Q3 2024 Biogen Inc Earnings Call
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Cynthia: Good morning, my name is Cynthia and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen 3rd Quarter, 2024 earnings call in business update. A line to have been placed on mute to prevent any background noise.
Cynthia: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad.
Cynthia: Please limit yourself to one question to allow other participants time for questions. If you're required any further follow-up you may press star one again to rejoin the queue.
Cynthia: Today's conference is being recorded. Thank you.
Speaker Change: I would now like to turn the conference over to Dr. Steven Amado, Senior Director Evan Dester Relations. Dr. Amado, you may begin your conference.
Speaker Change: Thank you, good morning and welcome to Bige & Third Quarter 2024 earnings call. During this call, we'll make forward-bucking statements which involve risks and uncertainties that may cause actual results to differ materially from our forward-bucking statements.
Speaker Change: We provide a comprehensive list of risk factors in our SEC filings which I encourage you to review
Speaker Change: Our earnings release and other documents related to our results as well as reconciliation between Gap and non-Gap results discussed on this call can be found in the investors section of biogen.com We have also posted this slide on our website that will be used during this call.
Speaker Change: On today's calling, joined by our president and chief executive officer, Chris V. Bakker, Dr. Priya Singhal, head of the development, Mike McDonnell, Chief Financial Officer, as well as our head and president of North America, Alisha Alimo, who will be available for Q&A.
Speaker Change: and we'll make some opening comments and then we'll move to the Q&A session. To allow us to get through as many questions as possible, we kindly ask that you limit yourself to one question. I will now turn the call over to Chris.
Speaker Change: Thank you Steve, good morning everyone. I'll start first by thanking you Steve for stepping up his interim head of IR and done a great job of preparing this for this quarter.
Speaker Change: Also earlier this week we announced the retirement plans of our CFO, Mike McDonnell, and also the appointment of his successor, Robin Kramer
Speaker Change: Mike is still very firmly in the saddle at CFO and we will be recognizing his significant contribution to byage and with the fourth quarter earnings call later.
Speaker Change: So I think by Aginus made significant and very strong progress over the last two years and I do think the company is well positioned for the future.
Speaker Change: Our launches are progressing well with good sequential quarter of recorded growth. Our cost base has been significantly reduced.
Speaker Change: But more importantly, I value for money approach to spending, I think it's been embedded in our culture.
Speaker Change: The acquisitions we've done today have been well received and are already creating value. And I think we have a strong late stage pipeline emerging.
Speaker Change: So we turn first to the launches. Let's start talking about the Ken B.
Speaker Change: Now although the Kimby revenue in the US continues to be below the expectations of our collaboration and the subscriber base is not expanded to the extent that we had anticipated.
Speaker Change: Global revenues still drew by 66% in the third quarter as compared to the second quarter.
Speaker Change: and we got continued uptake outside the US and new prescribed regret of nearly 40% in the US.
Speaker Change: The collaboration continues to refine the commercial strategy and we're seeing benefits from an increase in our sales force, really who started out there in the field from first to September. And we continue to evaluate opportunities to potentially accelerate our business.
Speaker Change: Now we continue to see some healthcare systems who are treating expand and extend and expanding their treatment types in the U.S.
Speaker Change: and more recently we're starting to see large infusion networks activating in high population geographies to help absorb patient demand. We've been encouraged by the rate of uptake outside the U.S. including Japan, where revenue nearly doubled from the previous quarter.
Speaker Change: I think there's been terrific launch activities in Japan and China. It does seem like a single payer system. That's also an enable that kind of growth.
Speaker Change: And overall we can expect continued sequential growth, quarter-on-quarter from the can be over the near term
Speaker Change: We believe there are few potential catalysts that could accelerate uptake, including the potential availability of IV maintenance, as soon as next year. A subcutaneous formulation for maintenance and eventually induction, and more widespread utilization of blood-based diagnostics.
Speaker Change: Just to underline how much of a list this is for physicians.
Speaker Change: Some of you may have noted an opinion piece in JAMA neurology, dated October 14th that was written by Katherine Pusson of UCSF Jeff Burns at University of Kansas and Brent Forster at TAS.
Speaker Change: They talk about the unprecedented time of advances.
Speaker Change: But equally, they say that challenge and the importance of translating scientific advances in diagnostics, treatment and care and to practice in a timely and equitable manner cannot be overemphasized.
Speaker Change: Innovation at the clinic healthcare system and policy levels is necessary to equitably translate advances at scale.
Speaker Change: So we continue to believe that this is going to be an important market.
Speaker Change: But again, we don't believe that we have a demand issue, it is just taking the healthcare system time to actually adapt to treating this number of patients.
Speaker Change: Turning to Sky Clara's, we saw increased demand globally, as we broaden our footprint, particularly in Europe.
Speaker Change: Guy Clarice is now generating revenue from both commercial and other paid mechanisms and 50 markets outside the U.S.
Speaker Change: This concludes the number of countries in the EU, where we are seeing increased demand quarter of a quarter.
Speaker Change: Now at this point I'd like to say there is a difference between how we generate revenue in the US and how we're seeing demand develop in Europe. In the US, our revenue is rising at the rate we find patients.
Speaker Change: In Europe, we are actually already out there commercializing the product, and we have a number of early access programs in place.
Speaker Change: But the strategy for a lot of products in Europe is to get patients on board while you're negotiating with governments to get reimbursement.
Speaker Change: At some point, then the governments reimbursed those patients and you have an immediate population of patients ready to go because they are already on treatment. So when you're looking at the progression quarter on quarter,
Speaker Change: The XUF piece is not going to be a reflection of growing demand, but it's going to be a reflection of what point in time do we get reimbursement for governments.
Speaker Change: But I can tell you that we are adding patients every day every week in Europe at a pace that has exceeded our expectations
Speaker Change: Now we are looking to expand access to more patients and there are now 11 regulatory filings that have been submitted globally. So we're looking now beyond the U.S. and Europe and they could start generating revenue as soon as next year.
