Michael Aberman - Vice President of Strategy & Investor Relations Leonard S. Schleifer - Co-Founder, Chief Executive Officer, President, Executive Director and Ex Officio Member of Technology Committee George D.

Yancopoulos - Chief Scientific Officer, Executive Vice President, Director, Ex Officio Member of Technology Committee and President of Regeneron Research Laboratories Robert J. Terifay - Senior Vice President of Commercial Robert E.

Landry - Chief Financial Officer and Senior Vice President of Finance

Christopher J. Raymond - Robert W.

Baird & Co. Incorporated, Research Division Jason Kantor - Crédit Suisse AG, Research Division Joseph P.

Schwartz - Leerink Swann LLC, Research Division Terence C. Flynn - Goldman Sachs Group Inc., Research Division Mohit Bansal - Deutsche Bank AG, Research Division Philip Nadeau - Cowen and Company, LLC, Research Division Matthew Roden - UBS Investment Bank, Research Division Matthew Kelsey Harrison - Morgan Stanley, Research Division John L.

Newman - Canaccord Genuity, Research Division Adnan S. Butt - RBC Capital Markets, LLC, Research Division Ying Huang - Barclays Capital, Research Division Nicholas Abbott - BMO Capital Markets U.S.

Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division

Thank you, operator. Good morning, and welcome to Regeneron Pharmaceuticals' First Quarter 2014 Conference Call.

An archive of this webcast will be available on our website under Events and Presentations for 30 days. Joining me on the call today is Dr.

Leonard Schleifer, Founder, President and Chief Executive Officer; George Yancopoulos, Founding Scientist, President of Regeneron Laboratories and Chief Scientific Officer; Bob Landry, Chief Financial Officer; and Bob Terifay, Senior Vice President, Commercial. After our prepared remarks, we'll open the call for Q&A.

I would also like to remind you that remarks made on this call include forward-looking statements about Regeneron. Such statements may include, but are not limited to, those related to Regeneron and its products and business, sales and expense forecast, financial forecast, development programs, collaborations, finances, regulatory matters, intellectual property 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 such statements. A more complete description of these and other material risks can be found in Regeneron's filing with the United States Securities and Exchange Commission, or SEC, including its Form 10-K for the year ended December 31, 2013, and Form 10-Q for the quarter ended March 31, 2014, which was filed with the SEC this morning.

Regeneron does not undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed on today's call.

Information regarding our use of non-GAAP financial measures and the reconciliation of these measures to GAAP are available in our financial results press release, which can be accessed on our website, www.regeneron.com. Once our call concludes, the IR team will be available to answer further questions.

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

Thanks, Michael, and good morning, everyone. The first quarter was another significant quarter for Regeneron.

The global EYLEA franchise continued to grow, and I will address that in more detail shortly. Our pipeline made progress, and we now have 15 antibodies in clinical development.

We continue to make advances towards our mission of bringing important and innovative new medicines to patients. Our financial position has continued to strengthen, and we have embarked on new R&D initiatives and collaborations, including a collaboration with Avalanche Biotechnologies in the field of gene therapy that we announced earlier this week.

Let's turn now to some of the specifics of the quarter. The EYLEA franchise continues to exhibit strong growth, with global net sales of $577 million in the first quarter, representing a 54% increase compared to global EYLEA sales of $376 million in the first quarter of 2013.

First quarter 2014 EYLEA net sales in the U.S. was $359 million, which represents a 14% increase compared to first quarter of 2013.

Net sales in the first quarter of 2014 were negatively impacted by a decrease in distributor inventory, while net sales in the first quarter of 2013 benefited from an increase in distributor inventory. Excluding these inventory changes, underlying demand for EYLEA in the first quarter in the United States increased by over 25% year-over-year.

And this increase was despite the severe winter weather conditions that we believe impacted patients' ability to get to their physicians' offices for scheduled visits in many parts of the U.S. during the first quarter.

Bob Terifay will provide further details in his remarks. x U.S.

EYLEA sales -- net sales were $218 million compared to $62 million in the first quarter of 2013, which was the first full quarter of EYLEA sales outside the U.S. by our x U.S.

partner, Bayer HealthCare. Looking ahead at the rest of 2014, we expect a number of potential growth drivers for EYLEA in the U.S.

As announced previously, we have been granted an FDA target action date of August 18 for EYLEA in the Diabetic Macular Edema, or DME, indication. We believe that over the long term, in the United States, DME could be as significant an opportunity as wet AMD.

We have also been granted a PDUFA date of October 23 for EYLEA in the fourth indication macular edema following branch retinal vein occlusion, or BRVO. With these 2 potential label expansions in the second half of the year, we expect an increase in the growth of EYLEA sales in the U.S.

in 2014 to be weighted towards the second half of the year. Taking these factors into consideration, we reaffirm our previously provided full year U.S.

EYLEA net sales guidance of $1.7 billion to $1.8 billion. You will hear more about the commercial performance of EYLEA from Bob Terifay.

Further confirming our commitment to expanding our presence in the ophthalmology space, early this week, we announced an exciting collaboration with Avalanche to research and develop novel gene therapy products for the treatment of ophthalmic diseases. Avalanche is a leader in the field of next-generation gene therapy technologies, and we look forward to working with them to expand our approaches to developing novel therapies for diseases of the back of the eye.

In the coming months, we anticipate a large amount of new slope from our late-stage pipeline. We expect to report Phase III data from 9 studies about Alirocumab, our PCSK9 antibody for lowering LDL-cholesterol.

