On February 13, 2024 Biogen Inc. (NASDAQ: BIIB) reported fourth quarter and full year 2023 financial results (Press release, Biogen, FEB 13, 2024, View Source [SID1234640019]). Commenting on the results, President and Chief Executive Officer Christopher A. Viehbacher said:
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"2023 was a year of transformation for Biogen as we saw approval for four first-in-class medicines while we realigned our cost structure, remained prudent in allocating shareholder capital, and reprioritized our pipeline. We believe with these key elements in place we are now well positioned to return Biogen to sustainable growth. As we look to 2024, our focus is on operational execution, including building upon the progress of our recent new product launches. We believe this will allow us to continue to advance our goal of a new Biogen that creates enhanced value for patients and our shareholders."
Financial Highlights
Q4 ’23 Q4 ’22 △
r (CC#)
FY ’23 FY ’22 △
r (CC#)
Total Revenue (in millions)*
$2,386 $2,544 (6)% (5)% $9,836 $10,173 (3)% (1)%
GAAP diluted EPS $1.71 $3.79 (55)% — $7.97 $20.87 (62)% —
Non-GAAP diluted EPS $2.95 $4.05 (27)% — $14.72 $17.67 (17)% —
Note: Percent changes represented as favorable/(unfavorable) versus the prior year period.
* Beginning in the third quarter of 2023, Biogen modified its presentation of the commercialization expenses incurred within the LEQEMBI Collaboration. Biogen’s 50% portion of LEQEMBI product revenue, net, and cost of sales, including royalties, will continue to be classified as a component of revenue. Biogen will now present its 50% share of all global pre- and post-commercialization sales & marketing expenses for the LEQEMBI Collaboration within SG&A expense and will no longer present the post-commercialization portion of these expenses as a reduction to revenue.
# Percentage changes in revenue growth at constant currency (CC) are presented excluding the impact of changes in foreign currency exchange rates and hedging gains or losses. The current period’s foreign currency revenue values are converted into U.S. dollars using the average exchange rates from the prior period.
1
A reconciliation of GAAP to Non-GAAP financial measures can be found in Table 4 at the end of this news release.
Revenue Summary
(in millions) Q4 ’23 Q4 ’22 △
r (CC#)
FY ’23 FY ’22 △ △ (CC#)
Multiple sclerosis product revenue(1)
$1,168 $1,269 (8)% (6)% $4,662 $5,430 (14)% (12)%
Rare disease revenue(2)
$472 $459 3% 6% $1,803 $1,794 1% 4%
Biosimilars revenue $188 $175 8% 10% $770 $751 3% 6%
Other product revenue(3)
$4 $2 95% 90% $12 $13 (8)% (10)%
Total product revenue $1,832 $1,905 (4)% (2)% $7,247 $7,988 (9)% (7)%
Revenue from anti-CD20 therapeutic programs $436 $448 (3)% (3)% $1,690 $1,701 (1)% (1)%
Contract manufacturing, royalty and other revenue(4)
$118 $192 (38)% (38)% $899 $485 85% 85%
Total revenue $2,386 $2,544 (6)% (5)% $9,836 $10,173 (3)% (1)%
Note: Percent changes represented as favorable/(unfavorable) versus the prior year period. Numbers may not foot or recalculate due to rounding.
(1) Multiple sclerosis includes TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA.
(2) Rare disease includes SPINRAZA, QALSODY and SKYCLARYS.
(3) Other includes ADUHELM, FUMADERM and ZURZUVAE.
(4) Also includes Biogen’s 50% share of revenue, net, and cost of sales, including royalties, from the LEQEMBI Collaboration and revenue from manufacturing of LEQEMBI beginning in the first quarter of 2023. Beginning in the third quarter of 2023, Biogen modified its presentation of the commercialization expenses incurred within the LEQEMBI Collaboration. Biogen’s 50% portion of LEQEMBI product revenue, net and cost of sales, including royalties, will continue to be classified as a component of revenue. Biogen will now present its 50% share of all global pre- and post-commercialization sales & marketing expenses for the LEQEMBI Collaboration within SG&A expense and will no longer present the post-commercialization portion of these expenses as a reduction to revenue.
•Fourth quarter 2023 in-market product revenue for LEQEMBI recorded by Eisai was approximately $7 million.
•Full year 2023 in-market product revenue for LEQEMBI recorded by Eisai was approximately $10 million.
•Fourth quarter 2023 SKYCLARYS revenue was approximately $56 million.
•Fourth quarter 2023 ZURZUVAE revenue was approximately $2 million.
