Biogen Inc (BIIB) — Q2 2022 Earnings Call Transcript

Good morning, and welcome to Biogen's second quarter 2022 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 our GAAP financial measures and a reconciliation of the GAAP to non-GAAP financial measures that we will discuss today. Financials are provided in Tables 1 and 2, and Table 4 includes a reconciliation of our GAAP to non-GAAP financial results. We believe non-GAAP financial results better represent the ongoing economics of our business and reflect how we manage the business internally. We have also posted slides on our website that follow the discussions related to this call. I would like to point out that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. On today's call, I’m joined by our Chief Executive Officer, Michel Vounatsos; Dr. Priya Singhal, Interim Head of Research and Development; and our CFO, Mike McDonnell. As a reminder, during the Q&A portion of the call, we kindly ask that you limit yourself to one question. I will now turn the call over to Michel.

Good morning, everyone, and thank you for joining us. Biogen continued to execute well in the second quarter, and we are pleased to be raising our full year financial guidance. We believe our achievements are critical steps on our path to drive renewed value creation for both patients and shareholders over time. First, together with Eisai, we were granted Priority Review for lecanemab, under the accelerated approval pathway in the U.S. for early Alzheimer's disease. We expect an FDA decision by January 6 of next year. And in parallel, we look forward to the upcoming Phase 3 readout expected in the fall. Additionally, together with Sage, we reported positive data in postpartum depression. The SKYLARK Study is now the second positive Phase 3 study supporting the potential of zuranolone in PPD with four additional positive randomized controlled trials in major depressive disorders. We believe there is a substantial body of evidence supporting a significant opportunity for zuranolone. Pursuit of innovation, however, does not come without setbacks, and we were disappointed to learn that the BIIB104 Phase 2 study in schizophrenia was not positive. I will now focus on the near-term operational priorities we outlined in our last call, while Priya will review our recent progress in R&D, and Mike will discuss our second quarter performance. First, we are continuing to focus our R&D resources on programs where we see the greatest potential while also aiming to rebalance the risk profile across our pipeline. For example, we intend to accelerate the regulatory filing of zuranolone in postpartum depression following the positive SKYLARK Study. In addition, we have terminated some R&D programs that we believe lower positive success such as BIIB076, an anti-tau antibody in Alzheimer's disease and BIIB100, a small molecule XPO1 inhibitor in ALS. Second, we are on track to implement the cost reduction and productivity measures outlined on our last call in order to further align our costs with our revenue base while maintaining our focus on execution. Third, we are pursuing additional global growth opportunities with a focus on key emerging markets. This includes China, where we are encouraged by the launch of SPINRAZA. Fourth, we are focused on driving renewed growth in our biosimilars business. We just recently launched BYOOVIZ, the first biosimilar referencing LUCENTIS in the U.S. Biogen's first entry into the U.S. biosimilars market; we also expect to begin launching BYOOVIZ outside the U.S. early next year. With the completion of the sale of our joint venture interest in Samsung Bioepis in the second quarter, we now have an expanded ability to pursue the biosimilars business on our own as we aim to bring more biosimilars products to more patients and geographies. We continue to advance our biosimilars pipeline, which includes two Phase 3 programs referencing EYLEA and ACTEMRA. Fifth, we remain focused on capital allocation during the quarter. We entered into new collaborations with MedRhythms in MS and Alectos in Parkinson's disease, and we continue to evaluate both internal and external value creation opportunities. We also returned approximately $500 million to shareholders during the quarter through share repurchases. We are also pleased with the progress in our collaboration with Genentech for mosunetuzumab, a CD20xCD3 bispecific antibody recently approved in the EU for patients with relapsed or refractory follicular lymphoma. The BLA of mosunetuzumab for medication was recently granted Priority Review by the FDA, and we look forward to a potential approval in the U.S. Our progress across these areas, in addition to the recent advancements we have made in R&D, has the potential to help drive growth over time. Of course, not all our programs will deliver the results we hope, which is why we are continuing to advance and build a diversified and appropriately balanced pipeline as we work to create and sustain a multi-franchise portfolio over time. This includes near-term opportunities in Alzheimer's disease and depression, followed by other areas such as Parkinson's disease, lupus, and stroke in the mid- to late 2020s. We remain committed to taking advantage of all the strengths of the company. Our talent, our portfolio, our manufacturing capabilities, our pipeline, which includes 10 programs in Phase 3 or filed, and our strong balance sheet to deliver results for both the patients we serve and our shareholders. I will now turn the call over to Priya for an update on our recent progress in R&D.