Speaker Change: Zerzweb continues to output the former expectations, commercially in the U.S.
Speaker Change: What are we saw $12 million of revenue in the third quarter?
Speaker Change: and that's an increase of 49% over the second quarter, driven in part by a 40% increase in patients this quarter. I think the team has done an outstanding job with this launch. In all of the cases we've been talking about, McHambi.
Speaker Change: DiClaris and Zirzovey, I just remind everybody that these are not pre-existing markets. We are building these markets in each case.
Speaker Change: and that always takes longer than having incremental innovation where you go in and you just are looking to take some market share from pre-existing market.
Speaker Change: So if you could change the slide, Steve.
Speaker Change: Our goal is really for sustainable growth.
Speaker Change: and you know, there's short term and there's medium term growth. You know, when I came to the company I had really three major objectives. One is to...
Speaker Change: Put Viage in back onto a sustainable growth pattern for revenue to build a pipeline that can sustain that growth for Viage and well into the 2030s.
Speaker Change: and also to build a pipeline of leaders who will take this company to even more success in the 20-30s.
Speaker Change: So, as we look at the pipeline, I have to say, I think we are very excited about what we see emerging
Speaker Change: Again, we are biogen, we don't do incremental innovation, but I think there are some really interesting products that...
Speaker Change: We feel very good about because unlike a lot of products in the past with Bajans
Speaker Change: Where we go into phase 3, we don't really know whether they're going to work.
Speaker Change: I think we've seen an awful lot in biomarkers, in data and other indications that suggest there's a growing conviction in these assets.
Speaker Change: So, be ready.
Speaker Change: One of the things that excites me is that although this is an intratheical, as Priya will say, we recruited early on this one.
Speaker Change: and where finished recruiting. And to me, as someone who's had more commercial experience over 35 years, when I see a clinical trial recruiting early, particularly in a competitive space where they're existing therapies, that augures well for the year.
Speaker Change: for the product down the screen.
Speaker Change: I'm a producer of Luzimab, you know we saw positive phase 3 results and I like to congratulate Priya because Priya
Speaker Change: Had already thought about this in the work with UCB and there's actually a phase 3 protocol ready to go and so we'll be starting phase 3 very soon.
Speaker Change: Lupus is an area of huge on that need and we have not only Dapy but we have lit a philimab in two indications.
Speaker Change: And behind that we have also felt our demand back, she and Lupus Nefridis.
Speaker Change: and Felza, you know we had some very encouraging data at 10D Agle in Igan and we had breakthrough status on AMR.
Speaker Change: This is a game changer for us in terms of our pipeline because again here we've got phase two data that are very compelling. We all know that there are no guarantees in pipeline development, but at least we have, I think, reason to believe that that.
Speaker Change: that these products could come to market and make a big difference. And as we start to look at the peak revenue for each of these products,
Speaker Change: The cumulative of all of these, if they all actually made it to market and got approved, you know, have peak sales cumulatively of about 14 billion. And when you consider that our farm of business today is about 7.5 billion.
Speaker Change: This late stage pipeline could really transform biogen over the longer term. But I shouldn't really be talking about pipeline. The real expert is Priya and so with that I'm going to turn it over to Dr. Singhal.
Dr. Singhal: Thank you, Chris.
Dr. Singhal: Over the last two years, we have focused heavily on augmenting our pipeline as Chris noted with an eye towards transforming innovation into novel and impactful medicine.
Dr. Singhal: As a result, I believe our current pipeline has several programs that are both supported by encouraging clinical data and have the potential to deliver meaningful value to patients.
Dr. Singhal: This includes Dapy in Assyllie, Littafelah Mab in both Assyllie and CLE, Charles Zartemab in multiple immune-mediated diseases and our Tau ASO bib 80 in Alzheimer's as Chris suggested.
Dr. Singhal: While advancing these programs remains our top priority, we are also working to implement acceleration strategies across the broader portfolio to expedite decision-making while continuing to focus on execution.
Dr. Singhal: An important example of this is Baby D.
Dr. Singhal: where we recently completed enrollment in the amended phase 2 trial design and now expect a readout in 2026.
Dr. Singhal: Additionally, with the positive phase free results last month, we're moving very quickly with our collaboration partner UCB to initiate a second phase free study for DAPI in SLI this year.
Dr. Singhal: We are also implementing innovative new clinical development strategies to enhance clinical execution and accelerate cycle times.
Dr. Singhal: This includes initiatives like using AI to help optimize clinical trial participation and site selection.
Dr. Singhal: in parallel to these efforts.
Dr. Singhal: and aligned with our ambition of continuing to build the pipeline. We are working also with our research and corporate development colleagues to evaluate external innovation opportunities across the development stage and several indications.
Dr. Singhal: Overall, we believe that through these objectives we have the opportunity to execute on the meaningful opportunity that Chris has laid out for Biogen.
Dr. Singhal: Turning to the Quater, I would like to begin with Alzheimer's, where we are working with E-SY to continue generating important insights on LeCambi in early AD.
Dr. Singhal: This includes areas like long term treatment effect and real world evidence such as that presented at C-Tad, but importantly, we are also working to provide optionality for patients.
Dr. Singhal: and courage by data showing expanded benefit with continued LeChambe treatment and beyond just the removal of plaques, we continue to pursue maintenance-stosing options.
Dr. Singhal: We expect regulatory decisions on maintenance dosing for both the IV and the subcutaneous auto-injector next year in 2025.
Dr. Singhal: Furthermore, the ahead 3-4-5 study evaluating the ability of LeCambi to prevent or delay Alzheimer's in preclanical or pre-symptomatic AD and rolled well and we just completed enrollment this month in October.
Dr. Singhal: I look forward to us providing updates as this trial advances.
Dr. Singhal: We are also working to expand our leadership by advancing novel treatment approaches, including shuttles across different disease states and targets such as staff with baby.
Dr. Singhal: Moving to Immunology, we believe we are building an industry leading slave-stage pipeline, comprised of programs with established proof of concept.
Dr. Singhal: These programs cover a range of immune-mediated diseases that are characterized by significant unmet need.
