Operator:

Good morning. My name is Anna and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Second Quarter 2024 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. [Operator Instructions] 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.

Chris Viehbacher:

Thanks, Chuck. We got a lot to cover this morning, but first, in addition to our regular team of Priya, Alisha, and Mike, I'd like to welcome a new member to our team, Dr. Travis Murdoch. Travis is a physician who trained as a gastroenterologist and then studied immunology as a Rhodes Scholar at Oxford. Following a career at McKinsey, Third Rock, and Softbank, he became the founder and CEO of HI-Bio. I'm pleased to welcome Travis and the HI-Bio team to Biogen. We now have, again, a presence on the West Coast. And the HI-Bio team, working in collaboration with their Biogen colleagues on the East Coast, will drive forward the development of felzartamab. So we're announcing really strong quarterly results this morning, but I would say this is really a quarter that has lasted 18 months. I think the results we're presenting really reflect the hard work of team Biogen to transform our company. 18 months ago, we were a company that had been declining for four years in revenue and profit. And we have been working pretty tirelessly for the last 18 months to really turn that around and create a new future for ourselves. At the Q4 earnings in February of 2023, we outlined five priorities. First one was focus on new launches. Second was to reduce our cost base and align resources with growth opportunities. Third was to focus our investments in R&D on the most promising assets and improve the risk/reward profile. Four was to optimize our existing portfolio. And five was external growth. We've had a few setbacks along the way, but nonetheless, I think the results today really show that Biogen has done what it said it would do. And that to me has been always important in business. So if I take each one of those, I think if we look at our new product launches, all of the launches are either in line or ahead of expectations. I'm particularly happy to see the very strong results for LEQEMBI, not only in the US, but there's been a very successful launch in Japan. And the early data from China are also extremely promising, and Alisha will talk more about that. Last year, we set out to reduce our cost base and we are more than on track on delivering on those results and you can see that in the not only the reduction in OpEx but the very strong improvement in margins and Mike will talk about that. But one of the things that you don't see in the P&L that I'm particularly proud of is although we've really reduced our cost base and improved our margins, we have invested massively where we need to for growth opportunities, both in LEQEMBI and the other launches, but also on really trying to turbocharge some of the key assets in R&D. And, Priya will talk more about that, but one of the beneficiaries of that is BIIB080, and another one is litifilimab. We also have -- although we have seen a declining MS portfolio due to increased competition, particularly from biosimilars and from generics, we still had a number of products where we still had long patent protection. And one was SPINRAZA. And I think we've seen some very good performance. This is a very competitive space. And SPINRAZA has been able to hold its own. I think when I first joined the company, most people thought we were predicting the decline of that. Today, I would say the bumpiness tends to be in some countries where we only ship every now and then. I think in Russia, for example, we do one shipment per year. So that business has always been a little bit bumpy. But if you look at market share, I think SPINRAZA has done extremely well. And I'm very pleased to see VUMERITY growing at double digits again now in the US. This is the only patent protected product in the oral segment of MS. We see an awful lot of movement in the injectable part, but the oral segment has stayed pretty much constant and it's a great opportunity and I'm glad to see Alisha and her team really taking advantage of that. And then, we always said we were going to be open to external growth and I think the Reata transaction last year is really starting to pay dividends. We're seeing a very strong launch not only in the US, but now also in Europe. As you know, we tend to get patients on access programs and then the reimbursement follows. But we are expecting to be approved in 20 countries by the end of this year. And I think we're extremely happy with that. ZURZUVAE addresses a huge unmet need and that launch is also well in excess of expectations. So as I sit here today, I would say, the results that you're seeing are not, as I say, just the results of what we've done in the second quarter, but really, I think we're putting up scores on the scoreboard here that really now are starting to demonstrate all of those initiatives that we put in place last year and we're starting to deliver on them. Now of course we're not done yet and I think there's a real opportunity to continue to develop a sustainable growth platform. And we'll do that in two ways. The first is really, now that we have prioritized R&D, I see the Alzheimer's portfolio as being a core franchise for us for the coming years. We're obviously continuing to invest heavily in LEQEMBI with the maintenance indication, the subcutaneous, but also I think the AHEAD study, if we can really get the evidence that it will really demonstrate the importance of early treatment. Priya will talk about it, but the 36-month data that we showed at AAIC this week are extremely important for the future growth of LEQEMBI. But we've always known there will be other modalities, and I think tau is emerging as an extremely important modality for the treatment of Alzheimer's, and I think Biogen is a clear leader in that. And again, Priya will say more about that. We're also seeing an emerging lupus portfolio. We'll have a readout later this year with dapirolizumab that we share with UCB. But we're quite excited about litifilimab, both for SLE as well as cutaneous lupus. And we add another element to the lupus portfolio with felza because that is actually in Phase 1 for lupus nephritis. And to me, and Travis will go into this more, but the acquisition of HI-Bio is extremely important for our longer term growth outlook. This is an opportunity to present a set of opportunities that have a different risk-benefit profile. We have very strong Phase 2 results, which gives us a whole lot more confidence in Phase 3 results than some of the other assets that we have in our portfolio. Neuroscience is an area of a very important unmet need, but it's also one of the riskiest and hardest areas. And so I think we get a little bit more balance in our portfolio by pursuing things in immunology. And so I personally am extremely excited about felza and what Travis and his team can do. The other axis to this is we're going to continue to look at business development. I think you have seen that we're pretty disciplined. I think both of the acquisitions that we've done so far with Reata and HI-Bio will drive an awful lot of shareholder value and that is certainly top of mind as we look at business development. So I think Biogen is in a much different place than we were 18 months ago. We still have a number of challenges like any other company, but I think we're really positioned for longer-term growth now at the company. And with that, I'd like to turn it over to Alisha to give us a little more color on the successful launches.

Priya Singhal:

Thank you, Alisha. Over the last year, we have focused heavily on reviewing our existing pipeline with an eye toward improving its risk profile. The focus now is on building the pipeline through a combination of both internal and external opportunities with an eye towards risk diversification and creating value. We also remain focused on investing to win in Alzheimer's disease, where we believe we have a differentiated product in LEQEMBI, as well as an industry-leading R&D pipeline of potential next-generation therapies. Beginning with LEQEMBI. LEQEMBI is the only approved anti-amyloid antibody with, first, a dual mechanism of action targeting both amyloid plaques and highly toxic protofibrils. Second, clinical data across the full early Alzheimer's disease population, including individuals with no and low tau. And third, extensive real-world evidence. Importantly, as Alicia mentioned, Alzheimer's disease is a chronic progressive disease and we believe the dual action of LEQEMBI and the option for continued treatment is a unique advantage for patients looking to maintain or further clinical benefit. To this point, at AAIC earlier this week, Eisai presented three-year data from the Phase 3 CLARITY study and its open-label extension, which shows continued clinical benefit with longer duration LEQEMBI treatment. Shown on the left, this includes data from the early start group or individuals who started LEQEMBI during the 18-month placebo-controlled portion of the study, delayed start group or patients from the placebo arm who switched over to LEQEMBI at the start of the open label extension, as well as a baseline matched natural history cohort from ADNI. The early start group shows that three years of continuous leukemia treatment reduced clinical decline by negative 0.95 on CDR sum of boxes as compared to the natural history cohort, resulting in a clinically meaningful benefit for early AD patients. This represents an expansion of the benefit observed at 18 months. It is very important to keep in mind that a change from 0.5 to 1 on the CDR score domains of memory, community affairs, home and hobbies is the difference between slight impairment and loss of independence. We believe these results are significant as the majority of individuals, approximately 70%, had already successfully cleared plaque by the 18-month time point. Furthermore, data from the lecanemab Phase 2 study, shown on the right, which included a treatment gap of approximately two years on average, shows that Alzheimer's disease continues to progress when treatment is stopped or interrupted even after plaques are removed. Also at AAIC, Eisai presented data which showed that 51% of patients in the Clarity AD study with either no or low tau representing an early stage of Alzheimer's showed improvement from baseline in cognition and function over a three-year period as assessed by CDR sum of boxes. Taken together, these data suggest that earlier initiation of treatment with lecanemab may have a significant positive impact on disease progression and may provide continued benefits to patients with early Alzheimer's disease over the long term. We continue to focus our efforts on LEQEMBI with a goal of characterizing dosing for its long-term benefit, providing optionality with subcutaneous formulation, as well as evaluating its role in preclinical AD population, as Chris mentioned. Lastly, while we were disappointed to learn that lecanemab received a negative opinion from the CHMP, we believe that the clinical data supports a clear favorable benefit risk profile with a meaningful clinical benefit to patients. Furthermore, thousands of patients have now been treated with lecanemab globally, providing further real-world evidence on the efficacy and manageable safety profile. We are continuing to work with Eisai as they plan to request a re-examination of the EU filing as we work to enable access for people suffering from Alzheimer's globally. We continue to also invest in our broader Alzheimer's pipeline, including our investigational anti-tau ASO BIIB080. Based on the encouraging data from the Phase 1b study, we have now implemented a protocol amendment for the ongoing Phase 2 CELIA study with the aim of accelerating a potential proof-of-concept outcome. We are excited that this amendment, combined with the robust enrollment trends observed to date, may enable a readout in 2026. Beyond amyloid and tau and under Jane's guidance in research, we are advancing a preclinical AD pipeline that encompasses diverse targets and modalities, including active transport approaches. As communicated today in our earnings release, we decided to exit the ATV:Aβ collaboration with Denali. We continue to see merit in modalities that can actively transport therapeutic agents into the brain. And we continue to prioritize these efforts as we work to build upon our existing leadership in AD. Looking back over the last few months, while we discontinued three mid-stage programs based on readouts, we continued to make progress across several other areas of our pipeline. The first patient has received a dose of SKYCLARYS in Biogen's Phase 1 dose finding study for pediatric Friedreich's Ataxia. This is the first step in potentially expanding SKYCLARYS access to the pediatric population. And once a dose is identified, we plan to conduct a Phase 3 study to assess the benefit/risk in pediatric patients. We also expect the DEVOTE study evaluating high dose SPINRAZA to readout in this second half of the year. We have also made meaningful progress in immunology where the first patient was dosed in the litifilimab Phase 3 portion of the operationally seamless Phase 2/3 Amethyst study in CLE following the completion of the Phase 2 enrollment. As Chris mentioned, we continue to view immunology as a significant potential driver of Biogen's future growth and the recent acquisition of HI-Bio is an example of this importance. With that, I would like to hand over the call to Travis, who will dive a bit deeper into felzartamab.

Mike McDonnell:

Thank you, Travis, and good morning, good afternoon to everyone. I'd like to start by acknowledging the entire Biogen team for a strong second quarter. I'm pleased to provide some color on the results and please note that all the comparisons that I will make are versus the second quarter of 2023. Total revenue of $2.5 billion was up marginally versus the prior year at actual currency and grew 1% at constant currency. But importantly, we grew our core pharmaceutical revenue 5% at actual currency and 6% at constant currency. This was driven by the performance of our four recent launches, which more than offset the revenue decline in our MS business. Non-GAAP diluted EPS grew 31% to $5.28 and included a one-time benefit of $0.52 from the sale of one of our two priority review vouchers. Absent the PRV sale, non-GAAP EPS would have grown 18% to $4.76. We also reported a 43% improvement in non-GAAP operating income, which was a 30% improvement excluding the PRV sale. We continue to benefit from our R&D prioritization and fit for growth initiatives, where I'll provide more detail in a moment. We are pleased to be raising our full year 2024 guidance range. And in just a few moments, I will also provide some additional details on our guidance. Now a bit more color on our revenue for the second quarter. Our MS franchise revenue declined approximately 5% in the quarter, and there are a few dynamics in this business that are worth highlighting. First, we continue to see erosion of our interferon business as the entire class is seeing a shift to higher efficacy or oral therapies. Regarding TECFIDERA in the EU, we have now seen most generics exit the market, which helped drive ex-US growth of 11% at actual currency and 12% at constant currency to $208 million this quarter. We continue to believe that we are entitled to market protection in the EU until February of 2025. VUMERITY had its best quarter since launch as global revenue grew 13% at actual and constant currency to $166 million. VUMERITY remains the number one branded oral in terms of share in the United States. US TYSABRI revenue of $249 million declined 4% and benefited from the timing of shipments in the quarter, which was offset by declines due to competition within the high efficacy class. Next, our rare disease franchise produced revenue of $534 million and that represented growth of 22% at actual currency and 25% at constant currency. SKYCLARYS global revenue was $100 million. Global SPINRAZA revenue of $429 million declined 2% at actual currency and was flat at constant currency. US revenue was up 1% to $157 million, and we remain encouraged by the resilience here. And on LEQEMBI, we saw significant sequential growth with second quarter global in-market sales booked by Eisai of approximately $40 million, which included $30 million of US in-market sales. I'll turn now to a few comments on expenses. We continue to see lower non-GAAP cost of sales as a percentage of revenue, which was driven by a more favorable product mix, notably growth in SKYCLARYS replacing lower margin contract manufacturing revenue. We also had no idle capacity charges during the quarter versus $34 million in the second quarter of 2023. As mentioned previously, our R&D prioritization and fit for growth programs have begun to significantly improve our profitability. Second quarter non-GAAP R&D expense decreased from the second quarter of 2023 by $120 million or 21% as we continue to focus our spend on programs with the highest probability of success. Non-GAAP SG&A expense increased 1% in the second quarter. We have significantly reduced selling costs for legacy products and also significantly reduced our general and administrative cost base, which has allowed us to absorb most of the approximately $100 million of Q2 2024 incremental launch costs for LEQEMBI and SKYCLARYS. Now, a brief update on our balance sheet. We ended the second quarter with $1.9 billion of cash and marketable securities. As a reminder, we utilized $1.15 billion of this balance in July when we closed the HI-Bio acquisition. We ended the quarter with approximately $4.4 billion of net debt. During the quarter, we fully repaid the remaining balance of the $1 billion term loan that we put in place at the time of the Reata acquisition. And we continue to generate strong cash flow in the second quarter with approximately $592 million of free cash flow, which brings us to approximately $1.1 billion of free cash flow in the first half of 2024. We continue to believe that our balance sheet has the capacity for us to invest in both internal and external growth opportunities. Turning now to guidance. We're pleased that the operating performance of the business year-to-date supports raising our full year 2024 non-GAAP diluted EPS guidance from a previous range of $15 to $16 to a new range of between $15.75 to $16.25. This new range reflects expected growth of approximately 9% at the midpoint of the range compared to the full year of 2023. I would like to highlight several important things to remember for the second half of 2024 as you update your models. In terms of revenue, with our key products all performing generally in line or slightly ahead of expectations, there is a slight increase to the previous expectations for the year. We now expect full year total revenue to decline by a low-single-digit percentage when compared to 2023. We also expect core pharmaceutical revenue to be roughly flat year-over-year as recent launches are expected to progress and provide an offset to some key potential dynamics in the second half of the year. These include expected continued pressure on our MS franchise, which incorporates the potential for a biosimilar entrant in the US for TYSABRI, and we continue to monitor the timing of shipments for SPINRAZA in certain ex-US markets. Next, the sale of one of our two priority review vouchers is a non-recurring item. And since we expect to reinvest the proceeds of this sale and growth initiatives later this year, we do not expect this benefit to impact our full year EPS. Also, some key points to consider regarding our operating expenses. In the second half of the year, we expect to continue to ramp launch spending on our new product launches. This will include the 30% increase in the LEQEMBI field force, which is coming online as well as additional spend for some targeted direct-to-consumer campaigns. In addition, we expect incremental OpEx, primarily on the R&D line, of approximately $50 million in the back half of the year related to HI-Bio as we execute plans on three potential Phase 3 starts. We continue to expect full year 2024 combined non-GAAP R&D and SG&A expense of approximately $4.3 billion. We reported approximately $2 billion of spend in the first half of the year, implying higher spend in the second half of the year due to the reasons I just mentioned, along with some typical phasing of expenses throughout the year. I would also note that we now expect 2024 operating income to grow at a mid to high teen percentage versus the previous guide of a low double-digit percent growth. This improvement factors in higher expenses in the second half of the year versus the first half of the year, partially offset by higher revenue due to our new product launches. I would remind you that we expect a reduction in interest income of approximately $20 million for the remainder of 2024, and this is due to lower cash balances and associated lower interest income resulting from the HI-Bio acquisition. As always, our guidance does not consider the impact from any potential acquisitions or large business development transactions or pending and future litigations as these are often difficult to predict. I would refer to you to our press release for other important guidance assumptions. And just before we open it up for Q&A, I wanted to provide a brief update regarding the strategic review of our biosimilars business. After a comprehensive review of potential externalization options compared to retaining the business, we believe that the best value for shareholders going forward is to retain the business within our portfolio and to optimize the business with an aim to maximize profitability. And with that, we will open up the call for questions.

Operator:

[Operator Instructions] Your first question comes from the line of Salveen Richter with Goldman Sachs.

Chris Viehbacher:

Yeah, thank you for the question, Salveen. And our mission at Biogen remains to bring ourselves to sustainable growth on both the top line and the bottom line. Obviously, our original guidance, which implied growth of 5% on the bottom line at the midpoint and now 9% at the midpoint, shows that we've now turned the corner on the bottom line and we're very focused on our cost savings program, which importantly not only improve our operating performance, but also free up capital for growth initiatives. So that's real important. Obviously, we don't guide beyond 2024, but I would say that, when you look at our guidance this year, we're pleased with the fact that we've been able to get our top line somewhat much more stabilized and we've got the bottom line growing again as we look to next year. We're pleased with the progress of the launches. Our ability to restore the top line is going to be somewhat dependent on how those launches continue to perform along with how the MS franchise continues to sustain and be durable. And what I can say is that we're very focused on bringing the company back to growth. And we're certainly hopeful that 2023 was the trough year. And obviously, we're doing a nice job growing the bottom line in 2024 and we'll have more to say about the out-years as we move to the latter part of this year and into early next.

Operator:

Yes. The next question will come from Mohit Bansal with Wells Fargo.

Priya Singhal:

Thank you. This is Priya Singal. We are very disappointed, along with Eisai, at the outcome of the negative opinion for LEQEMBI. We continue to believe that the benefit/risk is positive and favorable. As you know, it's been approved in major regions of the world like the United States, China, Japan, and recently, we've also communicated approvals in Hong Kong, Israel as well as South Korea. So, yes, we have communicated publicly and I can reaffirm that we will be applying for a reexamination process. The way the reexamination process works is that you can continue to work with a newly appointed rapporteur and co-rapporteur for the process. So, right now, we would wait to receive the assessment report from the CHMP, the new rapporteur and co-rapporteur would be appointed and then we would work with them to understand what are the issues that are driving the decision. And currently, based on the opinion that was rendered, we believe these are addressable with the data that we've generated. Specifically, we have generated long-term data as we shared at AAIC and we would look to be engaging with the EMA and CHMP to see how we can submit additional data and the extensive real-world data that we have in the real world because thousands of patients now have been treated. So we have long-term continued benefit as we showed in the three month -- three year data at AAIC and also long-term safety. So we're continuing to work very closely with Eisai on the reexamination process and strategy. It is possible that a new SAG-N would be appointed and this process would generally move faster than the original application.

Operator:

Yes, that will be from Kevin Seigerman with BMO Capital Markets.

Priya Singhal:

I think just stepping back, I want to point us to comments we've made externally before as well that we have really -- we really looked at our readouts as important inflection points which allow us to double down, accelerate in those programs if the data are objectively clear and compelling. And then the other option would be that we can pivot and pivot to other programs that we may be considering. So overall, our process is that we develop up a priority go/no-go criteria. And based on that, we decide what the probability technical and regulatory success is in a particular program. And that is exactly the approach that we applied with the Angelman Syndrome, the BIIB121 data. That is going to be continuing to be the way that we look at all our readouts and we try to be very disciplined. I think things that we find very compelling are biomarkers, established regulatory pathways, clinical tractability as well as our confidence in regulatory endpoints or on our interact -- based on interactions with regulators. So we look at all of these and that's how we think about investment in Phase 3.

Chuck Triano:

Great. Thank you both. Next question, please, operator.

Michael DiFiore:

Hi, guys. Thanks so much for taking my question, and congrats on the quarter. So I was wondering if there's any updates on the subcu induction dose optimization work you're doing and whether this could lead to a more optimal risk/benefit ratio that the EMA is looking for?

Chuck Triano:

Thank you, Priya. Next question, please.

Nicole Gabreski:

Thanks. This is Nicole Gabreski on for Chris. Maybe just one on LEQEMBI. So some of our survey work we've done recently with neurologists and Alzheimer's specialists has kind of indicated maybe a less favorable view of the risk/benefit and cost/benefit ratios for LEQEMBI in recent quarters. And I guess we're starting to see some feedback from docs also questioning the amyloid hypothesis as a whole. I guess maybe just given this, could you speak to the interactions and/or feedback that reps are having in the field? I guess, are you starting to maybe experience any pushback as you move from HPPs who are sort of ready and waiting to prescribe LEQEMBI soon after approval to those who are in the next wave of uptake?

Chris Viehbacher:

And if I could just add to that, after decades of this, I tend to pay more attention to what physicians do versus what they say. And this is a very heavy lift for physicians to introduce this treatment into their practices and institutions. And when you look at the number of -- the increase of 50% of physicians writing this and the depth of ordering from the IDNs, we're seeing a lot of physicians investing huge amounts of time and energy to actually get through all of the processes, schedule the PET scans or the lumbar punctures, the MRIs. And to me, you don't do that if you don't have a strong conviction in the importance of this treatment to patients. So, personally, as I look at this, I'm extremely encouraged by where we are. I think now, for the first time since the launch, we can look forward to the growth of this market, not just because of the prescriptions, but I look at the evidence base that we are building with our partners at Eisai on LEQEMBI. It's very clear now from the three year data that it probably is not going to be enough to just remove the plaque. We'll need to continue to treat patients. And again, as I was saying earlier, with the AHEAD study, we hope to show that there is a benefit to treating earlier. So this market is going to grow and the evidence base is going to grow. It is market building that we're doing and that certainly takes time and patience. But as I say -- I've said in the past that it's difficult to predict where we're going to go. With this quarter, I think we're seeing we're on a very solid track. And I think the entry of Lilly will only accelerate the development of this marketplace.

Operator:

Yes, our next question will come from Brian Abrahams with RBC Capital Markets.

Alisha Alaimo:

All right. Thank you for the question. This is Alisha. First, we are very pleased with what we're seeing right now, especially globally and in the US with SKYCLARYS. And as I've mentioned before, we're past the catch-up population and we're now really into the patient identification phase. We look at every metric from discon, compliance, adherence, start times. And when it comes to discons, we do not see anything outside of what you see in the clinical trials. And so, the discontinuation rate is not anything more than obviously what we also saw in trials. I think when it comes to efficacy of the patients, physicians have been really good on setting expectations with patients on what to expect from SKYCLARYS. The field teams do a really good job of also educating both physicians and educational materials with patients on what to expect when you start this product. And so, you do see that patients tend to stay on product and physicians are very good also about saying to patients, at least stay on it for a year and let's talk about how you're feeling and where we're going and what we're seeing as adherence has been actually very good. I think the other dynamic that's playing out that you could be referring to is because we're now in the patient identification phase, you are going to see a little bit of difference from week-to-week and month-to-month. And we are adding patients every single week. We're also adding them every single month. And we acquire new data on a regular basis. And what we're seeing, at least recently, and I was sharing this with Chris the other day, we have this new AI engine that we've been deploying and we have identified significant number of additional coded FA patients that we didn't even have at the beginning of launch because we're starting to see that patients are engaging even more with their physicians. And so, now we're able to reach them with more efficiency and with more certainty across the board. And I think it's been very promising as we find new patients to come on.

Operator:

Yes, that will be from Paul Matteis with Stifel.

Chris Viehbacher:

Yeah, I'll take that one. I think first in terms of where we're looking, I think we're already long neuroscience. So we're probably looking outside of that space, immunology, rare diseases. As I look at Biogen, I would say we have an extremely high scientific and medical capability within the company. We have been historically a company that is in the low volume, high value area. We really understand the necessity to assist patients and physicians for some expensive products to get through a reimbursement, provide and sponsor genetic testing, for example, thinking about studies and real-world evidence becomes extremely important in this. So I think there's a capability of Biogen in rare diseases. Immunology is really an area we've been in since we started with multiple sclerosis. So I think we have the capabilities to go into those areas. I think where we are now is we're on a growth pattern. If we could find another Reata type acquisition, I think we would look for that. But those come along pretty rarely. It's rare that you can find a company that is that close to the market. In fact, it already launched by the time we actually had acquired that. But acquire that for price that still creates shareholder value. And we will continue to look, but they don't come along every day. And we're not in a position where I think we are desperate to do a deal. So we -- I think if you look at what we've done with HI-Bio, for example, as an alternative to that, being able to launch more products in the sort of 2027 to 2030 timeframe is a priority for us. And that's why we're really also focused on the mid to late stage development process. But we can be picky. I think also where we look is not necessarily where everybody else is looking. You really don't create value if you enter into these auction processes. And so, I think by being able to stick to those areas where we think this is -- this is a really -- this is a space where Biogen can really be a strong player, we'll avoid overpaying. I think the other thing I would say is, Biogen is a nice size. $1 billion moves the needle hugely in our company. There are a lot of bigger companies where $1 billion doesn't move the needle. And so, I think we can look at assets where we have the capital that might be too small for some of the bigger players, but be too expensive for some smaller players. So I think in some ways, we're in a position where we can look for assets and not necessarily be in such competitive places where, again, you risk overpaying. But we're looking. We take a systematic view. We're not going to take any sudden left turns strategically just because I'm not sure that that's really where the sweet spot is for Biogen. But I do think there's a number of opportunities out there. We also are doing a lot more in research on collaborations. And I think one of the things I'd like to see us do is really bring a lot more assets in from an early stage because the earlier you can acquire these assets, the more shareholder value you can create.

Operator:

Yes, that will be from Michael Yee with Jefferies.

Priya Singhal:

Yes, thank you. This is Priya Singhal. So, overall, we are excited about the readout for dapi. It is upcoming in the next several weeks. This is a partnered program with UCB and the collaboration is in very good -- in a very good place. We are expecting a headline or top line results of the first global Phase 3 trial. And specifically, I want to be clear that this study is investigating, in this very high unmet disease area, the safety and efficacy of dapi as an add-on to standard SLE therapy versus placebo as an add on to standard SLE therapy. We are conducting the study in patients who have persistent active or frequent flaring despite stable standard of care. And very similar to the Phase 1 and Phase 2, we will be looking at efficacy assessed by BILAG based Composite Lupus Assessment, or BICLA, but different than the Phase 2 study, it will take place over the 48 weeks to demonstrate the long-term effect. We also increased the sample size to provide a substantial dataset on safety and efficacy. Eventually and ultimately, we'll be looking for a meaningful change on the primary endpoint and key secondaries such as severe flare prevention, patients achieving low dose activity. And we really think that BICLA is a sensitive clinically meaningful composite for SLE disease activity that requires disease improvement across all body symptoms with moderate or severe baseline activity without the need for escalation in steroids or other background medications as well as without worsening. So we're looking forward to this. In addition to an acceptable safety and tolerability profile, we think this could be really meaningful for patients suffering from SLE. So if the results warrant continuing development, at this point, we expect to have the need to run another Phase 3, but we are planning some of this at-risk right now.

