Biogen Inc (BIIB) — Q3 2022 Earnings Call Transcript

Good morning, and welcome to Biogen's third 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 the reconciliation of the GAAP to non-GAAP financial measures that we will discuss today. Our GAAP financials are provided in tables one and two, and table four includes a reconciliation of our GAAP to non-GAAP financial results. We believe non-GAAP financial results better represent the ongoing economics of our business and reflect how we manage the business internally. We have also posted slides on our website that follow the discussions related to this call. I would like to point out that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. On today's call, I am joined by our Chief Executive Officer, Mr. 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. This is an exciting time for Biogen. In addition to key developments across our pipeline, which includes 12 programs in phase 3, we continue to execute progress, and we are pleased to be raising our full-year financial guidance. I would like to begin by reviewing the important advances we made this quarter and what we believe they mean for Biogen. Priya will then review our recent progress in R&D, and Mike will discuss our third quarter performance. First, together with Eisai, we were excited to announce the positive results from CLARITY AD, the Phase 3 study of lecanemab in early Alzheimer's disease. For over 15 years, Biogen has been working relentlessly to bring forward new therapeutics in Alzheimer's disease, incorporating both new insights in disease biology and clinical trial design. Today, we celebrate the positive CLARITY AD readout as a significant achievement in the treatment of Alzheimer's disease. The results from Clarity AD illustrated several key aspects of lecanemab's clinical profile, which we believe could provide a meaningful benefit for patients. First, lecanemab administration showed a highly statistically significant reduction in clinical decline as early as six months, which expanded over the 18-month study period on an absolute basis, consistent with the disease-modifying effect. Second, the study was positive on all key secondary endpoints. This includes improvement in cognition as well as activities of daily living such as conducting personal finances, performing household tasks, and independently traveling out of home. Third, the rate of ARIA in Clarity AD was within expectations. With an FDA decision on accelerated approval expected by January 6 of next year, and Eisai's plan to file for traditional approval in the US, EU and Japan by the end of Q1 2023, lecanemab has the potential to be the first globally approved treatment to slow the progression of Alzheimer's disease. We look forward to working with Eisai as they continue to engage both regulators and CMS with a goal of ensuring that people with Alzheimer's disease have access to important new treatments. We believe that Clarity AD results underscore the progress we are making in the fight against Alzheimer's. But Biogen will not stop here. We plan to build upon our current learnings as we continue to advance a diversified pipeline of potential Alzheimer's treatments.

Thank you, Michel, and good morning, everyone. As Michel mentioned, we had several exciting R&D achievements this past quarter that meaningfully advance the potential of our pipeline, which includes 30 programs, 12 of which are in Phase 3, in order to deliver new impactful therapies for patients and drive renewed growth for the company. Starting with Alzheimer's disease. Together with Eisai, we were very excited to announce the positive results of the Clarity AD study, evaluating lecanemab in early Alzheimer's disease. The primary endpoint of the study was a change from baseline on CDR Sum of Boxes, a well-established measure of cognition and function in Alzheimer's disease. The study met the primary endpoint and lecanemab reduced clinical decline on the CDR Sum of Boxes compared with placebo at 18 months by 0.45, representing a treatment difference of 27%. We also observed a highly statistically significant reduction in CDR Sum of Boxes versus placebo as early as six months. We believe this demonstrates a rapid onset of efficacy and a significant change in CDR Sum of Boxes versus placebo. Furthermore, the effect on CDR Sum of Boxes expanded over the 18-month study period on an absolute basis, suggesting that lecanemab was exerting a disease-modifying effect. The study also met all key secondary endpoints, reinforcing lecanemab's impact on cognition and function. This includes a statistically significant reduction in amyloid levels in the brain, as well as additional clinical assessments such as the ADCS-MCI-ADL, a caregiver-rated assessment of activities of daily living relative to placebo. We believe that these efficacy results, when combined with an observed overall incidence of ARIA of approximately 21%, highlight the potential for lecanemab to be a leading disease-modifying treatment for Alzheimer's disease. Eisai will present the Clarity AD study results at CTAD in November and intends to publish the findings in a peer-reviewed medical journal. The lecanemab filing under the accelerated approval pathway is currently under review with a PDUFA date of January 6, 2023. The FDA has also agreed that the Clarity AD could serve as a confirmatory study to verify the clinical benefit of lecanemab. Accordingly, we expect Eisai will file for traditional approval of lecanemab in the US as soon as possible, following a positive FDA decision on accelerated approval. This filing is expected by the end of Q1 2023, along with marketing authorization applications in the EU and Japan expected by the end of Q1 2023 as well. Eisai has also been engaging with the centers of Medicare and Medicaid services as they work to maximize access for patients. Beyond these regulatory and access engagements, together with Eisai, we are also advancing a comprehensive development program for lecanemab, which includes, first, the ongoing AHEAD 3-45 pre-clinical study to evaluate lecanemab when administered earlier in disease, when amyloid pathology is present but before the onset of cognitive impairment. Second, investigating a potential maintenance dosing regimen with the goal of reducing the lecanemab dosing frequency over time. And the development of a subcutaneous formulation of lecanemab. With these results in hand, we are focused now on maintaining our leadership position in Alzheimer's disease over the long-term. We have an industry-leading portfolio addressing both amyloid and tau pathologies.

