Biogen Inc. (BIIB) Earnings Call Transcript & Summary

All right. Thank you, and good morning, everyone. And once again, welcome to the 40th Annual and unfortunately second time Virtual at 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 move right into the Q&A where you can send in your own questions via the little blue ask a question button on the conference portal, and I'll do my best to work them into the conversation. So Michel, thank you very much for being with us here today. Let me hand things over to you.

Thank you, Cory, and good morning, everyone, and thank you for joining us. Before we begin -- next slide. Before we begin, I would like to point out that we'll be making some forward-looking statements. These are based on our current expectations and belief, and they contain risks and uncertainties. So I encourage you to consult our SEC filings. Next slide. Today, I will be also discussing ADUHELM, approved by last year by the FDA. So again, I encourage you to look at the full prescribing information included into the aduhelm.com website. Next slide. First, let me get started by our priority objective to create new franchises and diversify the company for long-term growth and value generation. Biogen has a track record of building new markets and strong commercial execution. We pioneered and maintained leadership for MS. We pioneered and maintained leadership for SMA. We also built a very successful new business with our biosimilars. We have now the priority objective to leverage these capabilities to build new franchises across new therapy areas. Next slide. In the near term, with Alzheimer's and depression, Biogen is positioned to enter two very large new markets, characterized by incredible unmet medical need and, therefore, significant value creation opportunities. If we start with AD, 30 million patients are suffering from the disease worldwide. And while dementia is a clinical symptom of the disease, we cannot forget that this is a terminal disease, representing the 6 leading causes of death in the U.S. We are witnessing the beginning of the wave of scientific breakthroughs in Alzheimer's and Biogen is very well positioned to lead in this space. Additionally, there are approximately 280 people suffering from depression worldwide, potentially a debilitating condition, including three sites for more severe cases. Thanks to the significant progress, what was historically been considered as high-risk, high-reward array of drug development is nowadays projected to be amongst the largest and fastest-growing therapy areas. Next slide. Biogen, as you can see here, continues to advance a leading multi-target, multi-modality, Alzheimer's disease this portfolio that offers many optionalities in terms of drug development, including combination therapies at one stage. These are assets targeting the two defining pathology of the disease, amyloid with ADUHELM and lecanemab, but also programs targeting tau with diverse modalities such as monoclonal antibodies, antisense oligonucleotide, small molecule and gene therapy. The anticipated 2022 milestones on this portfolio include a Phase III readout for lecanemab, very important, Phase II initiation for [indiscernible], our [indiscernible]; and advancement of our preclinical pipeline. I'd like next to spend a few minutes to highlight a few Alzheimer's program beginning with ADUHELM. Next slide. The accelerated approval was supported by clinical data showing that ADO impacted the underlying disease biology of Alzheimer's disease. This includes a robust reduction in the pathological or marks of Alzheimer's disease, specifically for both amyloid plaque and neurofibrillary tangles of cells in the brain. And as a reminder, the Phase III EMERGE study met the prespecified primary and secondary endpoints, showing significant reduction in clinical decline, and patients can receive the high dose of ADUHELM experience significant benefit on measures of cognition and function including the activity of the [indiscernible] Although the other Phase III ENGAGE did not meet its primary end point analysis for both [indiscernible] the more it was associated with greater reduction in clinical decline. Next slide. The launch of ADUHELM has clearly been slower than we expected, very unfortunately, with questions from the community about the product profile, the price and the current uncertainty around market access reimbursement. As an organization, we have focused on three priorities for the U.S. launch, and this starts first with improving the understanding on ADUHELM clinical data. Many aspects: first, at the annual CTAD Meeting last year, we communicated new data from the ENGAGE and EMERGE trials, showing that in addition to having a direct impact on amyloid plaque, ADUHELM treatment also resulted in a reduction in Ptau, phosphorylated tau, the principal component of neurofibrillary tangles. This is the other key pathological hallmark of Alzheimer's disease, believed to be downstream of amyloid beta. This change in plasma pita was correlated with a change in amyloid lag and reduced cognitive and functional decline, and this is very important. This suggests that ADUHELM impacts the underlying pathophysiology of Alzheimer's disease. In addition, we are committed to generating additional data through the EMBARK redosing study, the real-world [indiscernible] study as well, importantly, through the Phase IV confirmatory