Operator:

Yes, we'll now move to Eric Schmidt with Cantor Fitzgerald.

Chris Viehbacher:

Well, thanks for the question. I would hope it's not the high watermark because we're aiming much higher here, I can tell you. I think, clearly, we've got still an MS franchise that is -- we're not done yet in terms of seeing the competitive threats. There's potentially a biosimilar for TYSABRI, we have an important patent litigation that we'll see in the fall for TECFIDERA in Europe and there is the market exclusivity that expires in February. So shorter term, there's always some chop in the water. But I think where we have an opportunity is, we have an amazing talent base inside of Biogen. As you all know, I've been in this business a long time, seen a lot of companies, I continue just to be impressed by the scientific and medical capability that we have in the company and we've got capital. And so, I think we can do smart things with that capital. We've been busy transforming essentially passive capital into active capital. We had two priority review vouchers sitting on the shelf. The innovative nature of Biogen's products is such that we don't really need those vouchers because of the innovative products we bring to market anyway. So we had this one priority review voucher sitting on the shelf for six years that we've now converted hopefully into an active asset. We sold it, but the objective is to spend that on milestones in business development in the second half. If I look at HI-Bio, we took a year-and-a-half of fit for growth savings out of operating expense and transformed that into a growth opportunity with the acquisition of HI-Bio. So where I see us is, I think we're -- we've been able to change the trajectory of the company. We've been able to release resources from the business and reinvest them intelligently and we've got great people that I think can do that with tremendous results. So, I think as we look towards the future, it's really building out now the R&D portfolio, both internally and externally. I'd like to make sure we are still an innovation company going forward that we're not just acquiring our future, but really investing in that. So I think I'm now focused on the 2025 to 2030 timeframe. I think we're in good shape to grow through that period, but I think we can do more to really take advantage of the capability in R&D. And I think you'll see us continue to deploy capital with a lot of discipline but I think be able to turn passive capital into active capital and then into active growth.

Operator:

And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.

Operator:

Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Biogen First Quarter 2024 Earnings Call and Business Update. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] 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.

Chris Viehbacher:

Thank you, Chuck. Good morning, everybody. Well, it is certainly great to be able to announce earnings per share growth in our first quarter. This is the first time in several years that the underlying business performance of Biogen has allowed us to actually demonstrate earnings per share growth, and that's a major achievement. We've clearly still got a lot of work to do, but I think it feels like we're turning the corner in the company. And with that, I'd like to actually take the opportunity to thank my Biogen colleagues. We have instituted an awful lot of change within the company and I'd like to thank them for their commitment, passion, and patience throughout this process. But I think you're seeing some of that change that has occurred now in the numbers. We have tried to bring a lot more focus and discipline to really putting our resources behind those things that do good and drive value. And one of the things that you may not see is that, there is an awful lot of reinvestment going on. One of my early bosses in my career once told me, you can't save your way to prosperity in this business, and that is absolutely true. And that's not really what we set out to do. The Fit for Growth project, which is, as you can see from the numbers, on track to achieve its $1 billion in gross savings and $800 million in net cost savings and by the way, [$100] (ph) million of increased cash flow as well by the end of 2025. But what we really tried to do was redesign the organization. We have been so focused as a business for decades on our multiple sclerosis franchise, and here we are launching four first-in-class new medicines and we really needed to make sure we're supporting those launches. And in fact, despite the cost reductions and margin improvements that Mike is going to go into in more detail, but behind that, there are hundreds of millions of dollars being invested in new launches. And while our overall expense in research and development has decreased, this focus has actually enabled us to increase the investment in those assets where we have the most conviction. So, this is much more than a cost-savings exercise. This has been a redesign and a change in our culture to a degree. So, let's look at some of these new launches. And obviously, the one that everybody is most interested in is LEQEMBI and if we can move to that slide. You can look at this in a number of different layers. Obviously, first, we're seeing really good quarter-on-quarter trends. As you've seen, the number of patients on drug has increased to 2.5 fold compared to where we finished the fourth-quarter. Our in-market revenue almost tripled in Q1 versus Q4 of last year, and that's obviously important. But the thing that really is important to me as I look at this is not so much just that. I've been in this business for 3.5 decades. I've lost count of how many launches I've seen, but this is an extraordinarily difficult launch, really because the amount of change that physicians are facing with this is really profound. And as I go around to hospitals and talk to doctors and talk to those who are seeing other doctors, it really becomes evident that there are an awful lot of challenges to getting that -- even that first patient on treatment. We were at one hospital, it was going to take -- it took them three months to get approval just to hire a nurse to help navigate the system. At another major medical center, they're having to develop a five-year business plan, just to be able to access the infusion beds. And when you look at some of the uncertainty around PET scan reimbursement, and although CMS had clarified that and a lot of the MACs have pulled it through, there was still a lot of difficulty getting that clarity all the way through the channel. You know why I'm really encouraged by when I look at these numbers is, when -- although there are a lot of challenges, it's a lot of time investment for physicians and I think a lot of those physicians to their credit are investing that time and not necessarily getting reimbursed for that, but they're getting it done. They're overcoming these challenges and barriers. And that is, I think, what is so important. They see the need when they look at patients who are accomplished people, who are loved by their families, and seeing this dreaded disease pull the patient away from that on a day-by-day basis. So, I do think we are seeing an awful lot of momentum here. And again, I think there's an awful lot of credit to the neurologists and to these centers to overcoming these challenges and I think that is going to allow us to continue to see quarter-on-quarter growth. It may not be completely linear, and Alisha will go into more detail on that, but it takes time to get these protocols in-place and even when you get the first patient, there has been a tendency that let's have a handful of patients so we get comfortable with the system. But then, once they've done all that, then, we're starting to see volume pull through. And one of the interesting things about this launch is that, generally, we look at revenue as a surrogate for demand. And here there's -- that linkage is not quite so clear because it has taken this upfront time before you see revenue pull through. And I think that's one of the other things we're now seeing in this first quarter is that, we're actually seeing a little bit more of that linkage between demand and revenue. And behind all of this, once those processes are in place, and once physicians are ready, there is clearly an underlying demand behind that. So, I think that has given us a lot of confidence to now invest more, and we have a 30% expansion in our US field force plan. But I would also say, this is a launch that really didn't start until 1st of September. And even then, you could argue we weren't fully in the mode of being able to launch because the PET scan reimbursement hadn't been cleared. But our US teams for both Eisai and Biogen have done an awful lot of work to look at the data from the first seven months of the launch. And really, we're now looking at redeploying some resources here and there as we see what's important and what's not. I think the teams are really working well together. And we have a number of new elements of our promotional mix that will start to come into play as we progress through the second quarter. So, from a Biogen point of view, I think it's too early to put out any forecast. We're going to be looking at those month-over-month new patient starts and the increase in revenue. But I would certainly say I'm extremely encouraged by the progress that has occurred. And if I could switch gears to another key growth driver, which is SKYCLARYS, and Alisha, again, will go into more detail and I think also just show investors how we're progressing versus other analogs because the rare disease market doesn't behave so typically as in other markets. There is always a catch-up population in rare disease. And so, it takes a while for that catch-up population to work through the system and then have a look at what's the underlying demand. Remember that these are not patients sitting in waiting rooms and that there is a huge amount of work that goes into finding patients. And I think that is actually one of Biogen's strengths. That's I think what gives me the confidence to continue to invest more because I do think there is a know-how within Biogen and that's one of the reasons we want to build out a rare disease franchise. But we've got 1,100 patients now on therapy in the US. That's a really significant number. But I'm also really encouraged by the launch in Europe. We've already got -- and remember, this drug was only approved in the -- at the end of January and yet we already have 300 patients on treatment. Now, you all know Europe. We have to go country-by-country to get reimbursement and we have early access programs, some of those we can charge revenue for, some of them we can't, but we have already submitted reimbursement dossiers in five countries in the US. So I think Europe will increasingly add to the revenue. It's probably more of a 2025 story than a 2024. But I think if I'm looking at the acceptance and the uptake, then, that launch is also off to a successful start. And we know that there are an awful lot of patients in Latin America and we've already submitted in Brazil, for example, submitting in Argentina. And I think that actually is going to be a major benefit and opportunity for us as well. Remember, there are no patients in Asia because this is a genetic disease that really affects people of European descent. And in fact, it was quite interesting. I was talking to a key opinion leader in Germany who is actually done genetic studies. And you basically just follow where the explorers went and that's where you're going to find the patients. So I think with that, let's dive in a little bit deeper and I'll turn it over to Alisha.

Mike McDonnell:

Thank you, Alisha, and hello to everyone. I'd like to start with a high-level overview of our financial profile, and how we are seeing this progress in the context of our Fit for Growth program. We maintain a sharp focus on improving profitability as we endeavor to return the company to not just EPS growth, but revenue growth as well. Please note that any financial comparisons that I make are versus the first quarter of 2023. Regarding our top line, our four recent launches contributed revenue in the first quarter, which more than offset the 4% decline in our MS business. And as we noted during our previous earnings call and at a recent webcast investor conference, we expect that this year's revenue will be skewed more towards the second half of the year, and we expect this to be due to both the timing of shipments for SPINRAZA outside the US, as well as the expected growth profiles for our recently launched products. On gross margin, we saw improvement of 5 percentage points in the quarter as our revenue mix has shifted. This is due to increasing high-margin product revenue replacing lower-margin contract manufacturing revenue. We also had $45 million of idle capacity charges in the first quarter of 2023, and none in the first quarter of 2024. Our R&D prioritization and Fit for Growth initiatives had a clear impact on our non-GAAP R&D and SG&A expenses, which we refer to as core OpEx during the quarter, and that resulted in a 13% decrease year-over-year. These savings contributed to meaningful growth of our non-GAAP operating income of 24% year-over-year. Our operating margin was 31% in the quarter as compared to 23% in the first quarter of 2023. And while these are encouraging improvements so far, we believe there is still more work that can be done to continue to improve these metrics. Now, a bit more color on revenue dynamics during the first quarter. Total revenue was $2.3 billion, which was a decrease of 7% at actual and constant-currency. Our MS franchise revenue declined approximately 4% driven by competition and the usual channel seasonality that we see in the first quarter. Within MS, VUMERITY revenue grew 18% and benefited from global patient growth as well as some favorable channel dynamics during the first quarter. Regarding TECFIDERA in the EU, we have now seen most generics exit the market, which drove ex-US growth of 5% for TECFIDERA this quarter. We continue to believe we are entitled to market protection in the EU until February of 2025. And now, a quick double-click on our rare disease revenue for the quarter. SKYCLARYS delivered $78 million of revenue, including approximately $5 million in Europe, where we have launches in several countries underway. For SPINRAZA in the US, revenue was up 1% in the quarter, and we remain encouraged by the resilience here. SPINRAZA revenue outside the US declined 35%. The majority of this year-over-year decline was due to shipment timing in certain emerging markets. We continue to generally see stable patient numbers globally, and we would expect the shipping dynamic outside the US to largely normalize throughout the remainder of 2024. We also saw some modest negative impacts from competition and foreign exchange in the quarter. For the full year 2024, we expect global SPINRAZA revenue to decline by a low-single-digit percentage. ZURZUVAE delivered $12 million of revenue, which we believe is inclusive of some channel stocking in anticipation of increasing demand, which is common for any new launch. And lastly, contract manufacturing revenue was notably lower year-over-year, and as we reflected in our guidance for the full year, we continue to expect contribution from this line to be significantly lower than last year, due to completing a number of batch commitments in 2023. First quarter non-GAAP cost of sales was 22% of total revenue, and that's an improvement of 5 percentage points. As I previously mentioned, this improvement was driven by a more favorable product mix, as revenue from new product launches replaced lower margin contract manufacturing revenue, and it also was related to having lower idle capacity charges. We did not have any in the first quarter of 2024. First quarter non-GAAP R&D expense decreased $124 million, which was driven primarily by savings achieved from Fit for Growth, where we remain on track to achieve cost savings of $1 billion gross and [$8 million] (ph) net of investment by the end of 2025. We also saw savings as a result of our R&D portfolio prioritization, which has had a meaningful impact as we discontinued some programs and have focused our spend on areas we believe have a higher probability of success. Non-GAAP SG&A expense decreased approximately $33 million in the first quarter, and this was primarily due to $50 million of G&A-related cost reductions, which were realized in 2024 in connection with our Fit for Growth program, and that was offset by an increase in operational spending on sales and marketing activities in support of the LEQEMBI and SKYCLARYS launches. I will also note that the prior year included $31 million related to the termination of a co-promote agreement for our MS project -- products in Japan. All of this together contributed to non-GAAP operating income growing 24%, with non-GAAP operating margin now above 30% and improving and non-GAAP EPS growth of 8%. Next, a brief update on our balance sheet. We ended the quarter with approximately $6.5 billion of debt, $1.1 billion in cash and marketable securities, and net debt of roughly $5.5 billion. As of March 31, 2024, the $6.5 billion of total debt included $250 million of the $1 billion 2023 term loan, which was put in place at the time of the Reata acquisition. As of March 31, 2024, we had repaid $750 million of this $1 billion facility. The remaining $250 million is expected to be repaid during the second quarter of this year, so this quarter, earlier than our original expectation, which was by the end of this year. I'd note that this cash and marketable securities figure does not include a $437 million payment from Samsung, which we received earlier this month. We continued to generate strong free cash flow during the first quarter with approximately $507 million of free cash flow. So overall, our balance sheet remains in a strong position, with increasing capacity to invest in growth initiatives. And regarding our strategic review of the biosimilars business, at this point, we have not received an acceptable offer from a third-party. Our process remains ongoing and we will remain disciplined as we continue to explore all options including retaining the business. Next, I'd like to discuss our full year 2024 guidance ranges and assumptions. We are reaffirming our expectation of full-year 2024 non-GAAP diluted earnings per share of between $15 and $16, which reflects expected growth of approximately 5% at the midpoint of the range as compared to 2023. All of the previous assumptions to our guidance, including those you see on this slide, remain unchanged. I'd like to remind that we have potential R&D success milestone or opt-in payments associated with the upcoming clinical data readouts, and we have made an allowance for some of these potential payments in our guidance. Of course, whether or not they are paid will be dependent on the data and our resulting decisions. And finally, we just announced the completion of a sale of one of our two priority review vouchers for $103 million. At this point, we expect to earmark these proceeds for business investment, or to support business development opportunities as they arise. And in closing, we remain committed to our number one goal of returning Biogen to sustainable top and bottom-line growth, and creating long-term value for our shareholders. We will now open up the call for questions.

Operator:

Thank you. [Operator Instructions] Your first question comes from the line of Eric Schmidt with Cantor Fitzgerald.

Priya Singhal:

Yes. Thanks, Eric. So maybe I can just start off by saying that we are working with Eisai to really provide patients with the optionality of a subcutaneous formulation. Our approach is entirely data driven. So we were very encouraged to see the bioequivalence we met last year and we shared that at CTAD. This was the most important milestone. Thereafter, we've engaged with the FDA. And currently, just to characterize how we are approaching this, we've split our strategy for subcutaneous formulation. First and foremost, we are working to submit a rolling submission for subcutaneous autoinjector for maintenance. This we're going to do at earliest. Eisai has already submitted a fast track application. We're awaiting that. And as soon as we get it, we will make the submission, while we continue to generate the data for the three-month immunogenicity that the FDA has required. Second, because our exposure with subcutaneous formulation was higher than the IV formulation, we believe it's in the interest of patients to optimize dose, and that will lead to more convenience. So, we are optimizing this dose and that is something that is already ongoing and is currently ongoing this year. In terms of timelines, if we get the fast track for subcutaneous maintenance, we will file immediately for rolling review, and that we expect would be in this year even if we don't get the fast track because we have completed the three-month immunogenicity data by Q4. Second, for the subcutaneous induction therapy, we expect that we would file by the first quarter of 2026. That is what Eisai has already communicated in their investor comments early March. I'd also like to remind us that we completed our intravenous maintenance filing by Q1 2024 as we [indiscernible]. Thank you.

Operator:

We'll go next to Paul Matteis with Stifel.

Chris Viehbacher:

Thanks, Paul. I think this year, we're going to be focused on business development to bring in some new assets, both into early-stage research and development. We have always called ourselves a neuroscience company, but the reality of neuroscience is that, this is a high-risk area. We don't always understand the underlying disease biology, the diseases progress slowly, that leads you to some very long and expensive trials. You can't often do a proof-of-concept study in Phase 2. And so, while we remain committed to neuroscience, my personal view is that I think that is to -- that is not diversified enough for a company of our size. And so, already last year, we signaled that we'd like to go into some adjacencies in rare disease. I think we actually have a tremendous commercial capability in rare disease. There are special commercial requirements, the need sometimes to support diagnosis, all of the hurdles with payers that have to be overcome and of course, finding the patients. And there are an awful lot of tools that I think we have to be able to do that. And then immunology, we've been an immunology company since the get-go since some -- MS is really an autoimmune disease. So, I think we'll use the opportunity with licensing collaborations to expand that. I think where our balance sheet is, if something really extraordinary came along, I suppose we look at it, but I don't think where we sit right now, we'd be thinking about doing anything this year on an acquisition front, not certainly of any size. But Mike, maybe you can talk to the balance sheet capability.

Chuck Triano:

Thanks, Mike and Chris. Can we take the next question, please?

Salveen Richter:

Good morning. Thanks for taking my question. For SKYCLARYS, could you speak to the 2024 outlook and any bolus dynamics that has impacted this? And specifically, you've talked being 24% US market penetration. How are you thinking about peak penetration in the US and then the expectations for pace of uptake in Europe and net pricing there? Thank you.

Alisha Alaimo:

Yes. I think when you look at the US and the market penetration, and you probably saw in the analogs on the slide that the launch has gone very well thus far. And as I also said, we've made it through sort of the catch-up population. We have a lot of really good things in-place right now that we are launching in parallel to identify and hopefully get to the rest of the population. The way in which we think about this market though is, we do have two sets of patients. You have a set that are highly engaged with their physicians, and you have another set who haven't been engaged, probably over the last two to five years. We have enough data and analytics to understand exactly where these physicians are, and how the patients have moved through them. And so, with that, we are now identifying a lot of these offices, especially in the community who could have a patient or two that might be diagnosed with general ataxia, but not Friedreich's. And so, what I referred to earlier on the call is expanding the field force footprint. We have a very targeted approach to these offices in order to, again, increase the market penetration. Now, as you see with something like a SPINRAZA, we've also performed very well, and also have driven quite a good market penetration with that product, even though there's competitors in the marketplace. With SKYCLARYS, with no competitor really in the market, we expect to continue over the next several years to penetrate this for as far as we can go. We know that there are 4,500 approximate patients that could have Friedreich's ataxia. And so, what we're doing is planning everything that we can to get to as many of them as quickly as possible.

Chris Viehbacher:

Yes. And on Europe, in some ways the single-payer systems actually are really ideal for rare diseases. A lot of patients in the US, even if you have reimbursement, even if you have insurance coverage, there are an awful lot of hurdles that the US healthcare system imposes upon patients. And a lot of those, we don't really see in Europe. And so, I think we're seeing a rapid uptake. Again, there's -- there is a catch-up on population. So there's -- and there's a difference between patients on treatment and revenue-generating patients. So first, we have -- we have actually the commercial launch in Germany because we can get reimbursement relatively quickly. Other countries will come online as we go through the individual country reimbursement processes, but our objective is actually build up the patients. So there's a number who are on free drug at the moment through these EAPs, some of the EAPs you can charge for. So, it's going to be a little lumpy as we look at the revenue line. But I'd say we're extremely encouraged by the uptake of patients. And then, ex-US in Latin America, that could well be a story for 2025. I think you may see our first launch in Brazil in early part of 2025.

Operator:

Yes. We'll go next to Umer Raffat with Evercore.

Priya Singhal:

Thanks, Umer. We have looked at the Phase 2 study very carefully, and we have decided and we included the 48-week endpoint on BICLA for this Phase 3 study. And ultimately, we're looking for a meaningful change on the primary endpoint, and the key secondary endpoints for SLE such as severe flare prevention and patients achieving low disease activity. We also think that the BICLA is a sensitive, clinically meaningful composite measure of SLE disease activity, and requires disease improvement across all body systems with moderate or severe baseline activity without worsening and the need for escalation in background medications. So we modified the trial, we are -- we have refined the population, and we think that this is going to be really important as we kind of look forward to the readout. The other piece I think here to keep in mind is that we considered how we can modify the population for this study and get to an answer really quickly to bring potentially dapi to patients. So I hope that answers your question.

Operator:

We'll go next to Michael Yee with Jefferies.

Priya Singhal:

Yes. The outcome and the filing will be in that period, but we'll communicate more on this once we optimize the dose and we go forward.

Alisha Alaimo:

Yes. So for SKYCLARYS, it is quite complicated month-to-month, I will say, because you have patients, obviously, that we're getting via the start forms, which I will say for the highly engaged population we are pretty much maxing that out now. We absolutely know who they are and we've captured them through the physicians. But then, you're also going to have a discontinuation rate as you have noted, and you're going to have patients that are being pulled off the start forms, putting on to product. And then of course, you may have them miss a dose or two, right? So then, there's compliance. So month-to-month, it will be lumpy because you can say you add 50 patients, but then you have other dynamics going on in the patient population. But what our outlook is for the year, which I can't give you a specific number, is that we are going to continue to add every single month. We are able to find those patients in the community, and there are other puts and takes in those numbers. But at the end of the day, we will ensure that we are still leading the rare disease analogs and that we're going to generate market penetration.

Chuck Triano:

Great. Thanks, Chris. Let's go to the next question, please.

Colin Bristow:

Good morning and thanks for taking the questions. Maybe one on the LEQEMBI commercial setup. So, one investor concern and important feedback we've been hearing from physicians is around, there being less sales and marketing presence than perhaps had been expected. I heard in your prepared remarks you're saying you expect a 30% increase in the US footprint. Are you able to sort of quantify the current US commercial footprint? And was the 30% increase always planned, or was it based on some review that the current footprint wasn't adequate? Thank you.

Chuck Triano:

And let me just turn it to Priya for a clarification back to Mike Yee's question on subcu.

Chuck Triano:

So, the outcome and not the filing?

Chuck Triano:

Obviously earlier?

Chuck Triano:

Yes.

Chuck Triano:

Thanks, Priya. Let's move to the next question, please.

Brian Abrahams:

Hi, there. Good morning. Thanks so much for taking my question. With regards to LEQEMBI subcu, on the FDA request for immunogenicity data, I'm curious if you have a sense as to what drove that request. Your level of confidence that the PK will be linear using half the subcu dose? And then, when are you proposing that patients in their course of treatment should transition from an IV to a subcu maintenance? Thanks.

Brian Abrahams:

When are you proposing that patients transition from the IV to the subcu maintenance? Is there data supporting what -- when in the course of treatment that transition should happen?

Chuck Triano:

Thanks, Priya. Let's move to the next question, please.

Jay Olson:

Oh, hey. Thanks for providing this update. It seems like compared to previous quarters, you're focusing more on your three commercial launches and relatively less on the R&D pipeline. Is there any particular reason for that shift in focus? And how much more work do you plan to do to optimize your R&D portfolio? Thank you.

Priya Singhal:

Thanks, Chris. I think you covered it. That's exactly right. We are very excited about our four readouts. We are preparing for them. We have already worked through go/no-go criteria. And we continue to remain very excited about the rest of the pipeline that's in mid and late-stage, particularly our anti-tau ASO BIIB080, as well as our two Phase 3 programs in SLE, litifilimab as well as dapi that we just talked about, and with litifilimab also in cutaneous lupus. So, we have a number of projects in early phase development, and we're trying to be very disciplined about making sure that we make evidence and data-based decisions.

Operator:

We'll go next to Chris Raymond with Piper Sandler.

Chris Viehbacher:

Yes, well, there's a little bit of a lot of the above in there. I think the first is, we haven't abandoned MS. We do have programs in research early. The unmet need in MS has really narrowed. It's really the progressive form, which is a very tough indication really to go after. But we have programs still in ALS. And in fact, I think the fact that QALSODY was approved has actually proven to be an enormous scientific achievement. It may not be a major financial achievement, but this really opens up the field to having a biomarker where you can tell whether something is working or not in ALS. And so, we have a number of programs in ALS. We're in Huntington's. We have a program in Parkinson's, as you know. We've got TAU, which I think between TAU and lupus, we see as programs of high conviction within the company. So, we feel that -- I think you're right. We are very well-placed. Neurology, I wouldn't just say MS, but neurology. But the reality is that, we sit there with programs that are very difficult to predict, very expensive, very long running. And when you actually look at the ability to do external deals, that field is also very narrow. There's just not that many people working in the CNS space. So we're by no means abandoning it. And in fact, the fact that we go after these really tough diseases is really a source of pride within Biogen. And I have to say, I continue to be amazed at the capability and talent we have within the organization. But the reality is, we need to have more predictable results out of R&D. And I think we do have a lot of that capability within the company. I don't see us ever -- moving -- going left turn into oncology or something like that. But I do think we have a legitimacy and being in rare diseases and expanding into immunology. And in fact, I think what we've been doing in MS and in fact lupus is really an indicator of that. So, I think we're going to continue to branch out, but it also branches out our opportunity set for collaboration, and not just diversifying our portfolio.

Operator:

Yes. We'll go next to Terence Flynn with Morgan Stanley.

Alisha Alaimo:

Yes. So thank you for the question. My outlook for the rest of the year is, when you really think about the phases that these IDNs are in, and even you see these small accounts that they do move fast out in the community. And if you really take a step back and look in context for the IDNs, we got an approval -- full approval in July. It took about six to eight months for these very large systems to get organized, which is that staged and phased approach I talked about. And the fact that now they're actually opening up these other sites for diagnosing and prescribing, I believe that you're going to also see the number of physicians prescribing increasing, and it will continue to increase throughout the rest of the year. If you look at how many physicians that we are targeting and the numbers that are actually prescribing, we still have a good delta there. And so, I do see that continuing, especially with the field force coming in, if they're covering, our goal is really to drive the acceleration at these large IDNs. I talked to you about the Priority 100, but keep in mind, we actually target quite more than that. I just keep referring to the priority. And there are many other IDNs that are also prescribing and are also expanding and extending. The second part of your question was around --

Alisha Alaimo:

Duration. What's interesting with this and there's been a lot of conversations with many of these prescribing sites. Physicians lay very specific and explicit expectations with patients that when they go on this therapy, their expectation is they come in, every two weeks, to get their IV infusion and that they stay on product. And what we've seen thus far, and what we believe to be happening thus far is patients are staying on product. We hear that as feedback from the physicians. We also hear that as feedback from the numbers that we see the data that we see. So, so far with duration, the plan is that they're keeping patients on product. I think there are questions out there as to what to do about duration, but in the absence of any data, physicians are keeping patients on.

Operator:

This does conclude today's conference. We thank you for your participation.

Operator:

Good morning. My name is Katie and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Fourth Quarter and Full-Year 2023 Earnings Call and Business Update. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] 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.