Expense Summary
(in millions) Q4 ’23 Q4 ’22 △ FY ’23 FY ’22 △
GAAP cost of sales*
$618 $571 (8)% $2,533 $2,278 (11)%
% of Total Revenue 26% 22% 26% 22%
Non-GAAP cost of sales*
$587 $571 (3)% $2,502 $2,278 (10)%
% of Total Revenue 25% 22% 25% 22%
GAAP R&D expense $571 $602 5% $2,462 $2,231 (10)%
Non-GAAP R&D expense $568 $602 6% $2,262 $2,231 (1)%
GAAP SG&A expense#
$609 $633 4% $2,550 $2,404 (6)%
Non-GAAP SG&A expense#
$588 $632 7% $2,277 $2,400 5%
Note: Percent changes represented as favorable/(unfavorable) versus the prior year period
*Excluding amortization and impairment of acquired intangible assets
# As referenced above, beginning in the third quarter of 2023, Biogen’s 50% share of all global pre- and post-commercialization sales & marketing expenses for the LEQEMBI Collaboration will be presented within SG&A expense and will no longer present the post-commercialization portion of these expenses as a reduction to revenue.
•Fourth quarter 2023 GAAP and Non-GAAP cost of sales includes approximately $52 million of idle capacity charges. Fourth quarter 2022 GAAP and Non-GAAP cost of sales includes approximately $36 million of idle capacity charges. The increase in fourth quarter 2023 GAAP and Non-GAAP cost of sales as a percentage of total revenue was driven primarily by product mix.
•Full year 2023 GAAP and Non-GAAP cost of sales includes approximately $165 million of idle capacity charges. Full year 2022 GAAP and Non-GAAP cost of sales includes approximately $119 million of idle capacity charges and approximately $286 million in charges associated with the write-off of inventory and purchase commitments in excess of forecasted demand related to ADUHELM. The increase in full year 2023 GAAP and Non-GAAP cost of sales as a percentage of total revenue was driven primarily by product mix, particularly the year-over-year increase in contract manufacturing revenue.
•Fourth quarter 2023 GAAP and Non-GAAP R&D expense includes approximately $45 million related to Biogen’s portion of R&D expense related to the LEQEMBI Collaboration and approximately $60 million in close out costs related to ADUHELM.
•Full year 2023 GAAP and Non-GAAP R&D expense includes approximately $186 million related to Biogen’s portion of R&D expense related to the LEQEMBI Collaboration.
•Fourth quarter 2023 GAAP and Non-GAAP SG&A includes approximately $56 million related to Biogen’s portion of SG&A expense related to the LEQEMBI Collaboration.
•Full year 2023 GAAP and Non-GAAP SG&A includes approximately $152 million related to Biogen’s portion of SG&A expense related to the LEQEMBI Collaboration.
•Fourth quarter and full year 2023 GAAP restructuring expense was approximately $99 million and approximately $219 million, respectively.
Other Financial Highlights
•Fourth quarter 2023 GAAP and Non-GAAP collaboration profit sharing was a net expense of approximately $54 million, which includes approximately $53 million of net profit sharing expense related to Biogen’s collaboration with Samsung Bioepis, and approximately $1 million of net profit sharing expense related to Biogen’s collaboration with Sage Therapeutics related to the commercialization of ZURZUVAE in the U.S.
•Full year 2023 GAAP and Non-GAAP collaboration profit sharing was a net expense of approximately $219 million, which includes approximately $224 million of net profit sharing expense related to Biogen’s collaboration with Samsung Bioepis, partially offset by net reimbursement of approximately $5 million from Sage Therapeutics related to the commercialization of ZURZUVAE in the U.S.
•Fourth quarter 2023 GAAP and Non-GAAP other expense was approximately $67 million and approximately $62 million, respectively, primarily driven by net interest expense.
•Full year 2023 GAAP other expense was approximately $316 million, primarily driven by net unrealized losses on strategic equity investments of approximately $270 million. Full year 2023 Non-GAAP other expense was approximately $14 million, primarily driven by foreign exchange rate losses, partially offset by net interest income.
•Fourth quarter 2023 GAAP and Non-GAAP effective tax rates were 14.7% and 17.0%, respectively. Fourth quarter 2022 GAAP and Non-GAAP effective tax rates were 9.0% and 14.9%, respectively.
•Full year 2023 GAAP and Non-GAAP effective tax rates were 10.4% and 15.2%, respectively. Full year 2022 GAAP and Non-GAAP effective tax rates were 17.6% and 15.3%, respectively.
