Analyst Conference Call Summary

conference date: April 25, 2017 @ 5:30 AM Pacific Time
for quarter ending: March 31, 2017 (first quarter, Q1 2017)

Forward-looking statements

Overview: Bioverativ (BIVV) spin-off cut into numbers, otherwise a solid quarter. Made it clear that Biogen will add new therapy candidates to accelerate growth.

Basic data (GAAP):

Revenues were $2.81 billion, down 2% sequentially from $2.87 billion and up 3% from $2.73 billion in the year-earlier quarter.

Net income was $748 million, up 15% sequentially from $0.65 billion and down 23% from $971 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $3.46, up 16% sequentially from $2.99 and down 22% from $4.43 year-earlier.

Guidance:

No change in 2017 guidance. In July conference will give a more complete picture of the long-term growth plan.

Conference Highlights:

“I am very pleased with the results of the first quarter. We saw continued stability in our MS business, executed a strong launch of Spinraza, grew market share for our biosimilars business across Europe, and reinforced the intellectual property for Tecfidera,” ” said Chief Executive Officer Michel Vounatsos. Michel was appointed CEO in January and had previously been the chief commercial officer at Biogen. "We are working to add more assets to our pipeline," in addition to the acquisition of BMS-986168.

Revenue grew 8% y/y apples to apples (mainly excluding the Bioverativ spinoff).

There was a GAAP-only pre-tax charge of $354 million related to the Forward Pharma license agreement.

After the quarter ended "Biogen announced an agreement with Bristol-Myers Squibb to exclusively license BMS-986168, an experimental medicine with potential in Alzheimer’s disease and progressive supranuclear palsy (PSP), a rare condition that affects movement, speech, vision, and cognitive function. Biogen plans to initiate Phase 2 studies for BMS-986168 in both of these indications."

Biogen continues actively enrolling two global Phase 3 studies for aducanumab in early Alzheimer’s disease, exceeding enrollment goal for 2016. Enrollment should complete in 2018. Designated for rapid approval in Japan.

Nusinersen (Spinraza) for spinal muscular atrophy (SMA) uptake is expected to be gradual because of need to get insurance approvals. Spinraza is getting approval from U.S. medical plans, including Medicaid. International approvals are being sought. New study results in children were positive. Looking at gene therapy as an additional method for SMA, and may advance a product in 2018.

Sales of Benepali, an etanercept biosimilar, continued to ramp.

Non-GAAP net income was $1.12 billion, up 3% sequentially from $1.09 billion and up 7% from $1.05 billion year-earlier. Non-GAAP EPS was $5.20, up 3% sequentially from $5.04 and up 9% from $4.79 year-earlier. Non-GAAP number leave out the settlement charge, among other mostly non-cash items.

Total product revenue was $2.38 billion, down 5% sequentially from $2.50 billion due to the spinoff and up 3% from $2.31 billion year-earlier. That excludes the Rituxan revenue and other revenue.

*unconsolidated joint business revenue, Anti-CD20 products
** approx. 1 month revenue as spun off to Bioverativ

Cash and equivalents (including marketable securities) balance ended at $5.7 billion (24% in U.S.), down sequentially from $7.7 billion. $6.5 billion notes payable and other debt. $584 million was spent to repurchase shares.

Cost of sales was $385 million. Research and development expense was $423 million. Selling, general and administrative expense $499 million. Amortization of acquired intangible assets $449 million. Restructuring charges of $ million. Fair value adjustment (gain) of contingent consideration $ million. Collaboration profit sharing $21 million. Contingent consideration remeasurementt $10 million. Total cost and expenses $1.79 billion. Leaving income from operations of $1.02 billion. Other expense $38 million. Income taxes $239 million.

In January initiated a Phase 1 trail of BIIB076 for Alheimer's. It was derived from Neurimmune's reverse translational platform.

A Phase 2b study for Opicinumab (anti-Lingo) began in the quarter, and prioritizing it over ?, the other anti-Lingo candidate.

Working on a Phase 2 trial design for another remyelenation agent, BIIB061.

Roche's Ocrevus for primary progressive MS was approved by the FDA in March. Biogen will receive tiered royalties. The launch will cut into Biogen product revenue, partly offset by royalties received on it.

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. Hopes for full enrollment this year.

See also the Biogen product pipeline.

Biogen also continues to look to add assets.

Q&A:

Spinraza launch, what is going better than expected? We identified two bottlenecks, getting to SMA centers and insurance reimbursement. But SMA community is motivated.

MS business price and volume? In U.S. market contracted slightly in 2016 and that continued into Q1. Believes will see low-single digit market growth in rest of 2017. Tysabri rebounded, but interferon erosion continues as expected. Not satisfied with the discontinuation rate. Getting ready for increased competition. We will not comment on our plans for future pricing.

Filling out pipeline, comfort with Alzheimer's portfolio? Anti-tau is important and pleased to be able to compete to acquire it. Still looking to improve footprint in the early stage. Focused on neural space, including orphan diseases, and early clinical assets.

Spinraza results, details, number of patients on therapy? Our inventory number is just an estimate at less than $10 million. Patients ramped in Q1 despite infusion access constraints.

Nusinersen, how long can treated patients live? We don't know what the ultimate durability will be, but so far appears durable.

Spinraza coverage by commercial plans? About 75%, but about half of those have a narrow coverage. We will present data tonight that hopefully will get more broad coverage.

Spinraza patient backlog; Europe launch? We have internal backlog data, but are not sharing it. In Europe we are putting launch capacity in place on a country by country basis.

Tecfidera is gaining market share in a majority of European countries.

The key element for SMA and Spinraza is newborn screening.

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