Regeneron Pharmaceuticals, Inc.

Hello, and welcome to Regeneron Pharmaceuticals' fourth quarter 2024 earnings conference call. My name is Tawanda, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Ryan Crowe, Senior Vice President, Investor Relations. You may begin.

Thank you, Tawanda. Good morning, good afternoon, and good evening to everyone listening around the world. Thank you for your interest in Regeneron, and welcome to our fourth quarter 2024 earnings conference call. An archive and transcript of this call will be available on the Regeneron Investor Relations website shortly after the call ends. Joining me on today's call are Dr. Leonard Schleifer, Board Co-Chair, Co-Founder, President, and Chief Executive Officer. Dr. George Yancopoulos, Board Co-Chair, Co-Founder, President, and Chief Scientific Officer. Marion McCourt, Executive Vice President of Commercial, and Chris Fenimore, Executive Vice President and Chief Financial Officer. After our prepared remarks, the remaining time will be available for your questions. I would like to remind you that remarks made on today's call may include forward-looking statements about Regeneron. Such statements may include but are not limited to those related to Regeneron and its products and business, financial forecasting guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement, intellectual property, pending litigation and other proceedings, and competition. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Regeneron's filings with the United States Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2024, which we expect to file with the SEC tomorrow, February 5th. Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, please note that GAAP and non-GAAP financial measures will be discussed on today's call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our quarterly results press release and our corporate presentation both of which can be accessed on the Regeneron Investor Relations website. Once our call concludes, Chris and the IR team will be available to answer any further questions. With that, let me turn the call over to our President and Chief Executive Officer, Dr. Leonard Schleifer. Len?

Thank you, Ryan, and thank you to everyone for joining today's call. Regeneron capped 2024 with a strong fourth quarter, highlighted by 10% revenue growth. reflecting the strength and durability of our key franchises, primarily Dupixent, Libtyo, and ILEA and ILEA HD. 2024 was also a year in which we made significant investments across our broad pipeline, which yielded notable progress across several key programs. For my remarks today, I will use some of our key performance drivers, then briefly discuss a few of our more differentiated pipeline opportunities and close with a few comments on capital allocation. After my remarks, George will provide further updates on our pipeline. Marin will then review our commercial performance. And finally, Chris will detail our financial results for the fourth quarter of 2024 and our guidance for the current year. To start, I would like to share my perspective on the current state of Regeneron. From the beginning, our focus has been on science and innovation. developing cutting edge technology platforms that repeatedly yield scientific breakthroughs. These efforts have led to 13 products that have been approved or authorized worldwide, several of which are driving revenue growth and hold significant future potential. Our approach has already delivered five blockbuster drugs, a leading pipeline of approximately 40 product candidates across various therapeutic areas, and a world-class DNA sequence-linked healthcare database, providing us with unparalleled insights into key drivers of disease. At the J.P. Morgan Conference last month, we detailed 10 differentiated mid and late pipeline opportunities that could collectively address a total market opportunity of over $220 billion. Given these opportunities, The strength of our early-stage pipeline and our turnkey technology platforms, we have never been more confident in Regeneron's future, and we are incredibly excited about what lies ahead. Moving to our quarterly results, Tupixent continues to be a transformative medicine, with over 1 million patients on treatment around the world across seven approved indications. In the U.S., depicts and remains the leader in new-to-brand prescription share across all of its approved indications and continues to be well-positioned for future growth, given the potential for further penetration in approved indications, the ongoing launch in COPD, and potential 2025 launches in chronic spontaneous urticaria and bullous tympanoid. Regarding the ongoing launch in COPD, where DUPIXIT is the first and only biologic approved, we and our partner, Sanofi, have made great progress securing broad payer coverage and reimbursement, positioning us to drive uptake over the course of this year and beyond. ILEA-HD and ILEA continue to lead the anti-VEGF category, and our commercial efforts remain focused on driving ILEA-HD uptake, while preserving share for ILEA in an increasingly competitive category. Over the course of this year, we expect continued competitive pressure on ILEA, while strengthening the profile of ILEA-HT by offering it in a more convenient prefilled syringe administration, broadening its label to include macular edema following retinal vein occlusion, or RVO, and adding more dosing flexibility, including every four-week dosing as well as extended dosing intervals of up to every 24 weeks for certain indications. With these anticipated label enhancements, ILEA-HD will offer the broader set of retinal disease indications with the greatest dose and flexibility of any product in the anti-VEGF category, positioning it to become the new standard of care in the category. And we anticipate these enhancements will lead to acceleration in ILEA-HD uptake starting in the second half of this year. Liptunia became Regeneron's latest blockbuster product in 2024, and we are looking to build on that by expanding shared metastatic non-melanoma skin cancers, along with making further inroads in lung cancer. We also plan to seek regulatory approval for high-risk adjuvant cutaneous squamous cell carcinoma, a setting in which Keytruda failed and over the longer term could represent a blockbuster opportunity globally in and of itself. Moving to our pipeline and focusing on the upcoming year, we expect regulatory approvals for limboceltumab in relapsed refractory multiple myeloma, ogenectomab in late-line follicular lymphoma, and the aforementioned ligtio indication in adjuvant CSCC. In addition, we expect to read out pivotal or proof-of-concept data this year from several other programs, including our pivotal ARIFI studies for idopecumab, our IL-33 antibody, in former smokers with COPD. Pivotal data for the pheanilumab-liptio combination in first-line metastatic melanoma are also anticipated in 2024. We also expect pivotal data for our C5 antibody siRNA combination and generalized myasthenia gravis. Finally, we expect to learn more about our potential opportunity to improve the quality of weight loss in obese patients on semiglutide by blocking myostatin and activin A. George will soon discuss these programs in more detail and provide updates on many of the other programs in our broad and differentiated pipeline. Finally, regarding capital allocation, This morning, we were pleased to announce the initiation of a quarterly cash dividend program and an additional $3 billion share repurchase authorization, increasing our total current buyback capacity to approximately $4.5 billion. These decisions reflect our board and management's ongoing commitment to returning capital to shareholders, but this does not change the core of our capital allocation framework. Importantly, our dividend, will not impact the way we plan to heavily invest in our business and pipeline going forward, does not impair our ability to do business development in the future, and we anticipate that share repurchases will remain the primary means of returning capital to shareholders. However, initiating a dividend reflects our continued confidence in the future cash flows from our business, provides more balance to our approach to capital returns, gives us flexibility in how we return capital in the future, and expands the pool of potential Regeneron shareholders to include funds with a dividend mandate. In closing, Regeneron remains in a very strong position scientifically, commercially, and financially, enabling us to invest heavily in R&D and deliver tremendous innovation from our pipeline. maximize the growth opportunities from our inline brands, initiate a quarterly dividend, and significantly increase our capacity to repurchase shares. We look forward to keeping you updated in these innovations throughout 2025 and beyond. With that, I'll now turn the call over to George.

