Biogen Inc (BIIB) — Q3 2017 Earnings Call Transcript

Thanks, Dan. Thank you and welcome to Biogen's third quarter 2017 earnings conference call. Before we begin, I encourage everyone to go to the Investors section of biogen.com to find the press release and related financial tables, including a reconciliation of the GAAP to non-GAAP financial measures that we'll discuss today. Our GAAP financials are provided in Tables 1 and 2. Table 3 includes a reconciliation of our GAAP to non-GAAP financial results. We believe non-GAAP financial results better represent the ongoing economics of our business and reflect how we manage the business internally. We have also posted slides on our website that follow the discussions related to this call. I would like to point out that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. On today's call, I'm joined by our Chief Executive Officer, Michel Vounatsos, and Dr. Michael Ehlers, EVP of Research and Development. We will also be joined for the Q&A portion of the call by our Chief Medical Officer, Dr. Al Sandrock, and Dr. Paul McKenzie, EVP of Pharmaceutical Operations and Technology. Before I conclude, I would also like to note that, starting with the Q1 2018 earnings call, Biogen intends to cease publishing press releases related to future earnings calls, earnings releases, and investor events via newswire services. We will post these materials on the Investors section of Biogen's website, www.biogen.com, and issue a statement on Twitter when they become available. Our Twitter handle is @biogen. Now, I will turn the call over to Michel.