Thank you, Michel, and good morning, everyone. I would like to start by thanking the Biogen team for their focus and dedication as we continued to advance a robust and diversified R&D pipeline. As Michel mentioned, we had several exciting R&D achievements this past quarter that I believe are key steps toward advancing our pursuit of meaningful new therapies for patients. Starting with Alzheimer's disease, as Michel mentioned, the FDA has accepted and granted Priority Review for the BLA for lecanemab in early Alzheimer's disease under the accelerated approval pathway. Eisai is also continuing to progress the lecanemab Phase 3 Clarity study with an expected readout this fall. The Clarity AD study was designed to build upon the results of the prior Phase 2 study and utilizes clinically balanced assessments designed to evaluate various aspects of cognition and function. Given the robust trial design, we believe that the totality of the Clarity AD results should allow us to further understand the effect of amyloid removal on different clinical domains of Alzheimer's disease. The FDA has agreed that Clarity AD, when completed, can serve as a confirmatory study to verify the clinical benefit of lecanemab. Pending the results of the Clarity AD study, Eisai plans to file for traditional approval of lecanemab in the U.S., EU, and Japan by the end of Q1 2023. This timing may allow for lecanemab, if approved, to become the first anti-amyloid antibody for Alzheimer's disease with traditional approval. Last quarter, simulation modeling based on lecanemab Phase 2 results, Eisai also published an analysis estimating potential long-term outcomes of treatment with lecanemab. The results of this analysis suggest that compared to standard of care alone, individuals treated with lecanemab, in addition to standard of care, may potentially experience slower disease progression to mild, moderate, and severe Alzheimer's disease from baseline by 2.51, 3.13, and 2.34 years on average, respectively. These preliminary results could possibly translate into additional quality-adjusted life years and reduction in formal and informal costs of this disease. Beyond lecanemab, we continue to advance our biosimilars pipeline that is diversified across molecular targets and modalities. This includes BIIB080, our ASO targeting tau, where we expect to initiate a Phase 2 study later this year. Moving to neuropsychiatry, together with Sage, we were very excited to announce positive results from the SKYLARK Phase 3 Study of zuranolone in postpartum depression. The SKYLARK Study met its primary endpoint and all key secondary endpoints with a 2-week course of 50 milligrams zuranolone, demonstrating a statistically significant improvement in symptoms at day 15 as compared to placebo, the primary endpoint, and at day 3, day 28, and 45. This is the second positive Phase 3 study of zuranolone in postpartum depression, further reinforcing the clinical profile of zuranolone that has been observed to date. Postpartum depression is one of the most common medical complications occurring during and after pregnancy, affecting an estimated 1 in 8 mothers or approximately 500,000 women in the United States each year. Depression, sadness, anxiety, thoughts of hurting oneself or one's infant, and thoughts of suicide are common signs associated with PPD. This is an area of significant unmet need where new treatment options are desperately needed. With the SKYLARK Study results now in hand, we are working with Sage to advance a single regulatory filing for zuranolone in MDD and PPD in the U.S., which we expect to complete in the second half of this year. Last quarter, Sage also presented the results of the zuranolone Human Abuse Liability potential study at the College on Problems of Drug Dependence annual meeting. The results of this study showed that 30 and 60 milligrams of zuranolone demonstrated lower abuse potential as compared with alprazolam 1.5 milligrams and 3 milligrams in recreational users of CNS depressants. 90 milligrams of zuranolone was comparable to alprazolam, 1.5 milligrams and 3 milligrams. As a reminder, the zuranolone doses studied in the MDD and PPD trials were between 20 to 50 milligrams. Also in neuropsychiatry, we were disappointed that the TALLY Phase 2 study of BIIB104 in cognitive impairment associated with schizophrenia or CIAS did not meet its primary or secondary efficacy endpoints. Most adverse events in the BIIB104 treatment arms were mild to moderate in severity. Given the consistent lack of efficacy observed across the primary and secondary measures of cognition and functioning, while demonstrating expected drug exposure levels during the entire 12-week evaluation period, we have decided to discontinue the BIIB104 program in CIAS. We are continuing to analyze the data and plan to present detailed results at an upcoming scientific forum. Moving to our neuromuscular portfolio. Last month, we presented new 12-month data from the VALOR Phase 3 study and its open-label extension of tofersen in SOD1-ALS, a progressive and rare genetic form of ALS. This analysis was designed to evaluate participants who initiated tofersen during the 6 months placebo-controlled period in VALOR versus participants originally on placebo who had a delayed start of tofersen treatment during the study's open-label extension. The results of the new 12-month analysis showed that earlier initiation of tofersen slowed decline across measures of clinical and respiratory function, strength, and quality of life. Furthermore, tofersen led to robust and sustained reductions in neurofilament, a marker of axonal injury and neurodegeneration. We believe that these results build upon the encouraging trends in reduced disease progression originally observed in the VALOR 6-month randomized study and further support the potential for tofersen to slow disease progression in SOD1-ALS. We continue to engage global regulators with these data and will provide updates when appropriate. In movement disorders, we initiated the Phase 2b LUMA Study in Parkinson's disease for BIIB122, a small molecule LRRK2 inhibitor that we are developing in collaboration with Denali Therapeutics. LRRK2 mutations result in hyperactivation of the kinase and are estimated to account for roughly 5% of familial and 2% of sporadic Parkinson's disease. By inhibiting LRRK2, BIIB122 is designed to target an underlying biological pathway implicated in Parkinson's disease, lysosomal function. For this reason, we believe BIIB122 may have therapeutic potential in Parkinson's disease more broadly, both in people with and without pathogenic LRRK2 mutation. The LUMA study is designed to evaluate whether once daily oral BIIB122 administration can slow clinical worsening versus placebo in Parkinson's disease patients without a pathogenic LRRK2 variant. We also anticipate initiating the Phase 3 LIGHTHOUSE Study later this year designed to evaluate the safety and efficacy of BIIB122 in Parkinson's disease patients with a confirmed LRRK2 pathogenic variant. There are roughly 10 million people suffering from Parkinson's disease worldwide, and no approved treatment sets slowed disease progression. By inhibiting LRRK2, we have the potential to deliver a first-in-class therapy that may significantly alter the course of the disease. In conclusion, we executed well against our R&D objectives in the quarter and continue to prioritize our efforts across both therapeutic areas and programs. As Michel mentioned, we have already made several decisions resulting from this prioritization effort, and this is an ongoing process that will be driven by both scientific insights and internal inflection points. Moving towards the remainder of 2022, we anticipate several exciting milestones. These include zuranolone regulatory filings for both MDD and PPD in the U.S., the Phase 3 readout of lecanemab in Alzheimer's disease, and the initiation of mid- to late-stage studies in Alzheimer's, Parkinson's, and lupus. These are therapeutic areas characterized by significant unmet need and where Biogen has the opportunity to deliver first-in-class, best-in-class therapies to patients. I will now pass the call over to Mike.

