Regeneron Pharmaceuticals, Inc. (REGN) Q4 2020 Earnings Call Transcript

Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) Q4 2020 earnings call dated Feb. 05, 2021

Corporate Participants:

Justin Holko — Vice President, Investor Relations

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

Marion McCourt — Senior Vice President, Commercial

Robert E. Landry — Executive Vice President, Finance and Chief Financial Officer

Analysts:

Chris Raymond — Piper Sandler — Analyst

Cory Kasimov — JPMorgan — Analyst

Terence Flynn — Goldman Sachs — Analyst

Geoffrey Porges — SVB Leerink — Analyst

Ronny Gal — Bernstein — Analyst

Kennen MacKay — RBC Capital Markets — Analyst

Evan Seigerman — Credit Suisse — Analyst

Yaron Werber — Cowen — Analyst

Matthew Luchini — BMO Capital — Analyst

Mohit Bansal — Citigroup — Analyst

Presentation:

Operator

Welcome to the Regeneron Pharmaceuticals Fourth Quarter 2020 Earnings Conference Call. My name is Michelle, and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Justin Holko, Vice President, Investor Relations. You may begin.

Justin Holko — Vice President, Investor Relations

Thank you, Michelle. Good morning, good afternoon, and good evening to everyone listening to the call today. Thank you for your interest in Regeneron Pharmaceuticals, and welcome to the fourth quarter 2020 conference call. An archive of this webcast will be available on our website.

Joining me today on the call are Dr. Leonard Schleifer, Founder, President and Chief Executive Officer; Dr. George Yancopoulos, Co-Founder, President and Chief Scientific Officer; Marion McCourt, Executive Vice President and Head of Commercial; Bob Landry, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open the call for Q&A.

I would like to remind you that remarks made on today’s call include forward-looking statements about Regeneron. Such statements may include, but not limited to those related to Regeneron and its products and business, financial forecast and guidance, development programs and related anticipated milestones, collaborations, finances, regulatory matters, payer coverage and reimbursement issues, intellectual property, pending litigation, 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 31st, 2020, which we are planning to file with the SEC on Monday. Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition, please note that GAAP and non-GAAP measures will be discussed 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 financial results press release, which can be accessed on our website. Once our call concludes, Bob Landry and the Investor Relations team will be available to answer further questions.

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

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Thank you, Justin, and thanks to everyone joining on today’s call. 2020 was a devastating year for so many individuals and their families who succumbed to COVID-19. At Regeneron, we have done all we can to be part of the solution, and we will spend quite a bit of time today trying to inf orm you of our efforts.

On a more general note, for the company, that despite operating in unprecedented circumstances of a global pandemic, Regeneron delivered strong commercial and financial results, while advancing our innovative R&D pipeline and joining the fight against COVID-19. Despite COVID-19, we never lost sight of our focus on the patients who count on us for our innovative medicines and novel medical breakthroughs.

For the full year 2020, we grew the top line by 30% and the bottom line by 28%, with an increasingly diversified set of revenue and earnings streams. In fact, more than 80% of our top line growth came from products and revenues, other than EYLEA.

EYLEA global net sales were nearly $8 billion and grew 5% compared to the prior year. In the U.S., sales were close to $5 billion and grew 7% versus the prior year, rebounding strongly from April lows due to COVID-19, and outperforming the broader anti-VEGF category. EYLEA’s efficacy, safety and convenience creates a high bar for current and potential future entries, leaving us confident in its durability for years to come.

Next, our growth was also fueled by Dupixent, which sold more than $4 billion globally and grew 75% compared to the prior year. In the U.S. alone, more than a million prescriptions for Dupixent were written. Only 6% of eligible U.S. patients have been treated with Dupixent to-date, leaving much more room to grow. With regulatory approvals in atopic dermatitis, asthma and chronic rhinosinusitis with nasal polyposis and a late-stage development program across eight additional disease types, Dupixent has the potential to transform the treatment of Type 2 inflammatory diseases,

In oncology, we are pleased that Libtayo remains the number one treatment in cutaneous squamous cell carcinoma. In 2020, global net sales were approximately $348 million, representing growth of 80% and further market penetration in the U.S. and from launches around the world.

Beyond Libtayo, we are emerging as a leader in the development of novel bispecific and other antibody treatments. We now have 12 oncology antibodies in clinical development. Our ability to create a variety of rational combinations using our VelociSuite antibody technologies, positions us well to unlock the next wave of innovation in immuno-oncology.

Regeneron also made strides against infectious diseases in 2020 with the FDA approval of Inmazeb, a monoclonal antibody cocktail and the first ever treatment for ebolavirus infection. But nowhere has the power of our R&D teams and technologies been more evident than in the discovery and development of our novel antibody cocktail against COVID-19 known as REGEN-COV.

In just 10 months, we went from program inception to clinically demonstrating profound antiviral activity, as well as reduction of medical visits. to receiving an emergency use authorization for REGEN-COV in the United States. Most recently, we showed promising data that suggest REGEN-COV reduces transmission of the virus and prevents infections in patients at high risk of contracting the virus.

Importantly, we announced a new supply agreement with the United States government for an additional 1.25 million treatment doses for up to $2.6 billion.

Finally, we secured a strategic partnership with Roche to manufacture and commercialize REGEN-COV globally. These achievements would not have been possible without decades of investment in our innovative antibody related technologies and our scientific talent, who are a continual source of pride.

Regeneron also completed shareholder-friendly actions in 2020, including restructuring our Praluent agreement with Sanofi and achieving profitability for the brand in the United States. We also executed the largest ever United States healthcare equity offering with Sanofi stake in our company.

We leveraged our strong balance sheet and historically low interest rates to repurchase $5 billion of those shares, immediately reducing uncertainty and creating significant accretion for our shareholders.

We are entering 2021 with strong momentum across our entire business. We expect a number of exciting catalysts this year, including a series of important launches for Libtayo in lung cancer and basal cell cancers, Dupixent data readouts and launches and milestones for other products that will further enhance our diversity of sales and earnings and position us for sustained financial growth.

We are encouraged by the progress we are making against COVID-19 and expect several near-term data readouts for our antibody cocktail that George will outline momentarily. Importantly, our pipeline continues to grow and advance across a wide variety of diseases. Our core business momentum, new launches and R&D advances positions Regeneron to deliver significant and sustained growth for years to come.

