Biogen Inc.

Please stand by, we are about to begin. Good morning, my name is Allie and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen third 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 one 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 one 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, Allie. Good morning, and welcome to Biogen's third quarter 2023 earnings call. Before we begin, I'll remind you that 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 are located in the investors section of Biogen.com. 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 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 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. So, on today's call, I am joined by our President and Chief Executive Officer, Chris Biebacher, Dr. Priya Sengal, Head of Development, and our CFO, Mike McDonald. Chris, Priya, and Mike will each make some opening comments And then we'll move to a Q&A session. And 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 very much, Chuck.

Good morning, all. I think we released a very good set of results this morning ahead of expectations. But, of course, we're all too consciously aware that really what most of you are interested in is where is Biogen going. To that end, we outlined five priorities that we believed we needed to achieve to put Biogen in a position to be able to grow again sustainably. And I think in the first nine months of the year, we've made an awful lot of progress. And indeed, I would say the third quarter was a particularly busy quarter. To remind you all what those priorities were really was to focus our teams and our resources on new product launches. And that is a little easier said than done. We're a company that has a long heritage in the treatment of multiple sclerosis. And teams get very passionate about patient outcomes and working with physicians. And to move them to new areas does require a concerted effort. The other thing we want to do is to stabilize and grow again those existing products that still have market exclusivity for a significant period of time, notably Lumerity and Spinraza. The third thing was to really look at our cost base. Although we had a relatively mature product portfolio, we had one of the higher OPEX to sales ratios among our peer group, and we needed to address that. But more than that, we needed to really reallocate our resources. Fourth was to really look at our research and development pipeline, particularly for the longer-term growth outlook. We have really taken a deep dive into research and development, looked at those projects that perhaps no longer fulfilled their original target product profile, where the practice of medicine had changed, where the probability of success had changed, and we have terminated those programs so that we can focus on on those assets that we think have the most promise, and I think we have a number of those, any one of which could actually meaningfully add to our longer-term growth. And the final thing was, We said right at the outset we were interested in external growth. We always knew that the Lakembi launch was going to be a gradual launch. We always knew that also even the Xaranalone launch was a non-conventional launch, and to de-risk that profile, we wanted to look at external growth, and of course we've been able to do that. So as I look at where we are, In the third quarter, we actually had Lekembe was the first anti-amyloid antibody to receive traditional approval for early Alzheimer's disease. Zirjave was a mixed bag. We got an important indication with postpartum depression, but of course we missed on the major depressive disorder. As expected, we received Schedule IV listing from the DEA. And we also had CALSATI approved for treating a genetic cause of ALS. This is not necessarily a product that is going to be of interest to many of you from the revenue potential, but scientifically this is a major milestone, and validating the biomarker neurofilament I think will enable so many researchers to find further treatments for ALS and perhaps other diseases. As I noted, we closed the acquisition of Riata Pharmaceuticals, and that gives us a whole new growth opportunity. Skyclarus is off to a very strong launch, and we'll talk about that in a minute. But it also builds out our rare disease portfolio. You know, as you know, we are trying to To move into some adjacencies, just given the risk of the neurological conditions that we have tended to focus on and rare diseases has been a logical place for us to go. Biogen has been very successful with the launch of Spinraza and we think we can do the same with Skyclaris. And as I mentioned earlier, we had the Fit for Growth program, and this wasn't just about cost reduction because we do want to reinvest some of that, but we really needed to simplify the organizational structure to empower the organization more, move more of the decision-making closer to markets and customers. We have ended up taking an entire layer enterprise-wide out of the organization and in some parts of the organization, even two layers of that. So we do think those cost savings will add meaningfully to our earnings per share as we look forward, but I'm also looking forward to a significant change culturally in how we allocate capital and the agility and the ability to take decisions in the organization. Could I move to the next slide, please? So let's talk about Lekembe, a subject I'm sure all of you are very interested in. We have always guided that this was going to be a gradual launch. And we know that partly from the Aduhelm experience, but also just from the fundamentals of what we're doing. This is a product that needs to be administered within a treatment process or care network. And those care networks did not exist at the time of the launch, so they have to be built. And doing that requires actually quite a significant change to the work patterns within clinics. And while IDNs and clinics are working really hard to put these in place, It, of course, takes time. And I think, you know, a terrific example of that is the announcement recently by the Cleveland Clinic. We all know that the Cleveland Clinic is one of the most widely respected medical centers anywhere in the world. And they recently announced that they had just infused their first patient with the Chem-B, you know, months after the approval. And I think that just speaks to the complexity that we're dealing with. And in a lot of ways, we not only are pioneering science, we're pioneering this