medical, anonymized medical information. We use that in so many ways, not only to identify targets, but to validate the work we're doing in specific targets, specific diseases. George, how much have we done?

Leonard Schleifer:

So I mean, that's a large database of millions. And I think that, that is what you're hearing is that that's why we had more confidence perhaps than others did with DUPIXENT and now with anti-IL-33.

Operator:

Our next question comes from Yatin Suneja with Guggenheim Securities. You may proceed.

Leonard Schleifer:

I don't think that has any impact on us, on our program.

David Risinger:

I guess I'll just go straight to the question. Len, you had mentioned in your opening remarks the ongoing diversification of the company's revenues away from EYLEA. Could you please discuss your expectations for EYLEA U.S. sales growth in the near term, including the total EYLEA franchise prospects after Regeneron launches the HD? Thank you.

Operator:

Our next question comes from Hartaj Singh with Oppenheimer. You may proceed.

George Yancopoulos:

Well, I think you're going to actually see an update on our pivotal Phase II data, the actual data that was a little bit more maturing, with a further update we will be hoping to submit to the to the FDA for our BLA. So the data will be very close. We think the data will even get better as it matures. Because as we all know, response rates and so forth get better with time as you follow these patients. But these data are going to show what we believe are the potential to have best-in-class efficacy, as well as safety in the favorable dosing schedule based on the results that we'll show from our pivotal study at the upcoming ASCO.

Operator:

Our next question comes from Carter Gould with Barclays. You may proceed.

Leonard Schleifer:

Before Marion answers that, I just want to come back to the BCMA story a little bit, because it's one that I'm particularly excited about. The bispecific field, which was initiated by Regeneron in terms of using bispecifics, I think we were the first to put the biospecific into patients, has obviously become a very clouded space. and it's sometimes hard to differentiate what you've got compared to what the competition has and you look at somebody claiming one thing and you're claiming another and so on and so forth. But if you take a dispassionate view, I think for the BCMAxCD3 program, you could really see a differentiated molecules and the potential to be best-in-class. Antibodies are not all created equal. Bispecifics are not all created equally. You do see differences. Clinical trial programs and not all created equally. This is one I'd really encourage you to think a very careful look at and compare. Now there was some question on EYLEA. Marion, you're going to answer that.

Operator:

Our last question comes from Evan Seigerman with BMO. You may proceed.

Marion McCourt:

So of course, the updates on actual prescribing will be even more important as the product comes into the marketplace and physicians have an opportunity to use it and select patients. We obviously have done a lot of work with our medical team, looked at the clinical data with specialists. And to give you an early answer to your question, I think there's opportunity for a variety of patients that are deemed to be appropriate candidates. And there's a range. Certainly, when physicians are considering new patient starts, it's very attractive. We obviously have a strong portion of patients that are naive to EYLEA today, but in the future, the question becomes, why wouldn't you start a new patient with a product that gives you all the visual acuity benefits and safety of EYLEA, but it also gives you that durability and duration? Because obviously, physicians know their patients are anxious and don't like to have more injections in the eye than they need to. Similarly, you might have a patient that's very well controlled on another product, maybe EYLEA, maybe another product in the anti-VEGF category. But you'd like to give them that opportunity for duration and, maybe in some cases, if the product is in another area of the anti-VEGF category, improved visual acuity and duration. So I would say it's the combination of interest for patients who might be broadly anti-VEGF category switch patients, or the potential for new patients as well. I hope that helps, and I look forward to the day when we can give you specifics for market experience.

Operator:

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

Ryan Crowe:

Thank you, Shannon. Good morning, good afternoon and good evening to everyone listening around the globe. Thank you for your interest in Regeneron and welcome to our fourth quarter 2022 earnings conference call. An archive of this webcast will be available on our Investor Relations website shortly after the call ends. Joining me today are Dr. Leonard Schleifer, Co-Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will then open the call up for Q&A. I would like to remind you that remarks made on today’s call may include forward-looking statements about Regeneron. Such statements may include, but are not limited to, those related to Regeneron and its products and businesses, financial forecast and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected in that statement. A more complete description for these and other material risks can be found in Regeneron’s filings with the United States Securities and Exchange Commission including its Form 10-K for the year ended December 31, 2022 which we expect to file with the SEC on Monday, February 6. Regeneron does not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today’s call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our financial results press release and our corporate presentation, which can be accessed on our website. Once our call concludes, Bob Landry and the IR team will be available to answer any further questions you may have. With that, let me turn the call over to our President and Chief Executive Officer, Len Schleifer. Len?

George Yancopoulos:

Thanks, Len. I would like to briefly walk you through our pipeline’s progress in 2022 and touch upon what lies ahead in 2023. In ophthalmology, we presented pivotal – positive pivotal results for aflibercept 8 milligram in wet AMD and DME. These trials showed that aflibercept 8 milligram extended dosing intervals to every 12 or even 16 weeks for the vast majority of patients through 48 weeks without compromising the visual improvement or safety seen with EYLEA. These are truly unprecedented and potentially game-changing results who have not – which have not been achieved using any other anti-VEGF agents. Moving to Dupixent, in 2022, Dupixent became the only biologic approved in atopic dermatitis, for infants as young as 6 months of age, the first treatment for prurigo nodularis and the first treatment in the United States for eosinophilic esophagitis. And just this week, we obtained the European Commission approval for eosinophilic esophagitis as well. In addition, we submitted a supplemental BLA for chronic spontaneous urticaria and shared positive Phase 3 data in children with the eosinophilic esophagitis. Dupixent is now approved in 5 related Type 2 allergic conditions. And our data shows that these diseases are mediated by IL-4 and IL-13 driven Type 2 inflammation. Because many patients suffer from systemic Type 2 inflammation, they often suffer from several of these diseases concurrently. And thus, Dupixent has the potential to holistically address these patients multiple Type 2 conditions for which Dupixent is approved. While many other immunomodulators are associated with worrisome immunosuppression and carry boxed warnings, Dupixent’s safety profile supports its approval in infants. In 2023, we are looking forward to the initial results of BOREAS, the first Dupixent Phase 3 study in patients with chronic obstructive pulmonary disease, or COPD. Our Dupixent COPD Phase 3 studies have enrolled patients with elevated blood eosinophils aiming to select for patients with COPD driven by Type 2 inflammation. The BOREAS study passed an interim futility analysis in 2020, an encouraging event, which triggered the start of the replicate Phase 3 NOTUS study. We are looking forward to the readout of BOREAS with the primary endpoint of annualized rate of acute, moderate and severe COPD exacerbations expected in the first half of ‘23. Moving on to oncology, 2022 was an important year for our oncology programs. Libtayo was approved by the FDA in combination with chemotherapy in first-line non-small cell lung cancer, irrespective of histology or PD-L1 expression levels, an achievement met by only one other PD-1 or PD-L1 targeting agent. Libtayo is also emerging as an essential backbone of our oncology pipeline as several programs in combination with Libtayo are starting to yield encouraging data. First, I will discuss our LAG-3 antibody, fianlimab in combination with Libtayo, where we have recently shown positive data from a second confirmatory cohort of PD-1 naive metastatic melanoma patients and reported encouraging results from a smaller dataset in non-small-cell lung cancer patients. These initial results suggest that the fianlimab Libtayo combination has a potentially best-in-class profile in melanoma. And we are advancing broad pivotal programs in both melanoma and lung cancer. Phase 3 studies in metastatic melanoma and adjuvant melanoma are already enrolling and we have plans to soon initiate another Phase 3 study in perioperative melanoma as well as Phase 2/3 studies in first-line advanced as well as perioperative non-small cell lung cancer. Other notable Libtayo combination used from this year was the early but very encouraging data with our PSMA by CD28 costimulatory bispecific in advanced metastatic castrate-resistant prostate cancer, a tumor type considered immunologically cold with multiple recent Phase 3 failures demonstrating that prostate cancer is largely unresponsive to anti-PD-1 therapy in other end as well as in other types of chemo combination. In our proof-of-concept study of our PSMA by CD28 costimulatory bispecific, we observed first evidence that combining this new class of bispecifics with anti-PD-1 can confer profound responsiveness to tumors previously thought to be cold and unresponsive to anti-PD-1 therapy with 3 out of the 4 patients treated at the highest dose levels showing greater than 90% reductions within 6 weeks of initiating combination therapy in the prostate cancer biomarker PSA. Following up on these early but exciting results, we are continuing to enroll patients in this study and we are planning to present additional data at medical meetings in 2023. We also presented our first clinical data for a CD3 bispecific in a solid tumor for ubamatamab, our MUC16xCD3 bispecific in development for advanced ovarian cancer. As a single agent in a Phase 1 dose escalation study in heavily pretreated recurrent ovarian cancer patients, we observed a 4% overall response rate with a 31% response rates in a small subset of patients with high MUC16 expressing tumors. We expect initial dose escalation data later this year for ubamatamab with Libtayo as well as for our MUC16xCD28 costimulatory bispecific with Libtayo in advanced ovarian cancer. We also expect updated clinical data for our EGFRxCD28 costimulatory bispecific in combination with Libtayo in various solid tumors later this year. Moving on to our hematology oncology pipeline, at the American Society of Hematology, or ASH Annual Meeting, we presented new data from odronextamab, our CD20xCD3 bispecific as well as linvoseltamab our BCMAxCD3 bispecific. For odronextamab, we presented pivotal Phase 2 ELM-2 data. Odronextamab in third or later line relapsed or recurrent follicular lymphoma has a potential best-in-class efficacy profile with 82% of patients responding and 92% of these responders achieving a complete response with encouraging durability. Our optimized step-up dosing regimen has improved odronextamab’s safety profile while retaining efficacy similar to the prior dosing regimen. In third or later – in relapse or recurrent diffuse large B-cell lymphoma, odronextamab demonstrated efficacy regardless of prior CAR-T experience and a safety profile generally similar to that seen in follicular lymphoma. We are planning regulatory submissions in the second half of 2023 for both indications, which we hope will support potential accelerated approvals. In 2023, we anticipate initiating several Phase 3 studies in follicular lymphoma and diffuse large B-cell lymphoma, including in earlier lines of therapy. These trials will serve as confirmatory studies which could potentially support conversion to full approval. We also expect to initiate a proof-of-concept study of our CD22xCD28 costimulatory bispecific in combination with odronextamab in diffuse large B-cell lymphoma, which we hope could further add to the anticancer benefit for these patients. For linvoseltamab, our BCMAxCD3 bispecific antibody we presented efficacy and safety data from our pivotal Phase 2 study in third or later line multiple myeloma at ASH. Early, deep and durable responses were observed in patients with high disease burden and these responses may improve with longer follow-up. In 2023, we plan to initiate a confirmatory Phase 3 study of linvoseltamab in second line multiple myeloma and are on track for a BLA submission in the second half of the year. As with odronextamab, we plan to initiate combination studies for linvoseltamab with costimulatory bispecifics in the near future. I’d also like to update some additional clinical programs. Our antibody blocking Factor XI for anticoagulation and our antibody that activates the NPR1 receptor for heart failure are both completing proof of mechanism trials. Moving on to Regeneron Genetics Medicine, regarding our collaboration with Alnylam and siRNA Therapeutics, we are planning a broad and multi-pronged approach to develop treatments for NASH, nonalcoholic steatohepatitis. We are initiating a Phase 2 study of ALN-HSD and NASH patients with genetic risk factors. We also dosed first subjects in the first-in-human study of another siRNA medicine in development for NASH, ALN-PNP, which targets a different gene and can be potentially combined with ALN-HSD in appropriate patients. We have discovered additional NASH targets, which we have validated using our Regeneron Genetics Center, including side B, which will potentially be the next NASH therapeutic candidate to enter the clinic. With regard to our collaboration with Alnylam for central nervous system targets, our initial dose escalation study is ongoing. Our collaboration with Intellia and CRISPR-based therapeutics, this is expected to progress further in 2023, building on continuing data readouts from the Phase 1 study of NTLA-2001 in transthyretin amyloidosis in both cardiomyopathy and neuropathy patients, which provided the first demonstration in humans that CRISPR-based technologies can deliver up to 90% reduction of the pathological gene product for over a year. Regarding our gene therapy efforts, our collaborators at Decibel Therapeutics recently announced that a clinical trial has been authorized by both the U.S. FDA and the UK MHRA for DB-OTO, a virally delivered gene therapy designed to restore hearing to individuals with otoferlin-related hearing loss. A Phase 1/2 study in patients 2 years of age and younger is expected to initiate in the first half of 2023 with initial data from the first cohort of patients anticipated in the first quarter of 2024. I’d like to conclude with our next-generation COVID-19 efforts. As we recently announced, we have identified a potent broadly neutralizing COVID-19 antibody, which, unlike other neutralizing antibodies find outside of the so-called receptor binding domain, or RBD, of the spike protein. This antibody retains activity against all the viral variants seen throughout the pandemic because it binds to an atop that has remained highly conserved, greater than 99.9% across all known variants. The vast majority of antiviral antibodies generated as a result of vaccination or due to natural infection target the RBD domain, which results in overwhelming selective pressure driving the emergence of these resistant variants. We hope that by targeting this unique and conservative to outside of the RBD this antibody will also retain its activity in the face of future variance. We plan to initiate clinical trials to test this antibody this year, and we are looking to develop it in both treatment and prophylactic setting. In conclusion, Regeneron’s R&D engine continues its productivity, including the early-stage pipeline. Just in the first weeks of this year, we have initiated clinical studies for two new drug candidates and we anticipate clinical trials starting or IND submission for up to 10 new therapeutic candidates this year as well as for additional indications for candidates that are already in the clinic. So with that, I will turn it over to Marion.

