Biogen Inc. (BIIB) Earnings Call Transcript & Summary

Good morning. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen and Sage collaboration investor call. [Operator Instructions] Thank you. I would now like to turn the conference over to Mr. Joe Mara, Vice President, Investor Relations. Mr. Mara, you may now begin your conference.

Thank you, and welcome to today's investor call to discuss our proposed collaboration between Biogen and Sage Therapeutics. Before we begin, I encourage everyone to go to the Investors section of biogen.com to find the slides for today as well as the press release from last Friday, November 27, which includes additional details related to Biogen and Sage's global collaboration. I also want to point out that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. On today's call, I'm joined by our Chief Executive Officer, Michel Vounatsos; Dr. Al Sandrock, EVP of Research and Development; and our CFO, Mike McDonnell. I would like to ask everyone to please focus your questions on this proposed collaboration and the topics covered in today's call, which we plan to conclude promptly at 9:30 a.m. Thank you, and I will now turn the call over to Michel.

Thank you, Joe. Good morning, everyone, and thank you for joining us. We are very excited about our proposed collaboration with Sage Therapeutics, a premier neuroscience company. Under the terms of the collaboration, Biogen and Sage will enter into an agreement to jointly develop and commercialize zuranolone and SAGE-324 in the U.S. Biogen will also receive exclusive license to develop and commercialize zuranolone and SAGE-324 outside of the U.S., excluding rights to zuranolone in Japan, Taiwan and South Korea, which fall under a prior Sage agreement. Biogen will pay Sage $875 million upfront as well as potential milestones, profit sharing and royalties. In the U.S., Biogen and Sage will equally share development and commercialization costs as well as profits. In Biogen's ex U.S. territories, Biogen will be responsible for development and commercialization and will pay Sage royalties on potential sales. And finally, Biogen will also purchase shares of Sage common stock for $650 million. Allow me to outline 3 main reasons why we believe this collaboration on potentially differentiated assets should be beneficial for Biogen, our patients and our shareholders. First, the significant unmet medical need and multiple synergies with Biogen's portfolio. Major depressive disorders affect approximately 17 million people in the U.S. alone. And importantly, depression is a common comorbidity in patients and caregivers across several of our current therapy areas. In addition, this collaboration will accelerate our expansion into psychiatry and allow Biogen to potentially provide a more comprehensive approach to improving the lives of these patients and caregivers. We estimate that approximately 50% of patients with MS, 40% of patients with Alzheimer's disease, 50% of patients with Parkinson's disease, 30% of patients with ALS and 60% of SMA caregivers do experience depression. We believe that there is a potential for Sage lead asset, zuranolone, to help transform the treatment of depression and create tremendous value for patients and shareholders. Essential tremor is estimated to affect over 6 million people in the U.S. alone and will expand Biogen's pipeline within movement disorders. Furthermore, we believe that the profile of SAGE-324 has potential in other neurological conditions, including epilepsy and Parkinson's disease, an area that we recently bolstered through our collaboration with Denali. Second, diversification of our neuroscience portfolio. With multiple Phase III trial readouts expected next year in both major depressive disorders and postpartum depression, zuranolone will add to the 8 assets already in our pipeline that are in Phase III or filed. This includes Alzheimer's disease, ALS and ophthalmology. Importantly, this collaboration will further enhance our strategy to continue to build a multi-franchise portfolio and accelerate our expansion into our emerging growth area of neuropsychiatry. Third, value creation opportunities. Including this potential collaboration, within the last 4 years, Biogen will have allocated approximately $6.5 billion to business development, with more than 20 transactions enabling significant pipeline expansion. We believe this collaboration represents an additional opportunity for our next wave of value creation for patients and shareholders. I will now pass the call over to Al, who will provide more details on zuranolone and SAGE-324.

