On July 23, 2019 Biogen Inc. (Nasdaq: BIIB) reported second quarter 2019 financial results (Press release, Biogen, JUL 23, 2019, View Source [SID1234537666]).
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"Biogen delivered solid performance globally in the second quarter, and we believe we are on track for a strong year," said Michel Vounatsos, Biogen’s Chief Executive Officer. "We added four new programs to our pipeline this quarter, as we continued to diversify and build depth within neuroscience and pursue therapeutic adjacencies. Specifically, the acquisition of Nightstar Therapeutics has provided us with two potentially first-in-class mid- to late-stage gene therapy programs in specialty ophthalmology, and we initiated two new studies in our priority areas of multiple sclerosis and amyotrophic lateral sclerosis. We continued to allocate capital, and we remain focused on investing in the areas we believe have the highest potential return for shareholders."
Financial Results
Second quarter total revenues were $3.6 billion, an 8% increase versus the second quarter of 2018.
Multiple sclerosis (MS) revenues, including $183 million in royalties on the sales of OCREVUS, increased 3% versus the prior year to $2.4 billion.
Revenue growth was driven in part by the continued global launch of SPINRAZA, which contributed $488 million in revenues in the second quarter of 2019 compared to $423 million in the second quarter of 2018.
Revenue growth was also driven by biosimilars revenues, which increased to $184 million compared to $127 million in the second quarter of 2018, primarily driven by IMRALDI.
Second quarter GAAP net income and diluted earnings per share (EPS) attributable to Biogen Inc. were $1.5 billion and $7.85, respectively, compared to $867 million and $4.18, respectively, in the second quarter of 2018.
In the second quarter of 2018 GAAP net income and diluted EPS were impacted by $589 million and $2.84, net of tax, respectively, related to the 10-year exclusive agreement with Ionis Pharmaceuticals, Inc. (Ionis), the acquisition of BIIB104 from Pfizer Inc. (Pfizer), the option payment to Neurimmune SubOne AG, and the option agreement with TMS Co., Ltd. (TMS).
Second quarter Non-GAAP net income and diluted EPS attributable to Biogen Inc. were $1.7 billion and $9.15, respectively, compared to $1.2 billion and $5.80, respectively, in the second quarter of 2018.
In the second quarter of 2018 Non-GAAP net income and diluted EPS were impacted by $314 million and $1.52, net of tax, respectively, related to the 10-year exclusive agreement with Ionis and the option agreement with TMS.
In the second quarter of 2019 channel inventory levels in the U.S. decreased by approximately $25 million for TECFIDERA, AVONEX, PLEGRIDY, and TYSABRI combined. This compares to a decrease in inventory levels of approximately $175 million in the first quarter of 2019 and a decrease of approximately $50 million in the second quarter of 2018.
In the second quarter of 2019 SPINRAZA revenues comprised $231 million in sales in the U.S. and $258 million in sales outside the U.S. The number of commercial patients receiving SPINRAZA grew approximately 4% in the U.S. and approximately 17% outside the U.S. versus the first quarter of 2019. Versus the first quarter of 2019, SPINRAZA revenues outside the U.S. decreased 13%, due primarily to a positive pricing adjustment in France in the first quarter of 2019, the timing of shipments across several international markets, and a continued transition from loading to maintenance doses in more mature markets.
R&D expense in the first quarter of 2019 included $39 million related to Biogen’s agreement with Skyhawk Therapeutics, Inc.
R&D expense in the first quarter of 2019 included approximately $45 million in net closeout costs for the Phase 3 studies of aducanumab in Alzheimer’s disease.
R&D expense in the second quarter of 2018 included $324 million related to the upfront payment to Ionis under the 10-year exclusive agreement. In addition, GAAP R&D expense in the second quarter of 2018 included a $162 million charge related to the premium paid on Biogen’s equity investment in Ionis.
The increase in GAAP SG&A expense in the second quarter of 2019, as compared to the second quarter of 2018, was primarily due to acquisition related charges incurred in connection with our recent acquisition of Nightstar Therapeutics plc (NST), totaling approximately $33 million, including $18 million of stock-based compensation expense associated with the accelerated vesting of stock options previously granted to NST employees.