commercial approach. So of course, we have an aim of getting to 10,000 patients by the end of March. We're at 800 now. What gives us the confidence that we think we can get there? Well, I think we have a number of green shoots here, signs of progress. The first is, as we look at our internal metrics of intent to treat and patient demand, we You know, we are seeing all of those things progress extremely nicely. You know, the FDA not only provided traditional approval, but CMS actually moved very quickly. The day of traditional approval, as they promised, they actually have provided reimbursement, and the patient registry has, so far from what we hear from the market, been relatively easy to use. um we had some confusion around the reimbursement of of uh amyloid pet and cms has uh has clarified that now of course it's going to take a little time for that to flow down through to the max but i think that will also relieve some of the of the confusion out there. I think one of the most interesting things is we've got 60% of the top 100 targeted IDNs now having P&T approval. And one of the things that really gives me a lot of inspiration is usually these P&T committees meet twice a year. But a number of them actually have organized special meetings just for Lekembe and not wait until the next meeting. And that says to me that there's a recognition of the importance of this treatment and being able to get patients on treatment. So where we also go from here, remember a year ago from here, you know, there was still skepticism about whether reducing amyloid plaque would really have a benefit. And it wasn't really until the clarity study was finally presented at CTAD last year that we really had, for the first time, clear, compelling evidence of the benefit of removing these amyloid plaques. And now, of course, we can go and say, all right, that's tremendous. But why is that so tremendous? Well, for years, we've been trying to develop antibodies, and those antibodies failed. And that's what gave rise to the skepticism, you know, which were the right patients, which was the right antibody that was going to get the right amount of drug into the brain. And, you know, McKendie is really the first one to show that clear, compelling evidence that that has occurred. Now, of course, we all want to get fancy. And that's where we're going. And we just had CTAD this year. And think about what we've just done. We are generating more data to really demonstrate the benefit of this treatment. We've seen, for instance, that the subcutaneous treatment is going to work, that we have comparability with the infusion. And this means so much for the convenience of patients. But this is no mean task either. Others have tried to do this. How do you get enough drug through the muscle tissue and into the brain? That has been achieved and is a major milestone. We've been looking at maintenance dosing. What happens when you've cleared the plaque? Does the plaque come back? Well, we have 24 months data now that shows a lot of benefit of staying on treatment. Then the question is still, who's the right patient? And data were shown with early stage patients with low levels of tau. And those are fascinating data. You know, we had 76% of those patients stable over the course of measurement. And very intriguing and very interesting, we actually saw with 60% of those patients that we actually saw some clinical benefit as measured by the CDR sum of boxes. Completely unexpected. That generated an awful lot of discussion at CTAD. So now, of course, we're also looking at executing on geographic expansion. We've had the recent approval of Japan, and I'm traveling to Japan early in the new year to be with my friend and colleague, the CEO of ASI, to launch the KEMBI in Japan. And, of course, we've got global filings under review in the EU, China, and 10 other markets. So this is one where we're going to have to be patient, but, you know, all the signs are green at this moment. And, you know, for us internally, we see a launch that is on track. But as we've always said, there's no real analogs. And, you know, every month we learn something new. If I could move to the next slide, please, Chuck. Now let's talk about SkyClarus, something that is, you know, much different. And as you know, we now have 1180 start forms to date with about 860 patients actually on drug. When we look at all of the known analogs, we're actually exceeding all of those, including Spinraza at the same point in time. Now, we have to be a little cautious because we all know that there were likely to have been a number of patients ready and waiting by physicians. And I think that was even more of the case because you may recall that the product was actually approved in the spring, but then delayed for a couple of months due to a technical and temporary challenge on supply. And so I think there was an anticipation. Nonetheless, there is a very strong... a desire to see this product come. And we're actually seeing a lot of requests from countries around the world to make SkyClarus available. And that just speaks to, I think, the understanding that this is the very first treatment that has ever been approved for Friedreich's ataxia. This is an incredibly debilitating disease that affects so many young people right in the prime of their life. And so it's extremely important that they benefit from that. We had about $43 million of sales in the third quarter. One of the things that we are now working on that I think this is where Biogen can really add value is, you know, why is there 1180 on start forms and 860 on drug? Well, There are a number of things, trying to get reimbursement, we need genetic tests, we need to measure your liver enzymes before you go on the product. And one of the differences from Spinraz is that they're not all incentives. They could be out there in primary care, physician care, but Biogen is well equipped to do that. We are used to providing genetic tests. We don't worry about the reimbursement. We provide those. We have mobile labs so that we can help patients who are not near to major medical centers to get, for instance, the lab enzymes done. And also, we know how to pull through these start forms and navigate the difficult reimbursement situation. So, I think, you know, not only is there an advantage for Biogen in getting this important medicine to patients around the world, but I think even in the United States, we can actually make this more rapidly available to patients. So, with that, I'll turn it over to Priya.

