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Operator
Good morning, and welcome to the Regeneron Pharmaceuticals first quarter 2019 earnings conference call. My name is Brandon, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, during which you can dial star 1 if you have a question. Please note this conference is being recorded, and I will now turn it over to Mark Hudson. You may begin, sir.
Mark Hudson
Thank you, Brandon. Good morning, and welcome to Regeneron Pharmaceuticals' first quarter 2019 conference call. An archive of this webcast will be available on our website for 30 days under events. Joining me on the call today are Dr. Leonard Schleifer, Founder, President, and Chief Executive Officer, Dr. George Encopolis, Founding Scientist, President and Chief Scientific Officer, Mary McCourt, Senior Vice President and Head of Commercial, and Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we'll open up the call for Q&A. I'd also like to remind you that remarks today made on This call today includes forward-looking statements about Regeneron. Such statements may include, but are not limited to, those related to Regeneron and its products and business, financial forecasts and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, intellectual property, pending litigation, and competition. Each forward-looking statement is subject to risks and uncertainties that can cause actual results and events to differ materially from those projected in that statement. 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-Q for the quarter period ended March 31, 2019, which has been filed with the SEC today. Regeneron does not undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. In addition, please note that GAAP and non-GAAP measures will be discussed in today's call. Information regarding our use of non-GAAP financial measures and the reconciliation of those measures to GAAP is available in our financial results press release, which can be accessed on our website. Once our call concludes, Bob Landry, Jay Markowitz, and the IR team will be available to answer further questions. With that, let me turn the call over to our President and Chief Executive Officer, Dr. Lynch-Leifer.
Lynch - Leifer
Thanks, Mark. Good morning to everyone. I lay into PICS and kicked off a successful start to 2019. For the first quarter, total aggregate sales of all Regeneron-evented products were $2.27 billion, a 23% year-over-year increase. We are pleased with the early launch of Liptio, our foundation in immuno-oncology, and we made significant progress across our deep and diverse pipeline. ILEA, which was approved in the U.S. late in 2011, continues to deliver in its eighth year in the market, with U.S. sales of $1.07 billion, a 9% year-over-year increase. I'm proud to say that ILEA's growth has come without price increases. ILEA has an established efficacy and safety profile, with over 25 million injections sold worldwide. In addition to a demographic tailwind in approved indications, we view our pending new approval in diabetic retinopathy as a new opportunity to potentially drive growth. While the potential to prevent patients with diabetic retinopathy from suffering blinding complications is very exciting, we recognize that it will require market development because it involves treating patients that are currently asymptomatic. To test the hypothesis that higher doses may improve upon ILEA's already market-leading profile, later this year we plan to advance into clinical development a high-dose formulation of Aflib Recept, and we continue to make progress on new molecular entities that have the potential to be even better. Let me turn now to Dupixent, the product with the potential to change the course of allergic type 2 diseases. First quarter net sales globally were 374 million, and patient feedback testified to Dupixent's value proposition. We are seeing growth in both atopic dermatitis and asthma, and we expect further growth to be amplified by expanded age groups, new geographies, and additional indications. Moving now to libtio. In its first two quarters on the market, libtio has established a foothold in advanced cutaneous squamous cell carcinoma, or CSCC. We intend to build on that dramatic oncology foundation and expand into other indications. In addition to testing libtio in cancers, in which PD-1 blockade is known to be effective, we consider it an important component of potential future combinations that have the potential to broaden activity and deepen responses. Last month, we announced a collaboration with Alnylam that combines each company's unique assets and abilities and enables us to pursue intracellular targets in the eye and central nervous system, as well as a select number of targets in the liver. This deal exemplifies our business development strategy, and we continue to explore many new and exciting opportunities. Advancing our internal pipeline remains a key priority. Leveraging our scientific capabilities and our world-class genetic efforts and partnering with other scientific-driven companies is yet another way we plan to capitalize on our own research, productivity, and innovation. In summary, our core franchises of ILEA and Dupixent are growing. LibTIO is establishing itself as the foundation of our diversified and comprehensive immuno-oncology platform and has had early commercial success in its first indication. We are advancing a broad and deep pipeline, rich in opportunity for sustainable long-term growth. For more on that, I will now turn the call over to George.
