Biogen Inc (BIIB) Q4 2018 Earnings Conference Call Transcript

Image source: The Motley Fool. Contents:

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:


Good morning. My name is Jack, 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 2018 Financial Results and Business Update Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you’d like to ask a question during this time, simply press *1 on your telephone keypad. Please limit yourself to one question to allow other participants time for questions. If you require any further follow-up, you may press *1 again to rejoin the queue. Thank you. I would now like to turn the conference over to Mr. Matt Calistri, Vice President, Investor Relations. You may begin your conference.

Matt Calistri — Vice President, Investor Relations

Thank you and welcome to Biogen’s Fourth Quarter 2018 Earnings Conference Call. Before we begin, I encourage everyone to go to the Investor section of to find the earnings release and related financial tables, including a reconciliation of the GAAP to non-GAAP financial measures that we will discuss today. Our GAAP financials are provided in Tables 1 and 2. Table 3 includes a reconciliation of our GAAP to non-GAAP financial results. We believe non-GAAP financial results better represent the ongoing economics of our business and reflect how we manage the business internally. We have also posted slides on our website that follow the discussions related to this call.

I would like to point out that we will be making forward-looking statements which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail.

On today’s call, I am joined by our Chief Executive Officer, Michel Vounatsos, Dr. Michael Ehlers, EVP of Research and Development, and our CFO, Jeff Capello. We will also be joined for the Q&A portion of the call by our chief medical officer, Dr. Al Sandrock. Before I conclude, I would also like to remind everyone that we now post releases related to earnings calls and investor events on the Investor section of Biogen’s website,, and issue a statement on Twitter when they become available. We do this instead of publishing earnings releases and any releases related to investor events and earnings calls via newswire services. Our Twitter handle is @biogen. Now, I will turn the call over to Michel.

Michel Vounatsos — Chief Executive Officer

Good morning, everyone, and thank you for joining us. First, let me start with some financial highlights. Biogen closed 2018 with an all-time high in quarterly revenues of $3.5 billion, an increase of approximately 7% compared to the same period a year ago. For the full year 2018, Biogen generated another all-time high of $13.5 billion in revenues, representing growth of 10% year over year. Full-year 2018 GAAP earnings were $21.58 a share, an 81% increase versus full-year 2017. Full-year 2018 non-GAAP earnings were $26.20, a 20% increase versus full-year 2017. We are pleased with this strong year-over-year growth as we continue to execute on our strategy to solidify our long-term leadership position in neuroscience.

Now, let me review the year. First, full-year MS revenues including Ocrevus royalties were $9.1 billion, demonstrating resilience. The number of patients on our MS products globally remained relatively stable versus the prior year. Importantly, we continue to see improving trends for our MS business in the U.S. on a year-over-year basis.

Second, Spinraza, which we pioneered in collaboration with Ionis as the first treatment for SMA, generated full-year global revenues of $1.7 billion, nearly double the revenues we delivered in 2017. This blockbuster performance was driven by strong year-over-year revenue growth in the U.S. and even greater revenue growth outside of the U.S. Over the past year, including the expanded access program and clinical trials, we have more than doubled the number of patients on Spinraza to over 6,600 patients. Spinraza is the standard of care in SMA with approval in over 40 countries and formal reimbursement in 30 countries.

Third, we continue to expand and progress our neuroscience pipeline with strong momentum, building depth in our core growth areas. We are leveraging the interconnectivity within neuroscience as we aim to create multiple franchises beyond MS, SMA, and Alzheimer’s disease. 2018 was one of the most productive years we have had in research and development, as we aim to further de-risk our pipeline and prepare for multiple potential launches in the early 2020s.

Starting with our core growth areas, we made significant progress in our MS pipeline, including an end-year submission to the FDA, initiating new lifecycle management initiatives, and increasing investment in our R&D portfolio to develop potentially transformative new treatments, which Mike will discuss in more details.

In Alzheimer’s and dementia, we completed Phase 3 enrollment of aducanumab, we initiated a Phase 2 study of BIIB092 in Alzheimer’s disease, and we announced top-line results of BAN2401 with our partner Eisai. In neuromuscular disorders, we made impressive progress building depth. We acquired BIIB110, a muscle enhancement program, from AliveGen. We initiated a Phase 1 study of BIIB078, targeting C9ORF in ALS. And, we announced positive Phase 1 interim results for BIIB067 in SOD1 ALS.

In movement disorders, we created strong momentum. We initiated a Phase 2 study of BIIB054 in Parkinson’s disease and we completed enrollment of our Phase 2 study of BIIB092 in PSP. In our emerging growth areas of acute neurology, neurocognitive disorders, and pain, we did initiate four new studies. We expanded our pipeline with the addition of BIIB104 for cognitive impairment associated with schizophrenia and our option for TMS-007 for acute ischemic stroke. We are also advancing the Phase 3 program for BIIB093 in large hemispheric infarction, with a potential to generate peak revenues of over $1 billion with initial launches as early as 2022.

Moving on to our biosimilars business, full-year biosimilars revenues were $545 million, which represents 44% growth year over year. In the fourth quarter, we launched Imraldi, our adalimumab biosimilar referencing Humira, in several European markets. Imraldi has generated $17 million in revenues since its launch in mid-October, making it our most successful first-quarter launch of a biosimilar.

Importantly, our cash generation remained very strong and continued to provide us with significant optionality and flexibility to allocate capital. In 2018, we spent a total of approximately $1.8 billion through six [inaudible] development deals and the increase in our share of the Samsung Bioepis joint venture. We continue to diligently evaluate new opportunities for more potential business development and M&A. We also repurchased approximately 14.8 million shares for $4.4 billion, and we have about $2 billion remaining in our share repurchase program.

In addition, we began 2019 with a new collaboration with Skyhawk Therapeutics with the aim of developing oral splicing modulator for multiple diseases, including MS and SMA. We continue to be financially disciplined, and we are focused on implementing a lean and simple operating model with the goal of continuous operational improvements.

As we have demonstrated in the past, we are committed to maximizing returns for our shareholders while continuing to bring innovative therapies to patients — something that demands a thoughtful approach toward all our investments over both the short and the long term.

In summary, 2018 was clearly a very productive and successful year for Biogen, as we executed on our strategy and continued to deliver noticeable progress. Our core MS business demonstrated resilience. Spinraza continued to grow in the U.S. and even more outside of the U.S., and we remain committed to our goal of being the long-term standard of care in SMA. We expanded and progressed our pipeline by adding six new clinical programs and completing enrollment of three late-stage studies. We grew our biosimilar business and launched Imraldi in Europe.

We are actively implementing a leaner and simpler operating model, and we are generating ample cash as we focus on strategically allocating capital to develop and build depth in our neuroscience portfolio — again, with a goal of maximizing shareholder returns and bringing innovative therapies to patients. Overall, we continue to make progress toward our goal of building a multi-franchise neuroscience portfolio, and we are very excited about our upcoming data readouts. I will now turn the call over to Mike for a more detailed update on our recent progress in R&D.

Michael Ehlers, M.D., Ph.D. — Executive Vice President, Research and Development

Thank you, Michel, and good morning, everyone. Neuroscience is experiencing a revolution in science and medicine. There’s no larger area of unmet need than diseases of the nervous system, and we believe that our focus on neuroscience offers a key strategic advantage. Before I discuss our pipeline in more detail, let me comment on our recent progress in building a multi-franchise neuroscience portfolio supported by a broad range of therapeutic modalities.

Complementing our expanded collaboration with […]

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