Now, I will turn the podium over to George.

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

Thank you, Len. While the world — with the world still in the throes of the COVID-19 pandemic, I will start with our efforts on REGEN-COV, our antibody cocktail targeting the SARS-CoV-2 virus. Over the last few months, we have achieved several important milestones, on November 21st, our antibody cocktail received FDA Emergency Use Authorization for recently diagnosed mild-to-moderate COVID-19 in high-risk patients. The EUA was granted based on the initial results in patients from our large study in the non-hospitalized setting.

In December, we announced encouraging initial REGEN-COV results in hospitalized patients on low-flow oxygen, with the cocktail treatment successfully passing through criteria to continue and being associated with the reduction in the risk of death or mechanical ventilation.

Just last month, we released initial data with REGEN-COV in the prevention setting, which showed 100% prevention of symptomatic COVID-19 infections and 100% reduction of the duration of high viral shedding when patients would be expected to be most infectious and capable of transmitting the virus. Importantly, these results were achieved using our lower subcutaneous dose, which should simplify delivery.

We expect important additional readouts over the next few months in terms of the confirmatory Phase 3 results in the prevention setting; in the outpatient setting, which includes an evaluation of our lower dose; and in the hospitalized setting, as part of our collaboration with the U.K. recovery study. These upcoming data set are important for demonstrating efficacy across broader patient populations and supporting regulatory approvals worldwide.

I want to address the important issue of emerging virus variants, which have dominated the news, as they have the potential to evade both natural, as well as vaccine-derived immunity. We prospectively designed our cocktail with such variants in mind. In fact, as we published in Science Journal back in June, we anticipated the exact mutation that is raising concerns about resistance for the South African and Brazilian variant that have now also been seen in the United States. Because of our prospective recognition of the threats of variants and our intelligent design approach, our current antibody cocktail is active against all these currently known virus variant, as was recently independently confirmed by multiple prominent academics. If needed, we also have a large antibody collection that could be ready to mix and match in new cocktails against potential future viral variants. We of course hope that vaccines will efficiently and rapidly create widespread immunity and this immunity will withstand the challenge of time and of emerging variants.

However, even if the vaccine successfully provide widespread and long lasting immunity, according to the most optimistic timeline, it is estimated that up to hundreds of thousands of individuals may tragically die until we reach that point. Moreover, emerging variants are posing a very real threat to both natural and vaccine-derived immunity.

Recent data indicate vaccines may already be less than 50% effective against the new variants, with new mutations having the potential to further undermine vaccine immunity. We believe strategic deployment of antibody approaches, such as our REGEN-COV antibody cocktail could be targeted in such a way, so as to reduce the loss of life over the next six months, as well as to provide protection against the possibility of waning vaccine efficacy and ongoing disease prevalence.

Moving to Dupixent, in our immunology and inflammation portfolio. Dupixent is a new — has multiple trials and new potential indications that are progressing quickly. Most notably, our Phase 3 trial in eosinophilic esophagitis is now fully enrolled. Recall that we presented encouraging data from Part A of this study last year.

As we outlined recently, Dupixent is also part of our two-pronged approach against chronic obstructive pulmonary disease or COPD, along with itepekimab, our anti IL-33 antibody. The two Dupixentt Phase 3 studies in Type 2 COPD are ongoing and enrolling patients. Based on our proof-of-concept Phase 2 data that will be published later this year, we believe that blocking IL-33 could be useful for treating COPD in former smokers, where we have seen a 40% reduction in exacerbations.

We and Sanofi have now started the first Phase 3 study of itepekimab in this subset of COPD patients, with the confirmatory Phase 3 study to begin imminently. Our hope for this broad program is Dupixent and itepekimab can provide real benefit for the many patient suffering from COPD and with no biologic options to-date.

Dupixent is also part of multiple additional approaches to treat allergic diseases, in particular, in so-called effort to desensitize individuals from food and inhaled allergens. As you know, millions are undergoing allergy desensitization each year, often with unsatisfying results even after years of allergy treatments.

I am pleased to announce that the Phase 2, placebo-controlled trial of pediatric patients with peanut allergy met its primary and key secondary endpoints, showing that Dupixent, in combination with immune therapies oral immunotherapy, significantly improved desensitization to peanut protein when compared to oral immunotherapy alone. These results coupled with data of this year — later this year from a separate Phase 2 trial of Dupixent monotherapy in patients with peanut allergy, will inform next steps in this setting and for other forms of allergy desensitization as well.

We also have additional groundbreaking new approaches to allergy. We have created the first antibody-based therapeutics directed to allergens themselves with the idea that these antibodies can directly bind and neutralize the allergens. Our first two anti-allergen antibodies target cart allergy and birch allergy, with birch being the major cause of seasonal allergies in the spring. And the therapies may be particularly important for patients with these and other allergies with concomitant asthma, since these patients are not candidates for allergy desensitization.

We will be presenting detailed data from proof-of-concept studies at upcoming meetings, showing that these anti-allergen antibodies have the potential to revolutionize the treatment paradigm. And our first Phase 3 field study in birch allergy is now open for enrollment and will be conducted throughout the allergy season with results expected later this year.

We are similarly planning a Phase 3 study in patients suffering from cat allergy, to begin later this year.

Next, I’d like to briefly discuss EYLEA. We appreciate that EYLEA has withstood million attempts to challenge its leading efficacy and safety profile over the last decade, as we have accumulated a real-world experience of over 30 million injections, and it is not clear that any near-term competitors have data suggesting important advantages.

We would like to remind you that clinical trials have shown that substantial numbers of patients can be effectively treated at longer intervals with EYLEA. For example, the ALTAIR study shows that about 40% of patients can be extended to a 16-week treatment interval. We are now enrolling our Phase 3 program with high dose EYLEA, which we hope can deliver the same efficacy and safety but allow even more patients to be extended.

Moving to our oncology efforts, and starting with Libtayo. In a matter of weeks, assuming positive FDA action, we expect two significant label expansions for Libtayo in non-small cell lung cancer and in basal cell carcinoma. Later this year, the Independent Data Safety Monitoring Committee will be conducting interim analysis for our Libtayo chemotherapy combination study in lung cancer and for a monotherapy study in second line cervical cancer.