Thank you, Chris. This was an exciting quarter for Biogen's development organization. with the approval of Zerzuve in postpartum depression, as well as important new data presented for Lekembe and our tau-targeting ASO, BIB-80, two programs we believe that are critical to expanding Biogen's leadership in Alzheimer's disease. Starting with Lekembe, at CTAD last month, ISAI presented new data on a subcutaneous formulation of Lekembe. We believe the interim results at six months showed that subcutaneous Lekembe was comparable to the IV formulation on the basis of drug exposure as assessed by area under the birth, as well as amyloid plaque removal. In terms of safety, we believe the timing, frequency, and severity of ARIA-E was similar across IV and subcutaneous formulations. Additionally, overall, the incidence rate of systemic reactions with subcutaneous Lekembe was also lower with mild symptoms as compared to first-time Lekembe IV-treated patients from the CLARITY-AD core study. We believe these results further support the intent to develop subcutaneous formulation of Lekembe and, if approved, may allow for greater patient access improve compliance and convenience. We've made significant progress in our understanding of the potential clinical benefit that is associated with amyloid removal in Alzheimer's disease. However, there's still very many key questions remaining on how to maximize the clinical benefit with these agents, including when to begin treatment. We believe the differentiated and straightforward design of the CLARITY-AD study allowing entry of Alzheimer's patients with confirmed amyloid pathology but low tau burden allows us to gain additional insights into the clinical profile of Lekembe across various stages of Alzheimer's disease. The data show that in the low tau subpopulation, which represents the earliest stages of early AD, 76% of patients showed no decline and 60% showed clinical improvement at 18 months as assessed by CDR sum of boxes compared to 55% and 28% for placebo, respectively. We are very encouraged by these results. A second key question for the field is what happens when you continue treating after amyloid plaques have been removed, and why would this be beneficial? We believe that dual-acting Lekembe continues to support brain neuron function by also removing soluble, highly toxic protofibrils that can cause neuronal injury and death even after plaque removal. Therefore, with Lekembe, we believe there is a potential for longer-term treatment to sustain or further the clinical benefit observed within the initial plaque removal phase. In terms of data supporting this potential benefit, when examining the 24-month data from the CLARITY-AD core study and the open-label extension, we see a potential clinical benefit from continuing to treat with Lekembe. Specifically, the separation in CDR summer boxes between the group that continued to receive Lekembe or the early start group and the group who switched from placebo to Lekembe, the delayed start group, was maintained during the six-month open-label extension following the core study, suggesting a disease-modifying effect. The clinical benefit observed in the early start group at 24 months is further supported by the comparison against participants from the ADME Observational Natural History cohort that was selected to match the baseline demographics and clinical characteristics of the Clarity 80 population. Additionally, while the Delayed Start Lekembe cohort does not catch up to the Early Start group, we do believe a potential slowing of decline with six months of Lekembe treatment as compared to the ADNI cohort at the 24-month time point. We believe the totality of these data support both the importance of initiating treatment early as well as the durability of effect observed with continued Lekembe treatment. As we aim to provide options for patients, ESA is currently evaluating maintenance dosing or every four-week Lekembe dosing after the removal of plaque, and plans to submit a regulatory filing by the end of Q1 2024. Also at CTAD, Biogen presented new data from the Phase 1b study of our antisense oligonucleotide targeting tau. In the new results in this small study, for patients treated with the two highest doses of BIB80, we observed favorable trends on multiple exploratory endpoints of cognition and function as assessed by the CDR Summer Boxes, MMSE, and Functional Activities Questionnaire when compared to the baseline-matched external controls at Week 100. These findings build upon previously reported results from the BIB 18, Phase 1b, showing strong target engagement in the CSF, and a reduction in the brain tau pathology as measured by tau PET. Biomarker data from the placebo control period and long-term extension phase of this study were just recently published in JAMA Neurology. Viewed as an underlying pathology of Alzheimer's disease, tau has long been an area of focus in Alzheimer's drug development. While many prior attempts using monoclonal antibodies have failed. We now see, from the Phase 1b study of an antiseptic oligonucleotide targeting tau, a convergence of evidence across soluble biomarkers, tau PET, and exploratory clinical measures, suggesting a link between the reduction in tau pathology and potential clinical benefit. As a reminder, Our tau-targeting ASO is a completely new mechanism which, unlike the antibodies, is designed to reduce production of all forms of tau, including both intracellular and extracellular species. One clear challenge that we saw with antibodies was their inability to target intracellular species. We believe these results, while early, are encouraging and we are excited to be enrolling the phase two CELIA study of BIBAT in early AD. Over the last few months, I have spoken about our efforts to reprioritize Biogen's development pipeline in an effort to optimize R&D value and productivity. This presented us with an opportunity to take a fresh look at our pipeline and identify areas where we believe we have both sufficient expertise and confidence in the science, as well as our ability to deliver meaningful new treatments to patients while prioritizing resources accordingly. This starts with Alzheimer's, where we believe we have demonstrated scientific leadership and are taking steps to build long-term impact. This includes, first, working with ESI on several initiatives aimed at differentiating LeCambie and providing options to patients. Second, continuing to advance our ASO targeting TAO, as well as preclinical programs that span different molecular targets and approaches across the Alzheimer's disease biology. Lastly, continuing to deliver new insights on Alzheimer's disease biology and long-term treatment with anti-amyloid antibodies. On this point, at CTAD, we also presented new data from aducanumab, including new data from the eMERGE long-term extension and the EMBARC redosing study. We believe these findings can help support the field's understanding of the potential long-term treatment benefits associated with anti-amyloid antibodies. Beyond Alzheimer's disease, we have multiple near-term inflection points across various programs and therapeutic areas over the next year. This includes regulatory outcomes for Lecambi in several geographies, as well as regulatory outcomes for other products. In addition, we have important readouts for BIP-105 in ALS, BIP-121 in Angelman syndrome, and Dapirozumab Tegol in SLE, all expected mid-year 2024. Combined with the long-term potential of programs like Litophilimab, our homegrown asset currently being evaluated in two Phase III studies for SLE and a Phase II-III study for CLE, we believe our pipeline has the potential to support Biogen's return to sustainable growth. And with our partners on the research and business development teams, we continue to evaluate external opportunities. I will now pass the call over to Mike.

