Analyst Conference Call Summary

Biogen Inc.

conference date: July 21, 2016 @ 5:30 AM Pacific Time
for quarter ending: June 30, 2016 (second quarter, Q2 2016)

Forward-looking statements

Overview: Strong results and raised 2016 revenue guidance. Announced large share buy back program. But will get a new CEO.

Basic data (GAAP):

Revenues were $2.89 billion, up 6% sequentially from $2.73 billion and up 12% from $2.59 billion in the year-earlier quarter.

Net income was $1.05 billion, up 8% sequentially from $971 million and up 13% from $927 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $4.79, up 9% sequentially from $4.43 and up 22% from $3.93 year-earlier.


$11.2 to $11.4 billion full year 2016 revenue, a slight increase from prior guidance.

2016 GAAP EPS $18.10 to $18.40, non-GAAP EPS $19.70 to $20.00.

Conference Highlights:

Believes the number of MS (multiple sclerosis) patients is growing in the low single digits in the U.S., but in the high single digits outside the U.S. Zinbryta will launch in the U.S. and Germany next month; the FDA approved it in May. It received approval in Europe in July and is partnered with AbbVie.

George Scangos, CEO, will be leaving, and a search for a new CEO is underway. Paul McKenzie was named Executive Vice President, Pharmaceutical Operations and Technology, in June. Michael Ehlers was named Executive Vice President, R&D.

Making an initiative for new therapies and rapid pipeline advancement, but not yet releasing details for competitive reasons.

The spin off of the hemophilia business is now expected in early 2017.

Biogen's Flixabi biosimilar launch is expected in the next few weeks in Europe. In January in partnership with Samsung Biologics, EU approval was granted for Benepali, an etanercept (Enbrel) biosimilar, and it recorded its first full quarter of revenue.

Biogen will have to pay royalties on a newly granted patent that relates to the production of interferons, about $50 million in the remainder of this year.

Biogen is actively enrolling two global Phase 3 studies for aducanumab in early Alzheimer’s disease. Only safety data from the ongoing Phase 1b trial is likely to be released in 2016. Biogen is pleased with enrollment progress.

Biogen is now building a new biologics facility in Switzerland, which will account for much of the capital spend in 2016.

Non-GAAP net income was $1.14 billion, up 9% sequentially from $1.05 million and up 15% from $995 million year-earlier. Non-GAAP EPS was $5.21, up 9% sequentially from $4.79 and up 23% from $4.22 year-earlier.

Total product revenue was $2.47 billion, up 7% sequentially from $2.31 billion and up 12% from $2.20 billion year-earlier. That excludes the Rituxan revenue and other revenue.

Revenue in Millions
Q2 2016
Q1 2016
Q2 2015
y/y %

*unconsolidated joint business revenue

Other revenue was $79 million, down sequentially from $88 million and up from $56 million year-earlier.

Cash and equivalents (including marketable securities) balance ended at $7.3 billion, up sequentially from $6.8 billion, with about % of that in the U.S. $6.5 billion notes payable and other debt. Announced $5 billion share repurchase program over next 3 years.

Cost of sales was $370 million. Research and development expense was $473 million. Selling, general and administrative expense $492 million. Amortization of acquired intangible assets $93 million. Restructuring charges of $0 million. Fair value adjustment of contingent consideration $11 million gain. Total cost and expenses $1.43 billion. Leaving income from operations of $1.46 billion. Other expense $59 million. Income taxes $354 million. Income to non-controlling interests $1 million.

"In April 2016, Samsung Bioepis, the joint venture between Biogen and Samsung BioLogics, received a positive opinion from the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) recommending that marketing authorization be granted for Flixabi, an infliximab biosimilar candidate referencing Remicade®. "

In July an adalimumab biosimilar candidate referencing Humira marketing application was accepted for review in Europe, in partnership with Samsung Bioepis.

Gazyva, which is partnered with Roche, failed a Phase 3 study for diffuse large B-cell lymphoma in July.

Tysabri had its label extended in Europe to patients with relapsing-remitting MS with highly active disease despite a prior course of therapy.

Alprolix was approved in Europe in May.

Roche's Ocrevus is under review for MS in the U.S. and Europe. If approved, Biogen will receive tiered royalties.

Nusinersen (SMN-Rx) for spinal muscular atrophy in children is now in two Phase 3 studies, one for children and one for infants, with data due in the first half of 2017. Enrollment is nearly complete. This is in partnership with Ionis Pharmaceuticals. Updated Phase 2 data was be presented at AAN.

BAN2401 is in Phase 2 for Alzheimer’s disease.

E2609 is also in a Phase 2 study for Alzheimer’s disease.

Anti-LINGO (opicinumab) for multiple sclerosis read out topline Phase 2 data that did not reach its specified endpoints. See Q&A below for more.

MT-1303 for inflammatory bowel diseases should start Phase 3 studies in ulcerative colitis and Crohn's disease in the second half o 2016.

Raxatrigine (CNV1014802) is should start a Phase 3 trial for trigeminal neuralgia in 2016, and Phase 2b ready for sciatica also in 2016.

In December a Phase 1/2 trial for BIIB067 (formerly IONIS-SOD1RX) was initiated for amyotrophic lateral sclerosis (ALS) in collaboration with Ionis Pharmaceuticals.

See also the Biogen product pipeline.

Biogen also continues to look for outside opportunities.


Why not release the efficacy data from the aducanumab trial? We will introduce the safety and tolerability data, and eventually efficacy. We are pleased with enrollment, it is on track.

Diversification of business vs. focus? We are looking at deals at all stages of development from preclinical to Phase 3. Our main focus is neurology, but we are not ruling out other therapies.

Price effects for the MS franchise? Tysabri is holding a strong position in the high efficacy segment of the market. We welcome competition that benefits patients. In the U.S. the y/y change was mainly from price, with relatively steady unit trends. Outside the U.S. prices have been stable and units have been expanding, and Tecfidera is still gaining market share.

Interferon patent royalties? It was an unexpected. It was JFCR, a mid single-digit royalty, we are not disclosing the 3rd party. It will have a $50 million impact in the second half, then a larger impact in 2017. We still may have a favorable result for our own patent.

We ended the television campaign for Tecfidera, as it did not have a discernable effect on script trends.

Alzheimer's combinations? We like the idea of combinations. They could be helpful. It helps to have efficacy and safety data from each therapy before trying a combination.

Lingo data to be presented? It is a large and rich data set. We are in the early stages of figuring out how to repair the brain and to measure repairs. Could give clues as to which type of cohort is best to treat. There were interesting dose responses. We envision that these repair therapies will be added to immunomodulators. We are doing further analysis and may do another study, which could be a Phase 2 or 3 study.

Biosimilar launches and outlook? The preliminary launch results are vary encouraging, but vary greatly by country. The 3 anti-TNFs that could launch are addressing a $90 billion market.

The second quarter benefited vs. Q1 as insurance deductibles were filled for Avonex. No boost for Q3 from this source is expected.

One issue that has emerged for Tecfidera sales is gastrointestinal issues. We believe we can lower the discontinuation rate of 20% to lower levels through education.

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Copyright 2016 William P. Meyers