Biogen Inc (BIIB) — Q3 2020 Earnings Call Transcript

Thank you and good morning, and welcome to Biogen's third-quarter 2020 earnings call. Before we begin, I encourage everyone to go to the Investors section of biogen.com to find the earnings 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, and Table 3 includes a reconciliation of our GAAP to non-GAAP financial results and our GAAP to non-GAAP financial guidance. We believe non-GAAP financial results better represent the ongoing economics of our business and reflect how we manage the business internally. We’ve 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. Al Sandrock, EVP, Research and Development; and our CFO, Mike McDonnell. Now, I will turn the call over to Michel.

Good morning, everyone, and thank you for joining us. As you all know, the aducanumab Advisory Committee meeting is scheduled for November 6th. This is our highest priority, and we are very focused on preparing for this meeting. At the same time, the TECFIDERA situation in the U.S. is clearly a near-term challenge, which we will discuss. Before I continue, I would like to welcome Mike McDonnell, our new CFO. Mike's background and track record of accomplishment make him well prepared to be a very strong contributor to Biogen and I know he looks forward to getting to know many of you. Now let me review some key recent developments. First, we are very pleased that the FDA has accepted our BLA for aducanumab with Priority Review and has stated that, if possible, they plan to act early. As I mentioned, the Advisory Committee is of course an important event on the path to potential approval and we are actively preparing to participate and share our perspective on our clinical data. Outside the U.S. early this month, we submitted a marketing authorization application in Europe, and we are preparing for regulatory submission in Japan, following the recent formal meeting with the PMDA. We have progressed in our U.S. launch readiness, as we remain focused on appropriate engagement with scientific leaders, treatment sites, defining aducanumab's value proposition and establishing collaboration across multiple stakeholders to help prepare for the potential introduction of the first therapy to meaningfully change the course of Alzheimer's disease. Outside the U.S., we are continuing to ramp up our launch readiness, particularly in Europe and Japan. Beyond aducanumab, we continue to advance our broader Alzheimer's disease portfolio, including BAN2401 in Phase 3 and multiple targeting programs aimed at tau. Also, in neurodegeneration, we are proud to be collaborating with Denali, a premier innovative neuroscience company, pioneering novel approaches for treating brain diseases. This collaboration provides us a mid-stage small molecule LRRK2 inhibitor program, which expands our pipeline of potential therapies in Parkinson's disease across multiple modalities. We also received exclusive options rights to two programs for neurodegenerative diseases using Denali's innovative Transport Vehicle platform, including for amyloid beta antibodies. With the deep pipeline, aducanumab now under review and our recent collaboration with Denali, we believe we are well-positioned to lead in the fight against both Alzheimer's disease and Parkinson's disease, which are the most common neurodegenerative diseases with an urgent need for novel treatments. More broadly, we have continued to develop and expand our deep pipeline, which now includes 30 clinical assets with 8 in Phase 3 or advanced stages, including the recent initiation of the Phase 3 program for dapirolizumab pegol in lupus with UCB. As we have demonstrated in the past, we are committed to maximizing returns for our shareholders as we aim to bring innovative therapies to patients, something that demands a thoughtful approach towards all our investments over both the short and long term. Let me now discuss where we see Biogen strategically, as we believe we are in a transitional period with several upcoming inflection points. As we manage through the erosion of TECFIDERA in the U.S., Biogen remains focused on strong execution against our strategy. We are the leader in neuroscience. We have differentiated core capabilities as we aim to leverage groundbreaking science to address the tremendous unmet medical need in this space. We are leveraging a better understanding of disease biology, including the underlying genetics, as well as advances in biomarkers, such as novel imaging of the brain, to help reduce the risk in developing therapies for many previously intractable diseases. We are building on a strong financial track record with the core business in MS, SMA, and biosimilars, and we believe we are entering a new phase of important clinical readouts and value creation opportunities. We will continue to work to maximize the potential of our broad MS portfolio, including the launch of VUMERITY and the lifecycle management for TYSABRI and the Interferons. Despite increased competition, we believe SPINRAZA can continue to grow and serve as a foundation of care based on its well-established efficacy and safety profile in SMA. SPINRAZA has demonstrated sustained clinically meaningful benefits from pre-symptomatic infants to adults, and its safety profile has enabled us to begin assessing a higher dose for potentially even greater efficacy. We see biosimilars as another potential growth driver while providing headroom for innovation. We are working to expand into the U.S. and China with the potential to commercialize two new ophthalmology biosimilars with a global market opportunity of approximately $11 billion. Importantly, Samsung Bioepis recently announced that the Marketing Authorization Application was accepted by the EMA for SB11, a potential biosimilar referencing Lucentis. We remain optimistic about the prospect of launching aducanumab as the first therapy to meaningfully change the course of Alzheimer's disease, and this will be an important short-term and long-term growth driver for the company. In addition to aducanumab, we believe our pipeline could enable a second wave of growth in the mid-2020s, driven by areas such as ophthalmology, stroke, lupus, and ALS. Importantly, we expect 6 mid to late-stage data readouts by the end of 2021. We plan to continue pursuing external business development opportunities to further expand our pipeline. In just under 4 years, we have committed nearly $5 billion to business development and executed 20 transactions. Going forward, we will continue to prioritize the stability of our organization to support our current portfolio while preparing for the potential introduction of several new products, starting with aducanumab. We will be focused on diligent execution, capturing every opportunity for efficiency and cost savings. In summary, we have continued to execute well on our strategy. We believe we are well-positioned to serve our current and future patients as we build a multi-franchise portfolio, leveraging the interconnectivity of our deep neuroscience pipeline. We have a very strong balance sheet and we will remain focused on maximizing long-term shareholder value creation. I will now turn the call over to Al for a more detailed update on our recent progress in R&D.