Thank you, Priya. Good morning, everyone. I'm going to provide some highlights in color regarding our financial performance for the third quarter of 2023 and all the financial comparisons that you'll hear are versus the third quarter of 2022. Total revenue for the third quarter was $2.5 billion. That's an increase of 1% at actual currency and 3% at constant currency. Non-GAAP diluted EPS in the third quarter was $4.36. Total MS product revenue was $1.2 billion. That's a decrease of 14% at actual currency and 12% at constant currency. And that decline is primarily attributable to generic entrants for Tecfidera, as well as broad competition in the MS market. I would like to provide a few updates to the MS business this quarter. First, in Europe, We continue to see that some generics have not yet fully exited some of the EU markets, and we do believe that there may still be some generic product remaining in the channel. The pace of generic withdrawal has been slower than we expected, but we continue to closely monitor the situation and are working to enforce our legal rights to market protection. Dysabri biosimilar was approved in the US and EU, which we had previously assumed. At this point, we are not expecting a launch this year, but we are aware that there are plans to launch at BioSimilar in the first half of 2024. Biogen still has patents relating to Tysabri, and we will continue to enforce our IP. Bumerity was a bright spot in the third quarter. We did see revenue increase 20%. That was driven primarily by global patient growth. However, we are seeing continued effects from both pricing pressure and an overall contraction of the oral segment of the market. in the United States. Next, global Spinraza revenue of $448 million increased 4% in actual currency and 7% at constant currency. The 7% growth that we saw included 7% growth in the U.S. as well, and that was driven by patient growth. While outside the U.S., Spinraza benefited from the timing of shipments in certain markets. We continue to be encouraged by the performance of Spinraza the past few quarters and continue to believe that we're making good progress against our goal of returning Spinraza to consistent growth over time. Biosimilars, the third quarter revenue of $194 million increased 4% at actual currency and 7% at constant currency. During the third quarter, we updated how we present commercialization expenses incurred within the Lakembi collaboration. Our 50% portion of Lakembi net product revenue and cost of sales, which includes royalties, will continue to be classified as a component of revenue. Now Biogen's 50% share of all global commercialization sales and marketing expenses for the Lakembi collaboration will be presented in the SG&A expense line and will no longer be presented as a reduction to revenue. During the third quarter of 2023, we reclassified approximately $39 million of commercial collaboration costs from the first and second quarters of 2023 to reflect this change in presentation. These costs were moved out of the revenue line and into the SG&A expense line, resulting in a $39 million increase to both revenue and SG&A for the third quarter with no bottom line impact. This change in presentation does not affect any of our agreements with ASI, and we continue to share LeCambie collaboration revenue and commercialization expenses 50-50. This change will allow us to be more transparent in our reporting, and it's consistent with how some others in our industry report collaborations. This change will have no impact to Biogen's bottom line. As ASI reported, in-market product revenue for LeCambie in the third quarter was approximately $2 million. Our anti-CD20 revenue was $421 million, and that included an $11 million operating loss related to Lansumio. Contract manufacturing, royalty, and other revenue of $304 million was notably higher year over year, and that was driven mainly by the timing of batches. And it also includes the reclassified $39 million, which I just mentioned. A couple of things to note regarding the third quarter expenses. Third quarter non-GAAP cost of sales was 26% of total revenue. And that includes $35 million of idle capacity charges. Cost of sales as a percentage of revenue continues to be impacted by product mix. And in particular, this quarter increases in contract manufacturing revenue. Third quarter non-GAAP R&D expense includes approximately $44 million related to our portion of the Lekembe collaboration and approximately $37 million in closeout costs related to the EMBARQ trial for Aduhelm. Third quarter non-GAAP SG&A expense includes approximately $82 million related to our portion of the Lekembe collaboration. And that includes the previously mentioned reclassification of $39 million in collaboration costs from the first and second quarters of 2023 from revenue to SG&A expense. As compared to the prior year, the decrease in third quarter non-GAAP SG&A expense was driven by approximately $100 million in cost savings initiative, partially offset by an increase in commercialization expense for LeCambie and Zerzevay, as well as the $39 million reclassification that I just mentioned. Next, a few brief comments on our balance sheet. We ended the quarter with $2.3 billion in cash and marketable securities and $7.3 billion in debt, and that puts us in a net debt position of approximately $5 billion. Even though these figures include the majority of the payments related to the close of the RIADA transaction, it is important to note that we expect to utilize an additional approximately $1.3 billion of cash for outstanding payment obligations related to the transaction, and that should occur in the fourth quarter. We do continue to generate steady, positive cash flow from operations and generated $518 million of free cash flow during the third quarter. In the coming quarters, we will be utilizing a portion of our cash flow to pay down some of the newly acquired $1 billion of short-term debt that we used to partially fund the RIADA transaction. And next, I'd like to provide an update to our full year 2023 financial guidance, which takes into consideration three key recent events. One is the completed acquisition of RIADA. Second is the regulatory approval for Zerzavay in 2020. postpartum depression. And the third is the modification that we made to our presentation of the LeCambia expenses. We're updating our full year 2023 revenue guidance to a low single-digit percentage decline, and that is an improvement from our previous guidance, which was a mid-single-digit decline. And that's, of course, compared to full year 2022 reported results. This is primarily driven by the update to how we present Lakembi commercial expenses, which are no longer presented as a reduction to revenue. We are also updating and narrowing our full year 2023 non-GAAP diluted earnings per share guidance to be between $14.50 and $15. As we have previously noted, the acquisition of Riyadh will be slightly diluted to our 2023 non-GAAP EPS, with an expected impact of approximately 75 cents. Much of this impact comes from financing the transaction, which affects our operating income and expense line, including incremental interest expense, a significant decrease in interest income. Absent this impact from the REATA transaction, our EPS guidance would be narrowed to $15.25 to $15.75, and that's consistent with the midpoint of our previous guidance. Further, for 2023, we expect some incremental OPEX associated with the RIADA acquisition, and that will be largely offset by decreased spending for Zerzivay as we prepare to launch in the PPD indication. We also expect some savings from our Fit for Growth program in 2023. Looking forward to 2024, it is very important to note that as a result of the RIADA transaction, we will have approximately $6 billion less in cash That was generating interest income at approximately 5%, as well as an incremental $1 billion in debt at a blended rate of approximately 6.7%. I'd also note that for the full year 2023, we've absorbed a headwind of approximately $0.30 to EPS due to currency fluctuations, and this is a dynamic that we're watching very closely for 2024. I'd offer that we estimate Every one cent change in the Euro versus the U.S. dollar has a roughly $18 million impact to our P&L. I'd also refer you to our press release for other important guidance assumptions. Finally, a brief update on our Fit for Growth cost savings initiative. I'd start by reiterating that the program maintains the target of approximately $1 billion in gross savings by 2025 as compared to full year 2023. Since we first announced the program, we have not made any changes to our planned level of reinvestment other than the acquisition of RIATA and the regulatory approval for Zerzevay in PPD only, neither of which were included in our original assumption. The expected impact of RIATA and Zerzevay to the original program is approximately a net decrease in the expected reinvestment of $100 million. Or said differently, we now expect an additional $100 million in net savings. So the original $700 million in expected net savings increases to approximately $800 million. I would also just highlight that these figures do not include the impact of the LeCambie commercial spend, which will now be reflected in our SG&A line and will, of course, continue to ramp up as commercial activity and sales increase. I'd also like to point out that as before, the expense estimates presented today did not contemplate any incremental business development or any transactions related to the biosimilars business, and they assume continued R&D spent on Agihelm through at least 2025. I'm going to now turn the call back to Chris for some closing remarks.

