Biogen Inc. (BIIB) Q3 2023 Earnings Report, Transcript and Summary

Good morning. My name is Ally and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Biogen Third Quarter 2023 Earnings Call and Business Update. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Today's conference is being recorded. Thank you. I would now like to turn the conference over to Mr. Chuck Triano, Head of Investor Relations. Mr. Triano, you may begin your conference.

Thank you, Ally. Good morning and welcome to Biogen's third quarter 2023 earnings call. Before we begin, I'll remind you that the earnings released and related financial tables including our GAAP financial measures and a reconciliation of the GAAP to non-GAAP financial measures that we will discuss today are located in the Investors section of biogen.com.. Our GAAP financials are provided in tables 1 and 2, and table 4 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 discussion related to this call. I would like to point out that we will be making forward-looking statements, which are based on our expectations. 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. So, on today's call, I'm joined by our President and Chief Executive Officer, Chris Viehbacher; Dr. Priya Singhal, Head of Development; and our CFO, Mike McDonnell. Chris, Priya, and Mike will each make some opening comments and then we'll move to the Q&A session. And 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.

Thank you very much, Chuck. Good morning, all. I think we released a very good set of results this morning ahead of expectations. But of course, we're all too consciously aware that really what most of you are interested in is where's Biogen going. To that end, we outlined five priorities that we believed we needed to achieve to put Biogen in a position to be able to grow again sustainably. I think in the first nine months of the year, we've made an awful lot of progress. And indeed, I would say, the third quarter was a particularly busy quarter. To remind you all what those priorities were really was to focus our teams and our resources on new product launches. And that is a little easier said than done. We're a company that has a long heritage in the treatment of multiple sclerosis. And teams get very passionate about patient outcomes and working with physicians and to move them to new areas does require a concerted effort. The other thing we wanted to do is to stabilize and grow again, those existing products that still have market exclusivity for a significant period of time, notably VUMERITY and SPINRAZA. The third thing was to really look at our cost base. Although we had a relatively mature product portfolio, we had one of the higher OpEx to sales ratios among our peer group. And we needed to address that. But more than that, we needed to really reallocate our resources. Fourth was to really look at our research and development pipeline, particularly for the longer term growth outlook. We have really taken a deep dive into research and development, looked at those products, projects that perhaps no longer fulfil their original target product profile, where the practice of medicine had changed, where the probability of success had changed. And we have terminated those programs, so that we can focus on those assets that we think have the most promise. And I think we have a number of those, any one of which could actually meaningfully add to our longer term growth. And the final thing was, we said right at the outset, we were interested in external growth. We always knew that the LEQEMBI launch was going to be a gradual launch. We always knew that. Also, even the zuranolone launch was an unconventional launch. And to derisk that profile, we wanted to look at external growth. And of course, we've been able to do that. So as I look at where we are, in the third quarter, we actually had – LEQEMBI was the first anti-amyloid antibody to receive traditional approval for early Alzheimer's disease. ZURZUVAE was a mixed bag. We got an important indication with postpartum depression. But of course, we missed on the major depressive disorder. As expected, we've received Schedule IV listing from the DEA. And we also had QALSODY approved for treating a genetic cause of ALS. This is not necessarily a product that is going to be of interest to many of you from the revenue potential. But scientifically, this is a major milestone and validating the biomarker neurofilament, I think, will enable so many researchers to find further treatments for ALS and perhaps other diseases. As I noted, we closed the acquisition of Reata Pharmaceuticals, and that gives us a whole new growth opportunity. SKYCLARYS is off to a very strong launch, and we'll talk about that in a minute. But it also builds out our rare disease portfolio. As you know, we are trying to move into some adjacencies just given the risk of the neurological conditions that we have tended to focus on. And rare diseases has been a logical place for us to go. Biogen has been very successful with the launch of SPINRAZA and we think we can do the same with SKYCLARYS. And as I mentioned earlier, we had the Fit for Growth program, and this wasn't just about cost reduction because we do want to reinvest some of that, but we really needed to simplify the organizational structure, to empower the organization more, and move more of the decision making closer to markets and customers. We have ended up taking an entire layer enterprise-wide out of the organization and, in some parts of the organization, even two layers of that. So we do think those cost savings will add meaningfully to our earnings per share as we look forward. But I'm also looking forward to a significant change culturally and how we allocate capital and the agility and the ability to take decisions in the organization. Can I move to the next slide, please? So let's talk about LEQEMBI, a subject I'm sure all of you are very interested in. We have always guided that this was going to be a gradual launch. And we know that partly from the ADUHELM experience, but also just from the fundamentals of what we're doing. This is a product that needs to be administered within a treatment process or care network. And those care networks did not exist at the time of the launch. So they have to be built. And doing that requires actually quite a significant change to the work patterns within clinics. And whilst IDMs and clinics are working really hard to put these in place, it, of course, takes time. And I think a terrific example of that is the announcement recently by the Cleveland Clinic. We all know that the Cleveland Clinic is one of the most widely respected medical centers