Bob Landry:

Thank you, Marion. My comments today on Regeneron’s financial results and outlook will be on a non-GAAP basis, unless otherwise noted. Regeneron ended 2022 with a strong fourth quarter with continued execution driving positive results across the business. Excluding contributions from REGEN-COV and Ronapreve, fourth quarter total revenues increased 14% year-over-year to $3 billion, driven by growth across our core brands. Fourth quarter diluted net income per share was $12.56 on net income of $1.4 billion. Beginning with collaboration revenue and starting with Bayer. Fourth quarter 2022 ex-U.S. EYLEA net product sales were $839 million, up 7% on a constant currency basis versus fourth quarter 2021. Total Bayer collaboration revenue was $355 million, of which $324 million related to our share of EYLEA net profits outside the U.S. Total Sanofi collaboration revenue was $836 million in the fourth quarter and grew 61%, driven by DUPIXENT. Our share of profits from the commercialization of DUPIXENT and KEVZARA was $619 million, an increase of 60% versus the prior year. We also recognized a $50 million sales-based milestone in the fourth quarter of 2022 due to achievement of $2.5 billion of ex-U.S. sales of antibody collaboration products on a rolling 12-month basis. Finally, we recorded Roche collaboration revenue of $396 million in the fourth quarter for our share of gross profits from ex-U.S. sales of Ronapreve related to a previously signed contract. Moving now to our operating expenses. Fourth quarter 2022 R&D expense increased 43% year-over-year to $911 million, driven by the impact of the Libtayo transaction with Regeneron now recording all R&D expense for Libtayo and our full 50% share of antibody collaboration R&D spend for DUPIXENT and odronextamab, as well as additional costs incurred in connection with the company’s late-stage pipeline and increasing clinical manufacturing activities and higher headcount-related costs. SG&A expense increased 17% year-over-year to $579 million due to higher headcount and related costs, incremental costs to fully support the global commercialization of Libtayo and higher contributions to an independent not-for-profit patient systems organization. Product gross margin in the quarter increased to 93% as compared to 86% in the prior year. The improved gross margin was driven by a favorable change in product mix and no longer having to pay Sanofi for their share of U.S. Libtayo gross profits. Finally, fourth quarter 2022 effective tax rate was 11.3% compared to 12.6% in the prior year. Shifting now to cash flow and the balance sheet. For full year 2022, Regeneron generated $4.4 billion in free cash flow, favorably impacted by our first quarter 2022 payment from the U.S. government for sales REGEN-COV that were recorded in the fourth quarter of 2021. We ended 2022 with cash and marketable securities less debt of $11.6 billion. We continue to deliver on our capital allocation priorities in 2022 by deploying approximately $3.4 billion towards business development and share repurchases while continuing to fund our internal R&D efforts. In 2022, we executed approximately $1.3 billion in business development initiatives, including the acquisitions of Checkmate Pharmaceuticals in the exclusive worldwide rights to Libtayo. We also purchased approximately $2.1 billion of our shares in 2022, including $431 million in the fourth quarter. This morning, we announced a new $3 billion share repurchase authorization reflecting our continued confidence in our business and our pipeline. We remain buyers of our shares at current levels, and this new authorization enables us to continue returning capital directly to shareholders. I’d like to conclude with our initial financial guidance and outlook for 2023. We expect 2023 SG&A spend to be in the range of $2.13 billion to $2.2 billion. This primarily reflects the full year impact of global Life tile commercialization expenses, the build-out of our international commercial infrastructure in select markets and higher headcount to support our growing organization. We expect our 2023 R&D expense to be in the range of $3.725 billion to $3.925 billion. As George mentioned, we have numerous strategically important development programs advancing in 2023, including late-stage studies for our fianlimab, Libtayo combination in melanoma and lung cancer in confirmatory Phase 3 studies for odronextamab, both in FL and DLBCL and linvoseltamab in myeloma. In addition, we continue to advance programs in our early pipeline across multiple therapeutic areas including with collaborators such as Alnylam and Intellia positioning us for long-term growth. This range also includes the full year impact of the Libtayo transaction, we are now recording all development expenses for Libtayo recognizing our full 50% share of development expenses for DUPIXENT in itepekimab. COCM is expected to be in the range of $720 million to $800 million, similar to 2022 reflecting the gradual phase-in of a new Regeneron developed manufacturing process for DUPIXENT that is designed to improve drug substance yields. We expect our capital expenditures in 2023 to be in the range of $825 million to $950 million. These expenditures will support the continued expansion of our manufacturing facilities, including ongoing construction of a fill/finish facility as well as the previously announced expansion of R&D facilities at our Tarrytown, New York headquarters. Finally, we anticipate 2023 gross margin to be between 90% to 92% and our effective tax rate to be in the range of 11% to 13%. In addition to our full year financial guidance, we expect higher interest income in 2023, given our greater cash balance plus higher interest rates as compared to last year, which will favorably impact other income and expense. We also expect 2023 other revenue to be slightly lower than 2022. Finally, as I said in November, we no longer expect to record any material other operating income or expense in 2023 are beyond absent a new transaction. In conclusion, Regeneron continued to deliver robust financial results in 2022, and we are well positioned to drive continued growth in 2023 and beyond. With that, I will now pass the call back to Ryan.

Operator:

Thank you. [Operator Instructions] Our first question comes from the line of Tyler Van Buren with Cowen. Your line is now open.

Marion McCourt:

Hi, Tyler. Yes, and let me comment that certainly, EYLEA performance in the market, as I reported, continues to be very strong, a quick reminder on the year growing at 8% to $6.3 billion and certainly a very strong competitive performance. We are conscious of competition in the marketplace. But to give a bit of an update, we continue to hear that first nAb use has been modest and results, in some cases, have resulted in patients switching back to other agents, including EYLEA probably most frequently EYLEA. Certainly, we look forward to continued efforts on EYLEA this year is the standard of care. And as you know, from many of us talking to KOLs, they’re incredibly enthusiastic about the launch – potential launch of aflibercept 8-milligram coming later this year.

Operator:

Thank you. Our next question comes from the line of Matthew Harrison with Morgan Stanley. Your line is now open.

Matthew Harrison:

Sorry, could you not hear me, Len?

Ryan Crowe:

Yes, we can.

George Yancopoulos:

Well, we powered our futility analysis as well as our clinical trial to deliver what we believe would be clinically meaningful benefit if the study proves positive, which we hope it will. And remember, we’re going to be looking at both exist patios, but also improvement in lung function. So it will be a sort of integration of the benefit that patients can receive from both those measures. I remind you that in other settings in asthma, in particular, DUPIXENT has distinguished itself from other immunomodulators and delivering pretty substantial improvements in pulmonary lung function. So it’s not only all about exacerbations, but we hope to have significant improvements in exacerbations as well as in lung functions which will hopefully provide important benefits to patients.

Operator:

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

George Yancopoulos:

Well, as you say, the important thing about that aspect of the Alnylam collaboration is together, we were hoping for the first time to see if we could develop technology that would actually allow us to do what’s been done now by Alnylam and others in the liver to bring it to other tissues, particularly to the central nervous system in this case. So this – the first study, which is focused on APP is really a proof of concept that can we get this technology to work, we view it as a potential sort of platform enabler, meaning that if we see anything here and obviously these are challenging things to be first and to do something that nobody has ever done before. And it’s obviously very early in the program. But the goal is to establish proof of principle that this type of technology, which looks like it can be pretty effective in the liver, chat and work outside of the liver, particularly in the CNS. So this would be a platform enabler.

Operator:

Our next question comes from the line of Brian Abrams with RBC Capital Markets. Your line is now open.

Leonard Schleifer:

Give us a second. We will disconnect all the Roche people on the call, so we can get you our strategy. In all seriousness, obviously, there is a lot of thought that’s going to go in between now and what we hope will be our late August approval on pricing, on rollout, on targeting, on strategy, etcetera, etcetera. But we are working on that. We have to get our label. We have to get it approved, and we will have everything else ready to go. The initial launch will be with a vial and then we hope down the road, not too far with the pre-filled syringe. Marion, I don’t know if you want to give away any of the secrets at this point.

Brian Abrams:

Very good.

Ryan Crowe:

Certainly. Thank you. Next question please.

Evan Seigerman:

Hi, guys. Thanks for taking the question. Maybe a follow-up to Matt’s question, can you just speak to what you saw in the pre-specified interim efficacy analysis of the BOREAS trial and just any additional color on the level of benefit versus placebo that triggered the initiation of the NOTUS trial? Thank you.

Leonard Schleifer:

And we remain blinded to that interim analysis Evan. So, next question please.

Salveen Richter:

Good morning. Thanks for taking my question. With regard to the oncology portfolio, what do you consider the most meaningful milestones for the next 12 months and particularly here the PSMAxCD28 asset? Thank you.

George Yancopoulos:

Yes. I think it’s – it was really critically important for us to validate individual agents in each class. That was our strategy. We wanted to develop the best-in-class checkpoint inhibitors, such as our PD-1 antibody, Libtayo, such as our LAG-3 antibody, fianlimab. We wanted to establish three bispecifics that we are best-in-class and that we are working in hem/onc settings, but also in solid tumor settings. And then, of course, we want to validate that this incredible principle of co-stimulatory bispecifics that we introduced into the world, which were truly magical in animal studies with essentially working like turnkey agents to synergize with the other two classes in animal studies that that we could reproduce that sort of activity in humans. And to us obviously, it takes years to get to that point, but we feel we are in a very exciting position right now because, as I have said, the individual classes are validated. We are starting to see impressive combination opportunities. We talked about combining two checkpoints, combining our LAG-3 with PD-1, where it looks like we have maybe taken first-line melanoma to a different point where patients can get a lot more benefit from this combination. And now having validated those, we are expanding much more broadly. Same thing with the CD3 bispecifics, we are growing that franchise now that we have shown that our platform works, and we are working both in hem/onc and outside in solid tumor settings. And the fact that our first costim bispecific delivered the sort of exciting early data that it delivered really gets us – very excited about the possibility now that we have this whole rollout. We have several of these costim bispecifics in the clinic, clearing their dose escalation safety settings, and we are now going to be rolling out data from these combinations, more data from the PSMA, costim bispecific in prostate cancer in more patients, but we are also going to be reporting on a series of other costims, including not only in combinations that we already talked about in solid tumors. But in the hem/onc space, where we are very excited, obviously, about our CD20xCD3 bispecific by itself and our BCMAxCD3 bispecific by themselves, that Len said. We are both filing for those hopefully by the end of the year, but also initiating earlier line studies. But just as importantly, we are going to be initiating combination with these costim bispecifics, which we think yet again, if these continue to work like they work not only in the animal models, but now how they are looking in the early human study, these could really leapfrog the individual agents to a whole place where they are really changing the practice of medicine and delivering much more benefit to patients, which is what we are all about.

Ryan Crowe:

Next question, Shannon.

Mohit Bansal:

Good. Thank you for taking my question. Maybe staying with COPD, so talking to some KOLs and reading some papers. It seems like IL-13 has some implication into fibrosis as well. Now, so the question is, do you think there could be a beneficial effect of IL-13 blockade and its impact on fibrosis on COPD-4 and above blocking inflammation? And if yes, do you think a 1-year trial would be enough to see that?

Ryan Crowe:

Thanks George. Next question Shannon.

Colin Bristow:

Hi. Good morning and thanks for taking the questions. I wanted to sort of push a little more on the COPD readout. And just trying to understand what’s underpinning your confidence here. It certainly feels like you are more enthusiastic than what we are hearing out of Europe. Is this primarily based on the threshold set for BOREAS interim and these were sufficiently robust that you just – you feel good about the ultimate result, or is there something else you can point us to? Thanks.

Ryan Crowe:

Thanks Len. Next question Shannon.

Chris Raymond:

Thanks. Maybe a broader question on the VEGF retinal market. Last year, at AAO, there was a lot of discussion and debate around the potential impact on the retinal specialist practices if intravitreal therapies for geographic atrophy are approved. And some folks were talking about, just back of the envelope, this could drive a pretty sizable like 30%-some increase in injection volume, the practices just from treating geographic atrophy patients. As you guys think about this dynamic, we have heard some KOLs sort of offer up potential fix to that, that they would move in a more accelerated fashion to longer duration, longer-acting therapies for wet AMD. Are you guys seeing that? Is that something that we should be thinking about in terms of a driver from short-acting to longer acting?

George Yancopoulos:

Well we also shouldn’t lose sight of the fact that if treatments for geographic accuracy become much more take off and become much more prevalent that they do have a side effect. They are actually increasing levels of macular edema in these patients, which will of course, necessarily treatment there as well.

Operator:

Our next question comes from the line of Chris Schott with JPMorgan. Your line is now open.

