Analyst Conference Call Summary

biotechnology

conference date: July 20, 2022 @ 5:00 AM Pacific Time
for quarter ending: June 30, 2022 (second quarter, Q2 2022)

Forward-looking statements

Overview: Revenue still declining, but raised guidance and many developments.

Basic data (GAAP):

Revenues were $2.59 billion, up 2% sequentially from $2.53 billion and down 7% from $2.78 billion in the year-earlier quarter.

Net income $1.06 billion, up 249% sequentially from $304 million and up 236% from $449 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $7.24, up 251% sequentially from $2.06 and up 142% from $2.99 year-earlier.

Guidance:

For full year 2022 increased to: revenue $9.9 to $10.1 billion; non-GAAP diluted EPS $15.25 to $16.75.

Conference Highlights: Positive update to guidance.

CEO Michel Vounatsos said: "We continued to execute on our near-term operational priorities in the second quarter and are pleased to be raising our financial guidance for the year. At the same time, we continue to face revenue declines due in part to generic and biosimilar competition for Tecfidera and Rituxan. We made important progress towards bringing new potential treatments to patients suffering from Alzheimer's disease and depression, which we believe are critical steps on our path to drive value creation for both patients and shareholders over time." Has terminated some R&D programs that seem less likely to succeed or produce value. Spinraza launched in China. Also looking for external opportunities to create value. Believes can drive growth over time. There were negative currency impacts from outside the U.S.

Mr. Vounatsos will be stepping down as CEO when a successor has been found.

Biogen and Sage started the rolling NDA submission to the FDA for zuranolone for the treatment of major depressive disorder (MDD) in late April 2022. An additional filing for postpartum depression (PPD) is anticipated in 2023. In October 2021 Sage and Biogen had announced new data from the LANDSCAPE and NEST clinical studies. Zuranolone for major depressive disorder reported positive Phase 3 data in Q4 2021 from the open-label Shoreline study.

Biogen launched Byooviz, a biosimilar to Lucentis, in the U.S., for wet macular degeneration, diabetic retinopathy, and macular edema. In cooperation with Samsung Bioepois. In Q3 2021 Byooviz (ranibizumab-nuna), a biosimilar referencing Lucentis (ranibizumab), was approved in the U.S., E.U., and U.K.

In Q2 2022 tofersen 12-month data for SOD1 ALS showed slowed declines in function. But it did not achieve statistical significance at week 28. Will be talking to regulators about a path forward.

In Q2 2022 a Phase 2b study of BIIB122 was initiatied in Parkinson's without a pathogeic LRRK2 variant. A Phase 3 study is planned to start before the end of 2022.

In July, 2022, after the quarter ended, with Eisai announced the FDA accepted the BLA and granted priority review for lecanemab for Alzheimer's. Based on an 856 person Phase 2 trial and safety data from a Phase 3 confirmatory study. Building inventory for potential commercial launch.

In July 2022 Biogen announced that the TALLY Phase 2 study of BIIB104 in cognitive impairment associated with schizophrenia did not meet its primary or secondary efficacy endpoints so the program is discontinued.

In July 2022 the FDA accepted the Roche BLA for Lunsumio for follicular lymphoma. Already approved in EU. Biogen to profit share 30% in the US and get low-single-digit royalties outside the U.S.

In Q2 2022 Biogen and Alectos Therapeutics entered into a license and collaboration agreement to develop and commercialize a novel preclinical selective GBA2 inhibitor, AL01811, which has first-in-class potential for patients with Parkinson's disease.

In Q2 2022 Biogen and MedRhythms entered into a license agreement to develop and commercialize MR-004, an investigational prescription digital therapeutic for the potential treatment of gait deficits in Multiple Sclerosis.

Biogen completed the sale its stake in Samsung Biologics for up to $2.3 billion in April 2022, with $1 billion received at closing. Biogen will continue to record some revenue and costs under the agreement.

Biosimilars revenue of $194 million decreased 4% versus the prior year at actual currency and increased 3% at constant currency. Biogen currently has four more biosimilar programs in development. In Q2 2022 positive Phase 3 data from BIIB800, a biosimilar referencing Actemra was presented.

Second quarter GAAP other income was $429 million, primarily driven by an approximately $1.5 billion gain on the sale of our equity stake in the Samsung Bioepis Joint Venture, partially offset by net unrealized losses on strategic equity investments of $77 million, net interest expense of $53 million, and $900 million, plus estimated fees and expenses, related to an agreement in principle to resolve previously disclosed litigation relating to conduct prior to 2015.

10 programs are either in Phase 3 or being filed for regulatory approval.

Tecfidera revenue continues to be impacted by generic entries in the U.S. and by pricing pressure outside the U.S.

Non-GAAP net income was $767 million, up 43% sequentially from $535 million but down 8% from $838 million year-earlier. Non-GAAP EPS diluted was $5.25, up 45% sequentially from $3.62 and down 6% from $5.58 year-earlier.

Total product revenue was $2.06 billion, down 1% sequentially from $2.07 billion and down 8% from $2.24 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 $5.90 billion, up sequentially from $4.75 billion. $7.28 billion debt. At the beginning of Q3 paid off $1 billion in notes due September 2022. $500 million was spent to repurchase shares. $737 million cash flow from operations. $37 million cap ex. $700 million free cash flow.

GAAP Cost of sales was $484 million. R&D expense was $529 million. SG&A expense $572 million. Amortization of acquired intangible assets $68 million. Collaboration profit sharing income $29 million. Gain on fair value remeasurement of contingent consideration $5 million. Restructuring charges $71 million. Other expense $429 million. Total cost and expenses $1.32 billion. Leaving income from operations of $1.27 million. Income tax $217 million. Equity income, $6 million. Net loss attributable to noncontrolling interests, $1 million.

See also the Biogen product pipeline. The entire pipeline includes 27 clinical programs.

Q&A summary:

Closing of pipeline programs? Prioritizing, dependent on scientific insights and internal inflection points. In case of BIIB104 hypothesis was disproved. BIIB76 is anti-tau, closing down at Biogen, back to Neurimmune. Lecanemab program is well-designed, so we will wait for the data.

Is there explicit feedback from the FDA on the P value required for Lecanemab? It can be a study for traditional approval, per feedback. FDA said they would accept statistical significance, using CDR sum of boxes.

CEO search? Search is progressing, but nothing yet to be reported.

Working with Sage and Esai to plan for commercial launches.

We have two other anti-amyloid, in other drugs, on the way, which will also be testing the anti-amyloid hypothesis. If there were a mixed readout scenario we would consult with the FDA for guidance.

Growth opportunity in emerging markets? We see a strongly emerging middle class able to pay for healthcare in Latin America, Asia and the Middle East. This is for our MS portfolio and Spinraza. Brazil and China are particularly of interest.

Zuranolone marketing and pricing thoughts? We are encouraged by the data. Looking at positioning in the market. Hopes to have a dedicated session with Sage for investors. No pricing decision yet. Depends on what schedule for abuse it gets assigned, hoping for schedule 4.

Possibility of going outside of neurology? We have 29 programs in the clinic, many more preclinical. Multiple modality platform. We know neuroscience is a difficult space. Could increase focus on neuropsychology. Outside that we are looking at immunology.

Ad Com for lecanemab, Clarity trial will readout in the fall, if positive could file by end of Q1 2023. We do not have an indication there will be an Ad Com. The national coverage (CMS) ruling is against accelated approval, so commercial infrastucture is dependent on likely full approval. Does depend the quality of the data.

CMS indicated that degree of rigor in the qualifying trial could determine whether Medicare would reimburse for any AD amyloid therapy.

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