Q4 2022 Regeneron Pharmaceuticals Inc Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
Welcome to the Regeneron Pharmaceuticals fourth quarter 2022 earnings conference call.
My name is Shannon and I'll be your operator for today's call.
At this time all participants are in a listen only mode.
Later, we will conduct a question and answer session.
Please note that this conference is being recorded.
I will now turn the call over to Ryan Crowe, Vice President of Investor Relations you may begin.
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 of 'twenty Two 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 Young Topless 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 <unk>.
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 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 to differ materially from those projected in that statement.
A more complete description for these and other material risks can be found in regeneron <unk> filings with the United States Securities and Exchange Commission.
<unk> its Form 10-K for the year ended December 31, 2022, which we expect to file with the SEC on Monday February 6th.
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 and.
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 Financial Officer, Len Schleifer, Lynn That'd be chief Executive Chief Executive Officer.
Okay. Good morning to everybody and for those of you experiencing the Arctic freeze I hope you're staying warm.
Strong fourth quarter performance capped a remarkable year of regeneron highlighted by significant achievements that better position the company to deliver sustainable growth and shareholder value.
Fourth quarter, 2022 revenue increased 14% compared to the prior year when excluding the impact of contributions from Regeneron and Rona underscore.
Underscoring the commercial strength and increasing diversity of our business.
We also made several important advances across our pipeline during the quarter, notably the submission of a biologic license application for a flipper set eight milligrams in Neovascular age related macular degeneration or wet AMD as well as diabetic macular edema or DNA positioning us for a potential.
U S launch in late August of this year.
Additionally, we received FDA approval for lip trial in combination with chemotherapy as a first line treatment for advanced non small cell lung cancer.
Tayo only the second PD, one or PDL, one antibody approved in this setting regardless of a patient's histology or PDL one expression level.
We also presented data from our rapidly advancing oncology pipeline, including four Fianna map, our lag three antibody in combination with live trial in advanced non small cell lung cancer origin X, a mab or CD 20 by CD three by specific and B cell lymphomas and Lynn both sell to map R. B.
CMA by CD three by specific in multiple myeloma.
Finally depicts it was approved for Prurigo Nigel Arris in Europe .
Briefly reflecting on 2022, we ended the year with three strategic imperatives that we felt we had to accomplish in order to position the company for long term growth.
First we had to fortify the medium and long term outlook for our retinal franchise.
Based on the positive results that we reported in September 2022 we believe a flip of Sept. Eight milligrams has the potential to change the treatment paradigm for patients with wet AMD and D&A.
Coming to new standards of care for these patients positioning regeneron for prolonged leadership in this category.
We needed to maintain and grow new pixel leadership across a variety of type two allergic diseases.
22 turned out to be a phenomenal year with two pixel global net product sales approaching $8 7 billion and growing 44%.
Constant currency.
Despite new competition, you picks and maintained a leading market position in atopic dermatitis asthma and nasal polyps and was also approved in new indications geographies and younger populations, which George will detail shortly.
Collectively these 2022 approvals meaningfully expanded the pick some commercial opportunity, allowing addressable population to increase by approximately 225000 patients, bringing the total addressable population to over 7 million patients globally.
Third we wanted to make significant progress towards becoming a leader in immuno oncology and 2022 turned out to be a crucial year key cause its long term goal was requiring centrepiece share of global rights to live Tayo and antibody discovered by Regeneron, which was a necessary step.
Towards realizing the full clinical and commercial potential of this foundational therapy.
It also enables us to unlock combination opportunities from promising candidates in our oncology pipeline, including with a lag three antibody a co stimulatory bispecific and three our C. D. Three five specifics.
Looking ahead, we expect 'twenty to 'twenty three to be another notable year with significant incremental progress across these imperatives as well as in other areas of our business.
We are preparing for a potential U S launch for flavors at eight milligrams in late August .
Given prescribers decade, plus experience without Leah.
And now with the 48 week data for a plebiscite eight milligrams, which demonstrated comparable efficacy and safety trial yet.
Laura treatment intervals, we believe that over time, there is an opportunity for flavors that eight milligrams to become a new standard of care for wet AMD M D.
Yeah.
We expect the picture to continue strengthening its leadership position across approved type two allergic diseases based on its differentiated mechanism of blocking both interleukin four and interleukin 13.
In 'twenty two 'twenty three we have an opportunity to reach even more patients with potential regulatory approvals in new diseases geographies and younger population that could add another approximately 500000 patients globally through the biological eligible population.
Additionally, we look forward to the upcoming readout of our first phase III study of your picture and C. O P D and the first half of this year.
In oncology, we expect to continue rapidly advancing our pipeline for lag three combination with lids.
We are moving forward with expansion beyond melanoma to include lung cancer.