Leonard Schleifer:

Well, we certainly believe that when you are in something where there is tremendous medical need and no alternative, that there will be opportunities to move for accelerated approval. We are all aware of the new FDA guidelines that they want you to be underway with your pivotal studies are well underway, I think is a phrase they use. So, we are taking that into account. But there is no question that if we can reproduce the efficacy that we saw in these late-stage prostate cancer patients. There is not only the need, but there will be a mechanism to get that to patients as quickly as possible. Remember, the main issue as you referred to, is being mindful of the safety. And of course, we are doing everything we can to mitigate that. But remember, thus far for the most part, there has been an extremely tight linkage of safety and efficacy. That is the adverse events occurred in those patients who were having the substantial benefit. So, that makes the risk/reward even more attractive from a regulator’s and doctor’s and frankly, a patient’s perspective. But the short answer is we think we are not going to go too fast where one would be reckless. We have to be careful. But we do think there is an opportunity for an accelerated approval if we follow the new approach the FDA has laid out.

Operator:

Our last question comes from the line of Robyn Karnauskas with Truist. Your line is now open.

George Yancopoulos:

Well, a lot of good questions in there. I will start from the end first. For sure, when we started the program, there was very serious concerns about previous experience with general CD28 activators that activated all over the body that resulted in really horrific situations for patients, which almost killed the field. We invented this new approach to tightly limit where we were limiting CD28 activation right at the tumor surface and so forth. And of course, there was a concern from the FDA, which is why, as you said, they made us employ a very, very conservative dose escalation program. We had to go through five or six dose levels just to get to where we thought were the active dose levels where we then start to see the rather dramatic antitumor activity that we began to report. We are hoping that as we get more experience and show that what we had demonstrated pre-clinically is really holding true in humans. In fact, the side effects that Len was talking about immune-related adverse events are totally unrelated to the sort of toxicities that were seen with non-specific CD28 superagonist in the past. They were really much more on target and on mechanism that is we were generating a presumably a polyclonal T-cell response against the tumor and some of that cross-reacted to tissues in the patients, and that’s what we were seeing. So, we are hoping that increasingly we might be able to move a little bit more quickly through some of these dose escalation stages to get to the active doses with these other agents. What we are seeing so far, as we have presented in our posters on MUC16xCD3 that right now it’s having an acceptable safety margin. And we also hope to see that when combined, either the CD3 combined with the MUC16xCD28 or when the MUC16 is combined with Libtayo that we will see the same sort of things that we saw with the PSMAxD28 that we will be getting, hopefully, market synergy and increase in the antitumor activity with hopefully a satisfactory safety window. And but that remains to be seen, and that’s why we are carefully going through the combination studies and the dose escalation studies. But once again, I mean just to say how I mean exciting it is for those of us who have been working on these programs for over 10 years to be at this point where the individual agents and the individual classes are now validated and we now get to mix and match these things. And as Len said, the history of the field is when you have active agents and you start combining this, you can then leapfrog and get to the next level that would change the practice of medicine for these cancers. That’s what we are aiming to do to try to save more lives, extend more lives, and it’s an exciting place to be in.

Operator:

This concludes today’s conference call. Thank you for participating. You may now disconnect.

Ryan Crowe:

Thank you, Towanda. Good morning, good afternoon, and good evening to everyone listening around the globe. Thank you for your interest in Regeneron, and welcome to our third quarter 2022 earnings conference call. An archive of this webcast will be available on our Investor Relations Web site shortly after the call ends. Joining me today are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open the call for Q&A. I would also like to remind you that remarks made on 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, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings, and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, including its Form 10-Q for the quarterly period ended September 30, 2022, which was filed with the SEC this morning. Regeneron does not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available on our financial results press release, which can be accessed on our Web site. 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. Len?

George Yancopoulos:

Thank you, Len. I will start with ophthalmology. Positive pivotal results for Aflibercept8 mg in the PULSAR and PHOTON study recently presented at the American Academy of Ophthalmology Annual Meeting. Results of these trials in wet AMD and DME respectively demonstrated that a remarkably high percentage of patients were able to be rapidly initiated into and then successfully maintained through week 48 on 12- and 16-week dosing intervals while achieving vision gains that were non-inferior to the current standard of care, EYLEA 2 mg dosed every 8 weeks. These results suggest that Aflibercept8 mg has the potential to become the new standard of care in these retinal diseases. I think it would be helpful if we step back for a minute and try to put these results in context. What our trials did was push the limits far beyond what has been accomplished with any currently available anti-VEGF therapies. Rather than using response criteria to try to identify or slowly extend patients to longer dosing intervals, our trials tested whether all patients could be randomly assigned and rapidly initiated on extended dosing intervals of Aflibercept8 mg without compromising visual improvement or safety. These Aflibercept8 mg trials accomplished just that for the vast majority while delivering a safety profile consistent with that of EYLEA. Eighty nine percent of DME patients and 77% of wet AMD patients were able to be rapidly initiated and maintained on a 16-week of Aflibercept8 mg dosing regimen while 93% of DME and 83% of wet AMD patients were able to be rapidly initially maintained on at least a 12-week dosing interval. All while delivering efficacy similar to that of EYLEA administered every 8 weeks. We believe these are truly unprecedented and potentially game changing results which have not been achieved using any other anti-VEGF agent. Others have speculated that PULSAR and PHOTON results were due to our dose modification criteria and even tried to theoretically extrapolate that their agent could have somehow approached these results using our criteria. We put these speculative extrapolations into the category of wishful thinking. And based on our expert analysis of the data, we conclude it is all about the drug and not the trial design. Briefly moving on to Dupixent, building on our recent approval in eosinophilic esophagitis in adults and adolescents, we are planning on submitting a supplementary BLA for eosinophilic esophagitis in 1- to 1-year old children in mid 2023. Dupixent ability to treat eosinophilic esophagitis highlights how important it is that our IL-4 and IL-13 blocker more completely target the entire type 2 inflammatory cascade and not only eosinophils. As you heard Len mention, the FDA label was expanded yet again in the third quarter ad Dupixent became the first and only treatment indicated for prurigo nodularis, a debilitating chronic skin disease. This marks the fifth disease for which Dupixent is now approved. Our collective clinical data with Dupixent support a unifying molecular mechanism underlying these related diseases from asthma to atopic dermatitis to nasal polyps to prurigo nodularis to eosinophilic esophagitis. In this unifying hypothesis, IL-4 and IL-13 induced inflammation is driving all these related diseases in different tissue compartments. Moving to Libtayo and oncology, in the third quarter, our robust oncology pipeline has started to deliver data readout from our latest and most innovative programs. We are expecting these readouts to accelerate in the remainder of 2022 and continue into 2023. The European Society of Medical Oncology or ESMO Annual Meeting in September was a truly a banner event for Regeneron with several notable oral presentations for assets in our oncology pipeline, which I would like to briefly summarize. Starting with Fianlimab, our LAG-3 antibody in combination with Libtayo, at ESMO, we shared data from two independent advanced melanoma expansion cohorts from our first in human study which importantly showed consistent efficacy and safety between the two replicate cohorts. Fianlimab in combination with Libtayo demonstrated greater than 60% response rates in each cohort. A median PFS estimated will be 24 months across both cohorts, and a median duration of response that has not yet been reached. The preliminary safety profile of the combination appears to be in line with anti-PD-1 monotherapy and potentially with less toxicity compared to anti-CTLA-4 combination. While dual LAG-3 and PD-1 inhibition has previously shown promise in advanced melanoma, response rates greater than 45% with median PFS of more than a year has not been previously reported. These initial results in melanoma suggest that Fianlimab–Libtayo combination has the potentially best-in-class profile in the setting. We are enrolling our Phase 3 metastatic melanoma study. Intend to initiate a Phase 3 adjuvant melanoma study later this year and have additional plans in other solid tumors where Fianlimab has a potential to be first-in-class. The neoadjuvant cutaneous squamous cell carcinoma or CSCC, a Phase 2 study of Libtayo monotherapy has shown promising results. Given prior to potentially curative surgery in patients with large tumors, Libtayo was able to deliver major pathological responses to 63% of patients prior to surgery. This raises the possibility that Libtayo could decrease the burden of these major and potentially disfiguring surgeries for the many patients who require them each year. We are pleased that concurrent with the ESMO presentation, these data were published in the New England Journal of Medicine. Regarding next steps, we are talking to regulators about possible pathways to labeling and potential inclusion in the NCCN guidelines. Also at ESMO, we presented initial clinical data for Ubamatamab, our MUC16xCD3 bispecific developed for advanced ovarian cancer, our first clinical data for a CD3 bispecific in a solid tumor. In heavily pre-treated ovarian cancer population, we observed durable responses to this MUC16xCD3 monotherapy. In a patient subset whose tumors over expressed MUC16, response rates were as high as 31%. Most of the treatment emergent adverse events occurred with the initial step up dosing. Ubamatamab is being developed as a monotherapy as well as in combination with Libtayo as well as in combination with our MUC16 co-stim bispecific. We are looking forward to more data across these programs in 2023. In our ESMO investor presentation, we shared more detailed data for our PSMAxCD28 co-stim bispecific in combination with Libtayo, representing the first efficacy and safety data with this new class of bispecifics which we had initially top lined and discussed at our second quarter earnings. We have since continued to enroll patients in the study. We are planning to present updated data at a medical meeting in the first-half of 2023. Regarding our hem/onc pipeline, we are looking forward to data from Odronextamab, our CD20xCD3 bispecific as well as Linvoseltamab, our BCMAxCD3 bispecific at the American Society of Hematology or ASH Annual Meeting in December. For Odronextamab, we will present pivotal Phase 2 data for both follicular lymphoma and diffused large B-cell lymphoma in two separate oral presentations. Upon discussions with the FDA, we are now targeting a second-half 2023 regulatory filing of this program. We hope to initiate combination studies with an appropriate CD28 co-stim bispecific in the near future. For Linvoseltamab, our BCMAxCD3 bispecific antibody, we remain on-track with development. And we are planning to file pending discussions with the FDA in 2023. We have now completed enrollment in our potentially pivotal Phase 2 study. As I mentioned earlier, data from this study will be updated at ASH. As with our Odronextamab, we are planning on initiating combination studies for Linvoseltamab with co-stimulatory bispecifics in the near future. We believe existing standard of care therapies leave significant room for improvement in these difficult-to-treat settings. And we have been encouraged by the interim efficacy and safety data we have generated today for both Odronextamab and Linvoseltamab. Finally at ESMO, we also shared initial data for our Maftivimab bispecific antibody in MET-altered non-small cell lung cancer. Responses were rich in patients with high levels of MET expression. No dose-limiting toxicities were observed. Even the modest over expression of MET may render lung cancer susceptible to this mechanism of action. And we are looking forward to the METxMET antibody-drug conjugate data next year. In summary, for oncology, a rich commentarial pipeline is delivering competitive data. And with our full ownership of Libtayo, we are excited about the potential to advance standard of care in oncology with our portfolio approach. Concluding with the Regeneron genetic medicines efforts where we continue to progress our pipeline and discovery engine. In September we and Alnylam reported promising data from our ongoing Phase 1 study of Alnylam HSD nonalcoholic steatohepatitis or NASH. We are planning on initiating a Phase 2 studies shortly, which is just one part of our multi-pronged approach exploring multiple genetically validated targets for NASH. Also in September, we and Intellia announced initial data from the cardiomyopathy arm of our ongoing Phase 1 study of NTLA-2001. An investigational CRISPR-based therapy for the treatment of transthyretin amyloidosis, which show deep and sustained mean serum TTR reductions of over 90% and was generally well tolerated. Finally, in October our collaborators at Decibel Therapeutics announced FDA clearance where an NDA application for DB-OTO, a first virally delivered gene therapeutic product candidate designed to provide hearing to individuals with otoferlin-related hearing loss. This IND provides clearance to initiate a pediatric Phase 1/2 clinical trial in the United States. With that, I will turn it over to Marion.