George
Thank you, Len, and good morning to everyone. Let me begin with ILEA, which remains the gold standard for retinal disease. Despite efforts by many others to develop drugs with superior visual outcomes, ILEA remains the market leader based upon visual outcome and safety and is the measure upon which other therapies are compared. In terms of additional indications in which ILEA can benefit patients, we are looking forward to next week's FDA action date for our supplemental BLA in diabetic retinopathy. Furthermore, we are awaiting FDA action on our resubmitted filing for the ILEA pre-filled syringe, hoping to launch in the second half of 2019. As Len mentioned, we also plan to initiate clinical development of a higher-dose formulation of Aflibrocept, and we continue preclinical development of the new VEGF blocker. Earlier research efforts are focusing on gene therapy and other novel approaches. I'd like to now turn to Depixin, which is emerging as a new standard for type 2 diseases. In the first quarter of 2019, we achieved three important regulatory milestones. The FDA approval for adolescents aged 12 through 17 with atopic dermatitis, a positive EU opinion for severe asthma in adolescents and adults, and the U.S. and EU filing of our applications for chronic rhinosinusitis with nasal polyposis, for which we received priority review in the United States with an action date of June 26. We hope to bring the benefit of Depixen to even younger atopic dermatitis patients. Our Phase III trial in pediatric patients age 6 to 11 is now fully enrolled, and we expect to report results on this trial later this year. We also have an ongoing pivotal confirmatory study in eosinophilic esophagitis, as well as studies with peanut and grass algae. Dupixent is delivering on its pipeline interproduct promise, demonstrating positive data in multiple allergic type 2 diseases, confirming our hypothesis that interleukin-4 and interleukin-13 are the key drivers of allergic type 2 disease in general. Many of these different manifestations of an overactive type 2 inflammation occur simultaneously in the same patient. For example, in our adolescent atopic dermatitis trials, more than 90% had at least one other allergic condition, with more than 50% suffering from comorbid asthma. Obviously, there would be a huge patient benefit if they can take a single medicine for multiple diseases. Interestingly, there are numerous case studies published by outside investigators indicating benefit for dupilumab in an assortment of additional type 2 related conditions, such as alopecia areata and bullous pemphigoid, that we have yet to study formally, and we are considering confirmatory studies in these settings. Of course, it is possible to treat numerous immune diseases with drugs that are broadly immunosuppressive, or to treat a single disease with drugs that are more disease-specific. Dupixent is the rare example of a drug that has efficacy across a range of type 2 diseases that tend to afflict the same patient with a favorable safety profile that has permitted development in teenagers and young children. In addition to Dupixent, we in Sanofi are also testing Regeneron 3500, our fully human anti-IL-33 antibody, in asthma, atopic dermatitis, and COPD. The first of these proof-of-concept trials to read out is in asthma. where we expect to report top-line results by mid-year. I will shift gears now from our efforts with immunotherapies in non-oncologic settings to our immunotherapy efforts to treat cancer, starting with our PD-1 antibody, Liptio. Last month, the European regulatory body issued a positive opinion for advanced cutaneous squamous cell carcinoma. This follows the September 2018 U.S. approval, which made Liptio the third FDA-approved PD-1 antibody and the first approved medicine of any kind for patients with advanced cutaneous squamous cell carcinoma. To extend Liptio's benefit in this disease, the second most common skin cancer, we will be starting a Phase III adjuvant trial this quarter and a neoadjuvant trial in the third quarter. We are also evaluating Liptio in the most common skin cancer, that is, basal cell carcinoma, where we have fully enrolled the locally advanced cohort of our potentially pivotal trial. Moving to lung cancer. Despite the head start of multiple other programs, Leptio has the opportunity to become one of only two PD-1 antibodies approved for the first-line treatment of metastatic non-small-cell lung cancer, the most common cause of cancer death. Our Leptio monotherapy trial, which we doubled in size, is about two-thirds enrolled. We will soon begin enrolling patients in our Phase III non-small-cell lung cancer trial, comparing Leptio plus chemotherapy to chemotherapy alone. This study will enroll both squamous and non-squamous, non-small cell lung cancer patients, regardless of PD-L1 expression. Yonliptia bispecific antibodies are another key component of our immuno-oncology strategy. We will present updated efficacy and safety data for our CD20 by CD3 bispecific antibody at two European hematology conferences in June. The data will include promising early results, with higher doses, longer-term follow-up, and efficacy in specific patient subpopulations, such as CAR-T failures. Encouraged by high rates of deep and durable responses, we are on track to initiate two potentially registrational Phase II studies, the first in advanced relapsed refractory follicular lymphoma by mid-year, and another in advanced relapsed refractory diffuse large B-cell lymphoma, or DLBCL, by the end of the year. We're enrolling patients in early studies testing our other two clinical stage CD3 bispecific antibodies, MUX16 by CD3 for platinum-resistant ovarian cancer and BCMA by CD3 for relapse or refractory multiple myeloma. Based on currently available results from BCMA-targeted CAR-T and other approaches, there is still room for improvement. A fully human bispecific BCMA by CD3 with favorable pharmacokinetics and lacking potentially immunogenic features, may provide the foundation for additional combination approaches. As far as we know, our bispecific platform is the only one that does not use artificial linkers, mutations, or other unnatural sequences. We are also advancing our entirely new class of bispecific antibodies, as we will soon begin clinical testing of our first co-stimulatory, or co-stim bispecific, Regen 5678, which is designed to brine prostate-specific membrane antigen, or PSMA, and CD28. We hope that our clinical studies will replicate our preclinical observations that this new class of COSTEM bispecifics has limited to toxicity while synergizing with Liptio as well as with the CD3 class of bispecifics. Since prostate cancer has shown real but limited responsiveness to PD-1 therapy, We believe it may therefore be an ideal opportunity to detect a clear signal of additional activity if the combination of Liptio and PSMA by CD28 results in a substantially higher response rate than previously observed with PD-1 blockers. The ability to test multiple combinations of our own checkpoint inhibitors, CD3 bispecifics, and Costin bispecifics is a differentiated feature of our immuno-oncology pipeline. However, Heightening the immune response via combination approaches carries inherent risks, as occurs with CAR-T therapies. For example, in our initial study combining our CD20 by CD3 bispecific with our PD-1 antibody, in which approximately 30 patients with advanced lymphoma have been treated with the combination, we observed enhanced cytokine release syndrome, or CRS, that might have been associated with increased tumor response, but also with increased toxicities. including, unfortunately, two fatalities potentially related to the CRS. We plan to modify the dosing regimen with the goal of minimizing toxicity while potentially capturing the potentially increased activity. Over the coming months and years, we expect to advance a steady stream of bispecifics into clinical development. Just to remind you, Regeneron 1979, C3 bispecifics other than those targeting MUX16 and BCMA, and our new class of COSTEM bispecifics are all wholly owned by Regeneron. Leaving out immune oncology and moving to pain, as we have emphasized previously, faciniumab, our anti-NGF antibody, involves a high-risk program due to long-term safety issues involving increased treatment-associated arthropathies and total joint replacements with this class. On April 30th, the Data Monitoring Committee recommended continuing the program at the ongoing lower doses where we previously reported positive efficacy results. These are just a few highlights of Regeneron's homegrown pipeline. Let me conclude with comments about the Regeneron Genetic Center, or the RGC, and our L-nylam collaboration. In March, the RGC provided to the global research community exome sequences from the first 50,000 UK biobank participants. Sequences are linked to detailed, de-identified electronic health records, imaging, and other health-related information provided through a collaboration among the UK Biobank, Regeneron, and GlaxoSmithKline. Regeneron is also leading a separate effort to sequence the remaining 450,000 UK Biobank participants, which we intend to complete by 2020, and is being funded by a consortium of biopharma companies, including Alnylam, AbbVie, AstraZeneca, BMS, Biogen, Pfizer, and Takeda. Finally, I would like to acknowledge our new collaboration with El Nylon. Regeneron and El Nylon's technologies are complementary, and our companies share a commitment to patients and to science. The emphasis of our joint work will be on diseases of the eye and CNS, and we will also work jointly on certain targets expressed in the liver, including C5, where we each have clinical stage acids. Regeneron's antibodies are optimal for secreted and cell surface targets, Alnylam's siRNA enables us to extend our therapeutic reach to inside the cell. With that, I'll turn over the call to Marion.