Thank you, Michel, and good morning, everyone. I'd like to begin by thanking the Biogen team for their hard work in making significant progress advancing our R&D programs. This includes milestones across key areas, such as the regulatory filings of aducanumab, pipeline progression, and business development. Starting with Alzheimer's disease, as Michel mentioned, we are working through the regulatory procedures for aducanumab around the world. We're also diligently preparing for the FDA advisory committee meeting on November 6. Also in Alzheimer's disease, our collaboration partner Eisai dosed the first patient in the AHEAD 3-45 clinical program, which is designed to evaluate BAN2401 in individuals with preclinical Alzheimer's disease. Through the results of this trial, we hope to learn whether BAN2401 can suppress the progression of amyloid and tau pathology and reduce cognitive decline in the very early stages of Alzheimer's disease. This quarter, we also announced an exciting collaboration with Denali Therapeutics, to co-develop and co-commercialize Denali's small molecule LRRK2 inhibitor DNL151 in Parkinson's disease, the second most common neurodegenerative disease. LRRK2 is a negative regulator of lysosomal function, and certain mutations in the LRRK2 gene increase the risk of Parkinson's disease. We will examine the therapeutic potential of LRRK2 kinase inhibition in patients with and without known genetic risks for Parkinson's disease. Our hope is that DNL151 could be a first-in-class oral therapy that slows the progression of the disease. This collaboration also provides us with the exclusive option to license two preclinical programs utilizing Denali's Transport Vehicle platform. This platform is designed to enhance the brain uptake of large therapeutic molecules by leveraging the transferrin receptor, which is highly expressed at the blood-brain barrier. One of these two programs seeks to enhance the delivery of an anti-beta amyloid antibody across the blood-brain barrier. We are pleased to be collaborating on this platform with Denali, a pioneer in enhancing the delivery of large molecules into the central nervous system. Moving to our MS portfolio, at the AdComs meeting last month, we presented new data from the EVOLVE MS-2 trial that further reinforced the clinically meaningful improvement in gastrointestinal tolerability associated with VUMERITY as compared to TECFIDERA. Specifically, patients taking VUMERITY reported a lower likelihood of experiencing GI symptoms that interfered with daily activities or were associated with missed work and used less concomitant medication to treat GI symptoms. Also, at ECTRIMS, an analysis of real-world data in patients receiving TYSABRI's extended interval dosing showed no significant differences in the rates of new T2 lesions, T2 lesion volumes, or brain atrophy on brain MRI scans when compared to patients receiving the currently approved every 4-week dosing regimen. These data contribute to a growing body of evidence that suggests TYSABRI's extended interval dosing has similar efficacy to that of standard dosing, while reducing the risk of PML. The efficacy of extended interval dosing as compared to the standard dosing regimen is being assessed prospectively in the ongoing NOVA study, which is expected to read out next year. Additionally, we presented real-world data showing the treatment with TYSABRI was associated with significant improvement in 9 of 12 patient-reported neuro quality of life domains. Whereas, in patients treated with OCREVUS, there were improvements in 4 of 12 domains. Moving to our MS pipeline, we were disappointed to learn that AFFINITY, the Phase 2b study of opicinumab, did not meet its primary endpoint or secondary endpoints. As a result, we have decided to discontinue development of opicinumab. Nevertheless, we remain committed to the therapeutic approach of repairing the central nervous system and still believe that remyelination has the potential to provide a therapeutic benefit for MS patients. We are continuing to analyze the significant dataset from this study to further inform our MS research in this area, including for BIIB061. Turning to neuromuscular disorders, following productive engagement with the FDA, we are advancing plans for a study to evaluate the benefit of tofersen when initiated in presymptomatic carriers of SOD1 mutations that have been linked to ALS. Akin to the NURTURE study of SPINRAZA in SMA, this study is designed to evaluate the ability of tofersen to delay clinical onset or slow disease progression of ALS when initiated prior to clinical symptom onset. We plan to initiate this study next year. Also in ALS, I am happy to report that we dosed the first patient in our Phase 1 study of BIIB105 in antisense oligonucleotide targeting ataxin-2. Ataxin-2 was originally identified as a modifier of TDP-43 toxicity, a pathology common to more than 90% of the ALS population, suggesting that reduction in ataxin-2 could be therapeutic across most ALS populations, other than that due to SOD1. Additionally, I would like to provide an update on our SMA gene therapy asset BIIB089. The FDA had previously placed a clinical hold on BIIB089 due to dorsal root ganglion toxicity, a pathology commonly observed in preclinical studies and which may also occur following use of the currently available AAV mediated SMA gene therapy. Thus, we've made the decision to discontinue BIIB089 and will instead focus on the pursuit of next-generation SMA gene therapy technology that we believe will address the DRG toxicity. Lastly, we are happy to announce that in collaboration with UCB, we have dosed the first patient in our Phase 3 program for dapirolizumab pegol in patients with systemic lupus erythematosus with active disease, despite being on standard of care therapies. In summary, we continue to build and advance a deep neuroscience pipeline that seeks to address patients' needs by leveraging both organic growth and external collaboration. This approach is evidenced by our recent agreement with Denali and also Scribe Therapeutics, where we are pursuing cutting-edge CRISPR technology to potentially develop gene therapies for ALS. We believe this mix of internal development and external collaboration allows us to maximize the value of our R&D programs and provides a source of sustained innovation to help drive long-term growth of the company. I will now pass the call to Mike.