Alirocumab clinical trials are addressing several patient populations, where, despite current therapies, there continues to exist a significant number of patients at high-cardiovascular risk. It is estimated that worldwide, there are approximately 22 million diabetic patients on statins with LDL-cholesterol levels greater than 70 milligrams per deciliter.

There are 7.6 million secondary prevention patients, at least 250,000 diagnosed heterozygous familial hypercholesterolemia patients, and finally, about 5.8 patients -- 5.8 million patients who are statin intolerant. All of these patient populations are at high-cardiovascular risk and could potentially benefit from a therapy that could lower their LDL-cholesterol more than can be achieved with current standard of care.

We hope to present our Phase III data from sarilumab, our IL-6 antibody, with achievement of rheumatoid arthritis in the medical conference this quarter. Despite the availability of several TNF inhibitors for the treatment of rheumatoid arthritis, it is believed that up to 40% of patients are inadequately controlled or unable to tolerate their first TNF-alpha inhibitor.

We believe that sarilumab has the potential to offer a very compelling product profile, with the flexibility of both low-dose and high-dose subcutaneous regimens, coupled with every-other-week dosing, which might offer a good option for patients. For dupilumab, a potentially important new therapy for patients with moderate to severe atopic dermatitis, we look forward to reporting top line Phase IIb data and starting a Phase III program in this indication shortly.

We are also currently exploring dupilumab in Phase II trials for asthma and nasal polyposis and evaluating starting the drug in a variety of other Th2-mediated diseases. You will hear further details from George.

With that, let me turn the call over to George Yancopoulos, Regeneron's Chief Scientific Officer, who will discuss our pipeline in greater detail. He will be followed by Bob Terifay, our Senior Vice President of Commercial, and then by Bob Landry, our Chief Financial Officer.

George?

Thank you, Len, and a very good morning to everyone who has joined us today. I'm happy to report that Regeneron's broad pipeline continues to advance.

Let me begin with EYLEA. As Len mentioned, we've been granted a PDUFA date of August 18 for EYLEA in the DME indication and October 23 for the macular edema, following BRVO indication.

Our x U.S. partner, Bayer HealthCare, has also submitted applications for marketing authorization in the DME indication in the European Union and in Japan.

Diabetes is a growing significant public health issue worldwide, and diabetic macular edema represents one of the site-threatening complication of diabetes. If approved, we hope to be able to provide a new therapeutic option for the treatment of this condition.

We are going to be getting a lot of data from our late-stage antibody programs in the very near term. Let me begin with alirocumab, a monoclonal antibody for lowering LDL-cholesterol.

Beginning in June, we expect to start reporting data from 9 Phase III studies about alirocumab. We have previously reported positive data from the Phase III ODYSSEY MONO study, which studies alirocumab in the monotherapy setting.

The data from these 10 studies will be the basis for our regulatory submissions globally. And we expect to be ready to make these submissions by approximately at the end of 2014.

In the U.S., the regulatory submission is gated on the progress of the ODYSSEY OUTCOMES trial and discussions with the FDA. Since both the trials and our discussions are ongoing, we cannot give more precise guidance on timing in the U.S.

at this time. This past quarter, we also shared data for the first time for alirocumab dosed every 4 weeks at the 150-milligram dose in patients who were not on statin.

We think this regimen could be an important option for patients to be dosed every 4 weeks, with an easy-to-use, single 1-milliliter injection of alirocumab. We are studying this dose in the CHOICE II trial that was started in the first quarter and is already fully enrolled.

I'm also happy to report that the CHOICE I study, which explores 300 milligrams dosed every 4 weeks, is also fully enrolled. We believe that the Phase III ODYSSEY program is designed to yield robust efficacy and safety data.

Excluding the OUTCOMES trial, we expect to have over 5,000 patient years of double-blind exposure at the time of the completion of these trials. As we have mentioned before, we have also designed our program to support the ability of physicians to personalize therapy and either start patients at a higher dose or start at a lower dose and up-titrate necessary, thus offering greater flexibility to suit individual patient needs.

Our Phase III program in rheumatoid arthritis with sarilumab, our antibody targeting the IL-6 pathway, is progressing. And we hope to present the full positive data from the Phase III MOBILITY study in an upcoming medical conference shortly.

We reported top line positive data from this study in the fourth quarter of 2013. There are currently 4 more Phase III studies of sarilumab in RA that are ongoing, with expected readouts beginning in 2015.

Turning to dupilumab. We continue to be very excited by this IL-4 receptor alpha antibody that blocks both the IL-4 and IL-13 signaling pathways.

Dupilumab is currently in clinical trials for asthma, atopic dermatitis and nasal polyposis. At the Annual Meeting of the American Academy of Allergy, Asthma and Immunology, also known as Quad AI, we presented positive data from a Phase IIa study of dupilumab in atopic dermatitis.

We expect to report data from our Phase IIb study of dupilumab in atopic dermatitis in the second quarter of 2014 and expect to initiate a Phase III study shortly thereafter. Dupilumab is also currently in a Phase II proof-of-concept trial in nasal polyposis and a Phase IIb study in asthma.

We are evaluating the potential use of dupilumab in additional clinical indications. As you can see, we have a busy late-stage pipeline.

Our early-stage pipeline is also active and growing. We now have a total of 15 antibodies in the clinic, including 2 that entered the clinic this year: REGN2176, our PDGF pathway blocking antibody; and REGN2222, against an undisclosed target.