Thank you, Mike. So we're already into 2024 in our AOP planning, and as we look to next year, We actually have a number of milestones, which is nice to see. As I mentioned earlier, we have an EMA decision on Lecambi in the EU and in China. We'll have a decision on Skyclarus in the EU and Calzadi in the EU, all in the first half of next year. We intend to have two more important regulatory submissions, one for the sub-Q formulation and also for the IV maintenance dosing, both for Lecambi And then finally, we're actually starting to see some development readouts in the pipeline. We expect dipyrrolizumab phase 3 in SLE in the new year. We have our ASO for sporadic ALS reading out on a phase 1-2, a phase 1 in Angelman syndrome, and of course with SAGE, the SAGE 324 program in essential tremor. So I think we'll have a number of interesting news points for next year. And with that, Chuck, I think we can turn it over for questions.

Thank you, Chris. Allie, can we please poll for questions?

Thank you.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. As a reminder, please limit yourself to one question. If you require any further follow-up, you may press star 1 to rejoin the queue. And our first question comes from the line of Sylvain Richard with Goldman Sachs. Please go ahead.

Good morning. Thanks for taking my question. Just on the on the REATA assets here, now with the acquisition closed and the launch progressing well, could you just give us your thoughts around key near-term value drivers, including the launch trajectory, the EMA approval outlook for early next year, and then expansion into the pediatric population.

Thank you. Actually, when you look at Spinraza, Spinraza is a good analog. One of the nice things about the rare disease space is that we tend not to be so U.S.-centric. When you look at Spinraza sales, it's Broadly, not quite, but it's roughly a third, a third, a third between the U.S., EU, and then the international area. And we expect the same, really, for Skyclaris. So we do expect significant value to come out of both EU, but also in Latin America, perhaps some in the Middle East, Turkey. Obviously, for genetic reasons, there is none in the Asia region. We do know that there are quite a few patients, for instance, in Brazil and in Argentina. So we are accelerating our efforts to file for approval in Latin America. On the EU, you never want to try to predict entirely the regulators. They have to respect their ability to make a decision until the end. But everything we've seen so far doesn't really change anything in our view of the probability of this being approved in the EU. And that represented, if you may remember, the time of the transaction. We estimate about a third of the value of the transaction. And then the pediatric study, we are in discussion with regulators. That will be actually quite important because there are a number of patients who start to become diagnosed as early as five or six years old, but certainly in that eight to 10 year old timeframe. So it's quite important that we get the pediatric study underway.

Thank you, Chris. Can we move to our next question, please? And our next question comes from Brian Abrams from RBC Capital. I'm not hearing you, Brian.

