Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) Q3 2023 Earnings Call Transcript

Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) Q3 2023 Earnings Call Transcript November 2, 2023

Regeneron Pharmaceuticals, Inc. beats earnings expectations. Reported EPS is $11.59, expectations were $10.8.

Operator: Welcome to the Regeneron Pharmaceuticals Third Quarter 2023 Earnings Conference Call. My name is Shannon, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Ryan Crowe, Vice President, Investor Relations. You may begin.

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?

Leonard Schleifer: Thanks, Ryan, and thanks to everyone joining today’s call. Regeneron delivered another strong quarter marked by continued execution across the company, which drove double-digit top line growth and notable progress across our innovative R&D pipeline. Total revenues increased by 15% on a reported basis compared to the prior year quarter, primarily driven by Sanofi collaboration revenues and Libtayo global net product sales, which grew by 50% and 62%, respectively. Dupixent global net product sales were $3.1 billion, up 33%, reflecting strong growth across all approved indications. Non-GAAP net income per share — diluted share increased by 4%, including an unfavorable $0.77 impact from acquired IP R&D. Today, I will briefly discuss the launch of EYLEA HD, the progress we continue to make across our pipeline, and our latest thinking on capital allocation.

I will then hand the call over to George, Marion and Bob, who will provide additional commentary on our pipeline, developments, commercial execution and our financial results for the quarter. Starting with EYLEA HD, which is off to a great start. We launched in late August shortly following FDA approval, and recorded $43 million of net product sales in the final six weeks of the quarter, which compares favorably to recent launches in the retinal disease category. Importantly, revenues were driven by strong initial demand with multiple reorders by distributors before the end of the quarter. In addition, samples for EYLEA HD were made available shortly after the launch, enabling prescribers and patients to trial the product. Early EYLEA HD utilization has come from across the spectrum of wet age-related macular degeneration and diabetic macular edema patients, and momentum continues to build as positive real-world clinical experiences accumulate.

We have also made significant progress establishing access and reimbursement, and we will continue to work on positioning EYLEA HD, the highest dose anti-VEGF therapy approved by the FDA, as a new standard of care in these retinal diseases. Moving on to the recent progress we have made advancing our pipeline. Within hematology oncology, in our CD3 bispecific platform, the BLA for odronextamab, our CD20xCD3 bispecific in certain lymphomas, was accepted by the FDA and granted priority review, which are — with a March 31 PDUFA data assigned. We also remain on track to submit a BLA next month for linvoseltamab, our BCMAxCD3 bispecific for multiple myeloma, with pivotal trials now underway for both programs to support potential accelerated approvals, we are preparing for two commercial launches next year.

Last week, we reported a potential breakthrough for patients with profound congenital hearing loss. The first patient enrolled in the Phase 1/2 cohort clinical trial of DB-OTO, an investigational cell selective adenovirus-associated viral gene therapy designed to provide durable physiological hearing to individuals with profound congenital hearing loss caused by mutations in the otoferlin gene, experienced hearing improvement six weeks after treatment compared to baseline. We are looking forward to continued follow-up with this patient as well as enrollment of additional patients to further validate this gene therapy approach. While otoferlin gene deficiency is an ultra-rare condition, we are hopeful that we can expand our approach to gene therapy in the year to more common genetic causes of profound hearing loss.

Finally, regarding capital allocation. While we continue to prioritize internal R&D investment, given the strength of our balance sheet and anticipated future cash flows, we believe we have the flexibility to take additional actions to drive shareholder value. Beyond our ongoing share repurchase program, we continue to actively pursue emerging science and innovative platforms that complement our core R&D strengths. In addition to the Decibel acquisition, we announced last month an expanded research collaboration with Intellia combining our proprietary antibody targeted viral vector delivery technologies with Intellia’s CRISPR platform to jointly explore in vivo programs outside of the liver for neurological and muscular diseases. We have always managed Regeneron with a focus on generating long-term returns, and we will continue to think carefully about how to strategically deploy our capital, with the goal of delivering breakthroughs to patients and value to shareholders.

In closing, we had a strong third quarter, the EYLEA HD launch is progressing well, our pipeline is delivering important innovations, and we continue to look at ways to efficiently allocate capital. With that, let me turn the call over to George.

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.

Marion McCourt: Thank you, George. I’m delighted to share details of our commercial performance in the third quarter, including very encouraging early signals for EYLEA HD as well as ongoing results from our inline brands. Starting with our anti-VEGF retinal franchise. Regeneron achieved $1.49 billion in total net sales for the quarter in the U.S. We were excited to rapidly launch EYLEA HD in late August following its U.S. approval, and total net sales for the quarter were $43 million. Early launch indicators have been very positive. Physician enthusiasm was extremely high prior to EYLEA HD launch, and that interest has translated into early use in a broad range of patient types across wet AMD and diabetic eye disease. It is noteworthy that physicians are prescribing EYLEA HD in recalcitrant, switch and naive patients.

We are already hearing anecdotal case reports from physicians whose recalcitrant patients are returning. Many of these patients have now been able to achieve drying that they were unable to obtain with other products. To accelerate this early launch momentum, our highly experienced team is rapidly advancing reimbursement and market access. We have confirmed paid claims from 100% of Medicare jurisdictions, and many large payers have recently published coverage policies for EYLEA HD. This includes both Medicare Advantage and commercial plans. While early, the speed of EYLEA HD coverage is significantly outpacing recent competitive launches. In addition, we continue to be on track to have a permanent J-Code by April 1, 2024, which we anticipate will drive additional uptake.

