Biogen Inc (BIIB) — Q1 2018 Earnings Call Transcript

Thanks, Dan. Thank you and welcome to Biogen's first quarter 2018 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 will 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 am joined by our Chief Executive Officer, Michel Vounatsos; Dr. Michael Ehlers, EVP of Research and Development; and our CFO, Jeff Capello. Before I conclude, I would also like to note that starting with the Q2 2018 earnings call we will post press releases related to future earnings calls, materials, and Investor Events on the Investors section of Biogen's website, and issue statement on Twitter when they become available. Now, I will turn the call over to Michel.

Thank you, Matt. Good morning everyone and thank you for joining us. First, let me begin with some financial highlights. Biogen started 2018 with first quarter revenues of $3.1 billion. On an apples-to-apples basis, excluding hemophilia, revenues grew 15% versus the same period a year ago. Including hemophilia, revenue grew 11%. First quarter 2018 GAAP earnings were $5.54 a share, a 60% increase versus the same period a year ago, and non-GAAP EPS was $6.05, a 16% increase versus the same period a year ago. We are pleased with our double-digit top-line and bottom-line growth. Our new management team is taking meaningful action to secure our long-term leadership in neuroscience, including strong execution on our core business, a renewed focus on business development, ramping up our internal R&D productivity, and implementing an enhanced operating model designed for the future. Now let me review the solid progress we made in the first quarter. First, our MS core business including OCREVUS royalties delivered revenues of $2.1 billion. Globally, our core franchise remained resilient as reflected by continued growth in the number of MS patients and new starts on Biogen therapy. In the U.S., the good news is that we saw improving demand for our MS products and our discontinuations remain relatively stable. However, we saw the usual seasonality and a larger than expected inventory drawdown. Outside of the U.S., our volumes grew in our priority markets and we continued our strong progress in the emerging markets. Overall, this performance is in line with our expectations, but there are some puts and takes that Jeff will discuss in more detail. We remain absolutely committed to our MS business and we are furthering our lifecycle management initiatives by advancing the development of BIIB098 with our partner Alkermes. We have planned to file for regulatory approval in the U.S. later this year. By initiating efficacy studies and further data generation for the expanded internal dosing for TYSABRI, as we build on the data presented at ECTRIMS. By beginning the development of PLEGRIDY IM as another potential convenient and efficacious option to bolster our market-leading interferon franchise and by continuing to pursue Opicinumab as a potential remyelination therapy. Second, SPINRAZA, the only approved medicine for SMA, generated global revenues of $364 million. The number of patients on SPINRAZA grew to approximately 4,100, an increase of over 25% from last quarter and Jeff will be providing more details on this performance. Overall, worldwide SPINRAZA performance was slightly ahead of our expectations, as lower than expected U.S. uptake in the adult segment was offset by stronger than anticipated performance outside of the U.S. We will continue to focus our efforts and resources on the more than 5,000 untreated pediatric and other patients in the U.S. and an even greater number of untreated patients outside of the U.S. that we believe will benefit from SPINRAZA. In the U.S., we believe we have treated more than half of the infants and close to half of the pediatric patients where we believe much more opportunity remains. At the end of the first quarter, approximately 25% of patients treated in the U.S. were adults, 18 years or older, an increase from 20% last quarter. We believe this is a very encouraging trend, particularly now that we have expanded our sales team and can dedicate more resources and efforts to this large pediatric and other segment of the SMA population. Outside the U.S., we continue to expand access and we are now treating over 1,800 patients. We believe the rapid and sequential reimbursement approvals and future launches are critical to achieving our long-term goals. I'm especially proud of our team's success in securing reimbursement in an additional seven markets, meaning we now have reimbursement in 24 countries, of which 17 have achieved formal reimbursement and seven have individual case-by-case reimbursement. We now have formal reimbursements covering over 400 million lives ex-U.S. and we expect to receive formal reimbursement in at least seven more countries by the end of 2018. In summary, beyond the seasonality and channel dynamics, our core MS business continues to be resilient and we continue to see significant future growth potential for SPINRAZA. Third, we expanded our neuroscience pipeline and capabilities further. We added BIIB104, a Phase 2 asset for neuropsychiatry, and we entered into an exclusive 10-year collaboration agreement with Ionis that we believe will differentiate Biogen as the leader in developing ASO-therapies for neurological diseases. We believe our exclusive access to Ionis's market-leading ASO platform for the CNS is a remarkable competitive advantage that has the potential to generate a steady flow of transformative medicine into our pipeline. Our cash generation remains very strong and continues to provide us with significant optionality and flexibility in terms of capital allocation. Importantly, and as we have demonstrated in the past, we are committed to maximizing returns over the long-term for our shareholders, something that demands a thoughtful approach towards all our investments. As you can see, our newly aligned management team is implementing our updated strategy and delivering noticeable results. We remain highly focused on executing well on both our MS and SMA core businesses. We are working to create a leaner and simpler operating model and we are strategically allocating capital as we invest to develop and expand our neuroscience portfolio, again with the objective of maximizing shareholder returns. I will now turn the call over to Mike for a more detailed update on our recent progress in R&D.

