Biogen Inc. (BIIB) Earnings Call Transcript & Summary

Great. Good morning, everybody. Thanks for joining us for the next session this morning. I'm Matthew Harrison, one of the biotech analysts here at Morgan Stanley. We're pleased to have Biogen with us this morning and Michel Vounatsos, the CEO; and Alisha Alaimo, who runs Commercial. Quickly before we get started, I need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at morganstanley.com/researchdisclosures. And I'm going to turn it over to Michel to make some opening comments, and then we'll get into Q&A.

Thank you, Matt, and good morning, everyone. Before I begin, I would like to state that we will be making some forward-looking statements, which contain risks and uncertainties, so I encourage everyone to go to the risk factors discussed in our SEC filing. Before I discuss ADUHELM together with Alisha, Head of the U.S., a few words about where we stand as a company, Biogen. We are and we remain a pioneer in neuroscience, and 2021 so far is truly a transformative year for the company as we continue to be a multi-franchise portfolio. In addition to the very important approval of ADUHELM for AD in the U.S., we also reported positive Phase III results in depression. As you know, positive Phase II results in acute ischemic stroke, essential tremor and very important milestones across our core business in MS, SMA and biosimilars. BD continued, and we recently closed on our collaboration with InnoCare for a CNS penetrant BTK inhibitor for MS. And as a reminder, we will have to expense $125 million in Q3 related to this transaction. With all the opportunities ahead, our focus for the next several years is on diligent execution. Turning to ADUHELM. Although we are facing some near-term challenges and everybody can see that, we continue to see a very high level of physician and patient interest, and we continue to believe the mid- to long-term opportunity remains significant. In addition to the launch in the U.S., ADUHELM is now filed in many geographies, and we are pleased to report the recent regulatory approval in the UAE. Starting now with the facts around ADUHELM. It's the first approved therapy to address a defined pathology of Alzheimer's disease, one of the 2 hallmarks of the disease. ADUHELM reduced the amyloid beta plaque in a dose and time-dependent manner in all our major studies. And we see continued reduction beyond the year 4 in the long-term extension of the PRIME study. This reduction in plaque is reasonably likely to predict clinical benefits. And in this case, we are talking about clinical -- slowing down clinical decline, and our clinical data are clearly outlined in the label. However, but we all know that in the past, some drugs directed to the same hypothesis and the same target did not show benefit. But we all know that these prior drugs did not lower the amyloid plaque, and this is the key difference, and maybe one of the reasons of the polemic we hear. However, nowadays, there is clearly too much confusion, misinformation and controversy surrounding our data and the approval process. I can tell you, Biogen stands behind our clinical data for the 8 studies with more than 3,000 patients that supported the accelerated approval, and we stand behind the integrity of the review process. It is imperative now that the society moves its attention to the clinical data and the patients in need, the way we did at the early days for HIV and oncology therapies. To this end, we encourage to see a growing number of prominent medical experts publishing support of ADUHELM and patients' involvement in the decision-making, including and not limited to guidelines on how to use the product in the real world. Having said that, we currently have 3 near-term priorities. The first one is to improve the understanding of our clinical data. Our manuscript on the Phase III data has been submitted and is currently under review, and we have a number of other manuscripts on our Phase III data that we'll follow upon on topics that varies from area management, clinical meaningfulness, biomarkers and more. Beyond this, we are advancing 3 studies to generate additional data. The first one is a redosing study, EMBARK, which has more than 1,700 patients previously enrolled on in aducanumab trials; the real-world observational Phase IV study called ICARE AD; and last and most importantly, the upcoming confirmatory controlled Phase IV as part of the post-marketing requirement, we are making good progress, Matt, on the protocol, and we are dedicating all the efforts with the aim of completing the trial ahead of the required schedule. This is what society deserves. Our second priority, Matt, is to appropriately expedite the development of the necessary infrastructure. The launch in the U.S. has been even more gradual than we initially expected, but we are seeing encouraging progress at some sites, Alisha will discuss. Last but not least, our third priority, as we wait for the NCD decision by CMS, is to clarify reimbursement pathway and maximize access for patients. And therefore, we focus on the customers, including the underserved population, who are more at risk due to ethnicity. Just this week, we partnered with CVS to add cognitive screenings as part of major programs run by CVS, and we are working with all the partners on health equity. Before I close, going forward, the dialogue must refocus on the unmet medical need of patients and caregivers, whose voices I worry are getting lost. Without access, every day that passes, we do estimate that approximately 1,000 patients are progressing and moving out of the window relevant for potentially ADUHELM treatment. So our focus is not on revenue in the coming months, but rather on the 3 priorities I shared with you: improving understanding of our current data; building our infrastructure; and securing reimbursement. Although the launch is slower than we initially anticipated for all the reasons you know, we are encouraged. We are, first of all, here for the long run with an entire -- an entire portfolio and lecanemab also to follow up. And we are encouraged by the progress we are making against the 3 priorities, which we believe will lead to a long-term potential of ADUHELM that we assess as being significant. I will ask Alisha to make a few remarks.