We expect at least 2 additional antibodies to enter the clinic by year-end, including our first clinical candidate in immuno-oncology, a bispecific antibody. All of these antibodies were derived using our VelocImmune technology.

8 of the 15 antibodies that are currently in clinical development are being developed in collaboration with Sanofi, including our newest antibody in the clinic, REGN2222. I would now like to also spend a few minutes talking about a recent new R&D initiative.

As we announced on Monday, we have entered into a collaboration with Avalanche Biotechnologies to develop next-generation gene therapy products in ophthalmology. Genetics has always been an area of interest and expertise at Regeneron.

As such, the movement to gene therapy is a natural fit. We view Avalanche as a leader in this field, particularly as it applies to diseases of the eye and development of novel vectors that specifically target retinal cells.

Our scientific and commercial expertise in ophthalmology, combined with Avalanche's novel vector technologies, will allow us to invest and investigate potentially breakthrough therapies in ophthalmology. With that, let me now turn the call over to Bob Terifay, our Senior Vice President of Commercial, who will provide further details on the EYLEA commercial landscape.

Thank you, George, and good morning, everyone. I'd like to begin with EYLEA, or intravitreal aflibercept injection.

First quarter U.S. EYLEA net sales were $359 million.

According to a qualitative market research survey that we conducted in the first quarter, EYLEA continues to account for approximately half of the branded anti-VEGF market in the United States for the treatment of wet AMD. And the brand of market continues to represent approximately half of the total anti-VEGF market in this indication.

As previously mentioned, we saw distributors build EYLEA inventory towards the end of last year, which was driven partly by the tightening of our commercial payment terms, beginning in January of 2014. During the first quarter, inventory levels were worked down to the normalized 1- to 2-week range compared to the greater than 2 weeks of inventory at the end of 2013.

Putting inventory aside, if we look at sales to physicians from the distributors, we saw an increase this quarter of over 25% on a quarter -- on a year-over-year basis and an increase of approximately 3% over fourth quarter of 2013. While there was quarter-over-quarter growth in sales to physicians, we believe the first quarter 2014 U.S.

EYLEA sales to doctors were negatively impacted by severe weather conditions in the United States. The inclement weather made it challenging for patients in some parts of the countries to travel to their physicians' offices.

Anecdotally, physicians have reported that in the Northeast, Midwest and mid-Atlantic, the weather resulted in fewer patient visits to physicians' offices. EYLEA is an in-office procedure, and the typical wet AMD as outpatient is elderly, making travel this winter particularly difficult.

An analysis of sales to physicians by geography shows that EYLEA sales growth in the first quarter was strongest in the parts of the country that did not experience such severe weather, such as the Pacific Northwest, the West Coast, the Southwest and the Southeast. Turning to the macular edema following central retinal vein occlusion, or CRVO indication, the second indication for which EYLEA has been approved in the United States, data from our survey suggest that EYLEA in this indication represents over 40% of the approved branded anti-VEGF market.

The branded anti-VEGF market continues to represent about 45% of the overall market. As Len and George mentioned, we're awaiting regulatory decisions for EYLEA in 2 additional indications: diabetic macular edema and macular edema following branch retinal vein occlusion, or BRVO.

DME could be as big of a market opportunity as wet AMD. As we have said before, it is estimated that approximately 600,000 patients are diagnosed with clinically significant macular edema in the United States.

Of these patients, only about 40% are currently treated with the anti-VEGF therapy. If approved in these indications, we expect an acceleration of growth in the United States' EYLEA sales in the second half of this year.

I now like to address the x U.S. EYLEA business, where we split profits with our collaborator, Bayer HealthCare.

First quarter 2014 x U.S. EYLEA sales were $218 million.

x U.S. EYLEA sales continue to be an important growth driver, and the launch outside the United States is making significant progress.

According to data provided by Bayer HealthCare, EYLEA has approximately a 30% share of the market in Germany and is gaining share in the United Kingdom and France, 2 countries where the drug was only recently launched. Over the course of 2014, we expect Bayer to embark on additional launches in the 2 approved indications of wet AMD and macular edema following central retinal vein occlusion, following regulatory and pricing approval in individual countries.

Outside of the United States, EYLEA's approved in 61 countries for the wet AMD indication and 40 countries in the macular edema following CRVO indication. With that, let me turn the call over to our Chief Financial Officer, Bob Landry.

Thanks, Bob, and good morning to everyone. Overall, we are pleased with our first quarter performance.

We earned $2.26 per diluted share from non-GAAP net income of $263 million, which represents a 27% and 31% increase, respectively, versus the 3 months ended March 31, 2013. Regeneron's non-GAAP EPS excludes noncash share-based compensation expense, noncash interest expense related to our senior convertible notes and income tax expense.

A full reconciliation of GAAP to non-GAAP earnings is set forth in our earnings release. Total revenue in the first quarter was $626 million, representing a 42% increase compared to total revenues in the first quarter of 2013.

Net product sales were $362 million in the first quarter of 2014 compared to $319 million in the first quarter of 2013. EYLEA net product sales in the United States were $359 million in the first quarter of 2014 compared to $314 million in the first quarter of 2013, an increase of 14%.

ARCALYST rilonacept net product sales were $3 million in the first quarter of 2014 compared to $5 million in the first quarter of 2013. As mentioned earlier on the call, first quarter 2014 U.S.

EYLEA net sales were adversely impacted by a drawdown of distributor inventory levels to a more normalized range of 1 to 2 weeks on hand. As stated in our press release issued earlier this morning, we are reaffirming our U.S.