Thank you, Michel, and good morning everyone. Last July, we communicated our vision for securing definitive leadership in neuroscience. This past quarter we have executed against our goal to meaningfully enhance our pipeline by adding or advancing five clinical-stage programs, improving our research productivity, and bolstering our portfolio of pre-clinical assets. I'd like to talk about how we continued that momentum in the first quarter across our core and emerging growth areas. Starting with MS and neuroimmunology. This week we are presenting data at the 70th Annual Meeting of the American Academy of Neurology or AAN, which was also presented at ECTRIMS, regarding the real-world use of TYSABRI, and the potential impact of extended interval dosing on the risk of PML. A post-hoc analysis of data from the touch database supported an approximately 90% reduction in the risk of PML when taking TYSABRI using extended interval dosing as compared to standard dosing. Based on these data, we're accelerating efforts to generate more data evaluated in the efficacy of alternate dosing. If this additional research supports a high level of efficacy with a lower risk of PML, we believe it would represent a significant advancement in the treatment of MS. This builds on our broader risk stratification efforts for TYSABRI including the use of JCV index values. Earlier this month, the FDA approved an updated label highlighting the association between index values and the risk of PML. Further, Alkermes will be presenting data at AAN from the EVOLVE-MS-1 study, which is a Phase 3 open-label long-term study of our partnered monomethyl fumarate prodrug BIIB98 in patients with relapsing remitting MS, with 528 patients enrolled to date. In a one-year interim analysis of exploratory efficacy endpoints, the annualized relapse rate in patients treated with BIIB98 was 0.16 and there was a significant reduction in the number of gadolinium-positive lesions from baseline to year one. These preliminary results for annualized relapse rate and MRI parameters support BIIB98 as a potential oral treatment option for patients with relapsing remitting MS. Alkermes is planning to file with the FDA by the end of the year. In other areas of MS, given their well-characterized efficacy and safety profile, and many years of patient experience, we believe that interferon therapies will continue to play an important role for MS patients. To that end, and as Michel mentioned, we are pleased to announce plans to develop an intramuscular formulation of PLEGRIDY with the goal of reducing injection site reactions, ultimately with the aim of delivering a therapy with safety and tolerability comparable to AVONEX, along with the efficacy and dosing convenience of PLEGRIDY. Finally, we continue to advance the Phase 2b study of Opicinumab as a potentially transformative therapy for many MS patients by promoting remyelination with the goal of improving pre-existing disability. All of these are examples of how we continue to innovate, aspire to create new options for MS patients, and aim to maintain our long-term leadership position in MS. We believe our current MS portfolio uniquely benefits patients across the full spectrum of the disease and we are committed to pursuing new advancements to address the remaining unmet needs of MS patients. I'll now turn to our progress in Alzheimer’s disease and dementia. We continue to advance our leading Alzheimer's portfolio with multiple assets across complementary modalities and pathways, including the industry's most advanced program targeting beta amyloid. We presented a new analysis of the Phase 1b PRIME study of aducanumab at AAN. In the 10-milligram per kilogram group, aducanumab demonstrated up to a 71% reduction in amyloid plaques on the centelloid scale, a method used to standardize PET results. This is the largest degree of plaque reduction ever observed in the field. We believe each new analysis of the Phase 1b data reinforces aducanumab's position as the most advanced potential disease-modifying therapy for Alzheimer's disease across the industry. Also targeting beta-amyloid, BAN2401, the A β antibody currently being developed by our collaboration partner Eisai, is continuing to progress to the final 18-month readout in the third quarter of this year, and the BACE inhibitor elenbecestat continues to recruit in Phase 3 studies also being conducted by our collaboration partner Eisai. Beyond A β, we believe that Tau plays an important and complementary role in Alzheimer's disease pathology and we are advancing a suite of Tau assets. We have begun screening patients in the Phase 2 Alzheimer's disease trial of BIIB092, the anti-tau antibody we licensed from BMS last year, and we expect data from the Phase 1 study of BIIB076, another anti-tau antibody, by the end of this year. Further, our first-in-class Tau antisense oligonucleotide BIIB080 is advancing in Phase 1 studies. Turning to neuromuscular disorders, we made significant progress in our strategic priority of spinal muscular atrophy. In March, we presented important new data for SPINRAZA at the Muscular Dystrophy Association Clinical Conference. New interim Phase 2 results from NURTURE studying pre-symptomatic infants with SMA showed that all infants treated with SPINRAZA were alive, did not require permanent ventilation, and showed improvement in motor function and motor milestone achievements compared to the decline normally seen over the course of the disease. All NURTURE participants achieved the age expected WHO motor milestone of sitting without support. We also presented a case series of five SPINRAZA-treated patients with SMA Type 2 or 3 between the ages of 17 and 19, upon their last visit, showing stable or improved motor function and improved quality of life. These data are important and support the clinical value of SPINRAZA for older patients who represent the majority of the current prevalence of the disease. We aim to continue to build on the body of data in this patient population over time. At AAN this week, we are presenting interim results from the SHINE open-label extension study for patients who have transitioned from the ENDEAR study, demonstrating long-term benefits for infantile-onset SMA in terms of both improved motor function and longer event-free survival. In collaboration with Columbia University, we are also presenting a case study of 14 later-onset patients between the ages of two and 15 showing that with SPINRAZA treatment, they were able to walk longer distances, while experiencing decreases in fatigue. In February, the end-of-study results from the SPINRAZA Phase 3 CHERISH study were published in a prominent medical journal, another important acknowledgement of the unprecedented benefits that SPINRAZA provides to later-onset patients. Biogen remains