Thank you, Michel. And as Michel mentioned, we continue to see a high level of patient interest, and we are seeing steady progress across several key metrics, underscoring our belief that the long-term opportunity for ADUHELM remains significant. So I would like to share some additional context of the 3 main challenges that are contributing to this gradual launch that Michel had stated. First, you heard Michel say there are some concerns and questions about our clinical data and the approval process. Though we knew breaking new ground would come with some debate, this has been more pervasive than we originally anticipated. Our commercial, market access and medical teams are working with an incredible sense of urgency to communicate our clinical data. And once it is published, we'll appropriately disseminate the manuscripts on our Phase III trials, which we believe will enable a data-centric conversation and better inform clinical practice. In addition, some sites are waiting for our published manuscript before they conduct their P&T reviews, which brings me to the second challenge. During our last earnings call, we shared that sites are in the process of P&T committees. And since that call, we have seen more progress with these formulary decisions. However, after this decision, we are seeing sites experience several operational issues that they need to work through before they can infuse their first patient. And though we did anticipate it would take time, operationalization, the patient journey care pathway is taking longer than we expected. So we need to remember that for many of these dementia specialists and the memory centers, while they do have an incredible amount of experience conducting clinical trials, this is the first time that they are triaging patient inquiries, creating draft protocols that have never existed before and establishing how, where and when they were performed, the MRIs, the amyloid beta confirmation and their infusions. For most of these specialists, it is also the first time they are learning how to buy and bill a product and get reimbursed for it. Building this infrastructure does take time. It takes resources, and it takes a lot of planning. Our local teams are working closely with sites across the country to help navigate these initial operational details. With that said, we are seeing steady progress across several key metrics. We are monitoring the number of activated sites, which, if you recall, we define as sites that have taken at least 1 patient through all the required steps to receive their first infusion. The rate of new site activation has been increasing over the past several weeks. And as of this week, we are now aware of approximately 50 sites that are infusing ADUHELM. We have also seen an increase in the number of CSF samples being submitted to our laboratory partners, and we are seeing an increase in calls to our Patient Services organization with the top request being a benefits investigation. And lastly, the third main challenge is a higher-than-expected level of uncertainty with respect to reimbursement. This has obviously been compounded by the National Coverage Determination analysis by CMS. We believe the majority of sites are waiting for clarity on reimbursement, including the outcome of the NCD, which could be another 7 months, according to the CMS announcement. As we shared in the past, while the NCD process is underway, we expect that regional MACs and Medicare Advantage Plans will provide coverage for ADUHELM. And the good news is we have already seen that several examples of Medicare Advantage and commercial plans providing coverage for patients, who broadly align with our clinical trial criteria. As you may know, we are still awaiting formal policies from most Medicare Advantage Plans. However, as you might have seen, Humana, which is the second largest Medicare Advantage Plan, recently confirmed publicly that they will cover the drug for commercial and Medicare-insured patients, who also meet this criteria. And as for the Medicare Administrative Contractors or MACs, as we like to call them, it is still relatively early as they take a certain amount of time to process claims under this miscellaneous J-code, but we have already seen some examples of MAC reimbursement. We are also not aware of any examples of outright denials from MACs or Medicare Advantage for patients, who matched the clinical trial entry criteria and if the offices provide the correct paperwork. Our local reimbursement teams are clarifying the reimbursement pathways with obviously all of our accounts, and there are programs available to help address these nonclinical barriers for patient access. So patient access, as you heard Michel say, is paramount to us during this time. So back to you, Matt.

