Analyst Conference Call Summary

Biogen Inc.

conference date: July 30, 2015 @ 5:30 AM Pacific Time
for quarter ending: June 30, 2015 (second quarter, Q2 2015)

Forward-looking statements

Overview: Speculation about Biogen having a viable Alzheimer's cure continues to be the main concern. Revenue continues to grow, up at a moderate 7% y/y, but GAAP EPS was up 31% y/y. Avonex and Tysabri revenues down significantly y/y. Reduced full year guidance.

Basic data (GAAP):

Revenues were $2.59 billion, up 1.5% sequentially from $2.55 billion and up 7% from $2.42 billion in the year-earlier quarter.

Net income was $927.3 million, up 13% sequentially from $822.5 million and up 30% from $714.5 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $3.93, up 13% sequentially from $3.49 and up 31% from $3.01 year-earlier.


Full year 2015 update: Revenue up 6% to 8% y/y. R&D expense 19% to 20% of total revenue. SG&A expense 20% to 21% of revenue. GAAP EPS $14.25 to $14.70. Non-GAAP diluted EPS $15.50 to $15.95. Down from prior guidance. Cap ex $650 to $700 million.

Conference Highlights:

Revenue results were below expectations from a few months ago, largely because Tecfidera sales did not accelerate as expected. But it has become the most prescribed oral multiple sclerosis therapy globally.

Biogen is now actively recruiting for two global Phase 3 studies for aducanumab in early Alzheimer’s disease. EMERGE and ENGAGE are each planned to enroll 1,350 patients. Recently Biogen presented new data from the Phase 1b PRIME study of aducanumab at the Alzheimer’s Association International Conference. The one-year data from the 6 mg/kg arm demonstrated a statistically significant reduction of beta amyloid in the brain. In exploratory analyses, the 6 mg/kg dose showed an improvement in the slowing of clinical decline, as measured by the Mini Mental State Examination (MMSE) and Clinical Dementia Rating sum of boxes (CDR-SB) scales, but the decline was not statistically significant. In a pre-specified analysis across placebo and all doses of aducanumab, the slowing of clinical decline was shown to be dose-dependent, and this dose-dependence achieved statistical significance for both scales. Believes totality of results supports Phase 3 trials and potential registration. Aducanumab demonstrated acceptable safety and tolerability.

[Comment: many promising Alzheimer's therapies have failed in Phase 3. But most Phase 1 trials don't demonstrate statistical significance because the sample sizes are too small. Phase 2 is where statistical significance is usually tested. If you don't understand statistical significance it is a bad idea to invest in biotech therapy stocks.]

"We see aducanumab as a potentially transformational opportunity for Biogen, and for patients with this devastating disease." In addition Biogen has two other Alheimer's potential therapies that are in Phase 2, which have differing mechanisms of action.

Non-GAAP net income was $995 million, up 11% sequentially from $900 million and up 20% y/y. Non-GAAP EPS was $4.22, up 10% sequentially from $3.82 and up % y/y.

Total product revenue was $2.20 billion, up 1% sequentially from $2.17 billion and up 7% from $2.06 billion year-earlier. Total multiple sclerosis product sales were $2.1 billion, up 5% from $2.0 billion year-earlier.

Revenue in Millions
Q2 2015
Q1 2015
Q2 2014
y/y %

*unconsolidated joint business revenue

Royalty revenue was $8.6 million, down sequentially from $19.8 million and down from $40.3 million year-earlier. "The decrease is primarily due to the cessation of Angiomax royalty payments following the expiration of applicable U.S. patent rights in December 2014."

Corporate partner revenue was $47.0 million, up sequentially from $32.2 million, and up from $21.5 million year-earlier.

Cash and equivalents (including marketable securities) balance ended at $4.5 billion. $576 million notes payable liability.

Cost of sales was $286.1 million. Research and development expense was $490.7 million. Selling, general and administrative expense $491.9 million. Amortization of acquired intangible assets $92 million. Fair value adjustment of contingent consideration $2.2 million gain. Total cost and expenses $1.36 billion. Leaving income from operations of $1.23 billion. Other expense $11 million. Income taxes $293 million. Loss to non-controlling interests $2.5 million.

Zinbryta, jointly developed with AbbVie for relapsing multiple sclerosis, BLA to FDA applied for so Biogen is starting to prepare for the commercial launch.

ISIS-SMN rx, partnered with Isis, Phase 2 data reported supporting new Phase 3 studies now enrolling patients for spinal muscular atrophy in infants and children.

Anti-TNF therapy positive results were announced in June.

New partnership announced in July with Applied Genetic Technologies to develop ophthalmic gene therapies.

Dropped sciatica program for Neublastin.

Alprolix is now under review in Europe.

Other major potential R&D pipeline events in 2015 include data for Neublastin for neuropathic pain; Phase 3 data for Tysabri in secondary progressive MS; Phase 2 data for Tysabri in acute ischemic stroke; and Phase 2 data for Neublastin for neuropathic pain.

See also the Biogen product pipeline for information on Biogen Phase I and Phase II candidates.

Biogen hopes to launch two biosimilar (generic large molecule) therapies in Europe in 2016.


Can you maintain today's 48% to 49% operating margin over the next few years? We want to drive towards margin improvement. We must control costs since revenue growth attenuated, but must prioritize pipeline investment.

Capital allocation strategy? We have a pristine capital structure. We would like to add debt, but that would require opportunities that make it worth adding the debt. We can buy back stock when it is under pressure. We continue to look for M&A opportunities.

Why should we be confident in the Alzheimer's data? The 6 mg cohort lined up nicely with our expectations. The relationship between CDR-SB and dosing was about as good as can be expected. We have a really firm basis on which to go forward, but will use CDR as an endpoint. The wobbly MMSE data is the only thing does not line up perfectly.

Are you saying Tecfidera is expected basically flat in the U.S. this year? That is accurate, we expect only modest patient growth in the U.S. for the rest of this year, in the U.S. We aspire to more.

We are increasingly aggressive about wanting to add more compounds to our pipeline.

Tecfidera second PML case? It is within the expected profile, still exceptionally rare.

Would you get statistical significance if you had used more patients at each dosage in the Alzheimer's trial? It is a very small sample size. The consistency of response across doses has allowed us to make some assumptions so that we can reach statistical significance in the Phase 3 trials. There is a very nice correlation between amyloid removal and mental function improvement. We are trying to push the dose up in order to get as much amyloid deposit removed as possible. We believe increasing doses work better as does increasing duration. We are pretty confidence in our Phase 3 sample size. We believe if approved people will get a genetic test and dosing will depend on genotype.

Tecfidera growth trajectory? The guidance does assume limited growth in the U.S. We are growing outside the U.S., excepting the German pricing issue in Q2. Clearly we have work to do.

Generic Copaxone impact? Within our expectations, it mainly impacts against branded Copaxone.

The Alheimer's data is consistent with the amyloid hypothesis (that it causes mental deterioration) being correct.

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Copyright 2015 William P. Meyers