Robert Landry:

Thank you, Marion. My comments today on Regeneron's financial results and outlook will be on non-GAAP basis, unless otherwise noted. Regeneron performed well in the third quarter, with growth from key brands and execution across the business continuing to drive strong financial results on both the top and bottom line. Excluding global revenues related to the COVID-19 antibody cocktail, third quarter total revenues increased 11% year-over-year to $2.9 billion, demonstrating continued growth momentum from our core business and reflecting the favorable impact of the Libtayo transaction. Third quarter total diluted net income per share was $11.14 on net income of $1.3 billion. Beginning with collaboration revenue, and starting with Bayer; third quarter 2022 ex-U.S. product sales were 817 million, up 4% on a constant currency basis, versus third quarter of 2021. Total Bayer collaboration revenue was $333 million, of which, $315 million related to our share of EYLEA in those profits outside the U.S. Total Sanofi collaboration revenue was $711 million in the third quarter of 2022, and grew 22% from the prior year, driven by Dupixent. Recall that in connection with the Libtayo transaction, we increased the repayment of our antibody collaboration development balance from 10% to 20% of antibody collaboration profits. A portion of this step-up is recorded as a reduction to antibody collaboration revenues, while another portion is recorded as R&D expense. Given Regeneron is now recording its full 50% share of antibody collaboration R&D expense has incurred, previously Regeneron had only recognized a partial share of its antibody collaboration R&D expense has incurred, with the remaining share of expenses added to the antibody development balance. Also, as we highlighted last quarter, in accordance with the agreement, we recorded a one time development balance repayment of $57 million as an incremental reduction to Sanofi collaboration revenue in the third quarter of 2022. We have posted to our Web site supporting materials to further explain the accounting associated with this and other elements of the Libtayo transaction. Moving now to our operating expenses, R&D increased 38% year-over-year to $817 million, partially driven by the impact of the Libtayo transaction, which affects R&D in two ways. First, Regeneron now records all R&D expense for Libtayo, which was previously shared equally with Sanofi. Second, as I mentioned earlier, Regeneron now records our full 50% share of antibody collaborations spend for Dupixent and Itepekimab. SG&A expense increased 20% year-over-year, to $467 million primarily driven due to incremental costs related to assuming global rights to Libtayo. Cost of goods sold in the third quarter was $109 million, and product gross margin in the quarter increased to 94% as compared to 90.2% in the prior year. The more favorable gross margin was driven by the non-recurrence of REGEN-COV sales in the current period and the removal of the payment to Sanofi for their share of U.S. Libtayo gross margin. Finally, the third quarter 2022 effective tax rate was 12.1% compared to 10.8% in the prior year. Shifting now to cash flow in the balance sheet, year-to-date in 2022, Regeneron has generated $2.9 billion in free cash flow, and ended the third quarter of 2022 with cash and marketable securities less debt of approximately $10.3 billion. We remain focused on leveraging our strong financial position to deliver long-term value for shareholders. Over the first nine months of 2022, we have deployed in excess of $2.8 billion in capital; we have executed approximately $1.2 billion in business development initiatives including the $900 million acquisition of Libtayo rights. Additionally, we have repurchased over $1.6 billion of our shares, including over $900 million in the third quarter alone. As of September 30, we had approximately $1.2 billion remaining on our current share repurchase authorization, and we remain opportunistic buyers. As we approach the end of the year, we've made some minor changes to our 2022 guidance ranges. A complete summary of our latest full-year financial guidance is available on our press release issued earlier this morning. In addition to these changes, I would also like to provide some initial thoughts on our 2023 expense outlook. We continue to make investments to advance our pipeline and position the company for long-term growth. We expect R&D investment to grow in 2023 comparable to our slightly above the nine-month year-to-date growth rate reported earlier today. The incremental R&D investment in 2023 will be driven by advancing our immuno-oncology, hematology, immunology, and genetics medicine pipeline, as well as the continued expansion of our R&D organization. In addition, 2023 will be the first full-year reflecting the impact of the Libtayo transaction where we record 100% of the global R&D spend for Libtayo and our full 50% share of the Sanofi antibody collaboration R&D spend as incurred. For SG&A in 2023, we currently project growth in the mid teens versus 2022 given we'll be recording a full-year of global Libtayo expenses along with targeted investments in the build-out of our international infrastructure. Finally, for other operating income and expense in the third quarter of 2022, we recognized the remaining $44 million of deferred income related to previously-received upfront payments in development milestone for Fasinumab as a result of the program discontinuation. We do not currently expect any material other operating income or expense in the fourth quarter of 2022, in 2023, and beyond absent any new transactions. In conclusion, Regeneron has performed exceptionally well in the first nine-months of 2022, and our strong financial position enables continued investment to drive long-term growth. With that, I will pass the call back to Ryan.

Operator:

[Operator Instructions] Our first question comes from line of Evan Seigerman with BMO. Your line is open.

Robert Landry:

Evan, hi, good morning, it's Bob. With regards to capital allocation, and demonstrated today by our growth in R&D in the 2023 forward guidance, we are going to continue to invest, first and foremost, in the R&D pipeline that we have. We issued our 10-Q this morning, within the MD&A; you'll see a plethora of trials that are currently ongoing. And as George mentioned in his script, we're very bullish with regards to what is in the pipeline. Now, again with regards to business development, it's not a [and or and or] [Ph], right, as you saw in what we've done in the first nine months of 2022, where we do think there are opportunities and where we do think we can do collaborations where one plus one is three, then we're absolutely going to take that opportunity, and I think Checkmate was a good example of that. And I would expect that you'd see more of that. With regards to your question on dividends, it's never a never. Obviously, that tool is in our tool chest if we do decide to play that card. As of right now, we don't have dividends in the foreseeable future in our plan. We have been very opportunistic with regards to buybacks. Again, the MD&A issued earlier today, the 10-Q will show you what we've been buying back our shares. Again, we'll remain opportunistic buyers. And we do have a remaining $1.2 billion remaining under our current $3 billion authorization.

Operator:

Thank you. Please stand by for our next question. Our next question comes from the line of Tyler Van Buren with Cowen. Your line is open.

Leonard Schleifer:

Yes, I don't think we want to scoop ourselves given that the conference is coming up pretty soon, Tyler. But Odronextamab has the potential of being a very important molecule. We recognize that there are some people ahead of us, and we recognize that some of the most recent timelines are pushed back a little bit based on recent regulatory feedback. The regulators have recently been focused on having Phase 3 trials substantially enrolled at the time of submission before they'll grant accelerated approval. But we are confident in the profile of Odronextamab. And as George says, there is also the future possibility of combinations with other things in our pipeline that could really even leapfrog.

Operator:

Thank you. Please stand by for our next question. Our next question comes from the line of Salveen Richter with Goldman Sachs. Your line is open.

Marion McCourt:

So, happy to give more characterization, as I mentioned, we see EYLEA continuing to perform extremely well, reaching all-times high category share of 50%, and now as well growth in the overall branded market where we participate with other branded agents, including Roche. One thing I will mention just to give a bit more insight is that EYLEA captured growth coming primarily from Lucentis and also from Avastin. And, in fact, if you put the Roche portfolio together, the growth of EYLEA obviously was positive, while there was a decline in a real market share for the Roche products combined.

Operator:

Thank you. Please stand by for our next question. Our next question comes from the line of Matthew Harrison with Morgan Stanley. Your line is open.

George Yancopoulos:

Actually COPD has been a very difficult disease for new therapies in biologics in particular. We think that there is a category of patients with COPD who have or are marked by more of what we call Th2-type inflammation. We think that, as I said in my remarks, that there's this unifying hypothesis there are a lot of Th2-type diseases that manifest in different ways. We believe that this subset of patients with COPD may maybe or fit into that category. And being able to benefit these patients in [technical difficulty] terms of either reducing their exacerbations and/or improving their lung function would really make a difference to these patients. And so, we're anxiously awaiting the data, and we're hopeful that we will have another set of patients where we might be able to demonstrate that Dupixent could really make a difference.

Operator:

Thank you. One moment for our next question. Our next question comes from the line of Tim Anderson with Wolfe Research. Your line is open.

Leonard Schleifer:

Maybe Marion can comment on it. But look, there's room for competitors in this market. We're really modestly penetrated in the opportunity. I don't think that the profile that you say is actually going to be suppressed. We've seen it so far, all that's similar. We have the earliest, from infancy already to adulthood. That's a big deal, okay. In addition, the fact that many of these people have other comorbidities, whether it be asthma or nasal polyps, for example, and they can get, if they do have comorbidities, this single drug can treat both. It's a very big differentiator. So, I think when you're the market leader, when you're so far ahead, when you have really a differentiated profile you have an advantage. Obviously, Lilly is a fine company; they know what they're doing. But as I said, there's room, frequently, when new, good drugs come to market there is a growth of the market. And we're not going after a fixed number of patients; we're actually growing those patients. Marion, I don't know if you want to add anything?

George Yancopoulos:

Not to pile on, but since -- just to add on to what Len was saying. I mean the fact that the IL-13 have failed in these other important Th2 inflammation-driven diseases, like asthma and like COPD and others right now really does suggest that they are not fully addressing the Th2 inflammation, both in any one particular disease, but also as Len said, so many of these individuals, if you just look at our label or any label that describes these diseases, they suffer from other allergic comorbidities. And so, obviously, it can make such a difference for a patient where one drug can treat a systemic disease as opposed to treating the disease only in one of the many compartments where it manifests itself. I think this is the way I think medicine in the field should be moving. This is a systemic disease where Th2 inflammation is probably rampant in many compartments in the body, you don't only want to treat it in one compartment, you want to treat the entire body. And that's what we've been showing systematically, by going one disease after another with Dupixent. It works in every compartment, and it broadly attacks the underlying inflammation that's related and causative in all of these diseases.

Operator:

Thank you. Please stand by for our next question. Our next question comes from the line of Mohit Bansal with Wells Fargo. Your line is open.

Marion McCourt:

I think it's very difficult to extrapolate one quarter. Certainly I did mentioned that there'd been a sequential decline of about 2% going from the second quarter into the third quarter in the overall anti-VEGF category. But I think it's really difficult to extrapolate from that. The numbers you shared on overall year-over-year growth of category, at about 4%, we recognize as well. I think we'll have to see as a bit more time goes by. But it's really difficult to draw conclusions on what may or may not have occurred in a one-quarter period.

Leonard Schleifer:

There's still quite a bit of room of growth in the diabetic eye diseases area. We still see a decent growth there in that category.

Leonard Schleifer:

Next question.

Operator:

Thank you. Please stand by for our next question. Our next question comes from the line of Christopher Raymond with Piper Sandler. Your line is open.

Marion McCourt:

I think it's probably best that Roche answer questions on what they're hearing about use. I'll just share at this point, I haven't heard characterization or that use is still at a low level, in fact quite modest. I can characterize the EYLEA performance, as I did, in terms of market leadership and the growth we see in our business in terms of market share and other parameters, and that is across indications, and certainly substantially creating EYLEA as leader in the anti-VEGF category. And, obviously, we're very enthusiastic as is the retina community, probably even more important about the possibilities and potential of Aflibercept8 mg if approved in the future.

Operator:

Please stand by for our next question. Our next question comes from the line of Colin Bristow with UBS. Your line is open.

Marion McCourt:

So, as a start, we don't predict future market share performance, so I'm going to stay away from specifics in that area. Certainly, not only this quarter but over several quarters, we've been able to demonstrate continuing strong performance with EYLEA as anti-VEGF category leader. And certainly we'll continue to work on that. And as agents have entered the market, our competitive readiness abilities have been very strong. But most important, frankly, it's the profile of EYLEA; the clinical attributes, the safety of the product, the breadth of indications, ease of access for physicians and patients, but going forward, certainly we will be very much prepared to launch Aflibercept8 mg and you know, as we get into that launch potentially with an FDA approval we will be able to give more characterization, but as George and Len described today, the profile of Aflibercept8 mg and opinion leaders in the retina community confirm that this profile potentially has all the ingredients to become standard of care, and certainly that's what we work on all the benefits of vision coupled with safety, and now this potential of substantial durability that hasn’t been seen before in the category.

Colin Bristow:

Thank you.

Operator:

Thank you. Please standby for our next question. Our next question comes from the line of Brian Abrahams with RBC. Your line is open.

George Yancopoulos:

Yes. I think that our data actually shows that with the remarkable response rates, which we saw especially going to the higher doses, yet it's not as if you have to look hard to find biomarkers for response, the number just to remind you that is at the highest dose; three out of the four patients had very profound responses. So, response predictors are not an issue, but you also pointed the question about therapeutic window, certainly we are seeing autoimmune-related side effects associated with these responses. And so, we are working hard now, we are actually -- we have accelerated enrollment in this program, we are trying to understand more of the relationship between the responders, and having these sorts of new side effects, I mean one very positive perspective is we don’t see these series autoimmune side effects in people who don’t see responses. So, it's the people who benefit, who do get the autoimmune side effects these have obviously coupled, it's because I think the drug is doing what we intent it to do. I think this is some of the most exciting data in the history of immunotherapy that you can take what people have historically called a "Cold tumor," that has almost no responses to immunotherapy or repeating one therapy, and get these incredibly high rate of very deep and so-called durable responses, and we will continue to work on improving the therapeutic window. In terms of the bispecific program more broadly, and I want to hearken back, Len sort of answered the previous question about CD20 and BCMA, but I do want to amplify on some of these comments, which is we think that there are indeed a very small number of bispecs in the CD20 space, and the BCMA space, which are actually looking quite competitive with each other, including ours, the emerging data suggests the efficacy and safety profiles of these agents will be competitive with each other, you will see our updated data, we will present it at ASH, but I think what's emerging is that these small numbers of competitors will exist in this field. I think that there is going to be room to these, there is actually a lot of patients in this late-stage settings who need treatment. So, I think that there is going to room for these small numbers of competitors there. But the future is going to be about moving into earlier lines of therapy, and there is going to therapies there about how one executes designs to those studies, the co-therapies, more standard co-therapies that are used there, and so there is going to be a lot of actually art to have one move these agents into the earlier lines of therapies, but the other very important thing is in addition to moving into earlier lines of therapy with these more standard combinations, where as I said, there is going to a lot of art to doing those studies, it's going to be of novel combos. And as we just talk about, with the CD20 and costim bispecifics that we're now showing that we are leading the field with, in prostate cancer we have very similar type agents now, that we are going to be combining with our CD20 bispecific in lymphoma and with our BCMA bispecific in myeloma, and we think that these are going to really have the opportunity to continue to change the game, and change the practice in medicine for these patients. So, it's about taking agents that R&D is going to be competitive and quite competitive with each other in these late stage settings, where I think they're all going to be making important contributions to the treatment in patients, but then moving in very artful ways to these earlier lines of therapy and using them there, where I think there is also going to be room, there is also going to be room for differentiation as well as the future, we are making these combos look all of these exciting opportunities we have in our portfolio can really take the utilization of these agents and the treatments of these patients, and these cancers to a whole another level, as we believe we are already showing that we are doing in prostate cancer.