Thank you, Len. At last month's J.P. Morgan Healthcare Conference, We showcased our robust R&D efforts and the promising opportunities within our pipeline that have the potential to revolutionize the practice of medicine across several different disease areas. This year holds the potential to be transformative for Regeneron, as we hope to capitalize on several of our scientific and technological breakthroughs. We anticipate reporting pivotal or proof of concept data from multiple programs across diverse therapeutic areas, including in oncology, COPD, and obesity, while also rapidly advancing our Factor XI antibodies to multiple Phase III trials. These programs represent significant opportunities for Regeneron to address substantial unmet needs across large commercial categories, positioning Regeneron for long-term growth. Let me highlight some of these opportunities and recent pipeline advancements. Starting with ILEA-HD, in December, we and Bayer reported positive data from the phase three quasar study in retinal vein occlusion, where ILEA-HD demonstrated non-inferior vision gains within every eight-week dosing regimen compared to the standard of care two milligram ILEA dose every four weeks. Additionally, approximately 90% of ILEA-HD patients were able to maintain eight-week dosing intervals throughout the 36 weeks. These data, together with our recently presented long-term follow-up data from the Pulsar and Photon studies in wet AMD and DME, respectively, continue to support ILEA-HD's best-in-class clinical profile. We remain on track to submit a supplementary BLA for this indication later in the first quarter. We also plan to seek approval from the FDA to potentially include every four-week dosing, maximizing ILEA-HD's dosing flexibility for physicians. Along with the submission for a pre-filled syringe and the potential FDA approval in April to extend dosing intervals to up to 24 weeks, the longest intervals in the category, ILEA-HD is set to provide the greatest dose inflexibility across the broadest indication set of any anti-VEGF therapy, all in a convenient pre-filled syringe. Next, immunology and starting with Dupixent. In November, Dupixent was approved in Europe to treat eosinophilic esophagitis in children as young as one year old, making it the first and only medicine indicated for these young patients in the U.S., and the European Union, and further highlighting Dupixent's exceptional safety profile. The supplementary BLA resubmission for chronic spontaneous urticaria was recently accepted by the FDA with a target action date of April 18th, potentially making it the first new target therapy for CSU in a decade. Finally, our supplementary BLA was submitted for bullous pemphigoid late last year, marking another first, as Dupixent is the only biologic to achieve significant improvements in disease remission and symptoms for this indication. While Mary will discuss the ongoing launch of dipixin in COPD, I want to remind you of another potentially significant opportunity in COPD with idipicumab, our interleukin-33 antibody discovered by Regeneron. We anticipate reporting pivotal results in former smokers from the RFI program in the second half of this year, a partially overlapping and distinct population from that treated with dipixin. As part of our long-term commitment to improving the lives of patients with allergic conditions, I would also like to highlight the compelling initial data from our ongoing Dupixen plus limvoceltamib trial for severe food allergy. These two agents have the potential to eliminate imigabine E, or IgE, the key driver of allergic reactions, and prevent IgE from returning, thereby reversing severe allergies. Last month, we shared initial clinical data from the first patient in our proof-of-concept study, which showed greater than 90% reductions in both total and food-specific IgE levels following initial treatments at low doses. This trial is continuing to enroll patients, and we plan to provide updates throughout 2025. Turning now to oncology, where we continue to break new ground. Last month, we announced positive data for Liptio in high-risk adjuvant CSCC. becoming the first immunotherapy to show a benefit in this high-risk population. At the first pre-specified interim analysis for disease-free survival, adjuvant Liptio demonstrated a 68% reduction in the risk of disease recurrence or death compared to placebo, with no new safety signals identified. This is the same setting in which Merck reported last year that Keytruda had failed, highlighting that antibodies, even within the same class, do not always produce the same treatment effect. We plan to submit these data to the FDA in the first half of 2025 and present these results at a medical meeting later this year. This data set reinforces our belief that Liptio provides a best-in-class foundation for combinations with our other oncology assets. Data from early clinical trials in melanoma suggests that Theanilamab, our LAG3 antibody, when combined with Liptio, might be the first combination to demonstrate meaningful additive benefit compared to PD-1 monotherapy without exacerbating safety. This combination is being studied in an ongoing randomized Phase III trial versus Keytruda monotherapy in first-line metastatic melanoma, with results expected in the second half of this year. If these data confirm best-in-class activity in melanoma, it will increase our confidence for this combination in other cancer settings. Turning to our CD3 bispecifics, we are pleased to announce that we have recently resubmitted the BLA for limvaceltamab, our BCMA by CD3 bispecific for relapse refractory multiple myeloma, following the resolution of third-party manufacturing issues. Limvaceltamab has the potential to be the best-in-class BCMA by CD3 bispecific due to its differentiated clinical profile, dosing, and administration, with nearly double the reported complete response rates at similar duration of follow-up. Given the strength of the data in late lines of therapy, including the observed level of efficacy and favorable safety profile of ilumoseltamab, we are pursuing a differentiated approach in earlier lines of therapy, emphasizing monotherapy and novel limited combination approaches. For ojonextamab, our CD20 by CD3 bispecific, we are pleased to announce that we have resubmitted the BLA for relapsed refractory follicular lymphoma. where Odrinexamab has also demonstrated potentially best-in-class efficacy, and we expect an FDA decision in the second half of 2025. In December, at the American Society of