Biogen Inc. (BIIB) Earnings Call Transcript & Summary

All right. Good morning from the virtual JPMorgan Healthcare Conference. My name is Cory Kasimov. I'm the senior large-cap biotech analyst, and it's my pleasure to introduce our next company, Biogen, and CEO Michel Vounatsos. Please note that following this presentation, we will have a Q&A session right here in this Zoom room where you'll also be able to submit your questions via the little blue Ask A Question button in your conference portal. So with that, Michel, thanks for being here today, and let me turn things over to you.

Thank you, Cory. Good day, everyone, and thank you for joining the Biogen session. I would like to point out that we'll be making some forward-looking statements, which are based on our expectation and beliefs. These statements are subject to risks and uncertainties. So therefore, I encourage you to consult the risk factors discussed in our SEC filing. I would like to structure the next 25 minutes or so in 3 parts. The first one, Biogen has a strong track record of execution. The second part, Biogen 2021: a transformative year for the company. The third one, building for the long term. Let's begin with our strong track record and Biogen's ability to execute well. First, strong execution on our pipeline portfolio. This is the most important. As a reminder, our goal is to build on our MS, SMA and biosimilars businesses to further diversify into a multi-franchise portfolio. We have made significant progress delivering on this strategy, and we expect significant regulatory and clinical milestones in 2021, which I will cover later on. Importantly, we have enhanced our pipeline by increasing the number of disease areas we are targeting, leveraging the interconnectivity in neuroscience including new programs with genetically validated targets, new modalities and new biosimilars. All this we are doing with the aim of improving risk profile for value creation opportunity, and I'm very proud about this progress on our strategy on our pipeline with all the near-term opportunities and the longer-term outlook. On to our financials. Biogen has a long history of delivering strong results on both the top and the bottom lines, while gradually diversifying the business. Our strong financial position has allowed investment in our pipeline, including capability builds, pursuing external opportunities and broadening our global reach. Biogen has a very strong global, commercial and medical affairs team with demonstrated ability to maintain leadership in highly competitive areas and also the ability for launch excellence into new disease areas. These teams are standing ready for new launch opportunities. Nevertheless, in 2021, we will be facing the abrupt erosion of tech and the erosion of rituximab in the U.S. Tech shall continue to do well ex U.S. Moving forward, however, we are excited about the opportunity to create long-term growth momentum driven by our robust pipeline. I will discuss the pipeline later in the presentation. Execution on the leading MS franchise speaks for itself. We demonstrated resilience despite the doubling of DMTs 7 to 13 between 2016 and 2020. I am very proud of this performance. And despite the tech generic entry, our MS franchise remains a highly profitable $6 billion-plus business and cash flow generation also out of this business. I am also encouraged by the progress we are making on VUMERITY. More details on our Q4 results soon. We are getting prepared for the launch in 2021 of TYSABRI subcu in the U.S. and PLEGRIDY IM. In addition, our earlier pipeline is advancing with an oral remuneration program, BIIB061 and oral BTK and next-generation anti-VLA-4 building on the success of TYSABRI in the critically important and growing high-efficacy space. Great execution, Biogen remains committed to MS until a cure is found. Moving on to SPINRAZA. Biogen has clearly demonstrated the ability to launch well in a new therapy area, build a market from ground up and maintain leadership despite increased competition. SPINRAZA generated $2.1 billion in revenue during the last 12 months, and we are now -- we now have more than 11,000 patients on therapy out of an opportunity approximately of 60,000 patients in the countries where we commercialize. This rare genetic disease in its small severe form is fatal and SPINRAZA remains, which was the first hope, remains the foundation of care in SMA with a broad label, proven efficacy across all patient types: presymptomatic infants, symptomatic adults, all the way, and a very well-characterized safety profile. We are pursuing an even higher dose program for greater efficacy in the DEVOTE study. And as you may have seen, we recently initiated the RESPOND study specifically designed to evaluate potential benefits of SPINRAZA following suboptimal response to gene therapy, a great success, again, in terms of execution for the organization, and more importantly, what it brings to the community. Turning on to our biosimilars business. Biogen executed on a fundamentally different operating model without losing the focus on MS and SMA. As a result today, we have leading 230,000 patients on our EU anti-TNF franchise with approximately $800 million in revenues. Beyond and more important than financials, biosimilars support the sustainability of our health care systems by generating headroom for innovation. And we estimate that with our 3 anti-TNFs, we saved over $2 billion in terms of savings in 2020 for the European policy leaders and systems. We aim to expand this business with more biosimilars all around the world. We have commercialization rights for 2 potential ophtha products, biosimilars, Lucentis and Eylea biosimilars. SB11 referencing Lucentis is filed in the U.S. and in Europe. We are very excited to potentially enter the U.S. market, where over the next 5 years, biosimilars are expected to generate