Good morning, everyone, and thank you for joining us. For the third quarter of 2017, Biogen generated revenues of $3.1 billion. On a like-for-like basis, excluding hemophilia, revenues grew 13% compared to the same period last year. Including hemophilia revenues from the previous period, revenues increased by 4%. This quarter, we achieved record earnings with GAAP net income of $1.2 billion and non-GAAP net income of $1.3 billion. Our GAAP earnings per share was $5.79, and non-GAAP earnings per share was $6.31, both reflecting record levels. In July, we shared our strategy to lead in neuroscience by developing groundbreaking therapies to address significant unmet medical needs globally. To achieve this, we are primarily focusing our research and development efforts on four core growth areas, along with five key priorities whose successful execution is vital for implementing our strategy. This strategy entails strengthening our core business while also creating new sources of value. Today, we are excited to share developments related to each priority. Overall, we are making positive progress with our core business, which includes maximizing the stability of our MS business, enhancing performance in Spinal Muscular Atrophy, and streamlining our operations to create a leaner model, all crucial for generating substantial cash flow. We plan to reinvest this cash flow into our final two priorities: adjusting our capital allocation strategies and expanding our neuroscience portfolio. We are confident in our potential to lead in neuroscience and are committed to growing our pipeline through both internal research and careful business development collaborations. We believe this strategy will optimize long-term shareholder returns. With this backdrop, I am pleased to discuss our Q3 performance. Our MS core business met our expectations, and we continued to gain strong momentum with SPINRAZA, significantly increasing the number of patients treated both in the U.S. and globally. We have made strides in advancing our neuroscience pipeline, improved collaborations with Eisai and Neurimmune, and streamlined our operations as we transition to a leaner operating model. We are eager to build on our momentum as we wrap up 2017 and move into 2018 and beyond. Now, let’s discuss our first strategic priority, which is enhancing the resilience of our MS core business. This segment is expected to drive near- and mid-term performance for Biogen and serve as a significant source of cash generation. Including $65 million from OCREVUS royalties, MS revenues reached $2.3 billion, nearing the all-time high set in Q2. We continued to see a 3% increase in global patients year-over-year, with a relatively stable patient count compared to Q2. This core franchise contributed $1.1 billion in free cash flow this quarter, essential for supporting our future growth investments. We also strengthened our overall position on U.S. formularies for 2018, which is encouraging. A trend has emerged where five major national plans have recently adopted an open access strategy. Last month, Aetna included TECFIDERA, AVONEX, and PLEGRIDY on their preferred list, and I commend our U.S. team for building trust and showcasing the value of our portfolio to payers. TECFIDERA maintained its global market share and continues to be the leading MS therapy. Revenue for TECFIDERA was a strong $1.1 billion this quarter, reflecting a 3% increase compared to the previous year, with a 9% rise in total patients over the same timeframe. However, U.S. TECFIDERA revenue decreased 4% to $836 million in Q3 from a record high in Q2 due to a slight drop in patient demand. In Q3 2016, TECFIDERA's revenues were positively affected by an inventory build, which impacts our year-over-year comparison. In Q3, inventory levels for TECFIDERA remained flat versus Q2, while in Europe, the number of TECFIDERA patients grew by approximately 16% year-over-year and 4% quarter-over-quarter, and the product has quickly gained over 10% market share in Japan. TYSABRI remains the leading high-efficacy MS therapy, with global revenues of $469 million. U.S. TYSABRI revenues were $267 million, down 8% compared to the previous quarter and down 11% year-over-year. We have noted an increase in discontinuation rates, particularly among JCV-positive patients, as OCREVUS continues to launch in the U.S. Outside the U.S., TYSABRI revenues were $203 million. In Europe, TYSABRI patient numbers rose by 2% since last quarter, thanks to an updated label providing better clarity on patient management. While our MS business shows some resilience, we are actively evolving our operating model, including the recent introduction of a new regional structure in the U.S. intended to increase accountability and enhance customer engagement. Now, let’s move on to our second strategic priority, which is to accelerate SMA. We view SPINRAZA as a crucial growth driver both currently and in the future. We are very pleased with the growth resulting from SPINRAZA's global launch, generating $271 million in revenues in Q3, including $198 million from the U.S. The number of patients on therapy in the U.S. increased by 75% as compared to the end of Q2. In comparison, Q2 revenues in the U.S. had included about $30 million from an inventory build, while inventory levels were stable in Q3. About 10% of U.S. SPINRAZA revenues for Q3 came from maintenance doses, as many patients who completed the four-dose loading regimen in prior quarters did not receive a dose in Q3 due to the maintenance schedule of one dose every four months. Furthermore, over 65% of patients currently receiving treatment are Type 2s and Type 3s, with a growing 20% over the age of 15, indicating that the most serious patients are receiving priority, although significant opportunities remain in other patient populations. The infrastructure for SPINRAZA in the U.S. has also improved, with over 180 treatment sites now administering the therapy, up from 145 last quarter. Additionally, we have more than 250 sites that have submitted start forms. Importantly, we have received hundreds of start forms from patients not yet on therapy, indicating strong demand. We are diligently working to help these patients begin SPINRAZA and also reaching out to the thousands of older SMA patients who may not be aware of the treatment or have not expressed intent to start. To access this broader demographic, we are enlarging our U.S. SMA team. Outside the U.S., SPINRAZA revenues for Q3 were $73 million, with this quarter’s revenues and volume exceeding those from Q1 of the U.S. launch. We have now launched in 11 European countries as well as Japan and recorded revenues from named patient sales in multiple countries across the Middle East and Latin America. So far, we have submitted 20 pricing and reimbursement applications in Europe. This quarter, SPINRAZA was approved in Brazil and Switzerland, with a submission filed in Argentina. Over time, we aim to make this therapy accessible on a global scale. In line with our priority to create a leaner and simpler operating model, we plan to enhance our operations and reallocate resources, aiming to redirect up to $400 million by the end of 2020 to reinvest in prioritized research and development as well as commercial opportunities. To achieve this, we anticipate expenditures of up to $170 million, mainly in 2018, through a restructuring program focused on various strategic operational and organizational initiatives. Moving on to our biosimilar business, revenues increased by 12% to $101 million, and the European Commission granted marketing authorization for our adalimumab biosimilar, IMRALDI. Biogen is now the first company to have approved biosimilars in Europe for the three most commonly prescribed anti-TNF biologic treatments. So, it was a positive quarter with significant progress in our core business. We witnessed resilience in our MS franchise, accelerated advancements in SMA through several successful launches, and continued growth in our biosimilar sector. We believe this strong foundation positions us to create further value for patients and shareholders in the future. We are very excited about the ongoing efforts to both develop and expand our existing portfolio and invest in enhancing our pipeline. Now I would like to update you on our plans to generate new sources of value. Our team has been diligently working to ensure that we have the right capabilities and pipeline to succeed in this area by optimizing partnerships for growth, advancing research candidates, actively seeking pipeline assets, bolstering our business development capabilities, and continuing to build our senior management team. Before I hand it over to Mike, I want to highlight a few key points: First, we renegotiated our partnership agreement with Eisai. Biogen will now receive 55% of profits in the U.S., 68.5% in Europe, and 20% in Japan, allowing us to leverage our strong presence in the U.S. and Europe alongside Eisai's advantages in Asian markets. Eisai has also decided to co-develop and commercialize adalimumab with us, a sign of their confidence in our lead Phase 3 Alzheimer's assets. Additionally, we agreed to reduce our royalty obligations to Neurimmune, which we believe will enhance the long-term financial aspects of adalimumab. Second, we released new data from the long-term extension of our ongoing Phase 1b study on aducanumab. We are encouraged by these results as they align with previously reported findings and support the design of our ongoing Phase 3 studies. We will present detailed data from this analysis at the upcoming Clinical Trials on Alzheimer's Disease conference next week, and Mike will provide further details shortly. Third, we advanced several assets in our pipeline. Enrollment for natalizumab in stroke and BIIB054 in Parkinson's disease has been completed, and we have initiated trials for natalizumab in epilepsy, our tau ASO in Alzheimer’s disease in collaboration with Ionis, and for opicinumab in MS. Additionally, we received a positive readout for STX-100 in idiopathic pulmonary fibrosis. Lastly, we have been actively building our new senior management team, essential for sustaining our momentum. We could not become the leader in neuroscience without our exceptional talent. Camille Lee has joined Biogen as Senior Vice President of the Alzheimer's Therapeutic Area. Dr. Sanjay Jariwala has come on board as Senior Vice President of Worldwide Medical, and Anabella Villalobos is now our Senior Vice President of Biotherapeutic Medicinal Science. Furthermore, we are making good progress in the search for a new CFO and hope to announce something soon. I will now turn the call over to Mike for an update on our recent advancements in research and development.