These early reimbursement successes and positive physician experiences are being shared by prescribers with our team and more broadly with the retina community. These initial results bode well for the future of EYLEA HD and substantiate our belief that EYLEA HD will rapidly become the new standard of care across its approved indications. EYLEA HD’s unsurpassed safety and durability demonstrated in clinical trials, coupled with prescriber confidence in EYLEA’s efficacy and safety record is expected to drive continued category leadership. In summary, while the launch is still in early days, we are pleased with our progress and look forward to providing future updates. EYLEA remains the category leader with 45% anti-VEGF share for the quarter in an increasingly competitive market.

With over 70 million injections worldwide since launch, EYLEA continues to demonstrate a strong and consistent safety profile, a key differentiator given retinal vasculitis and intraocular inflammation events with certain new products introduced in the retinal category. With both EYLEA HD and EYLEA, our formidable retina franchise is poured for sustained leadership. Next to Dupixent. Global net sales grew 33% year-over-year to $3.1 billion, and U.S. net sales grew 30% to $2.4 billion. This impressive third quarter performance demonstrates Dupixent’s clinical and safety differentiation across all approved indications, as well as its continued growth potential. In the third quarter more than 50,000 new patients are taking Dupixent in the U.S. alone, and there are now more than 750,000 patients on Dupixent worldwide.

In atopic dermatitis, Dupixent’s largest indication, we continue to see more than 20% growth six years post-launch. Physicians have great confidence from the combination of efficacy, safety and ease of use across all age groups, including as young as six months. Not only is their remarkable adherence once patients begin therapy, we also see Dupixent as being the clear treatment of choice for new patients with moderate to severe disease with significant growth opportunity. In asthma, Dupixent is differentiated from all other medicines in the category based on its rapid and sustained effect on lung function, reduced exacerbations and reduced corticosteroid use. In the U.S., Dupixent continues to lead new patient prescriptions, and we are quickly approaching our goal of being the number one prescribed medicine for asthma.

Together with our partner, Sanofi, Regeneron continues to advance recent launches in eosinophilic esophagitis and prurigo nodularis, which are already meaningfully contributing to Dupixent’s growth. Since FDA approval, approximately 20,000 new patients with eosinophilic esophagitis have been initiated, and demand is also robust for prurigo nodularis, where Dupixent is rapidly becoming the standard of care within a year of approval. We also look forward to offering Dupixent to even more patients in the future with anticipated regulatory approvals of pediatric eosinophilic esophagitis, as well as multiple near-term Phase 3 data readouts on COPD, chronic spontaneous urticaria and bullous pemphigoid. In summary, Dupixent continues to be a key driver of our growth, and we look forward to seeing its transformational benefits extending to even more patients with type 2 inflammatory diseases across indications, demographics and geographies.

And finally to LIBTAYO. Third quarter global net sales grew 59% year-over-year on a constant currency basis to $232 million, with U.S. net sales up 52% to $144 million. Global growth was driven by our non-melanoma skin indications coupled with increased utilization in both monotherapy and chemotherapy combination settings in lung cancer. We’re working to expand access and use in many additional countries following recent regulatory approvals. We continue to see a growing number of prescribers choosing LIBTAYO when treating their patients. In conclusion, Regeneron’s performance in the third quarter continues to deliver growth and value for patients and shareholders with opportunity for sustained growth. We’re encouraged by favorable early indicators from the EYLEA HD launch and continue to deliver compelling performance from our inline brands, including EYLEA, Dupixent and LIBTAYO.

Now I’ll turn the call over to Bob.

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.

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

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Q&A Session

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

Evan Seigerman: Hi, guys. Thank you for giving me the question, and congrats on all the progress. So you have over $15 billion of cash and marketable securities on your balance sheet. Maybe, Bob, you could talk about how you think about capital allocation? I know interest rates are high, but how else can you spend that money to drive even higher returns for Regeneron shareholders?

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.

Ryan Crowe: Next question, please, Shannon.

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

Mohit Bansal: Great. Thank you for taking my question. And congrats on all the progress. My question is regarding the ulcerative colitis trial you are doing with Dupixent. Could you talk a little bit about the rationale behind that? And are you enriching this trial in any way on the basis of eosinophil counts or any other marker there? Thank you.

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.

Ryan Crowe: Thanks, George. Let’s move to the next question, please, Shannon.

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

Chris Raymond: Yes, thank you. Just maybe Dupixent in [ph] COPD, I think the last time we talked to you guys on this, you were talking about the risk reward on taking an interim look on notice, just given the alpha hit. Looks like you’ve decided to take that step here. But can you give us a sense of the alpha hit [ph] you are taking by doing this interim look? Just looking at BOREAS, with the 30% reduction in exacerbations, it would seem you’d have a decent amount of room here if notice is tracking similarly. But if you can give us any more color on how you’re thinking about this risk reward of this decision and assume you’re going to press release that result of that if it’s going to be the end of the year? Thanks.

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.

Ryan Crowe: Thanks, Len. Next question, please, Shannon.

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

Colin Bristow: Good morning and congrats on the quarter. Not surprisingly, we’ve been getting an increasing number of questions on your obesity assets. And I was wondering if you could just talk to your strategy and level of enthusiasm here and maybe frame out some of the timelines, GPR75 [ph], the leptin receptor antagonist. I think you shared some pretty provocative data at ADA on the myostatin blocker and the Activin A blocker. Maybe you could just tell us your level enthusiasm is this something that you’re going to go full force and plan to have a major presence in down the road? Just some color there would be helpful. Thank you.

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.

Ryan Crowe: Okay. Thanks, George. Next question, please, Shannon.

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