Biogen Inc. (BIIB) Earnings Call Transcript & Summary

Welcome to the Annual Meeting for Biogen Inc. Our host for today's call is Dr. Stelios Papadopoulos, Chairman of the Board. [Operator Instructions] I will now turn the call over to your host, Dr. Papadopoulos, You may begin.

Thank you, sir. Good morning. I'm Stelios Papadopoulos, Chairman of the Board of Biogen, I would like to welcome you to Biogen's 2021 Annual Meeting of Stockholders. I'm here today with Susan Alexander, Biogen's Chief Legal Officer and Corporate Secretary, who will act as Secretary of the meeting; and Michel Vounatsos, our Chief Executive Officer and a Director, who will make a company presentation following the conclusion of the formal portion of the meeting. I am also joined by each of the other members of our Board of Directors, and I will name them later as well as members of the executive team of Biogen, including Michael McDonnell, Chief Financial Officer; and Alphonse Galdes, Head of Pharmaceutical Operations and Technology; Ginger Gregory, Chief Human Resources Officer; Chirfi Guindo, Head of Global Product Strategy and Commercialization; and Alfred Sandrock, Head of Research and Development. Kevin Burney and John Charters, representatives of PricewaterhouseCoopers, our independent auditor, are also participating in the meeting and will be available to answer any questions you may have for PwC. Before we begin the formal portion of the meeting, I would like to take this opportunity to thank Robert Pangia for his many years of dedicated service as a member of the Biogen Board of Directors. Bob has served the company with great distinction since you joined the Board of IDEC Pharmaceuticals in 1997. Bob was selected to continue to serve as a director of the company following IDEC's merger with Biogen in 2003. Throughout his tenure, Bob has been a vital contributor to the company and its Board. Bob's significant financial acumen and breadth of expertise within the health care industry have been especially important to the company's success over the years. On behalf of the Board, I would like to express our deep gratitude to Bob for his many contributions and years of exceptional service to the company and its stockholders. On a personal note, I've worked with Bob in various capacities and forms since the mid-1980s. I will certainly miss his wise counsel, but I'm sure we'll be talking regularly and, pandemic permitting, meeting again soon. The formal portion of the meeting will consist of the matters submitted to a vote of stockholders as described in our proxy statement. During the formal portion of the meeting, validated stockholders as of April 9, 2021, the record date for the meeting, who have entered the control number included with their proxy materials, will have an opportunity to vote and ask questions. Following the formal portion of the meeting, Michel will make a business presentation, and we will provide additional time for general questions. The agenda and rules of conduct for the meeting are posted on the virtual meeting site. Turning now to the formal business of today's meeting, I can confirm the following preliminary matters: The company has appointed Joseph MacLelland of CT Hagberg LLC to act as Inspector of Elections for all matters requiring a stockholder vote at this meeting. Mr. MacLelland is in attendance and has a certified list of stockholders who are entitled to vote at this meeting as of April 9, 2021, the meeting record date. The holders of proxies solicited by the Board of Directors of this meeting are Michel Vounatsos, Michael McDonnell and Susan Alexander. The majority of the shares of common stock entitled to vote at this meeting are present or represented by proxy, and therefore, a quorum is present for purpose of conducting the business of the meeting. We will now turn to the meeting proposals. It is now 9:04 a.m. on June 2, 2021, and I hereby declare the polls open for voting on all matters of business. If there are any stockholders who have previously submitted a proxy and wish to revoke their proxy or change their vote or if there any stockholders who have not yet submitted a proxy and wish to vote, you may submit your vote by clicking the voting link on the virtual meeting site. Stockholders may vote until the polls are closed following the presentation of the proposals. If you have already submitted a proxy and do not wish to change your previously submitted vote, there's no need to vote during the meeting. [Operator Instructions] We will take any questions once all the proposals have been read. Stockholders, if you have a question that is unrelated to the meeting proposals, we ask that you wait until the business discussion period to ask that question. The first proposal is the election of directors. We have 13 director nominees standing for election to serve a 1-year term, namely: Alexander Denner, Caroline Dorsa, Maria Freire, William Hawkins, William Jones, Nancy Leaming, Jesus Mantas, Richard Mulligan, Stelios Papadopoulos, Brian Posner, Eric Rowinsky, Stephen Sherwin and Michel Vounatsos. The second proposal is the ratification of the Audit Committee's selection of PricewaterhouseCoopers as our independent registered public accounting firm for the fiscal year ending December 31, 2021. The third proposal is an advisory vote on executive compensation. The fourth proposal is the approval of an amendment to Biogen's Amended and Restated Certificate of Incorporation, as amended, to add a federal forum selection provision. The fifth proposal is a [ stockholder ] proposal requesting a report on Biogen's lobbying activities, submitted for inclusion in the company's proxy statement by stockholders James McRitchie and Myra K. Young. At this time, I invite Mr. McRitchie and Ms. Young or their qualified representative to present the proposal. Comments or questions about the proposal can be made during the proposal discussion period.

