Biogen Inc. (BIIB) Earnings Call Transcript & Summary

Okay. Moving on to lupus. So litifilimab, you have some upcoming Phase III SLE data expected in the fourth quarter from 2 studies. And then you are running also a CLE study that's going to have data in the first half of '27. So maybe first, just help us set expectations for the 2 SLE studies that are coming out here in the fourth quarter. What are you guys -- why are you confident in success? What are you hoping to see?

Well, I think if people are nervous, it's really because this has been a graveyard for a lot of molecules, right? I mean this is, first of all, a very heterogeneous disease. There are some specialists do even question whether this is a single disease. But there are different joints involvement, different symptoms. I've seen numerous patient panels where one patient will say to another. My lupus is not your lupus. And so trying to find an endpoint that covers all of those things. The other is that people are -- have situations of flare and then they have remission. You've got the utilization of steroids. So there's always sort of some level of background therapy in placebo. And so probably the most important thing is really the patient selection coming into the study. Clearly, our teams have learned from others. You may recall that SAPHNELO of its Phase III did not work, and that was largely related to the use of inside, I think it was in the group. And we have, for instance, already controlled for that as did SAPHNELO with their second Phase III. The other I would say is we faced exactly the same situation with multiple sclerosis. There's also heterogeneous disease. It's something that you treat over a longer period of time. One of the things that's coming out of market research, for instance, now because this is a market that should be the same size as MS, but it's not today. And one of the problems has been the penetration of the biologics. And it's not really somewhat just a fault of the biologics. It's if you're going to treat patients over decades, which is the same thing for MS, you want to save the big guns, if you like, until you think the patient is more serious. So there's been a reluctance to use the biologics because they've only got two. So our brief is that as physicians have more treatment options, first of all, that, that market will grow. And a lot of this is going to be which drug is right for the right -- for this patient at which time. And again, this was exactly the same thing that we went through with multiple sclerosis. There is a heavy predominance of this disease in women and also in African-American women. And again, this is an area where we have a lot of experience, not only in MS, but also in postpartum depression. And that requires a different outreach. So I do think one is we have to make sure that the studies actually read out. But again, I think we have been able to learn from other studies and from our experience. And then from a commercial point of view, I think Biogen is uniquely positioned to really try to build this market. And then, of course, we have the cutaneous lupus coming in, in Q1 of the next -- first half of next year, I think it is.

Yes. What -- and so what do you think about, I guess, SAPHNELO is a precedent on positive study, one negative study. Do you feel pretty comfortable that even if you had a similar result, you'd be able to get approval in SLE on kind of a mixed bag of data?

You prefer having both, but there is at least precedent. And then you also have CRE. So you've got multiple shots on goal here.

You mentioned CLE. I think Phase II, obviously, is next year, but I think there's going to be some 1-year data at the European conference coming up here later this year. thing we should focus on that data set as we think ahead to the Phase III data next year?

The cutaneous lupus is an interesting one to study. First of all, there's -- nobody has been actually approved yet in just cutaneous lupus. Now the distinction is a little bit -- it's really a function of which physician is looking at it because you do have patients with SLE that have some skin engagement, where there's a greater preponderance of the skin engagement, then at some point, the patient gets referred to a dermatologist. So if you like, I think as we look at the segmentation of the market, we know we're going to have to see rheumatologists for SLE, but there might be some cutaneous there, too. And certainly, when you go to the dermatologist and the cutaneous lupus is is more predominant. And that is single organ engagement, and it's also very visible like many other dermatological conditions. So I think the read-through on a Phase II should be although given recent events, you can't be sure of any Phase III, but I think there's a reasonable expectation that there's a high probability of read-through from the Phase II.

Great. You touched on some of the commercial dynamics already, but maybe the related question is just the build of your own team. Where does that stand? Is that more of a end of this year into '27 dynamic as you build out the lupus sales force and footprint there?

So we have started already. Really starting on the medical affairs functions. We have been busy building out that and in all areas, in dermatology, rheumatology, nephrology, epileptology. That will continue into next year. Most of the commercial build-out would be closer to the actual approval. The good news is that for most of the conditions, particularly in the rare diseases, you don't have a huge commercial team to build out. And in lupus, I think we still have some people involved in multiple sclerosis. And so we think we might be able to move some of those, but particularly in the U.S., we might be able to utilize some of the same people for lupus.

Yes. And maybe just remind us, I think you framed the opportunity as an $8 billion market for lupus. Is that...

