Analyst Conference Call Summary

biotechnology

conference date: October 25, 2022 @ 5:00 AM Pacific Time
for quarter ending: September 30, 2022 (third quarter, Q3 2022)

Forward-looking statements

Overview: With revenue down 10% y/y, can near-term pipeline therapies come to the rescue?

Basic data (GAAP):

Revenues were $2.51 billion, down 3% sequentially from $2.59 billion and down 10% from $2.78 billion in the year-earlier quarter.

Net income $1.13 billion, up 7% sequentially from $1.06 billion and up 242% from $329 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $7.84, up 8% sequentially from $7.24 and up 253% from $2.22 year-earlier.

Guidance:

Updated (slightly raised) full year 2022 guidance to revenue between $10.0 and $10.15 billion. Non-GAAP diluted EPS $16.50 to $17.15.

Conference Highlights:

CEO Michel Vounatsos said: "We are excited about the topline results of the Clarity AD trial for lecanemab and believe this potential new therapy could provide a meaningful benefit for Alzheimer's patients. We also continue to make progress toward delivering new impactful therapies for patients suffering from depression and SOD1 ALS, with important upcoming regulatory milestones."

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

GAAP income and EPS is substantially higher than non-GAAP EPS mainly because of a $504 million gain on sale of a building that is excluded from non-GAAP result.

Plans to continue to research Alzheimer's and develop new therapies. Will also research giving lecanemab earlier in the disease, and a maintenance dose. Aims to maintain leadership position in Alzheimer's.

In July, 2022, after the quarter ended, with Eisai announced the FDA accepted the BLA and granted priority review for lecanemab (BNN2401) for Alzheimer's. Based on an 856 person Phase 2 trial and positive data from a large Phase 3 confirmatory study. Building inventory for potential commercial launch. Aims to file for regulatoary approval in the U.S., EU and Japan by the end of Q1 2023. Full phase 3 results will be published on November 29, 2022 at the Alzheimer's Congress. Also developing a subcutaneous formulation of lecanemab. Shows some slowing of disease as early as 6 months after dosing. Primary and secondary endpoint results were highly statistically significant.

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 SKYLANK, LANDSCAPE and NEST clinical studies. Zuranolone for major depressive disorder reported positive Phase 3 data in the Shoreline study, and a new analysis in Q3 2022 further supported use of the drug for MDD. The Skylark trial for PPD (post-partum depression) was positive.

In October 2022 Biogen announced that the first patient was dosed in the AMETHYST Phase 2/3 study evaluating litifilimab (BIIB059)in participants with cutaneous lupus erythematosus.

In October 2022 an EU court issued a nonbinding opinion that could extend patent protection of Tecfidera in Europe until February 2024.

In Q3 2022 a Phase 3 study of BIIB122 was initiatied in Parkinson's without a pathogeic LRRK2 variant.

Results published in Q3 of the Phase 3 VALOR study and its open label extension study evaluating tofersen for the treatment of superoxide dismutase 1 amyotrophic lateral sclerosis, or SOD1 ALS showed that earlier initiation of tofersen slowed decline across critical measures of function and strength. The FDA accepted the NDA for Tofersen in Q3 2022; the PDUFA is now April 25, 2023. But the study did miss an endpoint, application is based on longer-term positive results.

In Q3 2022 Biogen initiated the Phase 2/3 study of litibilimab (BIIB059) in CLE (cutaneous lupus erythematosus). Also published positive phase 2 results in SLE (systemic lupus erythematosus) and CLE.

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.

Biogen currently has four more biosimilar programs in development. In Q3 2022 Biogen announced that the EMA accepted the Marketing Authorization Application for BIIB800, a biosimilar candidate referencing RoACTEMRA, an anti-interleukin-6 receptor monoclonal antibody. In Q2 2022 positive Phase 3 data from BIIB800, a biosimilar referencing Actemra was presented.

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 $691 million, down 10% sequentially from $767 million and down 3% from $710 million year-earlier. Non-GAAP EPS diluted was $4.77, down 9% sequentially from $5.25 and flat from $4.77 year-earlier.

Total product revenue was $1.96 billion, down 5% sequentially from $2.06 billion and down 11% from $2.21 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 $5.77 billion, down sequentially from $5.90 billion. $6.28 billion debt. In Q3 paid off $1 billion in notes due September 2022. $250 million was spent to repurchase shares. $661 million cash flow from operations. $59 million cap ex. $602 million free cash flow. Expects over $1 billion in cash over the next year from selling its share in Samsung Bioepsis.

GAAP Cost of sales was $470 million. R&D expense was $549 million. SG&A expense $563 million. Amortization of acquired intangible assets $57 million. Collaboration profit sharing income $45 million. Gain on fair value remeasurement of contingent consideration $2 million. Restructuring charges $15 million. Other expense $56 million. Gain on sale of a building $504 million. Total cost and expenses $1.14 billion. Leaving income from operations of $ million. Income tax $236 million.

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

Q&A summary:

Eisai relationship status? The relationship is solid. Team works together closely. Eisai has final decision making rights, but 50/50 profit share.

Reimbursement access for lecanemab? Depends on strength of evidence, which will influence and CMS decision. Under accelerated approval not really covered, but will be with the traditional approval. We feel confident in the data, the trial was well designed. Eisai is already engaging with CMS.

Portfolio prioritization? We are still evaluating business development opportunities. We are busy preparing for several commercializations, but can always expand our portfolio.

Aduhelm update? We know removing amyloid plaque can be effective. We have some patients on the drug. We have not made any decisions for going forward, but we have a post-marketing requirement, so those 2 studies are being continued.

Planning the investment in the sales infrastructure for lecanemab with Eisai, it is their decision. Hoping the ramp will be closer to revenue than Aduhelm was. Scale up will be more careful.

Subgroups driving lecanemab results? P value 0.0005, so very significant. Population included underrepresented populations. Not sharing subgroup analysis yet.

Lilly mindshare in Alzheimer's space? Our goal is to get our launch right, with the appropriate infrastructure. Hopefully we would not see the reimbursement delay we saw with aduhelm. The safety profile will be very important for doctors. Mind share will be based on the data. This is a very large market, we welcome the efforts of other companies.

Denali collaboration? We are looking across our portfolio, will make announcements as appropriate.

Lecanemab pricing? Eisai will decide the pricing.

Spinraza pricing, dynamics outside the US? Seeing European momentum slow down, but sharing new data may help. Outside of Europe growth is rapid, but price is not the same. We see a gradual return to growth. The cause of revenue decline was foreign exchange rates, but volume grew.

Infusion capabilities? Overall that capacity needs to be expanded.

Lecanemab manufacturing? We have US and a Swiss facility we can use. We had about $100 million of inventory on hand at the end of the quarter. Could use the Swiss facility for aduhelm if we need to ramp that again. The aduhelm commercial infrastructure was largely dismantled to save costs.

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