GlaxoSmithKline
Thank you, George, and good morning, everyone. I'd like to start with ILEA. For the first quarter, U.S. ILEA net product sales grew 9% year-over-year to $1.07 billion. Overall market growth continues to be driven by the aging population, increase in diabetes prevalence, and physician preference for ILEA. ILEA is the world's leading anti-VEGF branded therapy for retinal disease. Based on its broad range of indications, demonstrated safety profile, dosing flexibility, and established physician confidence, ILEA market share continues to grow in the overall U.S. anti-VEGF market. This includes branded products and off-label repackaged Avastin. In the branded U.S. market, ILEA has about 70% share of net product sales. Among payers, ILEA continues to secure approximately 90% first-line access. We're committed to further strengthening our leadership position for ILEA through continued innovation in dose and delivery, as well as label expansion opportunities. Diabetes is our largest growth opportunity. Very shortly, we expect to hear from the FDA on our filing submission for ILEA and diabetic retinopathy. Diabetic retinopathy is not a benign condition. Patients with moderately severe and severe non-proliferative disease are at risk for potential blindness. Given the compelling data from our Panorama trial, we think this is an important opportunity to help patients avoid these serious complications. If approved, we have comprehensive plans to develop this market. Our focus will be on raising awareness of the benefits of treating diabetic retinopathy, encouraging early intervention for appropriate patients, and ensuring ILEA is the first-line anti-VEGF treatment for diabetic retinopathy patients. Turning now to Depixent, where global net product sales in the first quarter were 374 million. In the U.S., net product sales reached 303 million, representing a 159% year-over-year growth. Total prescriptions, or TRX, in the U.S. grew 18% quarter-over-quarter. This was driven by growth in adult atopic dermatitis and in our new asthma indication, which launched in the fourth quarter. In March, the FDA also approved Depixin in adolescent atopic dermatitis, which we anticipate will contribute to incremental growth. Across all indications, prescriber experience and depth continue to improve. Approximately 16,000 healthcare providers have prescribed Depixin, and we continue to see strong prescribing trends. Weekly new-to-brand prescriptions, or NBRX, for the quarter average 950 patients per week. up from approximately 700 in the prior quarter. In atopic dermatitis, more patients are now benefiting from Depixent, including those with both moderate and severe disease. Prescriber depth has grown, as evidenced by a nearly 200% year-over-year increase in the number of providers who have prescribed Depixent to five or more patients. Additionally, patient awareness has improved, benefiting from our promotional and educational campaigns. As a reminder, we estimate the target patient population most in need to be 300 to 400,000 adults, and just a small minority of patients have received Depixent since launch. We also see an important opportunity in adolescent patients with atopic dermatitis. Depixent is the first biologic approved in this patient group who remain uncontrolled using topical therapies. While it's very early, market launch reaction has been extremely positive, Our promotional efforts are focused on the same allergists and dermatologists who currently treat adults with atopic dermatitis, plus pediatric dermatologists and pediatric allergists. We have also been encouraged by payer receptivity to extending depiction access to this younger patient population. Additionally, we anticipate data from our pediatric study in atopic dermatitis ages 6 to 11 later this year. Turning now to asthma, where depiction is quickly establishing a competitive market presence in the U.S., Dupixent has a differentiated clinical and safety profile compared to other asthma biologics. It has a first-in-class mode of action that substantially reduces exacerbations and provides clinically meaningful improvement in lung function, broad approved patient population, and is the only asthma biologic that can be self-administered. Since Dupixent's asthma launch last October, we estimate the asthma biologic market has grown by more than 10%. Nearly 75% of Dupixent asthma patients are new to biologics, and significant opportunity remains for subsequent growth. Uptake has been driven by allergists who have experience using Dupixent in atopic dermatitis, and also pulmonologists who are highly receptive to Dupixent efficacy, use in steroid-dependent patients, and self-administration. Additionally, we are excited about launching in markets outside the U.S. Dupixent was recently approved in Japan and we expect an EU regulatory decision midyear. Finally, in June, we expect to hear from the FDA on our proposed indication in chronic rhinosinusitis with nasal polyps. This should help further differentiate Dupixent from the competition by demonstrating that the same treatment can address multiple related type 2 conditions that often present in the same patient. I'd now like to turn to Liptayo. In the U.S., First quarter net product sales were 27 million, driven by prescription demand. Building on our success since launch, Libtyo's brand awareness among the medical community has increased substantially. We made further progress in establishing Libtyo as a standard of care in advanced CSCC across all lines of therapy. Our launch update has benefited from broad payer access with nearly all Medicare, commercial, and Medicaid lives covered. We expect the number of patients on Libtyo to grow. based on demographics, enhancement in patient identification, and physician referrals. Litaio is the only FDA-approved treatment for advanced CSCC and the only anti-PD-1 or PD-L1 with a category 2A recommendation from the National Comprehensive Cancer Network, or NCCN. Now on to Praluent. Just over a week ago, the FDA approved Praluent to prevent cardiovascular events. Praluent is the first and only PCSK9 inhibitor with data showing a meaningful reduction in all-cause mortality, and we're pleased the data describing this mortality effect was included in the updated label. In this highly competitive market, we continue to be focused on patient affordability and payer access. Turning to Kevzara, within U.S. IL-6 subcutaneous class, Kevzara now has an estimated 45 percent share of new patients dispensed drug, or NBRX, and 26% share of total scripts, or TRX. We're working to accelerate Kevzara growth by securing a greater share of the IL-6 market and growing the market, which is currently estimated at $450 million in the U.S. Now I'll turn the call over to Bob.