Dr. Singhal: This includes our recent acquisition of the Zartumab, where we expect to initiate three phase three studies. Next year, in AMR, IGAN and PMN, continuing to evaluate other indications where this mechanism of action may be relevant.
Dr. Singhal: Additionally.
Dr. Singhal: We have multiple programs in Esselie.
Dr. Singhal: Veridis estimated that over 3 million individuals worldwide are affected and current standard of care are associated with suboptimal efficacy and various treatment related toxicities, leading to lasting negative consequences such as organ damage.
Dr. Singhal: Asleys also the number one cause of death in women aged 15 to 24 in the US and treatment options for, before during and after pregnancy, are limited due to safety concerns and contraindications for most common therapies.
Dr. Singhal: UNLESSCORING THE POTENCIAL OF OUR INMANOLOGY PYCLEAN.
Speaker Change: We are pleased to report that the phase 3 study of DAPE, plus standard of care, met the primary endpoint, showing a statistically significant greater improvement in disease activity as assessed by the Biclar endpoint at 48 weeks, versus placebo plus standard of care.
Speaker Change: Importantly, we also saw clinical improvements on key secondary endpoints, assessing disease activity and flare prevention to areas that represent key treatment goals for the management of SLE.
Speaker Change: Following the prior phase 2 study, Biogen along with our collaboration partner UCD, spent time analyzing the results in an attempt to design and de-risk a phase 3 study and demonstrate a potential treatment effect.
Speaker Change: These learnings combined with our understanding of the underlying disease biology, informed the design of the phase 3 study which included updated screening criteria to ensure patients had active disease in need of a biologic therapy on top of standard of care.
Speaker Change: The success of this approach is punctuated by the fact that Dapy is only the third molecule to show positive phase-free results in a global study in Italy over the last 20 years.
Speaker Change: We look forward to presenting detail results from the phase 3 study as a late breaker at the ACR annual meeting this month and together with UCB expect to initiate the second phase 3 study this year.
Speaker Change: Turning to SMA, our priority has always been on continuing to improve outcomes for patients.
Speaker Change: We were pleased to present detailed results from the Devote Study, evaluating the investigational Higher dose regimen of Nucenerson at the World Muscle Society meeting earlier this month.
Speaker Change: The higher those regimen consists of 250mg loading doses followed by 28mg maintenance doses every 4 months.
Speaker Change: This Regiment of High Dose delivers more drug in the first administration than the entire two-month loading phase of the approved Spinrata 12-mellogram Regiment.
Speaker Change: Consistent with the more rapid loading regimen, higher those new senorson, slowed neurodegeneration, faster than spin-rather 12 milligrams, as measured by neurofilament at base 64, an objective biomarker.
Speaker Change: The pivotal infantile on set cohort in part B of the vote, Matt the primary endpoint of change from baseline to six months in the drop-in-dend.
Speaker Change: Gumped to the pre-specified match sham group demonstrating a clinically and statistically significant improvement.
Speaker Change: We also observe trends in reduced risk of death, opulment and ventilation versus both sham control and the currently approved graduate.
Speaker Change: In addition, we shared initial results from the open-level, part C portion of the study with participants aged 4 to 65 transitioning from spin-rather 12 milligrams after an average of nearly 4 years on treatment.
Speaker Change: This group, she will improve and more the function after transitioning to higher dose.
Speaker Change: Bisa exciting results as we seek to help patients currently on the disease modifying therapy.
Speaker Change: Importantly, the high dose regimen was generally well tolerated and showed a safety profile similar to the approved 12 milligram regimen
Speaker Change: We believe these results highlight the unique potential of Flynn Raza to help address remaining unmet need in individuals with SMA and we aim to submit global regulatory filings later this year.
Speaker Change: In conclusion, this past quarter I believe we continue to execute well and achieved several important development milestones that highlight the potential of our pipeline to deliver meaningful new therapies to patient
Speaker Change: In addition to late stage readouts in Lupus and SMA, we also submitted X-US filings for the Rano loan and PPD and obtained the proofels for Sky Clarice and Paul Sardy in Switzerland and China respectively.
Speaker Change: We also presented new data insights across multiple disease areas at multiple medical meetings, including Alzheimer's, Neuromuscular and Veno's disease.
Speaker Change: i
Speaker Change: Today we believe that the pipeline is well positioned to deliver a regular cadence of pivotal readouts and potential launches.
Speaker Change: We continue to aspire to bring transformative medicines to patient's lives while we deliver on biogenes objective of achieving sustainable growth.
Speaker Change: Fogamon!
Speaker Change: I believe that the same core capabilities.
Speaker Change: and Deep Disease Area Expertise.
Speaker Change: that enabled us to reshape our current pipeline and establish leadership footholds.
Speaker Change: in areas like Alzheimer's, Imminology and Rare Disease, also uniquely positioned us to evaluate external innovation as we look for opportunities to augment our pipeline.
Speaker Change: With that, I would now like to hand the call over to Mike for the financial update.
Mike Mcdonnell: Thank you, Priya and good morning to everyone. I'd like to provide some color on our third quarter results.
Mike Mcdonnell: and all the comparisons that you'll hear me make are verses the 3rd quarter of 2023.
Mike Mcdonnell: and Lesie Hearme Note otherwise. Total revenue for the quarter was $2.5 billion, but total revenue in core pharmaceutical revenue were down 3%. Non-gap diluted EPS was $4.8.
Mike Mcdonnell: and that's down 6% in just a moment. I'll provide some additional detail on some key dynamics to note.
Mike Mcdonnell: from the third quarter. Non-gap operating income increased 4% versus the third quarter of 2023. As we continue to benefit from our R&D prioritization and fit for growth initiatives.
Mike Mcdonnell: We are pleased to again be raising our full year 2024 guidance range and in just a few moments, I'll provide some additional color on our raised guidance range for 2024.
Speaker Change: Tue Comments on revenue for the third quarter, our MS product revenue declined by approximately 9% and that was driven primarily by competitive dynamics in the space.
