Analyst Conference Call Summary

biotechnology

conference date: January 30, 2020 @ 5:00 AM Pacific Time
for quarter ending: December 31, 2019 (fourth quarter, Q4 2019)

Forward-looking statements

Overview: Revenue growth slowing, but adding to clinical-stage pipeline. Very rapid earning growth.

Basic data (GAAP):

Revenues were $3.67 billion, up 2% sequentially from $3.60 billion and up 4% from $3.53 billion in the year-earlier quarter.

Net income $1.44 billion, down 7% sequentially from $1.55 billion and up 52% from $0.95 billion in the year-earlier quarter.

EPS (earnings per share, diluted) were $8.08, down 4% sequentially from $8.39 and up 71% from $4.73 year-earlier.

Guidance:

Full year 2020 revenue between $14.0 and $14.3 billion. GAAP EPS $29.50 to $31.40. Non-GAAP EPS $31.50 to $33.50.

Conference Highlights:

CEO Michel Vounatsos said: " We are excited about the prospects for aducanumab in Alzheimer's disease and look forward to completing a regulatory filing in the U.S. as soon as possible. Our pipeline has grown and is maturing, as we added 7 new clinical programs in 2019 and expect 11 mid- to late-stage data readouts by the end of 2021. We look forward to multiple near-term opportunities for value creation, including in Alzheimer's disease, ALS, stroke, lupus, ophthalmology, and biosimilars, as we aim to build a multi-franchise portfolio." Cash flow remains strong, allowing for stock buy-backs plus acquisitions of potential therapies. Four deals in last 3 months.

Key revenue drivers were Spinraza and biosimilars, plus Ocrevus royalties.

In January 2020 Biogen announced an agreement to acquire from Pfizer PF-05251749, a novel CNS-penetrant small molecule inhibitor of casein kinase 1 (CK1), which is in Phase 1. Targets are sundowning in Alzheimer's disease and irregular sleep wake rhythm disorder in Parkinson's disease. The purchase will include an upfront payment of $75 million with up to $635 million in potential additional development and commercialization milestone payments, as well as tiered royalties in the high single digits to sub-teens.

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. Feedback on launch is good.

In December 2019 Biogen completed a transaction with Samsung Bioepis and secured the exclusive rights to commercialize two new potential ophthalmology biosimilars, SB11 referencing Lucentis and SB15 referencing Eylea, in major markets worldwide, including the U.S., Canada, Europe, Japan, and Australia. Biogen acquired exclusive commercialization rights for its anti-TNF portfolio, including Benepali, Flixabi, and Imraldi, in China. Biogen also acquired an option to extend its existing commercial agreement with Samsung Bioepis for this antiTNF portfolio in Europe.

In December 2019 Biogen presented topline data from the aducanumab Phase 3 EMERGE and ENGAGE studies at the Clinical Trials on Alzheimer's Disease (CTAD) annual congress in San Diego, California. A regulatory filing is planned. Redosing study application has been submitted to the FDA.

In December 2019 Biogen announced positive top-line results from the Phase 2 LILAC study evaluating the efficacy and safety of BIIB059, a fully humanized IgG1 monoclonal antibody targeting blood dendritic cell antigen 2 (BDCA2) expressed on plasmacytoid dendritic cells, in patients with lupus. The safety and tolerability profile of BIIB059 supports its continued development, and Biogen plans to advance BIIB059 to Phase

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 $1.49 billion, down 12% sequentially from $1.69 billion and up 6% from $1.40 billion year-earlier. Non-GAAP EPS was $8.34, down 9% sequentially from $9.17 and up 19% from $6.99 year-earlier.

Total product revenue was $2.93 billion, up 1% sequentially from $2.89 billion and up 4% from $2.83 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 $5.88 billion, down sequentially from $6.25 billion. $5.96 billion notes payable. $2.09 billion was spent to repurchase shares. $1.96 billion cash flow from operations.

Cost of sales was $447 million. Research and development expense was $692 million. Selling, general and administrative expense $665 million. Amortization of acquired intangible assets $68 million. Collaboration profit sharing $60 million. Other losses $40 million. Total cost and expenses $1.89 billion. Leaving income from operations of $1.78 billion. Other expense $49 million. Income taxes $276 million. Equity in loss of investee, $13 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 December 2019 Biogen entered into a collaboration agreement with CAMP4 Therapeutics for its CAMP4 Therapeutics' Gene Circuitry Platform, with the aim of identifying how to dial up or down the expression of disease-associated genes within microglial cells. Biogen paid CAMP4 Therapeutics an upfront payment of $15 million

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 December 2019 Biogen entered into a global license and collaboration agreement with Catalyst Biosciences for the development and commercialization of pegylated CB 2782, a preclinical anti-C3 protease, for the potential treatment of geographic atrophy associated dry age-related macular degeneration. Biogen paid Catalyst Biosciences an upfront payment of $15 million

BIIB 76 and 80 for Alzheimer's targeting Tau are all advancing 076 should report Phase 1 results in early 2020. 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.

BIIB092 reported negative Phase 2 results in progressive supranuclear palsy (PSP) in December 2019. Discontinued the PSP program, but continuing testing for Alzheimer's.

In November 2019 Biogen completed enrollment of the Phase 3 STAR clinical study evaluating gene therapy BIIB111 for the potential treatment of CHM. CHM is a rare, degenerative, X-linked inherited retinal disorder that leads to blindness and currently has no approved treatments

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

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

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.

Full year 2019 revenue was $14.39 billion, up 7% y/y. GAAP net income was $5.89 billion, up 33%, and dilute EPS was $31.42, up 46%. Non-GAAP net income was $6.29 billion, up 17%, EPS $33.57, up 28%.

Q&A summary:

Guidance assumptions on Spinraza competition? We plan on the Aristoplan (sp?, maybe Zolgensma) launch, we believe plenty of growth opportunity for Spinraza.

Aducanumab filing details? It is about getting documentation for the electronic submission. We have been closely engaged with the FDA, constructively, but it is a unique situation. We have started engaging with regulators outside the US.

Aducanumab redosing? It was mainly for humanitarian reasons. Single arm study, even former placebo patients were eligible. Endpoint is longterm safety and tolerability, will also look at efficacy.

Tecfidera IP decision next week? We will appeal if we do not prevail.

Aducanumab stat details? It is not always the case that pooling is done, there have been exceptions.

Any evidence of Zolgensma patients switching back to Spinraza? If they had Zolensma, in effect they are adding Spinraza to it. We are seeing it in the real world, physicians see room for improvement.

We always envisioned combination therapies for Alzheimer's. We were pleasantly surprised that Aducanumab affects Tau. We are looking at biomarkers for combinations.

Capital allocation? No net debt. High cash flow. We can do both: stock buy backs and acquisitions. We want to keep building the pipeline. 5 readouts in the next 2 years could have a meaningful impact on the company.

Anti-Lingo? The new Phase 2 study differs significantly from the earlier trial. We should have results soon.

Alzheimer's cost of goods, given amount of antibody needed? We have been looking at that. We are comfortable we can have a fair margin.

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