Kevzara
Thanks, Marion, and good morning to everyone. Today I will discuss our first quarter 2019 financial progress, highlight various items and events that impacted our results, and provide updates to our full-year guidance line items, which can be found in our press release that was issued earlier this morning. For the first quarter 2019, we reported non-GAAP diluted net income per share of $4.45 on non-GAAP net income of $518 million. Total revenues were $1.71 billion, a 13% year-over-year increase. Revenue growth continued to be driven by global sales of ILEA, an increase in both Sanofi and Bayer collaborations, and Liptayo net sales. For the first quarter of 2019, global net product sales of ILEA were $1.74 billion, an increase of 8% year-over-year. U.S. ILEA net product sales increased due to higher sales volume, partly offset by an increase in sales-related deductions, primarily due to higher discounts. U.S. distributor inventory experienced a slight quarter-over-quarter decrease, yet remains within our normal one- to two-week targeted range. Ex-U.S. ILEA net product sales recorded by our collaborator Bayer were $669 million, representing a 7% reported and a 15% operational or constant currency basis increase year-over-year. Total Bayer collaboration revenue for the first quarter of 2019 was $276 million, of which $249 million was derived from our share of net profits from ILEA sales outside the US. The $249 million represents year-over-year reported growth of 7% compared to the first quarter of 2018. Total Sanofi collaboration revenue was $246 million for the first quarter of 2019, a 30% year-over-year increase. We are projecting the Sanofi collaboration revenue line to increase over the remaining quarters of 2019. The year-over-year increase in Sanofi collaboration revenue was primarily driven by lower losses associated with the commercialization of non-IO antibodies, driven in part by higher net sales of Depixent and an increase in the antibody reimbursement of Regeneron commercialization expenses. These increases were partly offset by a decrease in reimbursement of research and development costs under the IO discovery and development agreement with Sanofi, as the amended December 31, 2018 agreement narrowed the scope of reimbursable activities to the BCMA by CD3 and MUC16 by CD3 programs. Second, Sanofi collaboration revenues associated with cost reimbursements from Sanofi for bulk drug manufactured by Regeneron were also adversely impacted by timing. In the first quarter of 2019, we recognized a loss of $28 million in connection with the commercialization of non-IO antibodies, which compares favorably to a loss of $75 million in the first quarter of 2018. As noted, the lower share of loss versus the first quarter of 2018 was primarily attributable to higher global net product sales of Depixent, partly offset by an increase in Depixent commercialization expenses to support the U.S. launch in asthma and ongoing global launches in atopic dermatitis. Turning now to expenses. Non-GAAP R&D expenses were $583 million for the first quarter of 2019 compared to $458 million for the first quarter of 2018. The year-over-year increase in non-GAAP R&D expense was the result of the expansion and progression of our earlier stage pipeline, an increase in LITAYO development expenses, higher clinical manufacturing costs, and higher headcount and headcount-related costs. This increase in R&D spend is consistent with our 2019 guidance and previously communicated commitment to reinvest the tax savings we are realizing from the enactment of the 2017 Tax Cuts and Jobs Act into research and development. Our non-GAAP unreimbursed R&D expense, which is calculated as the total non-GAAP R&D expense less R&D reimbursements from our collaborators, was $419 million for first quarter 2019, compared to $278 million for the first quarter 2018. Included in our updated non-GAAP unreimbursed R&D guidance are projected program initiation expenses related to our recently announced LNILAM collaboration. Despite the inclusion of these initiation expenses, we are maintaining the top end of our guidance and tightening the range. The $400 million upfront collaboration agreement payment to LNILAM will be recorded as an R&D expense in the second quarter, but will be excluded from reported non-GAAP R&D expenses. As a reminder, Regeneron's year-over-year increase in full-year non-GAAP unreimbursed R&D guidance is primarily attributable to higher clinical trial and manufacturing costs to support Regeneron's wholly-owned programs, including four to six new molecules expected to advance into the clinic in 2019 on top of the five molecules that were advanced into the clinic in 2018 and lower Sanofi reimbursement as a result of the amended IO discovery and development agreement. Next slide. Non-GAAP SG&A expense was $362 million for the first quarter of 2019, a 22% year-over-year increase. The year-over-year increase was driven by higher headcount and headcount-related costs, primarily to support the Depixent asthma and Leptile launches, higher contributions to independent not-for-profit patient assistant organizations, and an increase in U.S. commercialization-related promotional expenses for Depixent. We are lowering and tightening our previous 2019 guidance for non-GAAP SG&A expense. Also, as a reminder, the year-over-year increase in our guidance is primarily driven by increased spend and support launches for Dipixen and Liptio, as well as incremental spend to support the potential new growth opportunity of ILEA in diabetic retinopathy and increased patient assistance programs. Sanofi reimbursement of Regeneron commercialization-related expenses is A line item found within Sanofi collaboration revenue was $119 million for the first quarter of 2019. We are lowering and tightening our full-year 2019 guidance for Sanofi reimbursement of Regeneron commercialization-related expenses. For the three months ended March 31, 2019, combined non-GAAP cost of goods sold and cost of collaboration and contract manufacturing were $174 million, compared to $108 million in the first quarter of 2018. With regards to COGS, remember that it includes Sanofi's share of gross profits in connection with our commercialization of Liptayo in the United States. The year-over-year increase in cost of collaboration and contract manufacturing was primarily due to higher expenses in connection with planned process validation at our Limerick manufacturing facility, higher inventory write-offs and reserves, and the