study for which we expect to screen the first patient in May of this year, and we aim for the study to complete closely, approximately 4 years after initiation. We are working also on the primary manuscript. It's under review at a top-tier journal, and we hope this will be published very soon after data infrastructure. More sites come online with approximately 220 sites now treating patients as well as a continued increase in the utilization of our Aß CSF testing program. A clear progress in the development of infrastructure as we wait for clarity on reimbursement, but despite this progress, too many patients are not being offered the choice of a treatment. And they are very unfortunately progressing beyond the point of benefiting from the treatment. And remember what I said earlier, beyond dementia, this is a terminal disease. Finally, access. We recently reduced the price of ADUHELM by approximately 50%, which we hope will facilitate patient access in a sustainable manner. We are eagerly waiting the outcome of very soon the Medicare National Coverage determination for this class of antibodies. The draft proposal is expected these coming days. However, it's important to remember that final decision will be made in April. Next slide. Next, we have lecanemab, another important anti-amyloid therapy developing collaboration with our key partner, Eisai. We are very excited about the profile of lecanemab, with similar mechanism of action in terms of binding characteristics to ADUHELM. Lecanemab does not require attrition, period potentially allowing the patients to start on the target dose, and has demonstrated a very rapid reduction in amyloid black. And importantly, to date, we have observed a relatively low level in terms of incidence of ARIA. The rolling submission of lecanemab to the FDA under the accelerated approval pathway is ongoing and expected to be completed in the first half of this year. Importantly, the Phase III study of lecanemab is expected to read out during the second half of 2022. Therefore, lecanemab has the potential to be the first anti-amyloid antibody with full approval in the U.S. Eisai, in addition, is currently evaluating lecanemab in presymptomatic population. With ADUHELM and Lecanemab, Biogen and Eisai have the opportunity to provide patients with 2 out of the 4 potential options, critical, even if it takes more time than we want. Next slide. We also have programs directly targeting tau. Unlike amyloid plaque, which accumulates outside of the cell, neurofibrillary tangles are found intracellularly in the neurons, making them potentially less accessible to an antibody-based approach. BIIB080 is an ASO, an antisense oligonucleotide that targets tau mRNA and reduces the expression of all forms of tau, including intra and extracellular. This is a differentiated approach from prior antibodies targeting tau that have reported negative data. We are now actively planning the Phase II study of BIIB080, and we do anticipate dosing the first patients mid this year. Next slide. The second near-term growth opportunity for the company is with depression, a very common comorbidity in patients and caregivers across Biogen disease areas, marketed and in the pipeline. The current standard-of-care of antidepressants are very well documented, taken chronically, slow-acting weeks with well-known side effects. The vision for zuranolone is based on its potential to work rapidly and to continue to provide sustained benefit beyond the period of doses. If the product is approved, these two potential benefits could transform how depression is treated with a target profile of an as-needed short course of treatment for depressive episodes with rapid and sustained efficacy and hopefully favorable tolerability. Zuranolone program now has positive data from three clinical studies in major depressive disorder, all of which show that zuranolone results in a rapid reduction in symptoms at day 3. This is incredibly important, as today patients have to wait 4 weeks or more for the current approved antidepressants to begin working. And we know, for some cases, there's suicidal risk. Sage and Biogen are preparing to start the filing in the U.S. in the first half of this year. We are also waiting data from an additional Phase III study early this year, evaluating whether zuranolone can provide rapid reduction of depressive symptoms together when co-administered with the standard of care. Next slide. In addition to MDD, zuranolone has a great potential to improve standard of care for post-pattern depression, or PPD. PPD is very often underdiagnosed and undertreated despite that it affects approximately 0.5 million new models each year in the U.S. only. Building on the positive Phase III of ROBIN study, we expect data from SKYLARK in mid-2022 with the regulatory filing anticipated in the first half of 2023. Overall, we believe that the opportunities we have, in Alzheimer's, even if delayed, and depression, have the potential to drive growth over the early to mid-2020s and beyond. Next slide, please. As we look forward, Biogen will focus on 4 pillars to drive growth and generate value for the shareholders. First, we are starting from a strong foundation of neuroscience with 25 clinical programs, for which the velocity is good. Second, we'll be building on our expertise in our immunology with MS. We have, we believe, two compelling Phase III programs in lupus. This