Hematology meeting, we presented initial results from the safety lead-in portion of the confirmatory Phase III Olympia trial. Odrinexamab monotherapy delivered complete responses in all 12 patients available for efficacy with previously untreated follicular lymphoma. As a reminder, The standard of care regimen in this setting, rituximab plus chemotherapy, has historically achieved complete responses in approximately 67% of patients. Based on this impressive monotherapy efficacy for ojonexamab in both late-line and first-line patients, we are once again exploring a differentiated program in early lines of therapy, highlighted by our head-to-head evaluation of ojonexamab monotherapy compared to rituximab plus chemotherapy in in our Phase III Olympia I trial, which has already achieved over 40% enrollment. Our CD28 co-simulatory bispecifics for solid tumors are also progressing. We're working to mitigate safety concerns related to their combination with PD-1 blockade while prioritizing combination with CD3 bispecifics. The science suggests that this approach may enhance efficacy with fewer immune-mediated adverse events. We will provide updates on these innovative combinations later this year. moving now to a rapidly advancing Factor XI program. We're employing a two-prong approach to anticoagulation that offers a potential for improved blood clot prevention and lower bleeding risk. Supported by genetic data from the Regeneron Genetic Center, our approach has delivered two antibodies with unique profile to meet different market needs. Regeneron 708, which targets the catalytic domain of Factor XI, may provide improved efficacy compared to standard of care options. offering patients who need significant anticoagulation activity a potentially more effective option. On the other hand, Regen9933, which targets the A2 domain, is expected to carry a lower risk of bleeding, potentially making it a viable option for patients with the highest bleeding risk who would otherwise not be candidates for currently available anticoagulants. Late this year, we reported positive proof-of-concept data for the prevention of venous thromboembolism following total knee replacement, with both antibodies demonstrating robust anti-thrombotic effects. Regeneron 7508 was superior to enoxaparin and non-inferior pixaban, while Regen 9933 was numerically better than enoxaparin. These data support the advancement of both antibodies into broad pivotal programs across multiple indications and patient types, with initial Phase III studies expected to begin enrolling this year. Briefly to obesity, where we are progressing early clinical programs in an expansive pipeline of preclinical assets. Our muscle sparing phase two courage study is investigating the addition of Trivagramab to semaglutide with and without Garotisumab to improve the quality of weight loss and evaluate the maintenance of weight loss after discontinuing semaglutide. This trial is fully enrolled with data expected in the second half of the year. Moving to our Regeneron genetics medicine pipeline. Starting with our differentiated siRNA plus antibody approach, we have the potential to address multiple complement mediated diseases. In December, at the ASH annual meeting, we presented compelling updated results from an exploratory cohort in our phase three program for paroxysmal and nocturnal hemoglobinuria. Our combination achieved greater disease control compared to the standard current of care, Revilizumab, and only our combination lowered mean LDH levels to the normal range. When Revluzumab patients were switched to our combination, their mean LDH levels, which remained higher than normal, also became normalized. We are also evaluating this combination in generalized myasthenia gravis, with pivotal results expected in the second half of this year. In addition, we recently initiated our phase three program exploring this combination in geographic atrophy in dry age-related macular degeneration. where we believe our systemic approach has several advantages over currently approved intravitreal agents. For DbAuto, our autoferulin gene therapy program for genetic hearing loss, we announced data last month from the ongoing clinical program. DbAuto is an AAV-based dual vector gene therapy delivered to the inner ear to enable hearing in children suffering from profound genetic hearing deficit. We reported that 10 out of 11 treated children with at least one post-treatment assessment showed a notable increase in hearing, with some reaching the normal range. We look forward to continue to share additional data later this year. Regarding our collaboration with Alnylam, we are advancing several new siRNA CNS programs, including synuclein for Parkinson's and tau for Alzheimer's and other neurodegenerative diseases, with trials initiating later this year. And finally, I would like to highlight two recent advances that extend our leadership position in the field of structured big data that will be necessary to allow computational approaches to revolutionize the healthcare industry. Over the past decade, we have become the leader in high-throughput human DNA sequencing, enabling us to create the world's largest DNA sequence-linked healthcare database, encompassing nearly 3 million individuals, all with DNA sequence linked to de-identified healthcare records. We are now emerging also as the leaders in high-throughput proteomics, as reflected by the selection of the Regeneron Genetic Center to generate the proteomics data for the UK Biobank Pharma Proteomics Project, building on our previous selection to provide the sequence data for the UK Biobank. Importantly, our new strategic collaboration with Trivetta is expected to dramatically expand our database to include up to an additional 10 million individuals from Trivetta's network of leading U.S. health systems with the opportunity to generate both DNA sequence and proteomics information. While our leadership position in this big data space has already proven invaluable for our drug discovery and development efforts, we believe it can ultimately help us contribute to revolutionizing the field of healthcare analytics and management. In summary, I have never been more excited about the future of Regeneron and our potential to transform the practice of medicine and revolutionize the healthcare industry. Our pipeline is more innovative and exciting than ever, and we anticipate several pivotal or proof-of-concept data readouts throughout 2025, positioning Regeneron for long-term success. Let me now turn the call over to Marion.