anywhere in the world. And they recently announced that they had just infused their first patient with LEQEMBI months after the approval. And I think that just speaks to the complexity that we're dealing with. And in a lot of ways, we not only are pioneering science, we're pioneering this this commercial approach. So, of course, we have an aim of getting to 10,000 patients by the end of March. We're at 800 now. What gives us the confidence that we think we can get there? I think we have a number of greenshoots here, signs of progress. The first is, as we look at our internal metrics of intent to treat and patient demand, we are seeing all of those things progress extremely nicely. The FDA not only provided traditional approval, but CMS actually moved very quickly, the day of traditional approval, as they promised. They actually have provided reimbursement and the patient registry has so far from what we hear from the market and been relatively easy to use. We had some confusion around the reimbursement of amyloid PET. And CMS has clarified that. Now, of course, it's going to take a little time for that to flow down through to the max. But I think that will also relieve some of the confusion out there. I think one of the most interesting things is we've got 60% of the top 100 targeted IDMs now having P&T approval. And one of the things that really gives me a lot of inspiration is usually these P&T committees meet twice a year, but a number of them actually have organized special meetings just for LEQEMBI and not wait until the next meeting. And that says to me that there's a recognition of the importance of this treatment and being able to get patients on treatment. So where do we also go from here? Remember, a year ago from here, there was still skepticism about whether reducing amyloid plaque would really have a benefit. And it wasn't really till the CLARITY study was finally presented at CTAD last year that we really had, for the first time, clear compelling evidence of the benefit of removing these amyloid plaques. And now of course, we can go and say, all right, that's tremendous. But why is that so tremendous? Well, for years, we've been trying to develop antibodies, and those antibodies failed. And that's what gave rise to the skepticism. Which were the right patients? Which was the right antibody that was going to get the right amount of drug into the brain? And LEQEMBI is really the first one to show that clear, compelling evidence that that has occurred. Now, of course, we all want to get fancy. And that's where we're going. And we just had CTAD this year and think about what we've just done. We are generating more data to really demonstrate the benefit of this treatment. We've seen, for instance, that the subcutaneous treatment is going to work, that we have comparability with the infusion, and this means so much for the convenience of patients. But this is no mean task either. Others have tried to do this. How do you get enough drug through the muscle tissue and into the brain? That has been achieved and is a major milestone. We've been looking at maintenance dosing. What happens when you've cleared the plaque? Does the plaque come back? Well, we have 24 months data now that shows a lot of benefit of staying on treatment. Then the question is still who's the right patient. And data were shown with early stage patients with low levels of tau. And those are fascinating data. We had 76% of those patients stable over the course of measurement. And very intriguing and very interesting. We actually saw with 60% of those patients that we actually saw some clinical benefit, as measured by the CDR sum of boxes, completely unexpected. That generated an awful lot of discussion at CTAD. So now, of course, we're also looking at executing on geographic expansion. We've had the recent approval of Japan and I'm traveling to Japan early in the new year to be with my friend and colleague, the CEO of Eisai to launch LEQEMBI in Japan. And of course, we've got global filings under review in the EU, China and 10 other markets. So this is one where we're going to have to be patient, but all the signs are green at this moment. And for us, internally, we see a launch that is on track. But as we've always said, there's no real analogues. And every month, we learn something new. If I could move to the next slide, please, Chuck. Now, let's talk about SKYCLARYS, something that is much different. And as you know, we now have 1,180 start forms to date, with about 860 patients actually on drug. When we look at all of the known analogues, we're actually exceeding all of those, including SPINRAZA at the same point in time. Now, we have to be a little cautious because we all know that there would likely have been a number of patients ready and waiting by physicians. And I think that was even more of the case because, you may recall, that the product was actually approved in the spring, but then delayed for a couple of months due to a technical and temporary challenge on supply. And so, I think there was an anticipation. Nonetheless, there's a very strong desire to see this product come. And we're actually seeing a lot of requests from countries around the world to make SKYCLARYS available. And that just speaks to I think the understanding that this is the very first treatment that has ever been approved for Friedrich's ataxia. This is an incredibly debilitating disease that affects so many young people right in the prime of their life. And so, it's extremely important that they benefit from that. We had about $43 million of sales in the third quarter. One of the things that we are now working on and I think this is where Biogen can really add value is why is there 1,180 on start forms and 860 on drugs? Well, there are a number of things. Trying to get reimbursement, you need genetic tests, we need to measure your liver enzymes before you go on the product. And one of the differences from SPINRAZA is that they're not all incentives. They could be out there in in primary care, physician care. And Biogen is well equipped to do that. We are used to providing genetic tests. We don't worry about the reimbursement. We provide those. We have mobile labs, so that we can help patients who are not there to major medical centers to get, for instance, the lab enzymes done. And also, we know how to pull through these start forms and navigate the difficult reimbursement situation. So I think not only is there an advantage for Biogen in getting this important medicine to patients around the world, but I think even in the United States, we can actually make this more rapidly available to patients. So with that, I'll turn it over to Priya.