committed to advancing the standard of care in SMA beyond SPINRAZA. We continue to advance our gene therapy program in collaboration with the University of Pennsylvania, with study initiation expected in the middle of the year. But we are not stopping there. We believe that the future treatment landscape may involve combinations of sequential therapy across different modalities. We have heard reports that seven of the 15 patients in AveXis’ Phase 1 gene therapy study have subsequently gone on to SPINRAZA, suggesting that clinical experience to date may support the utility of ASOs in combination with gene therapy. Sequential or additive benefits of gene therapy in ASOs could include additive effects on protein levels on a per-cell basis, complementary distribution and transduction across the CNS, and durability and stability of episomal transgene expression. These are some of the reasons we are actively pursuing a strategy to evaluate SPINRAZA in combination with gene therapy, but simply, we do not believe gene therapy will replace ASOs but rather provide a complementary modality. Moving to our progress on movement disorders. At AAN, we are presenting Phase 1 data for BIIB054, our anti-alpha-synuclein antibody for Parkinson's disease. BIIB054 demonstrated favorable pharmacokinetics as well as a safety and tolerability profile, which support advancement into the ongoing Phase 2 trial. At AAN, we're also presenting Phase 1 data for anti-tau antibody BIIB092 in progressive supranuclear palsy, which was well tolerated and demonstrated reductions in CSF pre-tau levels of over 90%. We laid the foundation for our entry into neuropsychiatry this quarter, with our agreement to acquire Phase 2b ready AMPA receptor potentiator now called BIIB104 from Pfizer. This transaction has now closed. BIIB104 is a first-in-class molecule initially targeting cognitive impairment associated with schizophrenia or CIAS, a devastating aspect of schizophrenia with no current treatment options. We believe BIIB104 has compelling data from a number of distinct early clinical studies demonstrating functional circuit activation as measured by FMRI, treatment effects on relevant domains of cognition, and the potential for a favorable benefit-risk profile. In particular, the multiple ascending dose study in stable subjects with schizophrenia demonstrated dose-dependent effects on improvement from baseline to day 14 across multiple cognitive domains including working memory, short-term memory, verbal recall, and reasoning. Importantly, we saw correlation to this clinical evidence with plasma exposure. We believe this molecule is differentiated from prior compounds in the class due to its high potency and favorable PKPD profile, which we believe allows for an improved therapeutic index. We plan to initiate a Phase 2b trial in CIAS by the end of the year in parallel to exploring additional studies across other indications supporting our core growth areas. Within acute neurology, we are excited about the potential for BIIB093, our first-in-class IV glibenclamide therapeutic targeting brain edema in large hemispheric infarcts. We plan to start our Phase 3 study in the middle of this year. We also recently initiated the Phase 2 study of natalizumab in drug-resistant focal epilepsy and we dosed the first patient last month. Within neuropathic pain, we are advancing BIIB074 into Phase 3 for trigeminal neuralgia, initiating activities outside the U.S. in parallel to FDA engagement. We expect to dose the first patient by the end of the year. We have completed enrollment in the Phase 2 study of BIIB074 for painful lumbosacral radiculopathy with data expected towards the end of the year, and we've begun screening patients in the Phase 2 trial of BIIB074 in small fiber neuropathy as we explore multiple potential indications. Given the high unmet medical needs of neuropathic pain patients, especially in light of the growing opioid epidemic, we are excited to expand our pain portfolio with the recent initiation of a Phase 1 study for BIIB095, our second Nav 1.7 inhibitor. Within ophthalmology, our partner AGTC recently completed enrollment in the Phase 1/2 trial with its AAV-based gene therapy program for X-Linked Retinoschisis or XLRS. Top-line data are anticipated by Q4 with the final analysis at the 12-month time point. Last week, AGTC also dosed the first patient in the Phase 1/2 study in X-Linked's Retinitis Pigmentosa or XLRP. Underpinning all of our efforts across our core and emerging growth areas, is investing in core capabilities, platforms, and modalities to enhance our translational mission in neuroscience. To that end, last week we announced a new exclusive 10-year collaboration agreement with Ionis Pharmaceuticals to develop novel antisense oligonucleotide drug candidates for a range of neurological diseases. This partnership brings together the industry leader in ASO drug discovery with the industry leader in neuroscience drug development to create what we believe will be a powerful CNS genetic medicine engine. Based on our experience with SPINRAZA and other ASOs we have in development, we believe that intrathecal ASOs may address many genetic diseases and genetic targets of the central nervous system, including some pathways that were previously undruggable with small molecules and monoclonal antibodies. Given their ability to directly intervene at the genetic origin of a disease, we believe ASO approaches have a higher probability of success than traditional modalities, with a more efficient development path and greater potential speed to patients. We believe this collaboration solidifies a key pillar of our R&D strategy to become the leader in neuroscience. We aim to advance several SPINRAZA-like drugs to patients in the future. Importantly, ASOs are now validated as a transformative therapeutic modality for CNS in particular. Now with an industry-leading CNS ASO platform partnership secured, we further aim to build emerging synergistic modalities including gene therapy to augment Biogen's leadership in neurological diseases. We see high complementarity for ASO therapeutics in gene therapy. Intrathecal ASOs can be well tolerated, selectively target, can up or down-regulate gene expression, may be readily manufactured, may not be subject to immune surveillance, and exert effects that may be reversed based on drug pharmacokinetics. We further believe that a powerhouse ASO platform will significantly augment our overall approach to genetic diseases and targets of the CNS. Please refer to our webcast for more details on this new collaboration. Overall, we had a remarkably productive quarter across our pipeline in both our core and emerging growth areas and we aim to maintain this momentum through the rest of this year and beyond. I will now pass the call to Jeff.