Hello. This is James McRitchie presenting proposal #5, disclosure -- disclose lobbying activities. Additional information on the company's direct and indirect lobbying expenditures and related management control would provide shareholders with a better understanding of lobbying activities and related risks and benefits. The attack on the U.S. capital and the big lie challenging the validity of the election results revealed an entirely new level of reputational risk for corporate lobbying and expenditures, particularly when delegated to third-party groups. Biogen stopped PAC contributions to all politicians. However, the questions remain. Was it an emergency measure to repair reputational damage or something more lasting? According to a 2019 study, trade associations and social welfare groups spent $535 million on lobbying in 2017 and $675 million on unregulated public policy efforts. The $675 million that did not qualify as federal lobbying includes strategic consulting, broadcast and astroturf campaign. This highlights a large unknown risk for investors. How much is our company spending on undisclosed grassroots lobbying efforts? We understand trade associations and other nonprofit organizations can serve as a useful business purpose. However, Biogen's lack of public disclosure risk damage to its already precarious reputation. Now I'm going to give you a warning here. Please vote now while I'm talking. Companies, including Biogen according to what was just announced, often close the polls immediately to keep you from voting. Of course, that doesn't make any sense. Closing the polls immediately upon the end of presentation prevents anyone from considering what was presented. The whole purpose of presenting proposals at a meeting is to allow shareholders to consider the argument and then vote. Closing the polls immediately makes a mockery the process. Unfortunately, many companies care more about imposing their will than reflecting the wishes of shareholders. I'm stalling a bit to give you a little more time to vote. However, I don't want to be accused of wasting your time or filibustering. So I will close now. Once again, please vote for Proposal #5 to disclose lobbying activities. Thank you.

Thank you, Mr. McRitchie. Thank you. I'm now moving to the sixth proposal, which is a stockholder proposal requesting a report on Biogen's gender pay gap, submitted for inclusion in the company's proxy statement by Proxy Impact. At this time, I invite a representative from Proxy Impact or their qualified representative to present the proposal. Comments or questions about this proposal can be made during the proposal discussion period.

Good morning, everybody. My name is Michael Passoff. I'm the CEO of Proxy Impact. I'm here to speak to Proposal #6 regarding the gender pay gap. We're asking Biogen to provide quantitative data so that shareholders can assess the company's pay gap and the effectiveness of its policies to address this. Best practice pay gap reporting consists of 2 parts: equal pay for your current job; and equal opportunity to higher-paying jobs. Adjusted pay data is used to determine equal pay and unadjusted median pay data is used to identify equal opportunity. Biogen's opposition statement says that it has a 99.7 equal pay using adjusted data. This sounds great, except Biogen provides no quantitative information on the adjusted data that it's reporting. That also indicates that 15% of its workforce was not included in the calculations. When shareholders have reviewed similar statements from other companies, we have found that it is the highest-paying positions that are generally omitted from these proxy -- from these pay assessments, and that is exactly where the highest pay discrepancies are usually found. Meanwhile, the company's opposition statement fails to even mention the unadjusted median pay data. This is a significant omission given that the gender pay gap is literally defined as: the difference between median earnings of men and women relative to median earnings of men. United States Census Bureau, Department of Labor, OECD and International Labor Organization consider unadjusted median pay the valid way of measuring gender pay gaps, and Biogen has failed to acknowledge let alone provide this definitive pay gap data point. Median pay gap disclosures can improve performance and provide a baseline to investors for measuring progress moving forward. Biogen's U.K. operations are required by law to provide a gender pay gap report that includes both adjusted mean and unadjusted median pay data. This report, which is similar to the one requested by the shareholder resolution, paints a very different picture than the 99.7 equitable pay claims of Biogen's U.S. operations. In fact Biogen U.K. found significant differences in adjusted and unadjusted gender pay and bonus gap. The Biogen U.K. 2019 to 2020 gender pay gap report states that it had a 16% adjusted mean and an 8% unadjusted median hourly pay gap, and a 28% mean in the 25% medium bonus pay gap. Begs the question, why aren't U.S. investors given the same transparent pay gap disclosure that U.K. investors are given? To sum up, Biogen provides shareholders with some pay equity information, but does not provide quantifiable data that would allow shareholders to assess its overall pay gap and the year-to-year effectiveness of policies to address this. Biogen simply ignores unadjusted median pay gap data, although it's one of the 2 key metrics used to evaluate pay gaps and one that Biogen already provides in the U.K. Investors seek and will continue to seek quantitative comparable data to understand Biogen's pay gaps and related policies.