Thank you, Chris. This was an exciting quarter for Biogen's development organization with the approval of ZURZUVAE in postpartum depression, as well as important new data presented for LEQEMBI and our tau-targeting ASO, BIIB080, two programs we believe that are critical to expanding Biogen's leadership in Alzheimer's disease. Starting with LEQEMBI, at CTAD last month, Eisai presented new data on a subcutaneous formulation of LEQEMBI. We believe the interim results at six months showed that subcutaneous LEQEMBI was comparable to the IV formulation on the basis of drug exposure as assessed by area [Technical Difficulty] as well as amyloid plaque removal. In terms of safety, we believe the timing, frequency and severity of ARIA-E was similar across IV and subcutaneous formulations. Additionally, overall the incidence rate of systemic reactions with subcutaneous LEQEMBI was also lower with mild symptoms, as compared to first time LEQEMBI IV treated patients from the CLARITY AD core study. We believe these results further support the intent to develop subcutaneous formulation of LEQEMBI and, if approved, may allow for greater patient access, improved compliance and convenience. We've made significant progress in our understanding of the potential clinical benefit that is associated with amyloid removal in Alzheimer's disease. However, there are still very many key questions remaining on how to maximize the clinical benefit with these agents, including when to begin treatment. We believe the differentiated and straightforward design of the CLARITY AD study allowing entry of Alzheimer's patients with confirmed amyloid pathology, but low tau burden allows us to gain additional insights into the clinical profile of LEQEMBI across various stages of Alzheimer's disease. The data show that in the low tau sub population, which represents the earliest stages of early AD, 76% of patients showed no decline and 60% showed clinical improvement at 18 months, as assessed by CDR sum of boxes compared to 55% and 28% for placebo, respectively. We are very encouraged by these results. A second key question for the field is what happens when you continue treating after amyloid plaques have been removed? And why would this be beneficial? We believe that dual-acting LEQEMBI continues to support brain neuron function by also removing soluble, highly toxic protofibrils that can cause neuronal injury and death even after plaque removal. Therefore, with LEQEMBI, we believe there is a potential for longer term treatment to sustain or further the clinical benefit observed within the initial plaque removal phase. In terms of data supporting this potential benefit, when examining the 24-month data from the CLARITY AD core study and the open label extension, we see a potential clinical benefit from continuing to treat with LEQEMBI. Specifically, the separation in CDR sum of boxes between the group that continue to receive LEQEMBI or the early start group and the group who switched from placebo to LEQEMBI, the delayed start group, was maintained during the six month open label extension following the core study, suggesting a disease modifying effect. The clinical benefit observed in the early start group at 24 months is further supported by the comparison against participants from the ADNI observational natural history cohort that was selected to match the baseline demographics and clinical characteristics of the CLARITY AD population. Additionally, while the delayed start LEQEMBI cohort does not catch up to the early start group, we do believe a potential slowing of decline with six months of LEQEMBI treatment as compared to the ADNI cohort at the 24 month time point. We believe the totality of these data support both the importance of initiating treatment early as well as the durability of effect observed with continued LEQEMBI treatment. As we aim to provide options for patients, Eisai is currently evaluating maintenance dosing or every four-week LEQEMBI dosing after the removal of plaque and plans to submit a regulatory filing by the end of Q1 2024. Also, at CTAD, Biogen presented new data from the Phase 1b study of our antisense oligonucleotide targeting tau. In the new results in the small study for patients treated with the two highest doses of BIIB080, we observed favorable trends on multiple exploratory endpoints of cognition and function as assessed by the CDR sum of boxes, MMSE and functional activities questionnaire when compared to the baseline matched external controls at week 100. These findings build upon previously reported results from the BIIB080 Phase 1b showing strong target engagement in the CSF and a reduction in the brain tau pathology as measured by tau PET. Biomarker data from the placebo control period and long term extension phase of this study were just recently published in JAMA Neurology. Viewed as an underlying pathology of Alzheimer's disease, tau has long been an area of focus in Alzheimer's drug development. While many prior attempts using monoclonal antibodies have failed, we now see from the Phase 1b study of an [Technical Difficulty] a convergence of evidence across soluble biomarkers, tau PET, and exploratory clinical measures suggesting a link between the reduction in tau pathology and potential clinical benefit. As a reminder, our tau targeting ASO is a completely new mechanism, which unlike the antibodies is designed to reduce production of all forms of tau, including both intracellular and extracellular species. One clear challenge that we saw with antibodies was their inability to target intracellular species. We believe these results, while early, are encouraging and we are excited to be enrolling the Phase 2 CELIA study of BIIB080 in early AD. Over the last few months, I have spoken about our efforts to reprioritize Biogen's development pipeline in an effort to optimize R&D value and productivity. This presented us with an opportunity to take a fresh look at our pipeline, and identify areas where we believe we have both sufficient expertise and confidence in the science as well as our ability to deliver meaningful new treatments to patients, while prioritizing resources accordingly. This starts with Alzheimer's where we believe we have demonstrated scientific leadership and are taking steps to build long term impact. This includes first working with Eisai on several initiatives aimed at differentiating LEQEMBI and providing options to patients. Second, continuing to advance our ASO targeting tau as well as preclinical programs that span different molecular targets and approaches across the Alzheimer's disease biology. Lastly, continuing to deliver new insights on Alzheimer's disease biology and long term treatment with anti-amyloid antibodies. On this point, at CTAD, we also presented new data from aducanumab, including new data from the EMERGE long term extension and the EMBARK redosing study. We believe these findings can help support the field's understanding of the potential long term treatment benefits associated with anti-amyloid antibodies. Beyond Alzheimer's disease, we have multiple near-term inflection points across various programs and therapeutic areas over the next year. This includes regulatory outcomes for LEQEMBI in several geographies, as well as regulatory outcomes for other products. In addition, we have important readouts for BIIB105 in ALS, BIIB121 in Angelman syndrome, and dapirolizumab pegol in SLE, all expected mid-year 2024. Combined with the long term potential of programs like litifilimab, our homegrown asset currently being evaluated in two Phase 3 studies for SLE and a Phase 2/3 study for CLE, we believe our pipeline has the potential to support Biogen's return to sustainable growth. And with our partners on the research and business development teams, we continue to evaluate external opportunities. I will now pass the call over to Mike.