We continue to make progress with Libtayo as it is establishing itself as the leading immunotherapy for non-melanoma skin cancers, as we hope to make it a potential major new player in the lung cancer space and as we employ it as a foundational therapy to our oncology strategy for bringing novel combinations to the many cancers that are desperate for new treatments.

This combination approach has a major focus on our bispecifics portfolio, as we are emerging as leaders with both our CD3 classes bispecific as well as our so-called costim bispecifics. These two classes of bispecifics can be paired with each other as well as with Libtayo, and we are exploring all these combinations and more.

We’ll present the updates at the American Society of Hematology, or ASH, meeting in December on Odronextamab, a CD20xCD3 bispecifics, which continue to show high rates of durable responses in follicular and diffuse large B-cell lymphomas.

We are working with the FDA to determine the optimal dosing program protocol designed to further minimize already rare cytokine release syndrome events during the step-up dosing phase of this powerful agent. A subcutaneous formulation is under development as well.

We’ll also provide an update at ASH on our BCMAxCD3 bispecifics for relapsed refractory myeloma and our pivotal Phase 2 trial is enrolling well, with full enrollment anticipated this year. Phase 3 trials for this program as well as studies of a subcutaneous formulation are also on track to start this year as well.

Our third CD3 bispecific in the clinic, REGN4018, our MUC16xCD3 bispecific continues in dose escalation trials for ovarian cancer, where we are observing early efficacy signals.

Our costim bispecifics are also progressing. Notably, our trial for our MUC16xCD28 co-stimulatory bispecific has just dosed its first patient and will continue in combination with Libtayo. Later this year, it would also be combined in patients with our MUC16xCD3 bispecific, making it a first clinical pairing of CD3 and costim bispecific, which we hope will provide for a game-changing and generalizable approach to solid as well as hematologic tumors.

Regarding the latter, we will soon be initiating trials of a costim bispecific to be paired with our CD20xCD3 bispecific for lymphoma; and later this year of a different costim bispecific to be paired with our BCMAxCD3 bispecific in myeloma.

Our PCMA costim bispecific is progressing in dose escalation trials with Libtayo for patients with prostate cancer, and we also have a costim targeting the EGF receptor that will allow for a variety of novel combinations as well. These combination programs bearing bispecs with each other and with our anti-PD1, has the potential to synergistically unleash the power of immuno-oncology more broadly than currently approved treatments. And thus, there is a lot of interest in the timing of the data releases from these early combination programs.

We hope you appreciate the requirement for careful and deliberate dose escalation trials to ensure patient safety, as these drugs are designed to activate patients’ immune system and involve novel and powerful pathways. Hence, while early results or topline data announcements are possible in 2021, readouts are equally possible to occur in 2022.

Now to oncology, I would like to highlight that next week, we expect approval for evinacumab, now known as Evkeeza, for homozygous familial hypercholesterolemia. If approved, this addition to our portfolio builds upon our cardiometabolic expertise and has the potential to help patients suffering from this rare disease.

Before I finish, I’d like to highlight that we continue to invest in our world-leading human sequencing efforts at the Regeneron Genetic Center, which is pivotal to identifying and validating targets for our new genetics medicines initiative, which we believe to be transformational not only for Regeneron, but for our entire industry. And it already involves important collaborations with partners such as Alnylam, Intellia, Decibel, bluebird, and others.

To conclude, in 2020, we and our partners have introduced nine new investigational therapies into the clinic, submitted marketing applications for six new indications and secured two new drug approvals for authorizations. We are proud of the remarkable accomplishments our Regeneron team has achieved in a difficult year and we thank our many investigators and patients who have been essential to helping us with these accomplishments.

With that, I’d like to turn it over to Marion.

Marion McCourt — Senior Vice President, Commercial

Thank you, George. We ended 2020 with positive momentum across our commercial portfolio as our core products, EYLEA, Dupixent and Libtayo, delivered strong performance in the fourth quarter. Our 2020 results coupled with near-term launch opportunities position us for continued diversified growth in 2021.

Beginning with EYLEA, fourth quarter global net sales grew 10% year-over-year to $2.2 billion. As we reported last month, U.S. EYLEA net sales grew 10% year-over-year to $1.34 billion, the highest reported net sales since EYLEA’s launch. EYLEA again outperformed the category with share gains from both branded and unbranded competition. EYLEA share of the branded category approached 75% for the quarter and EYLEA remains the number one prescribed anti-VEGF therapy overall in wet AMD and diabetic eye disease.

While volume in the overall anti-VEGF category declined in 2020, EYLEA was the only product in the category to grow. Patient volumes are now normalizing. EYLEA sets a high bar on efficacy, safety, dosing inflexibility and real world experience for current and future competition.

The anti-VEGF category continues to be supported by the aging population and increasing prevalence of diabetes. Realizing the full potential in diabetic eye disease remains a key initiative, representing a significant growth opportunity for EYLEA and is largely unpenetrated.

We intend to initiate a direct-to-consumer campaign to create awareness for patients on the importance of vision care as part of managing their diabetes.

In summary, EYLEA had an impressive quarter and we remain confident in its outlook.

Next, we recorded $146 million for our antibody cocktail, REGEN-COV, in the fourth quarter. Where appropriate, we are deploying commercial efforts under the EUA to improve availability for this important treatment against COVID-19 for at-risk patients. We are engaging with all stakeholders to reduce bottlenecks and drive utilization rates higher. Regeneron is working to educate stakeholders, including patients, on the urgency to treat at-risk non-hospitalized patients within 10 days of receiving a positive COVID-19 diagnosis. Initiatives to reduce administrative burden and direct patients to treatment centers are beginning to yield encouraging results. Physicians using REGEN-COV are providing very positive feedback on treatment results.

Let me also briefly discuss another new medicine, evinacumab, brand name Evkeeza. We’re prepared for the February 11 PDUFA date for Evkeeza for the treatment of HoFH, a rare disease that affects approximately 1,300 patients in the U.S. There’s high unmet need for these patients with this rare genetic condition as they struggle to keep their LDL cholesterol levels under control. These patients face an increased risk of premature heart disease as early as their teenage years. We are leveraging our cardio metabolic expertise and existing commercial platform to drive uptake in this rare disease category.

