Analyst Conference Call Summary

biotechnology

Biogen Inc.
BIIB

conference date: October 20, 2021 @ 5:00 AM Pacific Time
for quarter ending: September 30, 2021 (third quarter, Q3 2021)


Forward-looking statements

Overview: Revenue was down 18% y/y as older drugs, primarily Tecdidera, were hurt by generic competition, while newer drugs failed to ramp much. Did raise 2021 guidance slightly.

Basic data (GAAP):

Revenues were $2.78 billion, flat sequentially from $2.78 billion and down 18% from $3.38 billion in the year-earlier quarter.

Net income $329 million, down 27% sequentially from $448 million and down 53% from $702 billion in the year-earlier quarter.

EPS (earnings per share, diluted) were $2.22, down 26% sequentially from $2.99 and down 50% from $4.46 year-earlier.

Guidance:

Total 2021 guidance increased slightly, revenue now $10.8 to $10.9 billion. Non-GAAP diluted EPS $18.95 to $19.35. Does not expect a significant Aduhelm sales ramp until at least Q2 2022.

Conference Highlights:

CEO Michel Vounatsos said: "The potential uptake of Aduhelm in the U.S. is delayed, but we continue to believe in its long-term potential. We see 2021 as a transformational year for our company." Reminded that Aduhelm met its endpoints in one large Phase 3 trial. Reimbursement is the main reason for difficulties getting patients started. Believes is positioned to remain the long term leader in Alzheimer's.

Aduhelm (aducanumab) was approved by the FDA in Q2 2021 under its accelerated approval program, for Alzheimer's. Revenue in Q3 was $0.3 million. An NCD decision is expected in Aprile 2022. In July the FDA updated the label to emphasize the early disease stage emphasized in the clinical trials. The long-term Embark trial enrolled its final patient in July 2021.

October 2021 topline results for tofersen (BIIB067) for SOD1 ALS were mixed, not meeting the primary endpoint. But there were positive trends in some endpoints, so Biogen will talk to regulators about a possible path to registration.

Guidance assumes continued erosion of Tecfidera revenue. Aducanumab spend is significant, but revenue is expected to ramp slowly now that there is an approval.

Beginning in Q2 2021 material upfront payments and premiums paid on the acquisition of common stock associated with significant collaboration and licensing arrangements along with the related transaction costs incurred are no longer excluded from Non-GAAP R&D and SG&A expenses. Q3 included a $125 million GAAP and non-GAAP R&D expense of $125 million for the upfront payment to InnoCare.

In Q3 third quarter biogen suspended further development of BIIB111 (timrepigene emparvovec) in choroideremia and BIIB112 (cotoretigene toliparvovec) in X-linked retinitis pigmentosa and recorded $39 million of estimated clinical trial close-out costs, plus impairment charges of $43 million. But the main expense increase in Q3 was for Aduhelm.

n October 2021 Biogen and Sage announced they would submit an NDA to the FDA for zuranolone for the treatment of major depressive disorder (MDD). It is an investigational two-week, once-daily therapeutic. The NDA will be in 2H 2022,following rolling submission. 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.

In Q3 2021 the EMA issued a positive opinion for Vumerity for RR multiple sclerosis.

In Q3 2021 Eisai initiated a rolling submission to the FDA of a BLA for lecanemab for the treatment of early Alzheimer's, under the accelerated approval pathway. This is based on clinical, biomarker and safety data from the Phase 2b clinical trial in people with early AD and confirmed amyloid pathology.

In Q3 2021 Byooviz (ranibizumab-nuna), a biosimilar referencing Lucentis (ranibizumab), was approved in the U.S., E.U., and U.K. In Q2 2021 BAT 1806, a biosimilar referencing Actemra reported positive Phase 3 data.

Vixotrigine (BIIB074) for pain from small fiber neuropathy, in a Phase 2 trial, gave mixed results, with the 200 mg dose doing better than the 350 mg dose, but on the whoe was positive.

Biogen in Q3 2021 present the proposed design for the Phase 4 Aduhelm trial, as well as other data on Alzheimer's drugs, at AAIC.