over $100 billion in terms of savings. The business represents a very good hedge for us in terms of profitability of success, probability of success, and we could increasingly become more profitable as a company with our biosimilars portfolio. But for that, we need to expand, and this is our commitment. Another great execution for the company. Geographically, Biogen has also implemented a diversification of our revenue sources. Ex U.S. revenues have grown significantly from $2.6 billion in 2016 to $4.8 billion over the next -- over the last 12 months. Biogen has now a direct presence in very important markets such as the #2 in the world, China, directly Biogen, but also others in Asia Pac, Middle East and Latin America. This is very important also for diversification and also in terms of risk management, considering the exposure that our industry has in terms of potential policy risks. Overall, Biogen is in a very strong financial position with the flexibility to allocate capital for potential shareholder value creation. We have a healthy balance sheet, low net debt and we expect to continue to generate significant cash flow. We ended the third quarter with $4.6 billion cash and this, after we have deployed during the last 12 months, approximately $1.6 billion BD and returning approximately $8 billion to shareholders through share repurchase. Moving forward, we expect to focus capital allocation on business development as well as continued opportunistic share repurchase, including the new $5 billion authorization announced in October. Biogen has demonstrated very strong execution across our pipeline, significantly improved, very strong execution with our commercial arm of the business and very strong cash flow generation. Let me now address why we believe 2021 can be a transformative year for our company. First, aducanumab is now filed in 3 major geographies with a regulatory decision expected in the U.S. within the next 2 months. We know the Alzheimer's disease affects 5 million patients in the U.S. and over 30 million globally. This is a progressive disease, resulting in memory loss, behavioral symptoms and loss of ability to perform activities of daily living. In advanced stages, patients become completely dependent, and the disease is ultimately fatal. Today, there is no treatment available that can alter the course of the disease. We stand behind our clinical data and we continue to believe that our results support approval. This includes the positive data from EMERGE, the first ever positive Phase III study for therapy to change the course of the disease. We are continuing to engage with the U.S. FDA as it completes its review, and we have continued to have very good regulatory interaction all around the world. We are ready to launch in the U.S., and we are looking forward to the FDA final decision in the coming weeks. Beyond aducanumab, we are advancing a broad portfolio of potential Alzheimer's therapies. This includes BAN2401, another antibody with a similar mechanism to aducanumab targeting amyloid beta. And we see that the hypothesis is reinforced today with the news from another important company, currently in Phase III, BAN2401. And we have a suite of tau-directed therapies for Alzheimer's antibodies but also antisense oligonucleotides. Again, aducanumab in the coming weeks, we look forward to the FDA decision. 2021 is also a potentially transformative year for our broader pipeline. We expect 9 mid to late-stage readouts by the end of the year, including 4 pivotal readouts across depression, ophthalmology, choroideremia and ALS. And you can see here in depression, the Phase III readouts, the 4 pivotal with PPD and MMD (sic) [ MDD ], postpartum and major depressive disorders. Very important readouts. But also, we expect 5 Phase II readouts for essential tremor, Parkinson's disease, ophthalmology XLRP, stroke and, again, Alzheimer's disease with another compound. A critical year for the organization in terms of regulatory decision and very important readouts in 2021. I would like to outline one very important collaboration with Sage, another neuroscience company. The synergies in terms of comorbidities with our portfolio are absolutely remarkable. We are particularly excited about this collaboration because it enhances also our late-stage pipeline. Zuranolone will be an entry point or a way for Biogen into neuropsychiatric disorders, starting with depression, but with the opportunity to expand the clinical investigation into other areas, such as bipolar disorders or general anxiety. We are also -- and the epidemiology is tremendous, hundreds of millions depressed people around the world, as you can imagine, in the U.S. only, 17 million. We are also very excited about the SAGE-324 currently in Phase II for essential tremor, 6 million patients in the U.S., unmet medical need is significant and we'll have, again, the opportunity to expand and to further develop the compound potentially in other indication, Parkinson or epilepsy. So 2021 is an exciting and potentially transformative year for Biogen with a regulatory decision on aducanumab in the coming weeks, 9 important readouts across our broad neuroscience pipeline and multiple expanded milestones beyond those across our core business, such as TYSABRI subcutaneous and the launch of PLEGRIDY IM. 2021, a transformative year for Biogen. Beyond 2021, let me now turn to how Biogen is strategically building a sustainable business for the longer run. As we aim to generate a sustainable growth, we are investing in disease areas beyond solely MS and SMA that has characterized our footprint in market since a few years. We are, therefore, contemplating multiple value creation opportunities in a broad array of areas with very high unmet medical need. We spoke about the epidemiology in Alzheimer's disease, and we briefly spoke also about neuropsychiatry with 216 million people suffering from depression around the world. But Parkinson's disease, 10 million patients battling with the disease without much innovation since decades. Acute neurology with stroke that represents today the fifth leading dose -- cause of death in the U.S. ALS, which is a terrible disease and 5 years -- less than 5 years average life expectancy and incidence of 6,000 patients every year in the U.S. Ophthalmology with up to 200,000 patients living with inherited retinal disorders in the U.S. Last but not least, the very important franchise that we have in lupus, 2 compound in development, moving into Phase III with an epidemiology of more than 800,000 people in the G7, if I'm not mistaken. Therefore, building on the interconnectivity in neuroscience, Biogen has the potential to launch multiple blockbusters in those areas of high unmet medical need. To address this opportunity, we have significantly broadened our pipeline with 34 programs, including 10 in Phase III are filed. We are planning to advance 2 additional programs in Phase III for lupus, as I said, based on the promising Phase II data. Over the past 3 years, we have added 26 clinical program driven in part by 23 early to late-stage business development transactions, including the recent one with Sage and Denali. I would like to outline that this pipeline was broadened. But nowadays, we have new modalities again. We have genetically validated targets, and we have biosimilars so the risk/reward profile is more balanced, and I am very proud about that, and I want to compliment the team. Again, we have the potential for multiple blockbuster launches in the early to mid-2020s in Alzheimer's disease, but also beyond. Our strategy is to leverage this richer pipeline combined with further BD to build a multi-franchise portfolio. We clearly see the progress from the past with many inflection points and readouts in 2021, but look at the opportunity beyond. This should represent a significant opportunity for shareholder value creation over the coming period towards the longer term. We, therefore, believe that we are in a much better position for long-term value generation. Allow me to highlight 2 recent and critical collaboration. The first one with Denali, a pioneer in neuroscience with a unique platform, transport vehicle across the blood-brain barrier. First, with a mid-stage and leading oral molecule LRRK2 inhibitor, which expands our Parkinson's disease potential therapies. In addition, we have the exclusive rights to 2 programs using the innovative transport vehicle platform, including one with amyloid beta. Very proud to be collaborating with a great team at Denali. Second is our collaboration with Apple, announced just a few hours ago this morning. Together, we will initiate a multiyear study starting later in 2021 to explore the development of digital biomarkers for detection and monitoring of cognitive decline at the earlier stage, which is critical. The more we move to the left, we know we can be more effective with the treatment, more cost effective for the society. If we step back, technology is a revolution in the way we research, develop and commercialize our product. It's also at the center of empowering patients to track, manage and improve the disease states and potentially treatment. As a leader in neuroscience, we are scaling up our digital capabilities to further meet patient needs, but also transform the way we operate as an organization. This collaboration is a prime example of what can result when technology is applied to neurology. Collaboration like this one with Apple reinforces our ongoing focus on digitalization. A critical component of building for the long term is a strong commitment to corporate responsibility, and this is part of what makes Biogen unique. Our purpose at Biogen is very, very strong. The pandemic has been a clear reminder of just how much health matters. Without health, there is no economy. While also highlighting dramatic disparities and interrelated challenges of climate, health and equity. That's why we're investing on climate and health, access and equity, diversity and inclusion. And we took on the goal of eliminating fossil fuel emissions by 2040 with our Healthy Climate and Healthy Lives initiative. It is absolutely necessary for leaders to take bold action. Now is the time to advance a shared vision of more inclusive and sustainable future, one where science meets humanity, and I am, again, very proud about what Biogen is doing, taking again the lead as a pharma company. To conclude, we believe Biogen has a significant opportunity for value creation for the short run and for the longer run. Biogen has a very strong track record of execution. First, on our pipeline, strong progress on execution on our strategy, but also the proven ability to compete with established franchise, to launch well and enter new markets. We have a very strong financial position and flexibility to allocate capital, always in the best interest of shareholders. 2021 is a transformative year for the organization. Aducanumab is under regulatory review in the U.S., EU and Japan. FDA decision is expected by March 7, 2021. 9 mid- to late-stage readouts expected also in 2021. 2021, a transformative year for the organization. We are here for the long run. Therefore, we are building for the long run. We continue to progress with diversification of our portfolio, building a multi-franchise portfolio. We are accelerating and embracing technology and digital capabilities internally to transform the way we operate, but also in the way we serve the market and the patients. Last but not least, we have a very strong commitment to corporate responsibility. Thank you for your attention. We can now move to Q&A, and I would like to call on my colleagues, Mike McDonnell, Biogen's CFO; and Al Sandrock, Biogen's Head of R&D. Thank you.

