Biogen Inc. (BIIB) Earnings Call Transcript & Summary

Good morning, everybody. I'm Chris Schott at JPMorgan, and it's my pleasure to be hosting a fireside chat with Chris Viehbacher, who joined Biogen a little bit less than 2 months ago as CEO. So Chris, Happy New Year, and thanks for joining us today.

Thanks. Happy New Year to you.

So maybe just to kick off. It seems like you're joining a company that's kind of at a crossroads. So you've got, obviously, a very exciting new launch in the Alzheimer's side. We've got a large pipeline, but one I think is viewed as kind of high-risk high reward, and we've got a base business that's got some LOE pressures. So can you talk about the key challenges that you see facing Biogen right now and how your kind of plan to prioritize these as you think about your tenure as CEO?

Yes. I mean -- so Biogen was founded over 40 years ago. I'm guessing they were at the very first of this JPMorgan Conferences 41x ago, right, because I think it's probably more than 41 years ago and it's been a very narrowly focused company on multiple sclerosis and very successful by the course that is now something we're calling basically a melting iceberg. It's not a patent cliff, but it's not got growth perspectives. And my job, as I see it is to restore the company to sustainable growth. So there are a number of levers for that. First, we look inside the company and then the 2 biggest opportunities, I mean, quite honestly, having 2 blockbuster products to launch almost simultaneously. I never had that privilege actually at Sanofi. So it is a huge opportunity. Now they're not simple launches, and we can go into that, but lecanemab, clearly is a breakthrough. And so is actually zuranolone. I mean, most people don't realize, it's probably the first new mode of action in mental health in 20 years, certainly for depression. So after that, we have our existing business. The MS franchise actually is quite interesting because there's still a lot of people love Tysabri and love even Avonex. I think we have to look at how are we really spending the right amount of money on that and we have to look at our cost base. But SPINRAZA, I think, actually has opportunity as well, particularly in the adult population. Obviously, in small children, babies, they're being screened now for SMA. But there's an awful lot of undiagnosed and misdiagnosed cases in the adult population. Third opportunity is really the cost base. We still -- we have $5 billion less of profit than we did in 2019. I have to say that hasn't completely percolated through the company so far. And then the fourth is we're in a very healthy financial position, and we'll start to look at some external growth.

Yes. So I guess maybe one of the things I think about is you've had obviously some prior experiences at very large companies. How has that prepared you for kind of taking a company like Biogen, taking kind of a fresh look at a business like that.

I'd say I've got 2 different experiences. I've grown up in the large company model where -- certainly, there's always an element to leading complex organizations being global. But I actually really enjoyed the last 7 years in an entrepreneurial environment. And one of the things I learned was -- one of the reasons I think the biotech sector has become so strong is because of weak decision-making in large pharma and large biopharma. This need to have validation at every milestone before you can raise money, I think, is a healthy thing. And I'd like to bring some of that actually into the company, particularly on earlier-stage projects. Obviously, Sanofi needed turning around as well and rebuilding. So there's an opportunity to bring some of the, I think, potential to look at value creating either acquisitions or business development. So I'd say those things to have helped. But of course, we're a much smaller organization. I actually like the nimbleness of Biogen. I think we had 110,000 people at Sanofi, and we got 8,500, 8,500 is a whole lot more than I've dealt with the last 7 years I have to say.

Bring those 2 together. I guess are you envisioning any strategic shifts for Biogen. You touched on this a little bit moving forward, I guess, as you think about whether it's the focus of the pipeline, whether it's the kind of mix of internal versus external, like how are you thinking about that?

No radical left turns. I would say some redefinition of what we're about. I think Biogen has typically presented itself as a neuroscience company. And I would argue we're already broader than that. Multiple sclerosis is really an autoimmune disease. And I think that gives us some legitimacy to go towards immunology, with zuranolone, we're getting into psychiatry. And with SPINRAZA, yes, it's a neurodegenerative disease, but it's also a rare disease. And so I think we could legitimately expand into the rare disease space. So I don't see us getting into oncology tomorrow. There's enough other people in that space or into cardiology. But I do think we'll widen our aperture a little bit. One of the terrific things about Biogen is it has had the courage and the persistence to go after some areas of real unmet need. But the issue in neurology is that these conditions evolve so slowly that the trials have to be long and they're expensive. And so you get this high-risk, high-reward type situation. And I think we need to balance that out a little bit.

Okay. Okay. So when I think about your ability to do that, does that -- is that something you can do internally as you mentioned you've got some strengths in markets that are maybe outside of traditional neurology? Or is that going to be maybe more of a push on the external side of things?