Speaker Change: Along with some channel dynamics.
Speaker Change: Importantly, we announced last week that the European Patent Office upheld the validity of Bajan's Tecpedera-related patent covering DMF dosing, which expires in February of 2028.
Speaker Change: We are pleased with the decision, whoever generic are challenging this pattern and we do anticipate further challenges.
Speaker Change: Ty Sabri has seen impacts from a biosimmer entering Europe and although a biosimmer is not yet launched in the U.S. we continue to see increasing competition in the high efficacy class.
Speaker Change: Next, our rare disease franchise produced revenue of $495 million and that represents growth of 10%.
Speaker Change: This guy Claris Lons continues to progress in the U.S. for revenue of $82 million, increased 8% from the second quarter, and that was driven by increased demand.
Speaker Change: Sky Claris is now generating revenue in 15 countries outside the US.
Speaker Change: With third quarter global revenue of $100,000,000, this was up modestly from the second quarter of inviting increasing demand, and that was partially offset by some pricing and reimbursement dynamics in some newly launched markets.
Speaker Change: Globals spin rods a revenue of $381 million to clients $67 million or 15%. That was impacted by the loss of an annual tender in Russia which resulted in an unfavorable impact of approximately $45 million in the third quarter.
Speaker Change: It is important to note that this tender, which occurs in contributes to Revenue, only wants each year, affected Q3, 2020, 4 results, but we do not expect for the Revenue impact for the rest of this year.
Speaker Change: The Global Decrease was also impacted by the timing of shipments and some foreign currency.
Speaker Change: Ben Raza, US revenue was up 2% to 153 million dollars and we remain encouraged by the performance here.
Speaker Change: Zerzouvae delivered $22 million of revenue in the quarter, and that's up 49% from the second quarter, and we continue to be encouraged by an increase in demand.
Speaker Change: We again saw sequential growth for LeCambi with third quarter of global in market sales, but by a size of approximately $67 million and that's up 66% versus the second quarter.
Speaker Change: LeCambi in market sales in the US were $39 million, that's up 33% versus the second quarter. And finally contract manufacturing royalty and other revenue was $250 million. That was notably lower year over year as expected due to the completion of certain batch commitments.
Speaker Change: in 2023.
Speaker Change: Now I'll turn to a few comments on third quarter expenses.
Speaker Change: Non-Gap cost the sales as a percentage of revenue decreased to percentage points. That was driven primarily by product mix, particularly the year-over-year increase in revenue from new product launches and the decrease in contract manufacturing revenue, as well as lower idle capacity charges.
Speaker Change: Non-Gap R&D expense decreased $48 million as we continue to see benefits from our R&D prioritization initiatives.
Speaker Change: Non-Gap S.E.N.A. expense increased 1% in the third quarter as benefits from our fit for growth initiative, allowed us to absorb most of the $45 million of incremental costs in the third quarter associated with our launches.
Speaker Change: We continue to believe we can go on $1 billion of gross and $800 million of net savings associated with our kit for growth initiative by the end of 2025.
Speaker Change: Non-Gap EPS was $4.8 in the third quarter
Speaker Change: EPS was unfavorably impacted by certain non-operating items, including a decline of approximately $80 million of net interest income on lower cast balances as a result of the Riyada and high bio acquisitions.
Speaker Change: This was partially offset by some favorable tax items in the quarter which added about $16 million to our net income.
Speaker Change: Now, a brief update on our balance sheet, we ended the quarter with $1.7 billion of cash in marketable securities and approximately $4.6 billion of net debt.
Speaker Change: We were able to generate approximately $900-1 million of free cash flow, and that was our highest free cash flow since the second quarter of 2021.
Speaker Change: 3rd quarter 2024, Free Castle benefited in part from some favorable work in capital dynamics.
Speaker Change: We continue to believe that our balance sheet remains strong and provides us the capacity to continue to invest in both internal and external growth opportunities.
Speaker Change: i
Speaker Change: Turning now to guidance, we're pleased that the business performance year date again supports raising our full year 2024 non-gap diluted EPS guidance range from between $15.75 and $16.25.
Speaker Change: to a new range of between $16.10 and $16.60. This new range reflects expected growth of approximately 11% at the midpoint of the range compared to full year 2023.
Speaker Change: I'd like to highlight a few of the key assumptions relevant to this guidance. First, on the top line we continue to expect that our total revenue will be climbed by a low single digit percentage.
Speaker Change: and as we've communicated throughout the year we expect to continue to ramp investment behind our new product launches and key R&D programs.
Speaker Change: which includes Pelsar to Maver, following our acquisition of High Bile. And lastly, as is typically the case with our business, we expect seasonally higher S-GNA spend in the fourth quarter as compared to the rest of the year.
Speaker Change: I would refer you to this slide as well as our press release for other important guidance assumptions.
Speaker Change: In closing, we remain focused on advancing our ongoing product launches and key areas of our late stage pipeline. We believe our efforts in these areas will help position by agent for long-term sustainable growth.
Speaker Change: which continues to be our number one goal.
Speaker Change: And with that, we will open up the call for questions.
Speaker Change: Thank you. If you would like to ask a question, please press star one on your telephone keypad. As a reminder, please limit yourself to one question. If you require any further follow-up, you may press star one again to rejoin the queue.
Speaker Change: Your first question comes from the line of Brian Abrams with RBC Capital Markets.
Brian Abrams: Hey, good morning, thanks so much for taking my question. I'm curious, on the can be when you might expect to see more pull through from the expanded commercial efforts, whether you're starting to see any of those signals.
Brian Abrams: and October. You mentioned as well the potential for some other commercial acceleration strategies in your prepared remarks. Can you maybe expand on that a little bit more and characterize your overall alignment of the day side on the commercial plans? Thanks.
Brian Abrams: i
Speaker Change: I'll take the second part of the question Brian then passed over to Alisha and give a little more color on the...
Speaker Change: The expanded field force. You know, I think we have learned enough a lot, really, in the years since we launched the product. I mean, the product launch really started.