EYLEA net sales guidance of $1.7 billion to $1.8 billion. This guidance factors in the potential approval of EYLEA in the DME and macular edema following BRVO indications in the U.S.

in the second half of the year. x U.S.

EYLEA sales were $218 million in the first quarter 2014 as compared to $62 million in the first quarter of 2013, which was the first full quarter of EYLEA sales outside the United States. Product revenue from x U.S.

EYLEA sales is recorded by Bayer HealthCare. As Bob Terifay mentioned in his comments, the EYLEA x U.S.

launches on a strong trajectory and showed sequential quarter-over-quarter growth of 18%. We and Bayer HealthCare are very pleased with the progress that EYLEA is making outside the U.S.

and anticipate further growth as Bayer continues the global rollout into additional markets, including Spain, Italy and Canada. We recognized $61 million as our share of the net profits from x U.S.

EYLEA sales in the first quarter of 2014, after repayment of $14 million in development expenses to Bayer HealthCare. Bayer HealthCare collaboration revenue for the first quarter was $125 million.

This included 2 $15 million sales milestones that we earned upon aggregate x U.S. net sales of EYLEA exceeding $500 million and $600 million, respectively, over a 12-month period.

Depending on x U.S. sales, we could receive 2 additional $15 million milestone payments this year.

Total Sanofi collaboration revenue was $131 million for the first quarter of 2014. As we've said before, the Sanofi collaboration revenue line primarily consists of reimbursement of Regeneron-incurred R&D expenses, which was $128 million in the first quarter; our share of losses in connection with ZALTRAP, ziv-aflibercept for intravenous infusion, which was $3 million in the first quarter; and amortization of upfront and other payments received from Sanofi.

Global ZALTRAP net sales as recorded by Sanofi were $22 million in the first quarter. Turning to expenses.

Non-GAAP R&D expenses were $244 million in the first quarter of 2014. Our unreimbursed R&D expense, which is calculated as the total GAAP R&D expense minus R&D reimbursements we received from our collaborators and R&D noncash share-based compensation expense, was $95 million in the first quarter of 2014.

Our press release issued this morning includes all the information that's required to calculate unreimbursed non-GAAP R&D expense. For 2014, we are reaffirming our previously provided unreimbursed non-GAAP R&D guidance of $425 million to $475 million.

Non-GAAP SG&A expenses for the first quarter were $71 million. For the full year 2014, we are reaffirming our non-GAAP SG&A guidance to be between $330 million to $380 million.

We are expecting our non-GAAP SG&A expenses to be higher in the second half of 2014, as we begin to record prelaunch expenses for alirocumab. As a reminder, non-GAAP R&D and SG&A expenses exclude noncash share-based compensation expense.

Non-GAAP cost of goods sold was $27 million in the first quarter. Included in this line item are royalty expenses in connection with our agreement with Genentech related to U.S.

EYLEA sales, which we're obligated to pay until May 2016. Cost of collaboration manufacturing was $16 million in the first quarter.

Turning now to taxes. The company does not currently pay or expect to pay in the near term significant cash income taxes.

In the first quarter of 2014, the GAAP effective tax rate was approximately 63%, which is higher than our previously reported rate. Recently enacted New York state tax legislation reduced our New York State income tax rate to 0%, effective in 2014.

While this will provide us with New York State tax relief, we also took a onetime tax charge in the first quarter to reduce our related deferred tax assets. Our effective tax rate for the first quarter of 2014 was also negatively impacted by the expiration at the end of 2013 of the federal tax credit for increased research activities and losses incurred in foreign jurisdictions with rates lower than the federal statutory rate.

For the full year 2014, we expect our GAAP effective tax rate to be in the low- to mid-50% range. At the end of the first quarter, we have cash and marketable securities totaling approximately $1.2 billion.

We also had trade accounts receivable approximating $800 million. With that, I'd like to turn the call back to Len.

Thanks, Bob, and thank you, everybody else. The coming months will be filled with data from many of our programs, including expected readouts from the Phase III alirocumab program and Phase IIb dupilumab trial in atopic dermatitis, both of which we are doing in collaboration with our partner, Sanofi, and the -- as well as the data presentation of the Phase III sarilumab MOBILITY results, also in collaboration with Sanofi.

In addition, we are preparing for the potential approvals and launches of EYLEA in 2 additional indications: diabetic macular edema and macular edema following BRVO. We are working steadily towards advancing our pipeline and investing in novel technologies.

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

Thank you, Len. That concludes our prepared remarks.

We'd now like to open the call to Q&A. [Operator Instructions] The IR team will be available in our offices after the call for follow-up questions.

Thank you, and operator, if you could please give instructions and open the call for questions.

So just curious, you guys highlighted sort of, as I heard it, 2 factors here for the seasonality. One was weather and the other was inventory.

And I think we kind of knew about the inventory, from your comments earlier in the year. But not asking for exact figures, could you give some sense of the breakdown between the 2?

And with weather improving in April, May, can you maybe talk about what sort of trends you've seen in the regions that were affected in Q1?

Chris, thanks. Len.

Thanks for your questions. In terms of the last part of your question, we just never comment about how -- quarters ago and mid-quarters.

Just a standard policy here. In terms of the breakdown between weather and inventory, it's hard to do that.

Inventory, we told you about, you can sort of quantify that, based on what the information we gave you at the end of last year and this call. Weather is just a guess how much that impacted things, and it's really hard to know, although, as Bob indicated, we saw a good and stronger growth in regions that were not impacted by the weather.