Worldwide, yes. I mean, if I look at the -- I think the MS market is $25 billion or $30 billion. If you look at the actual epidemiology, it's that size. Now nobody is really jumping to that number yet because it's going to take some time to really get the penetration of the biologics. But I think we look at this as much as a market growth opportunity and a market share. There's going to -- there's so many patients, and it's so heterogeneous. I'm not really too worried about the competitive dynamics because it's going to be which patient for which drug. And it's exactly the same dynamic we saw in multiple sclerosis. And the other is, is that we're going to have multiple shots on goal on this. We have litifilimab, but we're also partnered with UCB on dapirolizumab, which has already demonstrated on positive Phase III complementary mechanisms of action. And then we have an IRAK4 degrader that has entered the clinic. And so we see doing the exact same strategy as we did with MS, which was to have a portfolio of products that are applicable to patients at various times in their disease journey.

Great. Maybe we'll pivot over to one of your other late-stage pipeline assets, felzartamab. This is pretty interesting as you got from Hi-Bio trial ongoing in AMR. We're going to have data in the first half of next year. So I know you had some pretty strong Phase II data that were generated. So maybe just help us think through, again, what's the bar for success here as we look ahead to this next key readout after lupus.

Yes. Maybe before we zoom in, I mean, just on a macro level, I mean, I actually fell in love with immunology when we were developing DUPIXENT years ago when I was at Sanofi. These are multi-indication assets. You're essentially following a biological pathway, a cascade of the immune system, and that can lead to multiple different indications. So on the one hand, that is highly capital efficient because once you've established the safety in one indication, then you can rapidly go into other indications. Now the tricky part of that is that you're going to have a broad array of things that you have to do on the commercial front, which is exactly what we had to do back in the days of Sanofi. And here, we're talking also about an asset with multiple indications. Initially, the first 4 really are in kidney. You've got AMR, you've got IgAN, you've got PMN and you've got MVI, which is basically AMR, except that you don't have any donor-specific antibodies. But we also are looking at 2 non-kidney indications and initiating clinical trials in those. And we have a follow-up to that with the CD38. And the reason we're particularly interested in the CD38 is that one of the things when you're in immunology is you have to always be a little bit careful. I mean you need your immune system. And generally, what we're trying to do is tap down the immune system. But when you do that, you potentially expose people to opportunistic infections, for example. If you take CD20s, great B-cell depletion, but hey, you need those B cells sometimes. The CD38 is really precision immunology. We're going really after 2 things. One is the plasma cells that produce the autoantibodies, but we also have these natural killer cells or NK cells. And so we're actually only affecting the immune system as it relates to these rare kidney diseases. And we leave the rest of the immune system intact. And the other thing that is quite interesting about that is we seem to have something that feels disease-modifying at least for a while. Because when we look at IgAN, as an example, we'll go through a process of 9 infusions. And then we were able to maintain the effect over 18 months with no treatment at all. Now how long that lasts is something that we'll be testing in a Phase III clinical trial. But to us, that gives us a lot of competitive advantage. Now the first one is antibody-mediated reduction. There are about 11,000 patients in the U.S. if you look at the waiting list for kidney transplant, you're going to find that quite a significant percentage of people who've already had a kidney transplant. In fact, we've had patient panels where we had one woman who's undergone already 4 kidney transplants. And it's a very worrying thing for people. So the Phase II study showed that we had an 80% resolution of that. Now smaller numbers, we have to replicate this in a Phase III, but we will be the first to market in this. And the other interesting thing about this molecule versus even some other CD38 is that we're not really we're not really agonizing the complement immune system as some do. And if you're already trying to fight in autoimmune, you don't want to fire up another part of the immune system. And that seems to be unique to this molecule. If you look at the pricing, most recent pricing in IgAN, I mean, if you just took the IgAN pricing, there's about a $3 billion to $4 billion market opportunity in the U.S. alone. Now the interesting thing is that there's a different treatment regimen for AMR than there is in IgAN. So we think we can actually price AMR for a rare disease while still having a competitive price in IgAN. So the opportunity in AMR could even actually be even bigger. But we'll have data for that in the first half of next year as well.

And how do guidelines work at transplant centers? I mean, how important are those as you think about the rollout of this product. As you said, it's like there's a lot of people on the transplant list, I'm sure they're focused on rolling this out as quick as possible to people if it is successful. But did guidelines play a big role in terms of what the uptake curve could look like or any other constraints that we need to think about for this launch as you roll it out, if successful?

Guidelines tend to always follow. This is one where I think the unmet need is very significant. We know where these patients are. And one of the benefits of the Apellis acquisition was that we are now commercializing actively a nephrology product with EMPAVELI. And so we're actually already seeing the nephrologist. We're in -- there isn't a complete overlap between EMPAVELI and AMR, but there are also EMPAVELI patients, some of the transplant centers. So we know where all of those folks are. We're building -- we have a medical affairs organization. This is one where I'm challenging our team, I think we should be able to see quite a rapid uptake. But we'll have to wait and see exactly what the clinical trial data show and what the label is. But that one should be, if all goes well, that should be a relatively rapid uptake, I think.

