Analyst Conference Call Summary

biotechnology

Biogen Inc.
BIIB

conference date: October 22, 2019 @ 5:00 AM Pacific Time
for quarter ending: September 30, 2019 (third quarter, Q3 2019)


Forward-looking statements

Overview: Okay quarter. But Surprise!, despite previous announcement to the contrary, further data gathered indicates Aducanumab slows the decline of Alzheimer's patients, so it is heading for submittal to the FDA.

Basic data (GAAP):

Revenues were $3.60 billion, down 1% sequentially from $3.62 billion and up 5% from $3.44 billion in the year-earlier quarter.

Net income $1.55 billion, up 3% sequentially from $1.49 billion and up 7% from $1.44 billion in the year-earlier quarter.

EPS (earnings per share, diluted) were $8.39, up 7% sequentially from $7.85 and up 17% from $7.85 year-earlier.

Guidance:

Conference Highlights:

CEO Michel Vounatsos said: "Spinraza continued on a strong trajectory, particularly outside the U.S., and we are preparing for the expected launch of Vumerity, which we believe will be an important addition to our market-leading multiple sclerosis portfolio. In addition to the recent news on aducanumab, we made strong progress in our pipeline as we initiated new clinical programs targeting Parkinson’s disease and brain contusion, and we look forward to nine important data readouts by the end of next year. " The filing for aducanumab with the FDA is expected in Q1 2020.

Key revenue drivers were Spinraza and biosimilars.

Nine mid or late-stage data readouts of trials are expected by the end of 2020. [see slide 49 of presentation]

In October 2019 the FDA issued a tentative approval for Vumerity (diroximel fumarate), a novel oral fumarate with a distinct chemical structure, for the treatment of relapsing forms of MS. In July 2019 Biogen and Alkermes plc announced positive topline results from EVOLVE-MS2, a large, randomized, double-blind, five-week, Phase 3 study of Vumerity for relapsing-remitting MS, compared to Tecfidera.

Spinraza revenue was $547 million, up 12% sequentially from $488 million, and up 17% y/y from $468 million. New data presented highlighted efficacy. Adults treated in the U.S. grew 8% over Q2 2019. Believes despite possible new gene-therapy competion Spinraza will continue to be the standard of care for years. Now patients on Spinraza. Believes could be 45,000 patients world-wide. Dosed the first Chinese patients.

In Q3 2019 Biogen recognized a GAAP-only impairment charge of approximately $216 million and a GAAP-only gain of $61 million on fair value remeasurement of contingent consideration related to the discontinuation of BG00011.

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.

Now views ophthamology as a core growth area.

Biogen expects to expand its pipeline in MS and neuroimmunology, dementia, neuromuscular disorders, movement disorders, and ophthalmology.

Non-GAAP net income was $1.69 billion, down 3% sequentially from $1.74 billion and up 13% from $1.49 billion year-earlier. Non-GAAP EPS was $9.17, flat sequentially from $9.15 and up 24% from $7.40 year-earlier.

Total product revenue was $2.89 billion, flat sequentially from $2.88 billion and up 4% from $2.78 billion year-earlier. That excludes the Rituxan revenue, royalties and other revenue. U.S. revenue was $1.70 billion, rest of world $1.19 billion.

Therapy
Revenue in Millions
Q3 2019
Q2 2019
Q3 2018
y/y %
Tecfidera $1,122 $1,150 $1,090 3%
Avonex + Plegridy 530 554 590 -10%
Tysabri 484 475 470 3%
Fampyra 24 24 23 8%
Benepali 116 120 123 -6%
Imraldi 49 47 0 na
Flixabi 18 17 11 63%
Fumaderm 4 4 5 -22%
Spinraza 547 488 468 17%
Rituxan*+Gazyva royalty 408 394 375 9%
Ocrevus royalty 188 183 137 37%
Other** 110 160 147 -26%

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

Cash and equivalents (including marketable securities) balance ended at $6.25 billion, up sequentially from $4.3 billion. $5.95 billion notes payable. $718 million was spent to repurchase shares. $1.70 billion cash flow from operations.

Cost of sales was $430 million. Research and development expense was $540 million. Selling, general and administrative expense $555 million. Amortization of acquired intangible assets $284 million. Collaboration profit sharing $60 million. Other losses $75 million. Total cost and expenses $1.79 billion. Leaving income from operations of $1.80 billion. Other expense $27 million. Income taxes $211 million. Equity in loss of investee, $22 million.