Thank you, Priya, and good morning, everyone. I will provide some highlights of our financial performance for the second quarter and an update to our full year 2022 guidance. Please note that all financial comparisons are versus the second quarter of 2021, unless otherwise noted. Total revenue for the second quarter was $2.6 billion, which was a decrease of 7% at actual currency and 5% at constant currency. Non-GAAP diluted earnings per share in the second quarter was $5.25, a decrease of 6%. Total MS revenue inclusive of OCREVUS royalties was $1.7 billion, a decrease of 4% at actual currency and 3% at constant currency. Global TECFIDERA revenue of $398 million decreased 18% at actual currency and 17% at constant currency. TECFIDERA revenue in the U.S. increased versus the prior quarter. However, this was primarily due to channel dynamics, and we do expect TECFIDERA in the U.S. to decline throughout the year of 2022. Outside the U.S., TECFIDERA was modestly impacted by generic competition in markets such as Canada and Germany. At this point, we are aware of several generic applications that have been approved in Europe, and we will be monitoring the situation closely. Importantly, we were pleased to be granted a new patent in the EU and reserve all rights to assert the patent against infringing, but it's possible that it may still be at risk. Global VUMERITY revenue of $137 million increased 51% at actual currency and 52% at constant currency. VUMERITY continued to grow in the U.S. We are pleased with the trajectory. Outside the U.S., VUMERITY is now launched in 14 markets. We are currently working with our contract manufacturing suppliers on potential supply constraints and have therefore delayed any additional country launches. Global TYSABRI revenue of $516 million decreased 2% at actual currency and was flat at constant currency. In the United States, TYSABRI revenue was negatively impacted by modest volume declines, partially offset by favorable pricing. Outside the U.S., we were pleased to see continued patient growth. We are aware that regulatory filings for a biosimilar referencing TYSABRI have been submitted to both the FDA and the EMA. We will continue to enforce our IP, but a biosimilar could launch upon approval in the U.S. and EU, which could occur next year. Global Interferon revenue of $350 million decreased 13% at actual currency and 11% at constant and was impacted by the continued shift from the injectable platform to oral or high efficacy therapies. Versus the prior quarter, Interferon revenue increased 13% at actual currency and 14% at constant currency, primarily due to seasonality in channel dynamics in the U.S. Moving to SMA. Global SPINRAZA revenue of $431 million declined 14% at actual currency and 11% at constant currency. In the U.S., we're encouraged to see fewer SPINRAZA discontinuations during the quarter. Outside the U.S., the revenue decline was primarily driven by competition and with the timing of shipments in certain markets, pricing dynamics, and negative currency impacts. Global SPINRAZA revenue decreased 9% versus the first quarter of 2022 at actual currency and 8% at constant currency, driven by competition and negative currency impacts outside the U.S. as well as some seasonality dynamics in the U.S. Moving to our biosimilars business. Revenue of $194 million declined 4% at actual currency, increased 3% at constant currency. Biosimilars volume increases were more than offset by negative currency impact and pricing pressure. We continue to expect full-year biosimilars revenue to decrease versus 2021. We are pleased to have launched BYOOVIZ this quarter in the U.S., and we recorded some modest initial revenue due to channel stocking. As a reminder, we expect a gradual launch of BYOOVIZ with more meaningful revenue contribution starting in 2023. Total anti-CD20 revenue of $436 million decreased 1%. Revenue from OCREVUS royalties increased 14%, which was more than offset by continued RITUXAN declines due to biosimilar competition. Now moving on to expenses and the balance sheet. Second quarter non-GAAP R&D expense was $529 million, including $18 million in upfront payments related to operations with MedRhythms and Alectos Therapeutics. This is compared to $585 million in the second quarter of 2021, which included approximately $50 million in upfront payments. Non-GAAP SG&A was $570 million, including approximately $29 million related to ADUHELM. This is compared to $635 million in the second quarter