recognition of drug substance manufacturing costs associated with higher sales into PICSIN. Regeneron's process validation expenses and inventory write-offs and reserves for first quarter 2019 were $44 million higher than the first quarter 2018. While these sorts of charges and activities can be difficult to predict, we currently don't expect to see increases of this magnitude to impact any of our next three quarters. Turning down to taxes, our effective tax rate was 15.6% for the first quarter 2019 compared to 18.3% for the first quarter 2018. As a result of incurring the $400 million El Nile upfront collaboration expense in the U.S., we are lowering our full-year 2019 effective tax rate to be 11% to 13%. The impact of the lower effective tax rate will likely be seen later in the year as the tax benefit of stock-based compensation has historically been weighed towards the fourth quarter of the year. Turning next to Regeneron's first quarter 2019 cash flow and March 31, 2019 balance sheet. Regeneron ended the first quarter with cash and marketable securities of $5.57 billion and generated free cash flow of $823 million for the quarter. We calculate free cash flow as net cash provided by operating activities, less capital expenditures. Included in both balances was the first quarter 2019 receipt of $462 million of consideration from Sanofi related to the amended IO discovery and development agreement. Our capital expenditures for the first quarter, which has historically been our lowest spend quarter, was $74 million. Based on our latest projections, we are lowering and tightening our full-year 2019 capital expenditure guidance. Under the terms of the recently signed collaboration agreement with El Nilem, we are obligated to make an upfront payment of $400 million and have also agreed to purchase $400 million of El Nilem equity, which equates to approximately 4.44 million common shares of at the agreed-upon price of $90 per share. Subject to Hart-Scott-Rodino clearance, we anticipate closing this transaction and paying the $800 million during this second quarter. Additionally, we will provide El Nilem with a specified amount of funding at program initiation and at lead candidate designation, and El Nilem will be eligible to receive up to $200 million in clinical proof-of-principle milestones for I or CNS programs. The clinical proof of principle milestones are not expected in 2019. With that, I would like to turn the call back to Mark.
Mark Hudson
Thanks, Bob. That concludes our prepared remarks. Before we get into Q&A, we'll have Len just say something quick.
Lynch - Leifer
One late breaking news. We just received a note. I'm pleased to inform you that the European Commission has informed us that on the 6th of May, it adopted the EC implementing decision for the PICS and extension of the indication with the treatment of adults and adolescents with severe asthma with type 2 inflammation characterized by raised blood eosinophils and or raised FeNO, and the addition of the 200 milligram dose strength in both a pre-filled syringe and a pre-filled pen format. So the final full indication for Dupixin is now, Dupixin, this is in Europe, is indicated in adults and adolescents 12 years and older as add-on maintenance treatment for severe asthma with type 2 inflammation characterized by raised bloody acinophils and or raised FENO, who are inadequately controlled with high-dose inhaled corticosteroids plus another medicinal product for maintenance treatment.
Mark Hudson
Now we can go to questions. Thanks, Glenn. Operator, we'd like to open up the call for Q&A. To ensure we reach everyone in the queue, we ask every participant to please limit yourself to just one question. Operator, you may open the line.
Operator
Thank you. We will now begin the question-and-answer session. If you have a question, please press star 1 on your telephone keypad. If you'd like to be removed from the queue, please press the pound sign or the hash key. If you're on a speakerphone, please pick up your handset first before dialing. Once again, if you have a question, please press star 1 on your telephone keypad. And from Cohen, we have Yaron Werber. Please go ahead.
Cohen
Yeah, hi. Good morning. So congrats on the launch of Doopie. I have a question about Doopie trends so far in asthma. It sounds like you're really... are capturing a nice share in terms of 75% or first to biologics. So I have a two-part question. Number one, in terms of prior authorizations, what are you seeing for this new class versus the IL-5 class? And then secondly, when you're mentioning a 10% market growth, we're calculating the IL-5s are roughly doing about a billion and a half right now, depending on how you project growth. Are you kind of talking about 10% of that as sort of a comp and How do you see that market growing? Thank you.
GlaxoSmithKline
Sure. So let me take a start. I'll go to the last comment on the growth of the asthma biologics market. And in our calculation with somewhat as you described, we look at all the biologics products that are currently indicated in the U.S. for asthma. And then since the launch of Depixen for asthma, we're seeing the size of that market in total grow by about 10%. So certainly inclusive of Dupixent, which we believe is significantly driving the growth, but also in combination with the IL-5 category you mentioned, and also we would include Zolair, of course, as a biologic product within the asthma market. The next piece going back, we do see some very favorable indicators, you know, still somewhat early in launch. And most compelling, of course, is the profile and the unique aspects of Dupixent that is being showcased by allergists already experienced with the Dupixent from atopic dermatitis, but also pulmonologists, both the clinical profile, the safety profile, and the fact that patients can self-administer. Again, early in the reimbursement cycle, I will comment only on Dupixent. It's probably best that I not comment on access for competitive therapies, but I can share that In early days, while we continue to work closely with payers, we have been pleased with the ability for patients to receive reimbursement and for physicians to participate and have ease of prescribing. So while we'll continue to work closely in that area, early days, all aspects of the launch uptake, both patient experience, prescriber experience, and patient access have been quite favorable.
Mark Hudson
Operator, next question.
Operator
From Goldman Sachs, we have Terrence Flynn. Please go ahead.