We moved on next to Jeff Meacham from Bank of America.

Hey, guys. Good morning. Thanks for the question. Just had one on Lakembi maintenance. When you think about the strategy, I guess the question is, do you have regulatory color on a separate maintenance claim, just given the emphasis on plaque reduction initially? And related to that, would there have to be an additional level of evidence when you think about maintenance with respect to CMS reimbursement. Thank you.

I'll pass that one, Jeff, to Priya.

Thank you, Jeff. With regards to maintenance, what I can tell you is that ESI has communicated that, as you know, we're testing it every four weeks. This is with the intravenous infusion. And this data is expected to be filed by Q1 2024. I won't be able to comment on what it would lead to in terms of indication and such. But we are preparing the data for a potential filing.

Thanks, Priya. Next question, please, operator.

And next, we'll go back to Brian Abrams with RBC Capital Markets. Please go ahead.

Hi, good morning. Can you hear me now?

Yes, we can, Brian. Okay.

Sorry, I don't know what happened there before. So yeah, thanks for taking my question. Congrats on all the progress. So coming out of CTAD on sub-Q Lekembe, I realize FDA discussions are still to be had there. But can you maybe help us understand your latest thinking as to what's likely to be required for approval, how much of any additional patient data do you think you might need to generate a dose you might go forward with? Might you expect to be able to file for a lower dose based on PK modeling? And maybe you could confirm whether additional patients you're still seeing flow through the trials there are still seeing exposure below the 125% upper bound. Thanks.

Did you get all that, Priya?

Yes. Thank you, Brian. So this is really, we are encouraged with the subcutaneous interim data that we shared and Isai shared at CTAD. Just stepping back, you know, the subcutaneous study was a sub-study in the open-label extension for clarity AD. The patient population that was treatment naive and where we were really assessing the PKPD, which is the PK parameters as well as the PD outcome of amyloid plaque reduction. was a subset of 72 patients. And in addition, the study was set up to gather safety and tolerability in an additional 324 subjects. So the total study population was 394. And what we shared was that we believe that the subcutaneous formulation showed comparability and bioequivalence with the intravenous formulation. And it was between the confidence interval's of 80% and 125% of exposure. What we also noted was that the overall area under the curve was about 11% higher with subcutaneous, and we also noted that there was a 14% increased plaque reduction at the 6-month time point. So these are kind of the observations that we have from the data. We have had prior regulatory discussions, and we're now embarking upon additional meetings with the FDA to share the data with them and discuss next steps. So at this point, that's where we are. The plan is, as communicated by Isai, to file for a BLA by Q1 2024, and that's really the update. Isai has also commented that, potentially on a maintenance subcutaneous formulation and filing, but that is much later in the 2025 timeframe. So that's where we are right now. I hope I answered all your questions. Happy to follow up if not.

Thanks, Priya. Let's go to our next question, please.

And we're going to re-queue at this moment. So ladies and gentlemen, if you'd like to ask a question, that is star one on your telephone keypads. We're going to pause for just a moment to start that queue. But while we do, we're going to take our next question from Terrence Flynn from Morgan Stanley. Please go ahead. I apologize. We're next going to now go to Robin Karnakis from Truist Securities.

Hi, thank you for taking my question. I just want to get a sense of how you think about duration of therapy given your maintenance data. How should we think about modeling how long people might be on drugs at this time with the knowledge that you have for LeCambie? Thank you.

Why don't you start with that, Priya, and then I can finish maybe from a commercial point of view.

Yes. Thank you, Robin. So just stepping back, you know, as we think about the Alzheimer's disease progression, we know that patients actually have plaque reduction. But we have data from several sources now, Lakembe, Aduham, and others, that show that while plaque reaccumulates slowly at the rate of about 3% to 4% based on current understanding annually, the biomarkers actually reflecting disease progression continue to accumulate as soon as patients are off drug, at least with Lekembe and Aduham. And this is based on the A-beta 42 to 40 ratio, but also other pathological biomarkers. We've also shown most recently at CTAD that actually continuing patients on the 24-month, and we showed data on that, which I also shared in my prepared remarks, We saw that while patients who were on placebo during clarity AD study at 18 months and then transitioned onto drug in the open label extension, they never really caught up with what we call the early start cohort. However, they maintained their difference with the early start, which we believe is a disease-modifying effect. And then finally, when we superimpose that with the ADNI data and the natural history data, we see that the patients who even started 18 months actually maintained some level of stabilization on drug. So all these areas of evidence point us to the fact that really continuing drug at this point to some level is going to be important. You're absolutely right that I think we are still evaluating what is the right frequency and for how long. And that is what the maintenance sub-study, which is part of the Phase II open-label extension, is evaluating. And that's the data that we are gathering. But we believe that drug will need to be continued for a certain period of time, and patients will need to be monitored.