of 2021. Second quarter collaboration profit sharing was a net expense of $29 million, which includes $58 million of profit sharing expense related to the collaboration with Samsung Bioepis, partially offset by reimbursement of $29 million from Eisai related to the commercialization of ADUHELM in the U.S. Non-GAAP other expense was $79 million, primarily driven by interest expense. GAAP other income was $429 million, which included two items of note. First, we recorded an approximately $1.5 billion gain on the sale of our equity stake in the Samsung Bioepis joint venture. In addition, we recorded $900 million, plus estimated fees and expenses, related to an agreement in principle to resolve a previously disclosed qui tam litigation relating to conduct prior to 2015. This agreement in principle does not include any admission of liability and is subject to the negotiation of final settlement agreements and documents. We expect to make the payment shortly after the agreements are finalized, which we expect to be as soon as possible and within the next 12 months. In the second quarter, we generated $737 million in cash flow from operations. Capital expenditures were $37 million. Free cash flow was $700 million. We repurchased 2.4 million shares of the company's common stock during the quarter for $500 million. As of June 30, we ended the quarter with $7.3 billion in debt, $5.9 billion in cash and marketable securities, and $1.4 billion in net debt. In July, we repaid our senior notes due September 2022, with an aggregate principal amount of $1 billion. Of note, as of June 30, we utilized approximately $71 million of work in-process inventory related to lecanemab. We plan to continue building inventory over the coming months, and we are also procuring raw materials associated with this production. If the lecanemab Phase 3 study is negative or lecanemab does not receive regulatory approval, we would expect to expense inventory on hand at that time as research and development expense subject to cost sharing with Eisai. Overall, we remain in a very strong financial position with significant cash and financial capacity, including a $1 billion undrawn revolving credit facility to invest in growing the business over the long term. Let me now turn to our updated full year 2022 guidance. We are increasing our full year revenue guidance from our previous range of $9.7 billion to $10 billion to a range of $9.9 billion to $10.1 billion and increasing our full year non-GAAP diluted EPS guidance from our previous range of $14.25 to $16 to a new range of $15.25 to $16.75. This guidance increase is primarily a result of better-than-expected topline performance and continued cost management. This guidance assumes that foreign exchange rates, as of July 15, will remain in effect for the remainder of the year, net of hedging activities. Importantly, we are raising our revenue and EPS guidance ranges despite some meaningful currency headwinds which were not included in our guidance at the beginning of the year. Specifically, subsequent to issuing our most recent guidance on May 3, we have experienced a headwind of approximately $55 million to revenue and $0.20 to EPS due to currency fluctuations from April 29 through July 15. This is in addition to a headwind of approximately $120 million to revenue and $0.35 to EPS due to currency fluctuations between January 1 and April 29. These currency headwinds are primarily due to strengthening of the U.S. dollar relative to other currencies in which we transact. This financial guidance assumes continued declines in RITUXAN revenue due to biosimilar competition as well as continued erosion of TECFIDERA revenue in the U.S. due to generic entry. Further, this guidance reflects a range of scenarios for the impact of TECFIDERA generics in the EU, which is difficult to predict. We are aware of a small number of generics that have launched to date, and we are monitoring the situation. We assume we will utilize a portion of the remaining share repurchase authorization of $2.3 billion throughout the remainder of the year. Please see our press release for important guidance assumptions. In summary, we continue to execute well across our core business and are pleased to be raising our financial guidance for the year. We remain focused on delivering results and are optimistic about the potential opportunities ahead of us that we believe can create long-term value for shareholders. We will now open the call for questions.