Thank you, Al. Good morning, everyone. I'm excited to join Biogen and look forward to getting to know many of you. Biogen had another solid quarter despite the recent entry of generic TECFIDERA and the continued impacts of COVID-19 as we continue to execute well. We remain in a very strong financial position with significant cash and financial capacity to continue to grow the business over the long term. I will now review our financial performance in the quarter and also provide an update to our full year guidance. Total revenue for Q3 was $3.4 billion, a decline of 6% versus the prior year. This decline was mostly driven by the TECFIDERA generic entry and is inclusive of a 1% unfavorable currency impact. Total MS revenue, including OCREVUS royalties was $2.3 billion, a decrease of 4% versus the prior year. MS revenue during the third quarter began to experience the impact of the entrants of multiple generics of TECFIDERA in the U.S., while Q3 TECFIDERA revenue outside the U.S. was $283 million, representing an increase of 1% versus the prior year with continued patient growth. During the quarter, we saw improvement in VUMERITY trends, including an increased number of new starts. We believe VUMERITY can be an important product given its differentiated GI tolerability profile, as Al mentioned. TYSABRI had a strong quarter with Q3 global revenue of $516 million, growing 7% versus the prior year. We were pleased to see continued global patient growth of 4% for TYSABRI versus the prior year. We believe TYSABRI is well-positioned to play an increasingly important role in the treatment of MS. And we are working on several important initiatives, including subcutaneous administration, an option for home infusion and an option for extended interval dosing. Moving now to SMA. Global third quarter SPINRAZA revenue was $495 million, a decrease of 10% versus the prior year and stable versus the prior quarter. In the U.S., SPINRAZA revenue decreased by 23% versus the prior year as we continue to see an impact of COVID-19 on both new starts and maintenance doses, as well as additional competition. Outside the U.S., SPINRAZA revenue was stable versus the prior year and grew 10% versus the prior quarter. Although COVID-19 and new competition have had an impact on SPINRAZA, we see the potential for global growth given a strong efficacy and safety profile and a significant number of untreated patients across many established and emerging markets. Moving to our biosimilars business, revenue was $208 million this quarter, an increase of 13% versus Q3 2019. Q3 biosimilars revenue, despite returning to growth, continued to be negatively impacted by a slowdown in new treatments and reduced clinic capacity for immunology patients as a result of COVID-19. BENEPALI, our first and largest biosimilar, became the number one prescribed etanercept product across Europe. We estimate there are now approximately 220,000 patients using our biosimilars in Europe. And we believe we have the opportunity to continue to grow in Europe, as well as potentially within the U.S. and other geographies. Total anti-CD20 revenue in Q3 was $560 million, a decrease of 6% versus the prior year, with increased OCREVUS royalties offset by decreased revenue from RITUXAN due to COVID-19 and continued erosion from biosimilars, a trend we expect to continue to impact RITUXAN. Total other revenue in the third quarter increased 15% versus Q3 2019 to approximately $126 million. Turning now to expenses. Q3 GAAP R&D expense was $1.1 billion, or 34% of revenue. Non-GAAP R&D expense, which excludes $601 million related to our collaboration with Denali, was $540 million, or 16% of revenue. Beginning in Q3, material upfront payments associated with significant collaboration and licensing arrangements are excluded from non-GAAP R&D expense in order to better reflect our core operating performance. Year-to-date, non-GAAP results also reflect this change as the $125 million upfront payment related to the collaboration with Sangamo in the second quarter of 2020 has also now been excluded from non-GAAP R&D expense. Q3 GAAP SG&A expense of $573 million and non-GAAP SG&A of $569 million were both 17% of revenue. Within the U.S., we are reallocating some TECFIDERA resources to support the launch of VUMERITY as well as aducanumab, although we will continue to fully support our broader MS portfolio. In addition, we are ramping up our commercial preparations for aducanumab, which will create some upward pressure on SG&A. However, as always, we will continue to diligently manage our operating expenses to ensure we remain efficient across the organization. In Q3 of this year, our effective GAAP tax rate was approximately 25%, an increase from approximately 12% in the third quarter of 2019. This increase is primarily due to prior year favorability from Swiss tax reform as well as current year unfavorability, primarily driven by non-cash deferred tax adjustments related to TECFIDERA. For the third quarter of 2020, our effective non-GAAP tax rate was approximately 18%, an increase from approximately 16% in the third quarter of 2019. Third quarter GAAP net income was $702 million, and non-GAAP net income was $1.4 billion. GAAP diluted earnings per share in the third quarter was $4.46, a decrease of 47% versus the prior year, and non-GAAP diluted EPS was $8.84, a decrease of 4% versus the prior year. We repurchased approximately 4.5 million shares in Q3 for a total value of approximately $1.3 billion. The share repurchase program authorized in December of 2019 was completed as of September 30, 2020, and our Board of Directors has authorized a new $5 billion share repurchase program. In Q3, we generated approximately $1.2 billion in net cash flows from operations. Capital expenditures in Q3 were $84 million, and free cash flow was approximately $1.1 billion. We ended the quarter with $4.6 billion in cash and marketable securities and $7.4 billion in debt. Additionally, our $1 billion revolving credit facility was undrawn as of the end of the quarter. Let me now provide an update to our full-year guidance for 2020. Our guidance was last updated in July and assumed no generic entry for TECFIDERA. During the third quarter, we began to experience the impact of generic entrants, with more than 10 TECFIDERA generics approved and at least 6 now in the market and discounted prices of approximately 90%. Our guidance assumes significant erosion of TECFIDERA in the fourth quarter of 2020, the pace of which is difficult to predict. As a result, we now expect full-year revenue to be between approximately $13.2 billion to $13.4 billion. We expect full-year 2020 GAAP diluted EPS to be between $25.50 and $26.50, and non-GAAP diluted EPS to be between $32.50 and $33.50. Of note, this range excludes the upfront payments associated with the Sangamo and Denali collaborations during the second and third quarters of 2020, respectively. The upfront payment associated with the Q2 Sangamo transaction equates to roughly $0.65 per share. It's important to note that this guidance does not include potential impacts from new acquisitions or large business development transactions, as both have elements that are hard to predict. This financial guidance also assumes that foreign exchange rates as of September 30, 2020 remain in effect for the remainder of the year. I'll now turn the call back over to Michel for his closing comments.