Thank you, Michel, and good morning, everyone. Last quarter, we provided more insight into Biogen's research and development strategy, emphasizing our goal to lead in neuroscience. We remain convinced that no other area of medicine showcases as much patient need, global economic impact, and scientific promise as neuroscience. We are implementing a research and development investment strategy focused on achieving leadership in this field. I want to take a moment to highlight the notable progress we have made this quarter in our core and emerging growth areas. Starting with multiple sclerosis and neuroimmunology, we are dedicated to investing in research and development for MS to meet significant unmet needs. This week, Biogen is sharing new information through over 80 oral and poster presentations at the seventh joint ECTRIMS and ACTRIMS meeting, which includes comparative effectiveness data for TECFIDERA and TYSABRI, along with updates on various real-world initiatives to enhance the diagnosis and monitoring of disease progression. A key highlight at this meeting will be the presentation of a post-hoc analysis from the Phase 2 SYNERGY trial, which we believe demonstrates a subset of patients who show sustained clinical improvement when treated with opicinumab, a novel human monoclonal antibody targeting LINGO-1. At the 10-milligram per kilogram dosage, we observed that opicinumab was linked to a more significant and sustained treatment response in patients diagnosed with MS in the last 20 years and in those with brain MRI showing lesions with lower myelin content as indicated by magnetization transfer ratio, blood preserves, and relative tissue integrity as indicated by diffusion tensor imaging radial diffusivity. These factors support a biomedically and clinically valid hypothesis that we aim to verify in our Phase 2b AFFINITY trial. Specifically, AFFINITY is a multicenter, randomized, double-blind placebo-controlled study designed to enroll 240 patients with relapsing MS, initiated earlier this year. The trial's goal is to assess the potential for opicinumab to improve existing disabilities in relapsing MS patients through remyelination. We will examine a fixed dose of opicinumab that aligns closely with the dosage from SYNERGY as an add-on therapy for patients adequately managed on their disease-modifying therapy. The study's primary endpoint, overall response score, is a composite measure of both the improvement and worsening of disability over time. Additionally, this quarter, Lancet published new data analyzing the risk of progressive multifocal leukoencephalopathy (PML) in patients treated with natalizumab and JC virus antibody index values through extensive observational studies. The findings suggest that PML risk stays low for patients with an index of 0.9 or lower and increases for those above 1.5. In patients treated with natalizumab over six years, the cumulative risk of PML was 0.2% for those with an index below 0.9 and 2.8% for those with an index above 1.5. We hope these insights will guide physicians and patients in making personalized benefit/risk evaluations with TYSABRI. These findings are already mostly reflected in the EU label, and we are in discussions with the FDA regarding them. We also experienced promising developments in Alzheimer's disease and dementia, where we believe we hold one of the most extensive AD portfolios in the industry. We recently performed an additional interim analysis of the long-term extension of our ongoing Phase 1b study of aducanumab, called PRIME. The updated analyses incorporate data from both the placebo-controlled and long-term extension periods for patients treated with aducanumab for as long as 24 months in the titration cohort and 36 months in the fixed-dose cohorts. In the titration cohort treated for 24 months, amyloid plaque reduction was in line with time- and dose-dependent results seen in the fixed-dose cohorts. In those treated for 36 months, amyloid plaque levels continued to decrease in a time- and dose-dependent manner, with levels in the 10-milligram per kilogram fixed-dose cohort dropping below the threshold that distinguishes positive from negative scans. Analyses of CDR sum-of-boxes and the Mini Mental State Examination found ongoing benefits of aducanumab on clinical decline during treatment. In the Phase 1b long-term extension, the most frequently reported adverse events included headache, fall, and amyloid-related imaging abnormalities. We are eager to present these findings in detail at the Clinical Trials on Alzheimer's Disease Conference next week in Boston. Our partner, Ionis Pharmaceuticals, has recently started a Phase 1/2a trial with BIIB080 or IONIS-MAPTRx in patients with mild Alzheimer's disease and dosed the first patient this month. BIIB080 is an anti-sense therapy given intrathecally designed to selectively lower the production of tau protein in the brain. Accumulation of tau protein signifies Alzheimer's disease and correlates closely with clinical condition. Reducing tau through an antisense oligonucleotide represents a distinct approach in comparison to monoclonal antibodies. In neuromuscular disorders, we shared critical data for SPINRAZA at the 22nd International Congress of the World Muscle Society in France. Notable findings include a new analysis from the Phase 3 ENDEAR study measured by the Hammersmith Infant Neurological Examination. Significant differences were observed in motor milestone responders in infants with disease duration of 12 weeks or less, where 75% of those treated responded compared to none in the untreated group. For infants with a disease duration over 12 weeks at the start, 32% of treated patients responded while none in the untreated cohort did. There was also a statistically significant benefit in event-free survival for infants treated with SPINRAZA with disease duration less than or equal to 12 weeks. Additionally, data from EMBRACE, a Phase 2 multi-center, randomized, double-blind sham-controlled study showed a significant increase in motor milestone responders among infants and children treated with SPINRAZA compared to those untreated. In both ENDEAR and EMBRACE, SPINRAZA indicated a favorable benefit/risk profile, adding to the growing evidence that it positively impacts patients with spinal muscular atrophy, regardless of age or disease stage. Beyond SPINRAZA, we are excited about our gene therapy program in spinal muscular atrophy, which we expect to push into clinical trials in mid-2018. Regarding movement disorders, our anti alpha-synuclein antibody, BIIB054, targeting Parkinson's disease progression has completed enrollment in the Phase 1 trial, and we expect to share findings from the Parkinson's cohort of this study next year. A Phase 2 study of this asset is planned for this year. We remain committed to enhancing our portfolio in both our core and emerging growth areas, seeing significant future potential in acute neurology, pain, neuropsychiatry, and ophthalmology. Regarding acute neurology, we are currently conducting a Phase 2b trial with natalizumab in acute ischemic stroke to improve functional outcomes by reducing brain inflammation post-stroke. The study is fully enrolled, and we anticipate data early next year. This initiative complements BIIB093, an innovative therapy targeting brain edema in severe large hemispheric strokes, aiming for a Phase 3 launch next year. This quarter, we also initiated OPUS, a Phase 2 study for natalizumab, which could potentially serve as a first-in-class therapy for patients with drug-resistant focal epilepsy. With over 750,000 target patients in the U.S. and EU5, we see significant possibilities ahead. The study will include 70 patients over six months to assess the efficacy, safety, and tolerability of natalizumab as an adjunct therapy, with participants continuing into an open-label phase. The primary goal is to evaluate whether natalizumab adjunctively reduces seizure frequency in adults. Mechanistically, our preclinical and clinical research suggests that blocking alpha-4 integrin with natalizumab could lessen leukocyte vascular interactions and stabilize blood-brain barrier integrity, potentially diminishing seizure frequency and severity. In our emerging area of neuropathic pain, our Phase 2b study of BIIB074 in painful lumbosacral radiculopathy is currently enrolling, with results expected next year. We also plan to kick off a Phase 3 program for trigeminal neuralgia and a Phase 2 study in small fiber neuropathy next year. Outside our core and emerging growth sectors, we recently achieved proof of biology for BG00011 in a Phase 2a trial for idiopathic pulmonary fibrosis. For assets like BG00011 outside our neuroscience focus, we will continue development as long as the science remains strong and potentially valuable. The 41-patient Phase 2a trial showed significant down-regulation of the TGF beta pathway in treated patients, indicating the compound's compelling safety profile and effectiveness that supports progression into a Phase 2b study next year. Our key strategic priorities within research and development include expanding our translational capabilities in neuroscience, investing in prioritized assets in core and emerging areas, and enhancing our pipeline. We’ve made notable progress in improving the likelihood of success in transitioning from research to market. In 2017, we moved five programs from research to development in our core and emerging areas, aiming to nearly double our historical productivity and underscore our commitment to bringing novel drug candidates into clinical trials. We plan to maintain or exceed this level of R&D productivity next year. A vital part of our strategy involves leveraging antisense oligonucleotides, which present a promising pathway to expedite clinical progress. We recently established an ASO manufacturing facility in North Carolina to support our expanding ASO pipeline and began building our R&D leadership team to enhance future productivity. Although we are making significant advances in our portfolio, we acknowledge that accelerating our long-term growth necessitates further improvements. Internal productivity is showing promise, but we are also focused on expanding our neuroscience portfolio through external opportunities, which we'll detail in the coming months. In summary, across our portfolio, we see continued leadership in MS, accumulating clinical data in spinal muscular atrophy, an industry-leading Alzheimer's disease portfolio, a strong program in neuropathic pain, a unique stroke clinical portfolio, new biological mechanisms in idiopathic pulmonary fibrosis, and advancements in Parkinson's disease, epilepsy, and ALS, with a growing number of quality drug candidates entering the clinic. I will now pass the call back to Michel.