Thanks Mike. Good morning everyone. I'll now review our financial performance for the first quarter 2018, starting with revenues. As Michel mentioned earlier, results for the first quarter were largely in line with our expectations. Total revenue for Q1 were $3.1 billion, growing 11% year-over-year or 15% excluding hemophilia. Let me now provide more detail on our MS franchise revenues. While the expected seasonality and greater than anticipated inventory impacts in the U.S., we believe the fundamentals of the business are healthy across our portfolio as we continue to drive stability in the U.S. and strong growth outside the U.S. Global first quarter TECFIDERA revenues were $987 million, a 3% increase versus the prior year. This included revenues of $729 million in the U.S., a decrease of 3% versus Q1 2017, and $258 million outside the U.S., an increase of 25% versus the first quarter 2017. In the U.S., we saw an inventory drawdown of approximately $80 million. This compares to a drawdown of approximately $60 million in Q1 2017, thus driving a difference of $20 million year-over-year. Excluding this impact, U.S. TECFIDERA revenues would have been stable versus Q1 of last year as net pricing increases offset the impact of OCREVUS. On a sequential basis, we saw stable U.S. volumes for TECFIDERA versus the prior year when accounting for the inventory dynamics, with improving demand generation trends within the quarter leading to increased share of new prescriptions and stable share of total prescriptions. In addition, we were very pleased with TECFIDERA's performance outside the U.S., driven by strong year-over-year patient growth across each large European market and solid emerging market growth, particularly in Japan, where TECFIDERA has reached a 16% market share in its first year in the market. We believe there is significant opportunity remaining for TECFIDERA outside the U.S., with continued momentum expected in Europe and further geographic expansion into new markets such as Latin America. Ex-U.S. TECFIDERA revenues benefited by approximately $12 million versus the prior year due to changes in foreign exchange rates, net of hedging. TYSABRI worldwide revenues were $462 million this quarter, a decrease of 15% versus the first quarter of 2017. This included $250 million in the U.S. and $212 million outside the U.S. In the U.S., revenues declined 18% versus prior year primarily due to the launch of OCREVUS and disproportionately higher gross to net charges driven by seasonality and timing. We saw stable U.S. volume for TYSABRI versus the prior quarter, with improving share of new prescriptions and stable share of total prescriptions. Outside the U.S., TYSABRI revenues decreased 11% versus the prior year. As a reminder, in Q1 2017 we reported a $45 million benefit following our agreement with the Italian National Medicines Agency related to prior periods. Ex-U.S. TYSABRI revenues this quarter benefited by approximately $17 million versus the prior year due to changes in foreign exchange rates, net of hedging. TYSABRI patients increased in most major European markets versus the prior year, along with strong double-digit patient growth in emerging markets. Interferon revenues, including both AVONEX and PLEGRIDY, were $550 million during the first quarter, a decrease of 15% versus Q1 2017. This included $371 million in the U.S. and a $179 million in sales outside the U.S. In the U.S., we saw a decrease of Interferon inventory of approximately $50 million in Q1 2018 as compared to a decrease of $20 million, driving a $30 million delta year-over-year due to channel dynamics. Ex-U.S. Interferon revenues benefited by approximately $11 million versus the prior year due to changes in foreign exchange rates, net of hedging. Overall, U.S. MS performance versus prior year was impacted by both the launch of OCREVUS and channel dynamics. Despite these factors, our U.S. sales team demonstrates resilience in driving stability and underlying demand sequentially for TECFIDERA and TYSABRI. We expect both factors to be less significant on a year-over-year basis as we move throughout the year, but the potential benefit is if there is a channel build towards the end of the year, we are encouraged by the momentum we saw in underlying demand as we enter the second quarter. Let me now move on to SPINRAZA. Global first quarter SPINRAZA revenues were $364 million. This included $188 million in the U.S. and $176 million outside the U.S. We saw a 16% increase in the number of patients on therapy in the U.S. compared to the end of the fourth quarter. However, revenues decreased versus Q4 due to a lower rate of new patient starts, combined with the impact of loading dose dynamics. We believe we have now worked through a good majority of the bolus of urgent infant and pediatric patients we saw earlier in the launch, and we continue to see significant growth opportunity in both pediatric and adult populations. We saw an increased contribution from maintenance doses as many patients have transitioned to dosing once every four months on a chronic basis. In the U.S., approximately 40% of SPINRAZA revenues in the first quarter were attributed to maintenance doses compared to 25% in the fourth quarter. This correlates with a continued decline in the average doses per patient from 1.6 to 1.1 from Q4 last year to Q1 of this year. In the first quarter, approximately 20% of U.S. SPINRAZA units were dispensed through a free drug program, highlighting our goal that no patient would forego treatment because of financial limitations or insurance denial in the U.S. We believe both inventory levels and discounts and allowances for SPINRAZA were relatively flat in the first quarter versus Q4 of last year. We continue to be encouraged by the opportunity to reach a large number of untreated pediatric and adult patients in the U.S. We expect to see stable U.S. revenues sequentially for the next couple of quarters, but the potential inflection point by the end of the year as we remain focused on increasing our efforts around lead patient identification, reimbursement, and sales and marketing to reach older patients. Outside the U.S., the number of commercial SPINRAZA patients increased over 50% versus the prior quarter, and there are still approximately 290 patients active in the expanded access program. We signed contractual agreements securing reimbursement in multiple markets, with over two-thirds of ex-U.S. SPINRAZA revenues in the first quarter coming from Germany, Japan, Italy, and France. Overall, we believe that the international opportunity for SPINRAZA is even greater than in the U.S. given the uniform epidemiology across geographies and the growing level of market access that can generate future growth momentum. Let me now move on to our Biosimilars business, which generated $128 million in revenues this quarter, nearly doubling versus the prior year. We have seen continued steady market share gains across the large European markets following the rapid initial conversion in the Nordics. In addition to a continued expected uptick for BENEPALI, we believe the expected launch of IMRALDI in October this year will be an additional growth driver for our Biosimilars business going forward. In the coming months, we plan to exercise our option to increase our equity stake in the Samsung Bioepis joint venture. We believe this is an attractive value creation opportunity. Turning to anti-CD20 revenues, we recorded $443 million in Q1, an increase of 30% versus the prior year, primarily driven by OCREVUS royalties as well as a strong performance from RITUXAN. This includes our estimated OCREVUS royalties of $77 million for the first quarter. Total other revenues were $164 million in the first quarter, an 83% increase versus Q1 2017, as we continued to benefit from greater contract manufacturing. Q1 GAAP and non-GAAP gross margins were 86%, a slight improvement versus the fourth quarter due to lower contract manufacturing and the impact of the ZINBRYTA write-off last quarter. Q1 GAAP and non-GAAP R&D expense was 16% of revenue or $497 million, including approximately $13 million of trial closeout costs for ZINBRYTA. There were no meaningful milestone payments booked in the first quarter. The increase in R&D compared to Q1 2017 was principally driven by higher clinical trial costs as we invest to grow our product pipeline. In Q2, we expect to report $75 million of GAAP in-process R&D expense related to the closing of our asset acquisition with Pfizer for BIIB104. We also expect to report the substantial majority of the $375 million upfront payment to Ionis as both GAAP and non-GAAP R&D expense, along with the equity premium as GAAP only R&D. Q1 GAAP SG&A was 16% of revenue or $501 million. Q1 non-GAAP SG&A was also 16% of revenue at $498 million. As a percentage of revenues, both GAAP and non-GAAP SG&A decreased versus the prior year, primarily due to the timing of spend across sales and marketing and G&A. GAAP other net expense, which includes interest, was $41 million in Q1 versus $38 million in Q1 of last year. Non-GAAP other net expense was $35 million in Q1 versus $38 million in Q1 of last year. In Q1, our GAAP tax rate was approximately 22%, and our non-GAAP tax rate was approximately 21%, both benefiting by approximately 250 to 300 basis points versus the prior year from the recently enacted U.S. corporate tax reform legislation, as well as the expected closing of the Ionis transaction and mix of profits by geography. Our weighted average diluted share count for Q1 was approximately 212 million. We repurchased approximately 900,000 shares in Q1 for a total value of $250 million, leaving $2.75 billion remaining under our current share repurchase authorization, which now brings us to diluted earnings per share. In the first quarter, we booked GAAP earnings of $5.54 per share, an increase of 60% versus last year, and non-GAAP earnings of $6.05 per share, an increase of 16% versus last year. We generated approximately $1.5 billion of cash flow from operations for Q1 and ended the quarter with approximately $7.1 billion in cash and marketable securities, and $5.9 billion in debt. After repatriating $3.5 billion in Q1, approximately 85% of our cash is now held in the U.S. We believe we have and we will continue to have ample capacity to execute meaningful future business development and M&A, as well as return capital to shareholders. We will also continue to be disciplined in our approach and focused on value creation. I will now turn the call back over to Michel for his closing comments.

