On July 20, 2022 Biogen Inc. (Nasdaq: BIIB) reported second quarter 2022 financial results (Press release, Biogen, JUL 20, 2022, View Source [SID1234616806]).
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"We continued to execute on our near-term operational priorities in the second quarter and are pleased to be raising our financial guidance for the year. At the same time, we continue to face revenue declines due in part to generic and biosimilar competition for TECFIDERA and RITUXAN," said Michel Vounatsos, Biogen’s Chief Executive Officer. "We made important progress towards bringing new potential treatments to patients suffering from Alzheimer’s disease and depression, which we believe are critical steps on our path to drive value creation for both patients and shareholders over time."
Second Quarter 2022 Operating Results
•Second quarter total revenue of $2,589 million decreased 7% versus the prior year at actual currency and 5% at constant currency*. Multiple sclerosis (MS) revenue, including royalties on sales of OCREVUS, of $1,719 million decreased 4% versus the prior year at actual currency and 3% at constant currency. SPINRAZA revenue of $431 million decreased 14% versus the prior year at actual currency and 11% at constant currency. Biosimilars revenue of $194 million decreased 4% versus the prior year at actual currency and increased 3% at constant currency. RITUXAN/GAZYVA profits attributable to Biogen were $144 million, a decrease of 21% versus the prior year.
•Second quarter GAAP net income and diluted earnings per share (EPS) attributable to Biogen Inc. were $1,058 million and $7.24, respectively. Second quarter Non-GAAP net income and diluted EPS attributable to Biogen Inc. were $767 million and $5.25, respectively. A reconciliation of GAAP to Non-GAAP financial measures can be found in Table 4 at the end of this news release.
•Second quarter GAAP and Non-GAAP cost of sales was $484 million, as compared to $460 million in the second quarter of 2021. Second quarter 2022 GAAP and Non-GAAP cost of sales includes approximately $26 million of idle capacity charges. Eisai Co., Ltd.’s (Eisai) share of these charges (approximately $10 million) is reflected in collaboration profit sharing.
•Second quarter GAAP and Non-GAAP R&D expense was $529 million, as compared to $585 million in the second quarter of 2021. Second quarter 2021 GAAP and Non-GAAP R&D expense includes $50 million in upfront payments to Bio-Thera Solutions, Ltd., Capsigen Inc., and Ginkgo Bioworks. Second quarter 2022 GAAP and Non-GAAP R&D expense includes $18 million in upfront payments related to collaborations with MedRhythms and Alectos Therapeutics.
•Second quarter GAAP and Non-GAAP SG&A expense was $573 million and $570 million, respectively, as compared to $637 million and $635 million, respectively, in the second quarter of 2021. Second
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quarter 2022 GAAP and Non-GAAP SG&A expense includes approximately $29 million related to ADUHELM commercialization. Eisai’s reimbursement of U.S. ADUHELM SG&A expense of approximately $17 million is reflected in collaboration profit sharing.
•Second quarter GAAP and Non-GAAP amortization and impairment of acquired intangible assets was $68 million and $7 million, respectively.
•Second quarter GAAP and Non-GAAP collaboration profit sharing was a net expense of $29 million, which includes $58 million of net profit sharing expense related to Biogen’s collaboration with Samsung Bioepis, partially offset by reimbursement of $29 million from Eisai related to the commercialization of ADUHELM in the U.S.
•Second quarter GAAP restructuring expense was $71 million, primarily associated with the substantial elimination of the Company’s global commercial infrastructure supporting ADUHELM.
•Second quarter GAAP other income was $429 million, primarily driven by an approximately $1.5 billion gain on the sale of our equity stake in the Samsung Bioepis Joint Venture, partially offset by net unrealized losses on strategic equity investments of $77 million, net interest expense of $53 million, and $900 million, plus estimated fees and expenses, related to an agreement in principle to resolve previously disclosed qui tam litigation relating to conduct prior to 2015. This agreement in principle does not include any admission of liability and is subject to the negotiation of final settlement agreements and documents. Second quarter Non-GAAP other expense was $79 million, primarily driven by interest expense.
•Second quarter GAAP and Non-GAAP effective tax rates were 17% and 15%, respectively. The second quarter 2022 GAAP effective tax rate was unfavorably impacted by the gain on the sale of our equity stake in the Samsung Bioepis Joint Venture and the estimated tax impact of the agreement in principle to resolve the litigation described above, partially offset by the deferred tax impacts of an international restructuring.
