Biogen Inc. (BIIB) Earnings Call Transcript & Summary

Good morning, and welcome once again to Cowen and Company's 42nd Annual Healthcare Conference. I'm Phil Nadeau, a biotech analyst here at Cowen. It's my pleasure to moderate a fireside chat with Michel Vounatsos, the CEO of Biogen. We're very happy to have him show with us today. These are incredibly busy times for Biogen. Michel, with that, I'll hand it to you for some opening comments.

Thank you, Phil. Before we begin, I would like to point out that we'll be making forward-looking statements based on current expectations and beliefs. They are subject to risks and uncertainties, so I encourage you to consult the risk factors discussed in our SEC filings. Today, I will also be discussing ADUHELM approved last year by the FDA for the treatment of Alzheimer's disease under the accelerated approval pathway. Please see the full prescribing information and patient medication guide. But let me get started with the CMS national coverage determination. We believe that our planned data generation efforts will adequately address the concerns that CMS has raised. Specifically, we have initiated a multipronged approach that consists of both clinical trials and real-world data generation. These real world initiatives include the ongoing eyecare [ AD ] registry, a new clinical data research network and Medicare claims analysis. We do believe that the real-world data generation needed to fully characterize the profile of this new class can only be generated over time and with higher levels of drug utilization. This is why we are advocating for a final NCD that provides access that is equitable and broad enough to generate the additional data needed. Beyond Alzheimer's, while our base business continues to face challenges this year, we continue to be in a strong financial position with $4.7 billion in cash as of the end of 2021, modest debt and a core business that is expected to generate a multibillion dollar free cash flow stream in 2022. And we are excited to have a number of value creation opportunities in the near term and also on the horizon, including not only on the health but also lecanemab and zuranolone. With that, I'm happy to jump into the Q&A, Phil.

So Michel, maybe we'll start off with the big picture building on the point that you just made. What is your vision for Biogen over the next 5 years? How will the company create shareholder value? What are the key tenets of that?

Certainly, Phil, and as previously communicated, we have established 4 key strategic pillars to generate value. And if you look at what we have done during the past 5 years to prepare for the next 5 years, we have enriched our portfolio with more than 20 programs in neurology, diversifying the risks, multi-targets, multi-modality, genetically-validated targets. We have advanced our immuno programs in lupus. We have advanced our biosimilars footprint. And we have established a Biogen Digital Health to come in support. So allow me to come back to each one of those 4 pillars, and I will start as a first pillar with neurology. Beyond ADUHELM, we have lecanemab in partnership with SI for which the Phase III should read out during the second half of 2022. We initiated the running submission with the U.S. FDA while we speak. And we are getting ready together with a partner for this very important readout. And in Japan, we will hopefully benefit from an abbreviated review time by submitting data as soon as possible. So this is for lecanemab, again, the opportunity in AD. If I move on to neuropsychiatry and depression with zuranolone, our GABAA a positive allosteric modulator, we are certainly encouraged by the 6 positive data readout. It looks like the profile is for an early onset of activity on the depression symptoms, which are very important for any clinicians treating these type of patients with the risk of suicide during the first weeks and months. So having activity and efficacy after 3 days versus the 5 to 6 weeks is very important for the clinician, and we have that confirmed by market research. The second aspect is obviously an enhanced safety and tolerability profile versus standard of care. And we are very encouraged by the preliminary data readout, and we have initiated a rolling submission soon. We will be initiating rolling submission in the U.S. together with a partner. So 2 major opportunity for Biogen to enter significant disease areas, Alzheimer's and depression, a bit delayed for Alzheimer's for sure and depression and depression but we are making progress in the coming weeks and months will best indicate. If I double down on neuropsychiatry, we have BIIB104, which is a positive allosteric modulator of AMPA receptor for cognitive impairment associated. With schizophrenia, this is very important for those patients affected by this debilitating disease that can eventually have a more normal life, holding a job and living independently. I want to remind you all again in neurology that we have very positive readout of our Phase II TMS07,BIIB131 in ischemic stroke potentially a new mechanism of action, antithrombotic thrombolytic activity but also anti-inflammatory with potentially functional gains as we have seen in the Phase II and superior safety versus standard of care and the dosing potentially at 24 hours. We are very encouraged by this compound. If we move now to the second pillar and the bridge is neuro-immunology and MS in specialized immunology. We have dapirolizumab pegol developed together with UCB and our anti-BDCA2 antibody discovered in-house both of them in systemic lupus in Phase III, 2 Phase IIIs. And obviously, for the anti-BDCA2, we believe that cutaneous lupus could be also a leading indication and position for Biogen. So potentially first-in-class for systemic and leading for cutaneous. We did not yet initiate the Phase III, but we intend to do that in 2022. So this is for immunology. The third pillar is certainly the biosimilars that we have established a few years back. Now there will be soon if the deal close -- when the deal closed, we'll be free from partnership. We can add products and geographies and generate the value that this pillar deserves. Very important activity, too, for biosimilars. We may come back to that. Last but not least, we have established Biogen Digital Health to support our commercial and clinical assets, but also develop digital therapeutics down the way. So a rich portfolio, a much more diversified pipeline to mitigate a bit the risk that was initially solely on neuroscience. It's a matter of a little bit time. We're excited about the next 5 years.

