Analyst Conference Call Summary

biotechnology

Biogen Inc.
BIIB

conference date: April 24, 2019 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2019 (first quarter, Q1 2019)


Forward-looking statements

Overview: Strong revenue and profit growth in a quarter noted for the failure of an Alzheimer's clinical trial. GAAP EPS higher than non-GAAP due to a one-time revenue boost.

Basic data (GAAP):

Revenues were $3.49 billion, down 1% sequentially from $3.53 billion and up 11% from $3.13 billion in the year-earlier quarter.

Net income $1.41 billion, up 49% sequentially from $0.95 billion and up 20% from $1.17 billion in the year-earlier quarter.

EPS (earnings per share, diluted) were $7.15, up 51% sequentially from $4.73 and up 29% from $5.54 year-earlier.

Guidance:

Conference Highlights:

CEO Michel Vounatsos said: "Biogen delivered strong financial results in the first quarter driven by the solid operational performance of our MS, SMA, and biosimilars franchises. However, we are deeply disappointed with the discontinuation of aducanumab for Alzheimer's disease. We followed the science, and unfortunately the outcome was not as we had hoped. We continue to believe we can create value for patients and investors by capitalizing on opportunities in neuroscience, and we remain focused on allocating capital to the areas we believe have the highest potential return for shareholders."

He added: "Our proposed acquisition of Nightstar Therapeutics would provide us with two potentially first-in-class mid- to late-stage clinical assets in specialty ophthalmology. By the end of 2020 we expect readouts across our clinical programs in MS, progressive supranuclear palsy, ALS, Parkinson’s disease, pain, cognitive impairment associated with schizophrenia, epilepsy, stroke, and lupus."

Revenue growth was driven by Spinraza, now available in over 40 nations. Revenue waw $518 million, up 42% y/y from $364 million. New data presented in April highlighted efficacy. In February 2019 Spinraza was approved by the China National Medical Products Association for the treatment of 5q SMA. Believes despite possible new gene-therapy competion Spinraza will continue to be the standard of care for years.

MS revenue was stable. Expects to see some continued discounting pressure in 2019, particularly in Q1 and Q4.

Discussed Tecfidera intellectual property protection and possible future revenue falloff. Continues to believe Tecfidera patents are valid, including '514, which expires in 2028. Vumerity composition of matter pattent expires in 2033.

Biosimilar revenue is growing rapidly, mainly in Europe, driven by the launch of Imraldi (compare Humira). Three main anti-TNF biosimilars are now available in Europe. Other revenue spiked due to the sale of remaining hemophilia inventory to Bioverativ.

In Q1 2019 Biogen booked a pre-tax GAAP loss of $116 million related to its share purchase agreement with FUJIFILM under which FUJIFILM will acquire all of the outstanding shares of Biogen's subsidiary that owns its biologics manufacturing operations in Denmark. Pre-tax GAAP other income was $357 million, including $376 million in net gains on investments, principally driven by an increase in the fair value of our equity investment in Ionis Pharmaceuticals (IONS).

Over the next 12 to 18 months Biogen expects to expand its pipeline in MS and neuroimmunology, dementia, neuromuscular disorders, movement disorders, and ophthalmology.

Non-GAAP net income was $1.37 billion, down 2% sequentially from $1.40 billion and up 7% from $1.28 billion year-earlier. Non-GAAP EPS was $6.98, down slighly sequentially from $6.99 and up 15% from $6.05 year-earlier.

In the first quarter of 2019 the Board of Directors authorized repurchases of up to $5.0 billion of stock. This is in addition to the $1.0 billion remaining as of April 24, 2019, under the prior share repurchase program.

Total product revenue was $2.68 billion, down 5% sequentially from $2.83 billion and up 6% from $2.52 billion year-earlier. That excludes the Rituxan revenue, royalties and other revenue.

Therapy
Revenue in Millions
Q1 2019
Q4 2018
Q1 2018
y/y %
Tecfidera $999 $1,110 $987 1%
Avonex + Plegridy 501 597 550 -9%
Tysabri 460 464 462 0%
Fampyra 23 23 24 -6%
biosimilars 175 156 128 37%
Fumaderm 4 5 7 -41%
Spinraza 518 470 364 42%
Rituxan*+Gazyva royalty 405 383 366 11%
Ocrevus royalty 112 152 77 46%
Other** 292 166 164 78%

*unconsolidated joint business revenue, Anti-CD20 products
** mainly contract manufacturing

Cash and equivalents (including marketable securities) balance ended at $5.28 billion, up sequentially from $4.9 billion. $5.94 billion notes payable. $656 billion was spent to repurchase shares (from April 1, 2019 through April 24, 2019, Biogen repurchased an additional approximately 2.1 million shares for $492 million). $1.5 billion cash flow from operations.

Cost of sales was $602 million. Research and development expense was $564 million. Selling, general and administrative expense $568 million. Amortization of acquired intangible assets $68 million. Fair value adjustment gain of contingent consideration $12 million. Collaboration profit sharing $58 million. Total cost and expenses $1.99 billion. Leaving income from operations of $1.50 billion. Other income $357 million. Income taxes $423 million. Equity in loss of investee, $29 million.

In January 2019 Biogen and Skyhawk Therapeutics entered into a collaboration and research and development services agreement for Skyhawk's SkySTAR technology platform for small molecule RNA splicing modifiers for MS, spinal muscular atrophy (SMA), and other neurological diseases. Biogen paid Skyhawk an upfront payment of $74 million and may also pay additional milestone payments as well as potential royalties. Biogen recorded a research and development expense of approximately $39 million in Q1 2019.

In March the aducanumab Phase 3 trials for Alzheimer's were discontinued as data showed they were unlikely to hit their endpoints.