George Yancopoulos:

Right. And in some of the data we have already shown, and we will continue to show, many of our patients have remarkably high PSA levels, because they have very high burden of disease, as all know depending on the assay and the lab and so forth, normal PSA levels are in the low single-digits, you know, maybe one to four, consider the highest levels. We have patients who entered into our study with PSAs in the 100s, 500s, 600 and so forth. And we saw with this combination treatment, as soon as you put the combination on board essentially at the next time point that we measured within three weeks or so, we saw dramatic drops in the order of 99% reductions in the PSA. And these are really astounding results, and now where we continue to follow our patients over time we have seen that, for example, bone lesions have entirely normalized, and so forth. So, the effects are incredibly rapid as reflected in the PSA. And to the point about predicting which patients respond, it doesn’t matter whether you had patients who had relatively low burden as measured by PSA, where their PSA was measured in let's say, 40 to 50 range or whether you had incredibly high PSAs in 500 to 600 range, those patients seem to similarly respond in terms of very dramatic, very profound drops in the PSA within weeks of starting therapy. And as we continue to follow these patient's incredibly durable responses, first patient has now been out for more than a year. Their immune side effects have resolved, whereas their complete remission has remained completely intact, and as I said, not only completely normalized the PSA levels, but the bone lesions and so forth have all normalized at least as measured by bone scans and so forth. So, this really has the potential to be so game-changing for these late stage patients who really have at this point no other real recourse.

Operator:

Thank you. Please standby for our final question. Our final question comes from the line of Carter Gould that Barclays. Your line is open.

Marion McCourt:

Carter, thank you for the question, and certainly we will stay very close on this. And obviously the importance of new BLA and new J Code is important. In terms of timing, I would need a crystal ball you know, certainly would share with you, we will be working very closely with the proper organizations and officials, but at this time it's too early to give anything definitive on expectation for J Code timing.

Carter Gould:

Okay, thank you.

Operator:

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Ryan Crowe:

Thank you, Bella. Good morning, good afternoon and good evening to everyone listening around the globe. Thank you for your interest in Regeneron and welcome to our second quarter 2022 earnings conference call. An archive of this webcast will be available on our Investor Relations website shortly after the call ends. Joining me today are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open the call for Q&A. I would also like to remind you that remarks made on 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 businesses, financial forecasts and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payor coverage and reimbursement issues, intellectual property, pending litigation, and other proceedings and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other materials 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 30, 2022 which was filed with the SEC this morning. Regeneron does not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today’s call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available on 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 any further questions. With that, let me turn the call over to our President and Chief Executive Officer, Dr. Len Schleifer. Len?

George Yancopoulos:

Thanks Len. I will start with ophthalmology. We are looking forward to the upcoming Phase 3 readouts of aflibercept 8 mg in patients with diabetic macular edema and in wet age-related macular degeneration. PHOTON in patients with DME and PULSAR in patients with wet AMD will test whether patients treated with 8 mg dose every 12 weeks or every 16 weeks can achieve non-inferior best corrected visual acuity at week 48, compared to the currently approved EYLEA 2 mg dose every eight weeks. Unlike studies from other sponsors, in which patients were assigned to a dosing interval based on disease activity assessments following the loading phase, patients enrolled in the PHOTON and PULSAR studies were randomized at baseline into one of the three treatment groups, which we believe will allow us to determine whether extend dosing can truly be achieved. If the studies are positive and the high safety standard established with EYLEA is maintained, we believe aflibercept 8 mg would represent a significant clinical advance for patients. And we would target a U.S. regulatory filing by early 2023. Moving to Dupixent, which continued to deliver notable milestones in the second quarter of the year, Dupixent was recently improved in children with atopic dermatitis as young as six months old, making Dupixent the first and only biologic medicine approved to treat atopic dermatitis from infancy through adulthood. Marion will talk more about this as well as about our recent earlier than expected FDA approval for a brand new gastroenterology indication, eosinophilic esophagitis, or EOE. Since receiving approval in adults and in adolescent aged 12 and over, we have reported positive data in pediatric patients with EOE as young as 1 year of age. Our Phase 3 study in children 1 to 11 years of age met the primary endpoint with 68% of patients on the higher Dupixent dose and 58% on the lower Dupixent dose achieving histological disease remission compared to 3% of children on placebo at 16 weeks. EOE symptoms can be difficult to assess in these young patients. However, we also observed medical improvement in EOE symptom score. In an exploratory analysis we recorded 3.1% increase from baseline and body weight for age percentile for the higher dose group, compared to 0.3% of the placebo. These data will be discussed with regulatory authorities starting with the FDA later this year. Regarding approvals for new indications expected in the near future, for prurigo nodularis we received a PDUFA action date from the FDA of September 30. And the European Commission's decision expected in the first half of 2023. Also in the first half of next year, we are also looking forward to the readout of the first Dupixent study in chronic obstructive pulmonary disease or COPD. Moving on to Libtayo and oncology. As Len mentioned, we are excited to have acquired Sanofi’s stake in Libtayo, thereby gaining exclusive worldwide rights to a PD1 inhibitor review as foundational for our oncology franchise, which has the potential to be utilized in numerous combinations with other candidates in our pipeline, such as our costimulatory bispecifics, our C3 bispecifics and novel checkpoint inhibitors, such as fianlimab. Regarding such combinations, I'd like to provide a brief update on our first clinical data from our costimulatory pipeline involving REGN5678, a PSMAxCD28 costimulatory bispecific in combination with Libtayo. This combination is being studied in patients with advanced metastatic castration-resistant prostate cancer, who have previously progressed on multiple anti-antigen therapies. These patients unfortunately have a poor prognosis with approximately one to two years of life expectancy and with limited treatment options. Metastatic castrate-resistant prostate cancer is considered an immunologically cold tumor and is largely resistant to immune checkpoint inhibitor, with large trials of PD1 antibodies showing monotherapy response rates in the single digits. As just announced today by Merck, the challenge of metastatic castrate-resistant prostate cancer in terms of lack of efficacy for checkpoint inhibitors used in standard ways is emphasized by the failure of their large Phase 3 trial in earlier stage of this disease. Our costim program was designed to innovatively enhance responsiveness in these types of cold tumor classes, such as prostate cancer, and essentially turn these cold tumors into hot tumors. I will remind you of the extensive preclinical data we have published supporting this hypothesis. Since 2019 we have been in careful dose escalation for this prostate cancer program in close collaboration with the FDA. In our study, patients are dosed weekly with REGN5678 and every three weeks with Libtayo. However, first dose of Libtayo is not until week-four, permitting a period of PSMAxCD28 leading to evaluate monotherapy safety and efficacy. Earlier today, we announced the first clinical data from 33 patients across eight dose levels, which showed dose dependent anti-tumor activity. The key efficacy endpoint in the study is objective response rate defined as a greater than 50% decline of prostate-specific antigen or PSA from baseline and/or tumor shrinkage. PSA is a protein produced by the prostate gland and by prostate tumors and this is commonly used as a biomarker to diagnose and follow up prostate cancer as many metastatic castration-resistant prostate cancer patients have diseased limited to bone lesions and cannot be assessed by conventional resist criteria. Preliminary data from the ongoing dose escalation portion of the trial across eight dose level cohorts in a total of 33 patients showed dose dependent antitumor activity is assessed by PSA values at the five lowest dose levels, which are preclinical models predicted might be subtherapeutic. There was almost no evidence of any anti-tumor activity with only 1 in 17 patients showing a decrease in PSA. There were no greater than grade 3 -- greater or equal to grade 3 immune related adverse events or irAEs at these doses. The lack of anti-tumor activity among these patients was consistent with the approximate 6% response rate reported in other trials with anti-PD1 monotherapy. At the next three dose levels we began to see clear evidence of dose dependent anti-tumor activity, which was generally seen within six weeks of starting the combination. At dose level six, one of four patients experienced a 100% decrease in PSA and a complete response in target lesions based on resist criteria. The patient discontinued therapy due to a grade 3 immune-related adverse event of the skin that was considered to be a recurrence of a preexisting condition and has since resolved with treatment per investigator report. Despite termination of the treatment, he has maintained his 100% decrease in PSA and complete response in target lesions for approximately 10 months to date per investigator report. We continue to see anti-tumor activity at the next dose level or dose level seven. And in our eighth and most recent dose level, three out of four patients had dramatic and rapid PSA reductions, two with greater than 99% reductions and one with an 82% reduction. Of the two patients with greater than 99% PSA reductions, one experienced a grade 3 case of mucositis, which has resolved and the other experienced a grade 3 case of acute inflammatory demyelinating polyradiculopathy, which is ongoing. In terms of safety, very importantly, no grade 3 or higher irAEs were observed in patients without anti-tumor activity. And the occurrence of irAEs was correlated with anti-tumor activity. This is consistent with previous trials with anti PD1 immunotherapy, wherein irAEs have been reported to occur at a higher rate in responding patients. No grade 4 irAEs were greater than or equal to grade 2 cytokine release syndrome have been observed in the trial to date. There was one death that was considered unrelated to treatment. In this trial, irAEs are being treated according to standard management practices used for checkpoint inhibitors. We are planning on sharing more detailed data from this study at an upcoming medical meeting. Let remind you that through extensive preclinical research, we hypothesized that augmenting T-cell costimulation alongside PD inhibition could be a key to turning immunologically cold tumors hot. These preliminary data for a PSMAxCD28 costimulatory bispecific provides the first clinical evidence supporting the promise of our broader pipeline of coast inventory bispecifics in diverse solid tumors, as well as hemalogic malignancies. By combining these costimulatory bispecific well with our CD3 bispecifics we have the opportunity to create novel therapeutic synergies to address some of the most difficult to treat cancers. We look forward to partnering with the oncology community on this ambitious and potentially groundbreaking efforts. In addition to these exciting early data, we anticipate several important oncology milestones in the second half of the year. At the upcoming ESMO Conference, we will provide updates on fianlimab, our LAG-3 antibody in combination with Libtayo in a Phase 2 cohort of metastatic melanoma that will hopefully confirm the encouraging combined efficacy that we previously reported in this setting. In addition, we will present initial data for our MUC16xCD3 bispecific in metastatic ovarian cancer, where I'd like to remind you that we have also combination studies ongoing with both costimulatory bispecifics and Libtayo. We will also report initial data for a METxMET bispecific in advanced met-altered non-small cell lung cancer as well as for Libtayo monotherapy with neoadjuvant cutaneous squamous cell carcinoma. Moving on to our hematology pipeline. Odronextamab has the potential to be the first CD20xCD3 bispecific to be approved for both major types of advanced B-cell lymphoma, that is both follicular lymphoma and diffuse large B-cell lymphoma. Based on interim data from a cohort of patients dosed with our recently modified step-up regimen, we believe odronextamab may have the lowest rates of grade 3 or higher cytokine release syndrome for this class of bispecific in follicular lymphoma and diffuse large B-cell lymphoma while still maintaining the efficacy profile previously reported. We look forward to presenting these updated data and potentially submitting a BLA for both indications in the second half of this year, pending feedback from the FDA. We also plan to share updated data for a BCMAxCD3 bispecific study in relapse or refractory multiple myeloma by the end of the year. Pending regulatory feedback, we are planning to submit for regulatory approval in 2023. An umbrella study in multiple myeloma investigating BCMAxCD3 in combination with various standard of care products and investigational candidates is now open to enrollment while we plan to initiate an additional study in earlier lines of multiple myeloma later this year. As you can see, the pace of innovation in our oncology pipeline has been accelerating, building upon piles of foundation with data readouts for novel mechanisms for cancer indications that historically have not responded to immunotherapy. Concluding with our Regeneron genetics medicines, where we in collaboration continue to progress our pipeline and discovery engine. Our siRNA collaboration with Alnylam, a non-alcoholic steatohepatitis or NASH contains product candidates addressing various targets, including those discovered by the Regeneron Genetic Center. First data in NASH for ALN-HSD are anticipated this fall. We are progressing a second target, PNPLA3 into the clinic later this year and we have recently identified an additional novel promising target for NASH site B. as we just published in the New England Journal of Medicine, we found unprecedented association of very rare site B loss of function variants with lower risk of liver disease. In the largest association study examined protection from liver disease ever described, individuals with loss of function of side B variant has about 53% lower risk of developing non-alcoholic fatty liver disease and about 54% lower risk of developing non-alcoholic cirrhosis. Regeneron and Alnylam are developing siRNA therapeutic candidate leads to advance to the clinic. And with that, I will turn the call over to Marion.