Thank you, Priya. Good morning, everyone. I'm going to provide some highlights and color regarding our financial performance for the third quarter of 2023. And all the financial comparisons that you'll hear are versus the third quarter of 2022. Total revenue for the third quarter was $2.5 billion. That's an increase of 1% at actual currency and 3% at constant currency. Non-GAAP diluted EPS in the third quarter was $4.36. Total MS product revenue was $1.2 billion. That's a decrease of 14% at actual currency and 12% at constant currency. And that decline is primarily attributable to generic entrants for TECFIDERA, as well as broad competition in the MS market. I would like to provide a few updates to the MS business this quarter. First, in Europe, we continue to see that some generics have not yet fully exited some of the EU markets, and we do believe that there may still be some generic product remaining in the channel. The pace of generic withdrawal has been slower than we expected, but we continue to closely monitor the situation and are working to enforce our legal rights to market protection. TYSABRI biosimilar was approved in the US and EU which we had previously assumed. At this point, we are not expecting a launch this year, but we are aware that there are plans to launch a biosimilar in the first half of 2024. Biogen still has patents relating to TYSABRI and we will continue to enforce our IP. VUMERITY was a bright spot in the third quarter. We did see revenue increase 20%. That was driven primarily by global patient growth. However, we are seeing continued effects from both pricing pressure and an overall contraction of the oral segment of the market in the United States. Next, global SPINRAZA revenue of $448 million increased 4% at actual currency and 7% at constant currency. The 7% growth that we saw included 7% growth in the US as well. And that was driven by patient growth. While outside the US, SPINRAZA benefited from the timing of shipments in certain markets. We continue to be encouraged by the performance of SPINRAZA the past few quarters and continue to believe that we're making good progress against our goal of returning SPINRAZA to consistent growth over time. Biosimilars with a third quarter revenue of $194 million increased 4% at actual currency and 7% at constant currency. During the third quarter, we updated how we present commercialization expenses incurred within the LEQEMBI collaboration. Our 50% portion of LEQEMBI net product revenue and cost of sales, which includes royalties, will continue to be classified as a component of revenue. Now, Biogen's 50% share of all global commercialization sales and marketing expenses for the LEQEMBI collaboration will be presented in the SG&A expense line and will no longer be presented as a reduction to revenue. During the third quarter of 2023, we reclassified approximately $39 million of commercial collaboration costs from the first and second quarters of 2023 to reflect this change in presentation. These costs were moved out of the revenue line and into the SG&A expense line, resulting in a $39 million increase to both revenue and SG&A for the third quarter with no bottom line impact. This change in presentation does not affect any of our agreements with Eisai and we continue to share LEQEMBI collaboration revenue and commercialization expenses 50/50. This change will allow us to be more transparent in our reporting, and it's consistent with how some others in our industry report collaborations. This change will have no impact to Biogen's bottom line. As Eisai reported in-market product revenue for LEQEMBI in the third quarter was approximately $2 million, our anti-CD20 revenue was $421 million, and that included $11 million operating loss related to Lunsumio. Contract manufacturing royalty and other revenue of $304 million was notably higher year-over-year and that was driven mainly by the timing of batches and it also includes the reclassified $39 million, which I just mentioned. A couple of things to note regarding the third quarter expenses. Third quarter non-GAAP cost of sales was 26% of total revenue, and that includes $35 million of idle capacity charges. Cost of sales as a percentage of revenue continues to be impacted by product mix, and in particular this quarter increases in contract manufacturing revenue. Third quarter non-GAAP R&D expense includes approximately $44 million related to our portion of the LEQEMBI collaboration and approximately $37 million in close-out costs related to the EMBARK trial for ADUHELM. Third quarter non-GAAP SG&A expense includes approximately $82 million related to our portion of the LEQEMBI collaboration and that includes the previously mentioned reclassification of $39 million in collaboration costs from the first and second quarters of 2023 from revenue to SG&A expense. As compared to