Thank you, Mike. Now let me share with you how we are thinking about the rest of 2017. We expect that SPINRAZA continues on a strong trajectory in terms of patient uptake in the U.S. and internationally. However, due to the impact of the dosing scheduling, we anticipate SPINRAZA revenue growth in Q4 will be mostly driven by ex-U.S. markets. We expect OCREVUS will have a modest net negative impact on our MS portfolio, and we expect the typical seasonality for MS in Q4. And for expenses, we expect OpEx in Q4 to increase versus Q3, as we invest behind our strategic priorities. In conclusion, I believe we have a clear direction. Our actions are aligned to our strategic imperatives, and everything we do is linked to maximizing shareholder value over the long term. Our market-leading MS business remains resilient. We continued an impressive SPINRAZA launch. We advanced assets in our neuroscience portfolio. We increased our biosimilars revenues in Europe. And very importantly, we enhanced our collaboration arrangements with Eisai and Neurimmune. We intend to continue this momentum, especially with a focus on completing more business development to further expand our neuroscience portfolio so that we can achieve our mission to be the leader in neuroscience. Looking forward, within the next 12 to 18 months, we expect several meaningful readouts across our neuroscience pipeline, including: BAN2401 in Alzheimer's disease; natalizumab in stroke; BIIB067 for ALS; BIIB074 for painful lumbosacral radiculopathy; BIIB054 in Parkinson's; and our gene therapy program for XLRS. Before we go into Q&A, I would like to thank our employees around the world who are dedicated to making a positive impact on patients' lives and all of the physicians, caregivers, and participants in our clinical development programs. The past and future achievements could not be realized without their passion and commitment. With that, we will open the call for questions.