Robert Landry:

Thank you, Marion. My comments today on Regeneron’s financial results and outlook will be on a non-GAAP basis unless otherwise noted. Regeneron’s outstanding performance continued in the second quarter as our core business maintained a strong growth trajectory, and we have leveraged our strong financial position to complete two business development oncology transactions. Excluding global revenues related to the COVID-19 antibody cocktail, second quarter total revenues increased 20% year-over-year to $2.9 billion demonstrating continued momentum across our business. Second quarter total diluted net income per share was $9.77 on net income of $1.1 billion. Beginning with collaboration revenue and starting with Bayer. Second quarter 2022 ex-U.S. EYLEA net product sales were $870 million, up to 13% on a constant currency basis versus second quarter 2021. Total Bayer collaboration revenue was $358 million of which $340 million related to our share of EYLEA net profits outside the U.S. Total Sanofi collaboration revenue was $678 million in the second quarter of 2022, improved 55% from the prior year driven by Dupixent. Finally, we recorded Roche collaboration revenue of $8 million related to Roche’s sales of Ronapreve outside the U.S. We expect to record additional revenue from this collaboration in the fourth quarter of 2022. Moving now to our operating expenses. R&D increased 7% year-over-year to $690 million driven by higher head count in cost to support our expanding pipeline, partially offset by lower development costs for REGEN-COV. In the second quarter of 2022 acquired IPR&D was $197 million, which includes a previously disclosed $195 million charge related to our acquisition of Checkmate Pharmaceuticals. SG&A expense increased 14% year-over-year to $418 million, primarily due to costs related to growth initiatives for EYLEA and higher headcount to support our growing organization. Cost of goods sold decreased 73% year-over-year to $137 million primarily due to sales of REGEN-COV in the prior year that did not reoccur. Finally, the second quarter 2022 effective tax rate was 13.6% compared to 17% in the prior year. The lower rate is partially related to the non-recurrence of REGEN-COV sales. Shifting now to cash flow in the balance sheet. Year-to-date in 2022, Regeneron has generated $2.4 billion in free cash flow and ended the second quarter of 2022 with cash and marketable securities, less debt of $11.3 billion. We continue to deliver on our capital allocation priorities, completing our acquisition of Checkmate Pharmaceuticals, the first acquisition in Regeneron’s history and the purchase of Sanofi’s stake in Libtayo. In addition, we repurchased approximately $400 million of our shares in the second quarter of 2022, bringing our year-to-date total through July to over $1.1 billion. We continue to be opportunistic buyers where we see dislocation between our stock price and our intrinsic valuation. I will now discuss updates to our full year 2022 guidance driven by the closing of the Libtayo transaction. We are updating full year R&D expense guidance to be in the range of $3.1 billion to $3.24 billion, an increase of $170 million at the midpoint from our previous guidance. Approximately one third of the increase is driven by Regeneron now recording all R&D expense for Libtayo, which was previously shared with Sanofi. The remaining two thirds reflects the recording of our full 50% share of antibody collaboration spend as incurred beginning in the third quarter of 2022. Previously our share of antibody collaboration expenses was only partially expensed in the period incurred with the remaining share added to the antibody collaboration development balance. We were updating full year SG&A expense guidance to be in the range of $1.74 billion to $1.84 billion. The updated range reflects the inclusion of a 100% of Libtayo commercial expenses, which were previously shared with Sanofi net of anticipated synergies. We are also updating full year gross margin guidance to be in the range of 92% to 93%. The more favorable gross margin is due to the removal of the payment of Sanofi’s share of U.S. Libtayo gross margin that was previously recorded in this slide. A complete summary of our latest full year guidance is available in our press release issued earlier this morning. Let me conclude by highlighting four important financial modeling considerations related to the Libtayo transaction. First, effective July 1, Regeneron will record a 100% of the global Libtayo net product sales. We previously recorded only U.S. Libtayo net product sales. Second, the Libtayo off fund payment milestones and royalties will be recorded as an intangible asset on the balance sheet and amortized through cost of goods sold over the useful life of Libtayo. This amortization expense will be excluded from non-GAAP results. Third, as you may recall, we will now pay 20% of our share of antibody profits to reduce the antibody development balance instead of the previous 10% arrangement. The quarterly development balance repayment going forward will be reflected in our P&L as incremental antibody R&D expense I mentioned earlier when discussing revised R&D guidance with the remainder coming in the form of a reduction to antibody collaboration revenue. Therefore, the reduction in antibody collaboration revenue will be less than 20% of our share of antibody profits. As a result of the development balance repayment step-up, we expect to shorten the period to fully repay the development balance resulting in an earlier and very significant inflection in collaboration profits in the other years. Finally, in the third quarter of 2022, we will record a one-time development balance repayment per the Libtayo transaction agreement of approximately $55 million in addition to our regular quarterly repayments, which will be recorded as a deduction within the antibody collaboration revenue line. In conclusion, Regeneron is performing well and we continue to make investments in our business supported by our strong financial position to drive sustainable long-term growth. With that, I will pass the call back to Ryan.

Operator:

And our first question comes from the line of Mohit Bansal from Wells Fargo. Your line is now open.

George Yancopoulos:

Yes, those are really interesting questions and they get into the detail of very specific points of the regimen. Many of these, as you point out have not been directly studied in sort of head to head studies. So where we would have to maybe offline discuss some of these issues, but as I said, details that would require a lot of experimentation, maybe the answer.

Ryan Crowe:

Bella, can we go to the next question, please?

Evan Seigerman:

Hey guys. Thank you so much for taking my question. I'd love for you to expand on kind of some of the next steps for REGN5678. What do you want to see in additional cohort 8 patients and even at potentially higher dose cohorts to move into a registration directed trial? Thank you.

Ryan Crowe:

Thanks, George. Bella, next question please?

Tyler Van Buren:

Can, can you hear me? Sorry. It cut out.

Tyler Van Buren:

Good morning. Thanks very much for taking the question. I wanted to ask about PULSAR and PHOTON, just a follow up. Can you elaborate on the decision to randomize patients to the 12-week and 16-week arms prior to assessing their response for loading doses? Since patients can only be rescued during that first year or moved down in dosing interval and not moved up to a less frequent regimen, even though they might be doing well. Doesn't this make the comparison to the term studies difficult, and given this, how do you expect to communicate the data to the physicians when we see it?

Ryan Crowe:

Thanks, George.

Ryan Crowe:

We have to move to the next one. I'm sorry, Tyler. Bella, can we go to the next question?

Operator:

Sure. And your next question comes from the line of Salveen Richter from Goldman Sachs. Your line is open.

Leonard Schleifer:

Yes, it's a complicated -- it's a complicated question that until we see the final language in the statute, how it's interpreted and how it's actually implemented as to whether and how we file for the high dose, whether or not there'll be separate considerations for high dose versus the standard dose EYLEA. If there are -- if it turns out that there are, if it turns out that there are separate, we get a separate BLA, obviously you get, I can't remember what the statute says now, 11 or 12 years before this comes into play. And based on our current understanding of the bill, we believe that a new BLA would constitute a new biologic product. And therefore the 8 mg would not be subject to price negotiations in years. But we have to see what the final bill looks like and how it's interpreted. So we we're as anxious to see some of that as you are so being, so we will keep you informed about thinking as the bill is finalized and starting to be interpreted.

Operator:

Yes. Your next question comes through the line of Matthew Harrison from Morgan Stanley. Your line is now open.

George Yancopoulos:

That's a great question. I think you bring up a great point. And I think those of us who have been in this field now, we’re of course so excited by the early promise of immunotherapy checkpoint inhibitors and particularly PD1 antibodies. But of course over the years it's been recognized that only a small percentage of tumors, even in responding, even in the most responsive cancers, not all the patients respond and for many tumor classes, as we just saw with Merck's announcement of their failure today, in many classes, there's almost no detectable activity. So the Holy Grail in the field that people have been looking for is an answer to the question of, how do you activate immunotherapy in all these cold tumors, which is unfortunately the vast majority of cancers, both solid tumors and hemalogic malignancies. And so we went down this path based on the science that we could add the second signal, signal 2 to the first signal that could activate T cells. And these preliminary data suggest that that hypothesis might be right, and that we are on the way to this Holy Grail, that this is we believe very early data. We have a long way to go, but it's a spectacular indication that we have done where we are in the midst of doing and on the path of doing exactly what we set out to do, which is to turn immunotherapy cold tumors into hot tumors with dramatic anti-tumor activity. And the implications here based on all the pre-clinical data suggest that this is going to be broadly applicable. And as you all know, we have been developing a very broad costimulatory pipeline across many, many tumor classes, and several of them are already in the clinic, I mentioned. We have the prostate data. We have ongoing studies with the costim for ovarian cancer. We have other costims that are in the clinic for -- and we have other costims that are going to be entering into the clinic over the next short period of time. These are going to cover all sorts of cancers from the lung cancers that don't respond to hemalogic malignancies and so forth and so on. So we really think that this could be groundbreaking and taking immunotherapy now to the next level where all of us in the field were hoping it was going to go with the early advances with checkpoint inhibitors and have been frustrated over obviously the last decade or so that we haven't been able to get there. This may be the way to get there for the field. We have a very broad pipeline of costimulatory bispecific. By the way, we believe this validates the concept of the combinations, not only with Libtayo, and the PD1 class, but also with our CD3 class of bispecifics, because it suggests that the preclinical data which is so strongly supported now with this clinical data might also be very predictive for that class. So, a lot of exciting possibilities across very broad areas, diverse hemalogic malignancies. This is, I think, could represent the next breakthrough for immunotherapy.

George Yancopoulos:

No, I just want to add and build on what Len has said. So I think just like he said, in some ways, the CAR Ts in terms of high efficacy, particularly in hematologic malignancies, because that's where it's seen high efficacy seeing along with the AEs and in some of the responding patients, that's a good analogy. But I do have to point out the many differences. These are off the shelf reagents. Okay? Which God forbid, if there is a safety issue can be stopped. And it's much easier as we're already demonstrating to create a whole pipeline across a whole variety of broad cancers and unlike the Car T world right now, anyway, these are dramatic effects in solid tumors which were never really seen before by any other modality. So this is actually pretty exciting. There are analogies, there are in terms of dramatic efficacy, but also very important differences here that establish this as a potential breakthrough new class.

Operator:

Sure. Your next question comes from the line of Tim Anderson with Wolfe Research. Your line is open.

George Yancopoulos:

I think we've given a lot of the details and we're going be giving a lot more details obviously in upcoming meetings. Suffice it to say that as I mentioned for most of these patients, actually many of these patients, they don't have lesions outside of the bone, which is why we use PSA as as the indicator of total disease activity, because you don't have that many lesions. Okay? So that's one point where we're focusing on the PSA. We do believe that many of the IRAEs are the sort of IRAEs that you do see with both PD1 therapy and as Len mentioned also with CAR T therapy. And I think we indicate every single great 3 that we had and indicated that actually even though these are very early data in the treatment most of these patients many of these are actually already resolving or resolved. And we're going to continue to follow these patients and look for hopefully as seen, remember a total of six that one patient, the reason we highlighted then is they were the first responding patients, so we've now had almost a year follow up and we have this very impressive durability of response there. The other cohorts are much more recently treated and that's why we’re not giving that much follow up because these are patients who are in the very early months of being treated. But obviously you hear it, you hear it in our voices probably, those of us who have commented, we think this rule has the potential to be game changing, game changing for the field of immunotherapy and taking immunotherapy to the next level, also game changing for our oncology program and for our company.

Operator:

All right. Your next question comes from the line of Chris Raymond from Piper Sandler. Your line is now open.

George Yancopoulos:

Marion is going to answer the question. By the way we don't market products before they are approved. So it's not surprising that there is not awareness of a product that's an investigational product. Marion can comment on the other stuff.

George Yancopoulos:

All right, let me just add to that, that it's important to point out that the reason why EYLEA has become the leading anti-VEGF agent, branded VEGF agent is because it allows most of the EYLEA patients to go on longer interval dosing and have, and be very satisfied with the response. Now, of course, as with any disease and situation, not every patient is going do perfectly well. And we know that there is a small percentage of patients who do need more frequent EYLEA. And, and of course, if one has a new untested agent that doctors haven't seen, their hope in the place that they would first try in a small percentage of patients who don't -- who are not doing well. And of course, that's why it's being used in that setting. Now our goal, of course, with the high dose of EYLEA is to take now the best-in-class agent and hopefully produce even better results in terms of allowing these small percentage of patients who are being dosed more frequently, or even the patients who are now on eight-week regimens or 12-week regimens to go to more extended regimen. And that's the whole point of the design in the study. So I don't think there's any surprises that it's the small percentage of very hard to treat patients where somebody would try an untested agent that they're hoping might work better, but we have a real logical rational way that we are now taking EYLEA, bringing forth this high dose formulation and hope to extend the benefits that we're already seeing with this tried and true in terms of both safety and efficacy reagent, and even expand it and get even for these small percentage of patients longer dosing and even extend maybe everybody else.

Operator:

Sure. And your last question comes from the line of Carter Gould with Barclays. Your line is now open.

George Yancopoulos:

You can imagine we're working on the subq. We'll give you some details I think down the road later this year. In terms of co-formulation and we have a strong view that if you're doing it for gamesmanship or patent work and all that kind of stuff, you know that's one thing, but we, what we're more focused on is getting the optimal dose and the optimal regimen and they are not likely to be the same in many of these settings. It’s only useful if you're going try to have a single regimen that covers both. So, but we're a long way from worrying about that. We're far more focused on the fact that we've turned cold to hot which is a big deal at least in our eyes. And obviously it hasn't escaped yours, or I'm sure anybody's attention that now with this just appreciated new data where it looks like we're on the way of turning cold tumors to hot in combination with Libtayo we are in retrospect, very happy that we now have taken on sole ownership of Libtayo.

Operator:

Thank you. This concludes today’s conference call. Thank you for your participation. You may now disconnect.