the prior year, the decrease in third quarter non-GAAP SG&A expense was driven by approximately $100 million in cost savings initiatives, partially offset by an increase in commercialization expense for LEQEMBI and ZURZUVAE as well as the $39 million reclassification that I just mentioned. Next, a few brief comments on our balance sheet. We ended the quarter with $2.3 billion in cash and marketable securities and $7.3 billion in debt. And that puts us in a net debt position of approximately $5 billion. Even though these figures include the majority of the payments related to the close of the Reata transaction, it is important to note that we expect to utilize an additional approximately $1.3 billion of cash for outstanding payment obligations related to the transaction. And that should occur in the fourth quarter. We do continue to generate steady positive cash flow from operations and generated $518 million of free cash flow during the third quarter. In the coming quarters, we will be utilizing a portion of our cash flow to pay down some of the newly acquired $1 billion of short term debt that we use to partially fund the Reata transaction. Next, I'd like to provide an update to our full year 2023 financial guidance which takes into consideration three key recent events. One is the completed acquisition of Reata. Second is the regulatory approval for ZURZUVAE in postpartum depression. And the third is the modification that we made to our presentation of the LEQEMBI expenses. We're updating our full year 2023 revenue guidance to a low single-digit percentage decline. And that is an improvement from our previous guidance, which was a mid-single-digit decline. And that's of course compared to full year 2022 reported results. This is primarily driven by the update to how we present LEQEMBI commercial expenses which are no longer presented as a reduction to revenue. We are also updating and narrowing our full year 2023 non-GAAP diluted earnings per share guidance to be between $14.50 and $15. As we have previously noted, the acquisition of Reata will be slightly dilutive to our 2023 non-GAAP EPS with an expected impact of approximately $0.75. Much of this impact comes from financing the transaction which affects our operating income and expense line, including incremental interest expense [Technical Difficulty] a significant decrease in interest income. Absent this impact from the Reata transaction, our EPS guidance would be narrowed to $15.25 to $15.75. And that's consistent with the midpoint of our previous guidance. Further for 2023, we expect some incremental OpEx associated with the Reata acquisition. And that will be largely offset by decreased spending for ZURZUVAE as we prepare to launch in the PPD indication. We also expect some savings from our Fit for Growth program in 2023. Looking forward to 2024, it is very important to note that as a result of the Reata transaction, we will have approximately $6 billion less in cash that was generating interest income at approximately 5% as well as an incremental $1 billion in debt at a blended rate of approximately 6.7%. I'd also note that, for the full year 2023, we've absorbed a headwind of approximately $0.30 to EPS due to currency fluctuations. And this is a dynamic that we're watching very closely for 2024. I'd offer that we estimate every $0.01 change in the euro versus the US dollar has a roughly $18 million impact to our P&L. I'd also refer you to our press release for other important guidance assumptions. Finally, a brief update on our Fit for Growth cost savings initiative. I'd start by reiterating that the program maintains the target of approximately $1 billion in gross savings by 2025 as compared to full year 2023. Since we first announced the program, we have not made any changes to our planned level of reinvestment other than the acquisition of Reata and the regulatory approval for ZURZUVAE in PPD only, neither of which were included in our original assumption. The expected impact of Reata and ZURZUVAE to the original program is approximately a net decrease in the expected reinvestment of $100 million. Or said differently, we now expect an additional $100 million in net savings, so the original $700 million in expected net savings increases to approximately $800 million. I would also just highlight that these figures do not include the impact of the LEQEMBI commercial spend, which will now be reflected in our SG&A line and will of course continue to ramp up as commercial activity and sales increase. And I'd also like to point out that as before, the expense estimates presented today did not contemplate any incremental business development or any transactions related to the biosimilars business and they assume continued R&D spend on ADUHELM through at least 2025. I'm going to now turn the call back to Chris for some closing remarks.

