On November 8, 2023 Biogen Inc. (NASDAQ: BIIB) reported third quarter 2023 financial results (Press release, Biogen, NOV 8, 2023, View Source [SID1234637250]). Commenting on the quarter, President and Chief Executive Officer Christopher A. Viehbacher said:
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"We believe we have the key elements in place to position Biogen for long-term sustainable growth. Biogen has made significant progress on the business priorities outlined at the beginning of the year. During the third quarter alone, we received FDA approval for LEQEMBI and ZURZUVAE, announced the closing of the Reata transaction, and initiated our $1 billion Fit for Growth cost savings program. As we look ahead, the focus remains on execution. We aim to further our leadership in Alzheimer’s disease by both driving the LEQEMBI launch and advancing development of our tau-directed ASO, where we have the potential to establish another foothold in the fight against Alzheimer’s disease. In addition to potential revenue and EPS growth from new launches, Fit for Growth is expected to significantly strengthen our bottom line growth."
Financial Highlights
Q3 ’23 Q3 ’22 △
r (CC#)
Total Revenue (in millions)*
$2,530 $2,508 1% 3%
GAAP diluted EPS $(0.47) $7.84 (106)% —%
Non-GAAP diluted EPS $4.36 $4.77 (9)% —%
Note: Percent changes represented as favorable/(unfavorable) versus the prior year period.
* Beginning in the third quarter of 2023, we modified our presentation of the commercialization expenses incurred within the LEQEMBI Collaboration. Our 50% portion of LEQEMBI product revenue, net and cost of sales, including royalties, will continue to be classified as a component of revenue. We will now present our 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. To reflect this modification, during the third quarter of 2023 we reclassified $38.7 million in collaboration costs (from the first and second quarters of 2023) from revenue from LEQEMBI Collaboration to SG&A expense within our condensed consolidated statements of income.
# 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.
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) Q3 ’23 Q3 ’22 △
r (CC#)
Multiple sclerosis (MS) product revenue(1)
$1,159 $1,340 (14)% (12)%
Spinal muscular atrophy revenue(2)
$448 $431 4% 7%
Biosimilars revenue $194 $188 4% 7%
Other product revenue(3)
$4 $3 25% 23%
Total product revenue $1,805 $1,962 (8)% (6)%
Revenue from anti-CD20 therapeutic programs $421 $417 1% 1%
Contract manufacturing, royalty and other revenue(4)
$304 $130 135% 135%
Total revenue $2,530 $2,508 1% 3%
Note: Percent changes represented as favorable/(unfavorable) versus the prior year period. Numbers may not foot or recalculate due to rounding.
(1) MS includes TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRATM.
(2) Spinal muscular atrophy includes SPINRAZA.
(3) Other includes ADUHELM, FUMADERMTM and QALSODY.
(4) Also includes Biogen’s 50% share of revenue, net 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, we modified our presentation of the commercialization expenses incurred within the LEQEMBI Collaboration. Our 50% portion of LEQEMBI product revenue, net and cost of sales, including royalties, will continue to be classified as a component of revenue. We will now present our 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. To reflect this modification, during the third quarter of 2023 we reclassified $38.7 million in collaboration costs (from the first and second quarters of 2023) from revenue to SG&A expense within our condensed consolidated statements of income.
•Third quarter 2023 in-market product revenue for LEQEMBI recorded by Eisai was approximately $2 million.
Expense Summary
(in millions) Q3 ’23 Q3 ’22 △
GAAP and Non-GAAP cost of sales*
$660 $470 (40)%
% of Total Revenue 26% 19%
GAAP R&D expense $736 $549 (34)%
Non-GAAP R&D expense $539 $549 2%
GAAP SG&A expense#
$788 $563 (40)%
Non-GAAP SG&A expense#
$553 $562 2%
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, our 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. During the third quarter of 2023 we reclassified $38.7 million in collaboration costs (from the first and second quarters of 2023) from revenue to SG&A expense within our condensed consolidated statements of income.
