Analyst Conference Call Summary

Biogen Inc.
BIIB

conference date: January 26, 2017 @ 5:00 AM Pacific Time
for quarter ending: December 30, 2016 (fourth quarter, Q4 2016)


Forward-looking statements

Overview: Emphasized full year results as Q4 was kind of weak, partly from exchange rate effects. Tecfidera revenue is no longer growing, and there was a $455 million charge due to the agreement with Forward Pharma.

Basic data (GAAP):

Revenues were $2.87 billion, down 3% sequentially from $2.96 billion and up 1% from $2.84 billion in the year-earlier quarter.

Net income was $0.65 billion, down 37% sequentially from $1.03 billion and down 22% from $832 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $2.99, down 4% sequentially from $4.71 and down 21% from $3.77 year-earlier.

Guidance:

For full year 2017 revenue is expected between $11.1 and $11.4 billion, including 1 month of sales from Eloctate and Alprolix, before the Bioverativ spinoff.

2017 R&D expense about 16% to 17% of revenue. SG&A expense about 15% to 16% of revenue. GAAP EPS $18.00 to $18.80. Non-GAAP EPS $20.45 to $21.25.

Conference Highlights:

“Spinraza for spinal muscular atrophy is a prime example of the type of groundbreaking innovation that we must continue to pursue. As the first treatment for infants and children with this devastating disease, Spinraza has the potential to improve and extend the lives of thousands of patients worldwide” said Chief Executive Officer Michel Vounatsos. "I am excited to take the helm of a company with such a strong foundation, and my plan is to maintain a disciplined focus on near-term execution while laying the groundwork for Biogen’s long-term sustainability through continued investment in R&D and innovation and business development.” Michel was appointed CEO in January and had previously been the chief commercial officer at Biogen.

The quarter was impacted by a $455 million charge related to the settlement and license agreement with Forward Pharma for Tecfidera. The total payment will be $1.25 billion plus royalties for any MS therapy containing dimethyl fumarate. There was also an additional $50 million in R&D expense for the milestone payment to Eisai for elenbecestat (E2609) for Alzheimer's.

The hemophilia products Eloctate and Alprolix continue to rapidly ramp revenue, but are being spun off to Bioverativ, which will launch on February 1 as BIVV.

Biogen continues actively enrolling two global Phase 3 studies for aducanumab in early Alzheimer’s disease, exceeding enrollment goal for 2016. In December Phase 1b data was presented supporting the continuance of the Phase 3 trial.

Nusinersen for spinal muscular atrophy (SMA) was approved by the FDA. Uptake is expected to be gradual because of need to get insurance approvals.

Sales of Benepali, an etanercept biosimilar, are ramping strongly in Europe.

Non-GAAP net income was $1.09 billion, down 4% sequentially from $1.14 billion and up 10% from $995 million year-earlier. Non-GAAP EPS was $5.04, down 3% sequentially from $5.19 and up 12% from $4.50 year-earlier. Non-GAAP number leave out the settlement charge, among other things.

Total product revenue was $2.50 billion, down 2% sequentially from $2.54 billion and up 3% from $2.43 billion year-earlier. That excludes the Rituxan revenue and other revenue.

Therapy
Revenue in Millions
Q4 2016
Q3 2016
Q4 2015
y/y %
Tecfidera
$1,002
$1,034
$993
1%
Avonex
564
580
637
-12%
Tysabri
474
515
481
-1%
Plegridy
125
128
103
21%
Fampyra
22
21
28
-20%
Zinbryta
6
2
0
na
Eloctate
149
132
101
47%
Alprolix
93
85
71
31%
biosimilars
53
31
0
na
Fumaderm
11
11
13
-10%
Spinraza
5
0
0
na
Rituxan*+Gazyva
318
318
334
-5%
Other
51
99
79
-36%

*unconsolidated joint business revenue, Anti-CD20 products

Cash and equivalents (including marketable securities) balance ended at $7.7 billion (30% in U.S.), up sequentially from $7.4 billion. $6.5 billion notes payable and other debt. $651 million was spent to repurchase shares.

Cost of sales was $379 million. Research and development expense was $534 million. Selling, general and administrative expense $496 million. Amortization of acquired intangible assets $104 million. Restructuring charges of $12 million. Fair value adjustment (gain) of contingent consideration $4 million. Collaboration profit sharing $11 million. Tecfidera settlement $455 million. Total cost and expenses $1.99 billion. Leaving income from operations of $0.89 billion. Other expense $48 million. Income taxes $190 million. Loss to non-controlling interests $1 million.

For the full year revenue was $11.4 billion, up 6% from 2015. GAAP net income was $3.7 billion, up 4% y/y. GAAP EPS was $16.93, up 10% y/y. Non-GAAP net income was $4.4 billion, up 12%. Non-GAAP PS was $20.22, up 19%.

Now plans a Phase 2b study for Opicinumab (anti-Lingo) in Q4. Working on a Phase 2 trial design for another remyelenation agent, BIIB061.

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

BAN2401 is in Phase 2 for Alzheimer’s disease.

Raxatrigine (CNV1014802) is should start a Phase 3 trial for trigeminal neuralgia in 2017, and Phase 2b ready for sciatica also.

BIIB059 data should be presented soon for lupus.

Natalizumab for acute ischemic stroke is being revived for a Phase 2 trial, with different endpoints.

See also the Biogen product pipeline.

Biogen also continues to look to add assets.

Q&A:

Solanezumab result implications for aducanumab? There are key differences: the studied mild, we study prodromal and early mild. The outcome measures are different, we are using CDR. The drugs bind to different antibodies. They could not show a lowering of amyloid plaque, our antibody gets to the brain and shows a reduction in plaque.

Anti-Tau as an Alheimer's target? We are very interested in Tau. It seems to lead to progression. We are looking at imaging agents for Tau. We have a Tau monoclonal antibody and a drug in partnership with Ionis.

Seasonality? In MS we expect normal downward seasonality in Q1 in the U.S.

Stopping criteria for aducanumab trial? No comment on interim or futility analyses.

Spinraza revenue character, EU approval? The Q4 revenue was all channel build, it was approved on 12/23. EU approval is expected mid-year.

Volume and price in MS for guidance? The MS business is stable. The biggest ambiguity is from Spinraza. The U.S. market contracted in 2016, a lot depends on execution in Europe.

Demand from the patient side for Spinraza is strong. We have some good coverage decisions in addition to the one weak one. We believe rationality will prevail. We believe Type 2 SMA is just as devastating as Type 1.

For Alheimer's, we like the idea of combining different mechanisms of action.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2017 William P. Meyers