Financial Position
•Fourth quarter 2023 net cash flow from operations was approximately $13 million, which includes a payment of approximately $393 million for equity-based compensation attributable to the post-acquisition service period related to the Reata Pharmaceuticals, Inc. (Reata) transaction. Capital expenditures were approximately $65 million, and free cash flow, defined as net cash flow from operations less capital expenditures, was a net cash outflow of approximately $53 million.
•Full year 2023 net cash flow from operations was approximately $1.5 billion, and includes the aforementioned payment of approximately $393 million related to Reata. Capital expenditures were approximately $277 million, and free cash flow, defined as net cash flow from operations less capital expenditures, was approximately $1.3 billion.
•As of December 31, 2023, Biogen had cash, cash equivalents, and marketable securities totaling approximately $1.0 billion with approximately $6.9 billion in total debt, resulting in net debt of approximately $5.9 billion. This reflects all purchase payments related to the Reata transaction and a paydown of approximately $350 million of the $1 billion term loan related to our acquisition of Reata.
•No shares of the Company’s common stock were repurchased in the fourth quarter of 2023. As of December 31, 2023, there was approximately $2.1 billion remaining under the share repurchase program authorized in October 2020.
•For the fourth quarter of 2023 the Company’s GAAP weighted average diluted shares were 146 million. For full year 2023 the Company’s GAAP weighted average diluted shares were 146 million.
Full Year 2024 Financial Guidance
For the full year 2024, Biogen expects a Non-GAAP diluted EPS guidance range as follows:
Full Year 2024 Guidance
Non-GAAP diluted EPS
$15.00 to $16.00
Reflecting growth of ~5% at the mid-point*
Versus reported full year 2023
While total revenue is expected to decline by a low- to mid-single digit percentage, Biogen expects core pharmaceutical revenue, defined as product revenue plus Biogen’s 50% share of net LEQEMBI product revenue and cost of sales, including royalties, to be relatively flat for 2024 compared to 2023 as further declines in multiple sclerosis product revenue are expected to be offset by increases in revenue from new product launches.
As of December 31, 2023, batch commitments related to the 2020 sale of Hillerød, Denmark manufacturing operations to FUJIFILM have been satisfied. Biogen expects contract manufacturing revenue to be significantly lower in 2024 compared to 2023.
As a result of these dynamics affecting revenue, along with lower expected idle capacity charges, Biogen expects an improvement in the cost of sales as a percentage of total revenue for 2024 compared to 2023.
For 2024 compared to 2023, Biogen expects operating income to grow at a low-double digit percentage. This is expected to be driven by improved cost of sales as a percentage of revenue, as well as lower operating expenses as a result of the Company’s Fit for Growth program. The Fit for Growth program is expected to generate approximately $1 billion in gross savings and $800 million net of reinvestment by 2025. Since the program was initiated in 2023, approximately $200 million of savings have been achieved, and Biogen expects to realize approximately half of the overall net savings by the end of 2024 with the balance by the end of 2025. These amounts do not include Biogen’s 50% share of sales and marketing expenses for the LEQEMBI Collaboration.
This guidance also assumes that foreign exchange rates as of February 9, 2024, will remain in effect for the remainder of the year, net of hedging activities. Other modeling considerations will be provided on the conference call and webcast.
This financial guidance does not include any impact from potential acquisitions or large business development transactions or pending and future litigation, as all are hard to predict, or any impact of potential tax or healthcare reform. Biogen may incur charges, realize gains or losses, or experience other events or circumstances in 2024 that could cause any of these assumptions to change and/or actual results to vary from this financial guidance.
Biogen does not provide guidance for GAAP reported financial measures (other than revenue) or a reconciliation of forward-looking Non-GAAP financial measures to the most directly comparable GAAP reported financial measures because the Company is unable to predict with reasonable certainty the financial impact of items such as the transaction, integration, and certain other costs related to acquisitions or large business development transactions; unusual gains and losses; potential future asset impairments; gains and losses from our equity security investments; and the ultimate outcome of pending or future significant litigation without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance period. For the same reasons, the Company is unable to address the significance of the unavailable information, which could be material to future results.
Conference Call and Webcast
The Company’s earnings conference call for the fourth quarter will be broadcast via the internet at 8:00 a.m. ET on February 13, 2024 and will be accessible through the Investors section of Biogen’s website, www.biogen.com. Supplemental information in the form of a slide presentation is also accessible at the same location on the internet and will be subsequently available on the website for at least 90 days.