Thank you, Mike. Biogen has remained focused on strong execution across our core business in MS, SMA, and biosimilars, while continuing to advance our strategy of building a multi-franchise portfolio. I want to reiterate our commitment to maximizing returns to our shareholders and bringing innovative participation now and over the long-term. This requires 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 investments we make. Again, we are actively preparing for the aducanumab Advisory Committee and a potential launch. The unmet medical need and cost to society for Alzheimer's are tremendous and mounting. Alzheimer's creates a cost burden of approximately $550 billion per year in the U.S., and the cost for caring for an Alzheimer's patient can be over $0.5 million. Alzheimer's deprives many patients of their independence. By the age of 80, approximately 75% of people with Alzheimer's disease live in a nursing home at a per-patient cost of approximately $100,000 per year. The approval of aducanumab would be an unprecedented milestone for patients, their families, and society at large, and will represent an important short-term and long-term growth driver for the company. Finally, we are focused on advancing our broader purpose as an organization, as we aim to pioneer science for the betterment of humanity. This includes doing the right thing for patients, our employees, the environment, and the community, while accelerating our efforts in diversity and inclusion, all of which we believe contribute to long-term sustainable shareholder value. These issues are all interrelated. For example, environmental issues are central to human health. To that end, I am incredibly proud of our recently launched 20-year, $250 million Healthy Climate, Healthy Lives initiative. This includes a goal to eliminate our fossil fuel emissions by 2040 and to be a catalyst for positive change by advancing the science around how fossil fuels impact human health and taking action to promote climate and health equity. Finally, I would like to thank our employees around the world, who are dedicated to making a positive impact on patients' lives, including ensuring access to our therapies during these challenging times. With that, we will open the call for questions.

Hi, good morning. Thanks for taking my questions. As you've prepared for the AdCom, any notable new analyses or data points that we should expect to hear about as you try to frame the risk benefit for the drug here? And then congratulations on the European filing. Anything notable in terms of similarities or differences here versus your discussions with the FDA that you can call out on the European side? Thank you.

Hi. This is Al. We've done lots of analysis. We've been doing that for more than a year in collaboration with the FDA. We are working exceptionally hard, and the team is working exceptionally hard to prepare for the AdCom, and we're very excited about sharing our perspective on that day.