Thank you, Michel. We're very excited about the prospect of collaborating with Sage to develop innovative therapies for patients suffering from depression and other neurological disorders. Sage is a leader in psychiatry who we believe have discovered and developed important new drug candidates for major depressive disorder, or MDD, and postpartum depression, or PPD. From an R&D perspective, we have gotten to know many individuals in the Sage R&D organization, and we are truly impressed by the talent, their knowledge of neuropsychiatric diseases and their drug discovery and development capabilities. As Michel said, MDD and PPD are highly prevalent disorders, and we believe that Sage's lead asset, zuranolone, has the potential to be a first-in-class oral therapy for both. Zuranolone is a novel positive allosteric modulator of the GABAA receptor, administered as a 2-week once-a-day treatment. In prior clinical trials, it has shown a rapid onset of action, with separation from placebo typically occurring within a few days. This may provide a significant advantage over currently available antidepressants, such as SSRIs and SNRIs, that can take 4 to 6 weeks for efficacy to be observed. Moreover, long-term follow-up from prior clinical trials suggest that a single 2-week regimen of zuranolone may provide a durable treatment effect. In fact, Sage recently announced 1-year data from the naturalistic study of 30-milligram zuranolone called SHORELINE where the vast majority of patients required only 1 or 2 treatments per year with a mean number of treatments of 1.9. Once confirmed, this long-lasting treatment effect, combined with rapid onset of action, means that zuranolone has the potential to change the treatment paradigm for MDD by allowing for as-needed episodic treatment. While the Phase III MOUNTAIN study of zuranolone did not meet its primary end point, we believe that zuranolone does appear to be biologically and clinically active and agree with Sage that the results of the MOUNTAIN study may have been confounded by several factors, including lower-than-expected drug exposure as well as baseline depression scores. The safety and efficacy of zuranolone are currently being assessed in a number of late-stage clinical trials that we believe have been designed to take into account the learnings from the MOUNTAIN study. We believe that zuranolone may also have potential in other neuropsychiatric disorders, including bipolar disorder and generalized anxiety disorder. Beyond zuranolone, we will collaborate on SAGE-324, currently in development for essential tremor. SAGE-324 may also have potential for treating other neurological conditions, such as epilepsy and Parkinson's disease. We believe that these important programs will diversify and strengthen Biogen's R&D portfolio and through this collaboration with Sage, help to position Biogen as a pioneer in neuropsychiatry. Importantly, this collaboration will add to our neuropsychiatry portfolio, which already includes BIIB104, a positive allosteric modulator of the AMPA receptor and BIIB118, a CK1 inhibitor. More broadly, we continue to develop and expand our deep pipeline, which, upon closing of this collaboration agreement, will include more than 30 clinical assets with 9 in Phase III or filed with important readouts expected next year. I will now pass the call back to Michel.

Thank you, Al. These programs are highly complementary to Biogen's current portfolio and potentially represent multibillion-dollar value-creation opportunities. We believe we can apply our expertise in clinical development and commercialization to maximize the potential global launches of both zuranolone and SAGE-324. This includes Biogen's demonstrated ability to successfully launch new products and leverage its global capabilities, including market access as illustrated by the success of SPINRAZA and biosimilars. We are excited to work with the talented team at Sage and potentially bring these important therapies to the million of patients in need around the world. As a reminder, this call is focused on the Biogen-Sage collaboration, so we will kindly ask you to limit your questions to this topic. We will now open the call for questions.

[Operator Instructions] We'll go ahead and take our first question from Michael Yee with Jefferies.

Congrats on this deal. My question relates to some interesting insight for Michel, suggesting there's a lot of overlap with these indications with some of your existing strategic focus areas like Alzheimer's and Parkinson's. I guess my question is, can you just clarify, is the call point the same or is the sales force overlap the same? Or maybe just try to clarify how that relates to Alzheimer's and Parkinson's and others. I guess, it's just they all have these diseases, but is it actually synergistic related to strategic commercial infrastructure?

I believe it is. And it's good to have all those synergies in all the key therapy areas where we are engaged. So we will be leveraging the neurology sales forces and the footprint that we have nowadays. And obviously, we will very carefully evaluate the potential additional target, psychiatrists, for example. But we know that in the case of AD, many patients see psychiatrists, depending on some markets, but the -- in the patient journey, the visit of psychiatrist is there, either for diagnosis or treatment. And we'll see how we could eventually or how we should eventually, together with a partner, supplement this footprint. We are not yet there, but the synergy is absolutely spectacular and it goes beyond the clinic.

We'll go ahead and take our next question from Umer Raffat with Evercore.