Chris Viehbacher:

Thank you, Chuck. Good morning, everybody. A year ago, I had the -- an opportunity of presenting Biogen's quarterly results for the first time. At that time, we expressed the objective of returning Biogen to sustainable growth. And I think in the intervening year we've made substantial progress and today it is a great amount of pride and pleasure that we can announce earnings guidance, which Mike will go into in greater detail, which says that we will -- we are expecting to see positive earnings per share growth. And as I have said on a number of occasions, once we can get Biogen growing, we really see it Biogen becoming a growth company for the foreseeable future. We have very little, if we have in fact no exposure to Inflation Reduction Act with our current portfolio. We don't have any new patent expiries really coming in anytime soon other than those that are already known. And I think we've undertaken a number of other measures that really reposition Biogen for growth. Now if I just review some of those things, the first is -- was really to refocus the company on growth drivers, in particular our new product launches. Biogen had four new product launches from approvals from the FDA last year. That's the second highest of anyone in our industry. And you know that required quite an awful lot of cultural change. The multiple sclerosis franchise has been the stalwart of our company for since its inception 45-years ago. Our people are passionate about the physicians to treat multiple sclerosis and the patients who have multiple sclerosis. And we are still a market leader in this space. However, that is a franchise that is facing increasing competition and we have to embrace new therapeutic categories and new businesses. And so we have really had a major shift in resources and focus, particularly towards LEQEMBI, ZURZUVAE, SKYCLARYS, and QALSODY. We also though have still some products with patent protection, again, with substantial competition. And if I take a product like SPINRAZA, analyst forecasts had shown forecasts that this product would decline. Particularly proud of our teams in demonstrating that they could bring this product to -- back to actually even modest growth. Obviously, the mode of administration of products can be a competitive advantage. So if you have a pill, you're going to be a lot more preferred than if you have an infusion, for example. But what we see in some of these really devastating diseases is that efficacy is still the most important factor. And that is why SPINRAZA continues to be a leader in its segment. And Biogen is extremely good at being able to develop the medical evidence to support the value proposition of its products. As many of you told me when I first came into the company, you know, you've got a mature product portfolio, but you've got one of the highest cost bases in our industry. And we took steps to address that. We -- but it wasn't just around reducing cost. We wanted to reengineer the business. We were shifting our focus, entering new therapeutic categories, and we needed to think about capabilities, we needed to think about the agility of the organization, the number of layers of management that we have. And so we implemented a fit-for-growth reengineering project. We've already achieved $200 million of savings, and we're on track to realize approximately half of the 800 million of net savings by the end of 2024. That's, of course, a gross savings of $1 billion. And then we had to look at research and development. And Biogen is an extremely interesting company. All of the diseases that Biogen targets are really devastating diseases, and we target -- and there is a lot of pride in the fact that we go and try to find solutions for diseases where nobody else is doing that. But of course, when you do that, you're pioneering. You're pioneering, because we don't really understand often the underlying disease biology of these conditions, and so we end up taking a lot of risk, and these trials can be really quite expensive. And yet we do need a company like Biogen in our world, and so our objective has been to really focus research and development investments on those products that will have the greatest impact. And of course, we have to manage the risk in the portfolio. We have to have Biogen as a sustainably growing company and one which is attractive to investors. We need the capital to go and invest in new projects. And so I think with Priya's help, we've been able to take an extremely disciplined and objective view to the pipeline. We have four data readouts this year, again, on extremely important illnesses, and Priya will talk more about that. And as we go into next year, we're going to be looking at how do we reinforce that pipeline? How do we rethink our research efforts? A lot has changed in science, but we haven't necessarily done that kind of change at Biogen. So I think research and development is extremely important to Biogen and I think continued to be a source of growth for the future. Now, as we look at what does drive growth, clearly we have LEQEMBI. And I'll remind everybody that, again, we are not just pioneering in science, but pioneering in commercial. One of the interesting things about this disease is that if we talk about the efficacy of the product, a lot of cases we're looking at the characteristic of a product, but actually when you talk about efficacy, you're talking about are you in the right patient? And in fact, for decades, our industry invested in drugs which failed to demonstrate a benefit in Alzheimer's disease. And there were two main problems with that. One was we couldn't get enough drug across the blood-brain barrier, and we weren't in the right patient. Clarity was the first study to really convincingly demonstrate the importance of reducing plaque and the impact on cognition. But we know that some data that we showed at CTAD that we believe that the earlier you can go, the more likely it is you're going to show even a greater efficacy, because we're not -- we're really in the business of trying to protect neurons or create an environment where injured neurons can recover. And so we have a huge investment in our AHEAD study to look at presymptomatic patients. We're investing in what happens when you remove the plaque and looking at maintenance. We're trying to make this more convenient for patients by having a subcutaneous formulation. And so this -- the pioneering continues. And the pioneering also is out there in the marketplace. Patients with Alzheimer's are not in the system today and are coming into the system. So we've got approximately 2,000 patients on therapy at the moment. Now, we don't have as companies direct access to the patient registries. You all know about the CMS registry, but there are a few other registries out there like ALZ-NET, for example. And we have seen some analysts have been able to access that data. There was one analyst report of 3,300 patients on the registry. Latest information that we have, and again, this is not perfect information, but we have an indication that there are about 3,800 patients as of last week on the registry. When you look at that, that suggests we're getting about 260, 265 patients per week in the month of January. And as far as we can tell, that's about a 56% increase over what we were seeing in December. So we are clearly seeing that there is demand for the product. We're clearly seeing that IDNs are moving to put in place the care pathways and the treatment protocols to improve access. 70 out of the top 100 IDNs have had positive P&T committee decisions. 80% of those have now actually ordered LEQEMBI. But if we talk to the people who are doing the PET scans, the MRIs, the people who sell the blood diagnostics, everybody is reporting increased activity and volume. And so -- and as you saw with Eisai's results, their belief is that for all the patients on treatment, there are at least three or four-fold of those who are actually in waiting rooms. So we do believe we're making very solid progress. And we believe that we have validated the go-to-market model. And now that we have enough IDNs with reimbursement and care pathways in place, we believe that it's also time now to increase our level of promotion out there. And so as Eisai has announced, we will be expanding total U.S. field force by about 30%. And as was already previously agreed last year, that once we had the go-to-market model really validated, that it's now time for Biogen colleagues to also go and visit physicians. And of course, we've seen the launch in Japan. I was there for the launch meeting, and Biogen's very proud to be working alongside our colleagues from Eisai on the launch in Japan. And we've seen LEQEMBI approved in China, and that launch will be from later this year. So everywhere we look with LEQEMBI, we are making solid progress. This is, as we have said before, a launch that really doesn't have an analog. We have always guided investors to the fact that this would be a progressive ramp, and that's what we're seeing. And we continue to believe in the long-term importance of LEQEMBI, both to patients and to our financial results. Moving on to SKYCLARYS, you've seen the launch numbers for the U.S., we have about 1,000 patients now on therapy. We don't have a pediatric indication yet. So the potential population's about 4,500. So we've got a little over 20% of the patients on therapy within about six months of launch. There’s an awful lot of complexity to launching these rare diseases, and I think this is where Biogen has an awful lot of strength. There's a lot of logistics issues with specialty pharmacy and reimbursement. And so we have already been able to demonstrate that we can reduce the time from the start form to shipment by 45%. We've got about two-thirds coverage out there in terms of reimbursement. And of course, patients and their physicians need an awful lot of support out there. And so we have patient services and family access managers, who are assisting patients and physicians to navigate the care pathways. One of the things that we see with SPINRAZA is that we do about a third of our sales in the U.S. and two-thirds ex-U.S., and we expect that to be a model for SKYCLARYS. Last night, we announced the formal approval by the European Commission for SKYCLARYS. We have expanded access program in a number of European countries, and we are in the process of setting those up in other countries, including those outside of the U.S. We have a global filing strategy that is underway to make sure that all patients with Friedreich's Ataxia can benefit from SKYCLARYS. And of course, we are actively working on doing the studies that would be needed to obtain the indication for children under age 16. ZURZUVAE, postpartum depression, enormous unmet need, tremendous media coverage. We're talking about maternal health and we're also talking about mental health. And those are two key trends in our societies today. It has been difficult often for mothers to seek treatment and get treatment. It is estimated about 80,000 women are diagnosed every year, but the incidence is believed to be way in excess of a half a million. So there's an awful lot of work to do to really get outreach to women, who are suffering from postpartum depression. I have to say the initial indications of launch are well above expectations and very promising, but it's six weeks of data. So I think we want to see more data to really come to any firm conclusions, but everything that we are seeing is extremely positive. We were originally positioning this product for major depressive disorder and we pivoted to postpartum depression that meant we've had to go back and recontract with payers. I have to say I'm highly appreciative of payers, because they have actually been honoring prescriptions even though we haven't got all of our contracting in place, and I think that is actually also helping with demand. So with that, I'll turn it over to Priya because I think increasingly what we'd like to also start to talk about is not only what we're selling, but the new hope for patients that's coming out of our pipeline. So I'll turn that over to you, Priya.

Mike McDonnell:

Thank you, Priya. Good morning, everyone. I'm going to provide some highlights and color regarding our financial performance for the fourth quarter of 2023, and I'll follow that with some detail on our 2024 financial guidance assumptions. Please note that all the financial comparisons that you will hear are versus the fourth quarter of 2022. Total revenue for the fourth quarter of 2023 was $2.4 billion. That's a decrease of 6% at actual currency and 5% at constant currency. Non-GAAP diluted earnings per share in the fourth quarter was $2.95, and that includes a $0.35 negative impact from the recently disclosed closeout costs related to ADUHELM. For the full-year of 2023, total revenue of $9.8 billion represents a decline of 3% at actual currency and 1% at constant currency, and that's consistent with our most recent guidance of a low single-digit decline. Full-year 2023 non-GAAP diluted EPS was $14.72, and that's also consistent with our most recent guidance range of $14.50 to $15. Total MS product revenue was $1.2 billion in the fourth quarter. That's a decrease of 8% at actual currency and 6% at constant currency, and that decline is broadly attributable to competition among the impacts from generic TECFIDERA. I'd like to now provide just a couple of quick updates to the MS business during the fourth quarter. First, for TECFIDERA, in Europe, in December, the European Commission revoked the centralized marketing authorization for generic versions of TECFIDERA, and in reaching this decision, the European Commission affirmed that Biogen is entitled to marketing protection for TECFIDERA until February of 2025, which makes TECFIDERA the only dimethyl fumarate treatment for MS that may be lawfully placed on the market for sale in the EU until that date. Also, a TYSABRI biosimilar is now launched in a small number of countries in Europe. We expect that biosimilars will continue to launch in the first-half of 2024 in other European geographies, as well as in the U.S. Biogen has patents related to TYSABRI, and we will continue to seek to enforce our IP. And although VUMERITY grew modestly in 2023, we are seeing continued effects from pricing pressure and an overall contraction of the oral segment of the market in the U.S., which we expect to continue to see in 2024. Now an update on our rare disease portfolio, which includes SPINRAZA, SKYCLARYS, and QALSODY. In the fourth quarter, we reported revenue $472 million, which is an increase of 3% at actual currency and 6% at constant currency. On our third quarter call, we noted that SPINRAZA outside the U.S. benefited from the timing of shipments in certain markets. This prior period benefit negatively impacted fourth quarter performance. While we expect continued shipment timing impacts for SPINRAZA in 2024, we remain encouraged by its overall performance. SPINRAZA outside the U.S. was also modestly impacted by pricing pressure and competition in Europe in the fourth quarter. As the market leader in SMA, we continue to believe that we can return SPINRAZA to growth over time. SKYCLARYS delivered $56 million of revenue in the first full quarter as a Biogen product, and we are encouraged by the continued patient growth that we've seen. Biosimilars fourth quarter revenue of $188 million increased 8% at actual currency and 10% at constant currency. We continue to explore strategic alternatives for this business and are working to ensure that we maximize its value for our shareholders. Our anti-CD20 revenue of $436 million included a $12 million operating loss related to our economics for LUNSUMIO. Contract manufacturing, royalty and other revenue of $118 million in the fourth quarter was notably lower year-over-year, mainly driven by the timing of batches, and I'll provide some additional detail on this dynamic shortly when I discuss our 2024 guidance. Now, a few things to note regarding fourth quarter expenses. Fourth quarter non-GAAP cost of sales was 25% of total revenue, and that includes $52 million of idle capacity charges. Fourth quarter non-GAAP R&D expense decreased $34 million and that's notwithstanding approximately $45 million related to our portion of the LEQEMBI collaboration and approximately $60 million in closeout costs relating to ADUHELM. Non-GAAP SG&A expense decreased $44 million in the fourth quarter, which was driven by approximately $110 million in cost savings initiatives, and that was partially offset by an increase in commercialization expenses related to the launches of SKYCLARYS and LEQEMBI. Next, a brief update on our balance sheet. We ended the year with $1 billion in cash and marketable securities and $6.9 billion in debt, which puts us in a net debt position of $5.9 billion. In the fourth quarter, we utilized approximately $1.3 billion of cash for final acquisition payment obligations related to the Reata transaction. We also paid down roughly $350 million of the $1 billion term loan that we put in place at the time of this acquisition. It's important to note that, included in the $1.3 billion I just mentioned, $393 million was reflected in cash flow from operations for a one-time payment related to equity-based compensation for the Reata transaction. So absent this, full-year 2023 free cash flow of $1.3 billion would have been approximately $1.7 billion. We expect to continue to generate strong cash flow this year and expect to receive a payment of $437 million from Samsung in early Q2 of this year. So now I'm going to discuss our full-year 2024 guidance ranges and assumptions. We expect full-year 2024 non-GAAP diluted earnings per share of between $15 and $16, and that reflects expected EPS growth of approximately 5% at the midpoint of the range, compared to 2023. While total revenue is expected to decline by a low to mid-single-digit percentage, we expect our core pharmaceutical revenue or product revenue plus Biogen's 50% share of LEQEMBI revenue net of cost of sales and royalties to be relatively flat for 2024 as compared to 2023. This assumption is driven by the expected increase in revenue from new product launches over the course of the year, roughly offsetting the declines in our MS product revenue. As has been the case in previous years, we expect Q1 to be seasonally weaker quarter, as compared to Q4 for our MS business in the U.S., and that's driven by higher discounts and allowances and some channel dynamics. We also expect contract manufacturing revenue to be significantly lower throughout 2024, as compared to 2023. This is in part due to completing certain batch commitments in 2023, as part of the 2020 sale of Hillerod, which is located in Denmark. We had manufacturing operations there. And these batch commitments contributed roughly $320 million in 2023, which will not recur in 2024. The increase in revenue from new product launches and decrease in contract manufacturing revenue, along with lower idle capacity charges, are expected to have a favorable impact on cost of sales as a percentage of revenue for 2024. We also believe we can grow our operating income at a low-double-digit percentage and operating margins by a mid-single-digit percentage, as compared to 2023. We expect this to be driven by improved cost of sales as a percentage of revenue, as well as lower expected operating expenses, resulting from our Fit for Growth initiative. On Fit for Growth, we continue to expect to generate approximately $1 billion in gross savings and $800 million in savings net of reinvestments by 2025. We have achieved approximately $200 million of savings in 2023 and are on track to realize another $200 million in 2024, which would put us at $400 million or half of the overall net savings by the end of this year with the remainder in 2025. In 2024, we expect our 50% portion of SG&A spend for LEQEMBI, which, as a reminder, is not included in our Fit for Growth assumptions and the reallocation of resources for ADUHELM to roughly offset. With all of these considerations in mind, we expect our full-year 2024 combined R&D and SG&A spend to total approximately $4.3 billion. We expect our other income and expense line to continue to be a headwind this year, given the reduction in interest income and increase in interest expense as a result of the Reata acquisition. And so in 2024, we expect an improving revenue profile, improved margins, and a return to non-GAAP EPS growth. Our number one goal remains to return to sustainable growth, and we remain committed to this goal and to creating long-term value for our shareholders. And now back to Chris for some closing remarks.

Chuck Triano:

Right. Thanks, Chris. Katie, could you please open polling for questions? Thank you.

Marc Goodman:

Yes. Good morning. Can you walk us through just the subcu and the maintenance approvals? Obviously, timelines, I guess, would be around the end of the year, but just talk about the impact into the market. Let's assume Lilly's on the market as well with a -- they're going to get approved soon. So how do you expect this to change the dynamics and the uptake? And just give us a sense of that, please. And then also, maybe you could just talk about the uptake in Japan that you expect? Thanks.

Priya Singhal:

Sure. Thanks, Marc, for that question. So overall, we shared our six month data for the subcutaneous formulation at CTAD last year. We believe we've achieved the bioequivalence with the IV formulation. Eisai has communicated very recently about the FDA meeting that is on the book to finalize strategy for submission. And currently, the aim is still to file by end of March 2024 for the subcutaneous formulation. In addition, there is data on the potential and need for IV maintenance, and that is also being aimed to file by Q1 2024. So that's the plan currently. I'm going to turn it over to Chris for the dynamics and the commercial implications.

Chuck Triano:

Do you want to comment on Japan?

Chuck Triano:

Great. Thanks, Chris. Next question, please, operator.

Salveen Richter:

Good morning. Thanks for taking my question. I have one with regard to the bottlenecks on the LEQEMBI launch. Could you speak to maybe two of those aspects? One is your expectations for Medicare Advantage to get to the same level of coverage as traditional Medicare and over what timeframe? And then secondly, just an update on the patient access to neurologists. Thank you.

Chuck Triano:

Great. Thank you, Chris. Let's move to the next question please.

Umer Raffat:

Hi, guys. Thanks for taking my question. I thought I'd ask for something a little different today, your CD40 Phase 3 in lupus. And my question is, two things. One, the trial size, this was shrunk from 450 down to 320. Could you speak to the recruiting challenges and whether they bode well or not well on efficacy? And then secondly, the primary endpoint, this one has three components, but the FDA guidance appears to want one clear index like a BILAG or SELENA-SLEDAI et cetera. Is there alignment with regulator on that? Thank you.

Chuck Triano:

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

Evan Seigerman:

Hi, all. Thank you so much for taking my question. Chris, maybe can you walk me through some of the rationale for adding more Biogen resources to the LEQEMBI launch and maybe kind of what's changed or evolved with your partnership with Eisai where you think you needed to add more Biogen resources in the United States? Thank you.

Chuck Triano:

Right, thanks, Chris. Now let's move to our next question, please.

Unidentified Analyst:

Hi, this is James on for Paul. Thanks for taking our question. Just one more on the lecanemab subcu and specifically in treatment-naive patients. Just wondering if you're confident that you have enough data from a regulatory perspective here, if you've aligned with regulators, you and Eisai aligned with regulators and specifically, if you have enough safety data in that treatment-naive patient population? Any color there would be great. Thanks.

Chuck Triano:

Thanks, Priya. Next question, please.

Phil Nadeau:

Good morning. Question on SKYCLARYS following last night's approval in the EU. Chris highlighted the importance of the U.S. markets. Could you discuss the expected cadence and trajectory of SKYCLARYS' launch outside the U.S. and Europe, in particular, when will be available in the major territories? And would you expect the uptake in those major territories to be as fast as it has been here in the United States? Thanks.

Priya Singhal:

Yes. I can comment on the fact that really, we are trying to expedite our regulatory filings in Latin America, Brazil, Argentina. We haven't yet communicated the time lines, but our teams are working very expeditiously, meeting with regulators to really define the pathways that could provide earliest access to patients.

Chuck Triano:

Great, thank you. Next question, please.

Michael Yee:

Thanks. We had a question on SKYCLARYS. Can you may be shed some more light on the dynamics of 800 patients to 1,000? And then the trajectory as we go forward into 2024, I know you mentioned there's about 4,000 patients, but how many of those are actually identified. Do you expect growth to moderate just from an expectation standpoint? Talk a little bit about the complexities in 2024 that you commented about. Thank you.

Chuck Triano:

Great. Thank you, Chris. Let's move to our next question, please.

Colin Bristow:

Hey, good morning. Thanks for taking the questions. I just wanted to clarify something in your slides that says that the subcu that we can be filing is now first-half of ‘24. But in your commentary, it sounds like it's still 24, so if you could just clarify that? And just talk to specifically what FDA is waiting to see, I think it was a 12-month data last time we spoke. What is it within that? And then maybe just as a follow-on, you had three, four, five study, what is the timing or thresholds for any interim analysis there? A - Priya Singhal I can get started. So overall, I think with the subcutaneous, just to be very clear, Eisai has communicated as recently as their earnings a few days ago that we aim to file by Q1 2024, which is end of the first quarter this year. And just shifting gears to AHEAD 3-45, this is really a platform -- a set of platform trials with different amyloid levels for defining preclinical Alzheimer's disease. So at a very high level, A45 is preclinical Alzheimer's disease with an enrollment target of 1,000 patients, and patients need to have an amyloid level of 40 centiloids or more. There's three phases of dosing with different doses, which is titration, induction and maintenance. And in this particular trial, the outcome is a PAC 5, which is a preclinical composite for Alzheimer's disease, where it's sensitive to patients who are still in the preclinical phase. The A3 trial is -- has a target enrollment of about 400 million and the preclinical amyloid cutoff is between 20 and 40 centiloids. And then again, it's got a different holding schedule of titration and then maintenance. Now the primary endpoint for the A3 trial is really a biomarker endpoint. We haven't really communicated exact time lines. These are very large trials. I think the Eisai and Biogen are very pleased with how they are being enrolled. And I think we'll communicate more. There is an opportunity to do an interim analysis and Eisai has spoken to this, but we haven't communicated a time line yet.

Priya Singhal:

I think there was the latter part of the question. I'll just wrap it up that with regards to FDA, I think I mentioned previously, there have been a lot of discussions. Eisai has recently mentioned the scheduling of more meeting another meeting. And so that strategy will be finalized. Looking at the 6-month data, we are very encouraged with what we saw. We believe that the highest threshold, really, the biggest hurdle was to meet bioequivalence, which we believe we've met. So we'll continue to wait for more data. But we are very encouraged with what we've seen so far.

Operator:

We'll go next to Chris Raymond with Piper Sandler.

Priya Singhal:

Sure, sure. So overall, just to step back, this is a program that Ionis, our partner, is operationalizing and the way the contractual agreements are written, we have the option of opting in to take the data that we see midyear and decide whether we would like to do a pivotal program -- a pivotal study. So that's how it's set up. And then to step back, I described it briefly in my opening remarks that this is a Phase Ib trial. So this is a Phase I trial that's being conducted in patients. It has a multiple ascending dose component for three months, followed by a long-term extension. So we will get data. This is across different age groups and different doses. So we'll get a composite of data. And importantly, we'll be looking or trends on EEG, which we know these patients suffer from the delta waves as I spoke to, the slowing. So we'll be looking at that. as well as clinical endpoints. And very specifically, there are quite a few clinical endpoints. There's the Bayley score, there's the CGI and there's a Vineland. We'll be looking at all of them. Stepping out into what do we feel about the competitive landscape? We feel that this as designed the program is well positioned. Just from an ASO perspective, the backbone of the BIIB121 ASO, we believe, is different. That's 1 from the Ultragenyx ASO. Second, we believe that the dosing may be needed at a quarterly level to really see the PK/PD impact that we need to have -- make an impact in this disease. And we do have a 3 monthly dosing in the LTE. So the MAD is 2 doses being given 1 month apart. And then the third dose, 2 months later, and then patients go into a 3-month dosing. So we are -- we feel that we will have a data set that we can look at and really assess whether we see an adequate signal to really take it into a Phase 3. And with regards to Roche discontinuing their program, we believe, again, that this is a different product, and we believe we may have a competitive advantage. Ultimately, of course, we need to see the data.

Operator:

We'll go next to Mohit Bansal with Wells Fargo.

Chris Viehbacher:

Sure. So as you know, we have an oral therapy out there. We have a gene therapy, and we have SPINRAZA with the intrathecal. So short term, I think one of the data points that was very important was demonstrating the efficacy of SPINRAZA following Zolgensma because there has been some feeling that Zolgensma wanes over time. So we're getting what we call switch packs, and the other on the oral therapy is that there has sometimes appear to be that the efficacy is limited to certain body weights. So we can actually go after more adult populations. We believe that only about 30% of patients with SMA are actually treated. Clearly, the pediatric patients are screened for and readily identified. But there are a number of adult patients where the disease is manifest, but it is sometimes difficult to diagnose. And so we're back to the rare disease job of hunting for patients. But we think, actually, we will be the most app most appropriate treatment for that patient population. So that's one source of growth. And then longer term, as you know, we have a high-dose SPINRAZA program in development which could, if it's successful, lead to just on intrathecal injection procured. And that would make an enormous difference to patients in terms of patient convenience and make SPINRAZA even more competitive compared to the others. Now that's still going to take a number of years, but we do expect that still to come to market before the patent on SPINRAZA occurs.

Chris Viehbacher:

Yes, there's a dynamic as sort of the oral comes into a market at one point or the gene therapy comes into a market. If you have 100% market share and the competitor comes in mathematically, you're going to lose market share. But what we see is that there is some churn for a year or two. And then the markets settle out, and that's when people start focusing on efficacy and patient populations. And as I say, so far, we have been able to maintain leadership in SMA despite the competition. And I think that's where they'll be. There'll be different products for different patients, but there's still enough of a patient population and even with the switchbacks that we can find reservoirs of growth.

Operator:

We'll go next to Jay Olson with Oppenheimer.

Chris Viehbacher:

Sure. Thanks, stunt double. We -- so there are a number of things that I think are quite encouraging. One is our initial target has been high-prescribing psychiatrists in this space as well as OB-GYNs. And one of the things that we were wondering about is, are the OB-GYNs really going to be willing to prescribe? And so one of the encouraging signs is that they in fact are doing so. So we're seeing quite a high percentage of the prescriptions coming from them. Another has been, I think, as I mentioned earlier, that payers have really wanted to ensure access to patients, and I'm quite thankful to them. I think Medicaid, for example, where 40% of births occur, have moved very quickly on that in a number of states. And some of the large -- at least one of the large commercial insurers is moving much quicker than we expected as well. So I think the reimbursement is a key statistic. Now, personally, I'm interested in knowing how many patients are treatment-naive versus people who have been on treatment. What is interesting is, is there a warehousing effect here as well? There's been an awful lot of media coverage. The product was approved in July. We were not able to launch because of the DEA inspection until the very end of 2023. So what we don't know is, are we seeing a bolus of patients come in because these are patients physicians have been following for some time who've been identified as being particularly important to have ZURZUVAE. So I think we'll need to see a little bit more data about who are the patients and where are they coming from, but as I say, so far, we're running for the first month. I mean, we're certainly doing much better than what we had anticipated. And we'll give you another update at Q1. We'll sit with Sage sometime in March to look at the data and say, what do we see as some of the trends. But so far so good.

Operator:

That concludes today's call. We appreciate your participation. You may now disconnect.

Operator:

Good morning. My name is Ally and I'll be your conference operator today. At this time, I'd 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 speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. 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.