Thank you, George. Regeneron's fourth quarter performance demonstrates our ongoing leadership across therapeutic categories. Our commercial team is well positioned to optimize our 2025 growth opportunities, driven by new indications new product enhancements, and new product approvals. Turning to fourth quarter results, starting with ILEA HD and ILEA, in January, we announced combined fourth quarter U.S. net sales of $1.5 billion for ILEA HD and ILEA, capturing over 46% of the total anti-VEGF category. For the full year, net product sales grew by 1.4% to approximately $6 billion, despite increasing competition in the category. ILEA HD net sales were $305 million in the fourth quarter and $1.2 billion for the full year, representing 20% of the combined net sales for ILEA HD and ILEA. Fourth quarter net sales for ILEA HD were affected by elevated wholesaler inventory levels at the end of Q3, which were absorbed over the course of the fourth quarter. In 2025, our team is laser focused on growing ILEA HD adoption. Physicians tell us that ILEA-HD has the potential to be the new standard of care for retinal diseases, and several catalysts occurring this year will put us in a position to grow our competitive share. The team is ready to launch the pre-filled syringe and our two-year label updates, both of which are anticipated to occur in the second quarter. Physicians eagerly await the pre-filled syringe, which has been described as game-changing by clinical trial participants. Further, our two-year long-term follow-up data from the Pulsar and Photon studies in wet AMD and DME, respectively, clearly illustrate ILEA-HD's ability to extend dosing beyond any other competitor in the anti-VEGF category. Two other potential FDA approvals are also expected later this year, the RVO indication and additional dosing flexibility. In RVO clinical trials, ILEA-HD dosing could be extended to every 12 weeks following loading doses. making it the only medicine with durability beyond four weeks and also the only medicine to show a numeric improvement in vision for RVO patients compared to ILEA dosed every four weeks. In terms of additional dosing flexibility across all of our approved indications, we look forward to the potential FDA approval of every four-week dosing for the subset of patients who need it, which would mean ILEA-HD has the most flexible dosing schedule of any anti-VEGF medicine. Fourth quarter ILEA net sales were 1.2 billion, primarily driven by persistent physician demand in spite of a recent of flibbers of two milligram biosimilar launch. Wholesale inventory levels were elevated at the end of the fourth quarter, and we expect ILEA net sales will be negatively impacted in the first quarter of 2025 as this increase in inventory is absorbed. We also expect ongoing market dynamics will put downward pressure on ILEA business. We continue supporting existing and new patients who benefit from ILEA while prioritizing uptake of ILEA-HD, which has the clinical profile to potentially become the new standard of care in the anti-VEGF category. Turning now to Liptio, which achieved blockbuster status in 2024 with global net sales of $1.2 billion. In the fourth quarter, global net sales grew by 50% year-over-year to $367 million, with U.S. net sales reaching $251 million. Leptio's strong performance was based on growth in non-melanoma skin cancers and steady gains in lung cancer. Looking forward, we eagerly await the submission and potential approval of Leptio in high-risk adjuvant CSCC, beginning in the U.S., where we estimate there are approximately 10,000 patients who may benefit from treatment. And next to Depixent, which continues to deliver exceptional results in type 2 inflammatory diseases, approved in seven indications worldwide, More than 1 million patients are currently benefiting from Dupixent treatment. Three of these indications, atopic dermatitis, asthma, and nasal polyps, have achieved blockbuster status, each generating over a billion dollars in annual net sales. In the fourth quarter, Dupixent worldwide net sales grew 15% year-over-year to 3.7 billion, with increasing volume across all indications, age groups, and geographies. In the U.S., net sales grew 10% year-over-year to $2.7 billion, driven by a 24% increase in total prescriptions, including the recent COPD launch. As Sanofi noted, fourth-quarter results were negatively impacted by one-time items. We continue to see broad growth across all blockbuster indications of atopic dermatitis, asthma, and nasal polyps. Despite new entrants in atopic dermatitis depicts and continues to be first choice for physicians who now understand that IL-4 and IL-13 are crucial drivers of type 2 inflammation. Additionally, there is robust uptake in our recent U.S. launches for sinophilic esophagitis, paragonodularis, with current trends suggesting that these indications will likely also achieve blockbuster status. We are off to a promising start in COPD, following approvals in more than 30 countries. In the U.S., the FDA approved Depixit in September of last year, And we are very encouraged by our progress in early market adoption. Together with our partner, Sanofi, we've made significant strides in securing U.S. access and reimbursement for commercial and Medicare patients. At the start of this year, nearly 85% of commercial patients and nearly 90% of Medicare patients have coverage. Additionally, we are pleased that global gold treatment guidelines for COPD now include Depixin as the only recommended biologic medicine for these patients. We look forward to accelerating the launch of this important indication and to make a significant difference in the lives of hundreds of thousands of COPD patients worldwide. Our teams are also preparing for a potential April launch in chronic spontaneous urticaria pending FDA approval. We believe Depixin offers a compelling treatment option and, if approved, would be the first new targeted therapy in the US in over a decade for the estimated 300,000 CSU patients. In conclusion, we continue to deliver solid performance across our commercial portfolio in the fourth quarter. We also see significant growth opportunities in 2025 and beyond, with near and medium-term catalysts to drive growth. With that, I'll turn the call to Chris.