Speaker Change: Really last fall, I mean we had to get all of the commercial team in place, but we also needed clarity around things like reimbursement of the PET scans. So, you know, for us I think this is about the anniversary really of the launch.
Speaker Change: And there are a lot of things that we are now understanding, the time it can take for our IDNs to really get their protocols in place and the care pathways. But there are also a number of things I choose to write patient.
Speaker Change: and we have also enough a lot more data coming along. We're going to have the subcutaneous formulation. I'll play the next year for maintenance, the I.V. for maintenance sometime next year.
Speaker Change: and so it seems opportune for the two partners now to come together and just review what's working well and what could we be doing more.
Speaker Change: So we'd probably be able to give you some more color on that. I would say the teams are working very well together. We both understand that this is a very complicated launch. I think more complicated than most, but I've certainly seen, I think, most people have seen.
Speaker Change: and yet we do see a lot of physicians again.
Speaker Change: who are really putting a lawful lot of work into to make all of this happen, you know, to, to, to, triage the patients as to who's really the right patient.
Speaker Change: High percentage of patients coming into the neurologists are not eligible for treatment, then organizing the pet scans of the Lumbar punctures, the MRIs and the infusion beds. So we sing enough a lot of...
Speaker Change: I'm real effort out there in the marketplace and we add prescribers every week and we see more sales every week and so I think that's the way it's going to progress.
Speaker Change: Probably until we get the subcutaneous for induction. I think that could be quite a game changer. And again, more use of the blood-based diagnostics in place of the PET scan. Both of those would, I think.
Speaker Change: Dramaticly reduced the workload of physicians, but...
Speaker Change: Alicia, maybe we can talk about the expanded field force and moving else you think might be helpful. Yeah, thank you, Chris, and thank you for the question Brian. As all of you have seen in Q3, we did have steady launch progress as we've seen in prior quarters, and that's including in the new number of patients.
Speaker Change: Also encouraging what you don't see in the trends that we're able to see is the total prescribers writing and actually in Q3, the new number of writers increased by 40% versus Q2, so you are seeing these physicians come on every single week, ideas expanding every single week as well.
Speaker Change: However, at the end of the day, just like in the beginning of the launch and even today, you know, fast forward after we've been out in the field for a while, which shows up in market research as the key barrier is still these infrastructure challenges as Chris alluded to. However, now with the new biogen team on board, we're also able to confirm that especially with physicians who haven't written yet.
Speaker Change: That is really one of their main concerns, or second concern of course is still Arya, even though it's not as big of a concern as it was prior, however, once they work through some patients and they work out their protocols, you do see that alleviate.
Speaker Change: However, we now have our full field force out there and as a reminder, we were very intentional as an organization as to who to hire. We were in a little bit of a luxury situation at the time when we posted these roles we had over a thousand applicants.
Speaker Change: and we only had a little over 25 roles that we had posted. So we were really able to pick those individuals who either had history in Alzheimer's disease or a history in these territories and already had built in relationships.
Speaker Change: and so now the teams have been out there for several weeks.
Speaker Change: We are starting to see in the offices specifically where Biogen has overlaid with A-Sy, where we are engaging, we do see a little bit more accelerated growth than what you do see in the rest of the nation, we're able to reach more targets.
Speaker Change: and also doors are opening up a little more easily for us because again those representatives did have prior relationships with physicians.
Speaker Change: and so in the longer term.
Speaker Change: We obviously are going to continue with doing frequency and depths, but at the end of the day, you know, for example, we can say in the Pacific Northwest
Speaker Change: You know we had a rep that's been had a relationship, actually prior with MS for 17 years, they were able to help the physician right away another physician in the southeast.
Speaker Change: You know, they had a relationship for over 20 years, they were able to unlock over 30 patients, I think, in less than a two week time period. So the relationships we've seen have mattered, also the history has mattered, and we are starting to see some acceleration, even a little, and it's been out there fully for about a month or so.
Speaker Change: Thank you, Alisha, next question please.
Alisha Alimo: Your next question comes from the line of Phil Nadeau with TD Cowan.
Phil Nadeau: Good morning, thanks for taking our question. Chris, you've referenced the subcutaneous formulation a couple times already this morning. Could you give us a bit more of an update on the status of the subcution, following both for maintenance as well as for induction? Thanks.
Speaker Change: Sure I'll turn that over to Priya. Yes, thank you Phil for that question.
Speaker Change: So we remain on top to really complete our subcutaneous maintenance filing as Esa is indicated and we expect that to be imminent.
Speaker Change: and then moving on to the initiation, we're working to generate the data, analyze the data, this is part of the clarity, open-level extension study in the subcutaneous substudy. And as Esa is indicated, we remain on track.
Speaker Change: to expect a regulatory outcome on subcutaneous initiation therapy by Q1 of 26 calendar year.
Speaker Change: Thank you Priya, next question please operator.
Speaker Change: Your next question comes from Mark Goodman with Leering.
Mark Goodman: Yes, because you come in a little bit more on SkyClarer's OUS, there was a common new opening remarks about pricing and reimbursement dynamics. If you could just give us a little more color there to the challenges. Thank you.
Speaker Change: Yeah, so as you know, you get approval in Europe, but then you have to go country by country to negotiate for reimbursement and basically what we are already doing is seeing physicians and we're getting patients on treatment.
Speaker Change: but the actual revenue generation of those patients varies by countries. So there are some countries for instance where you can charge. For an early access program there are countries where you can't. There are some countries where you can get reimbursement much earlier than other European countries.
Speaker Change: So we...
Speaker Change: So we are in that process, what we have not done.
Speaker Change: is really started the revenue generation, and sort of the patient-demand generation.
Speaker Change: with reimbursement. We are an active in all countries and signing up patients, and so we're tracking patient numbers, which are growing considerably every month.
Speaker Change: What you will see in the quarterly revenue numbers is when those patients convert to revenue generating patients. And that is by definition going to be a little lumpy because the patient demand is actually in advance of when we generate revenue.
Speaker Change: and on those programs where you have early access that you can pay for.