In December 2018 Biogen enrolled the first patient in a global Phase 3b study evaluating extended interval dosing (EID) for natalizumab (Tysabri) compared to standard interval dosing (SID) in patients with relapsing MS.

BAN2401 for Alzheimer's Phase 2 data released in October was encouraging but not definitive.

In March 2019 the first patient was dosed in the Phase 3 VALOR study of BIIB067 (tofersen), an antisense oligonucleotide for amyotrophic lateral sclerosis (ALS) with superoxide dismutase 1 (SOD1) mutations. The primary endpoint is an analysis based on the Amyotrophic Lateral Sclerosis Functional Rating Scale-Revised (ALSFRS-R) Score.

In February 2019 Alkermes plc and Biogen announced that the FDA accepted the New Drug Application (NDA) for diroximel fumarate (BIIB098), a novel oral fumarate for the treatment of relapsing forms of MS. If approved, Biogen intends to market diroximel fumarate under the brand name Vumerity. The NDA has been assigned a PDUFA (Prescription Drug User Fee Act) target action date in the fourth quarter of 2019

In March 2019 Biogen announced that it had entered into an agreement to acquire Nightstar Therapeutics plc (NST), a clinical-stage gene therapy company focused on adeno-associated virus treatments for inherited retinal disorders. Biogen would pay NST shareholders $25.50 in cash for each issued and outstanding NST share. This offer represents a total transaction value of approximately $800 million on a fully diluted basis. NST has two potentially first-in-class mid- to late-stage clinical assets as well as preclinical programs. NST’s lead asset NSR-REP1 is in Phase 3 development for choroideremia, a rare degenerative disorder that leads to blindness and has no approved treatment options. The closing of the proposed acquisition remains subject to customary closing conditions. Biogen expects to complete the acquisition by mid-year 2019.

BIIB 76, 92, and 80 for Alzheimer's targeting Tau are all advancing 076 should report Phase 1 results in early 2020. 092 completed Phase 2 in PSP with results expected in 2H 2019.

In December 2018 Biogen dosed the first patient in the Phase 2b study of BIIB104, an AMPA receptor potentiator, in patients with CIAS.

BIIB104 is a first-in-class, Phase 2b ready AMPA receptor potentiator for cognitive impairment associated with schizophrenia (CIAS), representing the Company’s first program in neuropsychiatry. BIIB104 has previously demonstrated an acceptable safety profile and treatment effect trends across key cognitive domains in Phase 1b clinical studies.

In 2018 Biogen added 6 clinical programs to its neuroscience pipeline, including BIIB078 (IONIS-C9Rx) for C9ORF72-associated ALS, BIIB110 (ActRIIA/B ligand trap) for muscle enhancement in diseases such as SMA, an option to acquire TMS-007 for acute ischemic stroke, BIIB104 (AMPA receptor potentiator) for cognitive impairment associated with schizophrenia (CIAS), BIIB074 (vixotrigine) for small fiber neuropathy, and BIIB095 for neuropathic pain.

BIIB093 started Phase 3 for cerebral edema associated with large hemispheric infarction.

BIIB074 Phase 2 for small fiber neuropathy is enrolling. BIIB074 (vixotrigine) should start for trigeminal neuralgia Phase 3 initiation now planned before end of 2019.

BIIB104 is being developed for neurocognitive disorders, including Phase 2b for cognitive impairment from schizophrenia.

See also the Biogen product pipeline. Plans to implement "a more robust product acquisition strategy" including both early and late stage assets.

Q&A:

Business development and M&A? We plan to deploy our capital to the highest return for shareholders. At the current stock price buy backs make sense. We have already greatly added to our clinical portfolio. But we have the cash flow to do both.

Basis of confidence in Spinraza v. new oral, not cutting in? Risdiplam data is still early and based on very few patients, but with good efficacy so far. There are still questions about the benefit-risk profile. Our new Spinraza data sets a higher bar for efficacy. Our safety profile is very deep. But will need to see how it plays out.

SMA new start trends in U.S., AveXis (xolgensma) launch? We grew 18% y/y in the U.S. We believe there are 9000 potential patients in the U.S., we only have 3000 in treatment. There was a slight decrease in new patient starts in Q1, which we think is partly due to seasonality.

Alzheimer's continuing spend? The plan was always to prepare Biogen for growth even without aducanumab. Further Alz research needs to be science driven. We are waiting for data and analyzing data to determine future plans.

We believe our cash flows will continue to grow.

Confidence in SOD1 BIIB67? We have learned how to measure target negation. We have learned a lot about ALS which could be used for further candidates.

BIIB92 color? It is a relatively large PSP Phase 2 study, we should have data towards the end of the year. We are talking with regulators about a primary endpoint. We have good target engagement, good lowering of tau in cerebral spinal fluid, but we don't know if it will have a clinical benefit.

Traditional risks are breaking down in a number of disease areas and with new platforms. So we see our risks diversified across the portfolio.

Biosmilar VEGF program interest? We believe in the value proposition for the biosimilar program. We would like to see a better biosimilar policy in the U.S. We do not intend to stop with our current portfolio.

OpenIcon Analyst Conference Summaries Main Page
Biogen Investor Relations page
Openicon Biogen main page

 

Search

More Analyst Conference Pages:

 AGEN
 AGIO
 ALNY
 ALXN
 AMAT
 AMGN
 CLDX
 CELG
 EPZM
 GILD
 GLYC
 INCY
 INO
 ISRG
 MCHP
 MYL.
 PLX
 REGN
 SGEN
 TTPH
 VBLT
 VSTM
 XLNX
 XLRN

 

Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. These are my personal notes, which I am sharing with the investment community, not financial advice.

Copyright 2019 William P. Meyers