Analyst Conference Call Summary

biotechnology

conference date: April 25, 2023 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2023 (first quarter, Q1 2023)

Forward-looking statements

Overview: Waiting for FDA decisions on Leqembi and Zuranolone.

Special Note: After the conference concluded, the FDA announced the approval of Qalsody (tofersen) for treatment of amyotrophic lateral sclerosis (ALS) associated with a mutation in the superoxide dismutase 1 (SOD1) gene.

Basic data (GAAP):

Revenues were $2.46 billion, down 3% sequentially from $2.54 billion and down 3% from $2.53 billion in the year-earlier quarter.

Net income $388 million, down 29% sequentially from $550 million and up 28% from $304 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $2.67, down 30% sequentially from $3.79 and up 30% from $2.06 year-earlier.

Guidance:

reiterated prior: non-GAAP diluted EPS $15.00 to $16.00.

Conference Highlights:

CEO Christopher A. Viehbacher said: "“In the first quarter, we continued to make strong progress against our business priorities, most importantly execution of three potential launches in 2023. Biogen is at the forefront of groundbreaking science as demonstrated by our ability to help advance new surrogate biomarkers in Alzheimer’s disease and ALS while also delivering breakthrough data to address tau pathology in Alzheimer’s. I believe these achievements represent Biogen at its best. We also continue to remain diligent in prioritizing our R&D pipeline, optimizing our operating model, and evaluating external opportunities as we work to establish a sustainable growth trajectory."

Believes has made good progress on the earlier program to save $1 billion, which is "pretty much complete.". Working on further savings to invest in best growth opportunities. Trying to redesign the company while supporting the MS business. Continues to evaluate sale of biosimilars business. FX currency was a headwind; results are better in constant currency. Margins improved y/y.

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

Biogen is considering strategic options for its biosimilar business.

Biogen is also refocusing investment in gene therapy to advance the fundamental technology.

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. The FDA Advisory Committee for Leqembi will meet June 9, 2023. PDUFA is July 6, 2023. The VHA already approved reimbursement. 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. New analysis of Phase 2b study shows a strong risk-benefit profile, and shows return to disease progress upon discontinuation. Getting much more support from neurologists and Congress for Leqembi than had been the case for Aduhelm.

Biogen and Sage's rolling NDA submission to the FDA for zuranolone for the treatment of major depressive disorder (MDD) and postpartum depression (PPD), has a PUFA date of August 5, 2023.

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 showed BIIB080 is the first tau-directed agent to substantially reduce tau pathology in early-stage AD as measured by both CSF levels and tau PET imaging.

There was a favorable decision in the EU extending the protection of Tecfidera until February 2024. Revenue could improve as the year progresses.

Biogen announced in April that it will terminate its involvement in the development of BIIB093 (glibenclamide IV), currently in a Phase 3 study for large hemispheric infarction and a Phase 2 study for brain contusion, due to operational challenges and other strategic considerations. It is discontinuing development of BIIB132 in spinocerebellar ataxia type 3. And it is pausing the initiation of a Phase 2b study for BIIB131 (TMS-007) for acute ischemic stroke and is assessing whether to initiate this study.

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.

Non-GAAP net income was $493 million, down 16% sequentially from $587 million and down 8% from $535 million year-earlier. Non-GAAP EPS diluted was $3.40, down 16% sequentially from $4.05 and down 6% from $3.62 year-earlier.

Total product revenue was $1.76 billion, down 7% sequentially from $1.90 billion and down 15% from $2.07 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 $6.02 billion, up sequentially from $5.60 billion. $6.28 billion debt. $0 million was spent to repurchase shares. Negative $455 million cash flow from operations. $67 million cap ex. $389 million free cash flow. After the 1st quarter ended received $813 million in cash from selling its share in Samsung Bioepsis.

GAAP Cost of sales was $663 million. R&D expense was $571 million. SG&A expense $605 million. Amortization of acquired intangible assets $50 million. Collaboration profit sharing income $57 million. Restructuring charges $10 million. Other expense $69 million. Total cost and expenses $2.02 billion. Leaving income from operations of $438 million. Income tax $51 million.

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

Q&A summary:

Leqembi reimbursement expectations, timeline? CMS said following full approval will allow for broad availability, no change there. We are seeing support from AAN for CMS reimbursement, also Congress.

External investment in pipeline? We could see rare disease tuck-ins. Looking for a new head of research. For transactions looking for near-term revenue generation.

BIIB080 v. failed tau? We are pioneers. Extracellular tau tries were not successful. Now looking to knock down all forms of tau with BIIB080. We are seeing close to 50% reduction. We need to assess how tau translate into clinical outcomes. We need more data from patients. Believe AZ will be a multi-modality space where patients need more than one therapy. The neurology community has shown great interest in BIIB080 and we are accelerating our investment in it.

Leqembi infrastructure strategy? Learned some from Aduhelm. There is a lot more interest in investing in infrastructure this time, but the CMS approval will be the starting gate.

Loss on Leqembi cost sharing of $19 million? It is net of revenue and expense. We did have minimal revenue. Patients are on cash pay, there is not reimbursement yet. So it mainly represents costs. This is a complex launch, we can't just send out reps and get prescriptions. Esai has some reps in the field, Biogen will likely start in 2024 because of capacity constraints for PET scans, MRIs, lumbar punctures.

Until recently there was a huge debate about the amyloid hypothesis. Clarity data put that debate to rest. After plaque is cleared there will be a maintenance phase. But we do not know how to restore neurons killed by plaque, so we need to get to zero amyloid earlier in the progression.

Launch revenue guidance? Not giving guidance, it is too hard to model. Zuranolone will be more of a contributor to our sales growth in 2024.

The stroke asset was in Phase 3, will other late programs be pulled? We looked at each program in depth, both challenges and opportunities, for all the desisions we announced.

Do you think there is upside to analyst zuranolone revenue estimates? We see a much higher potential. Not clear why there is a gap. We believe many patients and doctors are very unsatisfied with current therapies. The quick responses to z are quite attractive.

We could add debt if necessary for an acquisition or other opportunity.

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