Turning now to Libtayo, for the fourth quarter, global net sales grew to $97 million. In the U.S., net sales were $74 million, driven by steady volume growth in advanced CSCC. We are nearing the potential approval of two additional indications for Libtayo in basal cell carcinoma and non-small cell lung cancer, both of which received priority reviews and have upcoming PDUFA dates. Our teams are eager and ready to launch once approved.

For basal cell carcinoma, there are no FDA approved treatment options once a patient progresses on or becomes intolerant to hedgehog inhibitors. Just as we did with CSCC, we will work to establish Libtayo as the standard of care in appropriate BCC patients.

We also look forward to competing in non-small cell lung cancer, where there’s a large opportunity among patients with PD-L1 expressions at least 50%. Libtayo has a favorable product profile and a growing majority of treatment centers and oncologists have experience using Libtayo in their CSCC patients. Physicians preferred choice and recent market research shows that nearly two-thirds of physicians are highly motivated to evaluate Libtayo for their lung cancer patients if approved.

Additionally, we’ve built a highly experienced commercialization team with a significant launch experience with this class. If approved, we aim to rapidly increase market awareness of Libtayo as a compelling new anti-PD-1 monotherapy treatment option.

Finally, moving to Dupixent, global net sales in the fourth quarter were $1.17 billion, representing 56% growth compared to the prior year. In the U.S., broad-based growth across all approved indications contributed to net sales of $926 million. We continue to see strong prescription trends across all approved indications and weekly new patient shares have recently eclipsed pre-pandemic levels.

Atopic dermatitis, the largest indication, is a significant growth driver on Dupixent’s rapid onset, proven efficacy and well-established safety profile. Physicians continued to expand prescribing across both moderate and severe disease and in younger populations where safety is paramount.

Despite the impressive launch growth trajectory, there remains significant opportunity as only a small percentage of the over 2 million biologic eligible patients in the U.S. have been unprescribed Dupixent. Our initiatives aim to grow new patient starts as there is substantial opportunity for many more patients to benefit and support patients already on Dupixent to continue their treatment.

Moving to asthma. Dupixent is performing well in this competitive market based on its clinical efficacy and safety profile, which is compelling and differentiated to prescribers. Our market expansion efforts supporting HCPs and patients, including DTC, continue to have a meaningful impact on new initiations and launch preparations are underway in the pediatric asthma setting.

For chronic rhinosinusitis with nasal polyps, we see healthy demand and continued strong prescribing trends among ENTs and allergists. Dupixent is core to our diversified growth strategy where there remains substantial opportunity for future expansion.

In closing, we ended 2020 with momentum, delivering strong performance across our business. With several near-term launches ahead, we have important opportunities to strengthen our thriving commercial portfolio and capitalize on growth.

Now, I’ll turn the call to Bob.

Robert E. Landry — Executive Vice President, Finance and Chief Financial Officer

Thanks, Marion, and good morning and good afternoon, everybody. My comments today on financial results and outlook will be on a non-GAAP basis where applicable.

For the fourth quarter of 2020, Regeneron delivered again double-digit broad-based top and bottom-line growth. Our revenue streams continued to diversify with significant growth contributions from Dupixent and REGEN-COV, as we invest in our best-in-class pipeline for sustained future growth.

For the fourth quarter, total revenue grew 30% year-over-year to $2.4 billion, driven by growth in U.S. EYLEA sales; higher collaboration revenues from our partners, Sanofi and Bayer; and sales of our REGEN-COV antibody cocktail. Diluted net income per share grew 27% year-over-year to $9.53 on net income of $1.1 billion.

Since Marion discussed our U.S. EYLEA results, I will start with our Bayer and Sanofi collaborations.

Starting with the Bayer collaboration. Ex-U.S. EYLEA net product sales reported to us by Bayer were $859 million for the fourth quarter of 2020, representing growth of 10% on a reported basis compared to the prior year. Total Bayer collaboration revenue was $361 million, of which we recorded $335 million for our share of net profits from EYLEA sales outside the U.S.

Total Sanofi collaboration revenue was $317 million in the fourth quarter. Our share of the profits from the commercialization of non-IO antibodies was $230 million, which compares favorably to profits of $104 million in the prior year. This growth was primarily driven by higher Dupixent profits.

Other revenue increased to $123 million in the fourth quarter of 2020 compared to $96 million in the prior year. The primary driver is the recognition of $42 million from the U.S. government associated with reimbursements of REGEN-COV development.

As we said on the third quarter call, this line item continues to trend lower due to the wind down of development reimbursements from the U.S. government. In 2021, we expect to record approximately half of the $557 million recorded in other revenue for full-year 2020.

Moving on to our operating expenses and starting with R&D. R&D increased 50% year-over-year to $675 million, primarily due to continued clinical development costs for our REGEN-COV antibody cocktail and higher headcount to support our expanding pipeline.

Next, SG&A expense increased 22% year-over-year to $381 million. The year-over-year increase was largely driven by increased headcount launch preparations for Libtayo and continued investments for growth in EYLEA.

Cost of goods sold increased 79% from the prior year from $93 million to $166 million due to sales of REGEN-COV and Praluent in the U.S. Cost of collaboration and contract manufacturing was $174 million compared to $113 million in the fourth quarter of 2019, primarily due to increased sales of Dupixent. Additionally, in other operating income and expense, we recorded $145 million of income in the fourth quarter of 2020. This includes approximately $100 million of income related to higher recognition of upfront and milestone payments previously received from our collaborators with Sanofi, Teva and Mitsubishi Tanabe.

Finally, in other income and expense, we recorded $2 million of expense compared to $25 million of income in the fourth quarter of 2019. This is driven by interest expense related to our $2 billion debt issuance in August 2020 and lower investment returns on our existing cash and marketable securities.

Turning now to taxes. The effective tax rate was 7.7% in the fourth quarter of 2020 compared to 10.6% in the fourth quarter of 2019.

Shifting now to cash flow and the balance sheet. For the full-year 2020, Regeneron generated $2 billion in free cash flow and ended the year with cash and marketable securities, less long-term debt, of $4.7 billion. We also exhausted our inaugural $1 billion share repurchase program in the fourth quarter.