•Third quarter 2023 GAAP and Non-GAAP cost of sales includes approximately $35 million of idle capacity charges. Third quarter 2022 GAAP and Non-GAAP cost of sales includes approximately $11 million of idle capacity charges. The increase in third quarter 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.
•The increase in GAAP R&D and SG&A expense in the third quarter of 2023, as compared to the third quarter of 2022, of approximately $187 million and $225 million, respectively, was primarily due to acquisition related charges incurred in connection with our recent acquisition of Reata, including of stock-based compensation expense associated with the accelerated vesting of stock options previously granted to Reata employees.
•Third quarter 2023 GAAP and Non-GAAP R&D expense includes approximately $44 million related to Biogen’s portion of R&D expense related to the LEQEMBI Collaboration, and approximately $37 million in close out costs relating to the EMBARK trial for ADUHELM.
•Third quarter 2023 GAAP and Non-GAAP SG&A includes approximately $82 million related to Biogen’s portion of SG&A expense related to the LEQEMBI Collaboration, which includes a reclassification of $38.7 million in collaboration costs from the first and second quarters of 2023 from revenue to SG&A expense.
•Third quarter 2023 GAAP restructuring expense was $76 million.
•Third quarter 2023 GAAP transaction and integration costs related to the acquisition of Reata was approximately $30 million.
Other Financial Highlights
•Third quarter 2023 GAAP and Non-GAAP collaboration profit sharing was a net expense of $51 million, which includes $56 million of net profit sharing expense related to Biogen’s collaboration with Samsung Bioepis, partially offset by net reimbursement of $6 million from Sage Therapeutics related to the commercialization of ZURZUVAE in the U.S.
•Third quarter 2023 GAAP other expense was $300 million, primarily driven by net unrealized loss on strategic equity investments of $302 million. Third quarter 2023 Non-GAAP other income was $26 million, primarily driven by net interest income.
•Third quarter 2023 GAAP income tax benefit was $73 million, corresponding to an effective tax rate of 51.6%, as compared to an expense of $236 million, or 17.2%, in the third quarter of 2022. The third quarter 2023 GAAP tax benefit was driven by the non-cash changes in the value of Biogen’s equity investments and expenses related to the Reata acquisition. Third quarter 2023 Non-GAAP income tax expense was $100 million, or 14.7%, as compared to an expense of $129 million, or 15.7%, in the third quarter of 2022.
Financial Position
•Third quarter 2023 net cash flow from operations was $592 million. Capital expenditures were $74 million, and free cash flow, defined as net cash flow from operations less capital expenditures, was $518 million.
•As of September 30, 2023, Biogen had cash, cash equivalents, and marketable securities totaling $2,288 million and $7,286 million in total debt, resulting in net debt of $4,998 million.
•No shares of the Company’s common stock were repurchased in the third quarter of 2023. As of September 30, 2023, there was $2,050 million remaining under the share repurchase program authorized in October 2020.
•For the third quarter of 2023 the Company’s GAAP weighted average diluted shares were 145 million. Third quarter 2023 Non-GAAP weighted average diluted shares were 146 million.
3
Full Year 2023 Financial Guidance
For the full year 2023, Biogen is updating its guidance ranges to reflect the completed acquisition of Reata and its previously projected dilution to 2023 Non-GAAP diluted EPS, regulatory approval for ZURZUVAE in PPD, and the modification made to our presentation of LEQEMBI expenses.
Prior FY 2023 Guidance Updated FY 2023 Guidance
Total revenue Mid-single digit percentage decline versus reported full year 2022
Low-single digit percentage decline versus reported full year 2022
Non-GAAP diluted EPS $15.00 to $16.00
$14.50 to $15.00 Reflecting ~$0.75 of dilution from Reata acquisition which closed September 26, 2023
This guidance assumes that foreign exchange rates as of September 30, 2023, will remain in effect for the remainder of the year, net of hedging activities.
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 2023 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 third quarter will be broadcast via the internet at 8:00 a.m. ET on November 8, 2023 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.