Great. Thank you for those comments and for the help there. So maybe if I could just follow up on a couple of the points you made. So I guess maybe the first thing is you said the majority of sites are waiting for the NCD. I guess maybe could you just walk through what that means in terms of your interaction with them that they're not even accepting patients? And then do you think that could change if there becomes maybe more pervasive information that MACs and some MA Plans are actually reimbursing for the drug?

Yes. So I think what you're going to see across the board is that this is really a difficult position for physicians, especially when patients are coming in requesting the product, and yet there's hesitancy because they've never been through an NCD analysis before. This is brand new to neurology. And when you look at the NCDs in the past, they're mostly oncology. So education is really what's going to take time here on what this process is and that we do expect Medicare Advantage and MACs to reimburse. And once we get more proof that they're reimbursing, I think what you'll see is that physicians will start moving even more quickly. But because of the hesitancy, it does cause pause. But I believe as soon as they become educated and like I said in our quarterly call, you're not going to know until you try. And what we're seeing is if you're matching that clinical trial criteria, then they are approving those patients.

Okay. And then I guess the second follow-up is just obviously, as part of the NCD process, right, there's the preliminary decision in January versus sort of the more final one, I forget if it's April or something a few months after that. How do you think about each of those decisions influencing people? Do you think the preliminary decision, as an example, would be enough to change perspective or do you really need to get to the final decision?

Because these are so rare, the NCDs for drugs, you'll see that the last example that was in the public domain had a very different draft from the final outcome. However, I do believe once they post that draft and people see a direction of travel, they will become much more comfortable with what they think the final outcome will be. However, depending on what it is, as you know, this NCD is for all of the amyloid beta products. It's not just for ADUHELM. And so I do think we're going to get a really good insight in January.

I think, Matt, just to reinforce what Alisha just said, based on the significant patient interest and also physician interest that sometimes are blocked because of the P&T from which they are not part of, if there is a signal from society and for CMS here, I think this will trigger an accelerated process. I believe this will be an important milestone. It's my view.

Okay. Okay. Thank you, Michel. So then I guess maybe just -- and I know you've said this, right, you've commented more gradual launch than even you would have expected, and I'm not asking you to give specific numbers. But I think -- investors sort of know what that means, but I guess the real question is, are you basically telling people they should not expect significant sales until we get through the NCD process?

So we are certainly revisiting our very low sales target that we had already for 2021. And as I clearly mentioned during my introductory remarks, what is important is that Alisha and the team operationally are able to make progress. And the progress are based on 3 priorities: it's data, infrastructure and customer access, patient access. And if we're able to do that, then it's very important for the long term. My view is that where we land in terms of patient count at the end of the year will determine somehow a trajectory, which is a bit more solid than what we have today. So we ask for a bit more patience and society is adjusting to this big news. And we've seen, I mean, some of the extreme reaction that I will not comment on. And we, as Biogen, we remain focused on the patient, the customers, making progress and getting at the patient level by the end of the year.

Okay. Maybe I guess one follow-up to that. So if we think about this as maybe you have a little bit more time now to solve some of the operational issues. Maybe you could just talk about what you're doing there in terms of solving those operational issues? And then if you think you could ramp much more quickly if there is clarity around reimbursement when that happens, because the offices will be ready to sort of onboard patients at a meaningful rate.

Yes. I mean, as discussed earlier, we are working on data generation. I think it's all about science and data. And if there is a benefit risk question, I think it's a very fair question that we have the responsibility to address as a company, as a science-based company. So we need to get that out in terms of publication. We have additional tremendous data opportunity in terms of generation with EMBARK and ICARE AD and getting started with the post-marketing commitment, but we'll have other opportunities to communicate and to share that with the clinician, P&T committees, and this will help for the overall understanding of the product profile and engagement peer to peer, and which scientifically that is also very important. This is for the data. For the infrastructure, Alisha, do you want to say a word?