Actually other solid tumors for a co stimulatory bi specifics in combination with a tie up we are continuing to dose expansion and our phase one two PSA married by CD 28 program in advanced prostate cancer. We also expect to report additional phase one data from our Egfr bite.
28 program in solid tumors and to present initial clinical data from up 16 by CD 28 program in recurrent ovarian cancer.
And with that he Mark we anticipate second half for regulatory submissions, Oh generics I Mab in Follicular lymphoma, and diffuse large b cell lymphoma, as well as Lynn both cellcom add refractory multiple myeloma.
In 2023, we also plan to rapidly move forward with clinical development of our next generation COVID-19 antibody, which we believe could help protect the millions of marvell patients who were unable to Mount a sufficient immune response from vaccination.
And treat those who require other alternatives.
Activities, enabling clinical manufacturing and have commenced and we expect to enter clinical development later this year.
In closing 2022 was a pivotal year at Regeneron and we expect to continue making significant progress in 2023, our strategy remains focused on investing in our internal R&D capabilities, which has historically generated a high rate of return.
We remain confident in our near and long term growth prospects with approximately 35 pipeline candidates currently progressing through clinical trials.
We will also continue looking for opportunities to complement these internal efforts by exploring potential collaborations.
With our commercial capabilities continue to drive revenue growth.
Strong financial position Regeneron is extremely well positioned to continue delivering breakthroughs for patients and value to shareholders now I will turn the call over to George.
Thanks, Lynn I would like to briefly walk you through our pipelines progress in 2022 and touch upon what lies ahead in 2023.
Myology, we presented pivotal positive pivotal results for a flipper set eight milligram in wet AMD M. D and meet these trials showed that a flourish at eight 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.
They are truly unprecedented and potentially game changing result, we have not which have not been achieved using any other anti VEGF agents moving to depict in 2022 depicts and became the only biologic approved in atopic dermatitis.
Infants as young as six months of age.
The first treatment for Prurigo Nigel errors in 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 III data in children.
With eosinophilic esophagitis.
<unk> is now approved in five related type two allergic conditions no. Our data show that these diseases are mediated by IL, four and IL <unk> 13, driven type two inflammation.
Cause many patients suffer from systemic type two inflammation, they often suffer from several of these diseases concurrently.
Thus depicts and has the potential to Holistically address these patients multiple type two conditions.
Which depicts it is approved.
While many other immuno modulators are associated with worrisome.
Immunosuppression and Carrie boxed warnings depiction safety profile supports its approval in infants.
In 2023, we're looking forward to the initial results of Boreas. The first depicts in phase III study in patients with chronic obstructive pulmonary disease or COPD or depicts in COPD phase III studies have enrolled patients with elevated blood eosinophils aiming to select for patients with COPD driven by type two inflammation.
The Boreas study passed an interim futility analysis in 2020, and encouraging event, which triggered the start of the replicate phase III noticed study. We're looking forward to the readout of bore you with the primary endpoint of annualized rate of <unk>.
Cute moderate and severe COPD exacerbations expected in the first half of 'twenty three.
Moving onto oncology 2022 was an important year for oncology programs with Ty was approved by the FDA in combination with chemotherapy in first line non small cell lung cancer irrespective of histology or PDL, one expression levels and achieving met by only one other PD one or PD.
Oh, one targeting agent with tires also emerging as in a central backbone of our oncology pipeline of several programs in combination with the tile are starting to yield encouraging data.
First I'll discuss our lag three antibody fan Lam Fiamma map in combination with what Tayo, where we have recently shown positive data from a second confirmatory cohort are PD, one naive metastatic melanoma patients and reported encouraging results from a smaller dataset and non small cell lung cancer patients. These initiatives.
I would suggest that the Phantom Ablatival combination that's a potentially best in class profile in melanoma, and we are advancing broad pivotal programs in both melanoma and lung cancer.
Phase three studies in metastatic melanoma in adjuvant melanoma are already enrolling and we have plans to soon initiated another phase III study in perioperative melanoma as well as phase two three studies in first line advanced as well as perioperative non small cell lung cancer.
Other notable tayo combination use from this year was the early but very encouraging data with our P. SMA by CD 28, co stimulatory Bispecific in advanced metastatic castrate resistant prostate cancer, a tumor type considered immunologically cold.
With multiple recent phase III failures, demonstrating that prostate cancer is largely unresponsive to anti PD, one therapy in other and as well as in other types of chemo combination.
Proof of concept study of our P. SMA by CD 28, co stimulatory Bispecific, we observed first evidence that combining this new class of Bispecific with anti PD, one can confer profound responsiveness to tumors previously thought to be cold and unresponsive to anti PD, one therapy with three out of four patients treated there.
Hi, its dose levels, showing greater than 90% reductions within six weeks of initiating combination therapy in the prostate cancer biomarker P. S.
