Analyst Conference Call Summary

biotechnology

conference date: July 22, 2020 @ 5:00 AM Pacific Time
for quarter ending: June 30, 2020 (second quarter, Q2 2020)

Forward-looking statements

Overview: Slow revenue growth, developing pipeline.

Basic data (GAAP):

Revenues were $3.68 billion, up 4% sequentially from $3.53 billion and up % from $3.62 billion in the year-earlier quarter.

Net income $1.54 billion, up 10% sequentially from $1.40 billion and up 3% from $1.49 billion in the year-earlier quarter.

EPS (earnings per share, diluted) were $9.59, up 19% sequentially from $8.08 and up 22% from $7.85 year-earlier.

Guidance:

Updated full year 2020 guidance to: revenue $13.8 to $14.2 billion (lowered); R&D expense 16% to 17% of revenue (up); SG&A 17.5% to 18.5% (down); tax rate 18.5% to 19.5% (up); GAAP diluted EPS $32.00 to $34.00, up from $29.50 to $31.50; non-GAAP EPS $34.00 to $36.00, up from $31.50 to $33.50

Conference Highlights:

CEO Michel Vounatsos said: "We are pleased to have completed the BLA submission for aducanumab and look forward to the prospect of launching the first therapy to reduce clinical decline in Alzheimer’s disease. Our progress with aducanumab exemplifies our broader strategy of building a multi-franchise portfolio based on our deep expertise in neuroscience, and we have multiple near-term value creation opportunities in other areas such as ALS, ophthalmology, lupus, stroke, and biosimilars."

Other revenues increased 155% y/y to $408 million, primarily due to $330 million in revenues from the license of certain manufacturing-related intellectual property. Believed some product sales had accelerated into Q1, diminishing Q2, as a result of the pandemic.

Biogen completed filing the BLA for aducanumab on July 8, 2020. Making preparations for expanded manufacturing. In March 2020 the first patient was dosed in the aducanumab re-dosing study, EMBARK, a global re-dosing clinical study designed to evaluate aducanumab in eligible Alzheimer's disease patients who were actively enrolled in prior aducanumab studies. Data indicates aducanumab may slow the decline of patients. Started talking to payers about pricing the drug if it is approved. Preparing to file in EU and Japan. Also expanding the Alzheimer's program with other potential therapies.

Seven data readouts are expected by the end of 2021, including 3 Phase 3 and 5 Phase 2. The Phase 3 readouts are for tofersen for SOD1 ALS and BIIB111 for choroideremia.

Disappointed by the adverse patent decision for Tecfidera.

MS market has been impacted by pandemic, with fewer new patient starts and switches. So vumerity not ramping as quickly as expected. Pandemic also impacted other drug revenue, particularly biosimilars.

In Q2 2020 the collaboration between Biogen and Sangamo to develop gene regulation therapies for Alzheimer's disease, Parkinson's disease, neuromuscular disease, and other neurological diseases became effective. The companies will use Sangamos proprietary zinc finger protein technology delivered via adeno-associated virus to modulate the expression of key genes involved in neurological diseases. Upon closing Biogen paid Sangamo $225 million for Sangamo stock, approximately 24 million shares at $9.21 per share. Biogen will pay a $125 million license fee. In addition, Biogen may pay Sangamo up to $2.37 billion in milestone payments as well as tiered high single digit to sub-teen royalties.

Non-GAAP net income was $1.65 billion, up 4% sequentially from $1.58 billion but down 5% from $1.74 billion year-earlier. Non-GAAP EPS was $10.26, up 12% sequentially from $9.14 and up 12% from $9.15 year-earlier.

Total product revenue was $ billion, down % sequentially from $2.90 billion and up % from $ billion year-earlier. That excludes the Rituxan revenue, royalties and other revenue.

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

Cash and equivalents (including marketable securities) balance ended at $5.25 billion, up sequentially from $4.83 billion. $7.42 billion notes payable. $2.81 billion was spent to repurchase shares. $1.95 billion cash flow from operations.

Cost of sales was $411 million. Research and development expense was $648 million. Selling, general and administrative expense $555 million. Amortization of acquired intangible assets $62 million. Collaboration profit sharing $22 million. Acquired R&D $ million. Other expenses $10 million. Total cost and expenses $1.71 billion. Leaving income from operations of $1.97 billion. Other expense $63 million. Income taxes $446 million. Equity in loss of investee, $15 million. Income attributable to noncontrolling interests $64 million.

In Q1 2020 Biogen announced it is pursuing a process development and manufacturing collaboration with Vir Biotechnology, Inc., which is developing potential antibody therapies for COVID-19. Biogen, Broad Institute of MIT and Harvard, and Partners HealthCare announced a consortium that will build and share a COVID-19 biobank.

In March 2020 Biogen decided to discontinue development of natalizumab for epilepsy.

An IND has been submitted and approved for BIIB105 for sporadic ALS, in April 2020.

BIIB059 Phase 2 results for CLE (cutaneous lupus erythematosus) produced positive results in Q2 2020. Plans Phase 3 study to launch in H1 2020. Plans Phase 3 dapirolizumab pegol for systemic lupus erythematosus trial in Q3 2020.

In Q2 2020 Biogen executed a licensing agreement with Massachusetts Eye and Ear to develop treatments for inherited retinal degeneration due to PRPF31 gene mutations.

BIIB074 Phase 2 for small fiber neuropathy is enrolling. BIIB074 (vixotrigine)for trigeminal neuralgia Phase 3 initiation now planned.

Data from the Phase 1/2 studyof BIIB112 for XLRP ophthalmology study were positive, reported in Q2 2020. Now in Phase 2 study.

See also the Biogen product pipeline. The entire pipeline includes 27 clinical programs. 10 mid to late stage trial readouts are expected by the end of 2020.

Q&A summary:

Phase 3 BAN2401 chosen over aducanumab for study? Yes, they are similar, bind to agregated a-beta, and both showed a reduction in clinical decline. We believe that starting earlier in the disease is the best strategy.

Aducanumab trial differences, talks with FDA, quality of data? Filing based on 3 studies. Emerge showed effectiveness, Engage gave support for some trends, showed higher dose is needed for effect. Prime gave futher support for high dose over a sustained period of time.

Tec/Vumerity, why the slow introduction? We share the disappointment. We are working on further lifecycle management opportunities. The Vumerity launch was in December, just before the pandemic, but at first we were not focussed on switches. We could not reach prescribers, now we are focussed on it. Vumerity is well-differentiated.

Lowered SG&A guidance, where are the cuts? We have less travel and discretionary spend due to the pandemic.

Change to revenue guidance? Just the impact of the pandemic, mainly on Q2, but some headwinds will continue. We did see some strengthening in May and June for Spinraza.

We do know yet if we will get priority review on Aducanumab, they will tell us if and when they accept the filing.

Anti-lingo, what would be needed to move into Phase 3? Primary endpoint is overall response score, 4 components. Looking for overall improvement. Also looking at imaging of myelination.

It would not be unusual to have an Advisory Committee for a novel drug like aducanumab, so while we do not know yet, we are preparing for that.

Tau has risen in prominence as a biomarker and target for AZ. But we believe the amyloid beta is related. We believe we have data to show a convincing effect on tau. We have fast track status for aducanumab.

The big hope for revenue between now and 2025 is aducanumab. We are investing in developing other drivers.

BIIB111 Phase 3 trial endpoint is for increased visual acuity. Started in 2017, readout in Q1 2021.

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