Analyst Conference Call Summary

biotechnology

conference date: July 25, 2023 @ 5:00 AM Pacific Time
for quarter ending: June 30, 2023 (second quarter, Q2 2023)

Forward-looking statements

Overview: Leqembi full FDA approval; waiting for FDA decisions on Zuranolone.

Basic data (GAAP):

Revenues were $2.46 billion, flat sequentially from $2.46 billion and down 5% from $2.59 billion in the year-earlier quarter.

Net income $593 million, up 52% sequentially from $388 million and down 44% from $1.06 billion in the year-earlier quarter.

EPS (earnings per share, diluted) were $4.02, up 51% sequentially from $2.67 and down 44% from $7.24 year-earlier.

Guidance:

Reaffirmed full year 2023 revenue to decline mid-single digit % y/y. Non-GAAP diluted EPS $15.00 to $16.00.

Conference Highlights:

CEO Christopher A. Viehbacher said: "In the second quarter, Biogen continued to advance groundbreaking science with the FDA approval of two first-in-class therapies for Alzheimer's disease and ALS, while also delivering on our base business expectations. Biogen’s business is in transition. Accordingly, we have taken a bottom-up view to shift our resources to the areas of greatest value creation. While we will be making significant investments in our newly prioritized pipeline and new product launches, we will also need to invest less in other areas which are no longer growing. With these changes, I believe that Biogen will be better positioned to maximize its growth opportunities going forward." Looking to sell biosimilars business. Looking for external growth opportunities.

The FDA granted full approval for Leqembi (lecanemab) (BNN2401) for Alzheimer's on July 6, 2023, under the Accelerated Approval pathway. Partnered with Eisai. Full phase 3 results were published on November 29, 2022 at the Alzheimer's Congress. Reimbursement will be available under Medicare, per CMS. Follows dozens of drugs failures in AD. Will change how physicians practice, but hard to predict rate of adoption. Rival product has a different mechanism of action, clinical study designs were different. Other companies will now invest more in their research. Commercial insurer response has been good. Now has a trial for Leqembi in preclinical AD, AHEAD 3-045. Also working on a subcutaneous formulation, maintenance dosing OLE study. Analysis of Phase 3 trial showed higher response from low-Tau patients [slide 11]. Expects Japan approval in Q3, EU and China in Q1 2024.

Will now focus on value-based decisions, high-value R&D projects. Expects $1 billion in cost savings by 2025, but will invest $300 million or so in growth opportunities. Believes with will result in a headcount reduction of about 1,000.

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.

MS product revenue in Q2 was hurt by generic entrants, but EU protection extended to February 2025. Tysabri under pricing pressure. Interferons are being replaced by oral therapies.

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

The FDA approved tofersen for the treatment of superoxide dismutase 1 amyotrophic lateral sclerosis, or SOD1 ALS in April 2023.

In June 2023 the last patient was enrolled in the Phase 3 study of dapirolizumab pegol in systemic lupus erythematous (SLE). Top line results of the study expected mid-year 2024. Biogen and UCB anticipate that a second Phase 3 study would be needed to support a regulatory filing in SLE.

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. Cost to close out in Q2 was $13 million.

Biogen currently has four more biosimilar programs in development.

Non-GAAP net income was $585 million, up 19% sequentially from $493 million and down 24% from $767 million year-earlier. Non-GAAP EPS diluted was $4.02, up 18% sequentially from $3.40 and down 23% from $5.25 year-earlier.

Total product revenue was $1.84 billion, up 5% sequentially from $1.76 billion and down 10% from $2.05 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 $7.28 billion, up sequentially from $6.02 billion. $6.3 billion debt. $0 million was spent to repurchase shares. $487 million cash flow from operations. $71 million cap ex. $416 million free cash flow. In 2nd quarter received $813 million in cash from selling its share in Samsung Bioepsis.

GAAP Cost of sales was $593 million. R&D expense was $584 million. SG&A expense $548 million. Amortization of acquired intangible assets $53 million. Collaboration profit sharing income $57 million. Restructuring charges $34 million. Other income $121 million. Total cost and expenses $1.75 billion. Leaving income from operations of $708 million. Income tax $115 million.

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

Q&A summary:

Competitor data, dynamics? Will be super interesting. Many factors at play. The two product mechanisms are different. Donanemab does not go after the soluble forms of A-beta. We believe patients will need maintenance therapy. Leqembi was studied 2/3 MCI, 1/3 mild, donanemab population was reverse. Lilly used their own endpoint, we used the gold standard. Safety will be important. Believes as time passes treatment will shift to earlier patients. Lilly has emphasized sub-populations, but physicians likely will want to deal in broader strokes.

Leqembi academic v. community doctors? Registry feedback is manageable. Need clarification on PET scan reimbursement. Mechanics of seeing patients will change. Centers for infusion have to be geared up. Lots of wait and see in community due to past failures. Believe initial uptake will be measured due to its complexity.

Subcutaneous leqembi positioning? The big question is the length of duration of therapy. Subc would be administered weekly, could have better ARIA safety, waiting for data.

Changes to board? Change was made by consensus after lots of investor outreach. Reflects changes in management. Board asked what is right for Biogen. I am very happy working with the new chair.

M&A, BD? Reflecting company transition post MS focus. We can't just reduce costs, we need investment in new products. Now oriented towards growth, but still the market leader in MS. BD may be in earlier stages of pipeline. Neurological conditions progress slowly, so they need very long trials. So we are looking for areas like rare diseases and immunology where results come faster. We believe we will not need to raise more capital.

Questioned need for chronic dosing with Leqembi. AZ is progressive and fatal, multiple lines of inquiry show continued progresssion, including with donanemab. We need more data, especially for donanemab, where you get anti-drug antibodies. The jury is out, but we believe you cannot stop treatment and reverse the disease.

Biogen has an opportunity to return to growth over the next 2 years, plus some interesting products in our pipeline. We are looking carefully and bringing in new, external projects. We are focussed on shareholder value.

Leqembi incidence of ARIA is significantly less than other anti-amyloid drugs, incluing aduhelm and donanemab. But we do not know what is driving the differentiation. There is a difference in safety in every subgroup, as much as a 3 to 1 ratio. So we need more analysis.

Details on rollout of leqembi? Will upend past neurology processes. Depends on how prepared the sites are, which varies considerably. So far a lot of positive feedback, doctors are getting a lot of inquiries from patients.

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

Search

More Analyst Conference Pages: