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: Continued revenue decline and guided to more declines in 2023. Hopes Leqembi and Zuranolone will eventually lead to a turnaround.

Basic data (GAAP):

Revenues were $2.54 billion, up 1% sequentially from $2.51 billion and down 7% from $2.73 billion in the year-earlier quarter.

Net income $0.55 billion, down 51% sequentially from $1.13 billion and up 49% from $0.37 billion in the year-earlier quarter.

EPS (earnings per share, diluted) were $3.79, down 52% sequentially from $7.84 and up 52% from $2.50 year-earlier.

Guidance:

For the full year 2023 expects revenue to decline y/y by mid-single digits. Non-GAAP diluted EPS estimated between $15.00 and $16.00.

Conference Highlights:

CEO Christopher A. Viehbacher said: "There is an urgent need to restore growth to the company . .. We are working to put Biogen on a sustainable growth trajectory as we execute on two important near-term opportunities with Leqembi in Alzheimer's disease and zuranolone in depression; further diversify our product portfolio; and seek expansion through organic and external opportunities, including new partnerships." Decreases in Q4 and full year 2022 GAAP and Non-GAAP SG&A expense were driven by cost savings initiatives. Currency exchange rates were a negative headwind. Biogen is on track to hit cost savings goal of $1 billion.

While Biogen's MS products are still highly respected, the path to growth involves branching out. Believes its R&D pipeline is undervalued. Expanding into immunology, rare diseases. Does not expect significant Leqembi revenue until reimbursement is approved, which would follow full approval. Ramping has other issues, given a lack of testing capacity. 37% improvement in daily life activities vs. placebo, which is what physicians and patients care about. Already data that shows staying on drug after 18 months shows benefit. Now understanding is mild cognative approval comes with a long advance of plaque build up.

Belives zuranolone data is good, but first revenue not likely until Q4.

Biogen is considering strategic options for its biosimilar business.

In Q4 2022, Biogen discontinued further development of vixotrigine (BIIB074) for the treatment of neuropathic pain, resulting in a GAAP impairment charge of approximately $120 million. It also resulted in a GAAP pre-tax gain of approximately $195 million due to an adjustment to the value of contingent consideration obligations.

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.

The FDA approved Leqembi (lecanemab) (BNN2401) for Alzheimer's on January 6, 2023, under the Accelerated Approval pathway. Now, with Eisai, submitted for full traditional approval. Filed for full regulatory approval in the U.S., EU and Japan in January 2023. Full phase 3 results were 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 completed the rolling NDA submission to the FDA for zuranolone for the treatment of major depressive disorder (MDD) and postpartum depression (PPD), with a PUFA date of August 5, 2023.

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, so the application is based on longer-term positive results.

In Q4 2022 Biogen initiated a Phase 2 Study of BIIB080 (anti-tau ASO) in early Alzheimer's disease. This is an RNAi product that reduces all forms of tau. Data in March 2023.

In Q4 2022 Biogen initiated a Phase 1 Study of BIIB115 for SMA that may help address additional unmet needs of patients and which can be administered at extended dosing intervals

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.

Trying to stop generic Tecfidera launch in Europe and Vumerity biosimilars in the U.S. Biogen's biosimilars are under pricing pressure.

Non-GAAP net income was $587 million, down 15% sequentially from $691 million and up 17% from $500 million year-earlier. Non-GAAP EPS diluted was $4.05, down 15% sequentially from $4.77 and up 19% from $3.39 year-earlier.

Total product revenue was $1.90 billion, down 3% sequentially from $1.96 billion and down 13% from $2.19 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 $5.60 billion, down sequentially from $5.77 billion. 6.28$ billion debt. $0 million was spent to repurchase shares. Negative $175 million cash flow from operations. $917 million payment for litigation settlement. $86 million cap ex. Negative $261 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 $571 million. R&D expense was $602 million. SG&A expense $633 million. Amortization of acquired intangible assets $175 million. Collaboration profit sharing income $35 million. Gain on fair value remeasurement of contingent consideration $195 million. Restructuring charges $7 million. Other expense $113 million. Total cost and expenses $1.94 billion. Leaving income from operations of $604 million. Income tax $54 million.

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

For the full year 2022 Biogen revenue was $10.17 billion, down 7% y/y. GAAP diuted EPS was $20.87. Non-GAAP diluted EPS was $17.67.

Q&A summary:

NCD reconsideration for Leqembi, timeline? Not sure precedent will matter, it is an unusual set of circumstances. Believe CMS will wait for traditional approval before its decision, but the tone of the community is much improved, see the data as more compelling.

Timeline for trimming expenses? In R&D looking to save money by prioritizing programs, which will require some study. In SG&A most of the spend goes to the MS franchise, which produces most of our revenue. Revenue is declining, so shifting to support new launches. In 2023 will see some cost reductions, but some new investments, so no guidance on margins.

Biosimilars? It is a strong team that built a strong business. I am trying to drive focus, so whatever is not a growth driver needs to look at other options.

Infusion capacity for Leqembi? We worked on it for Aduhelm, but there is not a lot of unused capacity around right now. We expect slow, steady progress in line with physician decision making. Eisai is developing a longer term dosing therapy, we should know by Q1 2024. Also working on a subcutaneous formulation, which should be filed by Q1 2024.

Favored BD targets? We traditionally were narrowly focussed MS, a high-value, low volume product. Zuranolone could treat a much larger population. We did only one TV commercial in history, we will need to get good at that. We want to go beyond neurodegenerative diseases, which require very long and costly clinical trials. We should be in immunology, psychiatry, rare diseases.

There was not point hiring me if you don't want to go do BD deals.

We will have up to $10 billion capacity for BD. The main constraint is finding something worth doing.

The limiting factor for 2 to 3 years for Leqembi is more likely to be diagnostic capacity than whether we have a subq formulation. Blood diagnostics, which are likely a couple of years away, would be very important for us.

OpenIcon Analyst Conference Summaries Main Page
Biogen Investor Relations page
Openicon Biogen main page

Search

More Analyst Conference Pages: