Biogen Inc. (BIIB) Earnings Call Transcript & Summary

Good morning, and welcome once again to Cowen and Company's hopefully only virtual health care conference. I'm Phil Nadeau, Biotech Analyst here at Cowen, and it's my pleasure to moderate a fireside chat with Biogen. We have Michel Vounatsos, the CEO of Biogen with us today, as well as AL Sandrock, Executive Vice President of R&D.

So maybe over to you for the first question. Can you discuss your vision for Biogen over the next 5 years? How is the company going to create shareholder value? And what do you think differentiates Biogen as an investment versus other large-cap biotechs?

Thank you, Phil. And before we begin, I would like to make -- to point out that I will be making some forward-looking statements, which are based on current expectations and belief. They -- they are subject to risks and uncertainties. So I encourage you to consult the risk factors filed in the SEC filings. Coming back to your question, delighted to be here. Yes, we intend to create value for the patients first and also for the shareholders by continuing to execute on our strategy to build a neuro multi-franchise beyond what we have today. So this is our strategy. And the reason why we believe we can create tremendous value is that the epidemiology is extremely large and going wider. We believe we are entering a new era of neuro therapies based on the progress we make scientifically in terms of new biomarkers, better understanding of the neurogenetics. And in addition, Biogen has demonstrated the ability to execute well. So if you take together the epidemiology, the breaking science and the ability for the company to execute well, there is no reason why we should be in a position, hopefully, to deliver tremendous value to the society. First, I would like to get started with aducanumab, which is potentially the first to meaningfully change the course of Alzheimer's disease. And today, more than yesterday, we believe more in the amyloid beta hypothesis based on the new data that we have seen from another company. We continue to engage with regulatory authorities where we have filed. And since a few days, we have filed also in Brazil. Beyond aducanumab, what we have done during the past 4 years, we have diversified in one space our portfolio. We have now 33 assets in clinical development. We have implemented 20 business development deals, and we have deployed $6 billion to achieve that in addition to returning capital to the shareholders. On those big deals, we have some also late stage, like the Sage deal that we made lately, but also the exciting deal with Denali. 2021 will be a very exciting year with not only the regulatory decision from the U.S. FDA, the filings all around the world, but 8 important readouts -- late-stage readouts and 4 in Phase III. How do we -- how do we -- do we differentiate vis-à-vis the other biotech? Well, first, we have aducanumab. I think it's a major differentiator potentially. Secondly, it's all about leadership in one space where we tend to diversify coming from an MS portfolio, MS plus SMA plus biosimilar, and hopefully, to many more. The inflection point is now ahead of us.

Turning to aducanumab. You mentioned that's an important event for 2021. And investors are very keenly focused on the June 7 PDUFA date. Can you give us any update on the FDA's review and maybe possibly provide any additional information on the data that was submitted to the FDA that led to the PDUFA extension?

Certainly, Phil. And as you understand, we're under review. So what we can say is very limited. And I know that you all understand that. We try, nevertheless, to provide as much color as possible on this material -- important regulatory process, important for the patients first and then for all of the stakeholders. When we had information requests, this is a normal process, and we did respond with new analysis and clinical data. This has led to a major amendment in the new PDUFA date. Again, today, more than ever, we believe in this hypothesis, amyloid beta, that was so disputed. But now it's a bit more quiet based on evidence from 3 different compounds: first, aducanumab; then BAN2401 and then donanemab.

There's a lot of speculation on Wall Street that you could use the redosing study to supplement the data. And that could perhaps help answer some of the ADCOMS questions. Are you able to provide data from the REMARC study to the FDA, and though the primary endpoints are safety related, are efficacy measures meaningful when being collected in that trial?

So EMBARK study, and you do well to point your finger on it, is an opportunity, but it's still enrolling, and we anticipate that we'll be completing the enrollment towards the end of semester one. We need to keep in mind that the primary objective was to look at the long-term safety with the target dose of 10 milligram per kilogram. But we have also secondary measures and analysis on CDR sum of boxes and ADAS-Cog. So we look into that.

In terms of interactions with other regulatory agencies, you mentioned you just filed in Brazil. How about Europe? Any update on the interactions with the EU?

Yes. So we did file, a while ago in -- beyond the U.S., in Europe, Japan and now in Brazil. And we continue to engage, and we'll hear in the coming weeks from EMA, and we continue to engage productively with the regulatory authorities. I cannot say much more at this stage.

Could you discuss the commercial infrastructure that you're building for the launch? How many people need to be hired? Where are you in that, in the hiring process?

Certainly, feel we have hired the team since a while. And while we speak, Biogen is ready to launch aducanumab. We have deployed a cross-functional team in order to work on site readiness all around the country. And while we speak and as communicated during the Q4 call, we have several hundred sites ready to care for the patients, that potentially will come to the centers to be treated. The supply is set from RTP first in North Carolina and then later on from our state-of-the-art bio-manufacturing site in Switzerland, Solothurn. We need to keep in mind that while epidemiology is tremendous, there are also some bottlenecks and constraints that we continue to work on to the limit of what one company, one player can do. But this is where we need partners and support from different players. So the amyloid beta potential confirmation needs to be ready and with a capacity in order to take care of that many patients. And beyond PET imaging, we have also CSF opportunities with Fujirebio filed in the U.S. and approved in Europe. And we know, thankfully that are some blood-based diagnostics that are progressing very well. So all in all, the team, I'm pleased with the progress that the team has made. We hired people mostly who had experience in those centers. And this helped tremendously. I had the opportunity to spend half a day a couple of weeks ago with the U.S. team. I'm pleased with the progress. And we are set with price. We are ready and following a very thorough work done by the team, and we are working to ensure potentially an equitable launch so that we can take care of the underserved populations and learn from the COVID crisis. So Biogen is ready.

You just mentioned that you set the price. How does Biogen think about pricing a drug for Alzheimer's? And maybe a related question, what is your most recent assessment on the size of the Alzheimer's market opportunity?

So the price, the team has done a very thorough work on assessing, potentially, the value for aducanumab by looking at the clinical meaningfulness based on our data, but also the burden to the society in terms of cost, nowadays, assessing the U.S. more than [ USD 850 billion ] a year in terms of direct and indirect costs. But in addition, we know that 75% of the patients affected at the age of 50 -- at the age of 80 have to be institutionalized. And it costs more than $100,000 a year to keep those patients in institutions, in addition to the emotional impact it has on the caregivers, on the family. So it's a societal, I would say, issue. And these are key consideration in order to assess the value. The market is extremely large. Based on the entry criteria of our Phase III studies, it's more than 10 million patients in the U.S. only. Obviously, it doesn't mean that all the patients qualify, it doesn't mean that all the patients are known from the healthcare system. Some of them are not known. So the epidemiology is absolutely tremendous. It's a multi-billion dollar opportunity, certainly, for the company. But again, more importantly, we are talking about the value in terms of cognition and function to the patients directly, to the caregivers also.

If aducanumab were to be denied by the FDA, what would be the next steps for that program? Would Biogen conduct another Phase III trial? Or would you wait for the results of the BAN2401 Phase IIIs?

Yes. So we stand by our data. And as discussed earlier, Phil, we believe more than ever in the amyloid beta hypothesis that is now documented by 3 different programs. So it's hard to neglect this evidence. And remember that the FDA communicated that it was reasonable for us to go to file. So we will assess based on what will be the ultimate decision from the FDA, but we continue the prelaunch activities. The 3 months' delay are not really delay for market readiness. People are pleased with that because we can get more centers ready. And this is the assumption we took also for our guidance. So this is where we stand in terms of mindsets.

Great. Moving on to perhaps some other commercial programs. SPINRAZA, how would you characterize its competitive position in SMA today, particularly with regards to Zolgensma and Evrysdi?

So SMA is mostly disease of the CNS with also cell body on the -- of the lower motor neuron in the spinal cord. And SPINRAZA is successfully administered in the CNS. And we see with the NURTURE data and evidence that those presymptomatic infants have a near-normal function while they grow. So there is no evidence that we need to be complemented by any other treatment, both Zolgensma and Evrysdi, a dose in the periphery. This is indirect and potentially inefficient pathway with the risk of off-target toxicity, leading potentially to dose-limitation and constraints, whatever the weight, whatever the age of the patient is. That's why we see in Evrysdi that the data suggests that efficacy is basically lower than declining, with increased age and weight of the patients. And based on the data in the adult cohort, there is less favorable type of evidence. The patients, unfortunately, continue to progress in their disease, and very often, there is no improvement versus placebo. Therefore, we believe that SPINRAZA should remain the standard of care and the foundation of care in SMA. And that's why we feel that we can even increase our dose in the DEVOTE study for even higher efficacy of a product does centrally and also the response study for patients that do not reach a satisfactory level of effectiveness with gene therapy. But those therapeutic alternatives bring conveyance potentially, and there is COVID. So these are the challenge that we face. Hopefully -- with the evolution of vaccination, hopefully, we come to better days where there is less reluctance for some. And those populations should be the first one vaccinated to go to institution for the intrathecal dosing. But again, I fundamentally believe that it's an efficacy play. And we do face some headwind. We've seen that in the U.S., ex-U.S. going very well. And all in all, the performance standing pretty strong. With COVID gradually being behind us, hopefully, in the future, I think this will be a better momentum for SPINRAZA in my view.

Maybe following on that point, specifically for 2021, how do you balance the potential drivers of growth, like, international new patient starts with the potential headwinds such as emerging competition and COVID? Is 2021 a bit of a wildcard of a year? Or do you see trends emerging as COVID curves begin to go down?

Yes. I keep very close touch with the team, and they are reinsured with the momentum of vaccination going on all around the world. And now SPINRAZA is registered and reimbursed in more than 40 countries. So there is this momentum also beyond the U.S., Japan and core-Europe of having all the emerging geographies, having potentially access to this high efficacious product. And again, for us, it's mostly a function of COVID vaccinations and also data on the competitive alternative, which I hear and provide alternative for the patients and providers. So I applaud the progress. 5 years ago, we had nothing.

Turning to the multiple sclerosis franchise. You already had about almost $40 million in Q4 revenue, which was a major acceleration over prior quarters. What produced this acceleration in its launch? And ultimately, how much of the TECFIDERA franchise do you think VUMERITY will be able to protect from generic erosion?

So I'm pleased with the momentum displayed during the last quarters of -- the last months of the year. This was delayed. You remember that we launched, a bit more than a year ago. But COVID came and stopped the fast uptake. And then we could get additional focus behind VUMERITY, that is a product differentiated in terms of GI tolerability, and based on this clinical data can basically attract patients and decisions of providers, clinicians towards VUMERITY. I'm very pleased. We are filing in the EU, in Canada, in Israel, in Switzerland and Australia for VUMERITY. So there is this good momentum in the U.S. that hopefully continues, looking forward to letting all of you soon. And now there is the ex-U.S. that should come and -- and you remember, a couple of years ago, the discussion was, can we make this product a $0.5 billion product? I believe so, and I believe that we can pass this milestone.

Excluding TECFIDERA, anti-CD20s, what's the outlook for Biogen's MS franchise more generally? Is modest contraction reasonable in light of the potential headwinds, such as emerging competition this year?

I'm satisfied with the overall performance of the MS franchise despite the tech IP U.S. situation for which we are feeling -- for which we are feeling better. We still have $1 billion ex-U.S. -- more than $1 billion ex-U.S. of TECFIDERA that is also growing. I think there is a good momentum. The products are so well documented in terms of efficacy and safety. The team have decades of engagement with the clinicians and the payers. And in the face of COVID, and potentially better depletion, mode of action of competitors, I think that the well-documented TYSABRI and interferon can do extremely well. In addition, I am pleased that Biogen engage the marketing team on life cycle management opportunities. And we are getting prepared to launch subcutaneous form of TYSABRI that might be even more important now with the COVID environment, because then we don't need to go to a center to be dosed, subcutaneously and also the VUMERITY IM and/or the label improvement. So I am pleased with the momentum behind the MS franchise that still represents a leading position for Biogen, so is SMA, so is anti-TNFs in Europe. So a strong position. Wherever we are, there is a leadership position with very strong execution, even if competition is enhanced for each one of those, but we used to compete.

You mentioned the TECFIDERA appeal. Can you remind us when we could see a decision in that appeal? And what would be the next steps if Biogen were to win? Would they generously put them in market? Or will the case just be remanded back to the district court?

So you will understand, Phil, I cannot comment much, but we expect a feedback decision pretty soon, and we have an array of activities ready, but I cannot go beyond that.

Got it. Maybe one question on biosimilars. How large of a business do you think that the biosimilar franchise could be? And what other biosimilars would be attractive additions to your portfolio that currently are not in your pipeline?

Thank you. It was an opportunistic pilot initiated by my predecessor and becomes an integrated part of our strategy because it's always good when we meet payers to generate headroom for neuro innovation, because that constraints in terms of sustainability of the system. And in the U.S. only, we anticipate more than $100 billion savings from biosimilars in the next 5 years. Now the Biogen's position with anti-TNFs and only in one continent is not enough for the longer run growth opportunity even if we will continue, I believe, to grow with the anti-TNFs in Europe. But we need to enlarge the portfolio. And this is what we are doing. With the partner, Samsung, we have now the Eylea and Lucentis, one in Phase III Eylea and the other one filed in Europe and the U.S. We have larger opportunities for our new biosimilars beyond one continent, U.S., Canada, EU, Japan, Australia. And we are getting ready to launch those products and to support head authorities generate sustainable systems, while innovation continue to come in. So I am very supportive of this [indiscernible] activity, it's a good hedge. Profitability is good, can be better also, and we are working on that. And we'll keep you posted at the right time, very active in terms of business development. And so we are encouraged by this opportunity of a potentially growth franchise in a sustainable manner for Biogen.

A handful of questions on the pipeline. In your opinion, which of the pipeline candidates is most misunderstood or underappreciated by investors? Does Biogen think that investors are missing something about any particular program in the pipeline?

Yes. I mean, with full respect, I think there are a few things being missed. The first one is that we have an entire pipeline beyond aducanumab. And I see AL is smiling. Yes, this is the work that we have done during the past years consciously, and we didn't take any shortcuts. We went early stage. And we wanted to move this company from being mostly an MS company with an Alzheimer's bet. And now we have diversified in many disease states, within mostly the neuro space and immuno space, specialized immuno. So I am pleased with 33 programs in our pipeline. This is a substantial material upgrade versus where we were a few years back. And more importantly, and as discussed earlier, 8 late-stage readouts in 2021. And here, I'm not talking about aducanumab decision. It's beyond aducanumab. And we are talking here about disease states for which there is very little or no hope. Okay, think about ALS, SOD1, and then the C9orf following up and then ataxin-1. Think about choroideremia. Think about the lack of innovation in major depression since decades. So I am pleased with this progress. And this is eventually one thing where the company needs to do a better job at engaging with the shareholders and the analysts at explaining what is the beautiful pipeline that we have built. And this is one aspect. The second one is that we have the risk. We said, a few years back, we're going to try to go with genetically defined targets. We try to diversify in terms of modality. And this is what we have done beyond the biosimilars. And I'm pleased with that, but AL will add a few words.

Thank you, Michel. Yes. First of all, I want to say I agree with Michel on the points about diversification and risk. But maybe I can add a little color on how we decrease risk by leveraging genetically validated targets. Many of these neurodegenerative diseases have -- are driven either by monogenic/single genes or sometimes by multiple genes with lower penetrance, multiple alleles. So in the case of ALS, for example, we have our antisense against SOD, usually drives familial ALS, although some people don't have a clear family history. The same is true of C9orf. In the case of ataxin-2, ataxin-2 mutations can drive ALS as a single gene mutation, but there's evidence that the severity of the mutation in ataxin-2 also drives a rate of progression of ALS in general. So that -- so ataxin-2 could start in familial patients or patients where ALS is driven by a single gene, but it could be applied overall to the ALS population. Same in PD. As you know, we have these programs with LRRK2, and we licensed a small molecule from Denali. LRRK2 can drive PD as a single gene. But there's plenty of evidence to suggest that LRRK2 may also be involved in sporadic Parkinson's disease. So we aim to go after these well-validated targets, and you add to that very good biomarker assessment of whether or not we actually engage the target with our drugs. And those are the ways we decrease risk in a risky area, but with very, very high unmet need, as Michel has pointed out.

Could you discuss the Sage collaboration, in particular. What makes you optimistic for zuranolone in major depressive disorder and for BIIB124 in essential tremor?

Certainly, I will get started, and AL will add. I'm delighted that we were able to deliver on this partnership with Sage. The unmet medical need is absolutely tremendous. This is, again, a multibillion-dollar opportunity for the company. There is no innovation since decades in that space. And for essential tremor, there is no good treatment neither. So I believe that the value-creation opportunity is very high. The synergy and the comorbidity with the disease states where Biogen is present speaks for itself between 30% to 60% comorbid patients being MS, being SMA, being AD or Parkinson, together with a major depression profile impacting -- disease impacting the patient and the family. So for all those reasons and late stage, that is good to have for Biogen 2 and readouts in 2021. These are tremendous, I would say, elements and features that make this deal suitable for Biogen. AL?

What we saw in zuranolone was a drug that had a very rapid onset of action. You see evidence of efficacy within days, which is very different from the currently available therapies. We also saw a drug that had a very durable effect. So even after a 2-week course of treatment, patients can then stop treatment, and they remain in remission, essentially, for many months, sometimes more than a year. That's what the SHORELINE data show. And then finally, the treatment effect size is substantial. Some of the trials suggest that it could be at least as good as the currently available therapies, if not greater. And then finally, we saw an asset that had -- that was positive in multiple placebo-controlled randomized double-blind trials in PPD as well as MDD. In one trial, the MOUNTAIN trial that was negative, we feel we understand why it's negative and it's not uncommon in depression that even when a drug works, occasionally, a trial will be negative. And so that's what we saw, and we're very excited about this collaboration.

You both referenced tofersen and BIIB111 as 2 other late-stage readouts before the end of 2021, which of these programs is more likely to become a major contributor to Biogen's revenue and earnings?

I think we're excited with both, unmet medical need speaks for itself. There is no hope for ALS at this stage. And it shows -- it demonstrates extremely well the ability for Biogen to step back following a failure and saying we'll go through genetically violated familial ALS, smaller population and then go wider. I think there are good benchmarks in the industry of approaching this research in a very difficult space. So I am extremely encouraged by tofersen. But obviously, for choroideremia blindness and the first gene therapy being those in the back of the eye, it's also something we wait with a lot of excitement following the Nightstar acquisition. AL?

Yes. I would say that the tofersen program has special meaning for me as I used to treat ALS patients, and it's one of the most devastating diseases I have ever seen. The fact that we have a drug that we know is published in the New England Journal last year that we know it engages target, reduces the expression of the toxic gene. And I think it may provide proof of principle, as Michel said, to 2 other programs, C9orf as well as ataxin-2. And so I think that -- yes, I mean, for me, there's an emotional attachment essentially to person, but that's not to undermine the [indiscernible] need in choroideremia. I mean this is a disease that causes blindness, and there's no treatment. So they're both equally important.

In the last minute, Michel, just wanted to ask you a bit about the capital allocation strategy of Biogen. How do you balance returning money to shareholders versus the investment in your internal pipeline or acquisitions?

So always, obviously, it's -- the prime focus is on generating the highest return for the shareholders. We continue to generate a lot of cash that will enable us to do both and return capital to the shareholders and to continue to do BD. When we look at the return in cash, we look at the -- our approach would be present value of the company versus the marketplace. And for the BD, each opportunity stands on its own. And we look at the opportunity, and hopefully, we'll continue to do both. So this is what you should expect for 2021.

Great. With that, it looks like we're out of time. I'd like to thank Michel and AL for a great discussion.

Thank you, Phil.

Thank you.