Thank you, Marion. My comments today on Regeneron's financial results and outlook will be on a non-GAAP basis unless otherwise noted. Regeneron ended 2024 with strong financial performance in the fourth quarter, delivering growth on both the top and bottom line. Total revenues grew 10% year-over-year to $3.8 billion, primarily reflecting higher Sanity Collaboration revenue driven by Dupixent growth, strong global net sales growth for Libtyo, and modest growth for combined net sales of ILEA HD and ILEA in the U.S. Fourth quarter diluted net income per share was $12.07 on net income of $1.4 billion, up 2% from the prior year. On a full-year basis, total revenues were $14.2 billion, representing growth of 10 percent when excluding revenues from Roanoke Reef. 2024 earnings per share grew 4 percent from the prior year to $45.62. Turning to collaboration revenue in the fourth quarter, revenues from the Sanofi Collaboration were $1.2 billion, of which $1 billion related to our share of collaboration profits. Regeneron's share of profits grew 18 percent versus the prior year, driven by volume growth through Dupixent and higher collaboration margins. For the year, our share of profit net of development balance reimbursement increased to the highest level since initiation of the collaboration, reaching approximately 20% of total antibody net sales. The Sanofi development balance was approximately $1.6 billion at the end of 2024, reflecting a reduction of approximately $175 million from the end of the third quarter and approximately $700 million from the end of 2023. We continue to expect this balance to be fully reimbursed by the end of 2026, which is expected to result in a significant increase in Sanofi collaboration revenue and cash flow thereafter. Moving to Bayer, fourth quarter ex-U.S. net sales of ILEA and ILEA 8 MIG were $888 million, up 2 percent on a constant currency basis versus the prior year. Total buyer collaboration revenue was $377 million, of which $349 million related to our share of net profits outside the U.S. Now to our operating expenses. R&D expense was $1.2 billion in the fourth quarter. The increase in R&D expense versus the prior year was driven by cost-to-support advancement of Regeneron's broad clinical pipeline, including our C5 and Factor XI programs in hematology, certain oncology programs, etapecumab and COPD, and our ongoing program in obesity. Fourth quarter SG&A was 681 million, with growth from the prior year primarily reflecting investments to support the launch of ILEA-HD and our international expansion. Fourth quarter 2024 gross margin of net product sales was 86 percent, up slightly from the prior year quarter. Now to cash flow and the balance sheet. Regeneron generated approximately $3.7 billion in free cash flow in 2024, and end of the year with cash and marketable securities less debt of approximately $15.2 billion. In 2024, we deployed $2.6 billion towards share repurchases, including a meaningful step up in the fourth quarter during which we repurchased nearly $1 billion of our shares. Consistent with our capital allocation framework, we are investing heavily in our R&D capabilities to drive long-term growth, exploring business development opportunities, and returning capital to shareholders. This morning, we announced an additional share repurchase authorization of $3 billion, increasing our capacity for repurchases to approximately $4.5 billion as of today. In addition, we are enhancing our approach to returning capital to shareholders. As announced this morning, our Board of Directors has authorized the initiation of a quarterly dividend with the first dividend payable on March 20th to shareholders of record as of February 20th. The dividend will be 88 cents per share equivalent to $3.52 per share on an annual basis. We are confident in the long-term growth of our business, our innovative R&D engine, our differentiated pipeline, and the durability of our cash flows, all of which support the initiation of our first quarterly dividend and the announcement of an additional share repurchase authorization. I'll conclude with a review of our 2025 financial guidance. We expect 2025 R&D spend to be in the range of $5 to $5.2 billion. The increase versus 2024 is driven by cost to support our expanding late-stage pipeline, including Phase III programs for our Factor XI antibodies and hemlock bispecifics, as well as programs in obesity and genetic medicines, and the advancement of multiple new assets into the clinic. We expect 2025 SG&A to be in the range of $2.55 to $2.7 billion, representing 3 percent growth at the midpoint of this range versus 2024, driven by investments to support multiple potential oncology launches. We expect our gross margin on net product sales to be in the range of 87 to 88 percent. This guidance reflects a changing product mix as well as ongoing startup costs for our new till-finish facility and investments to drive future efficiencies across our manufacturing network. We expect cost of collaboration manufacturing to be in the range of 1 to 1.15 billion in 2025, primarily driven by higher depiction volumes. Recall that we are reimbursed for these costs as revenue, making them generally neutral to net income. We expect 2025 capital expenditures to be in the range of 815 to 975 million, primarily related to ongoing expansion of the R&D facilities at our Tarrytown headquarters and investments to increase bulk manufacturing capacity in the U.S. and Ireland to support our expanding pipeline. Finally, We expect our 2025 effective tax rate to be in the range of 11% to 13%. In summary, Regeneron delivered solid financial results in 2024, and our strong financial position and prudent capital allocation enables Regeneron to deliver long-term shareholder value. With that, I'll pass the call back to Ryan.