is an area with a different risk profile. And we are continuing to evaluate the optionality that we have to add more in specialized immunology beyond those 2 compounds, 3 programs in CLE and SLE. Third, we have also the opportunity to expand our biosimilars portfolio from 3 to 6 assets, 3 marketed, 3 in the pipe. We believe our manufacturing capability provides us with a competitive advantage in that space in terms of quality and mostly cost of goods. Lastly, we are focused on accelerating our efforts in digital health to support our commercial and pipeline programs while also creating the opportunity for potential digital therapeutics down the road. As you have seen, we recently announced a new collaboration with TheraPanacea with the aim of leveraging our unique database, I believe, the MS path and more and benefit from machine learning and artificial intelligence to develop digital health solutions for improved patient care, but also accelerate drug development. Next slide. Our progress across these 4 pillars provide us with the potential for two waves of growth, one now and over the next years in terms of opportunity with Alzheimer's and depression, which I just described. A second wave to expand into new areas, such as lupus, Parkinson's and stroke. Next slide. These areas are characterized by, again, incredible unmet needs, a significant opportunity for innovation and value creation. Stroke is the fifth leading cause of mortality in the U.S. and a leading, if not, the leading cause of long-term disability. Unfortunately, only 27% of the patients with ischemic stroke qualify within the window of opportunity to receive tPA, tissue plasminogen A, the approved thrombotic limited to 4.5 hours from the onset of the stroke due to increased risk of bleeding [indiscernible] if administered beyond the 4.5 hours. At the end, we estimate that only 6% of the patients receive tPA, only 6%. With BIIB131, our potential next-generation thrombolytic, we aim to address this gap by extending the treatment window up to 24 hours, while maintaining efficacy and appropriate safety, which is critical. This is why we are so excited to see the Phase II data from native 90 patients, demonstrating that BIIB131 could be administered after 12 hours after the onset of symptoms with no observed incidence of symptomatic bleeding in the brain, revascularization that we can see with imaging and functional gain at 3 months, very encouraging data. Next slide. These additional waves of growth will be enabled by our diversified pipeline. Today, this pipeline includes 31 clinical programs, 10 of which are in Phase III or filed. Over the past period, we have made significant progress to bolster this pipeline by adding over 20 clinical programs. This was in part due to over 30 business development deals, which cover an array of disease areas in order to diversify the portfolio, the pipeline, including MS, depression, stroke, just to name a few. Next slide. In 2022, we have a number of very meaningful milestones again. This includes multiple drug launches, including the continued launch of ADUHELM in the U.S. with potential geographic expansion in all the global markets. Second, VUMERITY in the EU, where we are planning to launch in 20 individual countries. And BYOOVIZ, our biosimilars referencing research in the U.S., which we expect to launch mid this year. Additionally, we plan to have two major regulatory filings this year in the U.S.: Lecanemab in Alzheimer's; and zuranolone in MDD, major filings; and 5 pipeline readouts, including 3 Phase III readouts in MDD, in PPD and Alzheimer's disease. These milestones should make 2022 an exciting year again for the company, with [indiscernible] excellence in execution as we simultaneously build new franchise, compete with our current core while maintaining a very strong cost discipline. Again, none of this will be possible without a base business that continues to generate significant cash flow. Next slide. I would like to discuss Biogen's strong track record and demonstrated ability to execute well. Next slide. As you know, 2021 has been impacted by the erosion of both TECFIDERA and rituximab in the U.S., significant products. We do recognize this near-term reduction in revenue from these two products as well as, unfortunately, the delayed uptake for reasons you know very well of ADUHELM. We did announce that we will implement cost reduction measures in 2022 to better align our costs with our revenue base. The cost reduction measures are estimated to yield approximately $0.5 billion in annualized savings, a significant portion of which will be realized during this calendar year. A portion of these savings will be offset by investment in Biogen's pipeline and priority initiatives. We will be providing you further details once we finalize those in the coming weeks and we'll be communicating that at next quarterly earnings. As a company, we will remain agile and flexible while we progress in the year and as we approach key milestones and market events such as reimbursement decisions. Next slide. How is our performance on MS? Biogen continues to be the global leader in MS. This, despite the entry of generics of TECFIDERA as well as multiple new competitors, our portfolio generated $7.1 billion in revenue over the last 12 months, and our products are well positioned versus competition in the current COVID environment in terms of immune