Christopher Viehbacher:

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's 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. 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 wanted to do is to stabilize and grow again, those existing products that still have market exclusivity for a significant period of time, notably VUMERITY 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 products, projects that perhaps no longer fulfil 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 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 LEQEMBI launch was going to be a gradual launch. We always knew that. Also, even the zuranolone launch was an unconventional launch. And to derisk 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 – LEQEMBI was the first anti-amyloid antibody to receive traditional approval for early Alzheimer's disease. ZURZUVAE 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've received Schedule IV listing from the DEA. And we also had QALSODY 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 Reata Pharmaceuticals, and that gives us a whole new growth opportunity. SKYCLARYS 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. As you know, we are trying 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 SKYCLARYS. 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, and 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 and how we allocate capital and the agility and the ability to take decisions in the organization. Can I move to the next slide, please? So let's talk about LEQEMBI, 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 whilst IDMs and clinics are working really hard to put these in place, it, of course, takes time. And I think 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 LEQEMBI 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 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? I think we have a number of greenshoots here, signs of progress. The first is, as we look at our internal metrics of intent to treat and patient demand, we are seeing all of those things progress extremely nicely. 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 and been relatively easy to use. We had some confusion around the reimbursement of amyloid PET. And CMS 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 confusion out there. I think one of the most interesting things is we've got 60% of the top 100 targeted IDMs 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 LEQEMBI 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 do we also go from here? Remember, a year ago from here, there was still skepticism about whether reducing amyloid plaque would really have a benefit. And it wasn't really till 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. Which were the right patients? Which was the right antibody that was going to get the right amount of drug into the brain? And LEQEMBI 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. 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 Eisai to launch LEQEMBI 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 all the signs are green at this moment. And for us, internally, we see a launch that is on track. But as we've always said, there's no real analogues. And every month, we learn something new. If I could move to the next slide, please, Chuck. Now, let's talk about SKYCLARYS, something that is much different. And as you know, we now have 1,180 start forms to date, with about 860 patients actually on drug. When we look at all of the known analogues, 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 would likely 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's a very strong desire to see this product come. And we're actually seeing a lot of requests from countries around the world to make SKYCLARYS available. And that just speaks to I think the understanding that this is the very first treatment that has ever been approved for Friedrich'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 and I think this is where Biogen can really add value is why is there 1,180 on start forms and 860 on drugs? Well, there are a number of things. Trying to get reimbursement, you need genetic tests, we need to measure your liver enzymes before you go on the product. And one of the differences from SPINRAZA is that they're not all incentives. They could be out there in in primary care, physician care. And 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 there 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 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.

Michael McDonnell:

Thank you, Priya. Good morning, everyone. I'm going to provide some highlights and 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. TYSABRI 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 a biosimilar in the first half of 2024. Biogen still has patents relating to TYSABRI and we will continue to enforce our IP. VUMERITY 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% at actual currency and 7% at constant currency. The 7% growth that we saw included 7% growth in the US as well. And that was driven by patient growth. While outside the US, 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 with a 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 LEQEMBI collaboration. Our 50% portion of LEQEMBI 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 LEQEMBI 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 Eisai and we continue to share LEQEMBI 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 Eisai reported in-market product revenue for LEQEMBI in the third quarter was approximately $2 million, our anti-CD20 revenue was $421 million, and that included $11 million operating loss related to Lunsumio. 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 LEQEMBI collaboration and approximately $37 million in close-out costs related to the EMBARK trial for ADUHELM. Third quarter non-GAAP SG&A expense includes approximately $82 million related to our portion of the LEQEMBI 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 initiatives, partially offset by an increase in commercialization expense for LEQEMBI and ZURZUVAE 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 Reata 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 use to partially fund the Reata transaction. 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 Reata. Second is the regulatory approval for ZURZUVAE in postpartum depression. And the third is the modification that we made to our presentation of the LEQEMBI 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 LEQEMBI 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 Reata will be slightly dilutive to our 2023 non-GAAP EPS with an expected impact of approximately $0.75. Much of this impact comes from financing the transaction which affects our operating income and expense line, including incremental interest expense [Technical Difficulty] 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 Reata acquisition. And that will be largely offset by decreased spending for ZURZUVAE 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 Reata 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 $0.01 change in the euro versus the US 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 Reata and the regulatory approval for ZURZUVAE in PPD only, neither of which were included in our original assumption. The expected impact of Reata and ZURZUVAE 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 LEQEMBI 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. And 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 spend on ADUHELM through at least 2025. I'm going to now turn the call back to Chris for some closing remarks.

Chuck Triano :

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

Salveen Richter:

Just 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?

Operator:

And our next question comes from Brian Abrams from RBC Capital. We moved on next to Geoff Meacham from Bank of America.

Priya Singhal:

With regards to maintenance, what I can tell you is that Eisai has communicated that – as you know, we're getting 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.

Brian Abrahams:

Congrats on all the progress. So coming out of CTAD on subcu LEQEMBI, I realize FDA discussions are still to be had. But can you maybe help us understand your latest thinking as to what's likely to be required for approval? How much, if any, additional patient data do you think you might need to generate at 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 who are still seeing – flow through the trials there are still seeing exposure below the 125% upper bound?

Operator:

[Operator Instructions]. We're going to take our next question from Terence Flynn from Morgan Stanley. I apologize. We're next going to now go to Robyn Karnauskas from Truist Securities.

Christopher Viehbacher:

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

Christopher Viehbacher:

More broadly, I would say – I've heard many neurologists say we used to think of Alzheimer's disease as a four to eight year disease, largely beginning 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 remove the plaques, there seems to be 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 subcu formulation also becomes important. Because if we are thinking of people staying on drug for longer, and I'm certainly not suggesting 25 years, but this could be a much longer period, certainly than the 18 months, and therefore the convenience of a subcu formulation is even more important. So we are learning every day. I think we saw that at CTAD. 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 how we do more studies and develop different formulations. And it's actually quite exciting.

Umer Raffat:

I wanted to focus on lecanemab subcu. And, Priya, I think you mentioned two things. One that there's a subcu maintenance filing, which is separate, which could be in 2025. Could you confirm if the dose is lower if it's a single shot instead of two? And also, the FDA interactions on subcu that you mentioned, are they a follow up to previously agreed upon trial design for subcu? Or do you think you need clarity whether plaque reduction alone will suffice for filing?

Operator:

And next we'll go to Michael Yee with Jefferies.

Priya Singhal:

What I can tell you is that it's a very important part – the AHEAD 3-45 study is a very important part of the overall development plan for LEQEMBI as an anti-amyloid agent. And the reason for 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, 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 LEQEMBI, which is really the only one with traditional approval, is targeting mild cognitive impairment – patients with mild cognitive impairment as well as mild dementia. But these patients already have symptoms and potentially a burden of doubt. The purpose of AHEAD 3-45 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 LEQEMBI can alter the costs of disease. So that's really the overarching aim of a study like AHEAD 3-45. 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 Eisai 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.

Terence Flynn:

Just a two part for me. Just was wondering if you can provide any more detail on the breadth of prescribing for LEQEMBI? I know you give 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 some progress on the MAC coverage. Any more details on the timelines there for when we might get broader coverage at the MAC level? I know there's a couple of MACs already covering, but anything there would be helpful. Thank you.

Operator:

And next, we're going to go to Paul Matteis from Stifel.

Christopher Viehbacher:

The situation is a little heterogeneous. It's not quite the same situation in every center. But I would say, based on what we know today, I do think there's clearly, at the moment, the need to get an appointment with a neurologist. 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 be 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 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 how do I get reimbursement for it? Is it just one? And it was more the confusion around – so I think the clarity of that will just take one of the factors of discussion and time out of the process. There is just at each stage – if you send someone out for the PET scan, the scan has got to come back, it's been interpreted by a PET scan reader there, but sometimes a physician will want to have someone in that practice read that. And it's just connecting – sending the patient to all these different points, even if you're 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 actually 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.

Phil Nadeau:

I want to ask about the SKYCLARYS 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 a whole explanation? And generally, what's Biogen confidence that a positive CHMP opinion will be secured in the first half of 2024?

Chuck Triano :

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.

Operator:

Good morning. My name is Ruth and I'll 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 speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Today's conference is being recorded. At this time, I would now like to turn the conference over to Mr. Chuck Triano, Head of Investor Relations. Mr. Triano, you may begin your conference.

Christopher Viehbacher:

Thank you, Chuck. Good morning, everybody. I'd like to start off with LEQEMBI. And I think before we really get into all the interesting details of commercialization and competitiveness, I 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 full -- 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 is 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 Donepezil 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, you're going be discovering an awful lot and a lot of this is just not that predictable. I would, again just call out to, kudos to our colleagues at Eisai. Within a very short period of time, they were able to get the 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 one of the things have -- has become obvious is when we start looking at Donanemab and Lecanemab, 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. This is a -- these are different products. They have different mechanisms because they have different binding. They've been studied in different populations. They've been studied in -- with different clinical study design process -- 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 is 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 US. We did get full approval earlier this month and the CMS approval that has significance also for others. This is going to encourage a lot of other companies to be investing and research in blood diagnostics. It's also, as you know, going to be an unusual launch. There's is 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. An awful lot of change will have to occur in the practice. New practices on a day-to-day basis. There's an awful lot of education around safety and 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 a very good response from commercial insurers. So, I think the launch of the LEQEMBI is off to a very good start and we'll, of course, keep you up to date as we get further patients. Now, 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 would expect the level of investment to go down. But we have actually relatively high operating expenses when we benchmark versus other companies. Part of that is an over-investment 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 look at the R&D pipeline, 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 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 R&D programs. And as we looked at 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 has still 25% market share in multiple sclerosis. We have the highest market share by a considerable margin. And so there is -- there are an awful lot of patients who depend on Biogen products. I think we can do that smarter. There is a need obviously to have strong investment in our new product launches. It's important clearly to manage cost, but shareholder value, most optimized, if we can really make a success of these launches. We need to get decision-making closer to the 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 neuropsychiatry. 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 company you know successfully launched new 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, I'd say, a complete redesign of Biogen and that will lead to 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 were truly fit for growth. And with that, I will turn it over to Priya.

Michael McDonnell:

Thank you, Priya, and good morning, everyone. I'll provide some highlights and color regarding our financial performance for the second quarter and all of the financial comparisons that you will hear are versus the second quarter of 2022. Total revenue for the second quarter was $2.5 billion, that's a decrease of 5% at actual currency and 3% at constant currency. Non-GAAP diluted earnings per share in the second quarter was $4.02. Total MS Products revenue was $1.2 billion, that's a decrease of 15% at actual currency and 14% at constant currency. So a few recent updates to the MS business this quarter. First, the decline in MS in the second quarter was attributable to generic entrants for TECFIDERA and broad competition in the MS market. We did not see much in the way of channel dynamics during the second quarter. Second, as we did announce previously, TECFIDERA's regulatory market protection in the EU was extended by one additional year until February 2nd of 2025. Some of the TECFIDERA generics have not yet fully exited some of the EU markets, and some generic products remain in the channel. The pace of generic withdrawal has been slower than we expected and we're closely monitoring the situation and working to enforce our legal right-to-market protection. Regarding TYSABRI, we have previously said that there may be a TYSABRI biosimilar launch in the US and EU sometime later in 2023. We are aware of the positive CHMP opinion for the TYSABRI biosimilar in the EU last week. And while we have not seen any biosimilar launches so far, we could see an approval and launch in the coming months. Moving on now to SMA. Global SPINRAZA revenue of $437 million increased 1% at actual currency and 5% at constant currency. SPINRAZA growth in the US was 12% and that was driven by patient growth. We were encouraged by the performance this past quarter and believe we are making good progress against our goal of returning SPINRAZA to consistent growth. Also as Priya mentioned, we are continuing to generate data to support the efficacy profile of SPINRAZA. And we believe that this along with the expected overall market expansion should help enable continued improved performance for SPINRAZA. Biosimilars revenue of $195 million was flat at actual currency and increased 4% at constant currency. We are continuing to manage supply constraints for IMRALDI and BENEPALI, and are monitoring this situation very closely. We've referenced previously that we are evaluating whether this business could create more value outside of Biogen and we are engaged with multiple interested parties and we'll provide further updates on that process as appropriate. Alzheimer's disease revenue, which includes revenue from ADUHELM and the LEQEMBI collaboration equated to a headwind of $20 million to revenue during the second quarter. As a reminder, LEQEMBI revenue represents our 50% of end-market revenue less 50% of commercialization expenses. We expect this line to continue to be negative in 2023 as the ramping of LEQEMBI commercialization expenses will exceed initial revenue. Total anti-CD20 revenue of $433 million was down 1% and included a $12 million operating loss related to LUNSUMIO. As a reminder, starting this quarter, our pre-tax profit share on RITUXAN, GAZYVA, and LUNSUMIO decreased from 37.5% to 35%. And that's due to the achievement of certain sales targets for GAZYVA as part of our contractual agreement with Genentech. Contract manufacturing, royalty, and other revenue of $198 million was notably higher year-over-year, and that was driven mainly by the timing of batches. A couple of details regarding Q2 expenses. For the second quarter, non-GAAP cost of sales was 24% of total revenue and that includes $34 million of idle capacity charges. We continue to see higher-cost of sales as a percentage of revenue as a result of product mix and idle capacity charges, and in particular, the increases that we're seeing in contract manufacturing revenue increases our overall cost of sales as a percentage of revenue. So in terms of modeling for the remainder of 2023, I'd offer that we believe contract manufacturing revenue will remain strong and will contribute to a higher cost of sales as a percentage of revenue for the remainder of this year as compared to the 24.1% that we saw in the second quarter. Second quarter non-GAAP R&D expense includes roughly $13 million in estimated study closeout costs related to BIIB093. As Priya mentioned, we are now substantially complete with our R&D prioritization. We estimate that this will result in gross savings of approximately $250 million next year. So this will be partially offset by natural increases in R&D due to portfolio progression. The decrease in second quarter SG&A expense was attributed to roughly $70 million of savings initiatives and that was partially offset by approximately $35 million of reinvestments mostly related to launch costs. We continue to expect our operating expenses to be lower in the second half of the year than in the first half as we complete the run-rate savings from our previously announced cost initiatives as well as a modest impact from our new fit-for-growth initiative. So now I'd like to take a minute to provide a little bit of additional detail on our new fit-for-growth program. This program will include changes to our operating model with a significant reduction of certain centralized functions. A substantial portion of the $700 million of net annual OpEx savings are expected to come from a net headcount reduction of approximately 1,000, which we expect to right-size the company with our business plan and enable us to return to sustainable growth. I would reiterate that the OpEx savings shown here are on an annualized basis. We believe that this is an efficient program with 70% of our expected gross OpEx savings to be realized as net savings. All-in, we expect a very modest impact on 2023 expenses and believe the net OpEx savings will be split roughly equally between 2024 and 2025. And all of these savings are incremental to any previously announced cost reduction programs. A few quick comments on our balance sheet, including the approximately $813 million that we received during the quarter related to the sale of our equity stake in Samsung Bioepis. We ended the quarter with $7.3 billion in cash and marketable securities. On June 30th, we had $6.3 billion in debt and that puts us in a net cash position of roughly $1 billion. We continue to generate steady, positive cash flow from operations with free cash flow of $416 million during the second quarter. And finally, now let me turn to our financial guidance for full year 2023. The business remains on track with our forecast for the full year. And today, we are reaffirming our full-year guidance of a full-year 2023 revenue decline in the mid-single-digit percentage range as compared to 2022 reported results and full-year 2023 non-GAAP diluted earnings per share of between $15 and $16. And you can refer to our press release for other important guidance assumptions. So now I'll turn it back over to Chris for a few closing comments.

Chuck Triano:

Thanks, Chris. Operator, can we please poll for questions?

Brian Abrahams:

Hey. Good morning, guys. Thanks so much for taking my question and congrats on all the developments. So we recently saw some competitor data at a medical conference. And I guess I'm curious, as you've seen things evolve here, what are the most important learnings that you've been taking away on the overall beta-amyloid class efficacy and safety profiles? And can you maybe expand a little bit more on your latest views on how you expect the competitive dynamics to play out in this space and the impact to your overall launch strategy? Thanks.

Chuck Triano:

Thanks, Chris. All right, can we poll for next question, please?

Marc Goodman:

Yes, good morning. Mike just to make sure we're aligned here with the numbers in the cost savings. So OpEx, $4.5 billion for 2023. So we should be thinking $3.8 billion in 2025. And then how do we get there with respect to SG&A and R&D? Is this -- are they about even. I mean is R&D going to move below the $2 billion line? Just help us give us a sense of that? And maybe just as you talk about the P&L, just comment on, do you expect gross margins to be higher or lower in kind of those years, just to help us think about how the P&L is going to look. Thanks.

Chuck Triano:

Thanks, Mike. Can we go to our next question, please?

Robyn Karnauskas:

Hi. Thanks for taking my question. I guess, I would just be curious initially as you're talking to doctors about if there is a difference between the academic community -- and the community setting and interest in using the drug and coordinating that. Can you give us more details as to how laborious and how easy the CMS registry, now that it's up and running, is there more questions they're asking? Thanks.

Chuck Triano:

Thanks, Chris. Next question please, operator.

Mohit Bansal:

Great. Thank you very much for taking my question. And maybe a question for Priya. So when you think about subcutaneous LEQEMBI and you'll see the data later this year. But how do you think about positioning it? Is it -- do you think it is more of a maintenance treatment after the IV LEQEMBI versus an induction kind of treatment? And how important is Cmax to get an induction approval here? Super helpful. Thank you.

Chuck Triano:

Thanks, Priya. Next question, please.

Umer Raffat:

Hi, guys. Thanks for taking my question. I feel like there's an elephant in the room and I do think we should speak to it. And Chris, this one is for you specifically. And the question really is, investors are very curious, what was your thought process on two specific occasions in the last few weeks? First, when you were first told about the proposed changes to the Board, what was your thought process? And second, what was your thought process in deciding whether or not you needed to put out any disclosures?

Chuck Triano:

Thank you, Chris. Can we move to our next question, please?

Salveen Richter:

Thank you, good morning. How is the fit-for-growth and your cost alignment work influenced your thoughts on M&A and BD? And you've noted the three disease areas, but can you just provide some thoughts on the value proposition across the areas? Any limits with regard to size of the deal and the use of equity? Thank you.

Chuck Triano:

And that limits the size or use of equity. It's part of the question, Chris.

Chuck Triano:

Great. Next question, please.

Michael Yee:

Hey, guys. Thank you. Just wanted to ask on the zuranolone program. Obviously, you have PDUFA date coming up. But Chris, you've made some pretty bullish comments on this before. Maybe right-size your expectations about how to think about that opportunity and whether there could be a split label? And importantly, since you're talking about cost cutting, how a positive approval or maybe some various form of two different indications could impact expenses going forward? So just talk a little bit about zuranolone. Thank you.

Chuck Triano:

Thanks, Chris. Can we move to our next question, please?

Tim Anderson:

Thank you. I know that Biogen and Eisai continue to talk up the need to dose Alzheimer's drugs or LEQEMBI specifically, chronically and not just for a finite period. And you're talking about protofibril and how they're the most neurotoxic species and that sort of thing. From what I understand, the science is really thin that says you need to dose chronically in less soluble forms of A beta to really make a difference in terms of continued disease progression. And empirically, if we just look at what came out of AAIC, we see a similar level of reduction and improvement in cognition with finite dosing with Donanemab and we see continued curve separation with Lilly's product and your product. So doesn't that potentially call into question the need for chronic dosing? And isn't that possibly a risk with LEQEMBI, that docs actually only use it until plaque is cleared and then they stop, which would lead to a very different revenue opportunity for LEQEMBI? Thank you.

Priya Singhal:

Thank you for the question. Yes. So this is a very important area of query and scientific hypothesis. So maybe before I really talk about LEQEMBI or Donanemab, we can agree that Alzheimer's disease is really a progressive and eventually fatal condition with obviously neurodegeneration involved along the way. And what we've seen with LEQEMBI and actually multiple lines of evidence outside of LEQEMBI, also with aducanumab in the past, is that when you clear plaque, it does not re-accumulate that easily. But what you do see is progression of disease and you see an impact on the fluid biomarkers. So with LEQEMBI and with the gap period that we had in Phase 2, we saw an increase -- a reversion of the A beta 42:40 ratio, implying the disease continued to progress. We saw very similar evidence with aducanumab. And I think what we see now with the plasma p-Tau levels, in the past, we saw with aducanumab sort of decreasing with the EMERGE data set. And with LEQEMBI, what we've seen with p-Tau181 is a stabilization. And actually, if you saw the Donanemab data on p-217, which was the plasma tau biomarker they used, and these track really quite closely is that you see a slight increase. So I think we still need to understand with more data transparency, the Donanemab data of what really happens to patients who stopped at six months or stopped at one year. And we hope we'll see more of that data from their open-label extension and be able to draw conclusions. But when you look at the substrate for Donanemab, it really does not make sense to continue to dose. One, because of substrate exhaustion and two, because of the presence of antidrug antibodies, close to about 84% to 87%. Whereas with LEQEMBI, you have the opportunity to have an individualized treatment duration discussion between the patient and the doctor because actually, it continues to impact soluble substrate, as Chris mentioned, and we are going to be generating data to actually look at this in a very systematic way with the Phase 1 open-label extension. So I think that the jury is out but the multiple lines of evidence do not seem to indicate that you can stop and reverse Alzheimer's disease. So that's where I'll leave it. Thank you.

Operator:

Yes, sir. We'll go next to Evan Seigerman with BMO.

Christopher Viehbacher:

Well, it's quite interesting. You see today, when I talk to bankers, it's interesting. I think if you've got something that has really good data that, there tends to be a price for that, and that price is more or less constant. I was asking bankers, do you think Merck would have had to pay even more for Prometheus, for instance two, three -- two years ago when that's kind of the go-go days of biotech, and their view is no. And so, I think if you find quality assets out there and that really doesn't vary that much. What does vary is all the other stuff, right? We got a little bit more interest in more speculative things and that's what really sort of says, well, are things relatively expensive or not? And as a company, I think I always like to say, our investors (Technical Difficulty) to make them rich and not someone else's shareholders. So if you're going to do a deal, you have to make sure that there is value creation for Biogen and its shareholders. And that's a hard thing. And we all know that a lot of BD doesn't do that. The way I look at Biogen, we've got -- had now the decision on LEQEMBI. We have a pending decision at the FDA for zuranolone, we've got pending decisions for LEQEMBI around the world. If you look at Biogen over the next two, three years, there's an opportunity for a return to growth over that time frame. I think we are making some bold moves here to address our cost base and really reposition our resources in the company. And we have, I think, some super interesting products in our research and development pipeline that Priya mentioned. So if you look at it, we already have a value-creation story. So anything that we're going to do has to be accretive to that picture. And you do have to go look, and you're going to have to go look at hundred things before you find something that really works, and that's what our teams are doing. The worst thing you can do is fall in love with something because then you lose the -- you lose your objectivity. I can tell you that we are laser-focused on changing the trajectory of our share price, as I've heard from so many investors, our share price hasn't really moved in 10 years. So that's where we are focused on really driving -- being much more focused on shareholder value and that means allocating capital in a way that's commensurate with that.

Operator:

The next question comes from Ami Fadia with Needham.

Christopher Viehbacher:

I missed part of that sentence about -- does that mean on the BD that we would not do something and I couldn't -- I didn't. Could you repeat the question?

Christopher Viehbacher:

Well, I think we have enough heavy lifting in R&D, to be honest. So I'm certainly looking at things that I think -- to me, it's less around the expenditure as how much risk you're taking. What I find hard is when we have a multiyear, five-year type Phase 3 study that's essentially a proof-of-concept. That's, I think, what we're really trying to move away from. Now what I would say though is, we are clearly benchmarking. And I really want us to be rigorous on G&A. I want us to be competitive on the sales and marketing. On R&D, I want us to be super disciplined on capital. But I would say all the benchmarking we've done is that Biogen has actually been better than average on productivity. And I do believe greatly in a lot of the capability within Biogen. And so, I do think if there are things that really make sense, I actually have a higher degree of trust in our R&D organization that I think that we should continue to invest in R&D. The really important thing is that you really -- the think secret about R&D is you have to design a killer experiment, define what the criteria are for moving into the next stage and don't allocate capital unless you really meet those data. The problem in a lot of organizations is we fall in love with something. The data aren't quite clear, but we'll go and keep going because we have it. And I think the discipline to kill stuff that doesn't meet its milestones is something that is probably more important than anything else to managing R&D investments. And that's why I'm grateful to have Priya because I think Priya is extremely objective on this. We all are. But again, I do think that we are an innovative company. And I wouldn't want to restrict too much Biogen's ability to invest in R&D over time, but we're going to be extremely tough on what it is that we're going to choose to develop.

Chuck Triano:

Great. Thanks, Mike. Next question, please?

Brian Skorney:

Hey, good morning, everyone. Thank you for taking my questions. Really just had one, you guys had a role in developing both LEQEMBI and ADUHELM. And one of the things that seems to be jumping out as sort of the differential profile of these drugs in terms of ARIA rates. But seeing as those differences despite very similar platform. So I guess there's a lot of speculation and maybe remains a lot of uncertainty as for the underlying mechanism. But any -- anything you can say in terms of sort of your thought process about how much of this may be is sort of subspecies target driven? How much of it may just be sort of a matter of PK? I mean, it seems like the comments on subcu indicate at least some of it may be Cmax driven. But just how are you guys currently thinking about the mechanism underpinning ARIA?

Christopher Viehbacher:

One of the things, Priya and I had was -- so Robin Kramer and Priya over the weekend after this super interesting paper about all that happened at AAIC and the differences. And the thing that struck me is just really how complex this is and how -- how much there is to really analyze and understand. But one of the things that struck me was that there is a difference in safety not just in the broad population but we see that in every subgroup too.

Christopher Viehbacher:

I mean looking at the ApoE group, heterozygous, homozygous is a difference. And if these drugs were similar, you wouldn't expect such a dramatic difference. I mean we're talking about in some subgroups, it can be as much as 3:1 ratio on the safety. And that's why I think we're going to spend an awful lot more time analyzing what's really going on here. And that's what I said at the outset. We're really just at the start of this. There's still so much we don't know, but this is going to generate an awful lot of research and we're going to start digging into this and understanding all of these different subtleties that are there. But I think these differences are going to be quite important. As Priya said, the jury is still out on that, but we have an awful lot of signs about what's really going on here. And that's why as a company, as Biogen, we don't see the launch of LEQEMBI as the end to our commitment to Alzheimer's. As Priya pointed out, we have other programs in Alzheimer's and we're going to be continuing to do research because it is really our ambition to be along with our partners, Eisai, the absolute leader in what we think is going to be an extremely significant market.

Operator:

Next question comes from Chris Schott with JPMorgan.

Christopher Viehbacher:

Well, as to what you anticipate it's kind of hard, as I say, this is only the second time in my career where I've actually seen a brand-new therapeutic area actually open up. And so, when you think about Alzheimer's patients and visiting neurologists, beyond cognitive tests and as I say, perhaps prescribing the anti-cholinergic like donepezil, hasn't really been much to do. And now we do have a treatment. And this is going to upend a lot of the processes within neurology practices. It's extremely exciting. But really, the uptake is geared on how prepared are the sites. And this is variable around the country. You've had some sites. Obviously, they've been involved in clinical trials. Some of them have different patient populations and we see that some sites are quite advanced and are ready to go. Some sites have been more in a wait-and-see mode, but I think are all ramping up. One of the things that we have been doing is -- is really trying to figure out where are the sites that are really ready and actually deploying our resources to those sites with -- then a secondary type of approach to sites that aren't quite ready and helping them. So -- so it all depends on really how advanced the sites are, how ready they are that it's really going to define the uptake. And that's why we have to target our resources to that and really assess the site activation if you like. But so far, we're getting a lot of positive feedback. Physicians are getting a lot of inquiries from patients. I think they will have to figure out exactly what's the right patient for this and that's where we have to do a lot of education. And we have these online programs and other programs to help educate physicians. There's a significant amount. I mean you just talk about what we've been talking about in terms of these protofibrils, about the different patient populations, all of those things are going to engage the whole neurology community here. But so far, everything is -- as far as we're concerned, the launch is going to plan.