Thank you, Mike. So we're already into 2024 in our AOP planning. And as we look to next year, we actually we have a number of milestones, which is nice to see. As I mentioned earlier, we have an EMA decision on LEQEMBI in the EU and in China. We'll have a decision on SKYCLARYS in the EU and QALSODY in the EU, all in the first half of next year. We intend to have two more important regulatory submissions, one for the subcu formulation and also for the IV maintenance dosings, both for LEQEMBI. And then finally, we're actually starting to see some development readouts in the pipeline. We expect the dapirolizumab Phase 3 in SLE in the new year. We have our ASO for sporadic ALS, reading out on a Phase 1/2. A Phase 1 in Angelman syndrome. And of course with Sage, the SAGE-324 program in essential tremor. So I think we'll have a number of interesting news points for next year. And with that, Chuck, I think we can turn it over for questions.

Thank you, Chris. Ally, can we please poll for questions? Thank you.

[Operator Instructions]. And our first question comes from the line of Salveen Richter with Goldman Sachs.

Just on the Reata assets here. Now with the acquisition closed and the launch progressing well, could you just give us your thoughts around key near term value drivers including the launch trajectory, the EMA approval outlook for early next year, and then expansion into the pediatric population?

Actually, when you look at SPINRAZA, SPINRAZA is a good analog. One of the nice things about the rare disease space is that we tend not to be so US centric. So when you look at SPINRAZA sales, it's broadly, not quite, but it's roughly a third, a third, a third between the US, EU and then the international area. And we expect the same really for SKYCLARYS. So we do expect significant value to come out of both EU, but also in Latin America, perhaps some in the Middle East, Turkey, obviously, for genetic reasons. There is none in the Asia region. But we do know that there are quite a few patients, for instance, in Brazil and in Argentina. So we are accelerating our efforts to file for approval in Latin America. On the EU, you never want to try to predict entirely the regulators. We have to respect their decision – ability to make a decision till the end. But everything we've seen so far doesn't really change anything in our view of the probability of this being approved in the in the EU. And that represented, as you may remember, at the time of the transaction, we estimate about a third of the value of the transaction. And then the pediatric study, we are in discussion with regulators. That will be actually quite important because there are a number of patients who start to become diagnosed as early as five or six years old, but certainly in that 8 to 10 year old timeframe. So it's quite important that we get the pediatric study underway.

And our next question comes from Brian Abrams from RBC Capital. We moved on next to Geoff Meacham from Bank of America.

Just had one on LEQEMBI maintenance? When we think about the strategy, I guess the question is, do you have regulatory color on a separate maintenance claim, just given the emphasis on plaque reduction initially? And related to that, would there have to be an additional level of evidence when you think about maintenance with respect to CMS reimbursement?

With regards to maintenance, what I can tell you is that Eisai has communicated that – as you know, we're getting it every four weeks. This is with the intravenous infusion. And this data is expected to be filed by Q1 2024. I won't be able to comment on what it would lead to in terms of indication and such. But we are preparing the data for a potential filing.

Next we'll go back to Brian Abrahams with RBC Capital Markets.

Congrats on all the progress. So coming out of CTAD on subcu LEQEMBI, I realize FDA discussions are still to be had. But can you maybe help us understand your latest thinking as to what's likely to be required for approval? How much, if any, additional patient data do you think you might need to generate at a dose you might go forward with? Might you expect to be able to file for a lower dose based on PK modeling? And maybe you could confirm whether additional patients who are still seeing – flow through the trials there are still seeing exposure below the 125% upper bound?

We are encouraged with the subcutaneous interim data that we shared and Eisai shared at CTAD. Just stepping back, the subcutaneous study was a sub study in the open label extension for CLARITY AD. The patient population that was treatment naïve and where we were really assessing the PK/PD, which was the PK parameters, as well as the PD outcome of amyloid plaque reduction, was a subset of 72 patients. And in addition, the study was set up to gather safety and tolerability in an additional 324 subjects. So the total study population was 394. And what we shared was that we believe that the subcutaneous formulation showed comparability and bioequivalence with the intravenous formulation, and it was between the confidence intervals of 80% and 125% of exposure. What we also noted was that the overall area under the curve was about 11% higher with subcutaneous. And we also noted that there was a 14% increased plaque reduction at the six-month time point. So these are kind of the observations that we have from the data. We have had prior regulatory discussions. And we're now embarking upon additional meetings with the FDA to share the data with them and discuss next steps. So at this point, that's where we are. The plan is, as communicated by Eisai, to file for a BLA by Q1 2024. And that's really the update. Eisai has also commented potentially on a maintenance subcutaneous formulation and filing, but that is much later in the 2025 timeframe. So that's where we are right now.

[Operator Instructions]. We're going to take our next question from Terence Flynn from Morgan Stanley. I apologize. We're next going to now go to Robyn Karnauskas from Truist Securities.

I just want to get a sense of how you think about duration of therapy given your maintenance data. How should we think about modeling how long people might be on drug at this point with the knowledge that you have for LEQEMBI?

Why don't you start with that, Priya, and then I can finish maybe from a commercial point of view?

Just stepping back, as we think about the Alzheimer's disease progression, we know that patients actually have plaque reduction. But we have data from several sources now, LEQEMBI, ADUHELM and others that show that while plaque reaccumulates slowly at a rate of about 3% to 4% based on current understanding annually, the biomarkers actually reflecting disease progression continue to accumulate as soon as patients are off drug, at least with LEQEMBI and ADUHELM. And this is based on the Aβ 42 to 40 ratio, but also other pathological biomarkers. We've also shown most recently at CTAD that actually continuing patients on the 24 month – and we showed data on that, which I also shared in my prepared remarks, we saw that while patients who were on placebo during CLARITY AD study at 18 months and then transitioned onto drug in the open label extension, they never really caught up with the what we call the early start cohort. However, they maintained their difference with the early start, which we believe is a disease modifying effect. And then finally, when we superimpose that with the ADNI data and the natural history data, we see that the patients who even start at 18 months actually maintain some level of stabilization on drugs. So all these areas of evidence point us to the fact that really continuing drugs at this point [Technical Difficulty] is going to be important. You're absolutely right that I think we are still evaluating what is the right frequency and for how long. And that is what the maintenance sub study, which is part of the Phase 2 open label extension is evaluating. And that's the data that we are gathering. But we believe that drug will need to be continued for a certain period of time, and patients will need to be monitored.