Thank you, Priya and good morning everyone. I will provide some highlights of our financial performance for the third quarter and an update to our full-year 2022 guidance. Please note that all financial comparisons are versus the third quarter of 2021. Total revenue for the third quarter was $2.5 billion, a decrease of 10% at actual currency and 8% at constant currency. Non-GAAP diluted EPS in the third quarter was $4.77, which was flat versus the third quarter of 2021. Total MS revenue, inclusive of OCREVUS royalties, was $1.6 billion, which was a decrease of 11% at actual currency and 9% at constant currency. Global TECFIDERA revenue of $339 million decreased 32% at actual currency and 30% at constant currency. We saw continued erosion of TECFIDERA in the US due to generics and an impact from generics outside of the US, primarily in Germany. We continue to see new generic launches in the EU. Earlier this month, the advocate general of the European Court of Justice issued a non-binding advisory opinion. We would expect TECFIDERA to have statutory market protection until at least February of 2024, if the court adopts the advisory opinion. Separately, we are filing actions to enforce our recently granted European TECFIDERA dosing patent, which expires in 2028. We have been successful in obtaining preliminary injunctions in some countries and unsuccessful in others, including Germany and France. Until we either affirm TECFIDERA's entitlement to statutory market protection in the EU or successfully assert our patent, generics can continue to sell in the countries where we do not have preliminary injunctions in place. Global VUMERITY revenue of $138 million increased 14% at actual currency and 15% at constant currency. US VUMERITY revenue increased 6% with higher volumes, partially offset by increased discounts and allowances. We have identified the root cause implemented manufacturing changes required to resolve the issue and are now working to secure necessary related regulatory approvals. We do not anticipate a supply shortage in 2022 and are currently focused on rebuilding adequate inventory with the goal of ensuring supply and reinitiating new country launches in 2023. Overall, we continue to believe that SPINRAZA has the potential to grow over time. Moving to our Biosimilars business. Revenue of $188 million declined 7% at actual currency and 4% at constant currency. We saw an increase in sales volumes, which was offset by unfavorable pricing as well as negative currency impacts. Total anti-CD20 revenue of $417 million was flat versus the prior year.

Thank you, Priya. I can tell you that we do remain very active in business development. Obviously, the portfolio is strong. And as we said during the prepared remarks, we have 12 Phase IIIs of filed products and we are getting prepared for AD, ALS, MDD and PPD. So, we are all very busy. Nevertheless, BD is on the table because the portfolio can always be improved. And we are evaluating every week prospects, and we are making progress. We've made more than 30 deals in the past few years, but we continue to be very active.

Good morning guys. I had a question on the status of your relationship with Eisai. There's a lot of investor questions on it. And I was just really curious if you could speak to sort of the status of the relationship, if you expect Eisai to allow you to commercialize and that there's not been any sort of contractual disputes or anything like that. Thank you very much.

Thanks for the question, Umer. I can tell you that the relationship is very solid for many years. I have the opportunity to meet and align with my counterpart on a very regular basis. The teams are working together very closely. The co-commercialization co-marketing is being discussed when we speak and is not yet determined. But overall, the relationship is sound. Mike, do you want to add something?

No, I think that covers it. I would say that as we work together on the commercialization strategy, obviously, Eisai has final decision-making rights, but it is a 50-50 profit share. And together, we're excited for the upcoming CTAD presentation, where more detailed study results will be shared.

Hey good morning. Thanks for taking my question and congrats on the quarter and on the lecanemab data. I'm curious how you envision reimbursement access for lecanemab with an accelerated versus a full approval? And I guess I'm wondering, based on you and your partner's ongoing CMS discussions, what your latest views are on whether topline results from Clarity AD would satisfy CMS' high-level evidence requirements to support NCD reconsideration in the case of an accelerated approval. Thanks.

Thanks for this important question. I think it all depends on the strength of the evidence. We are very pleased with the top-line results on the primary and secondary endpoints. We are all looking forward to CTAD and a coming publication in order to assess the level of evidence that will be considered by CMS, and that will imply the path forward. Priya?

Thank you, Michel. That's exactly right. And I'll just add that there are a couple of scenarios that are outlined in the NCD. So for the accelerated approval scenario, it's essentially coverage only in the situation of a randomized controlled trial, which is essentially non-coverage. But for traditional approval, there is a range of options, I think, that the NCD indicates, which is that it could be covered in a CMS-approved prospective comparative study, including registries. The strength and rigor of that kind of study will depend on the strength and rigor of the randomized controlled trial that affords the final traditional approval. So in that sense, we feel very confident about the strength of evidence. As you know, we met the primary endpoint with a treatment difference of 0.45, which translated to 27% versus placebo with lecanemab. And also all secondary endpoints were met in a highly significant manner. In addition, I would add that we had about 25% of an underrepresented population. So we believe that it's very well designed and the results are very encouraging.

So, we believe that we are making significant progress. And then separately, we are tackling the BIIB080, which we had very encouraging results from our phase 1b trial where we showed a dose and time-dependent reduction of tau. And we believe it addresses all forms of tau. So, now we're in the process of initiating a Phase 2. But you're absolutely right. We will be looking at many different approaches in how we can benefit patients in the best way that we can. So, yes, all biologies need to be considered, but we need to go step-wise, and we need to be systematic about this.

That concludes our call for this morning. Thank you, everyone, for joining us.