We noticed that you have been discontinuing pipeline programs a bit earlier, including 104, 100, and 076. Could you comment on whether this indicates a change in your approach to risk assumption and decision-making regarding pipeline prioritization? Additionally, how might this affect your plans to pursue approval of lecanemab if the Phase 3 study does not meet its primary endpoint?

Priya will give some color.

Thank you, Brian, for that question. So as we've mentioned last quarter, we've embarked upon a very focused and disciplined prioritization of the R&D portfolio. But it is dependent on internal inflection points as well as external scientific insights. So I want to specifically pick up on the points that you made about BIIB104. We just shared that we will be discontinuing development of BIIB104, which is an AMPA potentiator in CIAS, which is cognitive impairment associated with schizophrenia. And that is because we had a readout from TALLY where we saw expected pharmacological exposure, but we did not meet the primary or secondary endpoints. So we believe that we have tested the hypothesis really well here and that it's time to reconsider the data, look at it very carefully, think about other applications, but ensure that we allocate resources to the programs with a higher probability of success. So that addresses that question. With BIIB076 that you also mentioned, it's an anti-tau antibody with our partnership with Neurimmune. And we did announce that we are closing down development at Biogen for it. So I would ask that you direct further questions of next steps on BIIB076 to Neurimmune. But from our perspective, we are focusing, for example, on BIIB080, which is our antisense oligonucleotide that affects all post-translational forms of tau. And we will be starting a Phase 2 late-stage trial later this year. So that's how we're thinking about our prioritization. And finally, to address what it does for our bar on Alzheimer's, I'll just say that we look forward to the results of Clarity AD for lecanemab. It is a well-powered, well-designed trial. It has, we believe, the right primary endpoint in CDR Sum of Boxes, and we think that a statistically significant difference versus placebo would be clinically meaningful because of the instrument that's being utilized as a primary endpoint and also all the secondary endpoints. And in addition, we have a whole comprehensive program around lecanemab, which addresses presymptomatic patients as well as we're looking at maintenance along with Eisai and Phase 2 open-label extension and subcutaneous. So I think we will just wait for the data. As we have said, we expect to complete the filing along with Clarity AD should it be positive by Q1 2023. So I hope that answers the question.

We are pleased to be making progress with the filing of zuranolone and lecanemab, and we are also anticipating more data for ADUHELM. In terms of our earlier pipeline, we have significantly expanded it. There is always an inherent risk in neuroscience, so we strive to increase our chances of success by making selections based on specific triggers and scientific insights. This is the approach that Priya is implementing.

I just wanted to follow up on lecanemab. So I guess the key question that I've been getting a lot is, in the discussions with the FDA around using a single confirmatory study here, do you have explicit feedback from the regulators on the p-value necessary here? Or is that going to be a review issue?

Priya?

Thank you, Matthew. To provide some context, lecanemab is currently in the process of being filed for accelerated approval based on the Phase 2 study, specifically the 201 study. We are anticipating results from Clarity AD, which is the Phase 3 study involving 1,795 subjects. This is a global study that we believe is adequately powered. There won't be an interim or futility analysis; instead, we will have a primary readout expected in the fall of this year, 2022. It's worth noting that 25% of the subjects in this study come from an underrepresented population, which is similar to the CMS population. Regarding whether this could serve as a confirmatory study for traditional approval, we do believe that if the results are positive, it can be used as such. Additionally, I want to remind everyone that in the aducanumab briefing document, the FDA indicated that they would accept a statistically significant change on a meaningful instrument like the CDR Sum of Boxes as evidence of a clinically significant effect. This is crucial, and we are confident that the CDR Sum of Boxes is the appropriate primary endpoint, as it is clinically validated and integrates both cognitive and functional aspects, making it a widely recognized registrational endpoint. At this stage, we feel good about its power, though we will need to wait for the results. I hope this provides clarity on your question.

Congrats on the quarter. So just on the CEO search, could you give us an update on where you are in this process? And if you're able to now provide a timeline? And just within that question, given how important lecanemab is to the company and the trajectory, is it reasonable to expect that a new CEO would not be in place until after the outcome of the trial is known?

Thanks for the question. From my discussion earlier this week with the Board members and our Chairman, I hear that the search is progressing as planned. But at this stage, there is nothing yet to be reported. And obviously, we'll not speculate on lecanemab, but it's a very important event. But at this stage, nothing more to report.

I have a question about the investment in selling, general, and administrative expenses related to lecanemab. Is there a decision point for your commitment to reimburse 50-50, and what happens if the drug makes it to market? Also, regarding zuranolone, is there a proposed net investment for 2023? How should we approach that?

Yes. So both of those arrangements are 50-50. So you would expect that we certainly will be building infrastructure to support, hopefully, the successful launch of both of those products, and we share costs in both cases, 50-50. So we're very focused on managing our OpEx. Currently, the 2022 guidance implies a midpoint of about $4.6 billion versus $5.2 billion last year, progressing well on the cost measures that we've committed to. And then, of course, the commercial infrastructure around those two products are key items that we're working very closely with both Sage and Eisai on, particularly as it relates to planning for 2023 and beyond.