Great. Thank you, Michel, and welcome as well to Mike and Al. Thank you guys all for being here with us. We have a lot of questions that have come in from the audience. I want to start with a couple though, and I'll get to as many of these others as I can in 15-or-so minutes we have for Q&A. I'll just start and probably for you, Al. Just curious for your preliminary thoughts on the Lilly Phase II Alzheimer's update this morning and potential readthrough, if any, that you see to aducanumab or even 2401.

Yes. Thank you, Cory. Yes. So I think it's very, very exciting for patients. Additional reason to hope for a disease-modifying therapy for this disease, this terrible disease. Also great for our field, in general. I would say that the Lilly antibody has a lot of similarities to aducanumab. First of all, it seems to target a form of amyloid that's present in the plaque. In the case of the Lilly antibody, it does so by targeting the pyroglutamated form of amyloid. Aducanumab targets aggregated forms of Abeta. Both have a substantial reduction in amyloid plaque burden as seen by PET imaging. And both studies enroll patients with early Alzheimer's disease with mini mental status in the above 20 range. In the case of aducanumab Phase III, it was 24 and above. In the Phase II trial of aducanumab, it was 20 and above. So very similar. And also, I would note that the similarity also is in the trial design in terms of selecting the patients using biomarkers. In the case of aducanumab, we used amyloid PET imaging. In the case of the Lilly antibody, they used both amyloid PET imaging as well as tau imaging. So a lot of similarities in the antibodies, a lot of similarities in the imaging outcome measures, a lot of similarities in the trial design. So I think that there's a lot of hope for Alzheimer's patients that will have drugs soon for this terrible disease.

I would like to congratulate the colleagues at Lilly. I think these are very good results that adds momentum and belief to the amyloid beta hypothesis. And we know that these hypotheses were disputed until today. So I think these are very good results for the patients and for all involved.