As a result of our strong balance sheet and confidence in the growth trajectory of our business, we are announcing a new board authorized share repurchase program of $1.5 billion. This program is consistent with our capital allocation priorities of funding our broad R&D pipeline, investing in enabling and synergizing R&D business development opportunities, and returning cash to our shareholders. With this new authorization, we will continue to be opportunistic buyers where we see dislocation between our stock price and our intrinsic valuation.

Having reviewed our fourth quarter performance, I’d like to take some time to discuss the 2021 financial outlook. Starting with R&D guidance. We forecast our 2021 R&D expense to be in the range of $2.7 billion to $2.85 billion. We are continuing to advance programs in our diverse R&D portfolio with up to seven INDs to enter the clinic in 2021, of which six were discovered in-house. This is an addition to INDs that entered the clinic in 2020, which George mentioned.

Included in our R&D guidance and based on current plans, we expect to spend between $275 million and $350 million on the REGEN-COV development program. We expect most of this REGEN-COV spend to occur in the first half of the year.

Next, we forecast our 2021 SG&A expense to be in the range of $1.5 billion to $1.63 billion. We continue to invest in multiple launches in 2021, including two new indications for Libtayo and efforts for REGEN-COV. Also, as you heard from Marion, this increased spending will also be driven by a DTC campaign for EYLEA as we continue to see significant growth opportunity in diabetic eye disease.

Next, we expect our 2021 product gross margin on a percentage of net product sales that we record to be between 87% and 89%. We expect 2021 cost of collaboration manufacturing to be in the range of $670 million to $750 million, driven by continued growth in our Dupixent franchise. We forecast 2021 operating income and expense to be income of $150 million to $175 million.

Finally, we expect our 2021 non-GAAP tax rate to be in the range of 12% to 14%, inclusive of REGEN-COV sales in the U.S., which are taxed at the U.S. statutory rate.

I’d also like to review our current supply agreements with the U.S. government for REGEN-COV. We expect to recognize the remainder of the $466 million initial U.S. government contract in the first quarter of 2021. We also announced last month a new agreement with the U.S. government for additional doses of REGEN-COV.

Right now, we expect to deliver approximately 750,000 doses by the agreed delivery date of June 30 of this year at the contracted price of $2,100 per dose, with the vast majority of these deliveries occurring in the second quarter.

As George mentioned earlier, we are evaluating a lower 1.2-gram dose for REGEN-COV. Should this lower treatment dose receive emergency use authorization or approval from the FDA, we aim to deliver up to 1.25 million doses by June 30, which is the maximum quantity that is authorized for purchase by the U.S. government under the supply agreement. Importantly, if the lower dose is approved, the pricing per dose does not change.

Our ability to fulfill these finished doses is predicated on continued success in the manufacture of bulk product and access to third-party finished capacity, which is under heavy demand from COVID-19 vaccine manufacturers.

In conclusion, we are well positioned for significant growth with durable core products, multiple near-term launches and specialized growth opportunities, while investing in our R&D engine to drive sustainable long-term growth.

With that, I’d like to turn the call back to Justin.

Justin Holko — Vice President, Investor Relations

Thank you, Bob. Michelle, that concludes our prepared remarks. We’d now like to open the call for Q&A. We have more than 20 callers in the queue today. So, to ensure that we were able to address as many of these questions as possible, we are only going to answer one question from each caller before moving to the next. So, please do limit yourself to that one question. Please go ahead, Michelle.

Questions and Answers:

Operator

Thank you [Operator Instructions]. Our first question comes from Chris Raymond with Piper Sandler. Your line is open.

Chris Raymond — Piper Sandler — Analyst

Hey, thanks. So, I heard — this question is on REGEN-COV. So, I heard Marion’s prepared remarks around working to iron out some of the reported logistical and, arguably, financial barriers that have been talked about so much in the real-world setting. But I’m guessing, with the development path being as compressed as it was, your commercial support is probably playing catch up a bit here. But can you maybe talk a little bit about — more specifically what you guys feel needs to be worked on the most? Is it education of physicians? Is it the logistical issues? What kind of support — any color there in terms of what exactly you need to do to sort of smooth things out would be great.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Sure. It’s Len. Marion can give you more details. But the way we look at it, we need to do work at all parts of the funnel, the top end of the funnel being getting physicians to actually prescribe the product for the appropriate patients, and as well as at the bottom end of the funnel, which is — gets quite narrow in some places, allowing people to easily get administered the product once the physician wants to treat the patient.

And there’s been a lot of progress on both ends there. On the bottom end of the funnel, there have been best practices emerging where people have linked directly medical record algorithms to positive patients, asking their doctor if they want to get a consult to administer the cocktail. And they’ve administered lots and lots of doses of monoclonal antibodies. And these best practices are emerging around the country.

On the top end, there is still some skepticism that the data is incomplete, that the data isn’t robust enough. And we certainly would agree that we don’t have the normal data standards that you might have for a full FDA approval. But we remind everybody that we are in the midst of a pandemic, where hundreds of thousands of people are going to die and have died. And sometimes one has to look at the totality of the evidence and make decisions in that regard.

So, we continue on the top end education and the logistics on the bottom end. Marion would add something.

Marion McCourt — Senior Vice President, Commercial

Thanks, Len. And Chris, I would just add that, as Len pointed out, we continue to work with all of our stakeholders to improve in all dimensions, top level and at the local level. It’s not a traditional commercialization. Under the Emergency Use Authorization, we’re working very closely with the government, in helping stakeholders with education, the efforts of our medical affairs team in the marketplace has been Paramount, our trade and market access group, our policy and government teams. So, we have a lot of work to do. But we are making progress. And I do think that’s very, very encouraging.

Most encouraging of all is when we talk to the physicians and KOLs that have used REGEN-COV, they report positive results. And some at this point, some facilities have used antibodies and our antibody cocktail to treat hundreds and thousands of patients.

So, the best practices are growing, and we’re trying to appropriately accelerate that learning.

Chris Raymond — Piper Sandler — Analyst

Thank you.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Thank you. Michelle, next question, please.

Operator

Our next question comes from Cory Kasimov with JPMorgan. Your line is open.

