Biogen Inc.

Good morning. My name is Bettina and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen first quarter 2023 earnings call and business update. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. Please limit yourself to one question to allow other participants time for questions. If you require any further follow-up, you may press star 1 again to rejoin the queue. Today's conference is being recorded. Thank you. I would now like to turn the conference over to Mr. Chuck Triano, Head of Investor Relations. Mr. Triano, you may begin your conference.

Thank you, Bettina. Good morning, and welcome to Biogen's first quarter 2023 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 and non-GAAP financial measures that we will discuss today on the call. Our GAAP 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've also posted slides on our website that follow the discussion related to this call. I'd like to point out that we will be making forward-looking statements which are based on our current expectations. 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 President and Chief Executive Officer, Chris Feebacher, Dr. Priya Singhal, Head of Development, and our CFO, Mike McDonald. Chris, Priya, and Mike will each make opening comments, and then we'll move to the Q&A session. To allow us to get through as many questions as possible, we kindly ask that you limit yourself to one question. I'll now turn the call over to Chris.

Thank you, Chuck. Good morning, everybody. I'll start by first welcoming Chuck Triano as our new head of investor relations. Great to have you on the team, Chuck. On our last call, we described five priorities for the business that you see on the first slide here. And during the first quarter, I think we made a lot of good progress against those five priorities. We are continuing to work toward the potential launches of Lekembe and Alzheimer's disease and Zoranilone in both MDD and PPD. And I'm going to cover that on the next slide because that's really in some ways a super priority. On the next point on improving the risk profile and productivity of R&D, Priya will review the steps taken to improve the risk profile and the productivity of R&D. And you'll see that in greater detail. So I'm going to cover a little bit more on the cost base. The first thing I'd like to say is that we've made good progress on the previous program that had announced a billion dollars of cost savings. Those billion dollars have been secured and that program is complete. But over the last several months, I've been getting a better understanding of how the company operates, working with our senior leaders and thinking about how we operate at all levels of the company. particularly at a global, regional, and affiliate level. And as we said before, we do have a higher cost base than the average company in our category. And so we've initiated an additional program to align our operations and cost base with the expected revenue while leaving enough money for the upcoming launches. And we internally refer to this program as Fit for Growth. And really what we're trying to do is balance the opportunity for profitable growth by investing in our product launches and the R&D projects that we deem priority with an attempt to try to reduce that cost base and get that back to something that looks a little bit more in line with our competitors. Now, that's not just a simple job of taking out cost. What we're really trying to do is redesign the company. We have these two launches. They're going to have different geographic points of focus at the start. We won't have Zorana Loan for a few years outside of the U.S. Zorana Loan is clearly a top priority in the short term in the U.S. And outside the U.S., we're going to be certainly focused on the Lakembi launch in the first instance. So one of the things we want to do is make sure that we don't lose what is good in the company and what has been working. We also have to remember that we are still a leader in multiple sclerosis. There are a lot of patients who depend upon our products, and we have to make sure that the physicians who treat those patients have adequate information. So there's a balancing act as we try to shift our resources behind the growth opportunities while still supporting our historic MS business. And so we're taking essentially a bottoms-up and a methodical approach to this. This could have a much different approach to our operating model. We've been 45 years in multiple sclerosis with a limited product profile. Yes, we had at one point some products in hemophilia, and obviously we have Spinraza. And as a result, we had an awful lot of centralized cost. Right now, we're looking at how do we get a lot more of our resource and our attention closer to the customer. So it's a redesign effort, and it's meant to be durable. So we do recognize that there's an opportunity to reduce cost, but we really are looking at something more transformational that really sets the company up for growth. We'll be able to say more about that in Q2. Then another priority is really managing the base business. There's two dynamics in the company. We are a leader in MS, but that business is increasingly affected by competition. And we have growth opportunities with McKenvey and Zerenolone. So on the base business, the idea is how do we manage that business as profitably as we can? We did receive a favorable decision from the Court of Justice of the European Union related to TechFedera regulatory data and marketing protection, which was an important reinforcement of intellectual property and exclusivity rights. We believe this provides us marketing protection until at least February of next year. And we are looking to enforce that protection, but it'll take a little time for the market to settle. And separately, we also continue to enforce our 2028 patent for tech federa in the EU. We're also looking to aim to we're looking to maximize the profitability of the MS franchise. You know, up until now, the goal has been to defend revenue at all costs. I think now we want to take a little bit more of a nuanced approach of looking at where are the opportunities in MS, where do we have intellectual property, where do we have still sales promotion sensitivity and, and try to align our resources with that. And perhaps the, look at other means of promoting products that are a little less expensive. We do believe that Spinraza can return to growth, and we are seeing stabilization out there in the marketplace. Gene therapy is not for everyone, and the oral therapy has its limits. And there are still quite a few patients that suffer from SMA that don't benefit from any treatment. And as we announced at the previous quarter, we do have a formal process underway to evaluate strategic options for our biosimilars business. This is a very good business, and I think especially with the launch of biosimilars for Humira, we are seeing an opportunity for the healthcare system to make important economies that help fund innovation. And we need to think about how is the best way to manage this business and who might be the best owner of that business. On external growth, you know, we're looking at external growth really from two perspectives. One is how do we balance the company a little bit more on its pipeline? It has been very neuroscience focused. But as I've argued in the past, I think with MS, which is basically an autoimmune disease, I think we could migrate into immunology. With Spinraza, I think