Following up on these early but exciting results, we're continuing to enroll patients in this study and we're planning to present additional data at medical meetings in 2023.
We also presented our first clinical data for our C. D. Three by specific in a solid tumor for Uber Madame Anne our MX 16 by T. Three bispecific and the Belmond for advanced ovarian cancer.
Single agent in a phase one dose escalation study in heavily pretreated recurrent ovarian cancer patients we observed a 4% overall response rate with a 31% response rate and a small subset of patients with high <unk> expressing tumors. We expect initial dose escalation data later this year with Uber Madame Anne.
Type as well as for our MX 16 by CD 28, co stimulatory Bispecific wood look tile in advanced ovarian cancer.
Also expect updated clinical data for Egfr by CD 28, co stimulatory Bispecific in combination with lip tie up 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 Audra, an extra month or so.
CD 20 by CD, three bispecific as well as Linda Delta Man, our D. C M. A C III by specific.
Oh genetically mab, we presented pivotal phase two.
M. Two data well go next to map in third or later line relapsed 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 are optimized step up dosing regimen has improved go generic.
The safety profile, while retaining efficacy similar to the prior dosing regimen in third or later line relapse or recurrent diffuse large b cell lymphoma, or <unk> demonstrated efficacy regardless of prior car T experience and a safety profile generally similar to that seen in Follicular bump.
We are planning regulatory submissions in the second half of 2023 for both indications, which we hope will support potential accelerated approvals in.
In 2023, we anticipate initiating several phase III studies in Follicular.
Lymphoma and <unk>.
Diffuse large b cell lymphoma, including in earlier lines of therapy. These trials will serve as a confirmatory studies, which could potentially support conversion to full approval.
We also expect to initiate a proof of concept study of our CD 22 by CD 28, co stimulatory Bispecific in combination with Oz. Your next demand in diffuse large b cell lymphoma, which we hope could further add to the anti cancer benefit for these patients.
Linda South demand R. B S. P. C M. A C. Three bispecific antibody, we presented efficacy and safety data from our pivotal phase III study.
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.
And 'twenty two 'twenty three we plan to initiate a confirmatory phase III study of Windows South of Mab in second line multiple myeloma and our <unk>.
On track for a BLA submission in the second half of the year as without your next I Mab, we plan to initiate combination studies for a limbo south of Mab with coast inventory by specifics in the near future.
I'd also like to update some additional clinical programs, our antibody blocking factor 11 for anti coagulation and our antibody that activates the N. P. R. One receptor for heart failure are both completing proof of mechanism trials.
Moving on to Regeneron genetics medicine rigor.
Guarding our collaboration with Elba Island in SA RNA Therapeutics, we're planning a broad multi pronged approach to develop treatments for Nash non alcoholic SEATO hepatitis, we're initiating phase II study of L. N H S. D. In Nash patients with genetic risk factors. We also dosed the first subject in the first in human study of another S. I Ernie Maddock.
And in development for Nash L. M. P N P, which targets a different gene can be potentially combined with Alan HST inappropriate 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 Mylan for central nervous system targets are initial dose escalation study is ongoing.
Our collaboration with Italian CRISPR based therapeutics, which is expected to progress further in 2023 building on continuing data readouts from the phase one study of N T. L. A 2001 and transfer Eaton amyloidosis, and both cardiomyopathy and neuropathy patients.
Which provided the first demonstration in humans that crystal based technologies can deliver up to 90% reduction of the pathological gene product for over a year.
Regarding our gene therapy efforts, our collaborators of Decibel Therapeutics recently announced that a clinical trial has been authorized by both the U S. F. D. A in the U K M. H R. E D. B O T O a virally delivered gene therapy designed to restore hearing individuals with auto fairly related hearing loss.
Phase one two study in patients two years of age and younger is expected to initiate in the first half of 2023 with initial data from the first cohort of patients and so on 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 bind outside of the so called the receptor binding domain or our B D of the spike protein. This antibody retains activity against all of them.
Our ovarian seen throughout the pandemic because it binds to an epitope that has remained highly conserved greater than 99, 9%.
Cross all known variance the vast majority of anti barley antibodies generated as a result of vaccination or due to natural infection target. The R. B D domain, which results an overwhelming selective pressure driving the emergence of these resistant variants, we hope that by targeting is unique and can.
Serve desktop outside of the IBD. This anybody will also retain its activity in the face of future bearings, we plan to initiate clinical trials to test. This antibody this year and we're looking to develop it in both treatment and prophylactic setting.
In conclusion Regeneron to 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 our IND submission for up to 10, new therapeutic candidates this year as well as for additional cancer indications for Cam.
Today that are already in the clinic.