How do you intend to approach the lecanemab Phase 3 data set if the primary endpoint does not work, but a secondary like ADCOMS or ADAS-Cog or perhaps a subgroup like APOE ɛ4 carriers is active? And how would that impact your FDA submission?

Thank you, Umer. I’d like to take a moment to discuss the various scenarios regarding the data readout. On one side, we may achieve a positive primary endpoint outcome, along with favorable secondary endpoints. We believe that the overall data will be crucial. We've previously discussed this and have an agreement with the FDA indicating that a positive result could support a confirmatory study. Conversely, there is a possibility the study could yield negative results. In such a case, we would examine the other readouts because there are two additional anti-amyloid agents with data expected soon: gantenerumab and donanemab, as many are aware. This raises broader questions regarding these readouts and their implications for the anti-amyloid hypothesis in early Alzheimer's disease. There could be various mixed outcomes, and it would be challenging to predict how they would be perceived. For any mixed scenarios, there are numerous possible combinations, but I believe the entirety of the data will be significant. At this stage, it's difficult for me to speculate on potential mixed outcomes. We are taking all of this into account, and right now, our main focus is on gathering the data, concluding the study, obtaining a clear readout, and engaging with the FDA, particularly since this product has breakthrough and fast track designations that enable us to seek FDA guidance. We will maintain close communication, and that’s the information I can provide at this time. Thank you.

You keep referring to the growth opportunity in emerging markets. Can you just help us size how big is the business? How has it been growing? What are the key products that are growing there? What are some products that have yet to launch there that's in the pipeline that can we look forward to growth there? Just give us a sense of where this business is going to be in 3, 4 years?

Before Mike provides more details, it’s important to note that the epidemiology in the West and in emerging mature markets is quite similar, making our portfolio very relevant in this region. Additionally, we are witnessing a rapidly growing middle class that can afford to co-pay and is eager to access quality education and healthcare. Our experiences over the past few years in Latin America, Asia Pacific, and the Middle East show a strong uptake of our MS portfolio, even though we initially thought Asia Pacific would have a lower incidence. However, given the population size, these present significant opportunities. We also see promising uptake for SPINRAZA. This is a good opportunity for us. Our professional team understands that compliance is crucial everywhere, particularly in this region. We ensure a solid balance between Biogen's direct presence and our partnerships, and we have achieved strong double-digit momentum to date. Mike?

Yes, not a lot to add, Marc. I would say that we're pleased with a couple of markets that I would call out, one being China, the other being Brazil. In particular, China, we're seeing excellent uptake on SPINRAZA. It's not a huge revenue contributor due to pricing dynamics there, but I think overall, the majority of our international growth has been around SMA. But as Michael said, there's opportunity MS as well. And that's something that's gone from a very small revenue base to a respectable number as we sit here in 2022 and growing in the years beyond. So we're hopeful that we can continue to grow it meaningfully for the next several years.

Could you provide us any updates on how you're thinking about pricing and branding of zuranolone and thoughts here on how a potential Schedule IV could impact utilization?

We are very encouraged by the data. It’s exciting to see the second study in postpartum and the fourth study in major depressive disorders. We've had opportunities to connect with many stakeholders, and this disease impacts a large number of people. It is highly relevant. In the U.S., there are more than 19 million individuals affected, and nearly 500,000 new cases of postpartum depression each year. We are making significant progress in understanding the patient journey and the different segments of the market, from those who are treatment naive to those who have experienced treatment failures due to side effects or lack of efficacy. I hope that soon we can have a dedicated session with Sage to update you on our progress, and we will return with more information as soon as possible. Regarding pricing, we are still in the process of gathering information, and we don’t have any updates to provide at this time.

I can address the scheduling question. Thank you, Salveen. I wanted to point out that the DEA process is robust and typically takes about 3 months at the end of the approval process, during which they will designate a schedule. Sage has already completed their human abuse liability potential study, as I mentioned earlier. There could be up to 5 possible schedules, but currently, we know the data we have, and we also have the background of ZULRESSO, which is a Schedule IV drug. Therefore, we believe it is possible for zuranolone to receive a Schedule IV designation. Schedule IV indicates a low potential for abuse and a low risk for dependence. Other drugs in this category include Ativan, XANAX, Darvocet, and others. We expect that this is the likely scheduling based on our current data, but we must wait to see the final outcome as we go through the process. I hope that clarifies the matter.

Sorry, I'm losing my voice. So I know you've talked a lot about staying within the current pillars of neurology and maybe also immunology. I was just wondering, if you think about derisking the portfolio and maybe going outside those pillars, what are your current thoughts about that now given you've had 3 months to think about it? And then I guess the question that goes along with that, would you make that decision after you hire the final Head of R&D and CEO?