Thank you, Jeff. We closed the first quarter with solid double-digit revenue and earnings growth and with the momentum across our business that we anticipated. In line with our strategic priorities, we allocated capital to both invest in our differentiated pipeline and opportunistically return capital to shareholders. We do not intend to pause or slowdown here. We believe there will be plenty more we can accomplish through the rest of 2018. Looking forward within the next 12 months, we expect further progress across our neuroscience pipeline, including completing enrollment of aducanumab, dosing the first patient with our gene therapy for SMA, data readouts across MS, Alzheimer's, neuropathic pain, ophthalmology and ALS, initiation of Phase 3 studies in stroke and neuropathic pain, and filing for regulatory approval in the U.S. for BIIB098 in MS. Overall, as we have communicated in the past, our goal is to secure the long-term growth potential of Biogen beyond just aducanumab. We believe we have made progress between the potential 2019 U.S. launch of BIIB098, the potential launch of late-stage assets for stroke, PSP, neuropathic pain in the early 2020s, and our continued progress to bolster our early and mid-stage pipeline, but we clearly have more work to do to achieve this goal. Importantly, and for the long-term growth of Biogen, we are focused on our eight priority markets, with the U.S. remaining the most significant driver. However, as we execute on our strategy and selectively expand our global footprint, we are seeing evidence that there is likely more long-term growth opportunity than we expected in the EU and in the emerging markets. Our MS volumes continue to grow outside of the U.S. and it is still an underdiagnosed disease in many developed countries. Our Biosimilars business in Europe is now tracking at a potential run rate of at least $0.5 billion a year, and we plan to launch IMRALDI in October of this year. SPINRAZA is paving the way for Biogen to establish a presence in selected new geographies, which will support further global growth. In the first quarter, our ex-U.S. product revenues were $986 million, an increase of over 30% from the same period a year ago, and we have recently opened affiliates in China, Korea, Taiwan, and Colombia. Finally, I want to reiterate our commitment to maximizing returns to our shareholders over the long term. This demands that we continue to allocate capital efficiently, effectively, and appropriately. As we have demonstrated in the past, we will always strive to have an optimal capital structure as well as aim for superior returns from the investments we make. I would like to thank our employees around the world who have dedicated themselves to making a positive impact on patients' lives and all of the physicians, caregivers, and participants in our clinical development programs. Next month, Biogen will be celebrating its 40th Anniversary. Our past and future achievements could not be realized without their passion and commitment. With that, we will open the call for questions.