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

Thank you. Please stand by for our first question. Our first question comes from the line of Brian Abrahams. Your line is open.

Hey, guys. Good morning. Thanks for taking my question. Consensus numbers suggest expectations for annual sales erosion of about 7% annually over the next few years for the ILEA franchise. Just given what you've been seeing on the ground and some of the dynamics you described, including competitive pressure but a potential acceleration in HD with some of those approvals, Do you think that these expectations look reasonable? And I know you guys don't typically provide guidance, but I think any directionality might be helpful here just to understand whether folks are looking at dynamics here the right way or if expectations may be way off. Thanks.

So, as you pointed out, we don't give guidance. I wanted to give you a summary today of how we see the market. and certainly as it relates to ILEA-HD and the strengthening of the profile that we hope with additional FDA approvals this year related to delivery system with the pre-filled syringe, indication with RVO, dosing flexibility, and then also the clinical data that further cements ILEA-HD as the product with the greatest durability. We believe that combination of factors for ILEA-HD And the fact that already in our year, this past year in the market, ILEA HD at $1.2 billion in net sales is a blockbuster product. We see that as a very compelling profile. But I did want to be very realistic in my comments indicated we do expect to see additional competitive pressure on ILEA. Obviously, there's a biosimilar in the market today. So that is a factor that needs to be considered as well. But overall, we certainly believe we have a very strong position. I also noted today that our category share in the fourth quarter was at 46%. So obviously, we have a very strong position in the marketplace.

Thank you. Next question, please.

Thank you. Our next question comes from the line of Tyler Van Buren with TD Cohen. Your line is open.

Hey, guys. Good morning. Thank you very much for taking the question. So the dividend initiation is an exciting disclosure and earlier than some might have expected. So I'm curious why you guys decided to institute the dividend now as opposed to when the Santa Fe development balance was paid off by the end of next year and whether you plan to increase it from these levels over time.

Thanks, Tyler. Thanks for the question. So, you know, obviously we publicly were talking about initiating it. at the end of the repayment of the Sanofi development balance. I think for a variety of reasons, we have a lot of confidence, as we reiterated on the call today, that that would be paid down. It's also obviously a differentiation in our capital allocation strategy to sort of migrate a little bit away from share buybacks, although, as Len indicated in his remarks, that'll be the primary purpose of returning capital to our shareholders, but allowing us a little more flexibility of starting the dividend. And it also opens up, a larger base of shareholders. So there are a lot of funds out there that have a dividend mandate, and this will give them the opportunity to invest in Regeneron that they wouldn't have otherwise in the past been able to do.

Thanks, Chris. Next question, please.

Our next question comes from the line of Corey Casimo with Evercore.

Hey, good morning, guys. I wanted to ask on the adjuvant CSCC LIBTIO readout that you top-lined in January. How critical is it that the product also hits an overall survival in addition to the DFSU top line? And can you kind of comment as to how you see this, the opportunity here from a commercial perspective relative to the indications you already have? Thank you.

Well, because these patients are relatively earlier stages of their disease, they tend to have long survival times from their initial surgeries and so forth. So there are very few survival events. That said, of course, the FDA will be looking at the data to make sure that at least numerically things are not going in surprising or wrong directions. But we have confidence that the package is going to look pretty attractive.

And then just adding on the commercial perspective, you know, as I noted, we obviously have a very capable and talented oncology team the U.S. and in key international markets. But for the U.S., we estimate there would be about 10,000 patients who may benefit from the adjuvant CSCC indication.

Thanks, George and Mary. And next question, please, to Wanda.

Our next question comes from the line of Salvin Richter with Goldman Sachs.

Good morning. Thanks for taking my question. Could you just speak to the magnitude of inventory impact on ILEA-HD that played out last quarter and also the dynamics that are happening in the marketplace with PAV Blue, the biosimilar?

So, Salvinas, we had noted last quarter there had been a build in ILEA HD inventory, and that obviously impacted fourth quarter for ILEA HD burning off that inventory. As to the specific numbers, The range of impact in total would have been in the range of, if we looked at the combined ILEA HD and ILEA net product sales for the fourth quarter, the favorable impact was predominantly to ILEA, and that was about 85 million. And that was the result of higher wholesale inventory levels for ILEA, partially offset by lower wholesale inventory levels for ILEA HD.

Did you want to comment on the pad blue?

Well, Glenn, you know, it's really difficult to comment on PABLU. I will note one thing that very recently we had some victories at the Federal Circuit Court of Appeals, which thus far is leading to the conclusion that there's only one competitor of a biosimilar. If that holds, that really changes the dynamic quite a bit in terms of pricing and things like that. So having one competitor is quite different than having multiple competitors. So I'd encourage you to look at some of the recent wins we had at the Federal Circuit on the injunctions against other players. In terms of what's actually going in the market, you know, I think maybe you'll be on Amgen's call this afternoon. Maybe they can give you a more direct answer.

Thank you. Next question, please.

Our next question comes from the line of Chris Schott with J.P. Morgan.

Hi, this is Taylor Hanley on for Chris Schott. I just had a question on how you're thinking about operating expenses going forward. So with numerous programs advancing to late-stage development. How are you thinking about balancing investments across the pipeline? And do you think that there would be the potential to partner any of these programs, or should we think about Regeneron keeping everything in-house going forward?