This is -- we're just beginning also to understand the seasonality of our business here because up until now, we've been in the really rapid part of the growth of the launch, and you haven't seen -- it obscures any seasonality. When you look quarter of this -- first quarter of this year compared to first quarter of last year, the underlying growth to doctors was still very strong.

So that's the information we have, and I know you'd like to crawl around a little bit more, but I think that's all we're going to be able to give you today, Chris. Sorry.

Well, I was going to ask that exact same question, but I have plenty more. Could you give us an idea of what kind of [indiscernible] that you would hope could come out of the collaboration with Avalanche?

What kind of deliveries are we talking about? Is this something that would augment or replace anti-VEGF therapy?

Are we looking at other diseases of the back of the eye? Could you give us some better sense of what you're trying to get out of this collaboration?

Sure. Maybe George can comment on that in a little more detail.

But in terms of the business terms -- before he gets into the science, the business terms of that -- we get to work on some very specific targets, as well as we get to have a certain right to negotiate for what they have in the clinic already for anti-VEGF. But we believe that it's the ability to go after diseases that are not easily addressed by conventional pharmaceuticals that's intriguing here.

George?

Yes. To that end, we're not announcing what the targets are, but the point being that as Len said, they have an interesting set of technologies and vectors that allow you to target, perhaps, particular cell types.

It's a way of, perhaps, getting longer-term delivery of a gene product. And it also allows gene products that maybe can't be delivered as protein to be delivered to the eye.

So I think it's a very interesting collaboration. Of course, we note that it's a relatively long-term investment and collaboration that's not going to necessarily be yielding something in the very near future.

When would we expect to see any data from the PDGF program?

So the PDGF program is early going. And so I guess we'll get -- so when we have them, we'll give them to you.

We're just in the Phase I part of this program. So until we get a little more into it, it will be hard to give you some timeframes.

I was wondering if you could talk a little bit more about the market opportunity that you see for alirocumab before and after CV OUTCOMES data is generated. You gave some metrics on the various segments of patients.

Do you see adoption more or less in any of those areas if you're approved, just on LDL versus several years away when you get CV OUTCOMES data?

Right. So I'll let Bob take that question.

But let me just make the general point here, is that the drug is not approved yet, so we're speculating on how the drug might be used. We don't know what the label actually will be.

But we can talk to you about the kinds of patients that, based on our research, might find that they and their doctors would want to use this product before OUTCOMES and some afterwards. Bob?

Yes. So I think the important point is when you look at the high-risk -- so I think when you look at the high-risk patients with uncontrolled LDL-C, there are approximately 20 million of those patients in the United States.

And there is a significant unmet medical need that LDL-C reduction in and of itself is an important goal for patients. I think that the enriched patient populations that are particularly interesting are those who had a history of a cardiovascular event, as well as those who are statin intolerant.

Statin-intolerant patients don't have a very effective alternative to statins, and so those -- both of those markets represent significant opportunities, as does the heterozygous familial hypercholesterolemia patient population, who are also very, very poorly controlled.

Do you have any market research that says what physicians -- to what degree they're willing to use it in these segments before...

I'm not going to give you the specifics right now, but there is significant -- physicians, when they see the product profile, are very, very interested in using the product.

And if I could add also, it's Michael, we did an IRC, we had a call just a month ago. We presented some of our early market research that did show just unwillingness to prescribe.

So if you want to go, I can share those slides to talk about awareness, as well as likely how they're prescribing monoclonal, so we can do that offline.

Just one quick one and then a little more in-depth ones. First, just on the gross to net.

Can you guys give us any update there in terms of where this stands, given you mentioned you're still tracking the -- how your drug is now post in the hyper-growth phase. And then the second question is just any expectations for the ongoing DRCRnet, DME trial, comparing EYLEA, Lucentis and Avastin?

Right. So do we have any color at all on the...

Yes, Len. I mean, what we saw in the first quarter from a gross to net has been consistent to what we've seen.

We had a little bit of an outlier in the first -- in the fourth quarter of 2013, but it was kind of as expected, our gross to net, for quarter 1, pertaining to EYLEA.

And in terms of the DRCRnet study, I don't -- we don't know exactly but -- when the data will be available. I think this is referring to some studies being conducted by a consortium.

And my understanding is it might be late this year. But I'm not -- Bob, do you have any further information now?

I don't have any.

This is Mohit filling in for Robyn. She is hosting our Healthcare Conference in Boston.

So the question is regarding the market dynamic in DME. Could you please help us understand how the DME market is, in terms of maturity when you compare it to AMD?

And do you expect AMD like [indiscernible] for DME as well?

Right. So in terms of maturity, I would say that the market is not very mature yet.

Bob Terifay might have some color on that. And as well as in terms of the uptake, we don't want to get into predicting the launch here.

So Bob?

As we said, we believe that the long-term market opportunity in DME is at least as big as the wet AMD market opportunity. At the present time, about 400,000 patients are treated with an anti-VEGF therapy each year for wet AMD.

When you look at DME, it is growing year-over-year, but it's currently at about 240,000 patients are treated with an anti-VEGF. The issue is that a lot of these patients are still out with the general ophthalmologist who uses laser therapy in these patients.

The issue with laser therapy is that it does affect the visual field for the patient. And so the real challenge for us is to make sure that we emphasize to patients that they need to get a dilated retinal exam as early as possible and regularly.

And they need to get to a retinal physician for treatment. And that really is going to be the focus of our launch.