Thank you, Mr. Passoff. I will now move on to the recommendations by the Board, which are as follows: our Board recommends a vote for the election of each director nominee; for the ratification of PricewaterhouseCoopers of the company's registered public accounting firm; for the advisory vote on executive compensation; and for the amendment to amend the Restated Certificate of Incorporation. Our Board recommends a vote against the stockholder proposal requesting a report on lobbying activities and against the stockholder proposal requesting a report on gender pay gap. There are no other formal matters that have been properly brought before this meeting for a vote of stockholders. We will now take questions from stockholders related to the annual meeting matters. As a reminder, if you have a question that is unrelated to the meeting proposals, we ask that you wait until the business discussion period to ask that question. Are there any questions of stockholders related to matters properly brought before the meeting?

We have one question, Mr. Chairman, that relates to the order of the meeting. And the question is, how long are the polls open this morning?

Well, Ms. Alexander, I think you are most qualified to answer that question.

Yes. Thank you. When the question-and-answer period has ended, we will wait one moment for additional voting and the polls will then close. And there are no other questions, Mr. Chairman, on the proposals brought before this meeting.

So we will pause again for a brief moment. For those of you voting online to finish voting. So let's just give everybody a little bit of time. [Voting]

I think by now, everyone has had a sufficient time and an opportunity to ask questions and vote on the meeting proposals. I hereby declare the polls of the meeting closed at 9:17 a.m. I would like to remind everyone that most of the votes on the matters to be acted upon at this meeting have been cast by proxy, which will be tabulated by the Inspector of Elections. A preliminary tabulation of the votes indicates the following: on Proposal 1, our 13 director nominees have been elected to the Board of Directors to serve a 1-year term; on Proposal 2, PricewaterhouseCoopers has been ratified as our independent registered public accounting firm; on Proposal 3, approximately 51% of our stockholders have ordered in favor of the advisory vote on our executive compensation; on Proposal 4, the amendment to Biogen's Amended and Restated Certificate of Incorporation has been approved; on Proposal 5, approximately 41% of our stockholders have voted in favor of the stockholder proposal relating to lobbying activities; on Proposal 6, approximately 23% of our stockholders have voted in favor of the stockholder proposal relating to gender pay gap. We will file the final voting results with the Securities and Exchange Commission on a Form 8-K within 4 business days. This now concludes the formal business of today's meeting, and the formal portion of the meeting is now adjourned. At this point, I will turn to our Chief Executive Officer, Michel Vounatsos, who will make a brief presentation of the company, to which we will respond to any stockholder questions and comments. [Operator Instructions] Michel?

