Biogen Inc.

Good morning, my name is Ruth and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen's second 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. At this time, I would now like to turn the conference over to Mr. Chuck Triano, Head of Minister Relations. Mr. Triano, you may begin your conference.

Thank you, Operator. Good morning, and welcome to Biogen's second 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 to non-GAAP financial measures that we will discuss today. 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 have also posted slides on our website that will follow the discussion related to this call. I would like to point out that we will be making forward-looking statements which are based on our 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 Biebacher, Dr. Priya Senghal, Head of Development, and our CFO, Mike McDonald. Chris, Priya, and Mike will each make some 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 will now turn the call over to Chris. Thank you, Chuck. Good morning, everybody.

I'd like to start off with Lakembe. And, you know, I think before we really get into all the interesting details of commercialization and competitiveness, I'd just like to pause for a moment. This is an historic moment in healthcare history. We're talking about the very first disease-modifying treatment that's been approved, has received full approval from the FDA and reimbursement from CMS. And there have been literally dozens of medicines that have failed before this drug ever got to market. And that's important for a couple of reasons. The first is that There's an awful lot we still don't know. We are really at the beginning of a journey to really understand Alzheimer's disease and how we can affect this disease. But it's also going to have a big impact on the practice of medicine. Physicians haven't been able to really help patients very much beyond perhaps prescribing Dinefazil or products like that. And the treatment that we are proposing here really is going to change an awful lot of how physicians practice and treat these patients. So as we start thinking about intent to prescribe and how physicians are looking at things. We're actually not going to know that until we actually get out there on the marketplace and see how patients respond. Aduhelm did get approved, but as you all know, it never really got out of the blocks and never really got launched. So this is really a first. And whenever you're first, we're going to be discovering an awful lot. And a lot of this is just not that predictable. I would, again, just call out kudos to our colleagues at ASI. Within a very short period of time, they were able to get regulatory filings in the EU, Japan, China, Canada, Great Britain, and South Korea. So this is going to be truly a global launch. Now, we just had the AAIC last week, and Priya will cover off a little bit more about that. But, you know, one of the things that has become obvious is when we start looking at Denanumab and Licanumab, these are two very different products. And I don't think most people have actually really looked at that. Most people are looking at, okay, we've got an A-beta antibody and we're moving plaques. But there's a whole lot more to this story. And this is going to evolve over the next months and years. These are different products. They have different mechanisms because they have different binding. They've been studied in different populations. They've been studied with different clinical study design approaches. And, of course, they have a very different safety profile. And all of these differences are going to play out in the marketplace over the coming months and years. And it'll be interesting to see how that is, but I would just caution everybody, as we get into this and you see all of the data, there's an awful lot of subtlety to this, and it's going to be quite interesting from a commercial point of view. The launch is underway in the U.S. We did get full approval. Earlier this month and CMS approval that has significance also for others. This is going to encourage a lot of other companies to be investing in research and blood diagnostics. It's also, as, you know, going to be a, an unusual watch. There's an awful lot that has to be done. We're going to have patient navigators to help navigate the process to understand how treatment will occur, getting reimbursement. We will be working with physician offices. There's an awful lot of change that will have to occur in their practices on a day-to-day basis. There's an awful lot of education around safety, making sure that the right patients are in place. We have reached out to about 700 centers to date. We're also getting reimbursement beyond CMS. We have Medicaid, for example, in 48 out of the 50 states so far, and we have had very good response from commercial insurers. So I think the launch of the KEMBI is off to a very good start, and we'll, of course, keep you up to date as we get further information. I'll move on to another slide here. One of the things that we've been doing an awful lot in the past months is really making sure that we are well positioned for growth. And as we looked at the company, there's where we were. As you know, today we have a relatively mature product profile. Generally, when you have a mature product profile, you'd expect a level of investment to go down. We have actually relatively high operating expenses when we benchmark versus other companies. Part of that is an overinvestment in legacy products. But we also have an extremely centralized governance. We've got many organizational levels. We have a low span of control. On average, we have a span of control of three. And then as we looked at the R&D pipeline, you know, we've had five different heads of R&D in 10 years. And that's not good for an R&D organization. And as a result, we ended up with with some products that I think were relatively high risk and high cost and not necessarily of the highest value. So we've been through an extensive project to really review those programs. And as we looked at, well, where do we want to be? Well, we want to be making more value-based decisions for existing products. We don't want to just remove the promotional effort entirely. Biogen is still 25% market share in multiple sclerosis. We have the highest market share by a considerable margin. And so there are an awful lot of patients who depend on Biogen products, but I think we can do that smarter. There's a need, obviously, to have strong investment in our new product launches. It's important, clearly, to manage costs, but shareholder value is most optimized if we can really make a success of these launches. We need to get decision-making closer to customers. We want greater agility in the organization, and we want to focus on high-value projects in R&D. External growth will really give us the opportunity to diversify away from rare diseases, diversify into rare diseases, immunology, and psychiatry. So we did this redesign effort. What we did was a bottom-up exercise to look at where do we need to be as a country to successfully launched certain products. What kind of internal governance mechanisms do we want? What kind of metrics do we want? What kind of accountability? And so there's been a complete redesign of Biogen. And that will lead some cost savings. There are gross cost savings, which will be about $1 billion in annualized savings per year. Of that, we expect to invest at least $300 billion in growth opportunities going forward. So this is an opportunity really to make sure in this year, before we get into the product launches, that we are truly fit for growth. And with that, I'll turn it over to Priya.