Hi, guys. Thank you so much for taking my question. I'll leave out SPINRAZA patient count stuff for the rest of the call but, Michel, I actually wanted to focus on aducanumab for a minute, and two parts to that. First, I just wanted to think through what the $150 million payment to Neurimmune on the royalty reduction implies for the valuation of aducanumab. And the reason why I ask is because the implied valuation for aducanumab based on this $150 million payment is very different than what the market implies. So I was just curious and just wanted to understand the context of this negotiation a bit better. And then also on aducanumab, I was just curious. How much of your R&D spend is going towards aducanumab right now? And I ask because of the amount of payments Eisai is going to have to make starting 2019, whether that's appropriately reflected in Street expectations for your R&D spend in 2019 onwards or not. Thank you.

So thank you for the good questions. We are very pleased with these new agreements. We believe in the potential opportunity with aducanumab, and therefore, we act in alignment with this belief. And this took a lot of work, and it's probably the most important alliance we've reached in 2017 so far, so I think this is very important. For the $150 million, we are working on our long-term operating plan, and we remain, with the right assumptions, very bullish on the opportunity that we have with this product. With Neurimmune, we have a long-term collaboration and there are many things in play, in the past, in the present, and in the future. And I will say it's logical that working together we achieved this agreement between the two companies. So I would not go much further in terms of the speculation of the potential link, but I think that it's very positive for the overall future profitability of aducanumab if we're able to succeed. So we are pleased with this outcome. Concerning the clinical spend, the only thing I can tell you is that as for the time Eisai starts to contribute meaningfully to the clinical spend in 2019, a large portion of the overall spend will need to occur in 2019 and beyond. Does somebody want to add something, okay.

Good morning, guys. Thanks for the question. I want to get some context for SPINRAZA just for the U.S. Obviously, it's flattish in Q3 and you're also saying that, Michel, for Q4, are you guys seeing discontinuations or difficulties in getting reimbursement, or is this just wave two in the U.S. is more difficult than putting on wave one, which would be the worst patients, the most severe patients? Thank you.