Cory Kasimov — JPMorgan — Analyst

Hey. Good morning, guys. Thanks for taking the question. On Dupixent, given the time on market and the broad favorable feedback everyone seems to get on the product, why do you believe it’s only penetrated roughly 6% in the U.S. and for atopic derm? And what do you think is the key here over the next year or two to unlocking a lot more? Thank you.

Marion McCourt — Senior Vice President, Commercial

Sure. Well, let me take a stab, Cory, on that. I think that for patients with atopic dermatitis, there had been so little for so long that, over the course of several years now where Dupixent has been in the marketplace, the amazing efficacy, the safety profile, the convenience of use is something that has required a lot of market education and a lot of market understanding. And across the approved indications that we have in the US today, there are about 2 million — 2.2 million, actually, eligible patients and only about 6% are getting treatment today.

So, while favorable results in the understanding of Dupixent with dermatologists, allergists, all of our prescribers and, obviously, in asthma, now with pulmonologists and allergist, for nasal polyps with ENTs as well, this is a remarkable alternative across Type 2 disease for approved indications today. But there’s a lot of unmet need and, obviously, the future indications will take us into new populations and new prescribers.

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

I also think there’s a lot of education that needs to be done, because obviously there’s a long legacy in which people believe that drugs that you might take by mouth, things like JAK inhibitors or things like steroids are not as serious drugs as drugs that you take by an injection or biologicals. And I think that most people — or most sophisticated people are beginning to realize now that it’s the biologicals, particularly a drug like Dupixent which is more targeted, more natural and less prone to an assortment of both on-target and off-target toxicities.

And so, people think, a pill, it’s less serious. And I think we have to do a lot of education to explain that these biologicals are actually more targeted, more natural, they can be a lot safer. And though they’re more powerful, you don’t have to think of them as more serious in a negative way.

So, I think there’s a huge legacy of thinking of things like that. But the emerging data that’s coming out now is going to help, I think, with these points that, if you’re suffering from a disease like atopic dermatitis, you want to be on a natural approach, targeted biological, something that has an exquisite safety profile, like Dupixent.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Thanks, George. Next question, Michelle.

Operator

Our next question comes from Terence Flynn with Goldman Sachs. Your line is open.

Terence Flynn — Goldman Sachs — Analyst

Great. Thanks, again, for all the work on the COVID front. Really appreciate all the effort. I know you guys have been working hard there.

Just a question for George. You mentioned the efficacy signals you’re seeing with your MUC16 bispecific in ovarian cancer. Just wondering if you can elaborate a little bit more there. Is that a RECIST response? Is it CA-125? Or maybe another biomarker? And then where — on the safety front, anything initially you can share there as well? Thank you.

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

Right. Well, I can tell you when I say efficacy, it relates to both RECIST and CA-125 measures. I don’t think that we have given any specifics on that. And we’re waiting for an appropriate medical venue in which to present the data. But we are pretty excited about the preliminary evidence of activity. And as I said, we’ll be giving all the detail at an upcoming scientific meeting.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Thank you. Next question, Michelle.

Operator

Our next question comes from Geoffrey Porges with SVB Leerink. Your line is open.

Geoffrey Porges — SVB Leerink — Analyst

Thank you very much. And George, a couple of questions on the — allergy related. You sound quite excited about the allergy programs now. And just wondering if you could tell us a little bit about the path forward for peanut allergy and whether you think this will ultimately be a maintenance treatment for a significant population? Thanks.

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

Yes, I think that we’re very excited about our entire allergy portfolio because we really think we have a collection of powerful, but also groundbreaking new approaches. So, as we all know, so many people, millions in the United States, are taking, for example, multiple shots weekly to try to get desensitized or undergo these very long prolonged oral approaches and so forth, often with unsatisfying results even after years of therapy.

So, I think it’s exciting as we announced that we were able to demonstrate a significant improvement in the amount of peanut tolerization that could occur in conjunction with a new oral desensitization approach. And we think that this is going to prove to be generalizable across the board to many of these desensitization approaches where we hope that Dupixent will aid in making patients more desensitized, maybe able to tolerate these regimens better, as well as maybe improve more quickly.

And that’s only one component of our allergy program. We’re equally excited about a somewhat unrelated effort. We’re the first people who are moving into the clinic antibodies that directly bind and neutralize allergens. I for one don’t understand why this hasn’t been done before. But our data, some of which we have, talked about publicly and even published, and some of it we will be presenting at upcoming meetings show that these are very powerful approaches. From the first injection, almost immediately, at the first time measures, we’re getting the sorts of improvements that you see across studies resulting after years of desensitization therapy.

And we’re talking about two of the most important allergies, which are both associated with asthma, in which settings because of safety concerns, desensitization approaches are not indicated. That is cat allergy and birch allergy. The results are really striking. We think this is an entirely new way to fight allergy, one in which you can almost see the benefit immediately.

Once again, it’s a very natural and biologic and targeted approach. There are millions of people who are affected by these, and I think many of them having — many of them in my family, I can tell you that they would — if we can really continue to show the sort of safety and efficacy that the initial studies are showing, I think a lot of people would welcome the opportunity to take a shot and have immediate benefit in terms of their serious allergies. And it’s an entirely new approach.

And all of these things are synergistic, of course. We can imagine many ways in which we can be combining and mixing and matching various parts of our portfolio, including things like Dupixent and these anti-allergens, but with other approaches as well.

So, we really think that we may be at the dawn of a whole new era of biologics approach to treating allergy, which I think can really change everything for so many people.

And we know that, according to the CDC, allergic diseases are now approaching and increasing in epidemic proportions. So, there’s a real need out there. And there’s a real need for totally new approaches. And so, we’re very excited about them.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Thanks, George. Michelle, next question, please.

Operator

Our next question comes from Ronny Gal with Bernstein. Your line is open.

Ronny Gal — Bernstein — Analyst

Good morning, everybody. Question around the plan for non-small cell lung cancer. With you guys being so close to the launch, I was wondering if you could tell us a little bit more about your launch plans. It seems that you’ll have to use some sort of a targeting approach and segmentation to see where you will be able to penetrate the market given you coming in late. Can you share a little bit more about it? Kind of like what range of upside do we expect from this market? What would you be happy with?