Speaker Change: You have to establish a price.
Speaker Change: But in some cases, there is a claw back
Speaker Change: If the reimburse price is going to be lower than what the price is charging, and obviously as we go into countries and have a better idea where the price point is, we've had to make some adjustments on revenue that we have booked.
Speaker Change: and those programs where we can charge for an EAP and that's just really a normal process in most launches in Europe.
Speaker Change: Thank you, Chris. Next question operator.
Speaker Change: Your next question comes from the line of Salveen Richter with Goldman Sachs.
Salveen Richter: Thank you, good morning Chris, you spoke to the efforts with regard to the late stage pipeline and R&D, but you've also noted the lever with regard to business development, any update of thoughts here as to the strategy for the latter on the forward.
Speaker Change: Yeah, I mean we're...
Speaker Change: We're in one of those classic situations on our industry where we've had a...
Speaker Change: A legacy portfolio of assets that is facing increased competition and on the horizon we see an extremely promising pipeline and how do you bridge across that?
Speaker Change: You know there are some companies choose to simply wait that out and wait for the arrival of the pipeline. And you know our business is likely to grow between now and 2028.
Speaker Change: But I would say that the growth is not necessarily satisfactory for us.
Speaker Change: So we are looking and continue to look, I spend personally quite a lot of time on this
Speaker Change: Are there assets that we could bring in that could enhance our revenue growth in the near term?
Speaker Change: Um...
Speaker Change: But also, that's still great value for shareholders. You know, we're not really interested in just buying revenue. If we can buy a growth.
Speaker Change: and we can make a very good return on investment and we'll do so, but as you know, assets get pretty highly priced as they get close to the market.
Speaker Change: You have to do an awful lot of digging and an awful lot of looking and that's what we are doing. We have a whole team of people that look at public and private companies.
Speaker Change: and I think we still have...
Speaker Change: Considerable Financial Capacity, and Mike Meach want to comment on that, but we are active in that, but we are also disciplined, you know, fiduciaries of Sherholda Money, you know, I've always said
Mike Mcdonnell: We get paid to make our shareholders well, they've not somebody else's share holders. Yeah, so Salveen just on capacity, just to give you a frame move.
Mike Mcdonnell: of reference, you know, we ended the quarter with about a billion seven of cash on hand.
Mike Mcdonnell: And you know when you think about our capital structure, you know about $6.3 billion in total of that on a...
Mike Mcdonnell: and Eva Daarun, right about 3.3 to 3.4 billion. So it's below 2 times gross, that's a very modest amount.
Mike Mcdonnell: and you know when you think about capacity, you know, we're pleased with about $2 billion of free cash, about year to date, 901 million in the quarter.
Mike Mcdonnell: So, you know, with a couple billion dollars plus a free cash flow per year and
Mike Mcdonnell: Weston 2 turns of gross leverage you can see over the next couple of years, you know, if you added.
Mike Mcdonnell: and a reasonable amount of incremental debt.
Mike Mcdonnell: At some point in time plus the free cash flow in the cash on hand, there's, you know, comfortably $8 to $10 billion of capacity that you've got over the next year or two in order to collaborate and transact and look at acquisitions and other things that we can do to help supplement our growth.
Speaker Change: Thank you Mike, next question please operator.
Speaker Change: Your next question comes from the line of Michael Yee with Jeffries.
Michael Yee: Thank you, good morning. We noticed that you completed enrollment of the Head 345 study and I just wanted to ask Priya if you could remind us
Michael Yee: What's the timeline to look for that? More specifically, if there is a potential for an incremental analysis and or what that would do based on. Mind your standing, that these are pretty early, decent, and that patience is earned enrichment of the population and why would you be expecting what this can do.
Speaker Change: Thank you.
Michael Yee: Thank you Michael, yes we're excited about the fact that a head 345 has completed enrollment in October
Speaker Change: Just to remind everyone it's two trials and one is really looking at early intermediate stages, patients with early intermediate stages of amyloid and the other is with higher load of amyloid.
Speaker Change: and this is these are very large trials, so it's about 400 patients in the ahead tree which is the earliest intermediate stage and about a thousand patients in the ahead four five.
Speaker Change: and Timeline, Charles have a 2, 216 week time point.
Speaker Change: Having said that.
Speaker Change: We are continuing in parallel to engage with regulators and look at all options of when these might be ready to read out. So we'll continue to provide more updates for what we're very excited about having completed enrollment, specifically because the data that we've shared from the clarity.
Speaker Change: Study, shows that treating early and with patients with low-tow or low-tow, really you see a lot of benefits.
Speaker Change: in terms of stabilization and actually even clinical improvement. So it continues to really be a very exciting space for patients to have therapies and that's why we're very excited for where we are today.
Speaker Change: Thank you Priya, next question please.
Speaker Change: Your next question comes from the line of a humor Raffat with a record IFI.
Speaker Change: Thanks for taking my question. I thought I'll focus on a slightly different topic for a quick second. It does look like there's a very significant amount of R&D investment going into loop-is between your parallelismab as well as your BDCA molecule.
Speaker Change: and possibly the CD38 as well. And I guess my broader question is this. You hit a phase 3, which is obviously good news, but separately we're seeing incredible remission data from some CD19 car teas, which might even possibly manifest in some CD19 by specifics as well. So it seems like you have a lot of exposure not on that area, which is CD19 by specifics.
Speaker Change: And I guess how should we weigh by the time you guys do get to this market relative to some of the emerging data from potentially city-19 by specifics or the T-cell engagements. Thank you very much.
Speaker Change: Thank you, Omer. Yes, we continue to watch the innovation in the space and its exciting for patients.
Speaker Change: But I think when you step back and you think about the potential that DAPI can offer, and with the data that we shared, and we'll be sharing more data at ACR in a few weeks here, and it is embargoed. We're very excited by what we've seen in this moderate to severe population.
Speaker Change: So just stepping back, when you look at SLE, it is really a chronic disease, very heterogeneous, high global burden of disease, specifically in women and underserved populations.