Terrence Flynn
Hi. Thanks for taking the questions. Maybe just a two-part on Regeneron 1979. I'm just wondering when you guys will have visibility on if the Phase II trials will be or will not be registration enabling in lymphoma. And then the two deaths that you mentioned, can you give us any more context there with respect to either, you know, the dose or if they were in FL or DLBCL and anything on prior treatment history? Thanks a lot.
George
Well, we will be certainly informing you when we know that these are registrational studies. In terms of the toxicities, I just want to remind you, as I noted in my comments, that these were seen in combination with PD-1. And as I noted, that in some ways it indicates that the theoretical concept of combining these two classes actually increases immune activation is actually pertaining in the situation here. And what we believe is that we have ways of adjusting the dosing regimen so that we can avoid the increased cytokine release syndrome while capturing the potentially increased activity of combining these two classes.
Lynch - Leifer
So, Terrence, just to amplify on the registrational aspect, it's not that we're being coy. I think it They'll be registrational if the data are adequate. So, obviously, we'll let what I think what George was trying to say is we'll let you know when we have the data. We intend these to be registrational if the data continues to be as good as it was in the early studies. Operator, next question.
Operator
From JP Morgan, we have Corey Kazimoff. Please go ahead.
JP Morgan
Hey, good morning, guys. Thank you for taking the question. Wanted to follow up on the bispecific programs and recognizing that it's still, obviously, relatively early days. How do you see the durability of response from 1979 stacking up against CAR T therapies and the importance of this parameter for future broad commercial uptake? And as you're gathering experience in CAR T experience patients as well, how do you see 1979 initially slotting into the marketplace? Thanks.
George
Well, We have reported on durability and will continue to report on it in the upcoming conference. Most patients who remain on treatment maintain their responses. In terms of versus CAR-T, as I noted, we will be reporting on promising early results in post-CAR-T failures at the upcoming meeting. So we think that there's a lot of opportunity here for the CD20 bispecific both in the relapsed refractory setting where we're setting it in. It's obviously going to be much more convenient and amenable therapy to more patients who don't have to go through the whole process that's required for CAR T therapies. The possibility that can actually also work in individuals who have failed CAR T therapies is very exciting, let alone the possibility that with its profile, and the way we give it that we can also be moving relatively rapidly into the frontline settings as well. So we think this is a very exciting opportunity that can really address a lot of the need in lymphoma from the latest stage patients who have failed every other kind of therapy eventually to a frontline therapy that could really impact the disease in the earliest patients.
Lynch - Leifer
And just to amplify slightly for those who are not the aficionados, we reported previously rather striking response data, including a high percentage of complete responses at what we think would be the effective doses. And so when you start to see that in these very treatment-experienced patients, it gets pretty exciting pretty quickly.
Carter Gould
Operator, next question.
Operator
From UBS, we have Carter Gould. Please go ahead.
Carter Gould
morning. Thanks for taking the question. I wanted to, I guess, drill down a little bit more into the decision to move DUPI into a phase three in COPD. I think before you had talked about that being a little bit more of like a phase two, phase three study. It seems like it's a fully fleshed out kind of phase three, and maybe just speak to your level of confidence there, given sort of the mixed history with, or negative history with the IL-5s, and kind of what gives you confidence there. Thank you.
Lynch - Leifer
You know, maybe I'll let George answer as well, but I would say, you know, that one is a comes more under the category of we'll need to see the data rather than a high degree of confidence based upon some earlier studies. When we had done atopic dermatitis, when we had done our first asthma studies where we saw these clear-cut effects on FEV1 and even on loss of asthma control and dramatic responses in the AD, of course, you had a much higher degree of confidence. COPD is, I think, much tougher. It's worth looking at, but we wouldn't rank this as something we have a high degree of confidence in.
George
Yeah, I think what Len is alluding to is that COPD is a very complex disease. And the problem is that in the real world, the data suggests that it is indeed quite complicated in terms of it's impacted by asthma and type 2 diseases. And so there are a lot of patients who have COPD whose disease is worsened with these related type 2 toxicities. The problem is finding the right patients to treat and also negotiating with the FDA who likes to study cleaner diseases. So I think, as Len said, it's going to be a complicated story, and we'll see what the data says.
Mark Hudson
Operator, next question.
Operator
From Barclays, we have Jeff Meacham. Please go ahead.
Jeff Meacham
Hi, this is Greg Harrison. I'm for Jeff. Thanks for taking our question. Could you tell us maybe a little more about your overall strategy in the complement space, and what type of differentiation do you think you'd need to see with pizelumab to make it competitive in PNH, whether that's efficacy or dosing convenience, and what other types of additional indications could you potentially pursue there? Thanks.
Lynch - Leifer
So I think it's a little bit early to get into that sort of competitive assessment. Obviously, as George mentioned, we've got the ability to combine that with some SIRNA from Allen Island that we're going to be working with them. The potential there might have some unique features. It's just a little early to say where we'll slot it. We'll have to see how the data develops. But obviously, We're going to look at efficacy. We're going to look at interval, et cetera.
Mark Hudson
Operator, next call.
Operator
From SVB Learing, we have Jeffrey Porges. Please go ahead.
Jeffrey Porges
Thank you very much for taking the question. A couple of quick ones on R&D. First, George, could you just give us a sense of when you might be in a position to make a decision on your NGF program, specifically whether it's go or no-go, and whether that might be some savings to the otherwise upward trend in R&D? And then secondly, just to go back on the combination, it definitely sounds like you've had a setback on the PD-1 bispecific combination, but what are your thoughts on the PD-1 combination with the COSTIM molecule? How quickly might that advance? Are you concerned about some of the same either immunotoxicity liabilities or else TLS liabilities? Thanks.