Hi, thanks so much for taking my question. I wanted to focus on Alzheimer’s for a minute, maybe on your sample size estimation because of the higher variability and I guess my question is this: you added patients to the trial despite less than expected dropouts, which implies to me that perhaps the higher variance has to do with the assumptions you made on both the trials treating effect and perhaps also on variance. So my question is: were your assumptions on the placebo arm informed by prior trials that had reported large ones, or were they informed by the Phase 1b data that you presented previously?

Yes, Umer, this is Mike. I'll take that. So essentially, you're correct about this. Let me clarify. The variability that was observed and the powering of the study was initially designed based on our known data in the Phase 1b PRIME study as well as other previously conducted studies so both were contributing to our estimation on that. Of course, it's always an estimation of the variability that we would expect to see and the blinded sample size readjustment was put in place to take care of the situation where I think our assumptions were not quite accurate. And that's what we found in this case where our assumptions, as we had initially going in, were not exactly the same as the behavior that we were observing across the blinded sample size. So as a consequence, we increased the sample size of the trial as a whole in order to preserve 90% power.

Got it. And just to be clear, when Lilly ran their third trial, they used the higher end of the standard deviation and they basically took the higher standard deviation from the first two trials; is that a practice you had continued to implement as well?

Well, we haven't gotten into that level of detail on exactly the statistics underlying our initial assumptions. But just for a little bit of perspective, I mean this blinded sample size re-estimation is a pretty standard method used in trials and we did the same thing, actually an increase of sample size for both our TECFIDERA and PLEGRIDY trials while they were ongoing.

Hey guys, good morning and thanks a lot for the questions. Just had a question on commercial SPINRAZA. I realize that trends can be lumpy on a sequential basis just given dosing, but does the launch of new starts moderate in the U.S.? Can you speak to the dynamics in the U.S. end of the market and then obviously, OUS you do have some nice sequential growth and good new ads, and maybe just speak to kind of where you are with respect to adoption in some of the major markets. Thank you.

So thanks for the question. This is Michel. We don't see the start forms really at the tread line and we're working hard to really capture now the rest of the pediatric population and the adult population, and this takes a bit more time than we anticipated. But if we step back, there was a bolus of patients a year ago that were working for this only hope for treating SMA. And they came pretty fast to treatment and we have basically outpaced all estimates that we had and that the external stakeholders had also. So we did extremely well and the model worked very well. Now the second phase is to do the same, but for the pediatric and adult population which is the biggest segment of SMA patients. So we are basically enhancing and increasing the field team. We have now an adult campaign that we are launching and we start to see traction. We have patient ambassadors as adults, and we are encouraged by the momentum actually. So we are really focused on implementation; there are still more than 5,000 patients to go. The team is putting the head down and implementing better than ever, and actually I have good confidence in our U.S. team.

Maybe another question for Michel on biz dev. You mentioned a renewed focus here. Is there a specific goal that you're trying to achieve via business development? Maybe you can comment on what that is and what exactly you and the board have alignment on with regard to your focus here.

So let me take that one. This is Jeff. So as Michel has said, and I've said as well, we've got an enviable position here where we were well capitalized and we generated a lot of cash. And so we're in an enviable position where we have a lot of cash available to create shareholder value. Our premium is on adding to the pipeline, given our commercial footprint and our manufacturing footprint and trying to bring in assets that are closer to being market-ready. So there's certainly a preference to kind of look at those types of transactions. However, as we go along, we'll continue to add to the pipeline with mid-stage assets and lower-stage assets where they fill in, and Mike has done a great job with his team doing that. But at the same time, given our capital situation and our cash flow generation, we can both add to the pipeline with both later-stage assets and mid-stage assets and also return capital to shareholders. And I do want to reiterate we have $2.75 billion remaining under our share repurchase program and we expect to be active on that front as well.