Thanks for the question. We are very pleased with the momentum in the U.S. And having 75% patient growth is not a simple achievement, so I compliment the team. As expected and also as difficult to model as it can be, based on the dosing regimen, the impact of the patients we got in Q1 and on the early access program was fully reflected in Q3 because of the dosing regimen. Over time this will normalize, and that's why we are prudent the way we have been prudent since the beginning of the year, if you'll recall well. So we expect that the dynamic will normalize as the maintenance dose becomes the majority of the revenue, so this is basically the momentum we see. We enlarged the reach. We see a larger proportion of the patients above the age of 15. Meeting with scientific leaders, they are getting more experience on complicated spine in order to dose the patients, and they are investigating potential routes of administration and procedure for patients more complicated, other ones with the fusion, and those ones are the more complicated. And it is anticipated, just to come back because I know that everybody has that in their mind, so yes, we said 60% of the patients have a complicated spine or mostly the patients with the Type 2 and Type 3, mostly the Type 2. But out of this proportion, it's actually between 10% and 20% of those patients who have fusion that are more complex. The others are easier. And apparently, according to scientific leaders, the proportion of fusion ex-U.S. is much lower, just to give some context. So we remain optimistic on the potential of SPINRAZA in the U.S. and ex-U.S., and our peak sales objective did not change.

Thanks for taking the question. I guess I'm just having the same problem with squaring the circle here on SPINRAZA. It sounds like you did very well with new patient adds, a 75% increase in the number of patients on therapy from end of Q2 to end of Q3, and a variety – a large majority of those patients had to receive multiple doses. So I guess maybe not to ask the same question a different way, Michel, but how is it that you can't get growth with that many new patients being added here? There must be some change to gross-to-net or free drug or something of that sort.

The free drug, unless I make a mistake, was 20%. This is correct, so there was a slight increase but not a major impact. Again, it's the 75% patient growth that was dosed, 75% of patient growth that were dosed with the initial dosing regimen and very little of patients with the maintenance dose. This is the dynamic that we see. It is clear that for the later onset of disease and more complicated patients, it takes a bit more time to get those. That's why we have hundreds of start forms that are not yet for patients who are not yet dosed. So this is another dynamic that is not new. But again, as I said, the infrastructure and the system is adjusting.

Hi, good morning. Thanks for taking my question. Maybe, Michel, you talked about the formulary access for MS products. Can you talk on a high level what your expectation is for 2018 net pricing for TECFIDERA and also the other products? And then maybe another question is with Eisai just opting in for aducanumab, and we know that the BAN2401 program is coming to an end, did Eisai have any clarity on the analysis of the results from the 12-month follow-up before they opted in? Thank you.

So I will get started on the market access for 2018, and that is now almost under contract. And as communicated, we are very pleased with the progress for the U.S. And the gross-to-net impact is similar to prior years and the typical contracting arrangements for which our leadership position is helping, as you can imagine. So we didn't see a dramatic erosion in order to maintain or enhance. We saw a very limited one actually. So we are pleased with the momentum, including open formularies and including the win with some major payers like Aetna. So this is an important achievement.

Ying, this is Al Sandrock. In terms of what Eisai saw, they saw all of the same things we've seen so far, which include data from the Phase 1b trial that Mike talked about that we'll be presenting next week, which is the 36-month follow-up in the fixed-dose cohorts and the 24-month follow-up in the titration cohorts.

Hey, good morning, guys, and thank you for taking my question. I'll keep it to one. Are you surprised by the relative strength of SPINRAZA overseas? I guess is there anything noticeably different relative to the U.S. launch that you've seen over there in these early days? Thanks.

Thanks for the question. We are very pleased. And as communicated previously, we did anticipate that, unlike MS, we see that for SPINRAZA, mostly driven by the prevalence of the disease. We see a higher proportion of opportunities in terms of top line revenue ex-U.S. than U.S. So we are pleased with the early launch countries, Germany, a couple of Nordic countries, Japan since a few weeks. But this was mostly driven by Germany and some named patient sales in the Middle East, in Turkey, and in Latin America. Germany is going very strong. We got the journal official in Italy, and you'll recall that we had more than 100 – close to 120 patients on the early access program. And overall, maybe one element that is helping also the momentum in Europe, or ex-U.S., was the very large number of early access program patients that were already identified just waiting to gain reimbursement in order to be shifted to commercial goods. So obviously now, the question is, are we anticipating the same trends that basically many of you have anticipated as opposed – not just linear growth on a country basis ex-U.S.? We believe that based on the sequence of access, reimbursement, and unlocking opportunities in different countries that is not at the same time that this trend will not be the same as in the U.S. I think that this will be a smoother trend in the right direction. And again, overall, it's very nice momentum, and we are trending above what we thought were our internal targets.

Cory, just to put some numbers on it, we had more than 500 patients in the early access program across 18 countries in Europe. That compares to about 60 patients we had in the U.S., probably due to timing a little between when we saw the data and when the drug was approved, so a lot more interest in the EAP in Europe.