Speaker Change: And we believe that many options will be required. So I think while the BISPECIFICS and the CAR T's may show efficacy in small populations, we've got to keep in mind that these are very small data sets and likely may not be relevant to the entire population.
Speaker Change: And I think that here is where the scientific hypothesis and continuing to, you know, generate data sort of in phase two that makes us believe that we could have a high probability of success in phase three becomes really important. And with DAPI, we're really addressing and inhibiting the CD40 ligand, which has the ability to reduce B anticell activation, down regulating interferon pathways. And then with litifilumab, we're going after the type one interferon signature and really looking at inhibiting BDCA2 in the plasma deltoid cells. So we believe that this is going to be really important and probably many options are required, but we remain really optimistic about the data that we've seen so far and the momentum.
Speaker Change: that we have with our trials. So we continue to be believers in these pathways and these programs.
Speaker Change: With Lita Filimab, as you know, we're also addressing cutaneous lupus.
Speaker Change: where really there has been no innovation in 70 years.
Speaker Change: So, again, we have high scientific conviction, as Chris mentioned, and we'll continue to prosecute these. And I'll just add, Umer, you know, I was at GSK when we were developing Ben List over 15 years ago, and, you know, we almost killed that program because of modest efficacy until we realized that everything else was failing.
Speaker Change: And this was the last product standing.
Speaker Change: And to date, only two products have been approved. DAPI would be the third.
Speaker Change: And I can tell you over the years we've seen an awful lot of data in small populations as Priya has said.
Speaker Change: And so I think, you know, we have to wait and see who actually gets to the finish line. On CAR-T, yeah, it's some interesting data, but, you know, the logistics of CAR-T are not yet such that you're going to be seeing significant numbers of patients being treated, in my personal opinion.
Speaker Change: So, I think as Priya said, you know, there is a need there today. We have a product that has demonstrated results.
Speaker Change: We're going full speed ahead and you know just given that the nature of this disease I think you're going to find that there's there's not going to be any one product that that ultimately is a winner. It's going to take a different approaches.
Speaker Change: Thank you, Chris. Next question, please, operator.
Speaker Change: Your next question comes from the line of Jay Olson with Oppenheimer.
Jay Olson: Oh hey, congrats on the quarter and thank you for taking the question. We're curious about the 14 billion dollars of peak revenue potential from your four key pipeline programs. Can you talk about the relative contribution and timing of the four products in terms of which ones are the largest and nearest term? Thank you.
Speaker Change: I don't want to get into giving individual revenue forecasts. I think the idea was to give a sense of what's the magnitude of the pipeline. We all know that not everything can always succeed. But I do think if you look at where are there going to be significant programs,
Speaker Change: You know, if you look at BIP-80 and Alzheimer's...
Speaker Change: We do believe, and I think Biogen is not the only one, you know, I see Lilly and Roche continuing to invest significantly. You've seen AbbVie lay out quite an awful lot of money for a very early stage asset in Alzheimer's. So I think we all believe that
Speaker Change: As the health care system is ultimately able to adapt to the significant demand for treatment, that this becomes an important market.
Speaker Change: What we can see, and I was just at a major world-class medical school last week, spent a day there with a lot of researchers and Alzheimer's.
Speaker Change: They are excited about Tau in a way that we have not seen always at A-beta.
Speaker Change: You know, Alzheimer's severity really varies with the level of tau, and people really believe, a lot of people in the field really believe that going after tau will really have a significant benefit for patients.
Speaker Change: a product with a tremendous amount of potential.
Speaker Change: And as Priya said, you know, we have DAPI, but we also have lidofilamab and, you know, also Felza and lupus nephritis. So we do see that lupus is going to be a significant market. And again, you know, you look at
Speaker Change: You look at Benlista that is selling at about $3 billion a year, and then there's an AstraZeneca product that hasn't done as well, but you look at the numbers of patients, this is still a market where there's considerable room for expansion.
Speaker Change: You know, and Felsa, you know, we have three phase three programs.
Speaker Change: going in and we see all of those three indications as being significant opportunities so
Speaker Change: you know again you you you add them up 14 is kind of like the top number but you know somewhere between nine
Speaker Change: And 14 is what our teams have estimated. Again, you know, we have to wait and see what the clinical trial data looks like and the actual profile. But if you look at the potential of these markets and the unmet need and the potential for differentiation,
Speaker Change: We're becoming increasingly excited about this emerging pipeline.
Speaker Change: Thank you, Chris. Next question, please.
Speaker Change: Your next question comes from the line of Evan Seigerman with BMO Capital Markets.
Evan Seigerman: Hi guys, thank you so much for taking my question. I know in the past we've talked about the potential for Spinraza returning to growth. You know, given the softer numbers this quarter,
Evan Seigerman: talk about how you think that this is achieved. Is it predicated on high-dose nuclein nursing, or are there other factors and levers that you can pull to re-accelerate the growth of this product? Thank you.
Speaker Change: I'll start globally. You know, actually, if we take out some of the
Speaker Change: one-time effects of or sort of the the exceptional effects of the
Speaker Change: XUS, X European markets. Actually, we did see growth for Spinraza. It's clearly a very competitive marketplace.
Speaker Change: But it turns out that even though we have an intrathecal administration,
Speaker Change: That efficacy is really what matters in really severe diseases, and that's what, you know, we compete on. We had a study that...
Speaker Change: has demonstrated, for example, the benefit of adding Spinraza onto Sulgensma as gene therapy. And we know that the oral therapies have limitations in terms of which patients can be treated.
Speaker Change: I think that our teams believe that the vote is extremely important because we can get to the
Speaker Change: through the loading doses and get to the right level of therapeutic benefit faster than we could previously. And that actually reduces the number of intrathecal injections, at least for the loading phase. So...
Speaker Change: You know, I think this is really an efficacy game, but I'll ask Alisha, at least from a U.S. perspective, how you see that?