But I will tell you that since Lucentis launched in the diabetic macular edema indication, the market has grown.

Yes, I just want to reemphasize that our Phase III data that we submitted to the agency was a head-to-head comparison against laser. So we think that data, if the drug gets approved and then gets into a label, could have an influence on practice, in terms of the selection.

As Bob mentioned, laser still has a pretty strong legacy. I was at the ARVO meetings and some previous retinal meetings early this year, and basically, the sense you get from those meetings is that laser for center-involved macular edema is really being relegated not to the front line.

It's moving more and more to anti-VEGF therapy with the approval with Lucentis in that indication.

I wanted to ask on the dupilumab Phase IIb data that's going to be out sometime over the next few weeks, what your expectations are for the data. I guess, in particular, when I look at the Phase IIa with the EASI-50 responders at 100%, I guess that's not going to change.

I'm curious on the placebo on there. However, it looks like 30 days, that was still trending up.

So is there a chance that over 3 months, maybe placebo kind of also approaches that 100%? And same -- similar questions on the pruritus numeric rating scale and the IGA score, all those were trending down at 30 days.

Would we be wrong for the -- to our group in just extrapolating those lines out to 3 months? Is there anything different in the design between the IIb and the IIa that would kind of make that a not valid expectation?

Phil, I'll let George if he wants to get into some more detail, but I think that you may be approaching it in the wrong way. I don't think there's much of a gain to get into trying to predict exactly what these numbers are.

I think that what we can say is we feel extremely confident in this program that we're going to have strong data, based on what I feel is a very strong Phase I and Phase IIa program. That's the main message here.

George, do you want to add?

Yes. You should go back and just review the Phase IIa data, which was a 12-week study which was presented.

And we do think that, that data, we're hoping -- because that data was very impressive, we're hoping to replicate that sort of data into Phase IIb. The 100% numbers you're talking about was in the Phase I study in combination with topical corticosteroids.

So the average percent change in EASI over the 12-week study was about 75%. So that means the average percent change in the total patients was about 75%, and the placebo group was about 25%.

That was in the 12-week study, as I said, the Phase IIa. And the proportion of patients who achieved an EASI-50 at 12 weeks was about 85% and the placebo group, about 35%.

So what we're hoping -- these obviously are very impressive data, which we hope would be replicated in the Phase IIb. And that's what we're looking for.

We're looking to get quite similar data to what we saw in the Phase IIa, which was a 12-week study.

George, could you just comment because he made a question whether placebo continues to change over the course of the trial. Is that what we saw or is it...

Well, the placebo does go up slowly, but it was a 12-week study. I think Phil was thinking about our Phase Is, which were 4-week study.

So the increase from 1 month to 3 months is only about from 25% to 35% in placebo. So obviously, we saw a very big differential with the 85% EASI-50 -- 85% of patients achieving EASI-50 with dupilumab over 12 weeks.

So there was obviously a very substantial drug-associated benefit compared to placebo, and as I've said, I think, the hope is that we can replicate them. Just to give you some other outstanding numbers, EASI-75 is the percent of people who had a 75% improvement.

It was about 60% in the treated group and only about 14% in placebo. So there's really a relatively impressive drug effect.

The same with pruritus scores and every other assessment. And as I said, we only hope that this really represents the -- what this drug can really do and continue to do on patients.

So what we're hoping for is to largely just replicate these impressive Phase IIa data.

And are there any differences in enrollment criteria that we should keep in mind, that could result in slightly different patient population? Or are the patients almost exactly the same?

There are slight differences that could affect different aspects of the study, different jurisdictions, more patients, U.S. versus Europe, things like that.

But our biggest hope is just to reproduce these sort of data that we've already seen.

I want to take a stab at quantifying the inventory again and better understanding the underlying demand trend. So based on what you said, it seems to me that the channel swing might have been something like $25 million to $30 million between 4Q and 1Q.

So first of all, are we on the right track here? And then if we back that out of '14 numbers, then we're looking at about 2 straight quarters of about 3% sequential demand growth.

So is that about what should be expected until you get label expansion later this year? And we realize you have a big opportunity here with DME coming up, but is there anything you think can be done to revitalize this quarter and the opportunity?

Yes. So I don't think we want to get into predicting quarter-by-quarter sequential growth rates.

I don't think your calculations are wildly off. I don't want to get into the fine details of them.

But I think that we did tell you that the sequential growth in the fourth quarter to first quarter was about 3%. And we did tell you that we expect the growth -- the bigger part of the growth would come, subject to the approvals that we have in the latter part of the year.

So I think your thinking is good. So maybe that's all I want to say on that.

I do want -- as long as we were back on EYLEA, in case we don't come back to it, I do want to say that it's a very interesting marketplace, of course, with lots of things going on. There's still questions about what's going on with compounding.

There's still, of course, all the issues related to rebates. And then there's, of course, our poor friends and customers, the retinal docs, who, I think, took a lot of unnecessary abuse with articles in Washington Post and New York Times where they were -- it made it look like that if you needed a loan, you should call your local retinal doctor, and that probably was a little bit unfair because most of that money was being -- going through their shop to pay for either Lucentis or EYLEA.

So I just wanted to make a little comment about that. But the bottom line is that the business continues to grow, but we expect the big growth to come in the latter part of the year, hopefully, with the approvals.

I want to go back to dupilumab and just ask sort of a question around, there are a lot of other antibodies in development for asthma, some are IL-4 -- I mean, some IL-5, so a bunch of different mechanisms. But I'm just wondering if you could maybe help us understand mechanistically where you think the differences are and how they might play out clinically between dupilumab and some of these other antibodies.