So if I can add on to one of Jeff’s comments. The priority capital allocation will go in terms of business development, will focus on our priority growth areas. So we will retain some capital and will distribute. We'll continue to distribute the way we have done but even more eventually. But the investment in terms of business development will be primarily dedicated to the priority growth areas: MS, neuroimmunology, movement disorders, neuromuscular diseases, and Alzheimer’s disease.

Hey guys. Good morning. Thanks for taking the question. I guess following up on Eric's. I also wanted to ask about BD but in a different way as it relates to the growth outlook for the company from here. So with SPINRAZA flattening out, at least in the U.S. as you've been predicting and a stable MS franchise, I'm curious if you think you can continue to grow the business over the intermediate term without bringing in a later-stage pipeline from the outside. Thanks.

Let me start with a comment on MS, SPINRAZA flattening out in the U.S. I don't think we're saying that the U.S. is going to flatten out indefinitely. I think what we're saying is because we were so successful in getting through the bolus of patients when we first introduced the drug that we had kind of a one-time benefit of a number of patients, particularly in kind of the infants and the pediatrics. And so we worked our way through that, which is why kind of the loading doses have come down a bit, which is impacting our sequential growth. We think that as Michel said, penetrated the adult segment, which is the largest segment, that growth will resume and we're kind of predicting that to happen at kind of the end of this year as our sales force gets focused on the different centers to treat adults, we get through reimbursement, we identify those patients. So there is still a very good growth opportunity in the U.S. Outside the U.S., there's an even bigger opportunity and you can see, and we've said clearly that we think the market is going to be greater. We won’t face exactly the same dynamics because some of the outside U.S. patients don't go through the normal loading doses; they come through the expanded access program. So we'll have more of a regular growth outside of the U.S. So we're still very confident that the SPINRAZA has a good growth opportunity ahead of it.

So I can only reinforce the focus of the organization on executing well all around the world, including the U.S. As I've stated, we are very encouraged by the leadership and the implementation that we see in the U.S., even if there are some bumps sometimes along the way. This is the nature of our business. So it's all about growth, and hopefully this will be generated in the U.S. more directly, but mostly ex-U.S. Concerning SPINRAZA, with the rapid and sequential reimbursement that we are gaining and the objective by the end of the year, we are unlocking new opportunities in terms of picking SMA population. So this paves the way hopefully to achieve the peak sales that we anticipate. We've already stated this will be one of the largest assets of the organization. Obviously, we look at complementing eventually the momentum with some acquisitions, but we will be very wise always on the way we invest our capital, and if we believe these assets can do better in Biogen hands, then we’ll propose that to the board, but we'll always be very cautious. But we are actively looking absolutely.

Thank you very much and appreciate all the color. Just following up on SPINRAZA. You gave us good information on the distribution of patient types by age in the U.S. but could you provide the same color for the 2300 or so patients outside the U.S.? I think that's the right number. And then could you just comment on treatment persistence in the U.S. where you've been in the market for the longest for those three different patient populations: infant, pediatric, and adolescents and adults. Thanks.

Yes, so let me give you the numbers as it relates to kind of Europe. I don't have all the numbers around the world but kind of for our Type 1 patients, we were roughly 810 in the first quarter, Type 2 were 590, and Type 3 were 138. That's how it breaks out plus Geoffrey.

Thanks for the question. Appreciate it. In regards to the Samsung Bioepis stake which you made a comment about planning to exercise in the coming months, can you just remind us I guess how that would work when you do that? Do you have to integrate your P&L or are you just going to hold the equity stake? Obviously that would be worth billions of dollars, so maybe just the plans on that and how that strategically would fit with what you guys are trying to do, etc., etc. Thanks so much.

So this is Michel. Before we come to this question, I just wanted to answer the second part of the previous question. The discontinuations on SPINRAZA are extremely low, and this speaks to the efficacy of the product and the progress that the patients are making on the product. Now, regarding Biosimilars.

Yes, so as it relates to kind of exercising that option, that would be an equity investment we would make and would still be below the level that would require us to consolidate. So it would be an equity investment where we would just pick up our share or our share of the net profits with regard to that collaboration. So it would be booked kind of below the line, below non-operating.

Hi, thanks for the question. Another quick one on SPINRAZA as well. You mentioned previously that seven patients from the AveXis 101 Phase 1 Type 1 SMA patients have already been receiving SPINRAZA treatment. Can you talk about where those seven patients saw additional function improvements from SPINRAZA? And then secondly, in light of the recent failures of the Merck facing beta in two Phase 3 trials, does that change your thought on your base program in Phase 3 or not? Thank you.

Hey, Ying, this is Mike. Thanks for the questions there. I mean so the short answer is that we really don't have direct information on the clinical status or outcome of the patients in the AveXis trial that had subsequently gone on SPINRAZA. All we can really say is that medical experience to date and as reported by AveXis indicates that a large number of patients who received therapy subsequently went on to SPINRAZA. But while we don't know the exact reasons there, it's not hard to imagine and in any event suggest that even with a gene therapy product on the market, we can anticipate substantial need and use for combination therapy, which is something that we're actively exploring in terms of preclinical studies. With regard to the Merck base inhibitor results, of course these are things we've been looking at very carefully. I think they do raise a number of very valid questions about the right patient population study design when you might anticipate potential benefit or not, and these are things that we're looking at very closely in active discussions with our collaboration partner ASI.