I have two, if I may. One for Al and one for Michel, if that's okay. Al, so Sage has shown a very interesting analysis suggesting patients on their 30-mg dose with a HAM-D above 24 had a meaningfully higher effect size in the trial, which was a narrow miss. I'm curious, they've shown that analysis only for the 30-mg arm. Have you looked at that for 20 mg as well as placebo for HAM-D above 24? And what did you see there? And secondly, Michel, on aducanumab, can you speak to whether you intend to submit data from EMBARK dosing study to the FDA?

So I will start with the second question. We will not comment on aducanumab today. We're under review, please understand that. I appreciate that you asked the question, Umer. We will stick to the Biogen-Sage collaboration for today.

Umer, this is Al. We looked at everything, all their data. And I don't think Sage has disclosed what the 20-mg showed. So I'm not going to disclose it either. But rest assured that we believe that we understand why the primary end point was missed in MOUNTAIN, and we agree with Sage's assessment on that.

We'll take our next question from Paul Matteis with Stifel.

I was wondering if you could talk a little bit about the work you've done on the commercial side surrounding Sage's as-needed dosing approach. On Wall Street, this has been somewhat of a polarizing topic where some view it as transformative, others view it as something that psychiatrists might be a little bit averse to and worried about risking a patient for relapse or suicidality. So how did you think about that from a regulatory and commercial perspective?

Yes. I'll start. I mean, look, we're very excited about the potential for 217 to lead to essentially a paradigm shift in the way major depressive disorders are treated. The rapid onset of action and the durable treatment effect allows for even thinking about episodic treatment. And so whereas I acknowledge that there may be some medical education that's necessary since any time you change the way a branch of medicine is practiced, one has to educate and one has to provide the data that supports your medical education activities. But we believe that this is going to change the way -- potentially the way major depressive disorders are treated. And I think it's going to be a welcome change.

So this will require certainly some work from the medical affairs point of view. And we are ready for that in order to change the paradigm, being in PPD where the unmet medical need is significant, but also and mostly in major depressive disorders. The SSRIs are extremely well-known as products for their efficacy profile, but also for their limitation in terms of onset of action and the luggage of safety issues that they carry. And here, we believe we have differentiated product, but will need to educate and to engage on the medical affairs front, and we are prepared for that.

Could I also add that we're also excited about the potential for other indications, as we've noted. For example, bipolar disorder, we have trouble treating the depression in that because most of the drugs that are approved, I think nearly all of them are antipsychotics that are used for treating the mania. But treating depression and bipolar disorder is difficult because you worry about inducing mania. I think this drug may have potential there. I'm looking forward to -- with Sage figuring out how we go forward in that as well as generalized anxiety disorder. So I think there's a lot of different potential indications for 217.

We'll take our next question from Terence Flynn with Goldman Sachs.

I was just wondering if you see the likelihood of success for zuranolone in PPD versus MDD as similar or maybe if you have more confidence in one indication versus the other. And then do you see the probability of successes in line with a typical Phase III program or perhaps higher based on the existing data? And then, Al, if you could maybe weigh in on what will be required for FDA approval here, specifically for MDD.

Well, I believe that the pathophysiology of PPD and MDD overlap quite significantly. The triggers may be different but I think downstream, very similar pathophysiology. So I view them in a similar way, if you will. I think the evidence in clinical trials is strong for both. And I don't really see a major advantage of one indication over another. So that's that. And in terms of FDA approval, you should probably ask Sage. But I suspect that the reason why we're doing 3 trials, one in PPD and one in MDD, plus the CORAL study, which was just recently added to the Phase III program, that's a trial where we -- where zuranolone is added to on one of the currently available antidepressant therapies given as an open-label and comparing to placebo. I think that trial is pretty interesting as well because you take advantage of the rapid onset of action. And if that trial is also positive, it gives doctors an option of either using zuranolone as a monotherapy or adding it to one of the currently available antidepressant therapies. So I suspect that all 3 are useful trials and very important for approval, but I would rather that you ask Sage what's required for regulatory approval.

So just to reinforce what Al just said. We already have multiple trials, placebo control in PPD and MDD, that have shown positive results. And it has shown that the product is well tolerated and that there is a rapid onset of action, and we have clinical data suggesting durability to be confirmed. So it's a pretty good place to be.

We'll take our next question from Matthew Harrison with Morgan Stanley.

This is Max Skor on for Matthew Harrison. In regards to the safety profile of zuranolone, how confident are you, especially in regards to sedation events? And do you believe there'll be any risk to DEA scheduling?