More broadly, I would say – I've heard many neurologists say we used to think of Alzheimer's disease as a four to eight year disease, largely beginning with the onset of symptoms. With what we know now, a lot of them are saying we're thinking about this in 25 year terms. We know that patients start to accumulate plaques long before they have symptoms. And as Priya just said that even after you remove the plaques, there seems to be some benefit in continuing therapy. And as we think about that commercially, first, we have this AHEAD study that has launched looking at pre-symptomatic patients. It also raises the importance of blood based biomarkers because that's the only way we're going to be able to detect and diagnose, or at least triage patients initially at an earlier stage. And of course, that's where the subcu formulation also becomes important. Because if we are thinking of people staying on drug for longer, and I'm certainly not suggesting 25 years, but this could be a much longer period, certainly than the 18 months, and therefore the convenience of a subcu formulation is even more important. So we are learning every day. I think we saw that at CTAD. We understand increasingly the importance of early treatment. We're seeing the importance of staying or the benefit of potentially staying on treatment. And so, that has all kinds of commercial implications and how we do more studies and develop different formulations. And it's actually quite exciting.

We're next going to Umer Raffat from Evercore.

I wanted to focus on lecanemab subcu. And, Priya, I think you mentioned two things. One that there's a subcu maintenance filing, which is separate, which could be in 2025. Could you confirm if the dose is lower if it's a single shot instead of two? And also, the FDA interactions on subcu that you mentioned, are they a follow up to previously agreed upon trial design for subcu? Or do you think you need clarity whether plaque reduction alone will suffice for filing?

First of all, I think on the maintenance subcu, that is really a much later potential evaluation and filing. So I won't be able to comment further on that, specifically with regards to dose because we first need to evaluate IV maintenance and that is really the next milestone that's on the docket here. And then going back to your other question of what is the purpose of the FDA regulatory meeting, so maybe just stepping back, Eisai has had a number of meetings with FDA prior to the launch of the subcutaneous open label extension sub study that I spoke about and from CLARITY AD. And so, what we do know is that we do need to show bioequivalence on both PK and then we need to show comparability on plaque reduction. And based on the six month data that we just shared, and Eisai spoke to at CTAD, we believe we have achieved that. And so that's the first part. The second part is with that – because we have an 11% increase with overall AUC, area under the curve, exposure and 14% increased plaque removal, at the six month time point, does that result in a different dose? I think that that is really a matter of discussion, and we would have to discuss that with the FDA. So can't really comment more on that. But most importantly, I think the goal here was to show bioequivalence, which we believe we have achieved.

And next we'll go to Michael Yee with Jefferies.

I wanted to come back to a topic on the AHEAD 3-45 study. I believe that your partner, Eisai, commented there could be an interim analysis based on 400 patients and biomarkers. I notice that it's been enrolling for a while, but maybe it just sort of is picking up steam. Can you just maybe talk a little bit about the progress of that study, how you see that study and the status of patients getting in?

What I can tell you is that it's a very important part – the AHEAD 3-45 study is a very important part of the overall development plan for LEQEMBI as an anti-amyloid agent. And the reason for that, I think Chris mentioned it as well just a few minutes ago, that we know that plaque builds up – amyloid plaque builds up for many years. And then there's sort of a shift where tau tangles start appearing. And then you have the appearance of symptoms. So, over the last several years, there's been a lot of work on clinical staging and such. And we know that the anti-amyloid agents that are currently like – just like LEQEMBI, which is really the only one with traditional approval, is targeting mild cognitive impairment – patients with mild cognitive impairment as well as mild dementia. But these patients already have symptoms and potentially a burden of doubt. The purpose of AHEAD 3-45 is to look at different levels of amyloid plaque in patients who do not have symptoms, and see whether the addition of an anti-amyloid agent like LEQEMBI can alter the costs of disease. So that's really the overarching aim of a study like AHEAD 3-45. It's a very large study. As you can imagine, it's hard to find the patients. But we are very pleased with the progress that the study is making. And as Eisai commented very recently, there is the potential to do an interim analysis and think about whether other regulatory pathways are open with interim data. But we haven't really commented beyond that. These remain possibilities, but I think it will depend on how well we do with the recruitment and what the goals of eventual patient access are.

And next, we'll go to Terence Flynn with Morgan Stanley.

Just a two part for me. Just was wondering if you can provide any more detail on the breadth of prescribing for LEQEMBI? I know you give us the 800 patient number. But if you look at how many centers that's across, that would be helpful. And then I know you made some comments on some progress on the MAC coverage. Any more details on the timelines there for when we might get broader coverage at the MAC level? I know there's a couple of MACs already covering, but anything there would be helpful. Thank you.