Can you discuss how your strategy is going to change depending on whether there's success in Alzheimer's meaning either the NCD is brought in or lecanemab successful versus should you seem likely that Alzheimer's won't generate revenue for few years?

Certainly, Phil, and we remain very agile and flexible based on those decisions and readouts. The first scenario is that it's the hope for the patients, is that national CMS in the NCD decides to cover the helm and lecanemab is positive. Both partners, SI and Biogen can lead in AD for the longer run, and we'll have potentially 2 out of the 4 antibodies. So this is the positive scenario. In case CMS refuses access for the first approved innovation that targets a defined pathology of Alzheimer's, we will have no choice and to take some measures in terms of costs related to ADU. But hopefully, lecanemab will be positive, and then we will shift the focus behind lecanemab, together with a partner and in addition, we'll get ready for the zuranolone launch. The third scenario is that both are negative, which I hope this is not the case and I cannot believe this will be the case. And then we have no other choice then to take aggressive cost measures and to shift the focus on the zuranolone launch. But overall, the 2 waves of growth with the pipeline progressing and a diversified pipeline, a solid balance sheet, a lot of solid cash flow generation and the opportunity for the longer run.

Mentioned the NCD decision. I think that's something that we're all very much focused on. Can you provide an update on Biogen's efforts to broaden the reimbursement beyond the NCD proposal? Maybe in particular, is there anything you can share about your dialogue with CMS or HHS and your most recent banking on what that final national coverage policy will be?

Yes. This is very important, and we are very respectful of the progress in the draft and CD CMS are 3 concerns. The number 1 is that there are gaps in clinical benefits; two, is that we need more information on the risk of area; and three, we need more data to be generated from the underrepresented communities. The way we have said in our submission to CMS, these are also areas of focus for Biogen. And beyond the data from our Phase III, we have a multipronged approach to generate additional clinical data, which importantly includes real world evidence. These initiatives includes 2 additional clinical trials, the ENVISION Phase IV, but also the EMBARK re-dosing study with 1,700 patients enrolled already. And we're advancing 3 initiatives to generate real-world data. The first one is the ongoing eyecare AD registry with 6 run roll up to 6,000 patients, including at least 16% of the U.S. participants being black or Hispanic population. Second, we are in the process of initiating a clinical data research network, CRM, over 50,000 patients. CDRN is very important to collect a wide range of data on both individuals treated or not treated. This will provide data on treatment response versus standard of care, and this is model out of experience in oncology but also for Biogen in MS. In addition, we are working on Medicare claims analysis, which will encompass a much larger and more representative population of patients to help address diversity challenges and much more. So while additional data from the randomized trials like our post-marketing requirement, are very valuable. Real-world data is more representative of the Medicare population at large, and will be important to adequately address any open question on clinical efficacy and safety. These approaches are only viable if paired with the full coverage for FDA-approved agents in the class of the patients in the real-world setting have access to these agents. Therefore, we respectfully urge CMS to align Medicare coverage for the class of amyloid-directed therapies with the FDA labeled indication of individual products.

