Biogen's Second Quarter 2023 Earnings Call and Business Update is being held and is being recorded. The conference operator welcomes everyone to the call and introduces Chuck Triano, Head of Investor Relations. Mr. Triano encourages everyone to go to the Investors section of biogen.com for the earnings release and related financial tables. He also warns that forward-looking statements will be made and may differ from the actual results. On the call, Mr. Triano is joined by the company's President and Chief Executive Officer, Chris Viehbacher, Head of Development, Dr. Priya Singhal, and CFO, Mike McDonnell, who will each make opening comments before the Q&A session.

This paragraph discusses the historic moment of the first disease-modifying treatment that has been approved by the FDA and reimbursed by CMS. It notes that there have been many medicines that have failed before this drug ever got to market, and that physicians haven't been able to help patients very much beyond prescribing Donepezil. The paragraph also points out that as this is the first of its kind, there will be much to learn and discover as it is launched and physicians start prescribing it. Finally, it mentions the quick success of the regulatory filings in many countries.

Donanemab and Lecanemab are two different A-beta antibody treatments that are being launched globally, and have different mechanisms, populations, designs, and safety profiles that will be seen in the marketplace. The US launch has already been approved, and the CMS will encourage other companies to invest in blood diagnostics. There is a lot of preparation that needs to be done, such as patient navigators to help understand the process, working with physician offices, and educating about safety, and 700 centers have already been reached out to.

Biogen has a mature product profile, but has relatively high operating expenses due to over-investment in legacy products and an inefficient R&D pipeline. To remedy this, Biogen has undertaken a project to make more value-based decisions for existing products while still promoting them, and to invest in new product launches. They have a 25% market share in multiple sclerosis, and want to continue to provide products to the patients who depend on them.

Biogen and Eisai have redesigned their company and have invested $1 billion in annualized savings to invest in growth opportunities. This includes the traditional approval of LEQEMBI for the Alzheimer's field and the initiation of the AHEAD 3-45 trial to evaluate the potential of treating earlier to delay or even prevent the onset of Alzheimer's.

LEQEMBI has been approved in the US and a protocol for the AHEAD trial has been modified to allow for its use as a rescue drug for early AD patients. Eisai is working to improve and simplify the patient journey for LEQEMBI, including the development of a subcutaneous formulation and less-frequent maintenance dosing. The Clarity AD study has observed consistent reductions in both amyloid and tau PET and improved clinical outcomes. A new analysis containing initial results from the tau PET sub-study of Clarity AD has been presented, which categorizes individuals based upon tau burden measured at baseline.

Biogen is committed to advancing their multi-target multi-modality portfolio in order to treat Alzheimer's Disease, including programs targeting tau such as BIIB080 and BIIB113. The interim results from the response study of zolgensma treatment showed that most participants had sub-optimal clinical status at baseline, but improvements in motor function were observed at six months with no new safety concerns identified. Biogen has conducted a comprehensive review of their R&D programs in order to improve the risk profile and productivity of the pipeline.

In the second quarter of 2021, Biogen made a number of significant decisions and identified programs to prioritize. They modified or discontinued programs with low probability of success and now have a leaner pipeline with a higher probability of success. Examples of programs include BIIB080, Litifilimab, BIIB105, BIIB122, and BIIB121, all of which have data readouts expected over the next few years. Financially, Biogen had a strong second quarter compared to the same period in 2022.

The second quarter saw a 5% decrease in total revenue at actual currency and 3% decrease at constant currency. MS Products revenue decreased 15% at actual currency and 14% at constant currency. This was attributed to generic entrants for TECFIDERA and competition in the MS market. TECFIDERA's regulatory market protection in the EU was extended by one year, and there may be a TYSABRI biosimilar launch in the US and EU in 2023. SPINRAZA revenue increased 1% at actual currency and 5% at constant currency, with 12% growth in the US driven by patient growth. Data is being generated to support the efficacy profile of SPINRAZA, which should enable improved performance.

In the second quarter, biosimilars revenue was flat at actual currency and increased 4% at constant currency, while Alzheimer's disease revenue was a headwind of $20 million. Total anti-CD20 revenue was down 1%, and contract manufacturing, royalty, and other revenue was notably higher year-over-year. Non-GAAP cost of sales was 24% of total revenue, which included $34 million of idle capacity charges.