In October 2019 Biogen dosed the first patient in a Phase 2 study of BIIB093 (glibenclamide IV) for brain contusion. Data from a Phase 2 study of BIIB092 for progressive suprnuclear palsy is expected in 2H 2019 and could support a regulatory filing.

In June 2019 Roche announced positive topline results for NOBILITY, a Phase 2 study investigating the safety and efficacy of Gazyva for adults with proliferative lupus nephritis. The study met its primary endpoint and secondary endpoints. It is part of a collaboration between Biogen and Genentech in the U.S.

In June 2019, Biogen's collaboration partner UCB presented interim results from the Phase 2b study of dapirolizumab pegol (DZP) in patients with active systemic lupus erythematosus (SLE). The study demonstrated consistent and potentially meaningful improvements for the majority of clinical endpoints in patients treated with DZP compared with placebo. In addition, biomarker data demonstrated evidence of proof of biology. DZP was well tolerated and demonstrated an acceptable safety profile. Biogen and UCB now are planning a Phase 3 study.

In June 2019 Biogen completed its acquisition of NST, a clinical-stage gene therapy company focused on adeno-associated virus treatments for inherited retinal disorders. This added two mid- to late-stage clinical assets, as well as preclinical programs, in ophthalmology. The total transaction value was approximately $800 million.

Vumerity reported top line Phase 3 data in Q3 2019 and has been tentatively approved by the FDA. It is in collaboration with Alkermes plc. It is diroximel fumarate (BIIB098), a novel oral fumarate for the treatment of relapsing forms of MS.

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 September 2019 Eisai Co., Ltd. and Biogen announced the decision to discontinue the Phase 3 clinical studies (MISSION AD1 and MISSION AD2) of the investigational oral BACE (beta amyloid cleaving enzyme) inhibitor elenbecestat (development code: E2609) in patients with early AD. "We believe that no other company is better positioned to deliver breakthrough therapies for Alzheimer’s disease."

In August 2019 Biogen dosed the first patient in the Phase 1 study of BIIB094 (ION859), an antisense oligonucleotide targeting leucine-rich repeat kinase 2 (LRRK2) for Parkinson’s disease.

In May 2019 Biogen's collaboration partner Eisai dosed the first patient in the global Phase 3 study of BAN2401 in early Alzheimer's disease.

In May 2019 Biogen presented interim results of the Phase 1/2 study of BIIB067 (tofersen), an antisense oligonucleotide being studied for the potential treatment of amyotrophic lateral sclerosis (ALS) in adults with a confirmed superoxide dismutase 1 (SOD1) mutation. The data demonstrated a statistically significant reduction in SOD1 protein levels and a numerical trend towards slowing of clinical decline in SOD1-ALS patients treated with tofersen compared to placebo.

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

In September 2019 Roche announced that the FDA granted Breakthrough Therapy Designation to GAZYVA for adults with lupus nephritis.

In August 2019 Biogen discontinued the Phase 2b study of BG00011 for IPF due to safety concerns.

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:

Aducanumab data discrepancies? [Al Sandrock] Low dose is consistent across the two trials. The protocol amendment did not affect the low doses. Dosing is a complex combination of duration, magnitude, and whether there were interruptions.

Engage and Emerge, if data was merged, would they hit the endpoints? At high dose you would get an intermediate effect. We are looking at them as stand alone studies. The one month difference in start dates kept them different for the entire study. More data will be released at the science conference.

Did the FDA agree that a single positive trial could be sufficient for approval? The FDA thought it was reasonable to submit an application for approval. The FDA saw our full analysis of both studies. We currently do not plan a further study beyond the redosing study for previously enrolled patients.

Those who did not have the high dose had a neutral to positive effect. There is a sharp dose response, intermediate dosing is not enough, at least in an 18 month trial.

EU regulatory discussions for aducanumab? Just beginning to engage with the EU, no substantial discussion yet.

The FDA can approve a drug based on a single study, it is up to them to set the criteria. Emerge stands on its own, Engage is supportive, Prime adds.

In the course of an 18 month trial you need to remove a large amount of amyloid, followed by a lag, to start to see an effect on clinical outcomes.

How could a relatively small number of patients move from a negative futility analysis to a positive result? In Merge at time of futility analysis the trend was positive, so it did not take many additional patients to hit the primary endpoint. We also had a lot of patients who had not hit 18 months at the time of the futility analysis. Slide 22 was just an exploratory analysis, not the full data. Only a subset of patients got the PET imaging.

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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