I mean, more broadly, I would say, you know, I've heard many neurologists say, you know, we used to think of Alzheimer's disease as a four- to eight-year disease. disease largely beginning when with the onset of symptoms with what we know now a lot of them are saying we're thinking about this in 25 year terms we know that patients start to accumulate plaques long before they have symptoms and as Priya just said that even after you you remove the plaques there it seems to be some some benefit in continuing therapy and as we think about that commercially First, we have this AHEAD study that has launched looking at pre-symptomatic patients. It also raises the importance of blood-based biomarkers because that's the only way we're going to be able to detect and diagnose or at least triage patients initially at an earlier stage. And of course, that's where the sub-Q formulation also becomes important because if we are thinking of people staying on drugs for longer, and I'm certainly not suggesting 25 years, but you know, this could be a much longer period, certainly than the 18 months. And therefore, the convenience of the sub-Q formulation is even more important. So we are learning every day. I mean, I think we saw that at CTAD with we understand increasingly the importance of early treatment. We're seeing the importance of staying or the benefit of potentially staying on treatment. And so that has all kinds of commercial implications and and how we do more studies and develop different formulations.

And it's actually quite exciting. Thanks, Chris. Let's move to the next question, please.

Thank you. And we're next going to go to Umar Rafat from Evercore. Please go ahead.

Hi, guys. Thanks for accommodating me. I wanted to focus on leucanumab sub-Q. And Priya, I think you mentioned two things. that there's a sub-Q maintenance filing, which is separate, which could be in 25. Could you confirm if the dose is lower if it's a single shot instead of two? And also, the FDA interactions on sub-Q that you mentioned, are they a follow-up to previously agreed upon trial design for sub-Q, or do you think you need clarity whether plaque reduction alone will suffice for filing? Thank you.

Thanks, Omar. So first of all, I think on the maintenance sub-Q, that is really a much later potential evaluation and filing, so I won't be able to comment further on that specifically with regards to those, because we first need to evaluate IV maintenance, and that is really the next milestone that's on the docket here. And then going back to your other question of what is the purpose of the FDA regulatory meeting, so maybe just stepping back, ESAI has had a number of meetings with FDA prior to the launch, of the subcutaneous open-label extension substudy that I spoke about, and from Clarity AD. And so what we do know is that we do need to show bioequivalence on both PK, and then we need to show comparability on plaque reduction. And based on the six-month data that we just shared, and Issa, I spoke to at CTAD, we believe we have achieved that. And so that's the first part. The second part is with that, because we have an 11% increase in overall AUC and area under the curve exposure and 14% increased plaque removal at the six-month time point, does that result in a different dose? I think that that is really a matter of discussion, and we would have to discuss that with the FDA. So I can't really comment more on that. But most importantly, I think the goal here was to show bioequivalence, which we believe we have achieved.

Thanks, Bria.

Thank you. And next, we'll go to Michael Wee with Jefferies.

Thanks. Great. Good morning. I wanted to come back to a topic on the AHEAD 345 study. I believe that your partner recently commented there could be an interim analysis based on 400 patients and biomarkers. I know this study has been enrolling for a while, but maybe it just sort of is picking up steam. Can you just maybe talk a little bit about the progress of that study, how you see that study, and the status of patients getting in there. Thank you so much.

So what I can tell you is that it's a very important part, the AHEAD 345 study is a very important part of the overall development plan for Lekembe as an anti-amyloid agent. And the reason for this is that I think Chris mentioned it as well just a few minutes ago, that we know that plaque builds up, amyloid plaque builds up for many years, and then there's sort of a shift where tau tangles start appearing, and then you have the appearance of symptoms. So, you know, over the last several years, there's been a lot of work on clinical staging and such, and we know that the anti-amyloid agents that are currently, like, just like Lekembe, which is really the only one with traditional approval, is targeting mild cognitive impairment patients with mild cognitive impairment impairment as well as mild dementia, but these patients already have symptoms and potentially a burden of tau. The purpose of AHEAD 345 is to look at different levels of amyloid plaque in patients who do not have symptoms and see whether the addition of an anti-amyloid agent like Lekembe can alter the course of disease. So that's really the overarching aim of a study like AHEAD 345, It's a very large study. As you can imagine, it's hard to find the patients, but we are very pleased with the progress that the study is making. And as Isai commented very recently, there is the potential to do an interim analysis and think about whether other regulatory pathways are open. with interim data, but we haven't really commented beyond that. These remain possibilities, but I think it will depend on how well we do with the recruitment and what the goals of eventual patient access are. Thank you.

Let's go to our next question, please.

And next we'll go to Terrence Flynn with Morgan Stanley. Please go ahead.

Great thanks for taking the question just a two part for me just was wondering if you can provide any more detail on the breadth of prescribing for what can be I know you gave us the 800 patient number, but if you look at how many centers that's across that would be helpful. And then I know you made some comments on, you know, some progress on the MAC coverage. You know, any more details on the timelines there for when we might get broader coverage at the MAC level? I know there's a couple MACs already covering, but anything there would be helpful. Thank you.