Operator:

Yes. Our last question comes from Paul Matteis with Stifel.

Christopher Viehbacher:

Look, we're in late-stage review. So I think it's pretty normal that we don't want to disturb that process. And we obviously don't want to say anything that affects the FDA. I have to confess to a little bit of superstitiousness on my side. And I just -- I'd like to see the FDA decision and then we'll be happy to talk lots about it. But the opportunity is huge out there, Paul.

Operator:

This does conclude today's conference call. Thank you for your participation. You may now disconnect.

Operator:

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 speakers' remarks, there will be a question-and-answer session. [Operator Instructions] 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.

Christopher Viehbacher:

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 LEQEMBI in Alzheimer's disease and Zuranolone in both MDD and PPD. And I'm going to cover that on the next slide because it'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 to take -- taking to improve the risk profile of 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. That -- those billion dollars have been secured and have been -- that program is complete. But over the last several months, I have 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. We kicked in early 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 costs. 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 Zuranolone for few years outside of the US. Zuranolone is clearly a top priority in the short-term in the US. And outside the US, we're going to be certainly focused on the LEQEMBI 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 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 is a balancing act as we tried to shift our resources behind the growth opportunities while still supporting our historic MS business. And so we're taking a -- 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 is 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. 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 LEQEMBI and Zuranolone. So on the base business, the idea is how do we manage that business as profitably as we can. We did receive a favourable decision from the Court of Justice of the European Union related to TECFIDERA 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 will take a little time for the market to settle. And separately, we also continue to enforce our 2028 patent for TECFIDERA in the EU. We're also looking to aim to -- we're looking to maximize the profitability of the MS franchise. Up until now, the goal has been to defend revenue at all cost. I think now we want to take a little bit more of a nuanced approach of looking at where the opportunities in MS, where do we have intellectual property, where do we have still sales promotion sensitivity and tried to align our resources with that and perhaps 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 up there in the marketplace, gene therapy has 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 who is the -- and how is the best way to manage this business and who might be the best owner of that business. On external growth, 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 Tofersen. And, of course, we're in neuropsychiatry with Zuranolone. So these offer opportunities to think about how do we build out some of those franchises. Yeah, there is, no, 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 making sure that that transition is as smooth as possible from a results point of view. And I'm pleased to say that we have 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 a Biotech. So I think he's got some entrepreneurial spirit that will be very welcomed at Biogen. We do see LEQEMBI and Zuranolone as major contributors to revenue, but we want to continue to think about business development to support the growth trajectory and diversified as I said. So if I could have the next slide please. So we really got an unprecedented opportunity. We have today a PDUFA date for Tofersen. We have a PDUFA date on July for LEQEMBI and a PDUFA date in August for Zuranolone. 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 different areas. Obviously, LEQEMBI is little closer to home, since it's still in neurologist, but there's an awful lot of market building we will have to be done there. And, of course, Zuranolone takes us into a much different area and a much different position franchise. But we're making our milestones. We received accelerated approval in the US back in January. We filed for traditional approval in the US on the same day and within the EU, Japan and Eisai initiated regulatory filing in China. Filing all of those dossiers in that kind of timeframe is really quite significant and I have to congratulate our colleagues at Eisai for this effort. These filings have received priority review in the US, Japan and China. And, of course, a major milestone in that Veterans Health Administration has decided to reimburse LEQEMBI. Now, LEQEMBI 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, lumbar puncture for amyloid confirmation, specialists who are already busy, MRI imaging, bi-weekly 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 are 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. Eisai and Biogen are pursuing maintenance dosing in the subcu 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, 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 Neurologist has written in support. And I know that a number of patient advocacy groups are active and ensuring that patients have access to this important therapy. So Eisai 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 Zuranolone just for a few minutes. I mean, Zuranolone is still I think an underestimated asset in our portfolio. Unfortunately, a lot of people suffered 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. And Zuranolone 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 analogue 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 the launch that you look for is when the NRxs switched to TRxs. Well, we're not going to see that. They are not going to be TRxs with the product. So I think there are these changes in physician behaviour. This is a paradigm shift and paradigm shift is not always a good thing in pharmaceutical 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, well, it's efficacious, it works fast. And think about the freedom of knowing that after two weeks that you can stop taking Zuranolone. So I think that is going to be an enormous opportunity. And I'll just finish with Tofersen on this, it is not a big product obviously, about 300 patients. But it's classic Biogen. There is a -- we have a long history in ALS, lot of setbacks. But the organization has an ability to learn and adapt and Biogen was able to partner with the scientific community to help characterize neurofilament as a biomarker in 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 ground-breaking 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 LEQEMBI. We should hopefully have the PDUFA date behind us successfully. Hopefully, we've received a traditional approval and broader CMS coverage in the US. 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-US approval of LEQEMBI in Japan and hopefully we'll have received the approval for Zuranolone 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 -- by the time -- this time next year, I think we have an opportunity to build a global footprint of LEQEMBI with approvals in Europe and China. And, of course, we'll take the next steps on evolving the treatment paradigm with Alzheimer's disease with an expected regulatory filing of LEQEMBI maintenance dosing. We would also expect regulatory filings for subcutaneous dosing, which could facilitate at-home administration. So in conclusion, through a combination of ground breaking of sign, 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 turn it over to Priya for an update on our progress in R&D.

Michael McDonnell:

Thank you, Priya. Good morning, everyone. So I'll provide some highlights of our financial performance for the first quarter and please note that all financial comparisons that you will hear are versus the first quarter of 2022. Total revenue for the first quarter was $2.5 billion and that's a decrease of 3% at actual currency and flat at constant currency. Non-GAAP diluted earnings per share in the first quarter was $3.40, a decrease of 6%. Total MS product revenue was $1.1 billion, a decrease of 19% at actual currency and 17% at constant currency. I'd like to provide a few points here regarding MS during the quarter. In the U.S., we continue to see the impact of TECFIDERA generics declines in the interferons and competition for TYSABRI. As we noted in our last call, Q1 is typically a seasonally weaker quarter for our MS business in the U.S., and that's driven by higher discounts and allowances and some channel dynamics. And as it relates to channel dynamics, we did see a greater-than-expected decrease in channel inventory which added a few percentage points to the overall global decline. And we believe this is likely related to tighter working capital management in wholesalers and specialty pharmacies, due to the rising interest rate environment. In addition, VUMERITY is being impacted by both pricing pressure and a contraction of the oral segment of the market in the U.S. And as a reminder, in Q1 of last year, VUMERITY did benefit from a favourable Medicaid-related sales adjustment which also impacts the year-over-year comparison. As far as Europe, as you know, we received a favourable decision relating to the TECFIDERA regulatory data and marketing protection in the EU and that was assumed in our guidance. So we believe that TECFIDERA is entitled to regulatory marketing protection in EU until at least February of 2024 and we are working to enforce this protection. I would add that we did expect it would take some time following the decision for all generic products to be off the market and we are assuming that this exit will accelerate in the near term. Separately, we continue to enforce our patent which expires in 2028. So as we look toward the remainder of the year, we do expect to see a slower rate of decline on a year-over-year basis versus what we saw in Q1. We've taken some actions which aim to improve the underlying revenue trajectory for our MS portfolio in the second half, including for VUMERITY in the U.S., and we're continuing to closely monitor the underlying market dynamics in MS closely. Moving to SMA. Global SPINRAZA revenue of $443 million was a decrease of 6% in actual currency and 2% at constant currency. In the U.S., SPINRAZA revenue decreased 10% due to fewer new patient starts and some channel dynamics as compared to the first quarter of last year. However, we do continue to see what we believe are signs of stabilization in our patient base. Outside the U.S., revenue for SPINRAZA decreased 4% at actual currency and increased 2% at constant currency with competition more than offset by the timing of shipments in certain markets. Biosimilars revenue was $192 million, and that's a decline of 1% at actual currency and an increase of 4% at constant currency and that's due to volume growth driven by the launch of our BYOOVIZ product partially offset by continued pricing pressure for our anti-TNF products in Europe. Alzheimer's disease revenue, which includes revenue from ADUHELM and the LEQEMBI collaboration equated to a headwind of $18 million to revenue. As a reminder, beginning this quarter, our share of LEQEMBI commercial expenses in the U.S. is recorded as a component of revenue, thus the negative number this quarter. And for this line item, we expect this to continue to be negative in 2023 as ramping LEQEMBI commercialization expenses throughout the year are expected to exceed initial revenue. Total anti-CD20 revenue of $399 million was flat. Revenue from OCREVUS royalties increased 12%, which was partially offset by a 25% decline in revenue from our profit share on RITUXAN, and that was driven by biosimilar competition. The anti-CD20 revenue line also included a $10 million operating loss related to LUNSUMIO. I'd note that our R&D expense for LUNSUMIO is also recorded as a component of the anti-CD20 revenue line. Important to note that starting in the second quarter, our pre-tax profit share percentage on RITUXAN, GAZYVA and LUNSUMIO will decrease from 37.5% to 35% and that [Technical Difficulty] sales targets for GAZYVA as part of our contractual agreement with Genentech. Contract manufacturing royalty and other revenue of $319 million benefited from the timing of production of some contract manufacturing batches which includes LEQEMBI. While this line tends to vary from quarter-to-quarter, we do not expect this level of contract manufacturing revenue to continue throughout the remainder of 2023. A couple of details regarding Q1 expenses. For the first quarter, non-GAAP cost of sales was $663 million or 27% of revenue. This includes $45 million of idle capacity charges which Eisai no longer shares. During Q1, we did see pressure on cost of sales associated with product mix. We saw increased contract manufacturing revenue which has a higher cost of sales including manufacturing revenue for LEQEMBI which is at minimal gross margin. We continue to expect our cost of sales as a percentage of revenue for the remainder of the year to be higher than the 22.4% that we saw for full year of 2022 and that's primarily as a result of product mix and idle capacity charges. First quarter non-GAAP R&D expense was $571 million and that compares to $552 million in the first quarter of last year. Non-GAAP SG&A was $603 million and this compares to $635 million in the first quarter of 2022. The decrease in non-GAAP SG&A expense was driven primarily by cost savings initiatives which importantly were partially offset by investments to support new product launches and $31 million related to the termination of the co-promotion agreement with Eisai to Biogen's MS products in Japan. We continue to expect operating expenses to be lower in the second half of 2023 than in the first half. And as Chris mentioned, separate from the previously announced $1 billion cost savings initiative, we have initiated our fit-for-growth program in order to align our cost base with expected revenue while also investing in our growth opportunities. And we expect this program to have a modest impact on 2023 expenses and a more meaningful impact in 2024 and beyond and we'll have more to say about this on our second quarter earnings call. As for our balance sheet, we ended the quarter with $6 billion in cash and marketable securities, $6.3 billion in debt and roughly $300 million in net debt. Subsequent to the end of the quarter, we received approximately $813 million related to the sale of our equity stake in Samsung Bioepis, which is not included in these cash figures. And this payment is the second payment related to this transaction which closed around this time last year and we're expecting a third payment of approximately $438 million in April of 2024. In the first quarter, we generated $455 million in cash flow from operations. CapEx was $67 million. Free cash flow was $389 million. So overall, we remain in a very strong financial position with significant cash and financial capacity to invest in growing the business over time. Let me now turn to financial guidance for full year 2023. We are reaffirming our full year guidance of a full year 2023 revenue decline in the mid-single-digit percentage range as compared to 2022 reported results and full year 2023 non-GAAP diluted earnings per share of between $15 and $16 and I would refer you to our press release for other important guidance assumptions. So in closing, Biogen continued to make strong progress against our business priorities in the first quarter. We remain focused on three potential launches in 2023 while continuing to be diligent in prioritizing our R&D pipeline, optimizing our operating model and also evaluating external opportunities. We expect that execution of these priorities will position us well for returning Biogen to sustainable growth and creating long-term value for our shareholders. And with that we will now open the call for questions.

Phil Nadeau:

Good morning. Thanks for taking our question. Our question is on LEQEMBI reimbursement. What is Biogen's expectation for reimbursement post full approval? Do you expect coverage with evidence development or some other form? And second, when do you think that will be clear? CMS has suggested that the coverage will be revised on the day of approval. Is that going to be the final determination or will there be subsequent revisions after that? Thank you.

Christopher Viehbacher:

Yes. I hope if I got off mute. Yes, thanks, Phil. Nothing really new to report there, at least as far as CMS. CMS has said that following full approval that they will be making sure that the product is broadly available. I think there will be a question of existing registry, what type of registry, is there a cap on the registry that hasn't been defined at the moment. I think what really is encouraging is that we're seeing an awful lot of support being mustered and encouragement of CMS to reimburse. As I noted earlier, the American Association of neurologists has come out strongly in favour. As a reminder, they sided more with CMS at the time of ADUHELM. So this is a change in position. Over twice as many members of Congress have written to CMS and did for ADUHELM. And some of you may have been following the budget discussions in Washington and Congress with also an encouragement for CMS to make the product available. So we continue to believe that the product will be made available. We would hope that it's not with a registry. There's no real need for a registry. And we don't really see why this product wouldn't be reimbursed like any other product for Medicare. But we're probably not going to see anything until after the PDUFA date.

Paul Matteis:

Thanks so much for taking my question. I wanted to follow up a little bit more on external investments as it relates to reshaping your pipeline. Chris, you've outlined rare disease, psychiatry and immunology historically. It would seem like if you're going to decrease the risk profile of your R&D strategy that immunology and rare would be more on the developmental side, whereas for a psychiatry asset you want something that was either clinically de-risked or commercial. Is that the right way to think about it? And what's your appetite today for transacting before shoring up everything in-house? Thank you.

Operator:

We will now take a question from Geoff Meacham of Bank of America.

Christopher Viehbacher:

Priya?

Christopher Viehbacher:

If I could just follow up on that though, I think, Priya, I mean this is -- Priya noted that we've been through the pipeline and we have deprioritized some programs. But that's not just in an effort to reduce cost, it's really to be able to focus resources on those assets that we think are most promising. I can tell you, following the announcement of these results in Sweden and then also publication of the article in Nature. There's been a lot of attention on BIIB080 particularly from neurology community. And I think this is one of those assets that we really want to focus on. We've actually already allocated more resources to accelerate this program. And as Priya said, this is really one of the first manifestations of what it means to build a leadership position in Alzheimer's as opposed to just launching one product in this space. So most complex diseases do end up being combination therapies and there is some likelihood that will be the case in Alzheimer's. And to your point, I think Biogen is pretty well placed in that regard. And we're certainly getting even external interest in this program.

Salveen Richter:

Good morning. Thanks for taking question. On LEQEMBI, could you discuss your strategy here with respect to infrastructure, particularly infusion centers and testing post a potential full approval and assuming broad coverage by CMS?

Operator:

We will now take a question from Umer Raffat of Evercore.

Christopher Viehbacher:

Thanks, Umer. Mike, do you want to take the first part of the question, and I'll talk about the commercial infrastructure statement.

Christopher Viehbacher:

Yes. Thanks, Mike. Just in terms of relationship, I was in Japan last week and the CEO of Eisai and I had dinner. And I think our view is that the relationship and the partnership is actually working pretty effectively around the world. And as I said earlier, and I've said on a number of occasions, this is not a reach and frequency launch. So let's not think about the fact that we're just sending reps out and then that's going to have some impact directly on sales. There's an awful lot of certainly education that's being done. We actually -- Eisai has already reps out there in the field in the U.S. We, as Biogen, will likely -- will add reps in the -- at some point in the future, perhaps as early as next year, once reimbursement situation is known and the capacity increases. As I say, one of the lessons that we have to learn is that you don't want to get ahead of that. This is -- the initial launch period is going to be really one that's constrained by the capacity. And so there's an awful lot of work working with the neurology community, educate how you diagnose the patient, the whole process in a practice of -- when do you get the PET scan or the lumbar puncture, when are the -- how do you schedule the MRIs, getting the reimbursement, understanding where the infusion centers are. So it's a pretty high touch sell and customer relations at the start. I would say there's an initial investment, there'll be a second wave of investment once the CMS decision is known and then probably a third wave of investment as the capacity builds and the patient numbers increase.

Alice Nettleton:

Hi. Thank you for taking our question. This is Alice Nettleton on for Tim Anderson. Just on Alzheimer's, so we're wondering what is Biogen's working assumption on how the profile of Lilly's Donanemab will look relative to LEQEMBI. Past data would suggest it would be less safe with efficacy about the same. Is that how Biogen views the most likely outcome? Thank you.

Operator:

We will now take a question from Michael Yee of Jefferies. Please go ahead.

Christopher Viehbacher:

Yes, I wish I could give you some more guidance on that. As I'd like to say, I'm pretty confident in the three to five year outlook. The next 18 months are a little more difficult to model even for us. There is an awful lot of interest. There probably will be some queuing. There is going to be a question around the -- how quickly can the system flex. The way I would think about it is and the way I look at Biogen is I think Zuranolone actually is a product that can actually contribute faster to our sales growth in 2024. And I do think that one, yes, it's a paradigm shift, but there's a clear patient benefit and we don't have all of the infrastructure challenges to overcome. So to me, I look to more to the impact of Zuranolone next year. And the -- we'll be able to give a lot better idea by the end of this year once we see what's the initial take-off in the first six months once CMS issues its reimbursement.

Robyn Karnauskas:

Hi. Thanks for taking my question and all the colors has been very helpful. So just on if there is a registry, can you just talk to if you would foresee a registry being how much of a bottleneck it might create? How might it be paid for? And so help us, when we see that decision, understand what the challenges would be or it may not be as cumbersome as some might think? Thanks.

Operator:

We will now take a question from Marc Goodman of SVB Securities.

Priya Singhal:

Sure. So the way we've thought about these decisions is really we're looking at every program in great depth and several times over and thinking about what are the options, what are the operational and strategic and regulatory challenges, but also opportunities. And so really, it's an integrated view of where we believe that our resources would be better applied to other programs in our portfolio currently. That is, I would say, the common denominator across all the divisions that you're hearing from us today. We believe that we should be spending time elsewhere. Now having said that, you said the BIIB093 is in Phase III. I can't really comment on what might be the outcome. But for now, we are really discontinuing development.

Terence Flynn:

Great. Thanks so much for taking the question. Maybe a follow-up for Chris on Zuranolone. I think during your prepared remarks, you noted that this asset is underestimated. And based on your answer to the prior question, it sounds like potentially you think there could be some upside to numbers. So should we read that as -- is that the takeaway, that you think there's upside out of your consensus estimates here for that asset? And then just any update on the commercial footprint in terms of the build and what that might ultimately look like over time? Thank you.

Operator:

Our next question comes from Jay Olson of Oppenheimer.

Christopher Viehbacher:

Mike, do you want to take that one?

Christopher Viehbacher:

We know you all have other calls to get to, so operator, can we please take one more question.

Colin Bristow:

Hey, good morning, and thanks for squeezing me in. And also welcome, Chuck. We're excited to be working with you again. On subcut LEQEMBI, what does FDA specifically said is required for approval? And then can you just speak to how important the subcut formulation is to the commercial story? What proportion of patients would it allow you access to the infusion or not? And then just a sort of a subpart on the commercial part. The VHA is excluding APOE4 homozygous. Can you just speak to the risk that you see either as a labeling or commercial risk on full approval as access broadens? Thank you.

Michael McDonnell:

Yes. I mean I think on -- go ahead, Chris.

Michael McDonnell:

Yes. No, I was going to say on the commercial view of subcutaneous, this will be kind of ground-breaking and then we'll have to see how that plays out over time as patients with Alzheimer's along with their caretakers are maybe moving to more of a maintenance mode for their treatment. This could be something that could be very valuable and particularly for patients who have a distance to travel to get to an infusion center to be able to self-administer at home and something that we think could have a lot of potential. So more to come on that over time. We'll expect to hear more about it over the next nine or so months and we think it could be an important differentiator if it comes together.

Christopher Viehbacher:

I was just going to add, Chuck, we don't really see that the biweekly infusion as being a limiter right now for that [indiscernible] infusion. But it does, as Mike said, as we think about if we are able to get a maintenance indication and we are able to get blood diagnostics, the length of time that a patient will be on drug potentially will change in future and then therefore the subcu would certainly make a difference in that scenario. Back to you, Chuck.

Operator:

This concludes today's call. Thank you for your participation. You may now disconnect.

Operator:

Good morning. My name is Bettina [ph], and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Fourth Quarter and Full Year 2022 Earnings Call and Business Update. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there’ll be a question-and-answer session. [Operator Instructions]. Thank you. I would now like to turn the conference over to Mr. Mike Hencke, Head of Investor Relations. Mr. Hencke, you may begin your conference.

Christopher Viehbacher:

Thank you, Mike. Good morning, everybody, and thanks for joining us. It's a pleasure to welcome you here today. This is my first earnings call since joining Biogen. Now, clearly, Biogen has a strong legacy as one of the pioneers in biotechnology, and there's clearly a strong foundation to build upon. Equally, there's an urgent need to restore growth to the company. We have a great opportunity ahead with a potential launch of two important near-term launches with Alzheimer's and depression, and we have several pipeline programs. We'll be covering a lot more about how we intend to return to growth. But first, I'd like to turn this over to Mike and invite Mike to provide an overview of the fourth quarter and full year financial results.

Christopher Viehbacher:

Thank you, Mike. Biogen has recently celebrated its 45th anniversary, and this is a company that has really been built on multiple sclerosis. It had some hemophilia products until it was spun-off as Bioverativ, some of you may recall that in the past, and we have SPINRAZA. So now we really need to think about how do we transform the business? I know firsthand from talking to a number of neurologists that our products in MS are still considered to be the top products. But obviously, this is becoming a much more competitive environment. And therefore, we really need to think about how do we grow the business in the future. Now we have an amazing opportunity with two new products. And as many of you know, I've been in this business a long time, and it's pretty rare that you have this opportunity to launch not one but two major products and not just any products, but products that are really quite transformative in their respective therapeutic areas, and that's obviously the LEQEMBI and zuranolone. We also have existing products. We can still grow VUMERITY. We can still grow SPINRAZA. And I think we need to take a fresh approach to those and try to reinvigorate the growth of those two brands. As many of you will point out to me, Biogen has a cost base that is probably higher than most of its peers. And we need to think about that much more systematically. And some of that may require a reduction in cost. Some of it is actually a realignment with the new growth alternatives. And then we also need to look at the R&D pipeline. Now we don't get very much credit for what we have in R&D, and Priya is going to talk to you about a number of different products that we think have an awful lot of potential. Equally, the neurology franchise is [technical difficulty] slowly progressing diseases. That means you're automatically into long-term and costly clinical studies. And in addition, we have some projects in there where our Phase III studies are essentially proof-of-concept studies. And so that makes them also inherently riskier. And I think we need to think about how do we balance the pipeline in R&D going forward. And finally, I think we should always be -- any company should always be open to thinking about external growth opportunities. This hasn't always been a major thrust of the company in the past. But I do think that as we expand into other areas such as immunology, rare diseases, psychiatry, that there may be opportunities to bolster those franchises through external growth. So as you know, LEQEMBI has received accelerated approval in the United States in early January. We have, on the same day, filed for a full or traditional approval. And I have to also give credit to our partner, Eisai because within a very short period of time, not only did they file for traditional approval on the same day as receiving accelerated approval but also within weeks, they have filed in, in Europe, in Japan and initiated a rolling submission in China. And obviously, in the short term, the launch in the U.S. is really going to be constricted until we get reimbursement, and that's expected to occur once we have a traditional approval. When we get to confirmation of filing from the FDA, at that point, we'll know whether we have a priority review or not. Under the terms of the agreement, Eisai is principally responsible and leads all of the discussions with CMS. As many of you probably have heard, Eisai has said that they are hoping to receive a broader reimbursement once they get traditional approval and that could be as early as this summer. But as you know, this is not a round like pill that we're launching here. You need to have a PET scan or a lumbar puncture to confirm diagnosis. We're going to have infusion capacity restrictions. Neurologists have already been busy treating patients with other conditions. So there will be a question about do we have enough neurologists to expand the patient population? And so there's an awful lot to be done in the near term. In terms of the -- one of the questions that comes up is -- and that will be the main discussion for CMS. To me, the sum of boxes, the CDR-sum of boxes is not really how we look at patient benefit here. As I talk to physicians treating Alzheimer's patients, most of them are really asking, can I still drive a car? Can I feed myself? Can I dress myself? Can I enjoy life with my family? And how can I not be a burden to others? And when you actually look at the activities of daily life, we actually saw a 37% improvement versus placebo. And to me, that's where the real benefit of this product is. Now as we look at Alzheimer's, the other message I think I would really like to drive home today is that this is not just a product launch, there is it today and there is a tomorrow. And certainly, today, everybody is going to be focused on the initial sales of LEQEMBI and that's going to be a question of overcoming some of the infrastructure challenges that we just talked about. There's going to be an awful lot of education of physicians around safety, around the diagnosis and the infrastructure has to expand to be able to provide the PET scans or the CSF testing. But this is really opening up a whole new field. This is a whole new vista, both for patients and physicians. I can remember 10 years ago, where we've had a lot of failures of medicines in development to reduce amyloid. People had given up hope that this was going to be effective. Actually, it was Biogen's PRIME study that was initiated about 10 years ago that actually showed that there was still hope for this. And of course, it's really the CLARITY study that has really demonstrated the importance of removal of plaque and the potential to impact the decline in cognition. And what I think this is going to do is unleash a whole wave of research and development, but there's going to be other things. I mean just even things that we're doing. Obviously, there's amyloid, but there are going to be other modalities such as tau, and Priya will talk about our own potential solution in terms of tau. But we're also looking at this -- the trial really focused on this 18 months of treatment. What happens at the end of the 18 months? And there are actually already data that indicate staying on drug has a continued benefit. And so in fact, Eisai will be filing before the end of Q4 of this year, an indication for the treatment on a maintenance basis. But one of the other most interesting things I learned, and I've been obviously trying to get up to speed on Alzheimer's over the last 90 days, but it turns out that plaque burden is at its maximum just before symptoms arise. So imagine the benefit if we could actually go earlier and in fact, there is a study called ahead that is looking at a preclinical or presymptomatic patients that could be quite interesting. But to do that, of course, other things like blood-based biomarkers or another biomarkers are going to be important. We're going to have to make this a lot more convenient as a treatment and there's subcutaneous treatment formulations in progress. And so what I think you're going to see is just a flood of information over the next three to five years, as new modalities and new ways of treating Alzheimer's patients come up. So here, you see the AHEAD study that was launched in 2020 and looking at presymptomatic. One of the physicians who treat Alzheimer has told me, we used to think about Alzheimer's as a 7- to 8-year timeframe, which was really from the onset of symptoms until sadly death. Now they're looking at this on a 25-year frame because we know that plaque builds up over time. And in fact, what we call early-stage Alzheimer's today or with this mild cognitive improvement, it's really not. It's actually already pretty advanced by the time you have MCI. We already talked about the potential for maintenance dosing and different modalities. So this is going to be quite an exciting area, as we go along. Now the other exciting areas in major depressive disorder. And there are 21 million people who suffer from this. And every day, you're reading about the major concerns around mental health and society. In fact, STEP [ph] just had an article yesterday about the number of younger people who are suffering from depression and feeling sad and even suicidal. And so there is a clear need for new treatments. There are over 400 million prescriptions written every year for MDD and other medical health. But what we see is an awful lot of switching between therapies. There's a lot of concern around side effects. It takes a long time for these new medicine -- these existing medicines to work. And so my personal view is there's an awful lot of unmet need. I was at GlaxoSmithKline when we had Paxil and we had So I'm pretty familiar with what the existing treatments can and cannot do. Postpartum depression, another significant area of unmet need, one in eight mothers, we just had a tragic case, as many of us in the Boston area following, and it just demonstrates that there is a real need for a new approach and new treatment here. And this is not necessarily where a big commercial opportunity is, but there is a major societal need and I think that zuranolone can make a big change here. So we have had a priority review granted, and we have now a PDUFA date in August. As you know, we can't launch immediately because it will have to be a DAA review of the scheduling of the drug before we can launch. So we're looking to launch more towards the end of the year. One of the interesting things is I see this every now and then in the media about the controversial data of zuranolone because six out of seven trials were positive. Folks, when we were developing Paxil years ago, we had to do six Phase III studies to get to that worked. There's an incredible placebo effect here, which is why so many companies actually abandon mental health. So when I saw six out of seven, I said, "Well, this is absolutely terrific. And so I think there is quite an exciting opportunity here." We're not going to early go after every type of patient, and we're doing a lot of mid-market research. Today, we're finishing the SHORELINE study and that will inform us about who's the right patient for this. And obviously, the label will inform who we are interested. But there's a lot of unresolved symptoms of depression out there. MDD patients with elevated anxiety, we won't clearly have an anxiety indication, but that is an area of MDD patients that we're going to be focusing on and those who are adherence-challenged. Going back to existing drugs. I'll just say, obviously, Biogen had enormous success with SPINRAZA. But when you look at it, there are still a lot of potential patients that have been treated adult patients as well as pediatric patients. And we're going to have a fresh look at how we can improve the coverage of this product. Obviously, it's an intrathecal product, which is not necessarily the most convenient. You may have seen we've just done a collaboration with Alcyone to have a new device that would make this more convened for patients who are not wanting to go through the numerous lumbar punctures. We are looking at costs, that's looking at the profitability of our MS franchise. Can we shift some of these costs to supporting our new product launches. We have a biosimilars business, an important business. This is part of the way that we create the economies for the health care system for new businesses, but we are looking at whether we can do more with that business or maybe whether others could on this business. We're prioritizing the near-term opportunities and really looking at our cost base on a systematic basis. Priya is going to talk about the risk profile and productivity of the R&D pipeline. As I mentioned earlier, we have appointed Priya as Head of Development, I'd like to take the opportunity to congratulate her on that. We're also looking for a new Head of Research. While we have a lot going on, continue to evaluate external growth opportunities. And so I think with that, Priya, why don't we talk about R&D?