Terence, I don't have any real update on the MACs. There's, I think, what, a dozen of them and they're at various stages. I think by the time that's more – that most of them have got there, I think there's an assumption that that takes anywhere from 60 to 90 days to get through. So towards the end of the year. On coverage, it's one of the most interesting things is really just the diversity of situations that we see. I talked to some physicians in some major medical centers. They've got the protocol, they've got the treatments, they're putting patients through on a regular basis. But I've been talking to some major medical centers. You might think they've got this all handled, and they're still thinking about these protocols. And it's protocols around what's the right profile of the patient to put in this. There is a teamwork approach on this. And so, people have to connect on that. For some of the IDMs, they have all of the elements, but they have to connect internally with their MRI centers with the infusion centers. So it's a little hard to give you a broad brush. I would say, every day, we are finding more and more patients, obviously, getting through the course. We are looking upstream at a number of indicators because really revenue is a lagging indicator between – even when we start looking at registry results, it's somewhere between four to six weeks before we actually see those patients going on drug. But some of those timelines are changing constantly. So it's a pretty moving process here. It's just – every day changes. That's where, at some point, we get enough momentum, we get enough of these barriers cleared. One of the biggest is still the getting an appointment with a neurologist. And that's where I think we're looking at what can we do with blood based biomarkers, which are now available not obviously to replace PET scans or MRIs, but can we use them to triage patients, so that those who actually get into a neurology clinic are the ones who are already eligible. So there's an awful lot of thinking right on the fly as we learn from this experience. Again, this is really one where there's – there aren't really great analogs. I know some people try to suggest the CAR T approach. And while that is also a product in a process, the volumes – the scale of this is much different. And we're not obviously anywhere near as complex as a CAR T approach. So for us, there's not really any analogues we can do. And so, we're learning on the fly as we go along. But like I say, every day brings progress. And all of the indicators are in green so far, and it is really just getting enough critical mass now of all the centers who've got these care networks and care pathways in place.

And next, we're going to go to Paul Matteis from Stifel.

Chris, you just mentioned getting an appointment with neurologists. And then earlier in the call, you talked about the registry requirement not being as much of a challenge. I wanted to ask about the other components of the infrastructure here with LEQEMBI, IVs, PET scans and MRIs? How would you rank order these components of the equation as it relates to most and least challenging for centers to navigate? And how do you envision this kind of whole infrastructure network looking by saying next summer?

The situation is a little heterogeneous. It's not quite the same situation in every center. But I would say, based on what we know today, I do think there's clearly, at the moment, the need to get an appointment with a neurologist. The reality is that there weren't that many patients already in neurology practices. They tend to be in PCP practices. And the neurology practices – neurologists were already busy. And we have quite a volume of patients now to put through those neurology practices and a lot of them are realizing, I may be have to staff up on here. Do I have enough business to justify staffing up and not necessarily with neurologists, but perhaps with nurse practitioners, others who can take on some of the parts of the care pathway. For some of them, it's going through their internal governance process and determining which patients, I think, appropriately at this stage. There's clearly an awful lot of caution around ARIA. My personal belief is that, over time, neurologists will become more accustomed to understanding ARIA. Is there a difference between the asymptomatic and the symptomatic? And they'll have a lot more experience but they're looking at making sure that the patients who go through are trying to get to have the least risk of ARIA. I don't think the infusion center capacity seems to be a big issue for most centers. PET scans, there are enough PET scans as far as we can tell. It's really been around how do I get reimbursement for it? Is it just one? And it was more the confusion around – so I think the clarity of that will just take one of the factors of discussion and time out of the process. There is just at each stage – if you send someone out for the PET scan, the scan has got to come back, it's been interpreted by a PET scan reader there, but sometimes a physician will want to have someone in that practice read that. And it's just connecting – sending the patient to all these different points, even if you're an integrated delivery network. So I don't think it's necessarily any one thing, although I would say, if we can do a better job of getting patients triaged even before they can get to the neurologist, that could certainly be helpful. But I think it really is – this is changing, the practice paradigm for a lot of clinics. And they're all having to work through it. And these, of course, are super busy people. They've got other needs. And so trying to fit in the time to actually manage all this is actually a challenge. So I think it's completely natural and expected that this is progressing slowly. But again, you see some who are racing ahead. And that certainly gives me the confidence that others are going to figure this out, too.

We can go to our last question. And that'll be from Phil Nadeau from TD Cowen.

I want to ask about the SKYCLARYS EMA review? Could you give a bit more of an update on what the status of that review is? Has there been a need for a whole explanation? And generally, what's Biogen confidence that a positive CHMP opinion will be secured in the first half of 2024?

Overall, just stepping back during diligence, we reviewed regulatory correspondence. And we had a certain level of understanding of the topics. And subsequent to closing the deal, we have had more regulatory interactions, and nothing has changed our view, as Chris mentioned. We'd still expect to see an outcome in early 2024. So that remains on track. With regard to whether or not there will be an oral explanation, that is really something we don't comment on because it's under review. And that's part of the review details. So I hope that helps.

And this will conclude our call. Thanks, everyone, for joining us today. And the IR team will be available later on, of course, for any other follow-up questions.

Thank you. And ladies and gentlemen, that does conclude today's conference. We appreciate your participation. Have a wonderful day.