Have you -- I think in the past, you've noted that you were going to try to meet with CMS or HHS. Can you disclose whether you've had any face-to-face meetings?

Yes. The team had the opportunity to meet with the working team at CMS. And those meetings were constructive. There were exchange of information and dialogue, and I cannot complain about that.

There is a self-administered subcutaneous formulation of ADUHELM that presumably wouldn't be subject to the NCD since it would be covered through Medicare Part D. What is the status of that subcu ADUHELM? When could it be available? When could it come to market?

Certainly, if the product ADUHELM was approved by the U.S. FDA, it's based on the overall data, the clinical data and not on the modality, just to be clear. So I think it's fair that the product get access based on the body of evidence. Having said that, we are committed to develop life cycle management opportunities for ADUHELM in terms of new population and also additional modalities. We are committed to develop life cycle management opportunities for ADUHELM in terms of new population and also additional modalities. We are committed to the subcu formulation should we get access. And we are engaging with regulatory authorities while we speak for the best development. Our partners at SI are also developing the subcu. And they are also, if I'm not mistaken, committed to those with subcu in the long-term extension of the Clarity data readout during the second part of the year. So we are committed for life cycle management opportunities for both compounds. And I want to remind you that lecanemab has also committed for preclinical investigation clinical research.

The focus recently on ADUHELM been on reimbursement, physicians have also suggested that there's a lack of confidence in ADUHELM's clinical benefit and that's been a big impediment to adoption. You mentioned some trials and real-world experience that you're assembling for reimbursement. When could we see that data? Could that begin to change physicians' impressions of ADUHELM's efficacy? And does Biogen have other efforts to do that?

As you can imagine, Phil, we follow, we are tracking very, very closely the physician perception and efficacy, safety, the willingness to prescribe and the questions that they have. So beyond the positive strata and the negative ones, there is the biggest -- the disproportionate segment, our physician were undetermined. And if we look at the reasons why, there are 2. The first one is coverage decision by CMS. That will be answered in the coming weeks. The second one is benefit risk for ADUHELM. And for that, we need to continue to invest quality time, educational opportunities with the physician. But also deliver new data, the way we have done at CTAD on phosphorylated tau and more. And obviously, we are working still on the publication of ENGAGE and EMERGE, that is nowadays under peer review, and I hope it's a matter of a few days. I really hope. So this will be opportunities to engage and gradually move the needle. But the key element is the coverage decision.

Before moving to corporate strategy, one last question on Alzheimer's and lecanemab Clarity AD study. We expect to see the data later this year. How confident are you that Clarity AD will be successful? And in particular, primary endpoint there, CR, some of the boxes, which actually wasn't hit in Phase II, what gives you confidence that it will be in [indiscernible].

Yes. So it was at coms as a primary endpoint in the Phase II CDR in the Phase III. We have 1,800 patients enrolled. We are progressing well. SI is communicating that the study is well powered to detect a signal. In the Phase II, there was a correlation with those end time of removing of the plaque and clearing the plaque. And this was correlated with a slowing down of the cognitive decline. So these were encouraging signals. And now we wait anxiously for the -- and in the Phase III, it's only 1 dose, still no titration, only 1 dose, 10 milligram. So we wait for the results with optimism.

On corporate strategy, you mentioned cost cutting should the NCD not go your way. Can you maybe give us a bit more detail about how Biogen would adjust the Alzheimer's commercial infrastructure in marketing, depending on the outcome of the NCD and lecanemab's data? Beyond Alzheimer's, are there other places that Biogen can rationalize expenses?

Yes, certainly, we have initiated and communicated the end of '21, the decision to eliminate $500 million, $0.5 billion from our cost base. So we initiated this process. We'll be realizing $350 million, mostly during the second part of the year in 2022, but this is well underway. These are not easy decisions, but is a responsible one in order to preserve our operating results and we'll remain very flexible again based on the coming events. But we are working on that in a responsible manner, and we continue to be dedicated to our strategy, to our R&D engine and we will deliver on our strategy despite these cost decisions -- cost management decisions.