I can begin. Thank you for your question. To provide some context, at Biogen we aim for a multi-franchise portfolio. Our R&D pipeline is strong, diversified, and robust. We have ongoing clinical programs and additional projects in discovery and exploration, focusing on diseases where we aspire to lead and considering the targets and biological pathways we want to address using our various modalities. Our flexibility across modalities is another strength, as we have access to biologics, small molecules, antisense oligonucleotides, and gene therapy. Regarding neuroscience, it is a core strength of ours, despite the challenges in this area. We have achieved considerable success in conditions like multiple sclerosis and spinal muscular atrophy, and we are optimistic about potential advancements in Alzheimer’s disease. Additionally, we have zuranolone in development for depression, and we are considering expanding its application in neuropsychiatry, particularly for major depressive disorder and postpartum depression, where there is significant unmet need. In specialized immunology, we are running three Phase 3 trials with two products. Our internally developed BIIB059 shows promise as a potential first-in-class treatment for cutaneous lupus erythematosus and systemic lupus erythematosus. We also have a collaboration with UCB on Dapi, which is in Phase 3 as well. We are focused on understanding the Type 1 Interferon signature to explore additional indications for BIIB059 in specialized immunology. In neuroscience, we believe we can excel in Alzheimer’s, depression, and maintain our leadership in multiple sclerosis and SPINRAZA for SMA. We are actively working on BIIB115, a follow-on ASO treatment that may allow for once-a-year dosing. On the multiple sclerosis front, we are investigating both peripheral and central BTK inhibitors and will continue to assess emerging data. Beyond this core R&D portfolio, as Michel mentioned, we are also exploring biosimilars and digital therapeutics, having recently partnered with MedRhythms. Overall, we have a diversified portfolio, and we are quickly evaluating new data, such as from the BIIB104 readout, to consider its implications for the glutamatergic pathway. The same systematic thinking applies to our resources with BIIB059 and zuranolone. Our team is focused on executing this approach effectively. I hope this gives you an insight into our strategy.

Thank you, Priya. And to bring that together, what is very important for us to set the strategic direction is to clearly understand the key capabilities that we have within the company throughout the value chain, from the early research, clinical development throughout to commercialization and customer engagement. And as Priya said, today, we believe that we are pretty well diversified compared to where we were 6 years ago in neuroscience, in specialized immuno, in biosimilars, and emerging digital therapeutics capability. We have now 29 programs and 10 in Phase 3 of filed products. The question is how do we derisk in addition? And this is what Priya started to work on. Obviously, a new CEO and a permanent Head of R&D will have an opportunity to revisit the strategy together with the Board.

Going back to Alzheimer's for a minute. So in the face of the recent NCD and with the CLARITY study, obviously, pending, how do you think about the relative importance of the January PDUFA for lecanemab for accelerated approval that's based primarily on Phase 2 data? And has the FDA given any indication if they convene an ADCOM for this initial application?

Thank you, Cory. To recap, we have submitted documents for accelerated approval based on the Phase 2 data, and the PDUFA date is January 6, 2023. The Clarity AD results will be available in the fall of this year. If those results are favorable, Eisai expects to complete the filing for traditional approval by the end of the first quarter of 2023. Additionally, the overall information and data will be crucial for the outcome. Currently, we do not have any indication that there will be an advisory committee meeting. I hope this answers your question.

Can you talk about why BIIB104 did not meet the primary or secondary endpoints in the Phase 2 TALLY trial? And would you consider BIIB104 for a study in other indications?

Thank you, Jay. Great question. We are indeed very disappointed with the negative results for BIIB104. The hypothesis we were testing was that AMPA potentiation could influence NMDA receptor hypofunction, thereby enhancing synaptic connectivity and positively affecting the working memory domain in cognitive impairment associated with schizophrenia. Although we were looking forward to the outcomes, it did not meet the primary or secondary endpoints. In neuropsychiatry trials, there can sometimes be issues with adherence and compliance. We carefully reviewed the PK exposures, and since this was a 12-week study, we are confident that it was a highly compliant trial with expected exposures for BIIB104 throughout the duration. We believe we tested the hypothesis of AMPA potentiation leading to NMDA potentiation as well. Despite this, we found it to be an extremely well-run trial, and we have gathered a rich data set that can inform how we might explore the glutamatergic pathway in other neuropsychiatric indications. We are paying close attention to this and will evaluate it thoroughly. We did conduct early Phase I trials, but the data from those was unfortunately not replicated. These were very small trials; one involved healthy volunteers, and the other included schizophrenia patients, with subject numbers of 39 and 29, respectively. To your question, neuropsychiatry remains a key area of focus for us. We believe we have strengthened our capabilities and dedication in this field, and we will keep examining this high-quality data set, which we will also present at upcoming medical meetings.