Thank you very much, a quick clarification for Al, if I could, and then a question, Michel, for you. Al, on the intrathecal ASO for Alzheimer's, could you just talk about the dosing frequency and the access there in terms of being able to deliver the treatment? And then, Michel, could you talk about your policy on pricing? Of course, pricing has been a significant driver to the MS category overall in prior years, and then the company changed the policy this year, and you've taken single-digit price increases on a one-time basis this year. Is that what we should be modeling going forward? Thanks. And I apologize for the double question.

Geoff, this is Mike. I'll take a stab at the first one. I think it was about intrathecal access for this. It turns out that we don't anticipate any more significant problems in terms of intrathecal delivery with this program than in the SPINRAZA program at all. And the initial studies are really safety dose-ranging findings in Alzheimer's subjects. So we're trying to get an idea of exactly the right dose range. And then from a technical standpoint, we don't see or anticipate any more significant challenge than what we've seen with SPINRAZA.

So concerning the second question, let me start by saying that we are very pleased with the resilience of our MS portfolio. That is so important in terms of cash flow generation, and we intend actually to continue this momentum. We organized a meeting in a few days with all the Biogen leaders, where we are going to recommit so that we can defend as much as we can. The market share where we speak is holding at 38%. It was 38.3% before. I don't know when exactly. And as expected, the OCREVUS launch will erode the share. And if I look at the performance over the last two quarters, including OCREVUS, that was still a minimum contribution, it is the last best two quarters ever for Biogen, so it's not a cliff. And we'll continue to drive the activity to generate demand and volume, and we will not comment on the price policy.

Good morning, guys, congrats on your results and all the updates. Just to come back to aducanumab, on the updates with Eisai and Neurimmune, how should we think about these? Were these proactive moves on your end or more opportunistic moves after overtures from those companies?

So I will not intend to the details of the first move. These are contracts that were signed a few years back. We see data coming in the Phase 1/1b, and we are relatively pleased with this data. We'll hear more at CTAD, and I thought it would be an opportunity to see how we could improve the operation or give the best chance for the operation and the core promotion the day we have potentially the product, and therefore playing out who's the best where. And obviously, I have the agenda to increase the opportunity for Biogen, and I think that with the two deals, this is what we are achieving. But it's a win-win, and the partner at Eisai gets also the opportunity to co-promote the MS portfolio, which is important. So we are very pleased with these two upgraded, I would say, arenas.

Great, good morning. Thanks for taking the question. I'd like to just go back to SPINRAZA one more time. I'm sorry for starting to beat this too much. Can you just help us because the numbers don't square? And I'm just trying to figure out what piece we may be missing. So if you back out the inventory from the second quarter, you had 32% sequential revenue growth, but you had 75% growth in new patients. And I thought at the beginning, you said that 10% of patients had a maintenance dose. So it seems like you almost doubled – I mean a little less, but you had substantial – hundreds of new patients added on and some patients taking maintenance dose. So it seems like the price per patient has come down by 40%. So is that right, or what else are we missing in those numbers?

Hey, Matthew, this is Matt. Let me try to help clarify. So first, when we say 75% patient growth, what we're looking at is at the end of second quarter to the end of third quarter. If you look at the number of patients on therapy at the end of the second quarter versus at the end of the third quarter, we had 75% more patients. Now how many of those patients at the end of the third quarter received one, two, or three doses is unclear. We haven't revealed that. So that's probably part of the reason it's a little more difficult for you to square that math. And the other thing we talked about was 10% of the revenues came from patients who had been on a loading dose in prior quarters, so there's a lot of dynamics here. And the nature of loading doses versus maintenance doses I know makes it a little bit complicated, but that's how the math plays out. So I don't think it's a function of gross-to-net impacting. As you saw, we believe it's 20% of patients are on free. It's more a function of just the timing of doses. And as we said, we expect this is something that normalizes over time. I think the other thing you're all trying to solve for is the commentary we said about Q4. We said the majority of growth is expected to come outside of the U.S. I don't think the message is that there's no growth in SPINRAZA in the U.S. I think the message is that there would be growth in the U.S., but the majority of growth would come from outside of the U.S. So I don't think we're trying to send a message that you're not seeing growth in SPINRAZA in the U.S. We're just comparing it to the dynamics in the rest of the world. Does that help?

Yes, I think it does. And I think you've commented on ex-U.S. trajectory. But should we consider – I guess maybe you could just give us some guideposts on what's going to grow ex-U.S. trajectory. Is it new country launches or additional patients in existing countries?

You can assume new country launches would make – we believe new country launches will be one of the drivers there that could be. As you just look at the comments we've made, Germany and Turkey made up a majority of the rest of the world sales. But as you look at the countries that have already approved and some of the traction we're making, you're going to see more diversity across other countries. That's our belief.