Yes. And for the infrastructure, this is what our teams are trying to help with every single day, obviously, in the appropriate manner. And what you'll see is really the major bottleneck right now. I mean you're going to have several bottlenecks when you look across sort of this challenge, but it does take a lot of time from when that patient tries to get an appointment with the physician all the way to when they get infused. And so every step along that journey, we have teams that are supporting sites and supporting patients whether it be with the amyloid beta confirmation, right? We're working with 2 organizations, obviously, for the CSF testing. We help with where do they go if they have to refer out for LPs. Some of the physicians decide to do it themselves. We also help with the benefits investigation through our Patient Services Organization, and we also encourage the sites to do some of these steps in parallel. What you saw at the beginning of launch is everyone was going step by step, and they were waiting for every step to complete before they began the next one. What we're encouraging them to now do is do things in parallel, so they can start speeding up the process. What we also see across the country, once they get 1 or 2 patients through, things start moving a little more quickly for them.

Okay. And then I guess -- sorry, Michel, go ahead.

Yes. I just want to say that when we get the product across the line of regulatory approval and after a lengthy process and a complex process, as we all know, everybody is excited and wants to see urgent success and patient access, because ultimately, it's all about the patients, but we are here for the long run. And society is getting the -- its act together, and we have to be a little patient.

And one final thing, and I want to talk about some other things outside of this. But I think one other question people have is outside of reimbursement for the product itself, are there any issues with reimbursement for diagnostics that may permit treatment or hurdles in that regard?

This is a very important bottleneck that we had identified before and now that has impacted -- impacting the patient journey even more than what we anticipated. And we have partnership with Labcorp, and we have partnership with the Mayo Clinic, and we see the number of LPs increasing. But certainly, if we could get that reimbursed the way it is for oncology, this will certainly accelerate.

Okay. Michel, one of the -- outside of sort of the launch dynamics, obviously, the other thing that I think investors worry about the most is the competitive landscape. And probably more specifically, Lilly's donanemab comes up a lot in terms of the plaque reduction that, that drug has. So maybe you could just talk about how you think about the competitive landscape and how it's emerging, let's say, over the next 1 to 2 years.

Yes. Great question, Matt. Certainly, and people have categorized neuroscience as being a very high-risk area, and now we see different compounds in Alzheimer's. So maybe the risk is not that high, and we see a momentum because science is breaking. As a company, we always welcome competition, the way we did for MS or SMA. In this very specific case, the market is so large that the more players we are, the better. Clinician will have and patients will have options and the bigger the market will be, this is what I believe. And we are the pioneer in that space, we should not forget. Concerning the plaque. So the way the data is reported, it's based on an adjusted mean change from a baseline of amyloid burden at the outset in the 2 trials. And again, when you have different trials, it's dangerous. It's risky to compare, okay? In addition, I want to say that -- and here, the baseline was different. In addition, I would say -- I would like to outline that the titration regimen is different between the 2 products in the 2 trials. Nevertheless, and importantly, at the months 18, the level of Centiloid being reached is the same or very similar for the 2 compounds, which is important, which is very important, but again, the comparison is uncertain. We have to be very cautious. In terms of the 2 compounds, they don't bind the same way to the amyloid plaque. Aducanumab binds in addition to the soluble oligomers that are toxic, and this is important to take note of. This is one point. The second point is that if for the donanemab study, they stop the dosing when the patient is below the 24 Centiloid, it remains to be seen how durable the effect is on disease progression after stopping the dosing. Today, there is no scientific knowledge with any compound on the durability of treatment and the durability of effect. What we know is after more than 4 years, we see some benefit for the patients. So this key question, okay, it should not be a slogan or a claim, it should be a scientific question that has to be answered by the scientific evidence. It's critical while we move forward and also for payors and for patients. I believe that at the end of the day, science will speak and the patient and physician will be in front of opportunities to make choices, not solely on plaque, but also on clinical benefit, most importantly, on the safety profile, including immunogenicity that is very important in that case. So it still has to play out and Biogen will remain focused. We invest in our data for the long run. And so far, we believe in our product, our data and we move forward.