So with that I will turn it over to Maryann. Thanks, George the fourth quarter capped off a strong year of execution and growth delivering results across our commercial portfolio, we expanded into new indications, which coupled with our existing business is expected to drive meaningful growth in 2023 and beyond we look forward to several important.
Approvals and subsequent launches this year, providing additional opportunities for growth.
Starting with Eylea, where we announced in January 4th quarter U S. Net sales of $1 5 billion full year 2022, net sales were $6 3 billion, representing 8% year over year growth and outpacing total growth of the anti VEGF category for the year at the end of the fourth quarter.
Category share was approaching previous levels of approximately 50% of injections just followed the short term shift earlier in the quarter were idea was negatively impacted by a temporary increase in use of off label compounded avastin. During this time there was a short term closure of a not for profit piece.
<unk> co pay assistance fund, which reopened later in the quarter. We believe we have substantially recovered from the issue encountered in the fourth quarter. We continue to expect competitive pressures, but remain confident and regeneron to overall retinal franchise as it relates to a potential upcoming a flipper set eight milligram launch.
In summary, our retinal franchise leads the anti VEGF category with Eylea is the current standard of care and the flavors of eight milligram if approved.
Offering a differentiated clinical profile that can potentially shift the treatment paradigm.
Turning to live Tayo total fourth quarter Global net sales were 169 million growing 44% on a constant currency basis.
In the U S. Net sales grew 36% to $110 million with contributions across all indications.
Advanced non melanoma skin cancers, we continue to build our leadership position in the PD one class in lung cancer manpower continues to see steady growth in utilization and prescribers customer ordering has accelerated following the chemotherapy combination approval last November we were we.
Working to maximize launch uptake by increasing depth and that that's our prescribers.
Early launch indicators are positive community and academic centers have welcomed lip tires expanded role as an important treatment option in advanced non small cell lung cancer. There are more than 200000, new cases of lung cancer per year in the U S alone.
For which lead time is an important treatment option.
The U S law Tayo net sales grew 60% on a constant currency basis to 59 million driven by steady demand growth and additional launches as we secure access and reimbursement globally. We continue a targeted approach to extend our global commercial footprint in priority international markets designed to maximize opportunities.
Philip Tayo and potential future medicines.
Finally, turning to depict sent during the fourth quarter Global net sales grew 42% on a constant currency basis to $2 45 billion in the U S. Net sales grew 44% to $1 $94 billion with strong growth continuing cross atopic dermatitis asthma nasal polyps.
With additional contributions from recent launches and they suddenly felt like a soft shadows in.
In Prague, and not realize she picks is well positioned to expand market penetration and drive revenue growth across to establish new and potential future indications in 2023 and beyond atopic dermatitis depicts this largest indication continues to rapidly grow across all age groups firmly established.
Detection.
The preferred systemic therapy for patients with moderate to severe disease.
Continues to be rapid uptake in younger populations further confirming depictions differentiated efficacy and safety profile. We've also seen meaningful early adoption and prego Nigel ours.
Well it takes it is the only FDA approved medicine for this debilitating disease, we expect ongoing uptake of depicts and as the launch progresses and physicians identify patients who need.
It depicts and continues to perform well in the highly competitive biologic asthma space with steady market share gains and strong growth in total prescriptions and new patient starts and nasal polyps depicts this differentiated clinical profile continues to drive uptake as the leading first line treatment option in patients requiring CIS.
Stomach therapy.
And as soon as all that gets off a J. This launch is going exceptionally well finally, offering physicians and their patients a treatment to effectively manage the underlying mechanism disease patients treated with depiction of experienced dramatic improvements in their symptoms and quality of life, we've seen rapid uptake across the board.
Gastroenterologist and Allergists, we also continue to advance our clinical efforts in younger patients where there is also substantial unmet need outside the U S to pyxis net sales were 513 million growing 37% on a constant currency basis, driven by rapid uptake across the approved indications and launches and new Gi.
Other fees in Europe depicts it was approved for <unk> in December and earlier. This week. The picks. It was also approved for instance, esophagitis. We expect these new indications to contribute to depictions ongoing international growth.
In summary during 2022, we executed on our core focus to deliver life changing medicines to patients our commercial initiatives and strategies are driving increases in market penetration for our in line brands and optimizing the potential of new and upcoming launches.
Taken together, we are confident regeneron future.
Well positioned to deliver long term and sustainable growth now I'll turn the call to Bob <unk>.
Maryann My comments today on Regeneron financial results and outlook will be on a non-GAAP basis.
Otherwise noted regeneron ended 2022 with a strong fourth quarter with continued execution driving positive results across the business, excluding contributions from <unk> and rone approved.
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 up $1 4 billion.
Beginning with collaboration revenue and starting with Bayer fourth quarter, 2022 X 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 scientific collaboration revenue was 836 million in the fourth quarter and grew 61% driven by depiction.