George
Okay, well, first on the NGF, as I mentioned, the independent NGF, Data and Safety Monitoring Board gave the go-ahead just last week for us to continue with the program. So they will continue to monitor the study, and when we unblind the study and so forth, we'll be able to better assess what the efficacy-safety ratio is and where the program is going. So that's the story on NGF. I wouldn't necessarily classify the CD20 by CD3 combination with PD1 as a setback. As I said, I mean, what it really indicates is a pretty dramatic increase in immune activation. As you know, of course, these sorts of things were the things that demonstrated excitement in approaches like CAR-T therapies, in fact, It was noted in many cases that the people who had the patient had the highest immune activation, had the highest anti-tumor responses, and we think this is likely to be the case in this setting as well. The benefit that we have with the ability to individually titrate and give them in a different sequence allows us to much better fine-tune the timing of the immune activations and allow us to better take advantage of the immune activation while controlling the the potential cytokine release syndrome. So we actually think it's actually an exciting indicator of combined immunoactivation. And so we're very excited both of the combinations of our CD3 bispecifics with PD-1 but also CD28 bispecifics with PD-1 and the CD3 bispecifics with the CD28 bispecifics. All three of those sets of combos afford an incredible exciting set of opportunities that in animal studies have really been game-changing. And so we can only hope that we can achieve the same sort of benefit-risk in patients that we're seeing in those settings.
Mark Hudson
Operator, next question, please.
Operator
From Morgan Stanley, we have Matthew Harrison. Please go ahead.
Matthew Harrison
Hey, good morning. Thanks for taking the question. I was hoping you could talk a little bit about the adjuvant studies that you're running and maybe just comment how we should think about the data that you have in sarcoma informing those other skin cancer studies and just your confidence around what we know so far on the molecule about those adjuvant studies. Thanks.
George
Well, I think in cutaneous squamous cell carcinoma, obviously the very impactful efficacy that we saw in the latest stage patients gives us a lot of confidence that in the earlier stage patients, as is usually the case with cancer treatments, that one will be seeing even better benefit. And obviously, this increases very substantially the number of patients in those indications who might be able to benefit if our adjuvant and neoadjuvant trials in the cutaneous gramosol carcinoma produce that sort of data. that would be possible based on the data that we've seen in the late-stage patients. So that will be, I think, a very exciting way to increase the benefit to a large number more of patients who don't have satisfactory treatments right now and avoid them progressing to these later and much more debilitating stages. Similarly, in lung cancer patients, We're excited with our opportunity there in terms of our first-line setting, and, of course, we're also hoping to move into earlier settings there as well.
Mark Hudson
Operator, next question.
Operator
From Bank of America, we have Yin Huang. Please go ahead.
Yin Huang
Hi, everyone. Thanks for taking my questions. So you mentioned that the total prescriptions for Dupixent increased 18% quarter over quarter, and then... You patients are coming about right now at 950 per week. Can you provide a little bit more clarity about the breakdown between the patients coming from adolescent atopic dermatitis versus adult atopic dermatitis versus asthma? Where exactly are you seeing the most growth? Thank you.
GlaxoSmithKline
Sure. So it's early days, so we're not at this time giving specific breakouts by indication, but I certainly can give you a feel for performance. First, as you summarized some of the points that I'd made during the call, on NBRXs as one measures or new branded scripts on a weekly basis, we are seeing a significant increase. When we look at this quarter's rate on a weekly basis of 950 versus prior quarter at about 700 scripts per week, so we're very pleased. What is occurring is that we're actually seeing growth in all of our indications, which is a very exciting profile for Depixent. We continue to help more adult atopic dermatitis patients, so we're seeing growth in that realm. Additionally, as I mentioned during the discussion of the call, we are seeing a very nice start to the launch of asthma, both from a standpoint of Depixent's profile, but also from the standpoint of being very competitive to other agents that are currently being used as biologics for the treatment of asthma. And then finally, the Most recent indication for adolescents is one that has been transformational, certainly for patients and their families, but also as we hear stories all the time from physicians who are treating these patients. You know, these poor young adolescents, you know, are very often challenged to participate at school, you know, in their activities on a daily basis, and we're hearing just wonderful stories on the difference that depiction is making for them. So while very early in this launch, we're excited to be helping so many, and we see continued growth across atopic dermatitis, asthma, and, you know, all the various age groups we're now covering.
Mark Hudson
Operator, next question.
Operator
From Piper Jeffrey, we have Chris Raymond. Please go ahead.
Piper Jeffrey
Hi. This is Allie Bratzel for Chris this morning. Another question on Depixent. We've gotten pretty consistent physician feedback for multiple points that the Depixent sampling plan was suboptimal, at least for dermatologists, though I guess more recent feedback says that's improved lately. Could you just give us some background or color on your Depixent sampling plan, especially as additional indications are launching? Thanks.
GlaxoSmithKline
Sure. So, you know, first I will share that it is very important to us Their patients receive Dupixent and physicians have the experience that they need. There are availability of samples in the marketplace today. So as you indicate, we do have a sampling program. But we also think it's very important that as patients are initiated on therapy, they're able to stay on therapy. And we also have a number of support services that help patients and their prescribing physicians make sure that patients can navigate payer reimbursement and, once on Dupixent, can actually stay on therapy. We believe at this point we have the number of samples correct in the market to support our various indications.
Lynch - Leifer
So let me just amplify on that, what Mary just said, because I think it is a tension between wanting to make it as easy as possible for the doctors and patients. On the one hand, and on the other hand, the greater good we think of getting, forcing, if you will, payers to make decisions, so that everybody can get access. And payers are very sophisticated. As one payer said to me, keep it up, Len. We love those samples. It's like free drug, and we'd like you to keep going forever. So there is this tension of forcing payers to make a decision on the one hand and striking the right balance for making it easy for patients to initiate. The launch, the number of patients getting on the drug is really quite remarkable. So we think we've got that balance working.
Mark Hudson
Operator, next question.
Operator
From BMO, we have Matthew Lucchini. Please go ahead.