So I think it's important to note that our primary allocation of our capital is to our research and development efforts. We're in the midst of doing a little interesting exercise that if you compare our investment to other companies and you take into account equity investments and other upfronts and milestones that are essentially buying research and development, I think the data is going to show that we have an incredibly productive dollar-for-dollar, pound-for-pound R&D capabilities in the industry. In terms of whether or not we would partner, I think we have always been, that is, a financial partner, perhaps, or even a strategic partner on some program. We've always kept an open mind to see what is the best for the program and how can we best allocate our resources. So we don't manage the business in any fixed allocation way. We don't say we're going to spend X percent. We look at what's worth spending our money on. We look at what the potential ways to fund our programs are, and we try and make decisions that way rather than having some allocation quotas or the like. That flexibility, I think, has served us well, and it will continue to serve us well given that we have more than 40 programs in the clinic and many, many more. heading towards the clinic.

Okay, thank you. Next question, please, to Wanda.

Our next question comes from the line of Christopher Raymond with Piper Sandler.

Hey, this is Sam on for Chris. Thanks for taking our question. On ILEA, we noticed you had a modest price increase, which is the first time we've seen that for ILEA. Meanwhile, we've seen Roche have more regular price increases for Revizema since they launched. Any comments on your pricing strategy for ILEA going forward? Is the goal to, you know, stabilize average sale price over time? Thank you. No comment.

Okay. I was going to say no comment. I'll add, you know, you mentioned a price increase for ILEA. There is also a modest price increase for ILEA HD.

Okay. Next question, please.

Our next question comes from the line of Mohit Bensal with Wells Fargo.

Okay, thank you very much for taking my question. Maybe imagine just wanted to get a little bit more color on on how you're thinking about the cadence of file a HD for the year for the year because it seems like you're saying that you expect incremental conversion when people syringe and label expansion comes in. Could you help us understand, I mean, is it like, is it going to be more incremental or do you think there's an inflection especially due to pre-filtration given the market acceptability of that formulation? Thank you.

Mohit, I don't have additional comment at this time. I wanted to give the overall balance that we see obviously opportunity for ILEA-HD to continue to grow. As you know, the market is probably about 10% naive patients, 90% switch patients going over to ILEA-HD. And, you know, among those patients that are switching, the source of business is often coming from ILEA, second, furosemab, and third, Avastin. But as to the overall market dynamics, I don't have additional comments.

Yeah, I mean, and I would encourage you, obviously, to look beyond the hyper-focus on ILEA and We have Dupixent launching away in COPD. We have pivotal data coming up with ipecumab in COPD. We have first-line melanoma, metastatic melanoma data coming up second part of this year. We've got data in myasthenia gravis coming up. We're starting a trial in geographic atrophy. And I could go on and on and on. And I would encourage you to work through those because our strategy is not to be solely dependent on any one thing, yet still optimize every single thing. So we will do everything we can to optimize each of our programs, HD and so forth, but we don't want to become dependent on any one thing, which is why we're so excited about the pipeline. So I would say it's the pipeline. Next question.

Our next question comes from the line of Tim Anderson with Bank of America.

Hi, this is Alice Nettleton on for Tim Anderson. Thanks for taking our question. Sorry, another one on ILEA.

Why don't we come back to that question at the end so we can get some non-ILEA questions in. We'll put you at the end of the queue and we'll come back to you. Next question, please. Sure.

One moment. Our next question comes from the line of Akash Tewari with Jefferies.

Hi. I'm not going to ask an ILEA question. George, I love your take on Factor XI. We've seen both Ascendexian and some of the private MAP players show issues in preventing ischemic stroke events, with the MAP also showing an inverse dose response on bleed prevention. That said, Regeneron is the only company that's shown an incremental benefit in a total knee replacement study versus Eloquist. So can you talk about your confidence on 5708 and some of the recent data sets in the space?

Yeah, our strategy from the beginning was take advantage of our understanding from the genetics to design and select two antibodies that have very complementary but different profiles can address different patients and allow physicians and patients to choose the best antibody for their needs. So our antibody, the 7508 that you mentioned, that hits the cardiac domain is in side-by-side comparisons is biochemically the strongest blocker and has the strongest anticoagulant activity of anything in this class. And that would be designed for the patients who need the most anticoagulant control. And as you said, it performed very impressively in the initial proof of concept studies with regard to that functionality. The 9933 which affects the A2 domain, is designed to be slightly gentler. And the genetics suggest it may have very little, if any, bleeding risk, but perhaps a little bit less anticoagulation activity. So that's designed to give alternatives or options for the patients and the physicians who are most concerned in that setting about bleeding risk. So we think this is a very powerful optionality and flexibility. to be able to offer both physicians and patients who struggle between solving the dilemma about how do I control anticoagulation without causing bleeding and all of those concerns that go with that. And this way, we'll have data and we'll have comparative data in multiple settings to allow the physician and the patient to hopefully choose the best approach for their situation. And we think that certainly the The patients, the settings are really crying out for this sort of optionality and flexibility. This is why so many patients in so many indications, not only in atrial fibrillation, but across the entire spectrum of diseases in which thrombi and clots are a problem, are left untreated or not maximally treated. So we're hoping to address that huge unmet need by evaluating and getting data on these two genetically validated approaches.

Thanks, George. Next question, please.

Our next question comes from the line of William Pickering with Bernstein.

Hi. Thank you for taking my question. It's about your complement programs. So it seems like your antibody-SIRNA combo has potential to deliver really leading efficacy, but on safety you've seen some great 5AEs so far. how you see these combos fitting into the MG and GA treatment landscapes. And for GA specifically, anything about the design of the phase three trial that would kind of minimize some of those safety events that you've seen so far? Thank you.