Other Financial Highlights
For the second quarter of 2019 GAAP other expense was $197 million, which included $174 million in net losses on investments, principally driven by a decrease in the fair value of Biogen’s equity investment in Ionis as well as a realized loss on the sale of a portion of Biogen’s investment in Ionis common stock versus the prior quarter. Biogen realized a $40 million cash gain when compared to the original cost basis on the shares the Company sold during the second quarter of 2019. Non-GAAP other expense for the second quarter of 2019 was $19 million.
For the second quarter of 2019 the Company’s effective GAAP and non-GAAP tax rates were approximately 14%. During the second quarter of 2019 Biogen’s tax rates benefitted from a change to the Company’s tax profile. This benefit is not expected to recur post 2019.
In the second quarter of 2019 Biogen repurchased approximately 10.4 million shares of the Company’s common stock for a total value of approximately $2.4 billion.
Biogen completed the remaining authorization under the share repurchase program authorized in August 2018.
As of June 30, 2019, there was approximately $4.1 billion remaining under the share repurchase program authorized in March 2019.
As of June 30, 2019, Biogen had cash, cash equivalents, and marketable securities totaling approximately $4.3 billion, and approximately $5.9 billion in notes payable.
In the second quarter of 2019 the Company generated $2.0 billion in net cash flows from operations.
For the second quarter of 2019 the Company’s weighted average diluted shares were 190 million.
2019 Financial Guidance
Biogen is raising its full year 2019 financial guidance. This financial guidance consists of the following components:
Revenue is expected to be approximately $14.0 billion to $14.2 billion, an increase from the prior guidance range of approximately $13.6 billion to $13.8 billion.
GAAP and Non-GAAP R&D expense is expected to be approximately 15.5% to 16.5% of total revenue, compared to the prior guidance range of approximately 16% to 17%.
GAAP SG&A expense is expected to be approximately 16% to 17% of total revenue, unchanged versus the prior guidance range.
Non-GAAP SG&A expense is expected to be approximately 15.5% to 16.5% of total revenue, compared to the prior guidance range of approximately 16% to 17%.
GAAP tax rate is expected to be approximately 17% to 18%, compared to the prior guidance range of approximately 18.5% to 19.5%.
Non-GAAP tax rate is expected to be approximately 15.5% to 16.5%, compared to the prior guidance range of approximately 18% to 19%.
GAAP diluted EPS is expected to be between $29.60 and $30.40, an increase from the prior guidance range of $26.65 and $27.65.
Non-GAAP diluted EPS is expected to be between $31.50 and $32.30, an increase from the prior guidance range of $28.00 to $29.00.
This financial guidance does not include any impact from potential acquisitions or large business development transactions, as both are hard to predict.
Biogen may incur charges, realize gains, or experience other events or circumstances in 2019 that could cause actual results to vary from this financial guidance.
Recent Events
In June and July 2019 Biogen presented new results from the NURTURE study, adding data to the longest study of spinal muscular atrophy (SMA) in pre-symptomatic infants (n=25). The data reported, after up to 45.1 months of analysis, continued to demonstrate efficacy and safety in patients treated pre-symptomatically with SPINRAZA in comparison to the natural history of SMA. These new data also showed that patients treated with SPINRAZA had continuous improvement, with the overwhelming majority of patients achieving motor milestones in a normal timeframe. These data were presented at the Cure SMA Annual SMA Conference in Anaheim, Calif. (June 28-July 1, 2019) and the 5th Congress of the European Academy of Neurology in Oslo, Norway (June 29-July 2, 2019).
In June 2019 Roche announced positive topline results for NOBILITY, a Phase 2 study investigating the safety and efficacy of GAZYVA for adults with proliferative lupus nephritis. The study met its primary endpoint, showing GAZYVA, in combination with standard of care (mycophenolate mofetil or mycophenolic acid and corticosteroids), demonstrated enhanced efficacy compared to placebo plus standard of care alone in achieving complete renal response at one year. In addition, GAZYVA met key secondary endpoints showing improved overall renal responses (complete and partial renal response) and serologic markers of disease activity as compared to placebo. In the U.S., GAZYVA is part of a collaboration between Biogen and Genentech, Inc., a wholly-owned member of the Roche Group.