Michael McDonnell:

So thank you, Priya. I will now go through our 2023 guidance ranges and talk about some of the key assumptions and then we'll open it up for questions. We expect a full year 2023 revenue decline in the mid-single-digit percentage range as compared to 2022 reported results and full year 2023 non-GAAP diluted earnings per share of between $15 and $16. There are several dynamics that we expect in 2023 that I'd like to highlight. First, our guidance assumes a favorable decision by the Court of Justice of the European Union relating to regulatory data protection for TECFIDERA. And that's currently expected to be on March 16, as I mentioned earlier of this year, although we obviously cannot predict the outcome of that. This guidance also assumes modest in-market revenue for LEQEMBI in 2023, with commercial expenses -- commercialization expenses exceeding revenue, and Biogen will record its share of net commercial profits and losses for LEQEMBI in the U.S. as a component of total revenue, and we do expect this to be a headwind to our revenue in 2023. Just as a reminder, in 2022, we amended our collaboration agreement with Eisai for ADUHELM and as a result, we will have sole decision-making and commercialization rights, along with a substantial majority of the economics beginning in 2023. Eisai will receive a tiered royalty and will no longer share in expenses related to ADUHELM, and this does result in two important considerations for 2023. First, we expect to incur approximately $150 million to $200 million of excess capacity charges in 2023, and all of that will be borne by Biogen. In 2022, we incurred $119 million of idle capacity. And of that amount, $55 million was reimbursed by Eisai. Our cost of sales as a percentage of revenue is expected to be higher in 2023 than the 22.4% that we saw in 2022, and that's as a result of product mix as well as the dynamic that I just described. We expect this pressure on cost of goods sold to be particularly pronounced earlier in the year. The second result of the amended agreement with Eisai is that we will no longer be sharing ADUHELM R&D costs, and this is expected to create an increase of approximately $100 million in R&D expense in 2023 as compared to 2022. Full year operating expenses, which are comprised of both SG&A and R&D expense will reflect our previously disclosed $1 billion of cost reduction measures, and we expect that approximately $300 million of these cost savings will be reinvested to support the launch of zuranolone and other new products. So we expect that this will result in $700 million of net operating expense savings relative to full year 2021 operating expenses, which were approximately $5.2 billion. We are continuing to monitor potential supply constraints for IMRALDI, and our guidance does not assume any stock outs, but this does remain a risk. There are also some key seasonality dynamics that we'd like to note. As a reminder, Q1 tends to be seasonally weaker quarter as compared to Q4 for our MS business in the U.S., and that's due to channel dynamics and the higher discounts and allowances. SPINRAZA benefited in Q4 of 2022 in part due to the timing of some shipments. And additionally, as a reminder, the royalty rate for OCREVUS resets at the beginning of each year in this rate increases as sales levels increased throughout the year. We also expect that our operating expenses will be higher earlier in the year given that some of our cost savings initiatives will take time to materialize over the course of 2023. And of course, as always, we assume that foreign exchange rates as of December 31, 2022, will remain in effect for the year, net of our hedging activities. And I would refer you to our press release for other important guidance assumptions. Before concluding, I want to highlight a few of the key accounting considerations for LEQEMBI and zuranolone. And now that LEQEMBI has received accelerated approval in the United States, Biogen's 50% share of net commercial profits and losses, which includes in-market revenue less cost of goods, royalties and SG&A will be reflected as a component of total revenue. As I mentioned, we expect this to be negative in 2023 as we expect that commercial expenses will exceed revenue. Outside the U.S., our 50% share of commercial expenses will continue to be recorded within SG&A expense until LEQEMBI is approved on a region-by-region basis. Separately, Biogen's 50% share of global LEQEMBI R&D expenditures will continue to be reflected within R&D expense, and this is both before and after approval. And finally, on LEQEMBI, Biogen is manufacturing the LEQEMBI drug substance in our Switzerland facility, we capitalized inventory until it is sold to Eisai at which point we will recognize contract manufacturing revenue and contract manufacturing cost of goods sold, and that will be at a minimal gross margin. Zuranolone is also a 50-50 profit share in the U.S. with our partner Sage Therapeutics. Prior to regulatory approval, we will record our share of R&D and SG&A expense in their respective line items net of reimbursement to or from Sage. After U.S. approval, Biogen will record 100% of zuranolone product revenue, cost of goods and SG&A., and then we will share Sage's 50% of profits or losses as a component of Biogen's collaboration profit-sharing line. So in closing, our number one goal is to return Biogen to sustainable growth. We believe that the potential launches of LEQEMBI and zuranolone, along with the rest of our pipeline and our strong balance sheet, provide us with the necessary elements to achieve this goal. And we are also working very hard to improve our operating efficiency and remain committed to creating long-term value for our shareholders. And with that, we'll open up the call for questions.

Salveen Richter:

Good morning. And thank you for taking my question here. Maybe a question of whether you can lay out potential timelines for the NCD reconsideration for LEQEMBI? Historical precedent suggests this could take about nine months. But when is the soonest this process could start? Could it start approval? And when will we know when the process has been initiated? Thank you.

Operator:

Our next question comes from the line comes from the line of Mohit Bansal of Wells Fargo.

Christopher Viehbacher:

In OpEx, you've got two big buckets, right? You've got R&D and you've got SG&A. In R&D, we are looking at this whole prioritization exercise. And that means if you want to save money to a degree you have to -- you may have to cut some programs. And that's not something that you want to do quickly. You need to go and look at each program thoroughly, determine probabilities of success, cost to complete a whole bunch of other things. There is an infrastructure element to R&D that we will be looking at as a matter of priority. And then you have SG&A and within the sales and marketing, obviously, most of that spend is really going to the MS franchise. Now the MS franchise still supports most of our revenue in the business. And so one has to be careful about how much we want to reduce that spend by, but clearly, that's a declining revenue base. And so I think what you're really going to see is a shift from some of those resources to supporting the launch. Now there's hundreds of millions of dollars going between Eisai, Sage and Biogen behind the prelaunch activities this year for LEQEMBI and zuranolone. And those are obviously strategic products for all of the companies, and we really need to support the launches. But we have to be find the right balance and not seeing a decline in MS sales beyond what we already see. And then there is G&A, and we will be taking a close look at that this year. So you're going to see some reductions in cost, but there's also going to be some new investments. And so it's a little hard to say at this point where we're going to end up on margins. But if you strip out the royalty and collaboration income and do the OpEx to sales ratios, we're clearly higher than most of our peer companies. And considering that we have a fairly mature product profile of high volume -- of high-value, low-volume products, we should be more profitable. But the company has already taken $1 billion out. So that means more cost savings have to be done thoughtfully. So we'll be giving you updates throughout the year on that. But we are conscious that the cost base needs to be more productive than it is. On ADUHELM, ADUHELM will see -- we will be looking at the EMBARK data, which is long term, that will give some information about not just for ADUHELM, but also how we think about the longer-term treatment of amyloid-reducing antibodies. There, we also need to see exactly what the landscape is. What I can tell you is, there is no commercial effort behind ADUHELM. Our focus is on LEQEMBI. We believe that is the product that is most appropriate for patients. We do have a commitment to the FDA to do this confirmatory study, so we have to think through that carefully. But I just want to be clear that from a strategic point of view LEQEMBI is our absolute priority and ADUHELM is not being actively commercialized anywhere.

Colin Bristow:

Hi. Good morning and thanks for taking my question. One for Chris. In terms of your ongoing review of the business and the pipeline, how should we be thinking about timelines just in terms of the potential for strategic actions with ADUHELM? And then just more broadly in terms of business development, when you're sort of clearly identified the targets that would be potentially willing to move forward? And then just within this question, could you just characterize your ongoing interest in biosimilars? Thank you.

Operator:

Our next question comes from the line of Umer Raffat of Evercore.

Christopher Viehbacher:

So, on the capacity, obviously, Biogen had worked quite -- made quite a bit of progress on that for the launch of ADUHELM. And so, I would say we're probably in better shape today than when we were at the launch of ADUHELM. Nonetheless, it's not like there are a lot of empty infusion centers waiting for Alzheimer's patients today. So, there is going to have to be continued investment, and it will take time. And I think one of the reasons that we have guided to 100,000 patients is that it's just going to -- they're going to be constraints to the system. There's not a lot of point talking about what's the potential, how many Alzheimer's patients out there and how many are eligible, there are natural constraints to this. There's also going to have to be a careful selection of patients as to who's really the best patient to benefit from this treatment and physicians will take their time to understand this new therapy and get experience with the drug. So, it's going to be slow, steady progress. I can't give you -- I wouldn't want to comment today on how many sites, but it is something that is obviously a major part of this launch. That's why I say it's not really a round white tablet as the launch.

Priya Singhal:

Sure. So yes, exactly right, Chris. I think we've also -- we also think that some of this infusion capacity could be elastic, and we'll have early learnings. So, I think as you said, we'll learn as we go. Two points here. One is that Eisai is already leading on developing a maintenance therapy. And this could be either a four week or a 12-week dosing paradigm. They have said publicly that they will file for this by Q1 2024. That's important. The other aspect, I think, that is also in development is a subcutaneous formulation. And I think we are -- Eisai and Biogen are thinking about what burden it would -- a product like LEQEMBI have and how do we solve that for patients as well as providers, and that is really the strategy behind the subcutaneous development. It's being studied currently in a Phase III sub-study, and it will also be filed by Q1 2024 as Eisai has communicated. So, I think we're trying to work from multiple perspectives here, and we'll share more updates as they become relevant.

Evan Seigerman:

Okay. Thanks for taking my question. So, Chris, in your remarks, you highlighted a shift in business development, whereas in the past, Biogen may have been more hesitant to acquire, where would you like to focus BD? And what size deals would you be comfortable with? Thank you.

Michael McDonnell:

And I'll just quickly add, Evan, to your question on size of deals, without commenting on how large a deal we might do or a series of deals just in terms of aggregate capacity. As we mentioned up front, we ended year with $5.6 billion in cash, we have more coming in from Samsung in the early second quarter of this year, and we have a modest amount of debt. So, you can pretty quickly get to a close to better part of $10 billion of capacity number that we can utilize in a variety of ways.

Michael McDonnell :

Yes, $800 million that's coming in April and then another $400 million-plus that will come in next year.

Operator:

We will now move to Tim Anderson of Wolfe Research.

Priya Singhal :

I can take that. Thanks for that question. I think overall, I just want to reiterate that Eisai is starting subcutaneous in the Phase III open-label extension. And actually, details of that sub study are public. You can take a look at that. Eisai has also communicated that they believe that they have had the regulatory discussions to EMBARK upon this pathway. But beyond that, it would be speculative to say what are the minimum requirements. I think we do have regulatory discussions ongoing and a lot, as you know, is always dependent on the data as it gets generated. Overall, Eisai has communicated that they will -- they expect to file by Q1 2024. And then stepping back to what is the true potential. We -- I'll just draw us back to the data that we saw from the Clarity AD study, which was, of course, utilizing the intravenous bimonthly dosing regimen. I think the most important part there was that we saw the amyloid reduction at six months expanding over the 18-month period, we had a positive primary endpoint with a highly statistically significant p-value as well as all the secondary end points. So, we believe that really Clarity AD is quite clear in its outcome, and we believe that the data are meaningful and can have an impact on the patient population. The subcutaneous formulation is really our approach to kind of thinking about this more comprehensively. So, we believe as is it has a lot of potential and then, of course, we'll continue to build on what is the dosing, maintenance dosing as well as subcutaneous. And as Chris mentioned, what is the application of an anti-amyloid therapy in presymptomatic or preclinical Alzheimer's disease.

Operator:

We will now take your question from Brian Abrahams of RBC Capital Markets.

Christopher Viehbacher:

You mean the price decline related to maintenance, is that what you're saying?

Christopher Viehbacher:

Again, I think as -- obviously, we have to wait now and see the data and get approval for these things. But I think you're probably going to be in this plaque removal process, and that's every two weeks. As you get into maintenance, as Priya said, the dosing regimen could change. And obviously, if you were to go from two weeks to one month, that has an overall per patient cost on an annualized basis that would be lower. So, I think you'll see potentially a lower patient cost just because of the different dosing regimen over time. Shorter term, again, I think we probably have more patients out there than the system can manage. And so, I don't think there's going to be that much price pressure. Once the system adapts, there may be over time, but I don't really see prices being the main aspect of this. And remember, when you look at this -- I mean, we're talking about $26,500 for the drug cost. But there's a lot more cost to the system for the treatment of the patients. A PET scan, for instance, costs around $7,000 as an example, and you have the MRIs and you have the treatment. And that's why, to me, blood diagnostics could play a bigger role in actually reducing the overall cost. And I think those types of things, and as we move into maintenance dosing regimen, we may find that the average annual cost of a patient goes down, although we're not necessarily touching the price of the drug.

Michael Yee:

Hi. Thanks for the question. You mentioned in the slides that you would like to improve the risk profile and productivity, R&D pipeline, particularly profile. And I recall, in January, you talked about lower-risk-type projects and perhaps Biogen is too high risk, high reward, particularly for this market cap? And then going back to your prior days, you did, I think, the Genzyme on the Regeneron deal. So, can you just comment about the philosophy of bringing in products that are perhaps lower risk, more derisked and how you think about bringing those in and acting on those accordingly and with the speed? Thank you.

Mike Hencke :

Operator, I think we have time for one final question.

Chris Schott :

Thanks so much. Just another one on BD. Is this something you're going to be looking to do in parallel with your strategic review and cost resizing efforts? Or is this a bit of a longer-term priority once you make whatever changes are necessary for the core business? And maybe just a second part of that same question. Given your prior comments of the narrow focus of Biogen, does that point more towards BD is skewed towards either company acquisitions versus partnerships or earlier-stage deals because it seems like you might want to be bringing both products as well as kind of expertise in-house? Just help me a little bit in terms of like the -- how you think about that dynamic? Thank you.

Mike Hencke :

Okay. With that, I think we're going to conclude the call for today. Thank you, everyone, for joining us.

Operator:

Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Biogen Third Quarter 2022 Earnings Call and Business Update. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Mr. Mike Hencke, Head of Investor Relations. Mr. Hencke, you may begin your conference.

Michel Vounatsos:

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 are filed, 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. And 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 merger of 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 area 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 learning's as we continue to advance a diversified pipeline of potential Alzheimer's treatment. This includes two clinical-stage assets targeting tau pathology, BIIB080, our Phase 2 ready antisense oligonucleotide and BIB113, a Phase 1 small molecule. The pre-owned Alzheimer's Biogen has important opportunities in other therapeutic areas, where the unmet medical need remains significant. This includes depression where, together with Sage, we are continuing to advance the regulatory filing for zuranolone in both major depressive disorders, and postpartum depression, with a novel mechanism of action, efficacy observed as early as three days, and a consistent safety and tolerability profile across eight clinical studies, we believe that zuranolone, if approved, could be a meaningful new therapy for depression. Second, the FDA has accepted our filing for tofersen in SOD1-ALS under the accelerated approval pathway, and granted priority review. While the study did not meet the primary endpoint at six months, longer follow-up has shown that patients who remain on tofersen experienced a slow rate of decline in key clinical measures, including lung functions, muscle strength and quality of life. We are truly encouraged by these results in such a debilitating and fatal disease, and look forward to an FDA decision expected by April of next year. We believe this near-term opportunities, along with new launches of biosimilars, have the potential to drive renewed growth and position us to have five key franchises by 2025. Furthermore, we see the potential for additional growth drivers in the mid to late 2020s in areas such as Parkinson's disease, lupus and stroke, all with programs currently in Phase 3. Overall, we believe that we had an inflection point in CNS drug discovery and development, and these recent developments embody key advancements that are being made in neuroscience. For years, Biogen has been expanding our expertise and capabilities in this area, and we believe that we are well positioned to remain a leader in neuroscience as we work to usher in the new next wave of CNS therapeutics while also advancing our portfolio in specialized immunology where we have four late-stage studies in lupus. I will now turn the call over to Priya for a more detailed update on our recent progress in R&D.

Michael McDonnell:

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. There is no deadline for the court to issue its final decision, but we understand that approximately three to five months after issuance of the advocate general's opinion is typical. 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 asserted 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. VUMERITY is being impacted by both payer pressure and the contraction of the oral segment of the market in the United States. We continue to work with our contract manufacturing supplier to address potential supply constraints for VUMERITY. 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. Global TYSABRI revenue of $505 million decreased 3% at actual currency and 1% at constant currency. US TYSABRI revenue was negatively impacted by higher discounts and allowances and lower volume. Outside the US, we were pleased to see continued patient growth as well as good uptake of the subcutaneous formulation in the EU, which has now been launched in over 25 markets with an average conversion rate of approximately 40%. Although, the composition of matter patents for TYSABRI have expired, we have other patents related to the making and using of TYSABRI, including those listed in our 10-K. We'll continue to enforce this IP, including filing suit against Sandoz in the United States. Global interferon revenue of $336 million decreased 13% at actual currency and 12% at constant currency and was impacted by the continued shift from the injectable platforms to oral or high efficacy therapies. Moving to SMA. Global SPINRAZA revenue of $431 million declined 3% at actual currency and increased 2% at constant currency. In the United States, SPINRAZA revenue was flat versus the prior year, and we believe we may be seeing signs of stabilization in the US. Outside the US, excluding negative currency impacts, revenue increased due to volume growth in certain Asian markets as well as some positive pricing dynamics, partially offset by competition and the timing of shipments. 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. We continue to expect a gradual launch of BYOOVIZ with more meaningful revenue contribution expected to begin in 2023. Total anti-CD20 revenue of $417 million was flat versus the prior year. Revenue from OCREVUS royalties increased 6%, which was offset by continued RITUXAN declines due to biosimilar competition. Now moving on to expenses on the balance sheet. Third quarter non-GAAP cost of sales was $470 million, which includes $12 million of idle capacity charges. Going forward, we expect further pressure on gross margins due to shifts in product mix and potential idle capacity charges largely resulting from the suspension of drug product manufacturing for ADUHELM. Third quarter non-GAAP R&D expense was $549 million. This is compared to $702 million in the third quarter of 2021, which included approximately $165 million in upfront payments related to business development transactions as well as clinical trial closeout costs. Non-GAAP SG&A was $562 million. This is compared to $651 million in the third quarter of 2021. The decrease in SG&A expense was driven primarily by cost savings initiatives. Third quarter collaboration profit sharing was a net expense of $45 million, primarily driven by our collaboration with Samsung Bioepis. Non-GAAP other expense was $55 million, primarily driven by interest expense. In the third quarter, we generated $661 million in cash flow from operations. Capital expenditures were $59 million and free cash flow was $602 million. We repurchased 1.2 million shares of the company's common stock during the quarter for $250 million at an average price of $214 per share. We ended the quarter with $5.8 billion in cash and marketable securities, $6.3 billion in debt and approximately $500 million in net debt. Of note, in the third quarter, we received net proceeds of $583 million from the sale of one of our buildings in Cambridge as part of our office footprint optimization initiative. Additionally, in October, we paid $900 million plus fees and expenses to resolve the previously disclosed qui tam litigation. As a reminder, we expect to receive an additional $1.25 billion over the next 1.5 years from the sale of our equity stake in Samsung Bioepis, including approximately $813 million due in April of next year. Overall, we remain in a very strong financial position with significant cash and financial capacity, including a $1 billion undrawn revolving credit facility to invest in growing the business over the long-term. Before I turn to our updated guidance, let me say a few words about lecanemab. We are excited to be collaborating with Eisai on this important opportunity under a global 50-50 profit sharing agreement. As a reminder, Biogen has the right to co-commercialize and co-promote lecanemab with Eisai who has final decision-making authority. After approval, our share of profits or losses will be booked as a component of other revenue. The lecanemab component of other revenue may be negative in the initial quarters of the launch. Please see Slide 26 in our earnings presentation for other accounting considerations. Let me now discuss our updated full-year 2022 guidance. We are increasing our full-year revenue guidance from our previous range of $9.9 billion to $10.1 billion to a new range of $10 billion $10.115 billion and increasing our full year non-GAAP diluted EPS guidance from our previous range of $15.25 to $16.75 to a new range of $16.50 to $17.15. This guidance increase is primarily a result of better-than-expected topline performance and continued cost management. Our guidance ranges for non-GAAP R&D expense, non-GAAP SG&A expense, and our non-GAAP tax rate are all unchanged from prior guidance. As a reminder, we typically see a seasonally higher SG&A spend in the fourth quarter. This guidance assumes that foreign exchange rates as of September 30th will remain in effect for the remainder of the year, net of hedging activities. This financial guidance also assumes continued declines in RITUXAN revenue due to biosimilar competition, as well as continued erosion of TECFIDERA revenue due to generic entry. Please see our press release for other important guidance assumptions. In summary, we continue to execute well across our core business and are pleased to be raising our financial guidance for the year. We are excited about the recent lecanemab readout and believe our diversified pipeline across neuroscience, specialized immunology, and biosimilars has the potential to return Biogen to growth over time as we continue to build a multi-franchise portfolio. As always, we remain focused on creating long-term value for our shareholders. And with that, we will now open the call for questions.

Umer Raffat:

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.

Michael McDonnell:

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.

Brian Abrahams:

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.

Priya Singhal:

Thank you, Michel. That's exactly right. And I'll just add that there is a -- 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-overage. 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 statistical significant manner. And 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. The rest will remain to be seen, and Eisai is already engaging with CMS to discus this. You specifically asked about reconsideration, so I'll just add a note there, that in the final scenario that NCD -- the final NCD did put out was that CMS would act with urgency and potentially a reconsideration could be considered. That could take nine to 12 months from a historic precedent perspective. But I think in this sense, they have said that they would act with urgency. And that would be a full coverage without the need for prospective comparative studies. So I think we need to wait for the CTAD data and continue the engagement.

Salveen Richter:

Good morning. Thanks for taking my question. On the back of the lecanemab data, can you just walk us through how you're thinking about business development and portfolio prioritization?

Priya Singhal:

Thank you. So I think that's a great question. And just stepping back, as Michel mentioned during the remarks, we see ourselves as leaders in the Alzheimer's space. We believe that we've done a lot of evaluation of the scientific hypotheses, the biology. And we have set up our portfolio to be able to address both what in terms of the biology and also the when. So I think in terms of the biology, we've now had success with lecanemab. Previously, we've seen the results also with aducanumab, and that's the A-beta hypothesis. In addition, we had our own study with the monoclonal antibody against tau, which did not work. So, we did test that hypothesis with the extracellular tau and now we are positioned to initiate our Phase 2 with BIIB080, which is an antisense oligonucleotide that will address all post-translational forms of tau. So we believe [Technical Difficulty] we believe we have a leading antisense oligonucleotide. Also, we have BIIB113 in Phase 1, which addresses tau aggregation and addresses an enzymatic inhibition of tau aggregation. So, we are really trying to tackle this from all the -- from the amyloid and the tau pathology basis. Behind that, in the preclinical space, we have also several other biologies that we are looking at very carefully in terms of targets and also modalities. So, I think we have a very comprehensive approach. And with regards to when, I'm very pleased that we have lecanemab already being tested in preclinical Alzheimer's disease. So, that's a study that's already ongoing, which will address what happens when you intervene with an anti-amyloid therapy, prior -- when you do have the amyloid aggregation but you don't have symptoms. So, I think it's a very comprehensive approach. We are not going to stop here. We continue to look at very attractive targets. And I think BD and internal development will continue to be important. And finally, with lecanemab, we are testing two very important aspects in our development plan. Eisai is obviously the lead on this. In the Phase 2 open-label extension, we're looking at maintenance dosing. So, what's the right frequency to continue to preserve the clinical decline progression stop. And we are looking at subcutaneous development in the Phase III open-label extension. So I think overall, it's very, very comprehensive. And I think this will be a space that we will continue to invest to win. Thank you.

Michael McDonnell:

No, the only thing I would just quickly add is that -- I think you covered it, but I would just quickly add. You did not see BD activity during the quarter in the way of new collaborations or M&A, you should not read anything into that. We continue to have a very robust pipeline and we continue to look at a variety of deals. It does tend to be lumpy and you should fully expect that there will be more transactions in the future. Thanks.

Operator:

We'll take your next question from Tim Anderson with Wolfe Research.

Michel Vounatsos:

So we'll be all-in on lecanemab [ph], together with the great partners that we have, and we will do everything we can to secure access of the product to the patients after regulatory process. Nevertheless, the Clarity AD reinforces the finding that removing aggregated form of a beta [ph] in the brain can be associated with the slowing down of the cognitive decline. And this is very important, and this is what we have shown with ADU, and we have patients currently being dosed on the EMBARK study. And Priya will say more with that.