Yes. So first of all, the safety events are consistent with what's been seen with the class in general. Right now, we don't really have evidence to suggest that it's different than the other approaches vis-a-vis safety. In terms of efficacy, it's an incremental benefit that is able to drive many more of the patients into the normal range. So the current drugs can achieve in some patients as deep complement inhibition as we're seeing, but they don't do it for all the patients. We're doing it for a much higher percentage of patients, so we're not really lowering complement to much lower levels. We're just driving more of the patients to the levels that are already being achieved. This is consistent with the safety profiles being analogous to what's already been seen with the class. But very importantly, it's the uncontrolled patients which are causing the problems, whether it be in PNH or perhaps some of these other complement media diseases who are being suboptimally treated, which we hope we now have a solution for. For those patients, roughly 30% of the populations, even with the best standard of care, who are left suboptimally treated. That said, complement inhibition for an elderly or older AMD patient is certainly a concern with any approach. And as you said, we are doing a variety of things that are somewhat standard for the class to try to choose, first of all, enroll patients who are not as high risk to make sure, for example, they're vaccinated against the the organisms of risk and, of course, monitoring them closely. But we have to balance that, of course, with the concerns and the safety events that have been happening with the intravitreal approaches. I mean, these are designed to slow down slowly progressing vision-threatening events, yet the safety events can cause catastrophic immediate vision loss in patients. That's a little bit of a dilemma. Do you take a prevention that can make you immediately blind to slow down your eventual blindness? We're hoping to offer another option for these patients that might not risk their vision, but as you said, we'll have to balance the safety infectious types of events, which, as I said, are a class-specific type of problem.

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

Our next question comes from the line of Dave Reisinger with Lirik Partners. Your line is open.

Yes, thanks very much. So my question is on obesity. George, could you please discuss the need to combine myostatin with an active end blocker to treat obesity and optimize body composition? I ask because I'm curious about whether if the activin doesn't have the right benefit-risk profile, whether you could develop a myostatin as a standalone or not. Thanks very much.

Yeah, you pretty much summarized exactly our strategy based on our previous data in humans, including in sarcopenic individuals. The combination can grow more muscle. However, we do have some concerns with the activin A blockade. The GDFA blockade, now based on both genetics and what we've seen, looks to be exceedingly safe in terms of all the early data. We don't have as much data with the active in A, and so we're left with more concerns. So we're testing the combination, but we can fall back on just single approaches, which might have a little bit less efficacy in terms of muscle preservation, but might be safer. So that's why we're exploring these individually, but also together to understand the best benefit-risk profile. I want to remind you that, for example, at Lilly, they're trying a receptor blocker that not only blocks these two growth factors, but more than a dozen other related growth factors. So that may yield good efficacy, but the concerns there is not only you're blocking the myostatin and the activin A, but a dozen other factors as well, and what are the potential side effects you'll see here? That's why we like our program, that we can actually target the two most important factors as we've shown preclinically and clinically for muscle preservation while also trying them individually. So that way we'll have, once again, the most flexibility. A lot of our programs are designed to dissect and separate individual agents in various processes to understand best the benefit-risk profile of where you might trade efficacy for safety and vice versa.

Thanks, George. I don't see Bank of America in the queue, so we'll just go to the next question in the queue as our final question.

Our final question comes from the line of Terrence Flynn with Morgan Stanley.

Thank you. This is Chris for Terrence. Just a question on your LAC3 plus PD1 combo in non-small cell lung cancer program. What is the efficacy bar on the duration of response or PFS that you need to see for you to advance that into a pivotal program? Thank you.

Yeah, as we've seen from the small data set with our friends at Bristol in terms of their combination, those data sets are very small and they're hard to really make convincing conclusions on. That's why we are more focused on our melanoma data. If the melanoma data really deliver the sort of efficacy profile, safety and efficacy profile that we've seen in our proof of concept studies when we read out the phase three, I think that's going to generate enormous excitement, both for the potential to really help first-line melanoma patients, but also to extend this combination to a variety of other cancer settings, including potentially lung cancer. So I think that the bigger data set in the Phase III study is going to provide the most insight and the most potential confidence, as opposed to the smaller Phase IIs and proof-of-concept studies, which obviously can generate excitement, but they're not really definitive, as we've seen from our own data, but also from our friends who have other related programs going on. So I really point to the pivotal melanoma data. If that really emerges as the new standard of care of melanoma, I think it's going to provide a lot of interest and excitement in other cancer settings as well.

I see Bank of America is back in the queue, so we will take our final question from them as promised.

Our next question comes from the line of Tim Anderson with Bank of America.

Hi, thank you. This is Alice. So back to my question on ILEA, we talked to one big purchaser of ILEA recently who said that Regeneron essentially hasn't sweetened the contract terms on standard dose in an effort to compete with Amgen's product yet. So can we infer from this that you are likely to hold the ground on price and pricing concessions with the goal being that doctors will start using high dose more once the label and product enhancements come through. Thank you.

Alice, thank you for your patience. We don't comment on pricing strategy, but I certainly will compliment our very talented market access and pricing team, but no comment.

With that, we will conclude the call. Thank you, and thanks to everyone who dialed in for today's call. We apologize to those remaining in the Q&A queue. We did not have enough time to hear from you, but we're always happy to follow up. We're available to answer any remaining questions you may have. Thank you once again. Have a great day.

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