And I guess another topic that I think people don't talk a lot about, but we know is upcoming next year is you're going to have a another clinical readout for BAN2401 next year. How do you think about that, specifically in terms of your ability to generate 2 successful studies that clearly demonstrate disease implications and that may be changing the landscape again? So maybe you could just talk about your outlook for BAN.

So the environment is rich. We are delighted to have BAN2401 in partnership with Eisai. We have a very strong partnership with this company, and we are here again for the long run. We've seen tremendous data already generated in terms of safety database with the 600 patients in the Phase II, and so far, if I'm not mistaken, more than 1,500 patients. I know that Eisai is engaging with the FDA. Eisai for BAN2401 got breakthrough therapeutic designation, and we work diligently to get the product as quickly as possible in the marketplace. Obviously, the data for the readout of the Phase III will be very important.

Michel, is it possible that, that drug can be filed before the Phase III data?

I think it's possible. Eisai is in charge, and we're working with them. And we are looking at every opportunity to do what makes sense for the patients, and we are driven by that.

Okay. Okay. Good. Helpful. I mean I know we only have a couple more minutes. Maybe we could just talk about some of the other topics that are out there. I guess the first one is TECFIDERA appeal. Maybe just an update on how you guys are thinking about time lines there, when we might hear something?

So every morning, we are looking at the news and we anxiously wait to see what will be the independent decision of judges. And I believe there is still a tremendous brand equity for TECFIDERA in the marketplace. And while we are delighted to see also a delayed uptake of VUMERITY, talking about delayed uptake. This is another case, which shows basically the ability for the company to implement operationally and implement well. And TECFIDERA is really -- is still in the mind of customers and patients. And should we have a positive news, this has to be confirmed by another court in Delaware. And we need to see the implications in terms of the PBMs and other partners. And -- but it's a positive news, big time. It will be a positive news if this was confirmed.

Okay. Good. And then I guess the second thing is you talked about depression, Sage. I mean if you look at Sage's stock, right, investors aren't particularly impressed by that data. So I guess the first question would be, what are people missing, in your minds? And then maybe you could just give us your outlook for CORAL, which is obviously the study that's coming up towards the end of the year in combination with SSRIs.

Listen, we are pleased with the partnership. There is a clear comorbidity overlap with every disease states where we are. The data so far is encouraging, because we have multi trials. WATERFALL met the primary endpoint after 15 days. 50-milligram high dose side effect profile is in line with what we knew. And there is certainly an early onset at day 3, 8 and 12, if I'm not mistaken. There is no suicidal ideation. There is no weight gain and sexual dysfunction, the way we see with SSRIs and other therapeutic alternatives. So I think that based on this profile, we have potentially a product that can be differentiated for major depressive disorders. And now it's up to the engagement with the regulator that Sage is leading. So we are encouraged by the data so far. We look forward for more data points.

And then I guess last thing before we wrap up. You have a business update day coming in the fall here. Maybe you could just give people a little bit of a preview what we should expect you to talk about and what you're hoping to communicate there.

Listen, I'm very excited about that. I've said years over years that the plan A was to build a pipeline beyond aducanumab. This was the prime objective. I'm delighted that you guys will be participating and seeing the forest behind the tree. There are so many compounds in development in a pipeline that is maturing. We have 12 compounds in Phase III or filed, and the many capabilities of a company that is focused on one vertical, mostly which is neurological diseases, for which the unmet medical need is tremendous and for which Biogen is really taking the lead. And we see nowadays since the approval of aducanumab many followers, which is a good sign. So please join the September 21 R&D Day, so that you can see the update on the breadth and the diversification of our portfolio in neuroscience, but in addition, we have 2 compounds in Phase III for lupus. So this is important. This is the engine. This is a company that stands for science and innovation.

Okay. Good. Well, thank you. Thank you both for your comments this morning, and thanks for being with us.

Thank you, Matt.