Ryan Crowe:

Thank you Gigi. Good morning, good afternoon and good evening to everyone listening around the globe. Thank you for your interest in Regeneron and welcome to our first quarter 2022 earnings conference call. An archive of this webcast will be available on our Investor Relations website shortly after the call ends. Joining me today are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open the call for Q&A. I would also like to remind you that remarks made on 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 businesses, financial forecasts and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payor coverage and reimbursement issues, intellectual property, pending litigation, and other proceedings and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other materials 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 March 31, 2022 which was filed with the SEC this morning. Regeneron does not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today’s call. Information regarding our use of non-GAAP financial measures and the reconciliation of those measures to GAAP is available on 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 any further questions. This earnings call is neither an offer to purchase nor a solicitation of an offer to sell securities of Checkmate Pharmaceuticals Inc. In connection with the tender offer for Checkmate stock Regeneron and Scandinavian Acquisition Sub Inc. filed with the SEC and tender offer statement on Schedule TO and other tender offer materials, and Checkmate filed a solicitation recommendation statement on Schedule 14(b)(9) with the SEC. Copies of the documents filed with the SEC by Regeneron and Checkmate are available free of charge on Regeneron’s website at investor.regeneron.com or on Checkmate’s website at ir.checkmatepharma.com, as applicable, or at the SEC’s website at www.sec.gov. You should review such materials filed with the SEC carefully because they contain or will contain important information about the tender offer for Checkmate stock that holders of Checkmate securities and other investors should consider before making any decision with respect to the tender offer. With that, let me turn the call over to our President and Chief Executive Officer, Dr. Len Schleifer. Len?

George Yancopoulos:

Thank you Len. I will start with ophthalmology today. At the recent Angiogenesis meeting, we presented encouraging results for the Phase II CANDELA study of aflibercept 8 milligrams in patients with wet AMD primary safety end points with no new safety signals observed through week 44 and efficacy end points numerically favored aflibercept 8 milligrams in visual acuity, drying, and other anatomical measures through week 44. Phase III studies, PHOTON in DME and PULSAR in wet AMD are ongoing. The primary objective of the Phase III studies is to determine whether aflibercept 8 milligram dosing can allow for more extended dosing intervals while maintaining efficacy and safety. Regarding Phase III design in both PHOTON and the PULSAR study, patients are randomized at baseline to three groups

Robert Landry:

Thank you Marion. My comments today on Regeneron’s financial results and outlook will be on a non-GAAP basis unless otherwise noted. Regeneron is off to a strong start in 2022 with double-digit top and bottom line growth in the first quarter, driven by execution across the business. First quarter total revenues grew 17% year-over-year to $2.97 billion. Excluding global revenues related to the COVID-19 antibody cocktail, total revenues grew 25%, demonstrating continued strength of our core business. First quarter total diluted net income per share grew 16% to $11.49 on net income of $1.3 billion. Beginning with collaboration revenue and starting with Bayer, first quarter 2022 ex-U.S. EYLEA net product sales were $869 million, growing 7% on a reported basis and 13% on a constant currency basis versus first quarter 2021. Total Bayer collaboration revenue was $385 million, of which we recorded $338 million for our share of net profits from EYLEA sales outside the U.S. Total Sanofi collaboration revenue was $631 million in the first quarter of 2022 and grew 73% from the prior year, driven by Dupixent. In this quarter, we recognized the $50 million sales milestone upon achieving $2 billion of aggregate ex-U.S. sales for antibody collaboration products on a rolling 12-month basis. Finally, we recorded Roche collaboration revenue of $216 million related to Roche’s sales of Ronapreve outside the U.S. We do expect additional revenue from this collaboration primarily in the second half of 2022. Regarding REGEN-COV in the U.S., consistent with our commentary from earlier this year, we did not record any U.S. sales for REGEN-COV in the first quarter of 2022. Absent the execution and fulfillment of an additional government contract, we do not expect to record any U.S. sales for REGEN-COV this year. Other revenue in the first quarter of 2022 was $94 million. This includes a $30 million upfront payment from our collaborator, Ultragenyx to market Evkeeza outside of the U.S. Moving now to our operating expenses, R&D increased 12% to $751 million driven by higher headcount and clinical manufacturing costs, including for next-gen COVID antibodies, partially offset by lower clinical trial costs for REGEN-COV. Starting in the first quarter of 2022, we are changing the presentation of our non-GAAP results to include in-process R&D acquired in connection with asset acquisitions, as well as upfront and opt-in payments related to license and collaboration agreements. Going forward, we will now include these charges in both GAAP and non-GAAP results as a new line item called Acquired In Process Research and Development. In the first quarter of 2022, acquired IPR&D was $28 million, which includes a $20 million opt-in payment to our collaborator, Adicet. In full year 2021, there were $44 million of aggregate upfront payments excluded from non-GAAP R&D expense, all of which were recorded in the fourth quarter of 2021. SG&A expense increased 10% year-over-year to $389 million, primarily due to costs related to growth initiatives for EYLEA and higher headcount to support our expanding organization. COCM increased 58% year-over-year to $198 million due to higher sales in Dupixent and an increase in shipments of commercial supplies of Praluent for Sanofi outside the United States. Finally, the first quarter 2022 effective tax rate was 11.6% compared to 10.5% in the prior year. Shifting now to cash flow and the balance sheet, in the first quarter of 2022, Regeneron generated $2 billion in free cash flow, inclusive of collections from the U.S. Government for sales of REGEN-COV recorded in the fourth quarter of 2021 and ended the first quarter of 2022 with cash and marketable securities less debt of $11.4 billion. We continue to deliver on our capital allocation priorities. Last month, we announced the agreement to acquire Checkmate Pharmaceuticals for total equity value of approximately $250 million. Earlier this week, we launched the tender offer for Checkmate shares and expect this deal to close in mid-2022 subject to receipt of regulatory approval and other customary closing conditions. In addition, we repurchased $352 million of our shares in the first quarter of 2022. We continue to be opportunistic buyers where we see dislocation between our stock price and our intrinsic valuation. I will conclude with select updates to our full year 2022 guidance and outlook. We are updating full year R&D guidance to be in the range of $2.9 billion to $3.1 billion. The increase in guidance is driven by clinical manufacturing costs for next-gen COVID antibodies, most of which were recorded in the first quarter, and advancing programs across our pipeline. We also now expect our full year effective tax rate to be in the range of 12% to 14%. A complete summary of our latest full year guidance is available in our press release issued earlier this morning. In conclusion, our core business is performing well and we continue to make investments in our R&D engine supported by our strong financial position, leaving Regeneron well positioned for sustainable long term growth. With that, I will pass the call back to Ryan.

Operator:

Our first question comes from the line of Chris Raymond from Piper Sandler. Your line is now open.

Marion McCourt:

Chris, happy to give you some characterization of the market. First let me comment on EYLEA. As we reported today, our performance certainly with EYLEA in a very competitive marketplace is quite strong across indications, and certainly we see very strong performance not only in capturing more than our fair share of the market growth but also competitive share gains across indications. As a reminder, in the overall market we have about 50% of the VEGF category market share with EYLEA and in the branded marketplace over 75% of the branded market share. I really do think it’s probably best to let Roche comment on uptake of their new product in the marketplace. I’ll share that prescribers and key opinion leaders comment to us on the importance of the demonstrated safety they see with EYLEA, the efficacious profile that we have, and certainly the extensive consideration across indications and in-market use that has been incredibly robust. As it relates to other items around pricing and things of that sort, generally we don’t comment; but I certainly will say that looking ahead, we see strong leadership with EYLEA and a profile that is certainly leading the category in terms of experience, uptake and use.

Operator:

Thank you. Our next question comes from the line of Cory Kasimov from JP Morgan. Your line is now open.

Marion McCourt:

I think at this point, we’ll want to wait and look at product profile as the clinical data matures and then certainly as we move into launch preparation planning, we’ll be considerable of how the profile matches up against patient need and opportunity, so I think more to come on specifics on uptake. We remain optimistic, but of course we need to wait and see how the clinical data matures and the profile of product is clarified.

Operator:

Thank you. Our next question comes from the line of Evan Siegerman from BMO Capital Markets. Your line is now open.

Leonard Schleifer:

I’m sure--it’s Len here. I’m sure George would love to expand upon the thinking, but unfortunately because we just launched a tender offer, we’re really not committed to have that discussion. We’ll look forward to that discussion assuming that the deal closes around the middle of the year, as we anticipate.

Leonard Schleifer:

Sorry.

Leonard Schleifer:

But because we couldn’t answer that question, if you get back in the queue, we’ll come back to you for another question.

Ryan Crowe:

Thanks Evan. Gigi, next question.

Salveen Richter:

Good morning, thanks for taking my question. On these initial bispecific data sets in solid tumors in the second half, could you just speak to what exactly we’re going to see initially and then what you would want to see from the data set in terms of being clinically meaningful?

Leonard Schleifer:

Just to amplify a little bit, to make sure nobody missed what George just said, is that it seems to be the case that with these types of reagents, much as it is the case with other anti-cancer agents, that while you start in the latest, most difficult patients, there is better activity in earlier lines with these kinds of immune reagents, so finding activity in the late heavily treated would be very encouraging.

Operator:

Thank you. Our next question comes from the line of Brian Abrahams from RBC Capital Markets. Your line is now open.

George Yancopoulos:

Yes, we actually had initiated the concept for bispecifics in general as we were very early players in the field of this concept of step-up dosing, and what seems to be confirmed by our own data and other people’s data is that when you give them initially at low doses and gradually step up to your optimal dose, you are reducing the incidence of severe side effects, and particularly cytokine release syndrome. We had actually pretty low rates with our original, so our original dosing regimen was also a step-up dosing regimen, but in collaboration with the FDA, we redefined the stepped up dosing and came up with an even more gradual program. It only extends the timing to get to maximum dose by one week and we’re still obviously getting to that same dose, and what we’re saying is that from the early read from the new step-up dosing, which presumably we’ll give you the detailed data at some point in the future, the results are looking very promising. The already low rate of significant cytokine release syndrome that we were seeing looks like it’s depressed even further down to rates where we think, as I stated, we will be able to use this regimen and this approach in the outpatient setting. It’s just very promising that we’ve come up with a safe, what looks like to be a safe protocol that could be used in outpatient settings, and it’s getting to the same maximum dose in a pretty short period of time as well.

Operator:

Thank you. Our next question comes from the line of Carter Gould from Barclays Capital. Your line is now open.

Leonard Schleifer:

We have not obviously realized what we think is the full potential of our CV expertise and capabilities, and we are exploring ways on how to do that, some of which may require us to rethink combinations of both types of reagents and targets, and hopefully you’ll hear more that. But we would agree - right now, it’s not a major contributor to our near term performance.

Operator:

Our next question comes from the line of Brian Skorney from Baird. Your line is now open.

George Yancopoulos:

Yes, well in small numbers, we have very competitive response rates with deep responses and duration that we think for these late stage patients should be able to support registration if we can replicate it in the larger Phase II registrational possible study that we are undertaking. We continue to see a very acceptable safety and tolerability profile, and as you said, this is just the first step in the whole program. We are very excited about combinations and we’re also very excited about moving to earlier lines of therapy. In terms of combinations, as we’ve talked about before, it’s very logical and the preclinical data are very compelling. The combinations with so-called costimulatory bispecifics that also bind to a target on the same myeloma cells but now activate what we and others refer to as single two, will be very exciting and has really the potential to enhance responsiveness and deepen responsiveness and deepen duration. We have a series of additional next-generation candidates as well that we could layer on top of that next series of logical combinations which involve these costimulatory molecules, and we’re also thinking that obviously, as Len already mentioned, going to earlier lines of therapy is only going to increase the responsiveness and the opportunities to get longer and longer responses and, dare I say, even potentially cures, so that’s the basic summary of our programs - get registration in the late setting by replicating the data that we’ve seen with our ongoing registration possible Phase II study, adding combinations to enhance responses, deepen responsiveness and duration, and three, going into earlier lines of therapy as well.

Operator:

Thank you. Our next question comes from the line of Brittany A. Woods from Cowen & Company. Your line is now open.

George Yancopoulos:

These are all really great questions, and we are continuing to discuss our regulatory path both for getting our hopefully full approval for our existing cocktail, but also the regulatory path going forward for next-generation cocktails with the FDA. That’s an ongoing discussion that has potential to change, and obviously associated studies to support that program have the potential to change, so we are not at this point talking about the details of either, but great questions.

Ryan Crowe:

Thank you. Gigi, next question please.

Dane Leone:

Hi, thank you for taking the questions, and congratulations on all the progress across all of your programs. One question from me on the PHOTON and PULSAR outcomes. It’s been interesting to hear your narrative over many years now through EYLEA, and your team’s generally been right in terms of next-generation efforts that have failed to displace EYLEA as the standard of care. To that point, I’m a little interested from your commentary on the CANDELA readout and how that impacts your interpretation of PHOTON and PULSAR, meaning what does your team really think ends up being a differentiated outcome for those patients that are able to treat and extend on the high dose out to Q 16-week, and does that have to be a comparison to what read out with studies to make it a compelling drug option or a higher dose option in the market to complement EYLEA? The context for this, I guess, I’d put in is you guys have generally contended that a lot of these studies comparing against per label EYLEA are not actually fair studies to be running - obviously used an extra loading dose, but in the real world the treatment extended EYLEA versus any of these other agents is actually quite equivalent, so I’d be just interested to hear how you think that the contextualization of these high dose aflibercept studies really inform who should get the higher dose, if and when it becomes available. Thank you very much.

Ryan Crowe:

Thank you Len. Gigi, I think we have time for two more questions.

Charlie Yang:

Thanks for taking the question. This is Charlie Yang on for Matthew. I just want to follow up on the REGEN5458 BCMA bispecific. I guess my question here is given the competitor is ahead in potentially getting approval later this year, and they are already testing in combination with darsivax , for example, I’m just curious about your confidence on the 5458 in terms of its outlook, and maybe you could just provide some thoughts on the competitive landscape and the commercial opportunity across different line settings. Thank you.