Biogen is expecting to see strong contract manufacturing revenue for the remainder of 2023, which will result in a higher cost of sales. They also anticipate a decrease in R&D and SG&A expenses due to cost-saving initiatives and reinvestments. Biogen is implementing a new fit-for-growth program, which is expected to result in a net headcount reduction of 1,000 and an annualized net OpEx savings of $700 million. The program is expected to have a modest impact on 2023 expenses and the savings will be equally split between 2024 and 2025.

Sanofi ended the quarter with $7.3 billion in cash and marketable securities and $6.3 billion in debt, putting them in a net cash position of roughly $1 billion. They also generated positive cash flow from operations with free cash flow of $416 million. Sanofi reaffirmed their guidance of a mid-single-digit percentage revenue decline in 2023 compared to 2022 and non-GAAP diluted earnings per share of between $15 and $16. In addition to cost reduction programs, they are also re-engineering their marketed portfolio of products, with two approvals already this year and more expected in the third quarter from the PMDA in Japan, the EMA in Europe, and the FDA in China. The FDA is also expecting a decision on zuranolone next week.

Chris Viehbacher explains that the market is oversimplifying the efficacy and safety profiles of beta-amyloid class drugs. He explains that the two drugs in this class, Lecanemab and Donanemab, attack the problem in different ways and Lecanemab is more effective at targeting the most neurotoxic forms of A beta. He suggests that this will be an interesting commercial development as the competitive dynamics play out.

This paragraph discusses the differences between the two drugs Lecanemab and Donanemab and how they were studied and tested. It also discusses the efficacy and safety of the drugs, and how neurologists will need to monitor MRIs for any adverse reactions. The author believes that the soluble forms of the disease could still play a role, and that a maintenance therapy will be needed over time.

Chris discussed the safety benefits of lecanemab and how it will be beneficial to physicians, as well as the different blood diagnostics that will be developed. He believes that treatment will be provided to patients earlier than before, which is where LEQEMBI's benefit will arise. Lilly has been focused on looking at subpopulations and trying to provide broad coverage for physicians. Marc Goodman asked about the cost savings of OpEx, SG&A, and R&D in the years to come, as well as gross margins. Michael McDonnell affirmed that the math was correct.

Mike discussed the savings that would be achieved by 2025, which will come from both SG&A and R&D. The mix of savings between the two is not specified, but it is expected that the SG&A line will be weighted more heavily. The gross margin is expected to remain lower than usual due to the decline of MS products and the increase of contract manufacturing. Robyn Karnauskas asked if there is a difference between the academic and community settings in terms of interest in using the drug.

The CMS registry is manageable and the data is mostly available from medical records. However, there is some difficulty with PET scan reimbursement that should be clarified in the next 90 days. There is a routine that will develop in offices for administering LEQEMBI, but many in the medical community have adopted a wait-and-see attitude due to past disappointments. Now that CMS approval is in place, the practicalities of administering the medicine and the revenue uptake will become more apparent. The field organization is prepared for this.

Biogen and Eisai are working to simplify and improve the patient journey by creating a subcutaneous formulation of LEQEMBI, as well as an auto-injector for self-administration at home. LEQEMBI has the potential for long-term duration, and the companies are looking into what the right maintenance duration for the therapy should be.

Christopher Viehbacher explains that the Board has gone through a significant change, and that any significant change to a Board requires consensus. He further explains that there has been a lot of investor outreach, and that investors are curious about his thought process in regards to the proposed changes to the Board and the decision to put out any disclosures.

Biogen is undergoing a lot of internal management changes to address investor concerns. The Board is behind the changes and the company is focusing on what is best for them. They are not looking at personal relationships when it comes to disclosure, and the investors voted Susan Langer onto the Board. Fit-for-growth is reflecting the company's transition as they focus on multiple sclerosis.

Biogen is looking to invest in growth and cost reduction while maintaining their position as market leader in MS. They are looking to invest in product launches and R&D projects, while also changing their promotional mix. They are also looking at M&A and external growth opportunities, such as BD at an earlier stage of the pipeline, as well as neurological conditions which require long and expensive trials.