Share of profits from the commercialization of depicts <unk> Saar was $619 million, an increase of 60% versus the prior year.
We also recognized a 50 million dollar 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.
We recorded Roche collaboration revenue up $396 million in the fourth quarter for our share of gross profits from ex U S sales of Rona.
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 lip tayo transaction, which with Regeneron now recording all R&D expense for lip Tayo and our full 50% share of antibody collaboration R&D.
Then for depiction and it to pick them up as.
As well as additional costs incurred in connection with the Companys late stage pipeline and increasing clinical manufacturing activities and higher head count related costs.
SG&A expense increased 17% year over year to $579 million due to higher head count and related costs incremental costs to fully support the global commercialization of lip tayo and higher contributions to an independent not for profit patient assistant.
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 signing fee for their share of U S lip tayo 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 2020 to regeneron generated $4 4 billion in free cash flow favorably impacted by our first quarter 2022 payment from the U S government for sales of rich and Coke that were recorded in the fourth quarter of 2021, we ended 2022 with cash and marketable securities.
Less debt of 11.6 billion.
We continued 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.
And business development initiatives.
Including the acquisitions of Checkmate pharmaceuticals in the exclusive worldwide rights to lip tayo.
We also purchased approximately $2 $1 billion of our shares in 2022 <unk>.
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 S. G&A spend to be in the range of 2.13. The 2.28 billion. This primarily reflects the full year impact of global lip titled commercialization expenses.
The build out of our international commercial infrastructure in select markets and higher head count to support our growing organization.
We expect our 2023 R&D.
R&D expense to be in the range of $3 72 five.
Two three point 92, 5 billion as George mentioned, we have numerous strategically important development programs advancing in 2023, including late stage studies for our if the animal Mab lip tayo combination in melanoma and lung cancer and confirmatory phase III studies for <unk> lab, both in F. L. D. L. P C L in limbo sell to Nab.
In myeloma. In addition, we continue to advance programs in our early pipeline across multiple therapeutic areas, including with collaborators such as our NIE luminaire Telia positioning us for long term growth.
This range also includes the full year impact of the Tyco transaction. We're now recording all development expenses for the tile and recognizing our full 50% share of development expenses for <unk> in it to Peck a mab.
<unk> is expected to be in the range of $720 million to $800 million similar to 2022, reflecting reflecting the gradual phase in of a new regeneron developed manual manufacturing process for depiction that is designed to improve drug substance shields.
We expect our capital expenditures in 2023 to be in the range of 825 to 950 million. These expenditures will support the continued expansion of our manufacturing facilities, including ongoing construction of our fill finish facility as well as the previously announced expansion of R&D facilities at our Tarrytown, New York head.
Quarters.
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.
In addition to our full year financial guidance, we expect higher interest income in 2023, given a 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 or 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.
Thank you Bob Shannon that concludes our prepared remarks, we'd now like to open the call for Q&A.
To ensure we are able to address as many questions as possible and we will answer one question from each caller before moving onto the next Shannon. Please go ahead and poll for questions.
Thank you to ask a question. Please press star one on your telephone and wait for your name to be announced towards draw. Your question. Please press star one again, please stand by while we compile the Q&A roster.
Our first question comes from the line of Tyler Van Buren with Cowen. Your line is now open.
Hey, guys good morning, and congratulations on the results and thanks for the question regarding.
Regarding eylea I'd be great to hear the latest on what you're seeing in the marketplace with respect to have a body. So apparently roche is not seeing switches from ore bodies and go back to Eylea. Despite what we're hearing from the Kols. So any additional color there would be helpful.
Hi, Tyler, Yes, and let me comment that are you know certainly eylea performance in the market as I reported it continues to be very strong quick reminder, on the here growing at 8% to $6 3 billion and certainly a very strong competitive performance, we're conscious of competition in the marketplace, but.
It gives them a bit of an update we continue to hear about fresh nab.
He has just been modest and our results in some cases have resulted in patients switching back to other agents, including Eylea, probably most frequently eylea.
Certainly we look forward to our continued efforts on earlier this year as 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 a flipper set eight milligram coming later this year.
Thank you please.
Our next question comes from the line of Matthew Harrison with Morgan Stanley . Your line is now open.
Yeah.
Yeah.
Mark we don't hear you.
Sorry could you not hear mainland.
Yeah, Yeah, yeah, Okay, Alright, alright. So I was just wondering if you could comment on COPD in and what you view as clinically meaningful in terms of our result there.
Other companies have reported sort of 15% but.
But I think in the past you've talked about that as not being a particularly high bar. So maybe you could just talk about how you view clinical name from that thanks.
Well, we powered our futility analysis as well as our clinical.
Clinical trials to deliver what we believe would be clinically meaningful.
Benefit if the study proves positive, which we hope it will and remember we're gonna be looking at both exacerbation, but also improvement in lung function. So it'll be.