•Second quarter GAAP and Non-GAAP income attributable to noncontrolling interest was approximately $1 million.
* Percentage changes in revenue growth at constant currency 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.
Financial Position
•Second quarter 2022 cash flow from operations was $737 million. Capital expenditures were $37 million, and free cash flow, defined as cash flow from operations less capital expenditures, was $700 million.
•As of June 30, 2022, Biogen had cash, cash equivalents, and marketable securities totaling $5,901 million and $7,277 million in total debt, resulting in net debt of $1,376 million. Subsequent to June 30, 2022, the Company repaid its Senior Notes due September 2022, with an aggregate principal amount of $1 billion.
•In the second quarter of 2022 Biogen repurchased approximately 2.4 million shares of the Company’s common stock for a total value of $500 million. As of June 30, 2022, there was $2,300 million remaining under the share repurchase program authorized in October 2020.
•For the second quarter of 2022 the Company’s weighted average diluted shares were 146 million.
Full Year 2022 Financial Guidance
For the full year 2022, Biogen is updating its revenue and Non-GAAP diluted EPS guidance ranges as follows:
Prior Guidance Updated Guidance
Total revenue $9.7 to $10.0 billion $9.9 to $10.1 billion
Non-GAAP diluted EPS $14.25 to $16.00 $15.25 to $16.75
The increase in full year 2022 revenue and Non-GAAP diluted EPS guidance is driven primarily by better-than-expected topline performance and continued cost management.
This guidance assumes continued declines in RITUXAN revenue due to biosimilar competition, as well as continued erosion of TECFIDERA revenue in the U.S. due to generic entry. Further, this guidance reflects a range of scenarios for the impact of TECFIDERA generics in the E.U., which is difficult to predict.
Non-GAAP R&D expense is expected to be between $2.2 billion and $2.3 billion, unchanged from prior guidance.
Non-GAAP SG&A expense is expected to be between $2.3 billion and $2.4 billion, unchanged from prior guidance.
The Non-GAAP tax rate for 2022 is expected to be between 15.5% and 16.5%, unchanged from prior guidance.
This guidance assumes that foreign exchange rates as of July 15, 2022, will remain in effect for the remainder of the year, net of hedging activities. Subsequent to issuing its most recent 2022 financial guidance, the Company has experienced a headwind of approximately $55 million to full year 2022 revenue and approximately $0.20 to full year 2022 Non-GAAP diluted EPS due to currency fluctuations, net of hedging activities, from April 29, 2022 through July 15, 2022.
Biogen expects to utilize a portion of the remaining share repurchase authorization of $2,300 million through the end of 2022. 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 2022 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 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.
Key Recent Events
•In July 2022 Eisai and Biogen announced that the U.S. Food and Drug Administration (FDA) has accepted the Biologics License Application (BLA) and granted priority review for lecanemab for people with mild cognitive impairment due to Alzheimer’s disease (AD) and mild AD with confirmed presence of amyloid pathology in the brain under the accelerated approval pathway. The BLA submission for
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lecanemab is based on clinical, biomarker, and safety data from the proof-of-concept Phase 2b (Study 201 Core) in 856 people with early AD with confirmed presence of amyloid pathology, biomarker and safety data from the Study 201 OLE (180 subjects), and blinded safety data from the confirmatory Clarity AD Phase 3 study. The FDA is expected to make a decision on approval by January 6, 2023.
•In July 2022 Biogen announced that the TALLY Phase 2 study of BIIB104 in cognitive impairment associated with schizophrenia did not meet its primary or secondary efficacy endpoints. Most adverse events in the BIIB104 treatment arms were mild to moderate in severity. Given the consistent lack of efficacy observed across the primary and secondary measures of cognition and functioning, while demonstrating expected drug-exposure levels during the entire 12-week evaluation period, Biogen has decided to discontinue the BIIB104 program in cognitive impairment associated with schizophrenia.
•In July 2022 Roche announced that the FDA accepted the company’s BLA and granted priority review for LUNSUMIO (mosunetuzumab) for people with relapsed or refractory follicular lymphoma. This follows the European Commission approval of LUNSUMIO for people with relapsed or refractory follicular lymphoma in the second quarter of 2022. LUNSUMIO is the first CD20xCD3 T-cell engaging bispecific antibody available to treat the most common slow-growing form of non-Hodgkin lymphoma, follicular lymphoma. Biogen will share in the operating profits and losses of mosunetuzumab in United States in the low to mid 30% range and is eligible to receive low single-digit royalties on sales outside the United States.