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Yes, Ronny, it’s Len. I want to just make one comment about that we’re coming in late, and then say that we probably won’t answer our lunch plans. We have to get our final label and we certainly don’t want to tip off any of our competitors of what we’re up to. But we’re spending a lot of time obviously thinking about that.

But let me just address one comment you made, which was that, you said coming in late. I remember, it may have been you, but it probably was somebody else who asked this question, why were we even bothering with Libtayo in non-small cell lung cancer because by the time you get it approved, there’ll be 10 others that are there. And I remember George answering that question saying, well, he’s not so sure that there’ll be 10 others, all antibodies aren’t created equal, plus it would be a foundation for the rest of our business. And that wisdom has really panned out because if you look almost every day, there’s another failure of a PD-L1 or an inferior PD-1 that doesn’t combine, right? All sorts of things. And there really is only one right now, one gold standard, which is Keytruda. And obviously, we don’t have any head-to-head data. But when you look at our data, it’s really impressive data.

And so, we think that we should remind everybody that the questions that we got five or 10 years ago — why bother — have sort of panned out more the way George had anticipated, rather than maybe everybody else had.

As far as specific lunch plans, we’ll ask you to stay tuned because we’re working hard at preparing.

Next question?

Operator

Our next question comes from Kennen MacKay with RBC Capital Markets. Your line is open.

Kennen MacKay — RBC Capital Markets — Analyst

Hi. Thanks for taking the question. And what a year indeed. Maybe a question on EYLEA. Len, a couple of years ago, you got it completely right on some of the emerging competition not being as big a risk as myself and some of the Street had anticipated would be. Just would love to get your perspective on some of the new data from the Ang2 and sort of how you’re thinking about some of the evolving competition there again, given you’re certainly right in the path?

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Sure. I think George touched on it, but let me deal specifically as best we can for the product you referenced from Roche, which is a combination of anti-VEGF and anti-Ang2. I might start out by saying we have the greatest respect for Roche Genentech, the group, we partner with them in our COVID global efforts, and we watch them really establish the anti-VEGF class with Lucentis. So, we have tremendous respect for them.

But I think when it comes to Ang2, history has a very important lesson here, in that I was with George, I remember it, we were tracking — I was with George when one of his colleagues, they were working so hard to identify, purify and clone and sequence this really important molecule that was seemed to be a critical player in blood vessel formation and development, etc., and maybe the only real other critical factor other than VEGF.

So, George and his group discovered this molecule, and nobody would like to see it bear fruit in terms of a treatment. But the data that we have just don’t support that. Our data, we look very carefully, we could not find the benefit of adding Ang2 to the amazing effects that you get with a highly potent anti-VEGF compound, such as EYLEA.

So, when we look at the data you refer to, we haven’t seen all their data and we’ll look for it, but from what they’ve disclosed, some ways in the 40s-percent to be able to get to a 16-week regimen is what George referred to is exactly what EYLEA gets in the ALTAIR study.

So, we don’t see so far any evidence — we’ll look at the data — that there’s anything more there than high dose anti-VEGF therapy, higher than Lucentis on a molar basis. And so, we’ll have to wait and see. But one has to remember, though, so that safety, George mentioned, we have 30 million injections under our belt, that’s a tremendous, tremendous safety database. And you can see what happens that there’s been a reminder out there just how important the safety side of this is.

So, we’ll see. We have great respect for them. But we don’t see any data right now to suggest Ang2 blockade is playing any differentiated role, if any role at all.

I don’t know, George, the discover of Ang2, you want to comment further or –?

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

Just very quickly. As Len said, we discovered the entire family of the angiopoietins. And we obviously made the first and we think the best antibodies against these factors. We tried them in combination studies. I think there is no evidence at all from any of the faricimab data that there’s any additional benefit vis-a-vis mechanism of action of the combined blockade of the angiopoietin-2.

I think that it’s sort of a regulatory trick to try to create a differentiated molecule, put both activities within one. We think it’s a better, more convincing, frankly, safer approach to actually test both blocking agents separately, rather than combining them in one molecule when there’s no benefit other than pure regulatory tricks for combining them into one molecule.

The way we think that the data looks right now, it looks as if this is merely high dose Lucentis. And the data that they’ve at least reported to date suggests similar data to what we see right now currently with EYLEA. As Len mentioned, we have studies that show that up to 40% of patients can achieve 16-week dosing.

I think the important add-on to it is, of course — is that we have our upcoming studies with high dose EYLEA. So, basically, what people are doing are they’re taking carbon molecules which didn’t fare as well, and they’re high dosing them. Okay? We’re taking EYLEA and we’re high dosing it. And it’s already starting at a place where its duration and its efficacy and its safety seem to be leading with really no evidence that the competition has anything significantly different. But now, we’re testing the higher dose to see whether we can make EYLEA even better while still delivering the same safety and efficacy.

So, we’re pretty excited about that. And as we said, we see there’s no evidence that any of the competitors are providing anything different at this point.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Michelle, next question, please.

Operator

Our next question comes from Evan Seigerman with Credit Suisse. Your line is open.

Evan Seigerman — Credit Suisse — Analyst

Hi. Thank you so much for taking the question and thanks for all the work on the COVID-19 antibody. So, I’m looking at REGN1979. Assuming that the trial resumes near term, what do you really need to demonstrate in this Phase II, potentially pivotal file for submission next year? I believe you kind of highlighted that earlier in the year.

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

Yes, I think that, basically, what we have to do is just continue to see the efficacy and build on the duration that we’ve seen, while continuing to also decrease on any of the safety concerns and so forth. But I think the data, as it stands right now, would be very supportive of an approval as long as we can confirm it in larger numbers. And importantly, build on the already very impressive duration with some responses exceeding the year timeframes.

So, we’re very excited about it. Obviously, there’s always concerns and hurdles we have to get over. But assuming that we can get past them and we can resume enrollment and continue with the study, we hope that the data as it matures and accrues will continue to support that it’s an important option that these patients could have.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Thank you, Michelle. Next question, please.

Operator

Our next question comes from Yaron Werber with Cowen. Your line is open.

Yaron Werber — Cowen — Analyst

Yes. Hi. Thanks for taking my question. George, maybe just for you, you’re all very excited about the costim strategy. We’ll get data at some point in the late this year or next year. But how do you — when you’re thinking about costim with a CD-28 and also hitting the CD-3 axis or the bispecific, how would that work, if you could just give us a preview?