A sort of.
Integration of the benefit that patients can receive from both of those measures I remind you that and other settings in asthma in particular.
Fixing has distinguished itself from other <unk> modulators, and delivering pretty substantial improvements in pulmonary lung function. So it's not only all about exacerbations, but we hope to have them.
Significant improvements in exacerbations as well as in lung functions, which will hopefully provide important.
An important benefit to patients.
Thank you next question please.
Our next question comes from the line of Carter Gould with Barclays. Your line is now open.
Hi, guys. Thank you very much for taking the question.
You do have some ATP data on the horizon here with our nylon.
To hear your thoughts on how youre thinking about that and if we should be thinking about that as more of just a proof of concept or as a potential product opportunity even with interest in home delivery.
Yeah.
I guess more of the former.
How much.
Our gating factor to really kind of expanding the effort here potentially dramatically across a number of CNS diseases.
Thank you.
Well as you say the important thing about that aspect of email and collaboration as 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 an island and others are in the liver to bring it to other tissues.
Really up to the central nervous system in this case so.
This the first study, which is focused on OTT 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 at all.
Honestly you know these are these are challenging wants 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 haddon work outside of the liver, particularly in the CNS. So this would be a pla.
At four am enabler.
Thanks, George next question please.
Our next question comes from the line of Brian Abrams with RBC capital markets. Your line is now open.
Hey, guys. Congrats on all the progress and thanks for taking my question.
So with the potential approval coming this summer I'm curious, how we should be thinking about the launch cadence for hydro safe liver steps just considering awesome elements like the introduction of a pre filled syringe that a J code and maybe your overall strategy and how youre thinking about converting market segments, and where youre initially focus thanks.
Give us a second one disconnect all the Roche people on the call. So we can get to our strategy.
In all seriousness, obviously, where there's a lot of thought that's going to go in between now and what we hope will be a late August approval on pricing on rollout on targeting on strategy et cetera, et cetera, but we're working on that we have to get a label we have to get it approved.
And we will have everything else are ready to go the initial launch will be with a vial and then we hope.
Down the road not too far off with a pre filled syringe man I don't know if you want to give away any of your secret sauce.
I I would just say that you know we have a highly experienced team and commercialization and we certainly will be ready for the launch and in the meantime, with various I guess, Don or participation in the market today with Eylea, but I certainly more to come and we absolutely will look forward to the potential launch of it milligram.
Got it.
He asleep.
<unk>.
The Prisma launch has not turned the market sideways on us.
Real competition.
That I think are theres, a window, that's sort of closing for them to compete against two milligrams, we hoping that and then eight milligrams, we hope could become the standard of care. So a lot to look forward to later in the year certainly.
Thank you our next question please.
Our next question comes from the line of Evan <unk> with BMO capital markets. Your line is now open hey, guys. Thanks for the question maybe a follow up to Matt's question can you just speak to what you saw in the Prespecified interim efficacy analysis of the various trial.
Any additional color on the level of benefit versus placebo that trigger the initiation of the notice trial. Thank you.
Yeah, all I can say is that we powered it to deliver we thought it would be a clinically significant improvement there was a combination of measures of exacerbations in lung function improvement and we haven't disclosed what those numbers were.
And we remain blinded to the interim analysis Evan So next question. Please.
Our next question comes from the line of solving Richter with Goldman Sachs. Your line is now open.
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.
Particularly here that the PSM ACD 28 asset thank you.
Yeah.
Well, we obviously have some important submissions were needed to get in a later in the year as we mentioned four CDO three by specifics and we need to continue to get paid later in the year with more patients with our.
P SMA by CD 28, five specifics as well as from some of the other coach them by specifics and we have to move aggressively enrolling.
Additional studies, we plan for lag three.
And we have to make a lib tayo, even more successful in the marketplace and around the world. So lots to do I don't know if Georgia married have anything else to add there.
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 are our PD, one antibody lip titles, such as our lag three and.
Mike the inland that we wanted to establish.
The three bi specifics that we're best in class and that we're working in <unk> settings, but also in solid tumor settings, and then of course, we want to validate that this incredible principal of co stimulatory bi specifics that we introduced into the world, which were truly magical in animal studies with it.
Essentially working like turnkey agents to synergize with the other two classes in animal studies that that that we could reproduce that sort of activity in humans and so us.
Obviously, it takes years to get to that point, but we feel we're in a very exciting position right now because as I said the individual classes are validated we're starting to see impressive combination opportunities we've talked about combining two checkpoint combining our lag three with PD, one where it looks like.
We have.
Maybe taken a first line melanoma to a different point, where patients can get a lot more benefit from this combination and now having validated those we're expanding much more broadly same thing with the CD three bi specifics, we're growing that franchise now that we should.