In June 2019 Biogen presented new data at the European Congress of Rheumatology (EULAR) 2019 in Madrid, Spain (June 12-15, 2019). The data included real-world evidence from the Company’s biosimilar anti-TNF portfolio, which includes BENEPALI (etanercept), FLIXABI (infliximab), and IMRALDI (adalimumab), confirming the safety and efficacy of these biosimilars and the high adherence of patients to treatment.
In June 2019, at the EULAR conference, Biogen’s collaboration partner UCB presented interim results from the Phase 2b study of dapirolizumab pegol (DZP) in patients with active systemic lupus erythematosus (SLE) despite standard-of-care treatment. The primary endpoint of the study was to demonstrate a dose response at 24 weeks on the British Isles Lupus Assessment Group (BILAG)-based Composite Lupus Assessment (BICLA) (p=0.06). The study demonstrated consistent and potentially meaningful improvements for the majority of clinical endpoints in patients treated with DZP compared with placebo. In addition, biomarker data demonstrated evidence of proof of biology. DZP was well tolerated and demonstrated an acceptable safety profile.
In June 2019 Biogen completed its acquisition of NST, a clinical-stage gene therapy company focused on adeno-associated virus treatments for inherited retinal disorders. As a result of the acquisition, Biogen added two mid- to late-stage clinical assets, as well as preclinical programs, in ophthalmology. The total transaction value was approximately $800 million, after taking into account transaction expenses and cash acquired at closing.
In May 2019 Biogen presented new interim data from the ongoing open-label, pivotal EVOLVE-MS-1 study of BIIB098 (diroximel fumarate) in relapsing MS (RMS) at the annual meeting of the Consortium of Multiple Sclerosis Centers in Seattle, Wash. (May 28-June 1, 2019). These data indicated that diroximel fumarate was generally well tolerated and significantly reduced disease activity in newly diagnosed RMS patients and those previously treated with interferons or glatiramer acetate. Treatment discontinuations due to gastrointestinal events occurred at a low rate over one year. Diroximel fumarate is a novel oral fumarate candidate in development with Alkermes Pharma Ireland Limited, a subsidiary of Alkermes plc.
In May 2019 Biogen’s collaboration partner Eisai, Co., Ltd. dosed the first patient in the global Phase 3 study (Clarity AD) of BAN2401 in early Alzheimer´s disease.
In May 2019 The National Institute for Health and Care Excellence (NICE) in the United Kingdom recommended funding for SPINRAZA on the National Health Service. The positive recommendation is for the treatment of infants, children, and adults with 5q SMA, including pre-symptomatic and symptomatic SMA Types 1, 2, and 3.
In May 2019 Biogen presented new data for its MS portfolio at the 71st annual meeting of the American Academy of Neurology (AAN) in Philadelphia, Pa. (May 4-11, 2019). The presentations included data on the safety and efficacy of diroximel fumarate from the EVOLVE-MS-1 study, updated safety analyses evaluating extended interval dosing of approximately every six weeks for natalizumab compared to the approved every four-week dosing, and data demonstrating that treatment with TECFIDERA significantly slowed the rate of whole brain volume loss compared to placebo.
In May 2019 Biogen presented new data at the 71st annual meeting of the AAN affirming the safety and durability of SPINRAZA, including data from the SHINE extension study, with patients followed for up to four years, and the NURTURE study of pre-symptomatic infants.
In May 2019, at the 71st annual meeting of the AAN and The European Network for the Cure of ALS meeting in Tours, France (May 15-17, 2019), Biogen presented interim results of the Phase 1/2 study of BIIB067 (tofersen), an antisense oligonucleotide being studied for the potential treatment of amyotrophic lateral sclerosis (ALS) in adults with a confirmed superoxide dismutase 1 (SOD1) mutation. The data demonstrated a statistically significant reduction in SOD1 protein levels and a numerical trend towards slowing of clinical decline in SOD1-ALS patients treated with tofersen compared to placebo.
In April 2019 Biogen published data from CS2/CS12, an open-label study of the safety and tolerability of SPINRAZA in individuals with later-onset SMA, in the peer-reviewed journal Neurology, the medical journal of the AAN. The data showed that individuals with later-onset SMA, treated with SPINRAZA, regained motor function that had been previously lost and that treatment stabilized their disease activity leading to improvements in activities of daily living.
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 23, 2019, 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.