Non-GAAP net income was $710 million, down 17% sequentially from $852 million and down 20% from $887 million year-earlier. Non-GAAP EPS was $4.77, down 16% sequentially from $5.68 and down 15% from $5.64 year-earlier.

Total product revenue was $2.21 billion, down 1% sequentially from $2.24 billion and down 18% from $2.69 billion year-earlier. That excludes the Rituxan revenue, royalties and other revenue.

Therapy
Revenue in Millions
Q3 2021
Q2 2021
Q3 2020
y/y %
Aduhelm $0 $2 $0 na
Tecfidera 499 488 953 -48%
Vumerity 121 91 14 764%
Avonex + Plegridy 388 400 474 -18%
Tysabri 523 524 517 1%
Fampyra 26 26 27 -4%
Spinraza 444 500 494 -10%
Benepali 121 122 124 2%
Imraldi 57 56 56 2%
Flixabi 25 25 28 -11%
Fumaderm 3 3 3 0%
Rituxan*+Gazyva royalty 151 183 288 -48%
Ocrevus royalty 264 257 272 -3%
Other** 158 99 126 25%

* unconsolidated joint business revenue, Anti-CD20 products
** mainly contract manufacturing

Cash and equivalents (including marketable securities) balance ended at $3.92 billion, down sequentially from $3.97 billion. $7.27 billion debt. $750 million was spent to repurchase shares. $805 million cash flow from operations. $42 million cap ex. $763 million free cash flow.

GAAP Cost of sales was $512 million. Research and development expense was $702 million. Selling, general and administrative expense $654 million. Amortization of acquired intangible assets $111 million. Collaboration profit sharing gain $21 million. Gain on fair value remeasurement of contingent consideration $16 million. Total cost and expenses $1.98 billion. Leaving income from operations of $794 million. Other expense $503 million. Income tax benefit $26 million. Equity in loss of investee, $1 million. Net loss attributable to noncontrolling interests, $11 million.

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

Q&A summary:

Negative feedback from some doctors? How to convince even with a positive NCD decision? The first priority we have is educating the community based on additional data, including what will be published in the near future. The primary roadblock is financial worry. Majority of prescribers fall into two categories: those worried about the benefit/risk analysis, and those worried about the NCD desision. Many prescribers have not made a decision. So we are educating and the data and the reimbursement pathways. The cost of doing nothing is that 1,000 patients a day advance past where Aduhelm can help.

Scenarios with positive NCD outcome? We are advocating for PET reimbursement. The NCD decision is for the entire class of AD antibody. Could decide no coverage, coverage with restriction, or no restrictions. It is a rigorous process, we are supplying them with data when requested.

Would lowering the price increase traction? The metrics support the price. We have the option to fine tune pricing, but data comes first, and we continue to build the infrastructure. We have not heard that price is the primary negative driver. We do have financial assistance programs for patients.

Zuranolone cost per pill issue (upfront nature of costs vs. current treatments)? We can transform the management of depression. We are not yet ready to discuss price. Education will be necessary to change from current standards of care.

Differences of BAN2401 v. Adulhelm? Showing good results from reducing amyloid burden would help doctors be more confident about benefit/risk. BAN2401 appears to have a lower ARIA adverse event rate.

Aduhelm manufacturing strategy, given slow rollout? We are staging the cost. We are investing in about $500 million in SG&A, but we are prudent with the timing. It is like an extended pre-launch.

Street $1 billion Aduhelm in 2022, is that too high? Number of expected starts? We are not guiding for 2022. Minimal Aduhelm sales in 2021, if NCD decision is positive, ramp after April. We are progressing with sites: 120 or so sites have infused at least one patient. That is double what it was about 6 weeks ago. Titration is also important, which also slows the revenue ramp. Hundreds of centers are progressing towards listing the product.

Would BAN2401 be the growth driver longer term? We have not even seen the Phase 3 data yet, but it is coming along well.

Potential site activations? We have several hundred that are in the queue. Operational challenges are typical of being a pioneer in a space. There are a lot of steps: MRI, lumbar puncture, infusion site, etc. We believe when NCD decision is out about 900 sites total are possible.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. These are my personal notes, which I am sharing with the investment community, not financial advice.

Copyright 2021 William P. Meyers