On the difference in the EU?

The EU, we just filed after some formal meetings, and we expect to hear back and start the engagement process. And in Japan, we just had our formal interactions, and we'll be filing soon.

Hi, good morning. Question is really about expenses. You're about to lose $3 billion at TECFIDERA sales, and I was just curious how come you're not announcing some type of restructuring plan, or just significant cost-cutting to help offset that? I mean, I understand that VUMERITY is still there, but clearly there's a disconnect between the sales of those two and big sales with those two. And then just secondarily, can you talk about any tax rate implications because of TECFIDERA sales going away? Thank you.

So, thanks for the good question. We are always looking at savings opportunities and how to be an even more efficient operation, especially when we face the potential launch of TEC in the U.S., which is certainly a material impact. We did extract approximately $400 million from our infrastructure in order to be a leaner and simpler organization, and we have an array of measures in place to simplify the back office and try to save additional resources. You need to understand that we still have a $6 billion plus business with MS in a highly competitive environment where we need to absolutely resource in order to defend our leadership position. VUMERITY is immaterial for now, but the signing is demonstrating some good signs and we'll come back to it. So we need to stay on and continue to resource the launch of VUMERITY, and obviously, there's aducanumab. We use the learning from COVID and utilization also to gain efficiency. But again, we need to continue to resource the base business. We need to prepare for the launch of aducanumab, because we are optimistic and at the same time, we try really to save what we can.

Yes. So I'll just quickly add to that, Marc. Thanks very much for the question, Mike speaking. I think just to add to what Michel was saying, a little bit of color, running at about 17% of revenue for SG&A, we feel like it runs pretty efficiently. As Michel said, we are reallocating some costs and resources to the aducanumab launch and in support of VUMERITY. And obviously, we do need to continue to support the MS franchise, but I would just point out that any cost savings that we have, we guided for only the fourth quarter. We're not guiding for '21 at this time. But obviously, you wouldn't see cost impacts around this until 2021, which we'll talk more about when we get to 2021. On your question around the tax rate, I think you were reacting to a comment in the prepared remarks. Given the change in the cash flow profile and the profitability profile for TECFIDERA, there was a deferred tax adjustment that was required to be booked relating to evaluation allowance, which had a modest impact on the effective tax rate for the quarter. So hopefully that's helpful.

So if I may add to what Mike said, TECFIDERA is still above a $1 billion ex-U.S. If we remove completely the U.S. market and it's growing. And there are some countries where we are launching TECFIDERA. So we see continuing to resource the overall $6 billion plus MS franchise and also TECFIDERA ex-U.S.

Great. Good morning. Thanks for taking the question. I guess, as you guys think about the Advisory Committee and you think about potential path to approval, what do you think is the risk that the FDA may think about approving aducanumab in a certain subgroup of patients where they think the risk-benefit is better compared to the overall patient population? If you could comment on that, that would be helpful. And then, Mike, can you just comment on inventory trends in the quarter? Thanks.

Hi, Matthew. This is Al. We look, the FDA has all the data. We continue to believe that aducanumab has substantial evidence of efficacy. If we didn't believe that, we wouldn't have filed. And we look forward to sharing all the data at the FDA Advisory Committee, including potential subgroups. And it's in the FDA's hands at this point.

Yes, this is Joe. In terms of your question on inventory, I would just say it wasn't a significant impact in the quarter and not something that we called out.

Hi everyone. I appreciate the opportunity to ask my question. Michel, I know you were very enthusiastic when you decided to file with the FDA. I'm not sure if it's the virtual format of this call, but I'm not sensing that same excitement regarding the EU filing. Is there something different being raised by the EU compared to the FDA? I would be interested in your thoughts on that, Michel. Al, I remember that when the data was shared, some critical aspects were not presented. The assumption seemed to be that they align with the overall analysis, but could you clarify if you anticipate that the FDA will focus on APOE4 carriers as opposed to non-carriers? Also, can you remind us if the efficacy is similar in those two groups? And if we examine only patients without ARIA, do you expect the efficacy difference to be consistent with the overall conclusion?

So let me take the first part of your question, Umer. So we are equally excited about all the interactions with regulators all around the world. Having said that, the U.S. FDA will certainly influence as a cascade, all the regulators. We had to refocus our team on the U.S. FDA because we were approved by other agencies who wanted to meet and wanted us to share the data. So I will not speak about China and all the markets, Australia, Canada, Switzerland, et cetera. So certainly, the focus is on the U.S. FDA, the November 6, we are excited, and we are optimistic and then the others will unfold naturally, hopefully.

Hi, Umer. Regarding your question about carriers versus non-carriers, I don't want to speculate on what the FDA will ask the advisors at the Advisory Committee. However, if that is the case, we are prepared. We haven't presented our subgroup data yet, but we will at some point, and it could potentially be brought up at the Advisory Committee. We are eager to share our insights on the data, regardless of the discussion topics.