Okay. And Michel, I got a couple of people asking me a clarifying question with regard to a comment you made in your presentation, where you said that an aducanumab FDA decision is anticipated in the coming weeks. Is that different than saying the PDUFA date is on March 7? Or are you just looking at March as the coming weeks?

No, we cannot speculate on what the FDA wants to do, but being coming weeks or March 7, it's basically the same. So -- but we will not speculate on when the FDA will make their decision.

Okay. And then this is a question I'm also getting and I have myself, and I know it's probably hard to talk about, but I feel compelled to ask it anyway. Just really interested in your take on the pretty divergent views between leadership at the FDA and the panel. Is there any kind of broad-based commentary you can make on that?

I mean, the first reaction, Cory, is that we were very surprised. There was a very good work for the BLA review done together with the FDA. I would say my only comment is that we were prepared to answer every single question asked by the panel, if only we are given a chance to answer. And I would like Al to comment.

Yes. I was equally surprised. I would say that the advisory committee vote is nonbinding. And there's plenty of precedence for FDA to not go along with the vote of the committee. But listen, we remain in review. We have regular interactions with the FDA. And as Michel said, we'll find out hopefully, by March 7, what their decision is.

Okay. And then can you speak to the type of commercial prep that you're undertaking in market research ahead of the aducanumab PDUFA? And if it is indeed approved, how large of a commercial organization you would need?

So we are working since more than a year at getting first the U.S. market-ready for launch. And today, we are ready for launch, Cory. We started by engaging with scientific leaders, obviously, appropriate engagement with scientific leaders, critically important. We engage on the meaningfulness of the data and the value proposition that will lead to a price decision for aducanumab. And we are ready on that also, but it's too early to state anything. We have to wait for the FDA and a cross-functional team worked on securing site readiness. And while we speak, we have hundreds of sites ready in the U.S. And we were very pleased, despite the challenges brought by COVID, that there was a lot of receptivity to engage on securing that the patient that we see visit the sites will be taken care in terms of diagnosis, dosing, monitoring of the disease. So I am pleased with the development, and we are also making progress in Europe, in key European markets and in Japan while we speak. But the aim is obviously to bring the product to a decision -- the FDA now and other regulatory body to all the patients in need all around the world.

Okay. Another question from the audience around your interesting Apple collaboration announced this morning. Given your capabilities as well as Apple's capabilities, what do you consider the biggest challenge in the development and the application of digital biomarkers in Alzheimer's?

I am extremely encouraged by technology. I think that today, and even more tomorrow, our patients are using the neurobiology and neuro technology to manage the disease. And it's only the beginning of a tsunami of digital offering that are coming to the companies for clinical development, new biomarkers, but also to the patients in order to increase awareness and to enable them to better monitor their disease. So I believe into informed patients. I believe into the patients taking command on their disease. And even as importantly, the earlier we can detect, the better it is for the community. And we need to move towards the left. This is where we are the most cost effective. I am delighted with this collaboration. It's only a first step for Biogen.

Okay. I'm going to try to squeeze 2 other audience questions together here. First, at this point, does the EMBARK study play any role in the approvability of aducanumab? And then has the FDA asked for additional data post the ADCOM?

Al, would you take this one, please?

Yes. Well, we'd like to not disclose the content of our regulatory interactions with FDA. That's been our policy for a number of years. And so we're not going to do that. The EMBARK study is a redosing study of patients who were previously in the aducanumab trial, and that study continues to enroll very well.

Okay. And then, Al, are you be able to comment -- I know you don't specifically guide to it, but just the level of interest for patient accrual of the BAN2401 program?

I would rather direct the question to the Eisai colleagues.

Okay. Fair enough.

One continues to progress very well in Phase III, similar binding characteristics to aducanumab. We are very encouraged to have this partnership with Eisai and the second compound.

Okay. In interest of time, I'm going to shift to talk a little bit about the Sage collaboration, maybe come back for a couple more on Alzheimer's. But either Michel or Al, can you talk about the rationale for that pretty significant Sage deal and why you are confident doing this ahead of the binary Phase III WATERFALL data in MDD expect in the first half of this year?