response to vaccinations. VUMERITY is the #1 oral launch in the U.S. since the launch of TECFIDERA, and we are planning to launch in approximately 20 EU markets this year. We believe VUMERITY has the potential to be over $ 1 billion product over time, and you also remember the slow start that we had. As a company, we continue to invest in life cycle management and several milestones were achieved in 2021, such as the intramuscular formulation of PLEGRIDY, the important subcutaneous administration for TYSABRI in the EU, now available in 19 countries, 12 additional countries are expected to come online in 2022. In addition, we continue to support our pipeline in MS, and we bolstered our research with a license agreement with InnoCare, our BTK inhibitor in Phase II CNS penetrant. Next slide. How are we doing on SMA? Biogen also continues to be the global leader in SMA. SPINRAZA generated $2 billion of revenue over the last 12 months and has over 11,000 patients on therapy. SPINRAZA, we believe, remains the foundation of care for SMA. We have a broad label. We have proven efficacy and a well-characterized safety profile, but we continue to invest because there is unmet medical need in SMA. And we pursue, as communicated lately, a new ASO with the potential for extended dosing intervals. Even if efficacy is the priority, I think this will help patients and caregivers, additional real-world evidence to confirm efficacy in adults in both type 2 and type 3 patients, and you know this is a key differentiator versus competitors. A higher dose for even greater efficacy currently being evaluated in the DEVOTE study. And finally, in the RESPONSE study, SPINRAZA following suboptimal response to gene therapy. And in the ASCEND study, SPINRAZA following oral treatment. What we can see is that there is a market growth, thanks to competition. Continued data generation, the efficacy and safety profile in all age groups, further geographic expansion, we will continue, we believe, to drive SPINRAZA, and we believe we can return to growth over the medium to long term. Next slide. How are we doing on our biosimilars portfolio? Biogen has the market-leading anti-TNF portfolio in the EU and generated approximately EUR 800 million in revenue. During the past 12 months, we believe biosimilars are important, and ours help create budget headroom to fund innovation with an estimated healthcare savings in Europe so far of over EUR 2 billion in 2021. In addition, we have commercialization rights to three additional biosimilars across major markets globally, starting with BYOOVIZ, our biosimilars referencing LUCENTIS. We obtain approval in the U.S., in the EU, in the U.K., and we expect to launch in the U.S. in a few months from now. We believe we can continue to grow our biosimilars business with new products entering also new geographies such as the U.S. Our MS, SMA and biosimilars performance continues to be very strong. And I want to acknowledge the work of the entire team at Biogen. Next slide. Lastly, I want to highlight Biogen's strong financial position. Next slide. We are fortunate to be in a strong financial position with the flexibility to allocate capital for potential shareholder value creation. We have a healthy balance sheet, low debt net, and we expect to continue to generate significant cash flow. We ended the third quarter with $3.9 billion in cash, and we generated $2.6 billion (sic) [ $2.8 ] in free cash flow year-to-date through September. Moving forward, we expect to focus capital allocation on investing in our core business and pipeline as well as continued business development while also returning capital to shareholders. Next slide. Before I conclude, let me touch on a critical element, which is Biogen's very strong commitment to corporate responsivity. For many years, we've been recognized as a leader in sustainability. Initiatives like Healthy Climate, Healthy Lives campaigns are very important, and we aim to take critical steps to create a new reality and I believe the world needs that for the way we live and the way we do business. We are very proud that our commitment to ESG is recognized internally, but also externally. We believe that now is a time to advance a shared vision for a more inclusive and sustainable future, one where science meets humanity. Next slide. To summarize, Biogen continues to advance and build a diversified multi-franchise portfolio, the potential for value creation is significant, and we expect two waves of growth. This starts now with Alzheimer's disease and soon depression, and extends further into a diverse set of therapeutic areas with several potential breakthrough therapies that I believe are overlooked nowadays. The delayed uptake of ADUHELM is a near-term challenge, and establishing a leading Alzheimer's disease franchise together with lecanemab is our first priority. We are closely monitoring market events, and we will remain dynamic and flexible. We will continue to execute on our leading core business and closely manage our expense base. The near-term challenges are not defining Biogen but an opportunity to reaffirm our resilience. Our fundamentals are very strong. Building on a robust financial position and sustained leadership on our core business, our future is poised for multiple growth opportunities and value creation. Please review the important disclaimers on the next few slides. And Cory will now move to Q&A.