Shown that our platform works and we're working both in Haemonchus outside in solid tumor settings, and the fact that our first coast and by specific 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 coast in buses in the clinic clearing their dose escalation safety settings, and we're now going to be.
Rolling out data from these combinations more more data from the P. SMA co stim bispecific in prostate cancer and more patients, but we're also going to be reporting on a series of other costumes, including not only in combinations that we're already talked about in solid tumors, but in the Helios space.
We're we're very excited obviously about.
Our CD 20 by CD three bispecific by itself in our D. C made by T. Three by specific by themselves as Len said, we're both filing for those hopefully by the end of the year, but also initiating earlier life study, but just as importantly, we're gonna be initiating combinations with these coastal advisors, which we think yet again.
If these continue to work like they work not only in the animal models, but now how they're they're looking in the early human studies these could really leapfrog them.
The individual agents to a whole new place, where they're really changing the practice of medicine and delivering them much more benefit to patients which is what we're all about yeah I don't think.
Georges point can be overstated.
Overstated.
Cancer.
Tours in serious advanced tumors is still far and few between in and there's still tremendous need which makes this a very dynamic.
Treatment marketplace, because people want that extra benefit because it's not like they're getting cures.
Uh huh.
Haven't cured a lung cancer, where we haven't cured and most serious cancers. So.
The ability to have foundational individual treatments and then get more by combining them really does position us to leapfrog to use George's word in the treatment paradigm.
World because patients and the doctors are very sensitive to improve improve outcomes, because theres still a tremendous tremendous need.
Thank you your next question Shannon.
Our next question comes from the line of Mohit Bansal with Wells Fargo. Your line is open.
Great. Thank you for taking my question.
Maybe staying with COPD so they're.
Talking to some Q I was reading some paper it seems like <unk> has some implications into fibrosis as the no. So the question is do you think there could be a beneficial effect of <unk> blockade and its impact on fibrosis.
On COPD over and above blocking inflammation and if yes do you think about near trial would be enough to see that.
I think you bring up really interesting points, we were actually involved in some of the experiments years ago that showed that IL 13 could actually cause fibrosis in animal model and certainly we do believe that long term like in many of the diseases that we've studied so far that the benefit.
It depicts and blocking both IL four and IL 13 can continue to accrue for the patient in terms of preventing the chronic inflammation that results in so much of this remodeling that you talked about we believe this may be true in asthma and <unk>.
And where we're actually involved in programs and studies to show that some of the same things that you're talking about will also benefit in that you will prevent long term remodeling that decreases lung function over time with structural changes in the asthmatic patients and we believe that that may also be true of course in COPD, but first we need as you.
Say the shorter term studies to be positive, but we do believe that if they produce the type of data that we're hoping to pick some views that type of data, we're hoping it could in COPD that longer term studies like you say could end up showing even long term longer term benefits in terms of exactly the type of remodeling.
And fibrotic changes that result in permanent loss of function lung function in these patients. So we think that you're totally right, but it will probably as you say take longer term studies to actually pick that up.
George next question Shannon.
And our next question comes from the line of Colin Bristow with UBS. Your line is now open.
Hey, good morning, and thanks for taking the question.
I wanted to sort of.
Push a little more on the <unk> piece, the PD readout and just trying to understand what's underpinning your confidence.
It certainly feels like Youre more enthusiastic than what we're hearing out of Europe .
Is this primarily based on the threshold set for Boris interim and these are sufficiently robust you. Just you feel good about the ultimate was all or is there something else you can point us to.
Yeah, I wouldn't over or under Reed R situation right here and it almost doesn't matter because regeneron is a data driven enterprise and we're all going to see the data.
Summing up we hope for later this quarter.
We are totally blinded to the valuation that was done on the interim analysis.
We set we have said we set it at a reasonable bar, but it was only at <unk>.
<unk> of the patients. So you never know how this is going to turn out we would not be as confident about something like this compared to another classic type two inflammatory disease.
So you have that on the negative side, but on the positive side you do have the fact that we've selected patients who have high eosinophils and we had this interim analysis bottom line as we look forward to the data.
Well as you do.
Thanks, Glenn next question Shannon.
Our next question comes from the line of Chris Raymond with Piper Sandler. Your line is now open.
Thanks.
A broader question on the that Jeff Ratner market.
Last year at a there was a lot of discussion and debate around the potential impact on retinal specialist practices.
Yes, intra vitriol therapies for geographic atrophy or approved.
And some folks were talking about just back of the envelope it could drive a pretty sizeable like 30, some percent increase in injection volume of practices just from treating geographic atrophy patients.
As you guys think about this dynamic.
We've heard some kols sort of offer up potential fix to that.
That they would move in more accelerated fashion to get longer duration, you no 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.
Yeah, I mean I think.
