Analyst Conference Call Summary

biotechnology

conference date: August 1, 2024 @ 5:30 AM Pacific Time
for quarter ending: June 30, 2024 (second quarter, Q2 2024)

Forward-looking statements

Overview: Zurzuvae and Leqembi sales in slow ramp.

Basic data (GAAP):

Revenues were $2.47 billion, up 8% sequentially from $2.29 billion and flat from $2.46 billion in the year-earlier quarter.

Net income $584 million, up 49% sequentially from $393 million and down 1% from $592 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $4.00, up 48% sequentially from $2.70 and down 2% from $4.07 year-earlier.

Guidance:

Raised 2024 to $15.75 to $16.25 non-GAAP EPS.

Conference Highlights:

CEO Christopher A. Viehbacher said: "Biogen delivered strong financial performance in the second quarter thanks to solid execution against our business strategy, which is aimed at transforming the Company to deliver sustainable growth. We saw continued positive momentum across new product launches and are pleased with the trends we see with key products going into the third quarter. We believe we have created a strong mid- to late-stage development pipeline thanks to reprioritization efforts made last year and key acquisitions like HI-Bio, which was announced in the quarter. Our Fit for Growth program announced in early 2023 continues to deliver significant savings, allowing us to strategically reinvest a portion back into product launches and the pipeline." On track for reducing costs and improving margins. Well positioned for longer-term growth, despite challenges.

New growth drivers will be Leqembi, Skyclarys, Zurzuvae, and the ALS therapy Tofersen. Tecfidera has marketing protection in Europe until February 2025. Sold a priority review voucher for over $100 million in Q2. In q2 Biogen decided to retain its biosimilars business.

In Q3 2024 Biogen utilized $1.15 billion of cash to acquire HI-Bio (Human Immunology Biosciences), expanding its immunology portfolio and bolstering its late-stage pipeline with the addition of three potential phase 3 program starts, including nephropathy.

Biogen announced the termination of the Antibody Transport Vehicle, Amyloid beta program with Denali Therapeutics.

Leqembi (lecanemab) for Alzheimer's patients global growth accelerated, with U.S. sales at $30 million and global at $40 million. Doing well in Japan and China. [But that does not show up in Table 3 of the press release, probably offset by expenses.] Now has a trial for Leqembi in preclinical AD, AHEAD 3-045. Also working on a subcutaneous formulation, maintenance dosing OLE study, and preclinical AD. Ramp has significant startup hurdles like PET scans, and costs for clinics, so slower than otherwise. Underlaying demand is strong, some providers are now treating multiple patients. Expanding field force by 30%. Partnered with Eisai. EU rejected, but Eisai seeking further review. New data demonstrated benefits of continuing treatment for 3 years. In Q2 number of prescribing physicians increased about 50%, rapid growth in new patients, expanded capacity. New data shows stopping Leqembi causes return of Alz decline. ARIA rates with Leqembi are 50% lower than competitor's. Also expanding the field force.

Biogen and Sage's Zurzuvae [zuranolone] for the treatment of major postpartum depression (PPD) was approved by the FDA in early August 2023. It was given a favorable DEA rating in November, 2023, allowing for sales to begin in December 2023, with main launch in Q1 2024. Enourmous unmet need, good media coverage. Half million potential patients per year. Early indications are strong. Making progress with payers, number of prescribers. Medicaid revues by state are ongoing. In Q2 ramped better than expectations.

Skyclarys (omaveloxolone) for Friedrich's ataxia launch continues. On February 12, 2024 announced the European Commission granted its approval.

Qalsody was approved for ALS in the EU in May 2024.

Biogen dropped out of the BIIB121 program with Ionis for Angelman Syndrome.

In Lupus has two potential therapies in Phase 3, Dapirolizumab Pegol and Litifilimab. Data expected mid 2024.

Biogen currently has four more biosimilar programs in development. Biogen is considering strategic options for its biosimilar business.

Non-GAAP net income was $771 million, up 44% sequentially from $535 million and up 32% from $585 million year-earlier. Non-GAAP EPS diluted was $5.28, up 44% sequentially from $3.67 and up 31% from $4.02 year-earlier.

Total product revenue was $1.90 billion, up 11% sequentially from $1.71 billion and up 3% from $1.85 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 $1.91 billion, up sequentially from $1.07 billion. $6.3 billion debt. $0 million was spent to repurchase shares. $626 million cash flow from operations. $34 million cap ex. $592 million free cash flow. $2.1 billion remains authorized for share repurchases.

GAAP Cost of sales was $46 million. R&D expense was $514 million. SG&A expense $554 million. Amortization of acquired intangible assets $87 million. Collaboration profit sharing income $62 million. Restructuring charges $7 million. Other income $85 million. Gain on sale of PRV $89 million. Total cost and expenses $1.77 billion. Leaving income from operations of $699 million. Income tax $115 million.

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

Q&A selective summary:

Was 2023 the trough year for earnings? Increased guidance shows we turned the corner on the bottom line. We don't guide beyond 2024. We are pleased with the progress of our product launches. We hope 2023 was the trough year.

EMA Leqembi decision? Disappointed in the negative decision. We believe the benefit/risk ratio is positive. We will apply for reexamination after we receive the CHMP assessment issues. We believe the long-term data and real-world data we generated should address their issues.

Angelman syndrome drop out? Did not think the probability of success was enough to justify continued investment, based on data. Will be disciplined about all data readouts and continuation of programs.

Any pushback on Leqembi, amyloid hypothesis? On the ground, the ones who are prescribing are the ones we have worked with to understand the data. We don't hear pushback about cost/benefit. The real world feedback is very positive. So we are not seeing pushback. But it will take time and patience to build the market. Entry of Lilly will help accelerate this marketplace.

Business Development appetite? Probably outside of neuroscience. Possible immunology and rare diseases. We would like another Reata type acquisition, but those come along rarely. We are not desperate to do a deal. New product launches late decade is a priority for us. We could also do more collaborations.

Lupus program? Phase 3 readout coming soon. Dapi is an add on to standard therapy, looking for long term effects. But even if positive, would need to run another Phase 3 trial.

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