•In the second quarter of 2022 Eisai published results in Neurology and Therapy regarding the potential long-term health outcomes of lecanemab using simulation modeling based on the results of the Phase 2b Study. This analysis suggested that compared to standard of care (SoC) alone, individuals treated with lecanemab in addition to SoC may potentially experience slower disease progression to mild, moderate and severe AD from baseline by 2.51, 3.13 and 2.34 years on average, respectively. The preliminary results of this model-based simulation could possibly translate into additional quality-adjusted life years and reduction in the formal and informal care costs.
•In the second quarter of 2022 Biogen and Sage Therapeutics, Inc. announced that the Phase 3 SKYLARK Study of zuranolone, an investigational oral drug being evaluated in women with postpartum depression, met its primary and all key secondary endpoints. Subsequently, Sage and Biogen have decided to submit a single New Drug Application (NDA) seeking approval of zuranolone for the treatment of both major depressive disorder (MDD) and PPD. Sage and Biogen expect to complete the submission of this single NDA in the second half of 2022, and to seek priority review of the filing.
•In the second quarter of 2022 Biogen announced that the European Patent Office has granted a patent that expires in February 2028 related to TECFIDERA. The patent, EP 2 653 873, is directed to treating MS using dimethyl fumarate dosed at 480mg per day, which is the European Medicines Agency recommended maintenance dose for TECFIDERA. Patent EP 2 653 873 was granted from a divisional patent application of European Patent No. 2 137 537 and includes amended claims, which the European Patent Office Examining Division determined were allowable under the relevant provisions of the European Patent Convention.
•In the second quarter of 2022 Biogen announced new 12-month data for tofersen, an investigational antisense drug for people with superoxide dismutase 1 (SOD1) amyotrophic lateral sclerosis (ALS). The data show that earlier initiation of tofersen (compared to delayed initiation six months later in the open-label extension study) slowed declines in clinical function, respiratory function, muscle strength, and quality of life. Biogen continues to engage with FDA and other regulators with these data and will provide updates when appropriate.
•In the second quarter of 2022 Biogen presented new data from clinical studies aimed at assessing remaining unmet needs for people living with spinal muscular atrophy (SMA) and evaluating the potential impact of SPINRAZA in different patient populations at the SMA Research & Clinical Care Meeting hosted by Cure SMA. Biogen’s continued R&D investments, including the ongoing DEVOTE, RESPOND and ASCEND studies, aim to assess options and inform therapy decisions for the SMA community.
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•In the second quarter of 2022 Biogen and Bio-Thera Solutions, Ltd. presented positive Phase 3 data for BIIB800 (BAT1806), a biosimilar candidate referencing ACTEMRA/ROACTEMRA (tocilizumab), an anti-interleukin-6 receptor monoclonal antibody, at the Annual European Congress of Rheumatology. Data from the Phase 3 comparative clinical trial demonstrated that the investigational biosimilar candidate BIIB800 has equivalent efficacy and comparable safety and immunogenicity profile to the reference tocilizumab product.
•In the second quarter of 2022 Biogen and Samsung Bioepis Co., Ltd. launched BYOOVIZ (ranibizumab-nuna), a biosimilar referencing LUCENTIS, in the United States. BYOOVIZ is the first biosimilar launch in the U.S. under the Biogen and Samsung Bioepis’ collaboration.
•In the second quarter of 2022 Biogen and Denali Therapeutics Inc. announced that dosing commenced in the global Phase 2b LUMA study to evaluate the efficacy and safety of BIIB122 (DNL151), as compared to placebo in approximately 640 participants with early-stage Parkinson’s disease. BIIB122 is an inhibitor of LRRK2, a novel target with the potential to impact the underlying biology and slow the progression of Parkinson’s disease.
•In the second quarter of 2022 Biogen and Alectos Therapeutics entered into a license and collaboration agreement to develop and commercialize a novel preclinical selective GBA2 inhibitor, AL01811, which has first-in-class potential as an oral disease modifying treatment for patients with Parkinson’s disease.
•In the second quarter of 2022 Biogen and MedRhythms entered into a license agreement to develop and commercialize MR-004, an investigational prescription digital therapeutic for the potential treatment of gait deficits in MS.
Conference Call and Webcast
The Company’s earnings conference call for the second quarter will be broadcast via the internet at 8:00 a.m. ET on July 20, 2022, 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 one month.