So I'll let George handle that. But just from a -- before he gets into the technical aspects, just from a broad perspective, you're right there, there's a lot going on in asthma, and George can comment on where we fit in.

But there's been a lot less going on in atopic dermatitis, and that's a disease with a lot of people -- Bob, how many people have moderate to severe atopic dermatitis?

Over 1 million.

Over 1 million in the United States with moderate to severe atopic dermatitis, so that's -- from a competitive point of view, not a mechanistic point of view, obviously, the asthma space is more competitive. But, of course, it's a very serious disease.

Atopic dermatitis is a troubling disease, albeit not life-threatening, but a really serious troubling disease to many patients with less competition. George, do you want to get into the mechanistic stuff?

Yes. Well, the basic question that you get at in terms of mechanism is which of the side [ph] kinds [ph} are the most important drivers of the disease processes in these various settings?

And I think that, mechanistically, what we think is emerging, and in fact we think that our data is really contributing to this, is -- to shed some light on what's going on, in terms of what many view as a worldwide growing epidemic in terms of all sorts of allergic diseases. And we're not just talking about allergic asthma, but we're also talking about atopic dermatitis, but we're talking about everything else as well, food allergies, all sorts of other allergies, seasonal allergies and so forth.

They're well documented by the New York Times and the CDC. I mean, there's been this huge uptick in all of these diseases.

And one possibility is that these diseases have unrelated mechanisms and unrelated causes, and the upticks are just all occurring at the same time but are unrelated. So we believe, instead, that there's reason to think all of these as essentially variations of the same disease and that it's the same fundamental mechanistic drivers that are skewing the immune system, perhaps due to shared environmental impacts and drivers.

And that the same mechanistic drivers are contributing to variations of the same disease and in some people are manifested as allergic asthma, and others as atopic dermatitis, and somebody else as sinusitis and somebody else as seasonal allergies. And we believe that the data suggest that 4 and 13 are the critical mechanistic pathway drivers, perhaps, for all these diseases.

And the thing that we think is quite stunning and perhaps unprecedented is to have produced data that shows very interesting effects in 2 important variations of this class of disease, that is allergic asthma and atopic dermatitis, by hitting this pathway. I think that this really does suggest for the first time that, indeed, all of these related diseases perhaps have the same drivers, and that IL-4 and IL-13 are the core pathway drivers.

So it may be true that for one or another one of these diseases, a downstream factor could be important because that -- and it may be true for that variance of disease, but not another variation of disease. But it's also quite possible, we're very excited about this possibility, that 4 and 13 could be the core drivers of a large proportion of the allergic diseases that are now being driven.

I just wondered if you could talk about how much detail you might provide going forward on your Phase III studies for alirocumab in terms of the injection-site reactions. And the reason I ask is because when you presented your first Phase III study and you tight traded up from 75 to 150, it seems that your reverse event profile was more favorable than Amgen.

And I'm just wondering, going forward, how much detail would you be able to tell us about things like injection-site redness and reactions.

Yes. I think once we have the data and it's presented at the medical conference, we'll be happy to share all the detail that we have available.

It's not been an issue of any significant concern, as far as I'm aware to-date.

I still have 3 questions, but I'll start with 1 question. So for the alirocumab, for the anti-PCSK9 program, what's the difference that some other competitors think that they may be able to file but there's some uncertainty on the Regeneron Sanofi side?

And what's the cost of filing -- potential filing time range in the U.S.? Is that anywhere from 2014 to the end of 2015?

Can you say a bit on that?

Sure. Stating when you're going to file and predicting and all that sort of stuff, there may be some stylistic differences between the companies and how we approach things, but there are no regulatory differences between the companies.

The bottom line is that we and our partner, Sanofi, plan to be ready for filing, certainly, by the end of the year, in both the United States and the EU. In the U.S., it's gated on the progress of OUTCOMES trials and ongoing discussions with the FDA.

And so since these discussions are ongoing, we don't want to give you any precise predictions because they might change, as a result of these discussions. But we have no reason to believe -- in fact, we believe just the opposite, that the U.S.

regulatory requirements are going to be consistent for different products across the same class. And if anything, we think we have a much stronger package at this point, in terms of 5,000 patient years of blinded data in the non-OUTCOMES study, which, best to my calculation, might be as many as 2 or 3 times more than the Amgen program has, based on what was presented at the recent meeting.

So we have a very robust package, which we will be submitting with. And so we're confident that we'll get the same treatment from the regulators as everybody else.

I hate to beat a dead horse, but Bob, can you just quickly comment whether the inventory will go back to normal level of 1 to 2 weeks? Or it will -- or last quarter, 4Q, was actually outlier with greater than 2 weeks.

And then also on the status of your Ang2 VEGF program in wet AMD because we knew that Roche just started a Phase I program of their Ang2 and VEGF program.

Right. So to answer the inventory, as I said earlier, we were above the 1- to 2-week inventory level at the end of Q4.

At the end of Q1, we have returned back to the inventory levels below 2. And that is really where we anticipate inventory to be.

Although at the end of the year, you do see people buying in, especially the change in commercial dating terms, which led to some people buying a little bit of excess inventory.

Okay. George, do you want to make a comment on the Ang2, that study is for development for us later?

Right. So I think the common to the question was about Roche and Roche's bispecifics.