Great, good morning, thanks for taking the question. I was hoping maybe we could just talk a little bit about your neuropathic pain assets. Obviously, you're going to have some probably have some data from the radiculopathy study sometime in the second half of this year. Maybe if you could just help us think about what we're going to see out of that dataset and how you would frame that data in terms of insights into the overall program. Thanks.

Yes, so this is Mike, Matt. Thanks for the question on that. So right now this is, we've got BIIB074, which we'll be starting a Phase 3 trial in trigeminal neuralgia I mentioned. It’s completed enrollment in the Phase 2 study in painful lumbosacral radiculopathy. These are two different pain syndromes. I think as you know, one of the challenges but opportunities in the neuropathic pain space is you've got a variety of different specific indications that have different features of neuropathic pain. Trigeminal neuralgia is very episodic pain crises and some where we've got stronger proof of concept data. Lumbosacral radiculopathy or sciatica, this is a little bit more of a mixed neuropathic and inflammatory pain state that's a little bit more of a mixed mixture. We've started screening on our trial in small fiber neuropathy; again this would be a small fiber more episodic pain disease. In each of these cases, a lot depends on the specific pain state and the mechanism that you're going after. That's why we were trying in each of these three. The strongest clinical evidence that we have to-date is in trigeminal neuralgia, and we're looking to explore where that might provide additional benefit beyond trigeminal neuralgia.

Hi, thanks for taking the questions. Maybe just on SPINRAZA in Europe, I was wondering if you can give us a little bit more detail on the percent of patients that are getting a loading versus maintenance dosing and then roughly where you would expect that to end up by the end of the year. And then for Jeff, you had repurchased $250 million of stock in the quarter; you mentioned you still have a pretty sizable amount outstanding. How should we think about the case on the forward there? Thanks a lot.

So we get started on the SMA question ex-U.S., and you recall that we had many patients on the early access program. So we don’t have the hockey stick as easy of dosing dose in most of the market. So this is helping the trend be much more smooth. And in addition, there is a sequential access and reimbursement progress we're making and this should pave the way combined with the U.S. performance for long-term growth on SPINRAZA.

Regarding the share repurchase question, given the current stock price, we believe the company is significantly undervalued. We plan to increase the rate of our share repurchase program and aim to reach $2.75 billion within a reasonable timeframe.

Hi guys, thanks for taking my question. I was just curious actually about the Alkermes program BIIB098, just how you’re thinking about the potential opportunity there from that relationship of payors and the physicians and thinking about differentiated profile in TECFIDERA, in particular linear generic which may come in August of 2019. Thanks.

Okay Alethia, this is Mike. I’ll start with this and then pass it on a little bit. So I mean the status is that Alkermes is presenting data at AAN demonstrating clear benefits I mentioned on annualized relapse rate and MRI lesions. We’re in the midst of generating and gathering data in head-to-head comparison with TECFIDERA, which we’ll be talking about more at the beginning of next year. We do anticipate being able to file this year and look the profile that we're looking for here is to-date we've seen strong evidence of efficacy. We’ve seen a safety profile that looks favorable, and we're very interested to know how that lines up relative to our experience with TECFIDERA; and we imagine that upon filing and making it available to patients that this would provide an additional potential option with a potentially differentiated tolerability profile.

And if I may add, this is Michel. This will be another opportunity to expand the fastest growing segment of the MS DMT, which is the oral medications. TECFIDERA is doing great, but here we will have another opportunity with potentially BIIB098. And coming back to the overall growth questions and the reasons to believe also for MS, we continue to take price and we have seen that. The generics are mostly impacting the originator; the unmet medical needs is tremendous. We have an entire portfolio where we are leaders on the platforms, the orals, and the high efficacy. We are generating more data and we have a pipeline. So these are additional reasons to believe in our ability to compete and to grow.

Hi guys, thank you for taking my question. So just a little bit along the lines of TECFIDERA continuing about next year, you’re referring from doctors that they view TECFIDERA similarly, and so basically patients don’t get both. They are now curious whether or not your market research was supportive of that, and then on the lines do you think that a generic will really only impact the brand? What gives you the confidence? Is it just rebating? And would you be surprised going forward next year that you’ve seen a rise in people using generics ahead of a different type of brand in the oral class? So maybe give us some comfort around what your market repurchase value is?

So the way the market so far has managed those DMTs was with open formularies because of this type of disease, and they do believe the payors that this is not a blanket formulary that will increase the value for the patients. We are talking here logically different therapies, different classes. As you know, the monitoring on Gilenya is pretty intense during the first period on the product. I don’t see how evidence-based medicines will be completely overshadowed by formularies in order to prescribe first a generic of S1P that has baggage of efficacy and risk profile that is different from the other DMTs. This would be a bad day for evidence-based medicine in this country, and this will be the first time for neurological diseases and mostly for MS. I don’t see that as a credible assumption; we will not take that in our long-range plan assumption.

And Robyn, I may add just a little bit here, this is Mike. I think in our experience and discussions with practicing neurologists out there, there would be a very strong aversion we believe to patients potentially having to have multi-hour first dose cardiac monitoring as a step through for some of the therapy. So there is an initial clinical burden that would generally be viewed negatively by a number of MS neurologists we believe.

Thank you all for attending our Q1 call and have a good day. Thank you.