Hi there. Thank you so much for taking the question. So one from Michael, nice to meet you on the phone. So with the erosion of TECFIDERA, why did you opt to authorize an additional share repurchase program versus, say, allocating your capital elsewhere to maybe help grow revenues? Aside from aducanumab, how do you plan on addressing this decline in revenue and earnings that we're now seeing? Thank you.

Sure. Evan, nice to meet you, and thanks very much for the question. Look, Biogen for a period of time now has been very active in allocating capital. As Michel mentioned in the prepared remarks, just in the last 4 years, 20 transactions approaching $5 billion, and obviously the company has returned significant capital to shareholders in the form of share buybacks. And we expect both of those activities are going to continue. Obviously, we're going to continue to be active on the BD front as the company has been before. And notwithstanding the situation with TECFIDERA, we've got $4.6 billion of cash on hand as of the end of September, a modest amount of debt, net debt, I think, $2.8 billion. We've got still very significant cash flow and a very pristine balance sheet. And we intend to utilize that for both BD and share repurchases, and the logic of the share repurchase just completely aligns with that.

So we do remain, Evan, very active on BD and the organization can continue to do both. Return capital to the shareholders, and also add to the business momentum, and we have prepared for both. Working very hard on that.

Good morning. Thanks for taking my question. Al, one for you. I'm curious you've been asked a few times about the AdCom, but kind of dodged the questions of what your argument is going to be. I'm curious if you maybe just give us a brief preview of what the key elements are of your argument that aducanumab has a positive benefit-risk. What parts of the data where you highlight, and then on the risk side, how will you deal with the ARIA? And then just kind of a follow-up question to that. It is 2 weeks before we expect to see the proofing documents released publicly, has Biogen received them yet? Thanks.

Our argument is based on the strong positive results from the EMERGE study, which met all pre-specified primary and secondary endpoints. Additionally, we have supportive data from the Phase 1b trial published a few years back in Nature. Regarding the ENGAGE study, we believe we understand the reasons for its negative outcome, and we don't think it undermines the positive results from EMERGE. The main risk we see is ARIA, which we believe is manageable through MRI monitoring and titration. Therefore, we are confident that the benefit-risk ratio supports approval. If we weren’t convinced of this, we wouldn't have submitted our application. As for the briefing book, we will not comment on it, but it will be made publicly available two days before the Advisory Committee meeting, as noted in the FDA register.

Hi. Thanks for the question. Just following up, can you just comment about the language on how the FDA may plan to act early? What does that mean? Is that way earlier, and just maybe you keep emphasizing that. So just maybe add some color on that. And if it was early, would you actually be ready to launch literally any day if that actually happened? And if it's not the case that it goes that way, can you just rightsize which way expenses would be going? Because I think you spent a lot preparing for this, which is optimistic but just what that need to be adjusted? Just maybe some color there. Thank you so much.

I'll take the first part, Michael. In terms of acting early, the FDA has had the data since last June. Right after our first Type C meeting, we sent them all the primary data. That could be one reason why they said that they could act early. We see the Advisory Committee has scheduled pretty early relative to the timeframe that they have until the PDUFA date of early March. Okay, go ahead.

Regarding the launch readiness, the answer is definitely yes. We have increased our medical engagement with scientific leaders and have been in contact with payers. We are developing the value proposition and considering the potential price. We are making steady progress with a cross-functional team focused on site readiness. They are eager to meet and engage despite COVID. We have significantly enhanced our already strong digital capabilities. Patient engagement and services have been ramped up in anticipation of a high volume of requests for advice from patients. Our approach to the launch is methodical, starting with the most important treatment centers and specialists before expanding to a broader population, including engaging with Medicare. The burden of the disease creates significant interest from all parties we interact with, even though we are navigating the challenge of building the infrastructure on our own. Overall, I am very pleased with our progress, and we will be ready.

You address the last part, which is just expenses and ...

Yes. I mean, look, I think hopefully our optimism is clear and the scenario we're planning toward is a successful launch of aducanumab, and hopefully unlikely event that we don't have approval. Of course, we would have an obligation to look at our cost base.

Great. Good morning, guys. Thanks for taking the question. I just wanted to follow-up on something, Michel, that you just mentioned around pricing. I will acknowledge upfront putting a giant cart before the horse. But if aducanumab is approved, can you just talk about your latest thoughts on how to potentially price this to best summarize the product's potential and accessibility? And since everyone seems to be asking two, just a housekeeping for Michael. With SPINRAZA sales down 10% this quarter, I mean, you alluded to both competition, as well as kind of the continued effects of COVID. Is there any way to delineate that a little bit and talk about roughly speaking, what to do to each one?

We are making progress on determining the potential price for aducanumab, pending approval; however, it's still too early to finalize anything. We are engaging with pharmacoeconomists, ICER, and various advisors on this matter. As mentioned earlier, the societal cost is significantly high. We are conducting a thorough assessment of the clinical meaningfulness and the value that aducanumab will deliver to various stakeholders, including patients, caregivers, payers, and the overall value creation associated with the drug, not just in the first year but throughout its lifespan, potentially extending beyond the patent expiration. It remains an early stage, and we will revisit this topic while remaining focused and dedicated, with input from others.