A follow up to Cory's question but directed specifically at Mike. Mike, how does Biogen feel about putting resources behind the lecanemab launch? What would be the timing of an infrastructure build and true launch of the product? Would it be after accelerated approval, after full approval, or does it seem like now there's another step within NCD likely to come at some point? So when would Biogen feel comfortable in really investing in the commercial infrastructure for this program?

So before Mike jumps in, I would like to say that we work in full and close collaboration with our partners at Eisai that we are approaching a global launch, not suddenly a U.S. launch, and we anticipate the filing in Japan and EMA to take place during the first half of 2023. So this will be a global launch. And obviously, as we know, there is a sequential process here between an accelerated approval and a potentially full approval after that. Mike?

Yes. I think Michel covered a lot of it in terms of the question, Phil, but I would just say that as a reminder, that we and Eisai expect the Phase III readout for lecanemab in the fall of 2022. The PDUFA date is in early January of 2023. As you know, as currently written, the national coverage determination does significantly limit the market opportunity for antibodies with accelerated approval. And so as Michel said, we will closely align with Eisai to resource appropriately. We'll take learnings from ADUHELM as necessary and as where we can, and we'll resource it at each phase of its commercialization very gradually as lecanemab is launched. I'd say that, obviously, we did make the decision to take down the ADUHELM commercial infrastructure because we felt the time gap was too large to the timing of when we would need it for lecanemab. And I think that was the right decision. We feel like we can rebuild the infrastructure in a more gradual fashion and fairly quickly when we're ready. And again, that's something that we'll partner very closely with Eisai on.

I think that it will very much be dependent on the quality of the data. If the data clarifies and confirms without any ambiguity that removing the plaque is correlated with the slowing down of cognitive decline and reinforces the hypothesis, I think it will be a lot easier for us.

Yes. And the other thing to remember here, this is purely from an accounting standpoint, and it ties back a little bit to the question that Mike Yee asked earlier. Just as a reminder, all of the revenue costs, everything will be aggregated, and our 50% share will be reflected as a one-line revenue item for lecanemab.

Just want to follow up on some previous questions on lecanemab. You guys have talked about the U.S. opportunity already, but how much of a discussion have you had with EU or Japanese regulators just on the risk/benefit bar? I wasn't sure if your prior discussions from ADU were able to give you some insight there.

Thank you, Geoff. Eisai has stated that they will finish the filing in both Europe and Japan by the end of the first quarter of 2023, which aligns closely with the U.S. timeline, contingent on a positive Clarity AD readout. In line with this announcement, discussions with regulators globally have been ongoing and they have been in consultation. In Japan, Eisai has previously indicated that they were involved in prior consultations, which can significantly expedite the review process if the data is favorable. Everything is on track for submission completion. The discussions will always be driven by the benefit-risk assessment, and we believe the trial is well powered and designed to provide results using a clinically validated instrument, so we feel confident in its setup. Ultimately, the outcome will depend on the data.

Just looking ahead to the Clarity AD trial, what do you think CMS needs to see from that trial to potentially revise the NCD? I know there's a lot of discussion on the call. But I'm wondering, is that sufficient to essentially open up access in the Medicare population?

Thank you, Evan. Before addressing your question, it's important to reiterate that the final NCD indicated that antibodies with full approval may be included in CMS-approved prospective comparative studies, and that data could potentially be collected in a registry. What's open to interpretation is their next point, which suggests that the rigor of these study designs may largely depend on the strength of evidence from the initial randomized controlled trial that resulted in FDA approval. We are confident about this trial because we believe it is well designed and has sufficient power to provide a meaningful readout. If the Clarity AD trial yields positive results, we think it could meet the high level of evidence criteria established by CMS in the NCD, potentially leading to a reconsideration for full coverage. Additionally, there are two other readouts expected around the same timeframe that might also influence CMS's assessment of guidance and criteria for high-level evidence. Although it's not entirely clear at this moment, it will depend on individual molecules; my personal interpretation is that Phase 3 data will be crucial. Eisai has stated that Clarity has a strong design and they believe it could satisfy the high level of evidence outlined by CMS in the NCD memo, leading to potential reconsideration. For the high level of evidence, considerations would need to include safety and efficacy in underrepresented populations that reflect the CMS population. Furthermore, the Clarity AD participants have comorbidities and concomitant medications similar to those found in the CMS population. These factors position us favorably, but final outcomes will ultimately rely on the data.

And to add to what Priya has said, beyond the solid design, there is an open-label extension that will add some information. There is also a preclinical trial ongoing for the earlier population and life cycle management opportunities with a new subcutaneous formulation also underway.

And that will conclude our call today. Thank you, everyone, for joining us.