Terrific. Thank you, Michel. And I know I think you have the rest of your team joining in here now. So feel free to -- we can introduce everybody, but also you can, as we start in with questions, pivot however you'd like. And I'll remind everybody you can ask questions in the portal, but I'll get started here, and maybe with an obvious one. Just discuss the rationale behind ADUHELM's recent price cut, and what impact do you envision this might have on the upcoming NCD, if any.

So allow me, Cory, to introduce my talented team, dedicated talents, professionals to generate value for the patients and for the shareholders. We have our CFO, Michael McDonnell, here on the call. We have our interim Head of R&D, Priya Singhal, so talented. We are delighted to have Priya in the position. And while there is a search we're ongoing, we don't waste time. Priya is really in charge. We have Rachid Izzar, who is the Global Head of our AD Unit. And we have Alisha Alaimo, who is the Head of the U.S., and I think I forgot nobody. We can get started. Cory, can you repeat your first question, please?

Yes. Just the rationale behind the recent price cut for ADUHELM and what impact, if any, you envision this could have on the upcoming NCD.

Thank you for asking the question. What I would like to start by saying is that the initial price was evidence-based, based on the quality and well-documented level of quality that exist in the literature, and we had teams working for more than a year to come. And if you look at comparators, you'll see that this is a price that eventually we could defend. However, we're proving wrong by the reaction of the community, by the reaction of physicians, by, eventually, the reaction of patients and policy leaders. So we decided to take our destiny in our hands and to be proactive and to change the level of quality and basically to make a move. This is courageous. We could have waited and be dictated the need to change over time based on competitive pressure on access decision, okay? And I'm pleased that with the support of our Board, we were able to make the decision. The reaction was very positive. And Alisha will say a few words about that.

Yes. Thank you, Michel. And just to answer the original question about how will influence the NCD. Just now by statute, CMS doesn't take price into consideration when they consider the NCD. However, we have spoken with majority of payers and the price change was very well received by both payers and physicians. And you -- as you may have seen publicly, advocacy groups, including the Alzheimer's Association and us against Alzheimer's acknowledge that the price reduction was an important step for access, and they actually called on CMS to cover this class of therapies. And as far as the impact for patients, the reduction in the price significantly lowers the out-of-pocket cost depending on their type of insurance coverage. And we have heard anecdotal cases of physicians calling patients back who were hesitant because of the price. So this price decrease has had already quite a positive impact in the marketplace.