Despite all these practice aspects there.
The primary driver will be that patients would prefer to get a needle in the high less frequently.
With every time you put a needle in the eye there is a risk of inflammation or more serious complications hemorrhages attachments things like that so the less you have to do that and get the same benefit.
Is better for the patient from the needle.
Neither in the eye perspective, and it's better for the patient from the number of times they have to come to the Doctor. So often these are elderly patients frequently that Teva caregiver from a practice perspective, certainly many doctor's offices are overwhelmed by.
The number of injections that they're giving and that they could free up time with if you can get the same result from a practical point of view.
With less frequent injections, certainly that would free up more time and would drive but I believe at the end of the day.
Dax do make the decision with their patients.
This primarily because less.
Less injections in the eye are just safer.
And more convenient for the patient.
We also shouldn't lose sight of the fact that if.
They're actually increasing our levels of <unk> macular edema.
In these patients, which will of course necessitate treatment there as well.
Thanks, we have time for two more questions Shannon.
Our next question comes from the line of Chris Schott with Jpmorgan. Your line is now open.
All right great. Thanks, so much for the question just on the on the co Stim platform I guess once you land on the right dose for these products do you expect that there could be accelerating filing pathway just given a few options available for more most of these patients or do we still need to think about needing to go slowly even with the Registrational studies as youre kind of balancing I guess safe.
Versus first efficacy. Thank you.
Well, we certainly believe that when you're in something where there's tremendous medical need and no alternative that there will be opportunities to move for accelerated approval. We're all aware of the new FDA guidelines that they want you to be underway with Europe .
Pivotal your pivotal pivotal studies.
Well underway I think is a favorite use so we're taking that into account, but there's no question that in it.
If we can reproduce the.
Efficacy.
That we saw in these late stage prostate cancer patients, there's not only the need but there would be a mechanism to get that to patients.
Quickly as possible remember there is that the main issue as you referred to is just keep as being mindful of the safety and of course, we're doing everything we can to mitigate that but remember thus far for the most part b are there.
Theres been a extremely tight linkage of safety and efficacy that is the adverse events occurred in those patients who are having a.
The substantial benefit so that makes the risk reward even more attractive from a regular regulators.
Doctors and frankly, a patient perspective. So the short answer is we think we're not going to go too fast where one would be reckless or 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.
One last question please.
Shannon.
Our last question comes from the line of Robyn <unk> with <unk>. Your line is now open.
Great. Thank you for squeezing me in so just a follow up on the prior question. So for your MX 16.
So the 28 and <unk>.
It's one degree of accommodation and what are you expecting regarding the safety profile.
And how do you think about that type of comedy and efficacy and safety wise persons CD 28.
CPI combo.
And just a follow up about it.
Turn back in the day about dosing up with TD 20th of Super agonists like do you think that your initial data might alleviate the need for Joseph Hertz warehouses for CD 28 Com Bispecific.
Perfect. Thanks.
Well all of a lot of good questions in there and I'll start from the end first.
For sure when we started the program.
There was very serious concerns about <unk>.
Previous experience with general CD 28, activators that activated all over the body that resulted in.
Really a horrific situations for patients, which almost killed the field. We invented this new approach to tightly limit, where we were eliminating CD 28 activation right at the tumor surface and so forth.
And of course, there was concern from the FDA, which is why as you said they made us employ a very very.
Conservative dose escalation program, we have to go through five or six dose levels just to get to where we thought where the active dose levels, where we then start to see the rather dramatic and.
Anti tumor activity that we began to report we are hoping that as we get more experience and show that what we have demonstrated pre clinically is really holding true in humans.
In fact these side effects.
That Linda was talking about immune related adverse events are totally unrelated to the sort of toxicity that was seen with nonspecific CD 28 Super agonists 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 patients and that's where that's what we were seeing.
So so we're hoping we're 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 on what we're seeing so far as we presented it.
Our our posters on on an <unk> 16 by CD three that right now its having an acceptable.
The margin.
And we also hope to see that when combined either the CD three combined with the mud 16 by 228 or when the mustard since each way is combined with lip tire that you know we will see the same sort of things that we saw with the P. S. M. A by CD 20, there will be getting hopefully market synergy and increase in the anti tumor activity.
With.
Hopefully a.
Satisfactory safety window.
But that remains to be seen and that's why we're carefully going through the.
The combination studies in the dose escalation studies, but once again I mean, just to say how.
Exciting it is for those of US who've 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 you know 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're aiming to do to try to save more lives extend more lives and it's an exciting place to be in.
Thanks, George that's all the time, we have for today and thanks to everybody who dialed in and for your interest in Regeneron.
I apologize to those remaining in the queue that we did not have a chance to get to as always the IR team is available to answer any questions you may have.
Thank you once again and have a great day and a nice weekend.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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