And as you guys probably know, I mean, we're very heavily involved in the bispecific space and we have strong views about it. We think that, honestly, it only makes sense to make a bispecific, when you want to actually, for some reason, bring some targets together or join molecularly 2 targets.

It doesn't really makes sense. In fact, it's the opposite of making sense to make a single reagent that can block independently 2 things that are better blocked separately.

And why do I say that? The odds that you want to have a single agent that's delivered at the same exact levels to attack 2 different natural molecules that they themselves are probably going to be expressed by the body at 2 widely different levels with 2 different affinities and so forth, it just doesn't make any sense.

And it's much better, in fact, to be able to have 2 separate blockers, which you can give at the right proportions, at the right ratios, instead of having to be forced to be giving them in the fixed ratio that the bispecific does. So we are actually always designing bispecifics for the right and the rational reasons.

And obviously, we have a lot of bispecifics at various stages in development, including one we hope to be putting to the clinic this year. But those, we think, will be rationally designed and guided, based on the fact that it makes sense to make a bispecific for those targets.

For this purpose, we're blocking VEGF and Ang2, it makes no sense to have a bispecific. In fact, it's the opposite of making sense.

And we are very much more excited to have the 2 independent agents that will be able to be titrating exactly in their perfect ratios that will benefit most the patients, yet still give them the same injection if that need be.

This is Nick in for Jim this morning. Just to go a little bit back to DME.

Can you let us know, about 240,000 patients currently receiving treatment, what proportion of those are receiving an anti-VEGF and within that, the brand, I guess, Lucentis market share? And then, in terms of the biology of the disease here, clearly, differs from AMD.

So is this a disease where you think you will need chronic dosing for most patients? And then Protocol T was mentioned before.

But when you do your market research, obviously, there's a lot of interest versus laser. But a physician is really interested in getting this head-head data of Avastin versus the 2 branded products.

So let me cover on the numbers. To clarify, there are 600,000 patients with centrally involved DME.

240,000 are treated with an anti-VEGF therapy at the present time. Similar to before EYLEA launched, Avastin has the majority of the DME market at the current time.

If you remember, when we launched an AMD, Avastin had about 65% of the market. We were able to not just penetrate the Lucentis market but also penetrate the Avastin market.

So that is the opportunity in DME, is to grow the market beyond the 240,000 patients and to take share from both agents, both in the new patient starts, as well the switch patients. I would remind you, in our U.S.-based study, the VISTA study, 42% of the patients were prior anti-VEGF therapy.

As we presented at ARVO this week, those patients did equally well as the newly diagnosed patients. In terms of the biology, I'll let George address it, but what we see is the DME is a chronic condition and that there is a long-term opportunity for the products, although dosing may change over time.

So let me just make a couple of comments. First of all, I agree with Bob.

I think, look, our program is under review, so we don't know what our label is going to be. We don't know if it's going to be -- get approved.

But assuming that it does, I mean, and we think we have some nice advantages, at least in the design of that program, highlighting what Bob said, obviously, is we demonstrated that there was a lot of people in that program who had previous exposure to other anti-VEGF agents. And also, it's really the only approved agent, if it gets approved, that would have a direct comparison to laser.

Having said that, I do think people will be interested in the Protocol T, which is, for those who are not familiar, is a consortium DRCR-led, a study which compares Avastin and it compares Lucentis at the 0.3-milligram dose. I should remind everybody that one of the other advantages of our drug that we've submitted for is at the same dose, whereas the Lucentis had 2 different doses: 1 for AMD and 1 for DME, a lower dose, in the United States.

So all of these should play into the marketplace. But I think maybe we should really wait and respect the process and have a lot more to say about this, if we get the drug approved.

So let's wait for that before we say any more.

Just on U.S. EYLEA, after the first quarter, the guidance assumes a pretty big step-up in the second half.

And so I'm just curious, are there some market dynamics in DME that could accelerate adoption, when you look at things like compounding levels or payment terms or kind of what you guys see as an unmet need by laser or VEGF?

Yes. I mean, it's complicated, obviously, but -- and we're making some guesses, and so it's obviously a forward-looking guess.

But we do feel that based on what happened with the launch in AMD, there will be a reservoir of patients who might be unsatisfied with current therapies and who might consider using EYLEA, if it's approved. And so that reservoir should make for a pretty nice initial uptick, if it goes the same way as AMD went.

But, of course, there are other things, and as I said, there are other aspects of this as the lower dose we're is going up against this time as opposed to the -- we have a 2-milligram dose versus their 0.3-milligram dose. We did have data in our study for the Q2 month, so have to see how the labor goes with that.

That could be an advantage. Remember, diabetics tend to be younger.

Many of them still tend to be working. And so a convenience of -- less of an injection burden could be important.

But once again, I don't want to get ahead of ourselves. Let's -- we can have a really robust conversation about this, after the PDUFA date.

But Len, I do think there's another important factor. There's another influencer of the forecast in the second half, which is on October 23, we're expecting approval on macular edema following BRVO, if everything goes well.

Right. Regulatory authorities.

And the BRVO market is 3x the size of the CRVO market. So there are some upside there as well.

Right. And, of course, I would emphasize, Geoff, that this is a global launch and marketplace.

And so you might see growth here and more growth overseas, and then you'll see something more growth here and less growth. I just -- we think that the overall product is growing very nicely.

Bayer is doing a spectacular job, as you can tell from their numbers. And so we think of this as a pretty big important global franchise.

And Mike, do you want to wrap it up?

That's great. So thank you, everybody, for participating.

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