But Germany still has a long way to go, so you can actually expect both. But in the first phase, obviously the new product launches in new countries like Italy, while we speak, will add momentum, should add momentum.

Hi, good morning thanks for taking the question, maybe one for Michel or Mike. You both referred to business development looking externally. Neuro focus, maybe just give us your latest thoughts on early stage, later stage, how you're thinking about business development and maybe the cadence of the deal or deals. Thanks.

I will begin, and Mike can provide additional details. First, we have a strong cash flow generation, which we anticipate will increase significantly after 2019, when our royalty payments for TECFIDERA reduce. We will ensure that our capital allocation maximizes shareholder returns. Unlike in the past, where most of our earnings were returned to shareholders through share repurchases, we will now prioritize building our neuroscience pipeline while still considering share buybacks based on the stock price and other factors. We are exploring various opportunities. Eisai and Neurimmune required considerable time, and our sweet spot at Biogen continues to be in the early stages. We will be cautious if we venture beyond the early-stage valuation of such assets or companies. Mike?

Yes, I'd add just a little bit to that. We're quite committed to a couple of things within the R&D portfolio. Number one was increasing productivity of our existing pipeline, and number two was to be able to add important new assets to the pipeline. So we're quite committed to portfolio growth. Michel mentioned – our sweet spot, we believe, is in early-phase clinical assets because of our ability to really derisk those and advance those through proof-of-concept well. But of course, we look within that sweet spot and beyond. We've got a number of active discussions ongoing. We're augmenting our external innovation capabilities. We've been bringing online more search and evaluation, and we're really retuning a lot of the entire R&D organization and beyond to be more externally oriented. So I think that you will see over time both an increase in the productivity of the existing portfolio and a number of assets coming into the portfolio.

Good morning and thank you for including me. I have a question regarding the gene therapy platform. It's great to know that you anticipate starting your trials in mid-2018. My question pertains to manufacturing. Is there a chance to improve both capacity and cost? There are concerns about the difficulties in obtaining enough material to treat the entire patient population, especially beyond just Type 1 SMA. The cost per therapy appears to be in the hundreds of thousands of dollars per patient. Have you managed to move away from less stable transactions to something more predictable? Will you be addressing the cost structure? If possible, could you provide some key milestones related to that?

Sure, Ronny, this is Paul McKenzie. Thanks for the question and thanks for your great recent gene therapy seminar that you gave. A lot of people really benefited from that in the industry. You bring up a great question around our ability and beliefs around our development and manufacturing capability. As I shared with you before that we have doubled down on our development capability. We believe that will allow us to drive to a gene therapy platform that's industry-leading. We also have invested in manufacturing partnerships and platforms that allow us to do these activities, both development and manufacturing excellence, in parallel. We're very excited around our progress around our clinical supplies for the second half of 2018 dosing. And we continue to make great strides on our PCL development for the future commercial process. So more to come in the upcoming months, but we believe we're well positioned to continue to drive our agenda in gene therapy across the portfolio as a real platform play.

Ronny, this is Mike. Just following up on Paul's comments, manufacturing is certainly one area where we believe there's an opportunity for real competitive advantage in a platform approach that could be attractive for SMA and beyond. Within SMA in particular, there are a number of things that we are quite focused on, which is the right patient subtypes. We certainly have gained a lot of experience with patient subtypes within SMA with our SPINRAZA experience. And I think along with that are going to be important things that we're looking at, which are delivery rout timing of dosing administration, potential combinations with SPINRAZA. And of course, front and center in our mind is how all that ties in with clinical safety, and I think that a lot of this still has to play out. So between manufacturing, patient sub-type, delivery route, safety profile, those are key elements of our gene therapy strategy.

Hey, thanks for the question. Given the update on the Eisai opt-in, can you just remind us with the BAN2401 data coming, how to interpret that from the standpoint of a high hurdle given aducanumab's advancement in Phase 3 and so far ahead, how you would think about whether there would be two Phase 3 programs or just the fact that there's a high hurdle for this program given that they've now opted in? Thanks.

Mike, this is Al. First of all, it's prespecified in the agreement what the hurdles actually would be, and so there's that. The way I look at that data is first I want to see. Is there plaque reduction with BAN2401? If there isn't, then I don't know how to interpret the rest of the data. If there is plaque reduction, then the next thing we want to see, is there at least a trend or a favorable effect on the composite measure, which includes things like CDR sum-of-boxes, which would allow us to compare the effect of aducanumab with BAN2401. And then finally, of course, we need to look at the safety, what are the rates of the key adverse events, such as ARIA. And then with that, we'll make a decision. But as I said, the contract prespecifies what the efficacy hurdles are.

So thank you all and have a great day, bye for now.