So I'll get started, and Al will continue. I'm delighted that we are collaborating with Sage on these significant unmet medical needs. What are the key reasons? It's strategically aligned with what we want to do as a company. Multi-franchise and neuropsychiatry is characterized as an emerging opportunity that now is moving to basically 2021 in terms of very important readouts. I'm amazed by their remarkable comorbidity overlap with different disease states where we are in. There are not many compounds that has this type of overlap leading -- ranging from 30% to 60% and leading to potential synergy in the way we commercial the product -- commercialize the product. So this is absolutely critical. Sage and zuranolone has the potential to transform the way we treat major depression and postpartum. And the unmet medical need is, in the U.S., 17 million. I mean this is absolutely critical. So for all those good reasons, including financial and shareholder value creation, it's a good investment of our capital. And it's an entry point to other neuropsychiatric opportunity because we believe with zuranolone, we have a portfolio in appeal. Al?

Yes, very excited about this new class of neuroactive steroids that target the GABAA receptor. We see evidence in multiple randomized, double-blind placebo-controlled studies in both PPD and MDD of efficacy. I think the key thing here is that as opposed to the current standard of care, the onset of action is very rapid. We see separation from placebo within days. Even after a 2-week course, we see a long durability of effect. In the SHORELINE study, most patients after the initial course either required no additional treatment or 1 additional treatment in the course of 1 year. And in terms of the effect size, the -- in some studies, the effect size is larger than we see with SSRIs, although we will have to wait for the ongoing studies to see what the effect size turns out to be. But the published Phase II data in the New England Journal was quite remarkable. So very exciting class of drugs. The MOUNTAIN trial that read out in late 2019 was a disappointment. It missed on the primary endpoint at day 15, but I -- there was evidence of efficacy at earlier time points. Well, there was evidence of efficacy at all time points, but the p-value was less than 0.05 in the earlier time points. And we think we understand why that trial was negative on the primary endpoint. And we've -- and I think Sage has done a great job of adjusting for that as they plan the WATERFALL study.

Okay. And then how important was it for you to get SAGE-324 for essential tremor as part of this collaboration as well?

Well, it's an additional drug in the same class. We think it's important, essential tremor, and potentially for other uses. It's very exciting potential for this class of compounds. And essential tremor, as Michel said, is a very common disorder that patients see movement disorder specialists frequently for essential tremor. The currently approved drugs have been around for many, many years, and they have a lot -- they leave a lot to be desired in terms of better efficacy and safety. So I think that there's an unmet need there and a very exciting programs. And we'll expect to get a Phase II readout this year.

Okay. And let me bring probably Mike in on this question before we run out of time. Curious about Biogen's current deal-making capacity and appetite for bringing additional assets in-house, particularly on the heels of the recent Sage and Denali deal. So how does this -- and also, how does this change depending on what happens with aducanumab's regulatory review?

Mike?

Sure. So thanks for the question. And I would say that notwithstanding the situation with the -- with TECFIDERA, we continue to have very strong free cash flow. Michel talked about how much capital that we've deployed over the last 12 months ended September 30, north of $9 billion. You will continue to see us be a buyer of our stock, returning capital to shareholders, and you will continue to see us invest in business development. I think Sage and Denali, obviously, those were large meaningful deals that occurred late in the year. There's a very robust pipeline that we continue to look at a variety of different alternatives and opportunities. And it is very important to remember that we've got a very pristine balance sheet, a very modest amount of leverage and still very significant cash flow, notwithstanding the generic entry, and we'll utilize that cash flow to investing in our growth over time, whether aducanumab is approved or not.

Okay. Terrific. Well, I wish we could sit here and ask you a lot more questions, but unfortunately, we're out of time. So thank you guys all for participating in this today. And best of luck with all these events coming up here in the near term.

Thank you, Cory. Thank you so much.

Take care, guys.