And then just for Bob, for you, the REGEN-COV —

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

One question, Yaron. Sorry.

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

Len cut you off there. So, just in terms of the costim, so as we’ve shown in some very high-profile papers in Science and Science Translational, basically, nature uses to activate T cells to do their job, particularly, for example, to kill cells. They need signal 1 through the T cell receptor itself, which is a CD-3 is an important component of that. But they also need signal 2, which some people refer to as a costimulatory signal. And so, by combining bispecifics that involve CD-3 engagement and bispecifics that involve CD-28 or costimulatory engagement, you’re simultaneously activating both signal 1 and signal 2. And we have shown rather compellingly in preclinical models that this really accentuates and really dramatically increases the ability of T cells to kill the target itself.

Let me also remind you that the PD-1 and other checkpoint inhibitors provide a break. So, you have signal 1 and signal 2, which are driving the cells to kill. And then, you can have a brake signal that acts through checkpoints, such as PD-1. So, combining all three or combining them in pairwise fashion, in animal models, shows that you can just increase the amount of tumor killing that you get as compared with having just one of the approaches.

So, we’re just trying to understand what nature does and how nature optimizes the process and then mimic it with these natural approaches to biologics that can activate in a targeted fashion only on the tumor target cells, depending on how well the targeting is, signal 1, signal 2, while releasing the brake.

So, the preclinical data is pretty compelling. And we can only hope that we approach it with what we’re going to see in the clinic. And we do think that, over the next year, it’s going to be very interesting to see how these dose escalation trials play out.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

We’re a little bit past time. We still have 12 callers in the queue. We’re going to try to get the two more, and then we’ll catch up with everyone else following the call. Next question, Michelle.

Operator

Our next question comes from Matthew Luchini with BMO Capital. Your line is open.

Matthew Luchini — BMO Capital — Analyst

Hi. Great. Thanks for taking the question and fitting me in. I wanted to quickly come back to EYLEA competitive dynamics and just try to understand a little bit what your internal kind of market research is indicating about physicians’ willingness to even really consider new drugs? In other words, maybe you could share a little bit of your perspective on what impact the brolucizumab experience last year has had on their willingness to step away from a proven agent like EYLEA? Thanks.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Marion, you want to take that?

Marion McCourt — Senior Vice President, Commercial

Sure. I’m happy to take it. Well, I’ll start with where you ended. I do think that the experience of the Novartis launch reset the table on the importance of safety. And frankly, never assuming safety or assuming efficacy for any category, let alone when you’re injecting into someone’s eye and seeking to save their vision.

We look at the competitive dynamic, as you know, very, very thoroughly. And I do think that EYLEA during this period of time, the last couple of years, but certainly during the pandemic, the characteristics of the breath of indications, experience, the ability to treat and extend, now in a prefilled syringe for efficiency and throughput in the offices, and this remarkable safety and efficacy profile, make it an incredibly compelling choice for retinal specialists and injectors.

We, obviously, even within our own portfolio, look to improvements, like the EYLEA high dose for the future, the ability to treat and extend even further. But obviously, we’ve very deliberately with our scientific team set very, very high bar for competition.

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

I think that vision is so important. We all know it, we all treasure it, okay? And I think that there’s, hopefully, a new — a realization once again about how important it is and how a catastrophic event that causes permanent loss of vision can be so catastrophic and so damning. And I think that when you have such a safe and effective agent, with such an experience, one really has to take into consideration the risks, the potential catastrophic risks of trying new approaches, unknown safety risks with the potential catastrophic risk.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

All right. We have time for one more quick question.

Operator

Our next question comes from Mohit Bansal with Citigroup. Your line is open.

Mohit Bansal — Citigroup — Analyst

Great. Thanks for fitting me in and congrats on the progress. In our conversations with experts, doctors did talk about the potential use of Dupixent in milder patients, given the safety. So, to that end, do you need to do a clinical trial to get there? Or do you think it is already happening to some extent at dermatologists’ offices? Thank you.

Marion McCourt — Senior Vice President, Commercial

The profile today for Dupixent treatment is for patients with moderate to severe disease, both in atopic dermatitis and also for patients that require biologic asthma treatment. I’ll let team members talk about additional clinical work to that component. But that is our focus of the population.

As we discussed earlier, in the U.S. alone, we probably have about 2.2 million eligible patients, just on the indications where we have approval today. But to your comment, what I hear about time and time again from our physician prescribers and key opinion leaders is the remarkable safety profile based on a very specific mechanism of action. And that confidence in being able to treat not only adults, now the younger age groups where we have indications, for example, in atopic dermatitis, not only for adolescence, but on pediatric patients down to six years of age.

George D. Yancopoulos — Co-Founder, President and Chief Scientific Officer

So, I think it’s a great question and it reflects back on this issue about penetration and so forth. It didn’t take much market research to know how Dupixent was initially being used or how most drugs are used. Though it was approved, for example, in the moderate to severe population in atopic dermatitis, all physicians initially started with their toughest, their hardest, their most serious patients before then gradually going backwards in the treatment paradigm. And that is one of the reasons why we’re only penetrating about 6% of the moderate to severe population.

So, I think that gradually, with more confidence, they’re going to treat people who are on the more moderate side of things.

That said, I think the point that — the efficacy profile, but also the mechanism of action, the fact that you are probably in the long term may be benefiting the patient in terms of slowing or preventing the ultimate atopic marks that occurs in so many patients demands that we figure out a way to take this product to earlier patients.

Those will, however, require additional studies. We’re trying to figure out the best way to do it. But I for one do think that, for example, many more patients with much milder asthma or other milder forms of Type 2 disease that we know in many patients is just going to get worse over time. We owe these patients — we have to figure out through a clinical program, how to do the right studies, how to convince the FDA and how to move this treatment back towards these earlier patients.

Mohit Bansal — Citigroup — Analyst

Very helpful. Thank you.

Leonard S. Schleifer — Co-Founder, President and Chief Executive Officer

Thanks, everyone, for joining the call. Thank you for hanging in there a little longer than normal. Bob Landry and the investor relations team will be around after the call. We hope you enjoy your weekend. Please stay safe.

Operator

[Operator Closing Remarks]