I think there's -- on the near-term side, I think it's going to come externally. We're in psychiatry with our partner, Sage, but we really don't have another product in that area. And I think it would be nice to flesh that out. I see actually Alzheimer's is becoming a franchise for us. So with our partners Eisai, this isn't just about the launch of lecanemab, important as that is. We have 2 other assets in development. There's an awful lot of studies that can be done as well to build out that franchise. But yes, it will be a little bit of growth. But one of the other areas is research. And I split the role of R&D into development and research, development is really there for the next 3 to 5 years of growth. Research is there for the 5- to 15-year time frame. And I wanted research to be a little disconnected almost or unencumbered by here's where our business is today and be able to pursue science in a little broader way, not again, dramatically differently. But through research, I think over time, we can actually build out a pipeline that's a little broader than just pure neurology.

Does that broadening of the pipeline inherently assume that there's some pulling back of the more traditional neurology kind of opportunities? Or can this be just additive to what you're already doing?

At this stage, I think it's going to be more additive. I think there is an interesting pipeline in there. I think one of the assets, I'm particularly interested in is the Ionis partnered asset for anti-tau. Obviously, major breakthrough data. Alois Alzheimer discovered these plaques and tau tangles in the patients, the [indiscernible] 100 years ago, and it's taken us a century to actually have the first definitive data that says, if you remove plaque, you can have a cognitive function. But I think we'd all agree that there's still more to be done. So tau is promising. We also have 2 compounds in -- for lupus, SLE and CLE, and I think that's actually a promising area. We've got a project in stroke, but that's another one of these high-risk high rewards, and you'll find out at the last chapter, whether it works or not.

Exactly. And thinking about just Biogen traditionally, I think, has done business development through a series, maybe smaller partnerships. Is that what -- would you envision that you're going to stay the course there? Or could we see the company look at larger, I'll say, like multibillion-dollar acquisitions as you look to broaden out the focus of the organization?

Well, I'm going to focus on getting really the things right within the company, sort of the first half of this year. I do think we'll have to turn our attention to some external growth in the second half. And then it's just -- you can have a strategy, but after 35 years, I've discovered, you got to be still pretty opportunistic. You can go fishing, but you don't know whether you're going to eat, fast tonight or anything. And so I think the -- I wouldn't shy away from an acquisition, but obviously that gets you into a different risk profile. I would say within Biogen there's a lot that's already good. So I don't feel a pressure that we have to go do something quickly. But equally, we've got the financial wherewithal, and there is an opportunity to shape the company. I really like these collaborations. When I was at Sanofi, we had a very prolific one with Regeneron. I think Biogen is a really good partner. We're a partner Ionis, we're partnering with UCB, we're partnered with Denali, we're partnered with Eisai. And that's a cultural, I think, strength of the company that they can do that. And that is capital sparing in a lot of ways.

Okay. So when I think about that, seems like that kind of evolves over time. You've got the fire power to do it, but it may be is partnerships needs to...

You don't want to do an acquisition unless you've really got your own house in order. I don't think we're quite there yet.

Okay. Okay. That's helpful. Biogen made some significant cost cuts, I guess, over the last year or so. I think it's about $1 billion of expense pulled from the budget. Would you envision those additional cuts to come as we think about that cost base? Or at this point, you're in a pretty good place?

No, we definitely can look at the cost base. If you strip out the collaboration revenue and the royalties and start doing ratio analysis, I think everybody here knows that we've probably got a -- we have ratios that are not competitive with our sector. So we're certainly looking short term at things like G&A. I think we can look at return-on-investment in multiple sclerosis. Remember, this has been the bread and butter of the company. And so getting that company to reduce the investment on that is you really want to make sure that you know what you're doing with that. There are some costs that are inherent in what we're doing. I mean, we built a factory produce lecanemab that is not currently occupied. So we have enough number of idle costs. We are continuing to spend money on ADUHELM. And to be honest, that's a question that we'll have to figure out. We have to do a confirmatory study by the terms of the NDA. So if we don't do it, we lose the NDA. But if you lose the NDA, maybe this is an asset that has value to others, and we have to evaluate that. And I think we can be bringing a lot more of a return on investment type culture. It's a very gung-ho culture at Biogen, and I don't want to lose that. It's entrepreneurial. It really goes after things, but somewhere along the line, we also have to have some capital discipline.

The time lines around this? Is this -- I think you mentioned the house in order, that is this like kind of a first half '23 or is it...

Yes.

Okay. So we kind of get some clarity as the year goes along that goes. Perfect. Maybe kind of pivoting into some individual products. Alzheimer's obviously, very exciting opportunity here. I guess what are you seeing as the biggest challenges on lecanemab launch? And as we maybe just kind of couple that with what lessons you learned from ADUHELM?