Operator:

Your next question comes from Chris Raymond with Piper Sandler.

Michel Vounatsos:

Thanks for the question. I will start and Mike will add on. It was not reasonable based on the timeline and the gap between the ADU, NCD decision and the lecanumab readout and then regulatory process to keep a large force on board. This will not have been reasonable. So we had no choice than to take the actions that we took. Now there is a new page. And together with the partners, we are assessing, considering the benefits -- the strength, the relative strength of each company in each continent since we intend to file for full approval at the same time approximately in the US, in Europe and Japan should we have the accelerated approval early in the year. We are planning the investment, but we are not yet completely there. So we'll do that in a very paced and controlled manner, and we'll take it from here. Mike?

Operator:

Your next question--

Operator:

Your next question comes from Matthew Harrison with Morgan Stanley.

Priya Singhal:

I can take that question. Thanks for the question, Matthew. So overall, I'll just say that the Clarity AD met its primary endpoint, which was CDR-Sum of Boxes and this was with a p-value of 0.00005. So, it was very, very highly significant. And this was a large trial. So, it was about 1,800 participants with -- including the underrepresented population and it met all its secondary endpoints, which were independent domains of cognition and function. So, overall, we feel that the results are very, very positive and that they're very encouraging. Now, details of subgroup analyses have not been shared by Eisai, and I think we need to wait for the CTAD to see more details about both the primary and the secondary endpoints. But at this point, I would say that overall, we believe that we just have to wait, and we feel very encouraged by what we've seen on the topline. I won't be able to comment on exactly what you may or may not see. I think we have to wait for CTAD for that.

Brian Skorney:

Hey good morning everyone. Thanks for taking my question. I was wondering if you could outline any broad timeline that you have for subcu lecanemab. Just wondering what the pathway looks like and maybe you're seeking to get initial and chronic dosing approved, or would this be more like initially a label where you could have patients switching who have initiated IV over a period of time? And just any learnings from your interactions with FDA on subcu to -- that you think might be applied as forward?

Operator:

Your next question comes from Michael Yee with Jefferies.

Michel Vounatsos:

So Eisai has the lead in engaging regulators and payers. And from what we know is that Eisai has already initiated engagement with CMS. So they're responsible for this activity. And at this stage, I will not provide more details. But the engagement is there, which is the most important.

Robyn Karnauskas:

Thank you. My question is two fronts. So we're hearing a lot that Lilly has a very big presence right now and mind share of doctors in this space. And you mentioned, Mike, that you tend to -- that you think that we'll have more -- I'm trying to interpret what you said, is that you're going to ramp up spend in line with revenue. Can you just elaborate a little bit there? Because you will have competitors in the space. And a small question for Priya. We also hear that tau pathology that you may not want to do trials in patients that already have a beta plaque with tau – a couple of questions there.

Priya Singhal:

And I can add to that, Robyn. Thanks, Mike. I can add to that. In terms of doctors and mind share, I think that, obviously, this is a very highly rapidly evolving space from a scientific perspective. And I think lecanemab has demonstrated that removal of the plaques can result in a clinical impact. And this is really going to be important. I'd also like to add that the safety profile is going to be really, really important here. For example, with lecanemab, we've got rates of ARIA that are about 21%. We've seen this to be within expectations. And I think that this, together with the efficacy results, are going to be important for doctors to consider. So overall, while I think the question was a little bit more maybe about the launch, I would say that the mind share will depend on the data and I think the data needs to be seen from the other anti-amyloid therapies before we decide what is going to be meaningful. The other piece I think here is we see ourselves as pioneers. We've got this very encouraging data. We think that this is a very broad and complex patient population and the need and unmet need is very, very high. So, we think it's a very important place where we [Technical Difficulty] difference to patients. And then Robyn, on the second question, can you please clarify that? I didn't quite catch it. You broke up towards the end.

Priya Singhal:

Got it. So, I think I'll just step back to say that obviously, amyloid pathology is very key. We also believe that it's potentially upstream of tau pathology. And with aducanumab with -- our data with aducanumab, we did show the impact on phospho-related tau and such. So, we think that this cascade overall is going to be very important. Having said that, I think that you're right, that maybe the future of Alzheimer's disease is going to be about the timing of intervention, which I already spoke to, and that's a very different matter. But it could also be that one type of approach may not be adequate. The question here is that we're trying to be very systematic and methodical in how we approach it. So, we've now demonstrated with lecanemab that really there is the removal of aggregated plaque, which results in clinical impact. And I think Eisai has also shared earlier this year that this could result, based on data from Phase 2b and modeling, that this could result in a preservation of about two to three years before patients progress to significantly more severe stages of Alzheimer's. This is based on modeling and data from Phase 2, and I know that they have said publicly that they will also do this type of analysis with the Phase 3 data. So, I think 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.

Operator:

Your next question comes from Jay Olson with Oppenheimer.

Priya Singhal:

Thank you, Jay. It's a very good question. What I can share with you is that we are looking across our portfolio, and we're looking at several of our existing partnerships to see how we can actually move and build on the strength of these data and the strength of the biological hypothesis that we've seen. I can't comment more specifically on the Denali TV platform. But yes, everything is on the table. We'll be looking at everything very carefully, and we'll make announcements as they become relevant and as it's appropriate. Thank you.

Phil Nadeau:

Good morning. Thanks for taking our questions. A follow-up question on the learnings from the aducanumab launch. What are Biogen's recent thoughts on lecanemab's price? Would you expect to price at a premium to ADUHELM because of better data, a discount because of the pushback? And appreciating that Eisai has final say on all commercialization decisions, what role will Biogen play in setting the price of lecanemab? Thank you.

Operator:

We'll go next to Marc Goodman with SVB Securities.

Michel Vounatsos:

I think your question was about ex US SPINRAZA?

Michel Vounatsos:

Yes, so we see two types of dynamic. We see a European momentum that is being slowed down by the launch of risdiplam. But we are sharing data on the switch from patients, patients from the U.S. from plan back to SPINRAZA for efficacy reasons. So I think -- and we are learning from the US. So it's a matter of time. We are learning from the US. We're delighted by the US results. And we believe that this becomes a model for what other continents should learn from. And ex core Europe, we see a very rapid growth in terms of volume, but the price is not the same. So this is the momentum ex US. Overall, we are delighted by the US results where we can see SPINRAZA coming back, and we believe the product will resume its momentum to grow gradually. Mike, do you want to add?

Priya Singhal:

And I'll just wrap up really quickly on the second point. I think that your -- second question you had, Eisai has communicated that the 720-milligram weekly fixed dose is the dose that show the equivalents to intravenous dosing, 10-milligram per kg biweekly. And it's also actually now listed for the auto-injector study that was recently announced. I think that was the question. Please correct me if you had a different point in there.

Priya Singhal:

Thank you.

Operator:

We'll go next to Chris Schott with JPMorgan.

Priya Singhal:

Okay. So, I think overall, we've seen very good data with the 10-milligram per kg biweekly dose. I think the important point that is very, very, I think, relevant here is that the separation is seen at six months -- as early as six months, there's no titration and that expands on an absolute basis until the 18-month primary endpoint readout in Clarity AD. So, this is very encouraging data. I would say that as the infrastructure around Alzheimer's disease and all of this has been built out, it will actually be quite important for patients to be seen by physicians. So, we don't see it necessarily as a disadvantage, if that was the question. We don't see it as a disadvantage. But having said that, we are doing everything. Eisai is leading this effort, and we're trying to make sure that we are keeping patient convenience in mind, which is the premise of the subcutaneous development. So, I can't comment beyond that on how long it will be intravenous and when would it transition to subcutaneous. But we're looking at all these aspects very carefully at a high level and also at a granular level as we build out the clinical development program with all these topics in mind. So, overall, we believe in the early stages, it will actually be really important for patients to be seen in the clinic every two weeks.

Paul Matteis:

Great. Thanks so much. I was wondering, based on your experience in the field with ADUHELM, how would you characterize infusion capacity today in neurology clinics ahead of the lecanemab launch? Where is it today? And how much ramp up do you think needs to happen for there to be materially broader access over time?

Operator:

Your next question comes from Geoff Meacham with Bank of America.

Michel Vounatsos:

Mike?

Operator:

This concludes today's call. Thank you for your participation. You may now disconnect.

Operator:

Good morning. My name is Katie, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Biogen Second Quarter Earnings Call and Financial Update. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Mr. Mike Hencke, Head of Investor Relations. Mr. Hencke, you may begin your conference.

Michel Vounatsos :

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

Michael McDonnell :

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

Brian Abrahams :

So we noticed that -- and you discussed this a bit that you have been discontinuing pipeline programs, maybe a little bit earlier on, including 104, 100 and 076. Just wondering if you could maybe comment on that, whether this reflects any change in your philosophy on risk assumption and go no-go decision with respect to pipeline prioritization and maybe how -- if that might imply anything for your bar to pursue approval of lecanemab if the Phase 3 study misses on its primary endpoint?

Priya Singhal :

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

Operator:

We'll take our next question from Matthew Harrison with Morgan Stanley.

Michel Vounatsos :

Priya?

Operator:

We'll take our next question from Colin Bristow with UBS.

Michel Vounatsos :

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

Michael Yee :

I had a question around -- thoughts around investment into SG&A and how that works for lecanemab, and whether there is a decision point as to your commitment to have to reimburse 50-50 and how that works if the drug actually gets to market? And then secondly, as that relates to zuranolone, same thing. Is that a proposed net investment spend for 2023? How do we think about that?

Operator:

We'll take our next question from Umer Raffat with Evercore.

Priya Singhal :

Thank you, Umer. So maybe I can step back to say that we -- obviously, there are several scenarios of the data readout. And I think at one end, we have potentially a positive primary endpoint outcome with secondary endpoints as well. And we believe that the totality of the data will be really important. And as I said already, we do have -- we have discussed this, and we have agreement with the FDA that a positive readout could serve for a confirmatory study. And on the other end of the spectrum, it's possible that the study is negative. And in that scenario, we would be looking at also the other readouts because there are two -- these are, obviously, Biogen Eisai readout, but I will also draw attention to that that we have two other anti-amyloid agents readout in the near term. One is gantenerumab and the other is donanemab, as everyone knows. So really, this is a bigger question about these readouts and what they mean for the anti-amyloid hypothesis in Alzheimer's -- early Alzheimer's disease. There could be several mixed scenarios, some like you mentioned, and I think it will be very difficult to speculate exactly how that might be perceived. So I would say that the mix scenario, there could be several permutation combinations, but I think that the totality of the data is going to be important. So at this point, it would be tough for me to speculate on what mix scenario and what outcome it could lead to. But we are considering all of this. And I think currently, our focus is on ensuring that we collect the data, close the study, have a very clear readout and then we will be engaging, of course, with the FDA because this product also has breakthrough and fast track designation, which allows us to consult the FDA for the guidance. So we will be in close contact, and that's what I can tell you. Thank you.

Marc Goodman :

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

Michael McDonnell :

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

Salveen Richter :

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

Priya Singhal :

I can address the scheduling question. Thank you, Salveen. So I just wanted to say that if you step back, the DEA process is quite robust, and they will -- this typically takes about 3 months at the end of the approval process, and they will designate a schedule. Now Sage has already completed their human abuse liability potential study, as I mentioned in my opening comments. And there could potentially be 5 schedules that you could get. At present, what we do know is the data that we have, and we also have the background of ZULRESSO, which is a Schedule IV drug. So at this point, we do believe that it is possible for zuranolone to get a Schedule IV. And Schedule IV is typically -- what it means is low potential for abuse and low risk for dependence. The other drugs in this category are Ativan, XANAX, Darvocet and others. And we believe that this is currently the expected scheduling. Of course, we have to wait to go through the process to see what the outcome will be, but that's what we expect at the moment with the data we have. I hope that addresses it.

Robyn Karnauskas :

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

Michel Vounatsos :

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

Cory Kasimov :

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

Operator:

We'll take our next question from Jay Olson with Oppenheimer.

Priya Singhal :

Thank you, Jay. Great question. So yes, we are very disappointed with the negative readout for BIIB104. And just to step back, the hypothesis that we were testing was that AMPA potentiation can impact NMDA hypofunction -- NMDA receptor hypofunction and thereby, increase synaptic connectivity and increase the working memory domain -- impact the working memory domain positively in cognitive impairment that's associated with schizophrenia. So that was the hypothesis. And we were looking forward to the results. Of course, it has not met primary or secondary endpoints. Now in neuropsychiatry trials, sometimes you don't have the right adherence and compliance during the trial. So we have looked very carefully at the PK exposures and such. And this was a 12-week readout. So we have looked at that, and we have quite -- we feel quite confident that this was a very high -- highly compliant trial where we have expected exposures for BIIB104 through the -- throughout the 12-week duration. So we believe that we have tested the hypothesis of AMPA potentiation leading to NMDA potentiation as well. Having said that, we think that this was an extremely well-run trial, and we have collected a very rich data set that can give us leads on how we might want to pursue the [glutamergic] pathway in other neuropsychiatry indications. So yes, that is something that we are looking at very carefully, and we will be evaluating this very carefully. We did have early Phase I trials, but that data was, unfortunately, not replicated. Now these are very small trials. One was in healthy volunteers and the other 1 was in schizophrenia patients, but there was shorter duration and the subject numbers were 39 and 29, respectively. So very small trials. So yes, to your question, neuropsychiatry remains an area of high focus. We believe we've increased our capabilities and focus in this area, and we'll continue to look at this very high-quality data set, and we'll also be presenting it at upcoming medical meetings.

Philip Nadeau :

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

Michael McDonnell :

Yes. I think Michel covered a lot of it in terms of the question, Phil, but I would just say that as a reminder, that we and Eisai expect the Phase III readout for lecanemab in the fall of 2022. The PDUFA date is in early January of '23. As you know -- as currently written, the national coverage determination does significantly limit the market opportunity for antibodies with accelerated approval. And so as Michel said, we will closely align with Eisai to resource appropriately. We'll take learnings from ADUHELM as necessary and as where we can, and we'll resource it at each phase of its commercialization very gradually as lecanemab is launched. I'd say that, obviously, we did make the decision to take down the ADUHELM commercial infrastructure because we felt the time gap was too large to the timing of when we would need it for lecanemab. And I think that, that was the right decision. We feel like we can rebuild the infrastructure in a more gradual fashion and fairly quickly when we're ready. And again, that's something that we'll partner very closely with Eisai on.

Michael McDonnell :

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

Geoff Meacham :

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

Operator:

We'll take our next question from Evan Seigerman with Bank of Montreal.

Priya Singhal :

Thank you, Evan. So I think that before we kind of -- before I answer that directly, it would be important for us to kind of reiterate that the final NCD indicated that antibodies with full approval may be covered in CMS approved prospective comparative studies and -- but that this data could be collected in a registry. Now what is left open to interpretation here is there next point that they made, which is that the degree of rigor in these study designs may depend on good part on the strength of evidence of the initial randomized controlled trial that led to FDA approval. This aspect, we feel quite good about because we think that the trial is well designed and well set up and well powered to give us a readout. So we believe that if the trial reads out positive, that is the Clarity AD that there would be a chance that it would meet the high level of evidence bar that NCD has put forward from -- that CMS has put forward in the NCD and that they could potentially reconsider for full coverage. The other aspect to consider here is that there are two other readouts coming in the same sort of time frame, which could also influence how CMS looks at their guidance and what they designate as a high level of evidence. So it's not clear to us at this point, but it will depend on each molecule, Phase 3 data is my personal interpretation on this. Now as Eisai has announced, Clarity has a robust design, and they believe that it could meet the high level of evidence set forth by CMS in the NCD memo. So we do think that it could be reconsidered. And I think the high level of evidence would have to include safety, efficacy under represented population that mirrors the CMS population. In addition, I would say that the population in the Clarity AD also has comorbidities and concomitant medications not very dissimilar from the CMS population. So I think these things set us up well and they bode well. I think final outcome will depend on the data.

Michael Hencke :

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

Operator:

Good morning. My name is Cecilia and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen First Quarter 2022 Earnings Call and Business Update. All lines have been placed on mute to prevent any background noise [Operator Instructions]. Thank you. I would now like to turn the conference over to Mr. Mike Hencke, Head of Investor Relations. Mr. Hencke, you may begin your conference.

Michel Vounatsos:

Thank you, Mike. Good morning, everyone, and thank you for joining us. We continue to execute on our core business objectives in the first quarter. Mike and Priya will review our quarterly performance and recent progress in R&D, while I focus on our strategy and near-term operational priorities. Let me start with a few comments on the recent national coverage determination by CMS for amyloid beta targeted therapies for Alzheimer's disease. This decision effectively denies all Medicare beneficiaries access to ADUHELM. We are very disappointed by the final NCD. And as a result, we will substantially eliminate our commercial infrastructure for ADUHELM. We will retain minimal resources to manage patients access programs, including a continued free drug program for patients currently on treatment in the U.S. We expect to continue funding certain regulatory and R&D activities for ADUHELM, including the continuation of our EMBARK redosing study and the initiation of our Phase IV post-marketing requirement study ENVISION. Additional actions regarding ADUHELM may be informed by upcoming data readouts expected for this class of antibodies as well as further engagement with the FDA and CMS. In parallel, we are committed to working closely with Eisai on the potential launch of lecanemab. We are now looking forward as we work to advance our broader pipeline, including lecanemab and zuranolone, execute on our base business and deploy our capital in the best interest of shareholders. We recognize that Biogen is facing a number of near-term challenges. These challenges, including generic erosion of TECFIDERA, competition for SPINRAZA in biosimilars and DTNF [ph] and a declining profit share from RITUXAN in the U.S. These challenges are all part of the biopharmaceutical business life cycle, and we believe that potential new product launches such as lecanemab, zuranolone and additional biosimilars can help return the company to grow over time. Further, we see the potential for additional growth driver in the mid-to-late 2020s in other areas such as stroke, lupus and Parkinson's disease and, of course, we will be pursuing new business development opportunities as well. However, given that we are in a long product cycle business and in light of the CMS decision, we recognize there is more we must do today to provide better clarity and visibility into the company's future. Let me share the priority actions we are implementing now. First, we are increasing our focus on R&D prioritization with the goal of maximizing the probability of success, which Priya will further discuss. This prioritization process will be informed in part by key data readouts expected in 2022. In Alzheimer's disease, together with Eisai, we plan to complete the rolling submission for lecanemab under the Accelerated Approval Pathway in the U.S. during the second quarter of this year. In addition, we expect a readout of the Phase III CLARITY AD, complementary trial for lecanemab this fall. Based on the results of this study, we plan to submit for full FDA approval by the first quarter of 2023 with the opportunity for lecanemab to become the first anti-amyloid antibody to obtain full approval for Alzheimer's disease in the U.S. In neuropsychiatry, we are working with Sage to advance zuranolone as an important new potential option for MDD and PPD. We recently initiated the rolling submission of the zuranolone in MDD and expect to complete the filing in the second half of 2022. We also look forward to the Phase III SKYLARK study readout in PPD, expected mid this year with an associated filing for PPD anticipated early next year. Also in neuropsychiatry, we expect the Phase II readout for BIIB104 in cognitive impairment associated with schizophrenia in mid-2022. Second, we will implement additional cost reduction and productivity measures above and beyond our previously communicated initiatives to further align our costs with our revenue base. These measures will include the substantial elimination of our commercial infrastructure supporting ADUHELM as well as other cost reduction while we continue to fund promising pipeline and commercial opportunities. Third, we are executing on international growth opportunities with a focus on key emerging markets, such as China and certain markets in both Latin America and the Middle East. This includes the continued launch of SPINRAZA and may also include pursuing local business development opportunities. Both -- we plan to drive renewed growth in our biosimilars business, although our portfolio of NTMS products slightly past the peak of its life cycle. We currently have four more programs in development, and in the near term, we are preparing to launch Bioepis, referencing LUCENTIS in the U.S. in the coming half. Our fifth near-term priority is capital allocation. Biogen is fortunate to have a strong balance sheet with $4.8 billion in cash as of the end of the quarter and modest net debt, as well as strong cash flow generation. Going forward, we plan to continue to focus the deployment of cash towards initiatives designed to create incremental revenue growth opportunities while continuing to return cash to shareholders through share repurchases. In summary, the challenges faced by the company over the last -- the past 12 months have been significant. We are committed to taking advantage of all the strengths we have, including our talent, our commercial portfolio, our manufacturing capabilities, our pipeline, which includes 10 programs in Phase III filed and, of course, our strong balance sheet to deliver on the performance that is expected from us. Let me conclude by saying that it has been an honor to lead this outstanding company during such a challenging period of time and to work closely with so many dedicated and talented colleagues. I am very proud of all that we have achieved. I want to thank the Board of Directors and my colleagues for their support during this period. I will be leaving at a time of promise for Biogen with noteworthy potential for value creation, and I look forward working with my successor through a smooth transition. I will now turn the call over to Priya for an update on our recent progress in R&D.

Mike McDonnell:

Thank you, Priya, and good morning, everyone. I will provide some key highlights around the financial performance for the quarter and review our full year 2022 guidance. Please note that all financial comparisons are versus the prior year, unless otherwise noted. Total revenue for the first quarter was $2.5 billion. Our MS business inclusive of OCREVUS royalties delivered $1.6 billion in revenue. TECFIDERA continues to be impacted by generic entry in the U.S. and was negatively impacted by pricing pressure outside of the U.S. VUMERITY first quarter global revenue was $128 million. We are pleased with VUMERITY's trajectory in the U.S. and are making good progress towards launching in up to 20 markets outside the U.S. this year. TYSABRI global revenue increased 3%. In the U.S., TYSABRI revenue benefited from favorable pricing that more than offset modest volume declines. Outside the U.S., we were pleased to see continued patient growth. Interferon global revenue declined by 23% due to the continued shift from the injectable platforms to oral or high efficacy therapies. Moving now to SMA. SPINRAZA global revenue declined 9%. In the U.S., although revenue growth of 10% was driven by positive channel dynamics, we were encouraged to see new patient starts at the highest levels in over 2 years and a continued slowdown of discontinuations versus the prior quarter. Outside the U.S., the revenue decline was driven primarily by the timing of shipments in certain markets, competition and negative currency impacts, partially offset by strong initial uptake in China as this was the first full quarter since receiving national reimbursement in China. Global SPINRAZA revenue grew 7% versus Q4 of 2021, driven by solid sequential performance outside the U.S. as well as some seasonality dynamics in the U.S. Moving to our biosimilars business, revenue declined 5%. While volume increased, this was more than offset by pricing pressure and negative currency impacts. In April, we completed the transaction to sell our equity stake in our biosimilar joint venture. As a reminder, the economics for anti-TNF and ophthalmology programs will be substantially unchanged. In addition, we are preparing to launch Bioepis the U.S. in the coming months. We expect a gradual launch with more meaningful revenue contribution starting in 2023. Overall, we expect full year biosimilars revenue to decrease versus the prior year due to pricing pressure in Europe. Total anti-CD20 revenue grew 3% with increased OCREVUS royalties being partially offset by a continued decline in RITUXAN revenues due to biosimilar competition. First quarter gross margin was negatively impacted by a $275 million charge for ADUHELM inventory write-offs, as well as approximately $45 million of idle capacity charges. Note that Eisai's share of these charges is reflected in the collaboration profit sharing line. Moving now to expenses and the balance sheet. Q1 non-GAAP R&D expense was $552 million. Non-GAAP SG&A was $635 million, including approximately $80 million related to ADUHELM. Eisai's share of these costs are also reflected in the collaboration profit sharing line. First quarter collaboration profit sharing reduced our net operating expense by $117 million, which includes reimbursement of approximately $182 million from Eisai, partially offset by $64 million of net profit sharing expense related to our collaboration with Samsung Bioepis. In the first quarter, we generated approximately $162 million in cash flow from operations, which was negatively impacted by the timing of certain payments. Capital expenditures were $58 million and free cash flow was approximately $104 million. We ended the quarter with $7.3 billion in debt, $4.8 billion in cash and marketable securities, and $2.5 billion in net debt. We subsequently also received approximately $1 billion from the sale of our JV equity to Samsung Biologics. Additionally, our $1 billion revolving credit facility was undrawn as of the end of the quarter. Overall, we remain in a very strong financial position with significant cash and financial capacity to invest in growing the business over the long term. Let me now turn to our updated full year guidance for 2022. We are reaffirming our full year revenue guidance of $9.7 billion to $10 billion. This revenue guidance reflects the strengthening of the U.S. dollar from January 1 through April 29, resulting in an estimated currency headwind of approximately $120 million, net of hedging activities. We are also reaffirming our full year non-GAAP diluted EPS guidance of $14.25 to $16, despite the $0.76 impact of ADUHELM inventory write-off as well an impact of approximately $0.35 related to the strengthening of the dollar that I just mentioned. Although our prior guidance did not assume either the inventory write-offs or the currency headwinds, we believe the additional cost measures announced today as well as better performance in our base business can largely offset these impacts. This financial guidance assumes continued declines in RITUXAN revenue due to biosimilar competition as well as continued erosion of TECFIDERA revenue in the U.S. due to generic entry. This guidance also continues to assume the potential entry of TECFIDERA generics in the EU in the second quarter of 2022. We expect to decrease revenue from these high-margin products as well as the ADUHELM inventory charges to reduce our gross margin percentage when compared with 2021. This guidance reflects the initial implementation of the additional cost reduction and productivity measures, which Michel discussed. These additional measures are expected to yield approximately $500 million in annualized savings in addition to the previously communicated initiatives already targeting approximately $500 million in annualized savings. This brings total expected annualized savings to approximately $1 billion, a portion of which will be reinvested in strategic initiatives over the coming years. We expect non-GAAP R&D expense to be between $2.2 billion and $2.3 billion, which is unchanged from our previous guidance. Non-GAAP SG&A expense is expected to be between $2.3 billion and $2.4 billion, which is a decrease from prior guidance of $2.5 billion to $2.6 billion, which is due to the additional cost reduction measures just mentioned, which we expect to primarily impact the third and fourth quarters. This guidance assumes that foreign exchange rates as of April 29 will remain in effect for the remainder of the year, net of hedging activities and does not contemplate any further strengthening or weakening of the dollar throughout the year. We assume that we will utilize a portion of the remaining share repurchase authorization of $2.8 billion throughout the year. Please see our press release for other important guidance assumptions. So in summary, we continue to execute on our core business objectives this quarter and are now focused on a set of near-term operational priorities, which we believe can drive value creation over time. We'll now open the call for questions.

Matthew Harrison:

Great. Good morning, thanks for taking the question. Michel, I was hoping you could comment on the CEO transition here in terms of timing as well as what the Board is looking for in terms of the successor, and wishing you all the best in the transition. Thank you.

Operator:

We will now take our next question from Umer Raffat from Evercore.