we have an experience in rare diseases, and that will be reinforced with Tafersin. And of course, we're in neuropsychiatry with Zoranilone. So these offer opportunities to think about how do we build out some of those franchises. The other is, you know, I did describe this dynamic of the MS franchise declining slightly and new growth coming. And we may look at external growth as a way of of making sure that that transition is as smooth as possible from a results point of view. I'm pleased to say that we've appointed Adam Keeney as our head of corporate development. Adam has over 20 years of experience, not just in business development, but also in R&D and strategy across both large pharma, and he was the CEO of Biotech. So I think he's got some entrepreneurial spirit that will be very welcome at Biogen. We do see McKembee and Zorana Loan as major contributors to revenue, but, you know, we want to continue to think about business development to support the growth trajectory and diversify, as I said. So, if I could have the next slide, please. So, you know, we've really got an unprecedented opportunity. We have today a PDUFA date for Tafursin. We have a PDUFA date in July for McKembe and a PDUFA date in August for Zerenolone. I can't think of another major biopharmaceutical company that has that many new significant products to launch. That's a huge opportunity. But as I said earlier, we have to think about capabilities on that. These are going to be in different areas. Obviously, McKembe is a little closer to home since it's still the neurologist. but there's an awful lot of market building will have to be done there. And of course, the rent alone takes us into a much different area and a much different physician franchise, but we're making our milestones. We received accelerated approval in the U S back in January. Um, we filed for traditional approval in the U S uh, on the same day in the, in, in, within the EU, Japan, and when, and ACI initiated a regulatory filing in China. You know, filing all of those dossiers in that kind of timeframe is really quite significant, and I have to congratulate our colleagues at ACI for this effort. These filings have received priority review in the U.S., Japan, and China, and, of course, a major milestone in that the Veterans Health Administration has decided to reimburse McKinley. Now, Lekembe is going to be the first anti-amyloid antibody to receive traditional approval globally, hopefully in July. As we said, this is not a straightforward launch. It's a complex diagnosis involving PET scans, lump or puncture for amyloid confirmation, specialists who are already busy, MRI imaging, biweekly infusion. And we know that capacity could be an issue initially. CMS reimbursement will be the next major milestone. which we expect to have an answer on once the product has received full approval as expected following the PDUFA date in July. More importantly, though, we're looking at how do we right now alleviate those bottlenecks. Yes, CMS is there, but both companies are already thinking about what we can do to make this easier for patients and actually reduce cost. ASI and Biogen are pursuing maintenance dosing and the sub-Q formulation. Blood-based diagnostics, as I've said in the past, are really going to be a game changer in this space. And we believe that over time capacity is going to expand to meet the need. For reimbursement, you know, this is a big question. The Veterans Association is certainly helpful. I would just point out that compared to the situation that Aduhelm faced, we are getting a lot more support from Congress. The American Association of Neurologists has written in support. And I know that a number of patient advocacy groups are active in ensuring that patients have access to this important therapy. So, ACI is responsible under the contract for engaging with CMS. and we would hope to see broad coverage coming out of the CMS decision. Now, I'd like to talk about Zoranolone just for a few minutes. I mean, Zoranolone is still, I think, an underestimated asset in our portfolio. Unfortunately, a lot of people suffer from depression, so it is a large market. There are clearly a number of older medicines that are available. The main problem with those are the side effects of those medicines and the length of time it takes for them to work. Zoranilone works potentially in three days, and it's going to be a different type of launch because we're talking about a treatment that works in two weeks. The only analog I can find that is in a way similar was Zithromax. So we do know that there is going to be some need for education. Physicians are used to treating on a chronic basis. As we launch even, we're going to have to think about different metrics. One of the things in a launch that you look for is when do NRXs switch to TRXs? Well, we're not going to see that. There are not going to be TRXs with the product. So I think there are these changes in physician behavior. This is a paradigm shift. Paradigm shift is not always a good thing in physical marketing, as we know. However, what really drives us, this is a product that really makes a difference for patients. This is a product that is efficacious, it works fast, and think about the freedom of knowing that after two weeks that you can stop taking Zoranolone. So I think that is going to be an enormous opportunity and I'll just finish with to person on this. It is not a big product, obviously about 300 patients, but it's, it's, it's classic biogen. There's a, we have a long history in a lot of setbacks, but the organization has an ability to learn and adapt. And was able to partner with the scientific community to help characterize neurofilament and the biomarker and neuromuscular disorders. This is a huge deal because. neurofilament will be relevant to a lot of researchers who are looking at ALS. So I think we've got some groundbreaking science here. And this is where Biogen has had the resilience to go after a lot of significant unmet need that has resolved things in a way that not everybody has been able to do. Next slide, if I could. We've got a number of milestones coming, as you can see here on the slide. By our Q2 call, We would expect to be in a different place with Lekembe. We should hopefully have the PDUFA date behind us successfully. Hopefully, we've received traditional approval and broader CMS coverage in the U.S. And, of course, we'll be communicating more about our Fit for Growth cost optimization program. By the end of this year, hopefully, we've got the first ex-U.S. approval of Lekembe in Japan. And hopefully we'll have received the approval for Zoranolone in both MDD and PPD, as well as having completed a three-month DEA scheduling period and initiated the launch. And if I look further ahead by the end of this time next year, I think we have an opportunity to build a global footprint of LeCambie with approvals in Europe and China. And, of course, we'll take the next steps on evolving the treatment paradigm in Alzheimer's disease with an expected regulatory filing of can-be maintenance dosing. We would also expect regulatory filing for subcutaneous dosing, which could facilitate at-home administration. So, in conclusion, through a combination of groundbreaking science, high-potential near-term commercial opportunities, and diligent capital allocation, I think Biogen is going to be well-positioned for the sustainable long-term growth. I'd like to now hand it over to Priya for an update on our progress in R&D.