[indiscernible] that it's interested in licensing and acquiring products and candidates. Can you provide any update on your business development efforts? Has there been any change in focus? And maybe specifically, how do you balance returning money to shareholders versus investment in that internal pipeline?

Yes, Phil. And you know that based on the solid cash flow generation that the company is generating, we are able to do both, return capital to the shareholder, but also support our business. And this is what we will do. Always keeping in mind the interest of shareholders, the value generation over time. And we are committed, we are engaged in terms of BD, but we'll be -- we will be doing what we can to preserve a solid balance sheet. We are committed to that. I think it's very important for the company. But we look at an array of potential targets without any haste, without any panic, without any cutting corner and overpaying in order to buy any revenue. We will not do that.

Any update on the search for a new head of R&D to replace Al Sandrock?

I want to say that the process is starting. And -- but at the same time, I am impressed by the leadership that is confirmed out of Priya that I had the opportunity to see when she was in charge of regulatory science and safety at Biogen. We don't wait for the definitive nomination to take place in order to conduct the prioritization of the portfolio, to simplify process, to enhance the velocity of the pipeline, to be as cost effective as we can to embrace digital technologies. And I can be -- I can tell you that I'm really impressed by Priya's leadership, attention to details, involvement on every key process, more to come.

A few questions on your marketed product portfolio before turning to the pipeline. First, maybe on SPINRAZA, which in the recent past was another growth driver. How would you characterize SPINRAZA's competitive position in SMA today particularly with regards to the recent launches of ZOLGENSMA, Evrysdi and SPINRAZA was down in 2021. How confident are you that SPINRAZA will return to growth.

Phil, we do believe that we have a very strong body of evidence from presymptomatic infants to symptomatic adults, and we are able to generate more and more evidence of efficacy and also safety with the adult population where we know that our competition has some major limitations, either they don't have the indication or they are restricted because of those. Obviously, Evrysdi is a serious competitor and so is the gene therapy. Evrysdi was launched as an [indiscernible] in the face of COVID pandemia. So the convenience was certainly a key influencer. But I fundamentally believe and my team too and physicians that the primary leverage point is an efficacy play and not a convenience play for those patients to gain motor function based on this terrible genetic disease. Market research indicates interestingly that the efficacy perception of Evrysdi at the patient level and also at the physician level is decreasing. So we are, in parallel, committed to invest in the life cycle management, and we are initiating the ASCEND study with a higher dose in order to assess the potential residual risk -- unmet need, sorry, that in any case, the 3 DMTs have and concerning ZOLGENSMA the same. One and for all, but not eventually for all the patients, not one for good, but not only for all the patients. We see residual needs and we have initiated the RESPONSE study and the DEVOTE study for higher dose. So we are committed. There is a good momentum. We see this continuation in the U.S. from SPINRAZA are slowing down significantly and we see patients returning to SPINRAZA. And we see the uptake in the emerging geographies being very strong. So we are reasonably optimistic about the opportunity to regain growth over time with SPINRAZA.

Multiple sclerosis nearly had $125 million in Q4 revenue. There's been a nice acceleration there to its launch. Why is that? And how much of the TECFIDERA franchise do you think you could ultimately transfer to VUMERITY?

We are pleased with the momentum behind VUMERITY even if the first months were a bit slow in the U.S. But this product will pass the billion at peak, and this is good. In the U.S., momentum is good, and we are launching ex U.S. in 20 markets while we speak. So a good momentum. This is the efficacy of TECFIDERA with enhanced safety. So for me, this should be the best overall in the marketplace. And in the face of required immune response to vaccinations versus [indiscernible] or anti-CD20, I think our portfolio is well positioned. So VUMERITY is doing well and continues to be resource to win.

Multiple sclerosis is a huge part franchise for you. Excluding TECFIDERA and the CD20, which are facing biosimilar generic competition. What's the outlook for the rest of Biogen's MS franchise? Is a modest contraction reasonable in light of the potential headwinds such as merchant competition? Or is it possible for the franchise even to grow?

