Analyst Conference Call Summary

Biogen Inc.

conference date: October 21, 2015 @ 5:30 AM Pacific Time
for quarter ending: September 30, 2015 (third quarter, Q3 2015)

Forward-looking statements

Overview: Better than expected quarter and raised guidance.

Basic data (GAAP):

Revenues were $2.78 billion, up 7% sequentially from $2.59 billion and up 11% from $2.51 billion in the year-earlier quarter.

Net income was $965.6 million, up 4% sequentially from $927.3 million and up 13% from $856.9 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $4.15, up 6% sequentially from $3.93 and up 15% from $3.62 year-earlier.


Updated full year 2015:

Revenue growth of 8% to 9% y/y. Implies a sequential decrease in revenue in Q4 due to a reduction in Rituxan inventory at the wholesale level.

Operating expenses unchanged from prior guidance: 19% to 20% each R&D and SG&A. Interest expense will go up $60 million per quarter due to the new bonds (see below).

GAAP EPS rasied to $14.65 to $14.95. Non-GAAP EPS $16.20 to $16.50.

Conference Highlights:

Announced a 11% planned workforce reduction and stopping several pipeline programs. The estimated $250 million annual savings will be reinvested in sales and marketing as well as high-value pipeline projects. But the restructuring will result in a $85 to $95 million charge in Q4.

Patient growth across the portfolio was "modest."

Sales of Tecfidera remain a priority for Biogen.

Biogen is now actively recruiting for two global Phase 3 studies for aducanumab in early Alzheimer’s disease. The first patients have enrolled in the trials.

Biogen agreed to license Misubishi Tanabe Pharma's autoimmune disease therapy, which is ready for Phase 3 studies. $60 million to be paid upfront, likely in Q4. Up to $484 million in addional milestone payments, plus royalties in the teens.

[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.]

The pipeline programs being terminated include Phase 3 for Tecfidera in secondary progressive MS, anti-TWEAK for lupus nephritis, and other immonology and fibrosis programs.

Non-GAAP net income was $1.0 billion, up 0.5% sequentially from $995 million and up 16% y/y. Non-GAAP EPS was $4.48, up 6% sequentially from $4.22 and up 18% y/y.

Total product revenue was $2.39 billion, up 9% sequentially from $2.20 billion and up 13% from $2.12 billion year-earlier.

Revenue in Millions
Q3 2015
Q2 2015
Q3 2014
y/y %

*unconsolidated joint business revenue

Royalty revenue was $9.0 million, up sequentially from $8.6 million and way down from $67.1 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 $40.0 million,down sequentially from $47.0 million, and up from $36.3 million year-earlier.

Cash and equivalents (including marketable securities) balance ended at $7.8 billion. $6.53 million notes payable liability. In September $6 billion senior unsecured notes were issued. In-quarter stock repurchases used $3 billion. After the quarter ended $900 million was used for repurchases.

Cost of sales was $310.0 million. Research and development expense was $519.9 million. Selling, general and administrative expense $477.8 million. Amortization of acquired intangible assets $98.1 million. Fair value adjustment of contingent consideration $0.2 million gain. Total cost and expenses $1.41 billion. Leaving income from operations of $1.37 billion. Other expense $15.4 million. Income taxes $330.1 million. Income to non-controlling interests $53.9 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. Positive Phase 3 results published in New England Journal of Medicine.

ASCEND Phase 3 study failed for Tysabri (natalizumab) for secondary progressive MS. There were some positive indications, but Biogen will not be pursuing them. The already-proven benefits of Tysabri were confirmed.

Anti-LINGO Phase 2 for acute optic neuritis had a further analysis showing neuro-protective properties.

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

Alprolix is now under review in Europe.

Priorities after restructuring include:

Aducanumab in Phase 3 for Alzheimer’s disease;

BAN2401 in Phase 2 for Alzheimer’s disease;

E2609 in Phase 2 for Alzheimer’s disease;

SMN-Rx in Phase 3 for spinal muscular atrophy;

Anti-LINGO in Phase 2 for multiple sclerosis;

MT-1303, a Phase 3 ready asset for inflammatory bowel disease;

Raxatrigine (CNV1014802), a Phase 3 ready asset for trigeminal neuralgia and Phase 2b ready for lumbar radiculopathy.

Other major potential R&D pipeline events in 2015 include data for Neublastin for neuropathic pain; 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.

R&D day will be November 3.


Lingo MS low expectations by Wall Street? It is a high-risk concept, since no prior therapy has healed the nervous system in MS. We have indications it can work, we don't know if it will lead to a clinically meaningful effect. We hope to see that in the anti-LINGO MS trial.

The Tecfidera TV ads began the first week of October and should continue well into 2016. We are trying to activate patients that dropped therapies due to injection fatigue.

MT-1303 conditions for extending to MS? We are looking at a number of options while waiting for the deal to close.

Drug pricing views? Part of the rhetoric is from the Presidential campaign. The industry is preparing a thoughtful presentation of its views. In the end prices will be based on value. If we create drugs that bring value to patients, they will allow for good reimbursement even in a tough pricing environment.

Willingness to engage in M&A given restructuring? We are constantly engaged. It is a question of value; we are financially disciplined. We want high quality compounds that have a reasonable chance of clinical success that are priced right for us.

BAN2401 in Phase 2 for Alzheimer’s disease criteria for success? There will be several endpoints including amyloid plaque burden and cognition. There will be an interim analysis.

Aducanumab in Phase 3 for Alzheimer’s disease is focussed on early stages of the disease, where we believe it will be most effective. Patient enrollment is up to expectations. There will not be an interim analysis, we will go right to the end.

Generic copaxone impact? It is early in the process, but so far we see mainly impact on proprietary Copaxone itself.

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Copyright 2015 William P. Meyers