Matthew Lucchini
Hi, good morning. Thanks for taking the question. Just wanted to come back to the CRS scene with 1979 and recognizing what you've said so far. I'm just wondering if you might be able to put any more color around similarities or differences between the two patients that experienced the CRS and those that didn't, perhaps in terms of number of prior lines of therapy, types of therapy, if they were both seen in FL or DL, BCL, for example. Any other color you could provide would be helpful. Thank you.
George
Well, maybe I can just start by reminding you that in some ways this is very analogous to our early experience with the CD20 by CD3 monotherapy. In those early studies, actually with our lowest doses, we actually saw pretty profound CRS. And what the team did, it realized that we had the ability, like I said, this is one huge advantage with these biologics, for example, compared to things such as CAR T therapies, that we can literally dial up and dial down the doses and adjust sequences and divide the doses. And we were able to control it. So now as we got to the much higher doses, with much higher activities, as Len pointed out, where we're seeing in late-stage patients high proportions of not only overall responses but complete responses. This now comes with much less CRS than we saw in the early days because we learned how to adjust, divide, and sequence the dose of the individual therapy. We think that we're exactly in an analogous situation with the CD20 combination with the PD1. we're now at much lower doses of the CD20 in combination with the PD-1, but giving it in the way that we had avoided the CRS, we're now seeing it again, which tells us that we have higher immune activation, and we're going to just do the same sorts of things that we did by taking advantage of our ability to divide the doses and sequence the regimens and so forth, and we're hoping in the same way that we did with the bispecific on its own, we'll be able to take advantage of this increased immune activation but avoid the CRS. So we think these are really exciting times. We've seen it before. We got to what we believe now are, as Len said, the actual effective doses in these late-stage patients with the monotherapy, and we hope we'll now be able to do the same thing with the combination, deliver even better. more efficacy without having to pay too much of a price in terms of increased toxicity.
Lynch - Leifer
Plus, I think one has to think ahead. We have a lot of other bispecifics, I think, as George mentioned earlier, where you're going into some cancers where you don't see very many responses at all. And the notion that you can actually get these enhanced combined immune activations I think is as important for these other programs as it is for 1979, where actually you do quite fine as you get up to much higher doses. So I think this has really potentially profound implications for our other programs. Very good point. Operator, next question, please.
Operator
From Baird, we have Brian Scorny. Please go ahead.
Brian Scorny
Hey, good morning, guys. Thanks for taking the question. Bob, maybe just kind of characterize when we look at earnings going ahead, there's a little bit of a retrenchment on a year-over-year basis in first quarter compared to last year's. And I know you guys don't provide bottom-line guidance, but just maybe kind of from a target perspective, do you see 2019 as a year of EPS growth, and do you think it's just kind of the one-time items given a little drag, or should we kind of expect – 2019 to be more flattish and look towards 2020 and beyond to see a return to growth.
Kevzara
Yeah, Brian, so thanks. So, you know, we're not going to give guidance on this call with regards to EPS. It's just not what we've done previously. And, you know, we tried to highlight with regards to gives and takes during the first quarter. I mean, certainly with regards to our cost of collaboration manufacturing calling out the Delta, which was a – you know, a big increase year over year. You know, we don't talk much about our supply chain other than saying, you know, we think it's best in class. These are very difficult antibodies that we continue to make, and, you know, sometimes things like that happen. With regards to R&D, you know, our guidance holds. You know, we raise the lower end of our guidance, but that's because of the L-nylam transaction that we're going to execute in the middle of the second quarter. We're taking on initiations, and upon doing that, there will be payments to L-nylam So we still are comfortable with regards to where we are from our guidance point of view. I will say, you know, expenses in Q1 from R&D came in a little hotter than usual, but for the rest of the year, we still feel comfortable with the guidance levels we've provided previously.
Lynch - Leifer
I mean, I do think, to remind yourself, that the way we see the business, the top line of the products that have come out of Regeneron are continuing to grow, and the expenses are growing significantly. primarily because the research organization is just so doggone productive. I think it was mentioned that we put maybe four or five molecules in the clinic last year. We expect to put a similar number this year, and we have a steady flow projected for the year, for 2020 and beyond. So with that, obviously we feel we should be investing in our research because we think it has the potential to deliver a great return.
Mark Hudson
Operator, we'll take one last question.
Operator
And from Cantor Fitzgerald, we have Alethea Young. Please go ahead.
Cantor Fitzgerald
Hey, guys. Thanks for taking my question. Just one on L-nylum. I wanted you guys to talk a little bit more about how you're thinking about using this platform technology versus the antibodies and, you know, also things you might go after larger or more rare opportunities and just your general perspective on the platform safety as well. Thanks.
George
Yes. Well, We have enormous hope that Alnylam is going to be a transformational opportunity. Why? Because both sides bring, I think, a lot of unique and very exciting capabilities to the table. We've been obviously doing a lot of biology and genetics, particularly in the eye and also in the CNS that we haven't really talked about. And most, if not the vast majority of the targets there are intracellular targets. And obviously, Alnylam has the capability with their technology to start addressing some of these intracellular targets in these two spaces that are challenging with other approaches. And so this allows us to take advantage of our genetics, all the information coming out of our Regeneron Genetic Center, all the biology we've been doing, all the animal modeling that we've been doing, and now take advantage of them with a whole new platform, not antibodies that, as you know, are limited to extracellular targets, secreted proteins, and cell surface receptors, but an assortment of intracellular targets that we now think we can address both in the eye and CNS and address a whole new series of diseases where we have enormous, knowledge and capability based on our genetics and our biology efforts. So it's really coming together, I think, of two great like-minded companies with very complementary approaches that we think together we can really make a difference, particularly in these spaces.
Mark Hudson
Operator, this concludes today's call. Thank you, everyone, for joining. Again, Bob Landry, Jay Markowitz, and the IR team will be around to answer any further questions. Thank you.
Operator
Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.
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