Yeah, Terrence, I don't have any real update on the MACs. You know, there's, I think, what, a dozen of them, and they're at various stages. I think by the time that's more, you know, that most of them have got there, I think there's an assumption that that takes anywhere from 60 to 90 days to get through. So, you know, towards the end of the year. On coverage, you know, it's one of the most interesting things is really just the diversity of situations that we see. You know, I talk to some physicians in some major medical centers. They've got the protocol. They've got the treatments. They're putting patients through now on a regular basis. But, you know, I've been talking to some major medical centers. You might think they've got this all handled. And they're still thinking about these protocols. And protocols are around what's the right profile of the patient to put in this. There is a teamwork approach on this. And so people have to connect on that. For some of the IDNs, they have all of the elements, but they have to connect internally with their MRI centers, with the infusion centers. So it's You know, it's a little hard to give you a broad brush. I would say every day we are finding more and more patients obviously getting through the course. We are looking upstream at a number of indicators because really revenue is a lagging indicator. You know, between even when we start looking at registry results, it's somewhere between four to six weeks before we actually see those patients going on drugs. But some of those timelines are changing constantly. So it's a pretty moving process here. It's just everyday changes. And so that's where at some point we get enough momentum, we get enough of these barriers cleared. One of the biggest is still getting an appointment with a neurologist. and that's where I think we're looking at what can we do with blood-based biomarkers, which are now available, not obviously to replace PET scans or MRIs, but can we use them to triage patients so that those who actually get into a neurology clinic are the ones who are already eligible. So there's an awful lot of thinking right on the fly as we learn from this experience. Again, this is really one where there aren't really great analogs. You know, some people try to suggest that the CAR-T approach, and while that is also a product in a process, you know, the volumes, the scale of this is much different. And, you know, we're not obviously anywhere near as complex as the CAR-T approach. So for us, there's not really any analogs we can do, and so we're learning on the fly as we go along. But like I say, every day brings progress, and all of the indicators are in green so far. And it is really just getting enough critical mass now of all the centers who've got these care networks and care pathways in place.

Thanks, Chris. Can we go to the next question, please?

And next we're going to go to Paul Matias from Stiefel. Please go ahead.

Hey, thanks for taking my question. You know, Chris, you just mentioned getting an appointment with a neurologist, and then earlier in the call you talked about the registry requirement not being as much of a challenge. I wanted to ask about the other components of the infrastructure here with Lakembi, IVs, PET scans, and MRIs. How would you rank order these components of the equation as it relates to most and least challenging percenters to navigate? And how do you envision this kind of whole infrastructure network looking by, say, next summer? Thanks so much.

Yeah, the situation is a little heterogeneous. I mean, it's not quite the same situation in every center, but I would say, you know, based on what we know today, I do think there is clearly at the moment the need to get an appointment with a neurologist. You know, the reality is that there weren't that many patients already in neurology practices. They tend to be in PCP practices. And the neurology practices, neurologists were already busy. And we have quite a volume of patients now to put through those neurology practices. And a lot of them are realizing, I may have to staff up on here. Do I have enough business to justify staffing up? And not necessarily with neurologists, but perhaps with nurse practitioners, others who can take on some of the parts of the care pathway. For some of them, it's going through their internal governance process and determining which patients I think appropriately at this stage. There's clearly an awful lot of caution around ARIA. My personal belief is that over time, neurologists will become more accustomed to understanding ARIA. Is there a difference between the asymptomatic and the symptomatic? And they'll have a lot more experience, but they're looking at making sure that that the patients who go through are trying to get to have the least risk of ARIA. I don't think the infusion center capacity seems to be a big issue for most centers. PET scans, there are enough PET scans as far as we can tell. It's really been around, you know, how do I get reimbursement for it? Is it just one? And it was more the confusion around it. So I think the clarity of that will just take one of the you know, factors of discussion and time out of the process. And, you know, there is just at each stage, you know, if you send someone out for the PET scan, the scan's got to come back. It's been interpreted by a, you know, a PET scan reader there, but sometimes a physician will want to have someone in that practice read that. So, you know, and it's just connecting, sending the patient to all these different points, even if you're in an integrated delivery network. So I don't think it's necessarily any one thing, although I would say if we can do a better job of getting patients triaged even before they can get to the neurologist, that could certainly be helpful. But I think it really is, this is changing the practice paradigm for a lot of clinics, and they're all having to work through it. And these, of course, are super busy people. They've got other needs, and so trying to fit in the time to actually manage all this is naturally a challenge. So I think it's completely natural and expected that this is progressing slowly. But again, you see some who are racing ahead, and that certainly gives me the confidence that others are going to figure this out too.

Thanks, Chris. And Allie, can we?

We can go to our last question, and that will be from Phil Nadeau from TD Cowan. Please go ahead.

Good morning. Thanks for fitting me in. I want to ask about the SkyClaris EMA review. Could you give a bit more of an update on what the status of that review is? Has there been a need for an oral explanation? And generally, what's Biogen's confidence that a positive CHMP opinion will be secured in the first half of 2024? Thanks.

Bree, you want to take that one?

Sure. Thanks for the question. So overall, just stepping back, you know, during diligence, we reviewed regulatory correspondence and, you know, we had a certain level of understanding of the topics. And subsequent to closing the deal, we have had more regulatory interactions and nothing has changed our view, as Chris mentioned. We'd still expect to see an outcome in early 2024, so that remains on track. With regards to whether or not there will be an oral explanation, that is really something we don't comment on because it's under review and that's part of the review detail. So I hope that helps. Thank you.

Thanks, Brim. And this will conclude our call.

Thanks, everyone, for joining us today. And the IR team will be available later on, of course, for any other follow-up questions.

Thank you. And ladies and gentlemen, that does conclude today's conference. We appreciate your participation. Have a wonderful day.