So Cory, on the second part of your question I'll try to give you some data points that are hopefully helpful and just kind of speaking in year-over-year terms. So globally, SPINRAZA was down 10% year-over-year. And you'll see in some of the charts that we put up that patients are actually up 21% year-over-year. And the dynamics that factor into this are a few things. One is product dosing dynamics. We have fewer loading doses versus maintenance doses as the product matures. Secondly, there are COVID impacts. We can't precisely tell you what that number is. It's kind of hard to tease out, but we know that part of the reason is related to COVID and patients not getting in to get those treatments. There's some country mix in the mix here, so to speak, and some of the patient growth that we've had is coming from countries where the prices are lower. And lastly, there is competition from Zolgensma and Evrysdi. So those are kind of all in the mix to precisely say what the COVID piece is. It's not something that we can completely tease out. We know it is in the mix and hopefully those metrics that I gave you are somewhat helpful.

Congratulations. Thank you for the call. One, just a clarification. And again, nice meeting you initially on the phone. The message basically on the cost structure that, look, we might have to take a look at our cost structure, but we will wait until we know the outcome of aducanumab before we decide how to do this. Just clarifying that this has gone to message as we think about the cost structure in 2021. And second, just staying on the SMA side, can you guys give us a feel for your share of new starts in the U.S. and internationally, just so we can kind of have a model forward of how the market would split up?

Sure. So, Ronny, it's Mike speaking. So on your interpretation on the costs, as we've said, we're gearing up for a launch of aducanumab that does add some pressure to SG&A. And that is something that we're very focused on, obviously getting right. We have reallocated some resources, as I said, in the prepared remarks from TECFIDERA to aducanumab as well as the support of VUMERITY. We are going to continue to support the MS platform. As Michel said, we have over a $1 billion franchise outside of the U.S. in TECFIDERA, which is important to remember. And so that's kind of the state of play in terms of the fourth quarter that we've guided to today. And we'll have more to say about all of our financial metrics as we get into 2021 and provide presumably guidance for next year at that time.

Yes, Ronny, in the second part of your question, I don't think we've gotten to that level of detail in terms of kind of shares in new starts and whatnot.

But if you want, I can add a bit more color on what we see in terms of market dynamics, at least in the U.S. with a recent launch. Recently combined with the COVID environment is certainly generating some switch from SPINRAZA, and this is understandable because of the perceived convenience. But the SUNFISH data is showing clearly some limitations mostly because of the target toxicity potentially and the 5 mg ceiling that may impact efficacy while the weight of the kit increases, and patients and physicians start to be aware of that. But nevertheless, at the time of launch, patients are attracted by a potential oral medication, but it's not that easy, 365 times a year with challenging dosing versus 3 times a year only and take it and being sure that you get the dose. So we believe that based on the data that we have and all the real-world evidence from infants presymptomatic to symptomatic adults at the end of the day, safety and efficacy profile mostly will prevail, should prevail. That's why we remain reasonably optimistic about SPINRAZA once this wave of enthusiasm is a bit behind us.

Hey guys, thanks for the question. I just had a couple of quick ones. Michel, on the chance of the panel isn't favorable or FDA doesn't approve, what do you think could be some of those changes to the strategy? If it's more aggressive BD, does the $5 billion buyback announced today preclude the potential for doing a larger, more transformational deal? And then just a quick follow-up on SPINRAZA. Just, can you speak directionally that how much of the switch dynamic was in play in the U.S this quarter and would that be an indicator for the bigger OUS market? Thank you very much.

So just to start on SPINRAZA, we saw approximately 200 patients, if I’m not mistaken, being switched to the new launch every day. But again, we are confident that over time SPINRAZA will remain the foundational therapy for the treatment of SMA. Concerning the first question on what do you think about the strategy is. Well, I would like to start by reminding we are assessing that we remain optimistic about the potential launch of ADU, and this is the underlying assumption. But nevertheless, if ADU fails, we're still in a very strong position. We seem to be very profitable. We have a deep pipeline, we have a strong balance sheet, and we have a large portfolio in CNS, and this will enable long-term growth and value creation. So the prospects are not necessarily defined by the binary event, but they will be certainly affected in case of ADU failing. We have a pipeline, we have opportunities in ophthalmology, in stroke, in lupus, in ALS, and biosimilars. We have the bigger deal with Denali. We have the rest of the portfolio in AD, the leadership position in neurodegenerative diseases still here, and we have overall 30 clinical assets, 8 filed or in Phase 3. And we have the entire portfolio with lifecycle management opportunities. And as I said, I believe that SMA, SPINRAZA will remain the foundational therapy. So the cost discipline will be there all the time, as discussed by Mike.