Thank you, Stelios. First, I would like to thank you all for investing in and supporting Biogen. We believe Biogen is in a strong position, and we are continuing to operate our business with a focus on meeting the needs of patients across the world. Before I begin, I would like to point out that we'll be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties. I encourage you to consult the risk factors discussed in our SEC filings for additional details. As the leader in neuroscience, we are focused on value creation opportunities in multiple areas with very high unmet medical need. There is a tremendous unmet medical need in Alzheimer's Disease, the #1 neurodegenerative disease. 10 million patients are battling with Parkinson's disease, the #2 neurodegenerative disease. ALS is a devastating disease with an average life expectancy of less than 5 years. Approximately 260 million people globally suffer from depression. Stroke is the fifth leading cause of death in the U.S. Up to 200,000 patients suffer from an inherited retinal disorder in the U.S. and there is tremendous unmet need in lupus, a therapeutic adjacency to our core focus on neuroscience. We believe we are on track to make good progress across all these areas in 2021. Biogen is the global leader in multiple sclerosis, and we continue to invest to maximize the resilience of our broad portfolio. This remains a significant business and source of cash flow for the company, generating $6 billion in revenue without U.S. TECFIDERA, which is undergoing rapid erosion in the U.S. due to the entry of generics. We are continuing to pursue innovation in this market, including VUMERITY as a novel option in the large oral segment. We are encouraged by the continued progress we are making on the launch in the U.S. We continue to pursue life cycle management and R&D for MS, including the launch of intramuscular PLEGRIDY in the U.S. and the EU, subcutaneous TYSABRI in the EU, and we are advancing an early-stage pipeline of novel therapies, including an oral remuneration program, an oral BTK inhibitor and a next-generation anti-VLA-4, where we are working to build on the success of TYSABRI in the high-efficacy space. With SPINRAZA, we have demonstrated our ability to successfully launch into a new therapeutic area and build a new market from the ground up. SPINRAZA generated $2.1 billion of revenue in 2020, and we now have over 11,000 patients on therapy. SMA is a devastating rare genetic disease that cause degeneration of lower motor neurons and wasting of the skeletal muscles. In its more serious forms, it is fatal. SPINRAZA remains the foundation of care for SMA despite the entrance of new competition. We have a broad label based on proven efficacy across all patient types and a well-characterized safety profile. And we are continuing to invest in SMA to strengthen our competitive positioning by pursuing a higher dose for even greater efficacy currently being evaluated in the DEVOTE study. And the recently initiated RESPOND study evaluating the potential benefits of SPINRAZA, following suboptimal response to gene therapy. We also have a strong biosimilars business. We generated almost $800 million in revenues in 2020 with approximately 240,000 patients in Europe. We believe our biosimilars are strategically important as we work with payers and health systems globally to help create headroom for innovation in their budget. In Europe, Our 3 anti-TNF biosimilars contributed an estimated health care savings of over EUR 2.4 billion in 2020. But we aim to do more by bringing new biosimilars to market across an expanded geographic footprint. This includes new potential biosimilars in development referencing Lucentis and Eylea in collaboration with Samsung Bioepis and ACTEMRA in collaboration with Bio-Thera. Lastly, I would like to reflect upon Biogen's long-standing commitment to corporate responsibility. Our dedication to patients and the broader society is not only limited to developing novel therapeutics for patients suffering from serious disease but extends much further. At Biogen, we work with purpose to advance science to address the urgent and long-term challenges facing humanity. Now more than ever, we continue to strengthen environmental, social and governance priorities across the company. To underscore this commitment, we have decided to incorporate an ESG metric into our corporate scorecard to help ensure that we accelerate action across these critical issues. The pandemic has been a reminder of just how much health matters. It has highlighted the dramatic disparities and the interrelated challenges of climate, health, and equity. To further illustrate our commitment to corporate responsibility in 2020, we launched our 20-year $250 million Healthy Climate, Healthy Lives initiative. This includes our goal of eliminating our fossil fuel emission by 2040 and being a catalyst for positive change by advancing the science around how fossil fuel impacts human health and taking action to promote climate and health equity. Before I conclude, I would like to thank Bob Pangia for his service and our Board. He joined the Board of IDEC in 1997, and continued on Biogen's Board since the merger in 2003. Bob has been part of the remarkable evolution of Biogen from one of the world's first biotech company to a neuroscience pioneer that today discovers, develops and delivers worldwide innovative therapies for people living with serious neurological and neurodegenerative diseases. Bob has brought a wealth of experience and has been a vital contributor to the company and its Board. I would like also to welcome our 2 new Board members, Dr. Maria Freire and William Jones. We believe that diverse backgrounds and breadth of experience will provide vital insights to our Board and will be key in helping us represent our stockholders effectively. I'll now hand it over back to Dr. Papadopoulos for any question you may have. Stelios, you may be on mute.

You're correct, Michel. Thank you very much. We will now entertain questions or comments from our stockholders. Ms. Alexander, any questions or comments from anyone on the online group of our shareholders?

We do have questions from stockholders, Mr. Chairman, and I will read them in just as they appear. The first is, I am a Caucasian, but I think big businesses need to help remedy the disparity in the number of white employees to the number of African Americans. Besides education, employment of the black race helps to level the playing field. Reparations in the form of a job builds self-esteem, not a handout. Are you making any headway in employing African Americans?

Michel, would you like to take this?

Certainly, Mr. Chairman. We are committed to diversity, equity and inclusion across all aspects of our organization, including hiring, promotion, compensation and development practices. We believe that diversity drives innovation and that different backgrounds, culture and perspectives make us stronger as an organization. Our data shows that we have become more diverse in race, ethnicity and gender during the last few years, including with African-Americans in the U.S. As of December 31, 2020, 28% of Biogen's director level and above positions were held by ethnic or racial minorities in the U.S. Globally, 48% of Biogen's position at director level and above were held by women. We hold ourselves accountable by focusing on building a diverse talent pool and by prioritizing on being a more inclusive workplace that represents the communities that we serve. In 2020, we enhanced our diversity, equity and inclusion strategy and outlined actionable steps to deepen our commitment and build upon a strong foundation. We have several programs underway working to enrich our talent pipeline, including encouraging mid-career underrepresented minorities to participate in The Partnership's BioDiversity Fellows Program to help strengthen the leadership capacity of our black, African-American, Latinx and Asian employees. In addition, we are improving our collaboration with historically black colleges and universities, HBCUs, welcoming our first intern cohort in 2020. But in 2021, we have a goal to increase overall participation by 300% from our 2020 number. We also aim to increase diversity in U.S. manager position and above by 30% by the end of this year. Lastly, as part of our commitment to ESG transparency and reporting, we have also tied a portion of our employees' and executive officers' 2021 compensation to advancing our ESG strategy. This includes metrics related to our DE and inclusion efforts.

Thank you, Michel. Ms. Alexander, any other questions?

So our next question is, has the company increased patents in 2021 compared to 2020? How will the company use algorithms in 2021 and going forward?