Alisha Alimo: Hi, thank you, Chris. And hello, Evan. Thank you for the question. You know, Spinraza has really been a very strong contributor, especially in the U.S. business. And when you look at rare disease,
Alisha Alimo: You know, we believe that Spinaraz has really set that benchmark for what really excellent efficacy looks like.
Alisha Alimo: and that it translates down to a patient. And so, you know, growth year over year, which my team has seen, and even that's during a time we've had two very strong competitors.
Alisha Alimo: We had an oral launch during stay-at-home orders, and the team is still really leading the way with Spinraza. And we do believe it's for a few reasons. One, the efficacy of the product is obviously very strong, and a lot of our growth...
Alisha Alimo: Also comes from switchbacks. There's a lot of patients that are returning back to Spinraza Once they've switched away to a competitor and they realize that maybe the efficacy isn't there And so we do see quite quite a bit of that in the US
Alisha Alimo: And secondly, you know, you fast forward eight years, we are still finding new patients in this space. And that's with three major biopharma companies.
Alisha Alimo: you know putting money into this rare disease and so you do see new patients still coming online and we believe at least on the Biogen side we're very good at patient finding. We're able to find them quite quickly.
Alisha Alimo: We have an excellent AI sort of machine that we use along with the field force. We're able to locate them in centers of excellence and physicians are able to reach out and find these patients.
Alisha Alimo: And so with high dose coming, you know, one of the pieces of feedback you do get from physicians and patients is, you know, we just wish we had more.
Alisha Alimo: And so, with that, you know, we're preparing right now for that, obviously, the filing and the potential approval going into label, and we do believe that high dose will also support growth, you know, quarter over quarter, year on year for at least the U.S. organization.
Speaker Change: Thank you.
Speaker Change: Thank you, Alisha. Next question, please, operator.
Speaker Change: Your next question comes from the line of Paul Matteis with Stiefel.
Paul Matteis: Hey, thanks so much for taking the question. In connecting some of the dots here, Chris, as it relates to the hires you've made, and some of your portfolio decisions around certain legacy high-risk assets,
Paul Matteis: https://www.youtube.com
Paul Matteis: Do you have any appetite anymore to take on risk in neuroscience or do you feel like immunology, rare areas that you have a lot of experience with historically are going to be the sweet spot going forward? Thanks.
Speaker Change: You know, I would say, first, we're already long, neurology and neuroscience, I mean, we have very significant investments, obviously, with the BIB80 program.
Speaker Change: continued significant investment in Lakembi. We're still spending hundreds of millions of dollars every year on Lakembi R&D.
Speaker Change: And we have actually a number of programs coming behind that in early stage development, you know, we're working on brain shuttle technology, but looking at other modalities in Alzheimer's. We still have earlier stage programs in
Speaker Change: in MS and ALS, a significant program in Parkinson's in partnership with Denali. So I think we see neuroscience as somewhere where we already have a significant commitment.
Speaker Change: but you know to me I think it's it's not a good idea to just be in one therapeutic area and and in addition I think we actually already have capabilities beyond neuroscience
Speaker Change: You know, the whole MS franchise is really an immunology franchise, you know, you treat
Speaker Change: MS through the immune system. And I do believe we have an awful lot of immunology capability. And that certainly gave us the confidence to do the high bio acquisition. INI, you know, I go to a number of biotech conferences and venture conferences.
Speaker Change: INI has now become the second most important area in R&D after oncology.
Speaker Change: And so you're going to have an awful lot of emerging opportunities for BD in this space.
Speaker Change: in small volumes and high value products.
Speaker Change: highly differentiated scientific cell, and I think immunology fits that bill. Rare disease is really more of a commercial description than a scientific one, but we do have a commercial model in rare diseases that has an awful lot of capability that not everybody does.
Speaker Change: And so, expanding into that area with that commercial model, almost being, I would say, indication agnostic, is an area that we can go. And I don't think we're stretching our capabilities. There are some capabilities that we have to build.
Speaker Change: And in some ways,
Speaker Change: You know fit for growth was was as much shifting
Speaker Change: Some of the focus away from a traditional heavy focus on MS.
Speaker Change: and being able to adopt some of these other capabilities. But, you know, I wouldn't, you know, we don't really want to get into those areas where we'd have to go up against, you know, really large pharma companies in a commercial model. We're not really into incremental innovation in Biogen.
Speaker Change: atopic dermatitis but we have a legitimacy to play there and we have the capability and we can really take advantage of a lot of the really smart people within Biogen.
Speaker Change: Thank you, Chris. We'll move to our last question, please.
Speaker Change: Your next question comes from the line of Terence Flynn with Morgan Stanley.
Terence Flynn: Thanks for taking the question. Mike, I was just wondering if you can help us think directionally about margins for 2025 and some of the puts and takes. Thank you.
Mike Mcdonnell: Sure, and I'm going to assume, Terence, that you're referring primarily to our operating income.
Mike Mcdonnell: improvement in the third quarter was a little bit less than what you've seen there's a little bit of lumpiness to it and I think it's probably and some of that was driven by the revenue dynamics that we talked about in the quarter
Mike Mcdonnell: and some of the higher margin revenue like Spinraza and SkyClaris, but I think if you look at it on a year-to-date basis, that's probably the best way. We're 7% up.
Mike Mcdonnell: year-to-date on the operating income line, a seven percentage point improvement, I should say, it's 23% growth year-on-year. In our guidance we talk about mid single-digit improvement for the full year and high teens growth for full year.
Mike Mcdonnell: And I think that, you know, we feel good about the improvement that we've made. We still feel confident that we can garner the billion dollars gross and 800 million dollar net savings, which will continue to help our margins.
Mike Mcdonnell: and you know we're not guiding beyond this year but as we exit 2024 and head into 2025 I think it's important to remember that we've said that the 800 million dollars of savings we expected to get half of that by the end of this year and the other half next year so that'll continue to improve our margin profile as we go.
Speaker Change: Thank you, Mike, and thank you everyone for joining us today. Of course, the IR team will be available to answer any additional questions. Thank you.
Speaker Change: This concludes today's call. Thank you for your participation. You may now disconnect.