The company is looking to make more strategic decisions about its portfolio and external growth, and is focusing on immunology, neuropsychiatry, and getting more nimble and agile. They have $7.3 billion in cash and are aiming to be more rigorous about allocating capital to ensure the best returns for shareholders.

Christopher Viehbacher discusses the unmet need for mental health care, especially for postpartum depression, and how the pandemic has brought this issue to the forefront. He believes that zuranolone, which has a PDUFA date of August 5th, could offer a faster and more effective treatment for patients. He also believes that there could be an opportunity to contribute to this unmet need.

In response to a question about the need for chronic dosing of Alzheimer's drugs, Dr. Singhal states that Alzheimer's is a progressive and fatal condition with neurodegeneration and that when plaque is cleared it does not easily reaccumulate, but disease progression and an impact on fluid biomarkers can still be seen. She notes that this has been seen with both LEQEMBI and aducanumab.

Priya Radhakrishnan discussed the evidence seen with LEQEMBI and aducanumab regarding the A beta 42:40 ratio, plasma p-Tau levels, and Donanemab's p-217 biomarker. She concluded that it is not possible to stop and reverse Alzheimer's disease yet, but LEQEMBI provides the opportunity for individualized treatment duration discussions between the patient and doctor. Chuck Triano then opened the floor for the next question.

Christopher Viehbacher of Biogen believes that the value of BD in the market today is relatively constant due to the quality assets available. He believes that any deal Biogen makes needs to create value for their company and shareholders in order to be successful. Biogen is taking steps to reduce their cost base and reposition their resources, as well as having pending decisions for LEQEMBI and zuranolone, which could lead to a return to growth in the next two to three years.

Christopher Viehbacher is discussing the fit-for-growth initiative and its implications for business development. He states that they will be avoiding deals that involve significant R&D lifts over the next couple of years and will instead focus on allocating capital in a way that will increase shareholder value. He also mentioned that they are trying to move away from multiyear, five-year type Phase 3 studies that are essentially proof-of-concepts.

Michael McDonnell and Ami are discussing the benchmarking Biogen has done and the need for discipline in R&D investments. McDonnell then moves on to discuss the cost of sales as a percentage of revenue and how it is expected to increase due to outsized contract manufacturing revenue in 2023.

Mike explains that there is pressure on gross margin percentage, but that they are managing it and have implemented a cost reduction program. They are also seeing idle capacity charges, which they hope will abate as LEQEMBI ramps up. He also explains that there is speculation and uncertainty around the underlying mechanism of LEQEMBI and ADUHELM, despite their similar platform, due to the differential profile of the drugs in terms of ARIA rates.

Priya Singhal states that the mechanism behind ARIA is still not fully understood, but the data shows that the incidence of ARIA is significantly lower with LEQEMBI than with other anti-beta amyloid antibodies. Singhal suggests that the population recruited could be playing a role, and that doctors should consider the benefit-risk when prescribing LEQEMBI. Additionally, the window of susceptibility with ARIA and LEQEMBI is known to be circumscribed to the first six months and recurrence is very low. Eisai's Understanding ARIA program is focused on helping physicians stay on the monitoring plan.

Christopher Viehbacher and Priya Singhal discuss the benefit-risk profile of LEQEMBI, a broad AD population drug, and the potential differences in safety across subgroups. Viehbacher notes that the ratio of safety in some subgroups can be as much as 3:1, suggesting that there is more to be studied and understood. Singhal adds that the jury is still out on the differences, but there are signs of what is going on.

Biogen and its partner Eisai are committed to becoming the leaders in the Alzheimer's market, and the launch of LEQEMBI is just the start. The uptake of LEQEMBI is dependent on how prepared sites are, and this varies around the country. The launch of LEQEMBI is an exciting development as it provides a new treatment option for Alzheimer's patients and upends processes within neurology practices.

Chris is discussing the launch of a new drug, and Paul Matteis is asking about the lack of discussion on the call in relation to zuranolone, which Chris had previously called their most undervalued asset. Chris is still bullish on the drug, and they are gearing up for a potential new antidepressant approval.

Christopher Viehbacher and Chuck Triano discussed the potential opportunity of Biogen's late-stage review for a MDD approval, but Viehbacher was reluctant to say anything that might affect the FDA decision. Triano concluded the conference call thanking everyone for their participation.

This summary was generated with AI and may contain some inaccuracies.