So lecanemab is actually a really interesting product. You think after 35 years in this business, you've seen it all and yet you have something like this come along that's completely new. It has all the hallmarks of a specialty pharma and drug. We're into specialist, biologic, a lot of medical services wrapped around this. But we have the volume of a primary care product. And so that actually creates its own unique challenges. To get diagnosed, you're going to need either a PET scan or a lumbar puncture. There's going to be 3 MRIs over the first 6 months. It's a bi-weekly every 2-week infusion. And you're talking about a huge number, specialty pharma, you're thinking about tens of thousands, maybe hundreds of thousands of patients here. One day, you can be thinking about millions. And of course -- so there's a whole element of how the health care infrastructure has to evolve for this. And of course, then we're also dealing with Medicare in a lot of cases. And so there's going to be budget issues that we have to all be cognizant of. So we have to -- we'll have to work carefully with the system. I think as you've heard from Eisai, we're thinking about maybe 100,000 patients after the first 3 years. But -- and then this launch is not really a reach and frequency model, this isn't about just sending out reps. It's really around working with the system to make sure that we can expand it and make this new treatment available. We're also doing other studies around this. It seems like the earlier you treat, the more benefit you can have. So we have a study called AHEAD that is ongoing in presymptomatic patients. And as I say, we also have 2 other assets in this space that we want to develop.

Portfolio kind of build out over time. Reimbursement, I would say kind of big controversy around this, how do you see reimbursement evolving over the next year or so?

Well, CMS has obviously confirmed that if you get -- if we get full approval we will reimburse on the basis that there is a registry. Exactly what the timing is? We first have to see how long it's going to take to get full approval. The full approval was just submitted on Friday evening -- late in the evening. Is this going to be a 6-month, 9-month, 12-month review? We don't know yet. In general, I think -- though, I believe that CMS -- my personal view is that CMS will approve and reimburse this. Unlike ADUHELM, we've got very clear data with the Clarity study. I mean statistical significance everywhere, not only on the CDR sum of boxes, but also ADAS-Cog and also the activities of daily life, I think the safety issues have been -- are understood and you have to obviously be careful on that front. So I don't really see why this wouldn't be made available. I think what we have as a job to do is really to explain the real benefit of this to patients. So people say, "Oh, well, you know you had a 27% increase or whatever". That doesn't really tell the story. What I look at from more of a commercial point of view is the activities of daily life, we've have a 37% improvement in that. And that's not -- I think people have this view sometimes in -- not in this type of audience, but in the more general public that Alzheimer's is a little bit of memory loss. People don't, I think, fully understand that this is a fatal disease. And this is a progressive disease that's a massive burden on the caregivers. People have to quit their jobs to go and take care of loved ones. You progressively lose your ability to look after yourself. So these activities of daily care is not only memory loss, but it's orientation, it's personal care, its ability to continue with hobbies to be active in the social environment. And that is, I think, quite significant. There's something like 16 million people who today are actively involved with -- taken care of someone with Alzheimer's, many of those family members. So there's a massive societal burden that is only going to grow. And I think we have to really do a good job of explaining that because that sort of comes up in just about every conversation, what's the clinical benefit. This sum of boxes is not actually used by physicians when they see patients. So I think as we get this in the hands of physicians, we'll see who actually is really responding. We're going to do an awful lot of data analysis to try to predict who to responder, but also can we start to predict who might have more moderate to severe ARIA. But I do think this is really an opportunity to provide hope for so many people.

Just kind of back to the reimbursement, just comment whether it's yourselves or Eisai. Has there been much engagement with CMS at this point in terms of their willingness to kind of consider a different outcome in terms of the reimbursement?

So I only know that from what -- this is in the hands of Eisai. We've been working for 8 years together, and Biogen had the lead on a number of things for ADUHELM. Eisai has the lead for lecanemab. So they're the ones who are actually engaging with CMS and I haven't been privy to the actual detailed conversation.

Speaking of just how the commercialization will work. Can you just talk about individual responsibilities to companies and how that's going to split up?

So I say, it's not really a reach and frequency model to start. Usually, you launch, it's a real education campaign and just getting out there and educating physician here. There is an awful lot to think about in terms of this whole health care infrastructure build. So at least in the U.S., Eisai will take on the lead with getting a first initial wave of field force out there, and we are working then with them collaboratively on marketing, on thinking about additional clinical studies they want to do and how do we build up in Alzheimer's business together over the longer term.

And then as we think about kind of geographies outside the U.S., how do you envision that working?

We're going to do that country by country. So I think we have a very strong presence in Europe, for example. So we'll be looking at that. There are some parts of the world like Latin America, where we have a greater presence. They have a much greater presence in Asia. Remember, this is a 50-50 deal. So we have an inherent interest in making this efficient as well. And the reality is that co-promotion and co-marketing, on the one hand, you leverage the abilities of 2 companies, but on the other hand, you can create some duplication. So what we want to do is make this as both effective and also as cost efficient as possible.

In your time in the CEO role, have you -- had you much enter kind of engagement with your counterpart in Eisai in terms of how is that really -- how has that generally been?

So Haruo Naito and I have known each other for many years. My first trip as a CEO of Biogen was to Japan. We spent most of the Sunday together, thinking about how we wanted to work together. I talked to them at least three times this week. So we have an awful lot of interaction. And I would say, because we've known each other, there is actually a tremendous amount of mutual respect. Most importantly, and this is what you really need in the partnership, we have shared values and a shared vision of what we want to build.