Yes. Okay. The other one, you touched on this a little bit, but maybe just expand. So if the AMR data are positive, what are the lateral implications for IgAN, PMN, MVI, is there a direct read through to those or are there nuances but how do you think about likelihood of success of the kidney indications in the event that the AMR data are positive?

Yes. So I think actually -- well, it will be a read through, we think should be a read-through for MVI, Although, again, MVI is there's 2 things that could drive the rejection. One is the donor-specific antibodies that you inherited with the transplanted kidney, but there's also your own immune system. And so MVI is really -- it's your own immune system. So there should really be a high probability of success, again, is science, and you really want to see the data first. On IgAN, I think the interesting thing on IgAN is I think if you reduce the proteinuria in the Phase II, hopefully, you can do that in the Phase III. I think what we're going to want to see is replicating this disease-free or this treatment-free period because I think that could be really where we compete. IgAN has become a heavily competitive space. But at a global leadership conference we had at Biogen, we had on the table for everybody, the number of drugs. We had a little dish of all the drugs that these patients are taking. And I've been in this business a long time and done a lot of market research. People define good health as being I'm not taking any medications. And so if you have a treatment-free period, we believe that, that is an enormous competitive advantage in the IgAN space because everybody is going to have roughly about the same proteinuria, then you've got EGFR that could play a role, and we'll have to make sure that we are competitive in that space. But I think it's really going to be the -- not just the convenience, but the psychological benefit of saying, "Hey, I think I beat this thing."

Yes. Okay. Great. You mentioned part of the Apellis acquisition was the access to the renal sales force. And so maybe just give us the latest on kind of how to think about EMPAVELI growth, but also SYFOVRE here as those are kind of the 2 key commercial assets you also brought in-house. I think you guys have guided to mid- to high teens growth. Just should we expect that to continue into next year?

Yes. So one of the -- there were a number of drivers for this. We will -- and we were always upfront about being intentional about doing M&A. Our MS portfolio has been very resilient, but it's clearly not other than VUMERITY, which still has exclusivity in which we're still investing and seeing growth in it has been a declining business. And LEQEMBI did not initially take up the slack, although with LEQEMBI, but also with SKYCLARYS and with ZURZUVAE and Cofal-D, our growth brands are now at least outpacing the decline in the MS business. But we've been more or less flat over the last 3 years. We stopped the decline of revenue and profit. But when I looked out into the future, it was still going to be -- when you launch a product, they're not immediately profitable. And it's just not healthy for an organization not to grow. You need growth in the company. You -- it really was what drives a lot of the energy, but it also drives discipline and most of your metrics work best when there's growth. So we did need to get back to growth faster. But we didn't want to just do it just by the growth. We want to have something that was strategic. Immunology, like I said at the outset, has been a core part of where we want to go. This is a complement inhibitor. So that is into -- again, this is one of these ones. It's a single molecule that's in kidney. It's in a rare blood disease and it's also in eye disease and that's very much in line with what we're trying to do. And all of these products are early in their growth cycle. All of these have intellectual property protection for quite some time. SYFOVRE, we, I think, are off to a good start. We did a lift and shift of the entire commercial team to avoid some of the distraction that causes a dip in sales. And I think you saw in the second quarter that actually if anything, growth actually accelerated a little bit after the acquisition. And I think we can keep SYFOVRE growing. I think when we did the acquisition, we said that we had about the same internal forecast as the Street, which is kind of mid-single-digit growth. but the company wasn't valued on that basis. I mean investors were a lot more pessimistic. And if anything, I would say we're actually a little more optimistic than when we acquired the company on SYFOVRE. It's still a competitive dynamic, and we will need to still invest in the growth of the marketplace. But I think we're encouraged by what we see near term. And EMPAVELI gets us into the nephrology office. I mean if we hadn't done that, we just still invested in medical affairs, but we wouldn't have had a commercial team until we actually got approval for a product. So today, when we go to a we were at a nephrology congress and it just happened that the Biogen booth was right next to the EMPAVELI booth. And so we can literally just do a geographic integration right there at the Congress. And and that makes a difference. And you have different interactions and you've got a every single specialty is different. One day when I retire, I'm going to do a book on the taxonomy of each of these different medical specialists. And you can't underestimate that. The neurologist is different than the oncologist, it's different than the cardiologists and the nephrologists. And this gives us the ability to understand how nephrologists work, how their practices operate build those relationships of trust. And so one of the things which we did not value in our equation, but which we saw as a benefit to the acquisition is potentially a faster uptake of felzartamab by having that team in place already.

Great. Well, I think we're up against time, Chris, but always a pleasure. Thank you so much.

Thank you Terence.