So in the short term, nothing can compensate the erosion of TECFIDERA and our MS franchise is under pressure, including interferon in the first quarter of 2022. But VUMERITY is doing well and we'll pass $1 billion, not this year, but at peak, but is doing very well, cannot compensate completely TECFIDERA. We have life cycle management opportunities with TYSABRI subcu being launched in many countries ex U.S. and we have [indiscernible]. And beyond that, we are advancing the portfolio. We have BTK inhibitors or orelabrutinib, that is a highly selective CNS penetrant that could be BTK inhibitor could be developed for all type of MS. And we have our periphecally-active oral reversible BTK inhibitor that could be eventually ideally suited for combination therapy. So our -- and we have our anti-VLA-4, which is a [indiscernible]. So our portfolio is progressing. We are committed, but we have a gap. We cannot compensate for TECFIDERA on the spot, but even VUMERITY and life cycle management are doing well.

Moving to biosimilars, could you explain your rationale behind the sale of the stake in the biosimilar joint venture back to Samsung Bioepis? Why was now a good time for that transaction? And what does the deal imply about your commitment to the biosimilar business?

Overall, we are pleased with the partnership that we've had for so many years, and I think it's a very good return for the shareholders. We have an $800 million footprint approximately with the [indiscernible]. We'll continue to book sales on those. We continue to book sales on LUCENTIS and we will book sales on LUCENTIS and Eylea biosimilars that we have in partnership. We are getting ready to launch LUCENTIS mid this year. Even if in 2022, biosimilars will potentially decrease versus prior year because of the pressure we have in Europe with -- but when the deal is closed, we are free from the partnership, we can add products, we can add geographies. We have very solid biomanufacturing capabilities with the best competitive cost of goods. This is a good hedge vis-a-vis the rest of the strategic pillars, and we will extract the maximum value out of this opportunity without disturbing the rest of the portfolio. From a policy point of view, it adds a lot of also credibility and value to the company when we engage.

How large of a revenue opportunity could the LUCENTIS and [indiscernible] biosimilars be?

So it's a $3.5 billion asset worldwide, the $1.5 billion in the U.S. You can anticipate that 2022 will be a modest revenue contribution but will accelerate in 2023 onwards. We're excited to enlarge our portfolio in more geographies. But the U.S. is certainly key with so many molecules coming out of patents in the coming period.

Your opening remarks, you mentioned a number of pipeline programs. Which one do you think is most misunderstood or unappreciated by investors? So which of the programs that you mentioned, do you think is most likely to become a major contributor to Biogen's revenue and earnings?

Yes. Very often, we are characterized as being high risk, high reward. But as discussed earlier, we have done the best we could to diversify, to mitigate the risk overall as a company with a number of programs in neurology, with specialized immuno with biosimilars and potentially digital health that each one can hold a separate P&L. We are very excited with TMS-007, BIIB131 for ischemic strokes. I think this can be a breakthrough, the Phase II were very solid in terms of functional gains, safety, dosing window up to 24 hours versus tPA, that is 4.5. So we are encouraged by the progress. Now the Phase III very soon. And this can certainly be a true value added for patients and shareholders. We are very excited about those. But I cannot tell you that I'm not excited about the lupus compounds or more.

You also mentioned [indiscernible] in your opening remarks.

Action in terms of efficacy at day 3, which is remarkable and so needed by clinicians and patients at risk. The superior safety profile, the dosing on demand, 80% of the patient in shoreline that benefited from the product to a dose only once more in 1 year. So we can change the paradigm. Safety profile, again, is very important. And so the comorbidity overlap with the rest of Biogen footprint is important. And obviously, if we have the ADU assets or the Alzheimer's assets, there will be also an opportunity to synergize in terms of go-to-market. A bit too early in order to indicate what will be the commercial opportunity. But I can tell you, Phil, that from the metrics we get in market research, physicians appreciate the really fast onset of activity on -- for those patients who are at risk.

That's great. With that, it does look like we're out of time. So Michel, I'd like to thank you very much for coming to the Cowen Conference, and we appreciate your time and the discussion.

I appreciate it, Phil. Thank you.