Yes, I think the other point that I would just add is you mentioned, you asked whether the share repurchase authorization precludes BD, and the answer as we said before is, it doesn’t. We will continue to do both. And I would just remind that the authorization is very flexible. There's no timestamp on it. So we will continue to do both and be active, and we have a balance sheet that’s in a great position, which we’re pleased about.

Good morning. Thanks for taking my question. If aducanumab is approved, do you expect the formal risk evaluation and mitigation strategy program to be put in place? And we know you said you are ready to launch on day one, but what about the infrastructure around the burden caused by a potential REMS program?

This is Al. With respect to the REMS program, it's hard to say at this point. We are still in the review process. I would say that we believe that the risk of ARIA is manageable, and the community has learned how to manage this risk over the years. Whether that requires a REMS or not is up to the FDA.

Thank you.

Hi. Thank you for taking the questions. I’d like to switch gears and ask about Parkinson’s disease. As a leader in neurodegeneration, could you share your vision for the future treatment of Parkinson’s disease, where you have an alpha-synuclein antibody and there's recently been signals of efficacy from Prothena and Roche? And then you also had your LRRK2 program with Denali and then there are several gene therapies in development with competitors. So, which of these approaches do you think is most promising and where does Biogen fit into the competitive landscape? Thank you.

Yes, thank you very much. So we’re very excited about the potential in Parkinson’s disease. As you pointed out, the Prothena, Roche antibody looked like there was some efficacy in Parts 2 and 3, I believe, of the UPDRS score with additional support from digital measures and some imaging outcome measures as presented at the Movement Disorder Society meeting about a month or so ago. And we have our own alpha-synuclein antibody. It's different, in the sense that it's more specific for aggregated forms of alpha-synuclein, and we expect a readout on that in the coming months. We also have an antisense oligonucleotide program directed against alpha-synuclein. You pointed out the LRRK2 inhibitor. We have the lead program there, the Denali 151 program, an oral small molecule LRRK2 inhibitor. And that could work not just in patients with LRRK2 mutations, but also there is ample evidence of lysosomal hypofunction in other cases of PD, even patients that don’t have LRRK2 mutations. And so the potential is there that it could work in a broad range of Parkinson’s patients. And then as you pointed out on other lysosomal gene, arguably as GBA, patients who are homozygous for GBA have Gaucher’s disease or lysosomal storage disease. Those who are heterozygous have an increased risk of Parkinson’s disease. And so we have preclinical programs directed against that as well. We have the ability to license two programs with the Transport Vehicle program. I’d also point out that earlier this year we did a deal with Sangamo, which includes not only opportunities for gene therapy programs in Alzheimer’s disease but also Parkinson’s disease. One of our lead programs there's a gene therapy program on alpha-synuclein. So, I think there's a broad range. I think there's a lot of very good, validated targets, validated by human genetics and by clinical pathologic data in humans, and we have multiple modalities, gene therapies, small molecules, as well as antisense oligonucleotides at our disposal.

Thank you. We appreciate all the questions. We probably have time for about one more.

Hey, guys. Thanks so much for taking my question. So, you touched on some of the additional regulatory meetings you held outside the U.S. on aducanumab. I’m curious about your feedback from Japan, especially in particular the rollout of the Phase 1/2 study that you had conducted there and whether you see potential for ex-U.S. regulators such as those in Japan to act early? And then just really quickly on the MS franchise, you’ve got several next-generation agents like 091, 107, and 061, but they’re all relatively early and would probably come online after additional exclusivity losses. So just wondering how you're thinking about the lifecycle there, whether you have a predilection for flexing down spend long term until these come to fruition or are you thinking about augmenting the mid-stage MS portfolio to leverage the commercial infrastructure you have in place? Thanks.

So, Brian, I think with respect to ex-U.S. filings, I mean, as Michel said, we are equally optimistic about filings outside of the United States; we just aren’t as advanced in terms of the procedure. We just filed in EMA; we haven’t even filed yet in Japan. And so, we are eager to start the regulatory procedures. And as Michel said, we are equally optimistic. On the second part ...

On the lifecycle management of MS, we've made significant strides in our clinical programs and advancements within our MS portfolio and pipeline. The early pipeline includes BTK and various opportunities to develop or co-develop our products, and we have lifecycle management opportunities with TYSABRI, EIV, subcutaneous administration, Avonex, a new label, Plegridy, and IM. We have numerous opportunities to generate market events. Despite the potential launch of the high-efficacy product aducanumab making the segment increasingly crowded, TYSABRI continues to perform well due to its strong documentation and appreciation among patients and physicians. We remain confident about the rest of our portfolio, even considering the challenges we face with TEC in the U.S. There is a broader franchise beyond this specific issue and a commitment from the company beyond RMS for long-term returns. Biogen continues to support MS as we did from the very beginning. Thank you for your attention. It’s an exciting time at Biogen, and we look forward to early November for more updates from the AdCom, as we aim to advance the company after this event. Thank you, and have a great day.