And Cory, it is just brought to my attention that Healthcare Sectary, Becerra, communicated today, if I'm not mistaken, that with a 50% price drop of ADUHELM on January 1, there is a compelling basis to reexamine the previous recommendation.

Good timing for that. Okay. I guess, around the NCD, you've all talked quite a bit about the various scenarios surrounding this. What do you view -- it might be a difficult question to ask at this juncture, but I have to ask it anyway. What do you view as the most likely outcome at this stage?

So before Alisha jumps into this question that we get every day, I will say, anything that starts to provide access in this country, the #1 market in the world, is very good news. It means that the door is open. And then it's a matter of time with more data, better documentation on the products, more use infrastructure adjusting to, this will be a very good news. As long as there is -- they start to be an access for the patients, with a CD or not CD, what I want to see is that the door starts to be open. Alisha?

Yes. Thank you, Michel. So I don't know if this is a surprise or not to anyone, but we will see the draft at the exact same time as everyone else, which we can expect any day now. And we actually have a team clearly on hold waiting for this draft to be posted. Now many of you know that there are 5 different outcomes, of course, to the NCD. We can't really speculate on which one it will be because we actually don't know. However, after this draft is posted, there is another 30-day public comment period. And then after that, as you know, CMS will assess all of the comments. Any questions that they've asked us in data that we've given them, along with other manufacturers and anyone else who are part of the process. And then we are hoping that the final will be posted by April 12, which we're very committed to working closely with CMS. But as you may have seen in our public comments, Biogen and several other stakeholders are advocating for coverage aligned to the clinical trial patient population. So that is the outcome that we would like to see. And it's also important to remember that the draft in the final NCD can look very different. As we saw in the most recent one with CAR-T, which had a CED in the draft and then it had a cover with restrictions in the final. So our team is prepared for all the potential scenarios, and we anticipate that patient advocacy groups and HCPs will continue to engage and advocate for patient access in the NCD process.

And Cory, people can assume that really the launch is starting once you have reimbursement. I mean, how can you launch with that reimbursement. Nevertheless, I want to compliment Alisha and the team because they were able to deliver good progress during this very difficult past period.

Okay. I have a number of questions in the portal related to lecanemab. And essentially, they're all getting to the same thing. If data from lecanemab later this year are positive, how do you eventually prioritize and position ADUHELM in that product in the market together?

So before Priya gives more details, we are delighted to have potentially a franchise opportunity in AD. And this is very important and having lecanemab, with already a very good profile as per the Phase but we need to wait for the Phase III confirmatory study in order to see the benefit risk and how the franchise will play out once we see the data. Priya, you want to say a word, and maybe Rachid?

Yes. Thank you, Michel. I think it's really important to first note that we have two of the anti-amyloid therapies in our portfolio, this is exciting. We await the Phase III data of lecanemab, while it still is actually pursuing a rolling submission, which is also very exciting, and under a breakthrough designation. I think what's really, really important to remember is that along with aducanumab and lecanemab, we have two agents that specifically target the amyloid plaque, but in addition, also potentially targets soluble toxic oligomers, which might be very important for disease progression. Now there are several similarities between aducanumab and lecanemab, but there are also differences in terms of lecanemab does not need that titration. In addition, it's a Q2 dosing. And finally, I think what's really important is we have to see how the ARIA data plays out in Phase III, while they are pursuing a presymptomatic population and studying it also in that population. With that, I'm going to turn it over to Rachid.

Thank you. I think, Michel and Priya said it all, just to say that we are very pleased by the rising profile of lecanemab and we can't wait to see the Phase III result next year, and then we will adjust accordingly. We'll follow the signs and then we will see how those products will position themselves. But again, ultimately, we believe that the two products will have an important place in the treatment landscape.

Okay. Well, unfortunately, we are now out of time. I have so many more questions I'd love to ask you guys about Alzheimer's and other programs, but we'll have to do it at another point. Michel and team, thank you very much for being with us today, and good luck with all the news that's coming up in the rest of this week.

Thank you, Cory. Have a good week.

Thank you. Appreciate it.