Mike McDonnell:

Yes, Umer, it's Mike. Thank you for the question. So the cost savings that we mentioned today, the additional $500 million run rate that will be largely tied to the ADUHELM infrastructure. And we talked about that on our last call that we had initially expected about a $400 million number in 2022. And so obviously, that will be cut substantially. So in the SG&A guide where we took that down by about $200 million, that largely is a significant piece of it. Beyond that, we will obviously look at some of the non-revenue facing pieces in G&A and others in order to achieve that run rate. And as we've said in our prepared remarks, we may invest certain portions of that $500 million in savings into the -- into future growth initiatives with the overall priority being to return to growth. I will say in closing that as it relates to guidance, we were able to reaffirm our guidance, notwithstanding the inventory write-offs and the currency headwinds that we were facing. And that was really a result of two things. One is the cost initiatives, and then the second was that the top line has performed a little bit better than what we had originally expected at the beginning of the year. And I would point to SPINRAZA MS as well as the CD20s being a little bit stronger than expected, and that impact between the cost savings and the revenue. It's about half and half that contribute to our ability to hold the EPS in the same place. So we'll continue to take necessary cost measures to align with the revenue trajectory of the business. And hopefully, that's some helpful color.

Operator:

We will now take our next question from Robyn Karnauskas from Truist Securities. Please go ahead.

Michel Vounatsos:

Priya?

Michel Vounatsos:

Operator, we’ll take the next question please. We’re having technical difficulties, we’ll try to rejoin the call. [Technical Difficulty]

Salveen Richter:

Good morning, thanks for taking my question. In terms of your capital allocation strategy to drive growth, how much of a priority is business development?

Operator:

We will now take our next question from Michael Yee from Jefferies. Please go ahead.

Priya Singhal:

Thank you, Michael. Yes, I would say that across the board, we are going to be driven by science and integration and maximizing the value that we bring to patients with diseases of high unmet need. So I think we would evaluate all options. But I think the science has to be the driver, and that's how we would do the evaluations. So yes, exactly as you said.

Michel Vounatsos:

Potentially for some, but not for all. I think that Biogen will remain on the upper hand on a few priorities, but we'll be open to look for partnering on others. But it's for Priya and the team to determine with the support of the governance of the company.

Cory Kasimov:

Good morning, guys. Thanks for taking the question. I'm curious, what is significantly scaling back ADUHELM's commercial infrastructure, say, if anything, about your expectations for the Phase III lecanemab data? Or is it simply too long to wait until you get full approval even if lecanemab is successful in CLARITY AD? And along those lines, can you remind us of how your responsibilities for commercialization on that front might be any different than with ADUHELM? Thank you.

Operator:

We will now take our next question from Marc Goodman from SVB. Please go ahead.

Michel Vounatsos:

Yes, absolutely. And I think it's a very important question. It's all about having the right priorities and somehow rebalancing the risk profile of the portfolio. And we know that. And this goes with neuroscience. That Priya will say more.

Operator:

We will now take our next question from Brian Abrahams from RBC Capital Markets. Please go ahead.

Michel Vounatsos:

Thank you for the comments. Priya?

Operator:

We will now take our next question from Geoff Meacham from Bank of America. Please go ahead.

Priya Singhal:

Thank you. I think that, first of all, we remain committed to Alzheimer's disease. And lecanemab is -- we are very privileged and honored to have 2 Abeta removal agents. Aducanumab, we still continue to invest in EMBARK and ENVISION. We think that these will have potentially very critical scientific data that can impact not only the product but also the field. So that remains very important. We continue to invest in early Alzheimer's disease programs. As I mentioned, we have a BIIB080, which is our anti-tau ASO, and then we have BIB113, which is an OGA inhibitor. Very different sort of approaches to tau pathology. So this remains very important. We have other assets which have yet unnamed pathways and targets, which I can't speak about, but there are many, many others as well. So we remain committed to Alzheimer's disease. We are definitely taking all our learnings from the scientific approach, but also on how we would approach clinical development. So we are continuing to strengthen our clinical development expertise in the area. Would we be open to other assets? Yes, we continue to look and scour the external opportunities. At any given time, we are looking at many assets. And again, as I've said, the science will drive the way. The science and the value will continue to drive the way. So that's -- I would say, yes, we are absolutely interested and we continue to remain highly, highly committed to Alzheimer's disease. Thank you.

Jay Olson:

Thanks for taking the question. And thanks to Michel for his constant dedication to patients. My question is about the balance sheet. And if you were to pursue a larger business development transaction, how much debt would you be willing to take on? Thank you.

Operator:

We will now take our next question from Phil Nadeau from Cowen & Company. Please go ahead.

Priya Singhal:

Thank you. So first of all, CLARITY AD, we haven't spoken externally about the powering of the study, but Eisai has commented on it. In the Phase II study, we had several arms and the outcome was empowered for CDR Sum of Boxes. That is actually very different. Phase II has informed how Phase III has been designed and it is powered to detect a statistically significant difference on CDR Sum of Boxes. So that's one aspect I wanted to cover. The second is that CDR sum of boxes, we believe, is the right primary endpoint for this patient population and for the MCI in early Alzheimer's disease. This has cognitive and functional elements. We believe that it is the most relevant primary endpoint. And we feel that we are fairly confident in the design of the study to kind of give us the outcome. Now what kind of p-value is very hard, I would be speculating, so I won't speculate here. But we feel that the study is designed appropriately and that the results would be important to review. I think in terms of clinical meaningfulness, we have done a lot of work ourselves. There's a lot of external dialogue. And we do believe that, honestly, the EMERGE data that we had with the 22% difference is highly clinically relevant and clinically meaningful to KMEs and to patients. So we've done a lot of work around this. And I'm sure you've seen that in the public domain. Beyond that, I don't think I can comment on it. Thank you.

Operator:

We will now take our final question from Mohit Bansal from Wells Fargo. Please go ahead.

Mike McDonnell:

Yes. So thank you for the question, Mohit. And obviously, we did not buy any shares back during the quarter, and you shouldn't be looking quarter-to-quarter because that can vary depending on what we have in the way of business development activity, timing of windows, other considerations, et cetera. But we do expect to utilize a portion of the $2.8 billion that remains throughout the remainder of 2022, and we continue to believe that our stock is a good investment. But at the same time, you obviously will not see us repurchasing shares at the pace that you saw back 2, 3, 4 years ago because of the situation with TECFIDERA and RITUXAN, but we do continue to see it as a good investment and it will be a balance between BD and share repurchase as we go. But we'll be smart and balanced about it. And our capital allocation, as we mentioned, is one of our key operational priorities as we look forward throughout the rest of 2022.

Operator:

Thank you. That concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.

Operator:

Good morning. My name is Madison and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Fourth Quarter Earnings Call and Financial Update. [Operator Instructions] Thank you. I would now like to turn the conference over to Mr. Michael Hencke, Head of Investor Relations. Mr. Hencke, you may begin your conference.

Michel Vounatsos:

Good morning, everyone and thank you for joining us. I will start by briefly reviewing our financial performance and Mike will provide more details. For the fourth quarter, Biogen generated approximately $2.7 billion in revenue, representing a decrease of 4% year-over-year as we continued to experience the erosion of TECFIDERA revenue in the U.S. due to the impact of generic entry. Fourth quarter 2021 non-GAAP earnings were $3.39 a share. We believe this performance reinforces Biogen’s ability to execute well. However, given a number of challenges we have faced recently, we announced that we will implement cost reduction measures, which are expected to yield approximately $500 million in annualized savings and Mike will provide additional details. Let me now say a few words regarding the proposed National Coverage Determination, or NCD, for the class of monoclonal antibodies directed against amyloid for the treatment of Alzheimer’s disease. As currently written, the proposed NCD calls for coverage with evidence development or CED, which will provide reimbursement only for Medicare beneficiaries enrolled in an approved randomized controlled trial. In reaching this proposed recommendation, the Center for Medicare and Medicaid Services, or CMS, highlighted three key areas of focus for this class of therapies, all of which have implications for ADUHELM. First, CMS believes there are gaps in the data on the clinical benefit of these therapies. Second, CMS believes more information is needed about the potential risks of removing amyloid principally ARIA. And third, CMS would like additional data to be generated on the underrepresented communities in which Alzheimer’s disease is more prevalent. These are also areas of focus for Biogen with many important initiatives already underway. We have committed to constructive engagement with CMS to address their concerns and we agree with CMS that additional data maybe helpful to continue to characterize the benefit risk profile for this class of therapies. Now that ADUHELM is approved by the FDA, we believe the most helpful data generation can really only be generated from greater drug utilization in real world practice. We also agree with CMS that the final NCD decision should not lead to a duplication of ongoing activities. As currently postured, however, we believe the proposed CED requirements will be prohibitive for patients, overly burdensome, costly to companies and duplicative of the data that will be generated from ongoing trials and the FDA’s existing required post-marketing requirements. We believe the best way to address the concerns of CMS is to supplement the data from the ADUHELM Phase 3 studies. We generated data over 3,000 patients by taking a multi-pronged approach, leveraging the Phase 4 inflammatory study and vision, our EMBARK redosing study, which has enrolled approximately 1,700 patients; the ongoing ICARE AD registry; the ongoing Phase 3 studies of other antibodies in the class; and other ongoing and anticipated real world data generation efforts. We believe this extensive data generation opportunity will adequately address any open question regarding the clinical efficacy and safety of amyloid beta luring therapies. On this note, we expect to begin patient screening for the ENVISION study in May of this year, with the primary completion date anticipated approximately 4 years later. This is expected to be a global placebo-controlled trial aiming to enroll 1,500 patients with MCI due to Alzheimer’s disease or mild Alzheimer’s disease with confirmation of amyloid beta pathology. The planned endpoint will be CDR sum of boxes at 18 months, with a planned long-term extension for up to 48 months. We believe this study, combined with the other studies I mentioned, should address the questions raised by CMS. Therefore, we will continue to advocate for an NCD that provides rapid and equitable patient access by providing coverage only for the patients identified as most appropriate for treatment in our FDA-approved label, which generally aligns to our Phase 3 clinical trial population. We also believe this multi-pronged approach will allow for more equal access in all communities. We have concerns that the restrictions of the proposed CED would unfairly exclude access for patients in other self communities and geographically remote areas. In contrast, we expect both ENVISION and our ICARE AD registry, which seeks to enroll up to 6,000 participants to obtain more representative data from those communities by aiming to enroll 16% to 18% of U.S. participants from Black and Hispanic population. In summary, we will advocate for a final CD that tracks a better balance between patient access for an FDA-approved therapy today and the desire for additional data that can only be gathered over time and with higher levels of drug utilization in the real world. We look forward to discussing this consideration with CMS and working towards a final decision that is in the best interest of patients. Beyond the NCD last quarter, we presented additional data from the ADUHELM Phase 3 clinical trial showing the effect on downstream Alzheimer’s biology and the correlation between plasma P-cell reduction and less cognitive and functional decline. In addition, we published the Phase 3 ARIA findings in JAMA Neurology. As we look forward, we aim to expand both within and beyond neuroscience with a focus on four pillars to drive growth and value creation. First, we intend as a company to build on our strong foundation in neuroscience, where we currently have 26 programs in clinical development. Second, we have what we believe to be two compelling Phase 3 programs in lupus. This is a therapeutic area with a different risk profile and we are continuing to evaluate additional opportunities in specialized immunology. Third, over the last several years, we have also built a very successful new business with our biosimilars. We recently announced an agreement to sell our stake in the Samsung Bioepis joint venture to Samsung Biologics, with Biogen remaining in our current role as the commercialization partner for the Samsung Bioepis anti-TNF portfolio and ophthalmology programs. We currently anticipate that this transaction will close in mid-2022. Once closed, going forward, we will have an expanded ability to pursue the biosimilars business on our own as we aim to bring more biosimilar products to more patients in more geographies. Mike will provide more details. And lastly, we are also focused on accelerating our efforts in digital health to support our commercial and pipeline programs, while also creating opportunities for potential digital therapeutics. To this point, we have built a dedicated digital health portfolio, which includes the recently announced new collaboration with TheraPanacea with the aim of leveraging our significant database, but also machine learning, artificial intelligence to develop digital health solution that may improve patient care, accelerate drug development and further the understanding of underlying pathologies. Our progress across these four pillars provides us with the potential for two future waves of growth as we launch in new therapeutic areas and build new franchises. First, over the next few years, we believe we have a significant potential in Alzheimer’s disease and depression, two large therapeutic areas with significant and unmet needs. In Alzheimer’s disease, we have a deep pipeline of clinical and preclinical assets, leveraging multiple modalities and targets, including both amyloid and tau, with ADUHELM and Lecanemab, Biogen and Eisai have 2 out of the 4 potential anti-amyloid antibody therapies that are either approved or in late-stage development. In depression, we are collaborating with Sage Therapeutics on Zuranolone, which we believe has the potential to provide a valuable new option for patients suffering from major depressive disorder and postpartum depression. We believe our second future waves of growth anticipated in the mid to late 2020s will be driven by a number of diverse therapeutic areas, including stroke, Parkinson’s disease, and lupus with some of these programs already in Phase 3. These anticipated future waves of growth will be supported by our diversified pipeline, which today includes 32 clinical programs, 10 of which are in Phase 3 or filed. Additionally, outside of our core business, we are pleased to have recently exercised an option for mosunetuzumab, a late-stage investigational bispecific antibody targeting CD20 and CD3 in development by Genentech for oncology and potentially other indications. Exercise of this option will provide Biogen with a profit share, while Genentech will lead strategy and implementation with an expected FDA filing in the near future. This builds on Biogen and Genentech’s long history of productive collaboration, which began with rituximab. Our focus in 2022 will remain on execution and agility as we expect a number of important milestones. This includes the continued launch of ADUHELM in the U.S., the launch of VUMERITY in the EU and our expected entry into the U.S. biosimilars market with BYOOVIZ. We expect 5 data readouts, 3 of which are in Phase 3 and the completion of three regulatory filings in Alzheimer’s disease, depression and biosimilars. Before I turn the call over to Priya for an update on our progress in R&D, I want to first say how impressed I am by what I have seen from Priya, both as the Head of Safety and Regulatory Science and most recently as our Acting Head of R&D. Her ability to lead, her strategic thinking and her subject matter expertise gives me the utmost confidence in her ability to advance our pipeline, while we work to name a permanent successor. Please go ahead, Priya.

Mike McDonnell:

Thank you, Priya, and good morning, everyone. Thank you for joining us. I’ll focus my commentary on fourth quarter results along with some discussion regarding the full year 2021. Total revenue for the fourth quarter of $2.7 billion declined 4% versus the prior year at both actual and constant currency. Total revenue for the full year of $11 billion declined 18% versus the prior year at actual currency and 19% at constant currency. This decline was mostly driven by TECFIDERA generic entry in the United States. Non-GAAP diluted earnings per share in the fourth quarter, was $3.39. Full year non-GAAP diluted earnings per share, was $19.22. Total MS revenue inclusive of OCREVUS royalties in the fourth quarter was $1.8 billion. Global TECFIDERA revenue in the fourth quarter was $486 million. U.S. revenue was $161 million. Outside of the U.S., TECFIDERA revenue of $326 million increased by 13% versus the prior year with 7% growth in underlying patients. VUMERITY fourth quarter global revenue was $125 million as compared to $39 million in the fourth quarter of 2020. We expect VUMERITY to continue to grow both in the U.S. and outside the U.S. TYSABRI fourth quarter global revenue of $513 million increased 8% versus the prior year, benefiting from positive channel dynamics in the U.S., and we were pleased to see continued global patient growth. Moving to SMA, global fourth quarter SPINRAZA revenue of $441 million decreased 12% versus the prior year. In the U.S., SPINRAZA revenue of $150 million decreased by 6% versus the prior year, as we saw continued impact from competition. However, we were encouraged to see that discontinuations moderated somewhat versus Q3 of this year. U.S. SPINRAZA revenue increased 7% versus the prior quarter, inclusive of some favorable pricing and channel dynamics. Outside the U.S., SPINRAZA revenue of $291 million decreased 14% versus the prior year due to competition and pricing pressure. We continue to believe that SPINRAZA can return to growth over the medium to long-term. Total ADUHELM revenue for the fourth quarter was $1 million. Moving to our biosimilars business, fourth quarter revenue of $221 million increased 12% versus the prior year, with increased volume partially offset by pricing pressure. Our Q4 biosimilars revenue benefited from a one-time price adjustment of approximately $10 million. Last week, we announced that we have entered into an agreement to sell our equity stake in our biosimilar joint venture, Samsung Bioepis to Samsung Biologics or aggregate consideration of up to $2.3 billion. We believe this represents an attractive financial return given that our cumulative investment in the joint venture was $727 million. It’s important to note that we will continue to record revenue and costs associated with the commercialization of BENEPALI, IMRALDI and FLIXABI with economics that will be substantially unchanged from what you have seen previously. So we are pleased with this transaction because we not only maintain the commercialization rights that we have, but we will also have an expanded ability to pursue additional biosimilars products on our own going forward. Closing of this transaction is currently anticipated in mid-2022, contingent on the effectiveness of a securities registration statement filed by Samsung Biologics and satisfaction of certain regulatory and other customary closing conditions. Total anti-CD20 revenue in the fourth quarter of $414 million decreased 1% versus the prior year. RITUXAN revenue of $153 million decreased 29% versus the prior year due to the impacts of COVID-19 and continued erosion from biosimilar competition. OCREVUS royalty revenue of $261 million increased 29% versus the prior year. As a reminder, the effective royalty rate for OCREVUS royalties resets each calendar year. Fourth quarter gross margin was 76% of revenue, down from 83% in Q4 of 2020. And the reduction in gross margin versus prior year was primarily due to a $164 million charge for ADUHELM inventory and purchase commitments in excess of forecasted demand. Moving now to expenses on the balance sheet, Q4 non-GAAP R&D expense was $700 million, which includes a $60 million opt-in payment to Ionis for BIIB115 and a cost of approximately $50 million for the exercise of our option with Genentech for the bispecific antibody mentioned earlier. We will share any operating profits and losses for this program in the low to mid-30% range in the United States. Non-GAAP SG&A was $785 million, including approximately $155 million related to ADUHELM. Eisai’s reimbursement of U.S. SG&A costs of approximately $45 million is reflected in the collaboration profit sharing line. Fourth quarter collaboration profit sharing reduced our net operating expense by $67 million, which includes reimbursement of approximately $140 million from Eisai related to ADUHELM commercialization, partially offset by $75 million of net profit sharing expense related to our collaboration with Samsung Bioepis. During Q4 of this year, our effective non-GAAP tax rate was approximately 17%. During 2021, we repurchased approximately 6 million shares of our common stock for a total value of $1.8 billion. No shares were repurchased in the fourth quarter of 2021. As of December 31, 2021, there was $2.8 billion remaining under the share repurchase program which was authorized in October of 2020. Our weighted average diluted share count was approximately 147 million shares for the fourth quarter. In 2021, we generated approximately $3.6 billion in cash flow from operations. Capital expenditures were $258 million, and free cash flow was approximately $3.4 billion. We ended the year with $7.3 billion in debt, $4.7 billion in cash and marketable securities and $2.6 billion in net debt. In addition, our $1 billion revolving credit facility was undrawn as of the end of the year. Overall, we remain in a very strong financial position with significant cash and financial capacity to grow the business over the long-term. Let me now turn to our full year guidance for 2022. We expect full year 2022 revenue to be between $9.7 billion and $10 billion. This financial guidance assumes minimal ADUHELM revenue in 2022, continued declines in RITUXAN revenue due to biosimilar competition as well as continued erosion of TECFIDERA revenue in the U.S. due to generic entry. This guidance also assumes the potential entry of TECFIDERA generics in the EU as early as the first half of 2022 as the outcome of the ongoing challenges to TECFIDERA market protection is difficult to predict. We expect the decreased revenue from these high-margin products to reduce our gross margin percentage as compared to 2021. We expect full year 2022 non-GAAP diluted EPS between $14.25 and $16. Our guidance assumptions are highly dependent on the final national coverage determination, which is currently uncertain. If the final NCD, which is expected in April, is not broader than the draft NCD, our anticipated results and guidance may be impacted. This guidance assumes that we will not have any write-offs of ADUHELM inventory in 2022 which is valued at approximately $225 million as of the end of 2021. This guidance also assumes reasonable levels of utilization of our manufacturing capacity dedicated to our Alzheimer’s disease programs. If our manufacturing capacity is underutilized, we will incur incremental period costs, which are not reflected in our guidance. We expect non-GAAP R&D expense to be between $2.2 billion and $2.3 billion, and our non-GAAP SG&A expense to be between $2.5 billion and $2.6 billion. This non-GAAP SG&A expense estimate includes approximately $400 million in support of the launch of ADUHELM, of which approximately $145 million would be reimbursable by Eisai and reflected in the collaboration profit sharing line. These R&D and SG&A expense estimates reflect the implementation of previously disclosed cost reduction measures, which are expected to yield approximately $500 million in annualized savings, of which approximately $350 million is expected to be realized in 2022. These savings are expected to be achieved through various initiatives, which may include downsizing of our global Alzheimer’s infrastructure the savings from which would be shared with Eisai and operating efficiency gains across SG&A and R&D. These savings are expected to be offset by approximately $200 million in additional investments in our pipeline and strategic initiatives. In the event of a final NCD that is not broader than the draft NCD, we anticipate taking further cost reduction measures, which are not reflected in our guidance to further align our cost base with our revenue base. Some of the savings from these further cost reduction measures would be shared with Eisai. We expect our non-GAAP tax rate for 2022 to be between 15.5% and 16.5%, and we assume that we will utilize a portion of the remaining share repurchase authorization of $2.8 billion throughout the year, although this will depend on a variety of factors, including our business development activities. Foreign exchange rates as of December 31, 2021, are assumed to remain in effect for the year, net of hedging activities, we have not included any impact from potential acquisitions or large business development transactions as both are hard to predict or any impact of potential tax or healthcare reform. I will now turn the call back over to Michel for his closing remarks.

Operator:

Thank you. [Operator Instructions] Your first question comes from the line of Robyn Karnauskas with Truist Securities.

Michel Vounatsos:

Thanks for the question. As you know, we have a strong balance sheet, and we are continuously looking at how we can deliver long-term shareholder value. So, we are actively working on some business development opportunities to enrich our pipeline, complement our portfolio in line with our strategy. And we will look at the deals based on their own merits, and we are working on that.

Michel Vounatsos:

And Robyn, if I may, an important consideration is now that we can create more value with our biosimilars portfolio, more products, more geographies.

Michael Yee:

Thank you. Good morning. I guess my question is in regards to ADUHELM, what you are actively doing to try and change the NCD decision. And again, to reiterate, if it’s not changed dramatically, you guys would look to cut – further cut expenses. So, can you talk about what that would entail? And under what scenario that might change, for example, of BAM with positive. Maybe just outline the thoughts and the roadmap for ADUHELM in 2022? Thank you.

Alisha Alaimo:

Yes. Thank you, Michel, and hello, Michael. Thank you for the question. In regards to what we have been doing as an organization, during the past three weeks, we have met with CMS to share our perspective and answer any of the questions that they have. And you will see that we will be submitting our in-depth comments in the coming days, obviously, during this comment period. In parallel, we have also been educating physicians and policymakers and advocates about what this would actually mean for patients. I think a lot of people, as you have seen, have been quite confused by the draft NCD and what a CED actually means to them. And as you have likely seen, many stakeholders have had similar concerns. So, we have seen patients, patient advocates, HCPs, other manufacturers and industry groups like bio and pharma also sharing their perspectives quite publicly. And there is one week remaining for the open comment period, and we are very much looking forward to this final decision in April, so the community has more clarity. And that brings me now to the comment period. You may have seen over and I think as of today, it’s around 2,600, 2,700 public comments submitted to CMS. And again, with still one week remaining, I think it’s important for everyone to remember and to keep in mind that CMS indicates on their website that the most helpful comments are ones that site published clinical evidence. And when you actually separate the comments out from the dementia specialist, you will see that many of them are against this draft NCD. With prior comment periods, we have seen that in the final days, you tend to see more letters that are heavily researched and referenced. And as I have said before, you will see ours being posted in the coming days. So, we do remain engaged actively with all stakeholders. We do remain engaged, obviously, still with CMS, and we are looking forward to the final decision in April.

Mike McDonnell:

And Mike as a closing comment, if I may. As a company, we are fully committed to deliver on this data being the international study being the real world ones. And we believe that this extensive data generation will adequately address any open question raised by CMS.

Matthew Harrison:

Great. Good morning. Thanks for taking my questions. I was hoping you could just clarify on the TECFIDERA EU contribution to guidance and what we are going to learn this year, which may either help us understand if that revenue is at risk this year, or if you could continue to expect to see it and that could be potential upside to your current guidance? Thanks.

Mike McDonnell:

So, this is assumption driven at the same time for – at the same time, as already communicated, we are launching VUMERITY in 20 markets within the EU.

Umer Raffat:

Hi guys. Thanks for taking my question. I wanted to focus on BAN2401 for a second and really just two questions there. One, can you help us understand the magnitude of missed doses in the Phase 3, because I recall you increased the sample size by 200 patients. And I wonder if that percentage increased versus the original sample size reflects the amount of missed doses. And secondly, the primary analysis, is that ITT, or will that screen out the rapid progressors or certain subsets of patients based on some of the learnings from ADUHELM? Thank you very much.

Priya Singhal:

Thank you for the question. So, just stepping back, I just want to reiterate that Clarity AD will read out in Q3 this year, and we remain very excited about that outcome. I cannot really comment on the details of the statistical analysis plan. But what I can tell you is that any learnings that can be incorporated have been incorporated and that the primary endpoint remains the CDR sum of boxes. So, we look forward to the readout. Thank you.

Marc Goodman:

Yes. Good morning. So look, there is two key events, right. We have the CMS decision that we are waiting on. And then obviously, we have the lecanemab data in the third quarter. So, just kind of wondering your thought process of if the first one goes disappointing, do you make the changes, or are you waiting for the lecanemab data because we are kind of wondering whether you are going to break down the Alzheimer’s infrastructure before you get that data? And how much business development is being impacted by those two decisions? I mean are you looking at these BD opportunities right now regardless of what happens with those events? Thanks.

Mike McDonnell:

And I think, Marc, I would just add that the – how much of our infrastructure we would allocate to lecanemab versus not, etcetera, that really depends on what the final NCD says. It’s across the entire class, and that would really depend on the specifics of how the final NCD reads. I would say on BD, we will continue our BD efforts regardless. Those are ongoing, and they are always ongoing.

Salveen Richter:

Good morning. Thanks for taking my question. In light of the recent opt-in for the Roche compound, does this signal a greater structural move into oncology? And are there any other areas you are looking at as you pursue BD?

Operator:

And we will go ahead and take our next question from Cory Kasimov with JPMorgan.

Michel Vounatsos:

Priya.

Michel Vounatsos:

So, I think that we all have to do a better job, including diverse population, unfortunately affected with a high level of incidence for the disease in interventional studies and real-world studies. And this is what we are doing. And I think – I hope that this will be well received by CMS. And we did communicate that for the ENVISION study, we aim to reach from 16% to 18% of diverse population, the same in real world with ICARE AD. So moving forward, we will gather much more data, and the same for the other real world evidence opportunities that we are sharing with CMS.

Jay Olson:

Hey. Thanks for the updates and for taking the question. Since self-administered subcu formulation of ADUHELM could fall under the purview of Medicare Part D and therefore, lie outside the scope of a potential CED if it’s finalized, could you comment on where Biogen stands with regard to the development of subcu ADUHELM? I think you did a bioequivalent study a few years ago. So, is subcu something that could be a relatively near-term option?