Ryan Crowe:

Great, thanks George. Gigi, last question please.

Mohit Bansal:

Great, thank you for squeezing me in. Maybe a question on EYLEA, high dose EYLEA. George, would love to get your take on the design of the DME trial. It seems like there are five monthly doses in the 2 milligram arm, just like label, but only three for the 8 milligram arm. Could you please walk us through the rationale behind this difference, and wouldn’t this put high dose EYLEA at a disadvantage? Thank you.

Leonard Schleifer:

Yes, and I think we can eliminate if we get too high of a loading dose, obviously, it might complicate some of the efficacy readouts; but as George said, I think based on what we know when we designed it, this looks like it could--we’re optimistic.

Operator:

This concludes today’s conference call. Thank you for participating. You may now disconnect.

Mark Hudson:

Thank you, Michelle. Good morning, good afternoon, and good evening to everyone listening around the globe. Thank you for your interest in Regeneron, and welcome to the fourth quarter 2021 conference call. An archive of this webcast will be available on our website. Joining me on the call today are Dr. Len Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open up the call for Q&A. I'd also like to remind you that remarks today may on today's call include forward-looking statements about Regeneron. Such statements may include, but are not limited to those related to Regeneron and its products and business, financial forecasts and guidance, development programs and related anticipated milestone, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation and other proceedings and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, including its Form 10-K for the period ended December 31, 2021, which we are planning to file with the SEC early next week. Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our financial results press release, which can be accessed on our website. Once our call concludes, Bob Landry and the IR team will be available to answer further questions. With that, let me turn the call over to our President and Chief Executive Officer, Dr. Len Schleifer.

Dr. George Yancopoulos:

Thanks, Len. I'll start by briefly addressing our novel monoclonal antibodies for COVID-19. As Len mentioned, we are rapidly developing next-generation antibodies that retain potency against Omicron and other variants of concern. Early in 2019, we anticipated that the virus would mutate and, thus, began generating large pools of virus-neutralizing antibody candidates from both human survivors and our VelocImmune mice. We have continually evaluated and refreshed this pool and now have next-generation candidates that, based on preclinical studies, effectively neutralize Omicron and other variants of concern. We're on track to initiate clinical trials with the first of these in the coming months. In addition, we are in discussions with the FDA regarding how to streamline the development program for monoclonal antibodies, considering the unwavering unmet need and demand for these medicines, especially with potential future virus variants in mind. As Len already highlighted, since we believe that monoclonal antibodies will continue to play an especially important role in the treatment of future protection of the several million immunocompromised people in the United States alone, we are committed to undertaking a development pathway that will make this possible in the near future. Moving on to ophthalmology. At the upcoming Angiogenesis meeting, we will present the final Phase II data from the aflibercept 8-milligram CANDELA study in patients with wet AMD. In this study, aflibercept 8 milligram, given at the same protocol-specified dosing schedule, as currently approved EYLEA 2-milligram met its primary safety endpoint, with measures of drawing numerically favoring the 8-milligram dose over the 2-milligram dose. These two -- these Phase II results give us more confidence that the upcoming Phase III readouts has a potential to show that the higher 8-milligram aflibercept dose can at least match the efficacy and safety of EYLEA, but with more convenient dosing. Moving on to Dupixent. Building on the outstanding clinical success Dupixent has shown so far across a wide spectrum of allergic or type 2 inflammatory diseases, the second Phase III study in prurigo nodularis recently met primary and key secondary endpoints, making Dupixent the first and only systemic medicine to demonstrate such success in this indication. These data confirm the results from the first Phase III trial, where 60% of Dupixent patients met the primary endpoint of its reduction compared to 18% of placebo patients at 24 weeks. Nearly 3x many Dupixent patients experienced reduced skin lesions compared to placebo as well. Prurigo nodularis marks the sixth disease for which Dupixent has demonstrated profound benefit for patients, providing convincing evidence that the IL-4 and IL-13 pathways inhibited by Dupixent are the key drivers of the type 2 inflammation underlying all of these diseases. We have to appreciate how remarkable the Dupixent story is in terms of the important benefit it provides for the many patients across this diverse set of clinical conditions, together with its well-established safety profile, and highlights how Dupixent is delivering on its promise of providing a pipeline in a product. At the upcoming AAAAI meeting, in addition to the other important Dupixent updates, we will present pivotal results for the recent top line studies in eosinophilic esophagitis, or EOE, and for the first chronic spontaneous urticaria, or CSU study. EOE is a complex disease, and we are excited to share these data with the scientific community and patients. Our first regulatory submission for EOE in adolescents and adults is underway, with regulatory submissions for prurigo nodularis also starting in the first half of this year. Anticipated flow of Dupixent-related clinical data update continues. We are planning on reporting results in an additional Phase III study in CSU this time in omalizumab experienced patients and also for the chronic cold-induced urticaria indication in the second half of this year. These represents more difficult-to-treat patients or condition and present a higher bar for Dupixent. We're looking forward to results of these pivotal studies. Moving on to oncology and first Libtayo. Progress in our oncology portfolio includes pivotal readouts and regulatory filings for Libtayo presented an anticipated data readouts for our bispecifics as well as multiple upcoming milestones with novel diversified pipeline entrants. As Len mentioned, the Libtayo chemotherapy combination for patients with non-small cell lung cancer is under review at the FDA with a PDUFA date of September 19, 2022, which could address a larger portion of the patients with lung cancer. In hematology, at the American Society of Hematology Annual Meeting, we presented encouraging data for REGN5458, our BCMAxCD3 bispecific, investigated for relapsed or refractory multiple myeloma, with safety data that has shown no grade 3 or higher cytokine release syndrome to date and strong efficacy data. We believe our investigational agent is promising and has the potential to be competitive in this indication. We are planning on investigating this product for earlier lines of myeloma therapy, in combination with standard of care, and are excited about the combination with an appropriate co-stimulatory bispecific, which could further enhance responses. Odronextamab, our CD20xCD3 bispecific, has the potential for a best-in-class efficacy profile in both follicular lymphoma and diffuse large B-cell lymphoma, and our updated step-up dosing protocol may mitigate safety concerns and decrease the need for hospitalizations to manage cytokine release syndrome. In terms of progress of our bispecifics for solid tumors, as previously disclosed, we are observing early signs of activity for our MUC16xCD3 bispecific monotherapy developed for late-stage ovarian cancer, and we are excited to be sharing these early data later this year. In addition to monotherapy, the MUC16xCD3 bispecific is being investigated in combination with Libtayo and in a first of its kind in a combination trial with a MUC16xCD28 bispecific. These combinations are in early stages that are advancing through dose escalations. Later this year, we are hoping to share initial results for a unique biparatopic METXMET antibody studied in advanced non-small cell cancer patients with MET protein alterations. Early signs of clinical activity we have observed so far with the naked METXMET bispecific antibody, especially in patients with MET overexpression, bode well for our follow-on agents, the METXMET bispecific antibody drug conjugate, which is now enrolling patients in a Phase I study. We are also excited about our early-stage EGFRxCD28 co-stimulatory bispecific program for lung and other cancers. For prostate cancer, we are expecting initial readouts from our first co-stimulatory bispecific PSMAxCD28 later this year as well. PSMAxCD28 is progressing through dose escalation in combination with Libtayo. We are excited about the potential of our broad oncology portfolio, which includes multiple Phase I, II and III assets, as many are beginning to believe the future is going to involve the right combination of targeted immunotherapy agents. Concluding with our Regeneron Genetic medicines efforts, we and our collaborators have made significant strides in expanding the capabilities and scale of our groundbreaking work in genetics medicines. In terms of our siRNA collaboration with Alnylam, ALN-HSD is progressing through healthy volunteers, and initial data in NASH patients are anticipated by the middle of this year. With the C5 siRNA and the antibody combination, another first of its kind, healthy volunteer data were presented at ASH, demonstrating PK and PD results supportive of the monthly subcutaneous dosing regimen selected for pivotal studies. Phase III studies of the combination for paroxysmal nocturnal hemoglobinuria, or PNH, were also initiated. Recall, in PNH, we are planning to test our combination in both naive and switch patients tested against standard of care therapies, including ravulizumab and eculizumab. Also Alnylam has recently announced submission of the CTA application for ALN-APP, the industry's first-ever investigational RNAi therapeutic for CNS diseases. This agent will be evaluated in both the relatively rare disease driven by amyloid precursor protein, known as cerebral amyloid angiopathy, or CAA, as well as in early-onset Alzheimer's disease. Finally, later this quarter, we and Intellia will provide our -- an update on our joint TTR CRISPR-based knockout program for transthyretin amyloidosis. This will include additional ascending dose interim clinical data from the polyneuropathy arm of the ongoing Intellia 2001 Phase I study. We have also expanded the study to include patients with transthyretin amyloidosis with cardiomyopathy, which we believe will address an even broader patient population. We are very excited by our large and diverse pipeline of siRNA candidates that we are advancing with Alnylam, ranging from targeting the liver, the brain and the eye, as well as our CRISPR-based approaches in collaboration with Intellia and our viral-targeted gene delivery programs, such as with Decibel. While still early, we think these groundbreaking approaches have the potential to change the practice of medicine. And with that, I will turn the call over to Marion.

Bob Landry:

Thanks, Marion. My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis where applicable. Regeneron's fourth quarter capped off a strong year. In the quarter, we delivered top and bottom line growth driven by strong execution within our core business. Fourth quarter total revenue grew 104% year-over-year to $5 billion. Excluding revenues related to the COVID-19 antibody cocktail, total fourth quarter revenue grew 17% year-over-year to $2.7 billion, demonstrating continuing strength of our core business. Fourth quarter total diluted net income per share was $23.72 on net income of $2.7 billion. Starting with REGEN-COV. In the fourth quarter, we delivered the remaining 1.1 million doses from our September 2021 U.S. government supply agreement and recognized $2.3 billion of U.S. net sales. In accordance with our global collaboration with Roche, the amount of manufactured products supplied by each party to the global market resulted in the recognition of a true-up payment related to Roche's share of profits. As a result, in the fourth quarter, we recognized a $260 million charge in cost of goods sold and recorded no Roche collaboration revenue. As mentioned, we completed all deliveries under the September 2021 U.S. government supply contract in the fourth quarter. With the FDA's recent amendment to REGEN-COV's emergency use authorization, we do not expect to record any U.S. REGEN-COV sales in the first half of 2022. I will now move to our collaborations, starting with Bayer. Fourth quarter 2021 ex-U.S. EYLEA net product sales as reported to us by Bayer were $934 million, growing 9% on a reported basis and 12% on a constant currency basis. Total Bayer collaboration revenue was $372 million, of which we recorded $354 million for our share of net profits from EYLEA sales outside the U.S. Total Sanofi collaboration revenue was $518 million in the fourth quarter of 2021. Despite seasonally higher fourth quarter operating expenses, our share of the profits from the commercialization of Dupixent and Kevzara was $388 million, which compares favorably to our share of profits of $230 million in the fourth quarter of last year. Moving now to fourth quarter 2021 operating expenses. R&D decreased slightly to $639 million primarily due to lower spending on REGEN-COV development as compared to the fourth quarter of 2020. SG&A expense increased 30% year-over-year to $495 million primarily due to cost related to growth initiatives for EYLEA and higher head count-related costs. Cost of goods sold were $559 million primarily related to REGEN-COV manufacturing costs and, as I mentioned earlier, the recognition of the $260 million true-up payment to Roche for their share of profits related to the COVID antibody cocktail. Finally, the fourth quarter 2021 effective tax rate was 12.7%. Shifting now to cash flow and the balance sheet. For the year, Regeneron generated $6.5 billion in free cash flow and ended the year with cash and marketable securities less debt of $9.8 billion. In the fourth quarter 2021, we exhausted the remaining balance on our $1.5 billion share repurchase authorization. And in November, we announced a new $3 billion share repurchase authorization. Across both, we've repurchased approximately 850 million of shares in the fourth quarter of 2021. We continue to be opportunistic buyers where we see dislocation between our stock price and our intrinsic valuation. Now let me conclude with our initial 2022 outlook and guidance. As I mentioned earlier, we do not expect to record any U.S. REGEN-COV sales in the first half of 2022. For U.S. Praluent throughout 2021, we observed significant category and competitive pressures. We expect these pressures to accelerate throughout 2022. And now for our 2022 expense guidance. For R&D, we forecast our 2022 R&D expense to be in the range of $2.8 billion to $3 billion. As we highlighted throughout 2021, critically important development programs are advancing in 2022, including the late-stage randomized studies versus branded comparators for the LAG3 Libtayo combination, BCMAxCD3 and C5 programs in development expenses to advance next-generation antibodies against COVID-19. For SG&A, we forecast our 2022 SG&A expense to be in the range of $1.65 billion to $1.77 billion. Based on our initial plan, we expect SG&A expenses to be spread evenly across the quarters in 2022. For COGS, we forecast 2022 product gross margin on our percentage of net product sales to be between 90% and 92%. We expect cost of collaboration manufacturing to be in the range of $750 million to $830 million driven by continued growth in our Dupixent franchise. And finally, we anticipate our 2022 effective tax rate to be in the range of 13% to 15%. A complete summary of our full year guidance is available in our press release issued earlier this morning. In conclusion, our core business continues to advance and strengthen. With growth continuing across our existing portfolio and investments in our R&D engine supported by our strong balance sheet, we remain well positioned for sustainable long-term growth.