On January 29, 2019 Biogen Inc. (Nasdaq: BIIB) reported full year and fourth quarter 2018 financial results (Press release, Biogen, JAN 29, 2019, View Source [SID1234532945]).

"In 2018 Biogen executed well against our strategic priorities and financial objectives," said Michel Vounatsos, Biogen’s chief executive officer. "We made significant progress developing and expanding our pipeline, as well as advancing multiple modalities to potentially deliver new therapies to patients. We also reported solid revenue growth for the year, led by continued strong global penetration of SPINRAZA, significant gains in our biosimilars business, and resilience in our core MS business. We believe our strong base business, including a deep and diversified neuroscience pipeline, positions Biogen well to take advantage of the opportunities before us. As always, we remain focused on allocating capital efficiently and appropriately with the objective of maximizing returns for our shareholders over the long term."

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Financial Results

•Full year total revenues were $13.5 billion, a 10% increase versus the prior year. o Full year multiple sclerosis (MS) revenues, including $478 million in royalties on the sales of OCREVUS, were relatively stable versus the prior year at $9.1 billion.
▪ For the fourth quarter of 2018 MS revenues, including $152 million in royalties on the sales of OCREVUS, grew 2% versus the prior year to $2.3 billion.
o Full year revenue growth was driven primarily by the continued global launch of SPINRAZA, which contributed $1.7 billion in revenues compared to $884 million in the prior year.
• Full year GAAP net income and diluted earnings per share (EPS) attributable to Biogen Inc. were $4.4 billion and $21.58, respectively, compared to $2.5 billion and $11.92, respectively, in the prior year.

o Full year 2017 GAAP net income and diluted EPS attributable to Biogen Inc. were negatively impacted by $1.2 billion and $5.51, respectively, due to the transition toll tax and re-measurement of our net deferred tax assets related to the U.S. corporate tax reform legislation.

"We have shown strong momentum in building depth in our core growth areas beyond Alzheimer’s disease, as we continue to build multiple franchises within neuroscience," Mr. Vounatsos continued. "The positive data for BIIB067 in SOD1 ALS highlight the potential to leverage groundbreaking science to address previously untreatable diseases and exemplifies our strategy to build depth in neuromuscular diseases and movement disorders. Over the next 12-18 months, we expect to have several important data readouts across clinical programs in multiple sclerosis, progressive supranuclear palsy, and Alzheimer’s disease."

In the fourth quarter of 2018 channel inventory levels in the U.S. increased by approximately $115 million for TECFIDERA, AVONEX, PLEGRIDY, and TYSABRI combined. This compares to relatively stable inventory levels in the third quarter of 2018 and an increase of approximately $50 million in the fourth quarter of 2017.

• In the fourth quarter of 2018 SPINRAZA revenues comprised $236 million in sales in the U.S. and $234 million in sales outside the U.S. The number of commercial patients receiving SPINRAZA grew approximately 9% in the U.S. and approximately 18% outside the U.S. versus the third quarter of 2018. In the fourth quarter of 2018 Biogen recorded SPINRAZA revenues in over 40 countries. SPINRAZA revenues outside the 4 U.S. were negatively impacted by a combination of lower volumes in certain markets due to loading dose dynamics, the timing of shipments in certain distributor markets, and pricing dynamics in certain markets.

R&D expense in the fourth quarter of 2018 included $35 million related to the option exercise with Ionis Pharmaceuticals, Inc. (Ionis) to develop and commercialize BIIB067 (IONIS-SOD1Rx), an antisense oligonucleotide for ALS with superoxide dismutase 1 (SOD1) mutations.

• R&D expense in the fourth quarter of 2018 included $17 million related to the collaboration and research and development services agreement with C4 Therapeutics (C4T).

• SG&A expense in the fourth quarter of 2018 increased versus the third quarter of 2018 primarily due to timing of spend as well as certain investments across sales and marketing, worldwide medical, and general and administrative expense.

Other Financial Highlights

• For 2018 the Company’s effective full year GAAP tax rate was 24%, and the Company’s effective full year Non-GAAP tax rate was 21%. For the fourth quarter of 2018 the Company’s effective GAAP tax rate was 33%, and the Company’s effective Non-GAAP tax rate was 21%.

o In the fourth quarter of 2017 Biogen booked a GAAP-only tax charge of $1.2 billion related to the U.S. corporate tax reform legislation. o In the fourth qua 5

• As of December 31, 2018, Biogen had cash, cash equivalents, and marketable securities totaling approximately $4.9 billion, and approximately $5.9 billion in notes payable and other financing arrangements.

• The Company generated $6.2 billion in net cash flows from operations in 2018, including $1.9 billion in the fourth quarter of 2018.

• For 2018 the Company’s full year weighted average diluted shares were 205 million. For the fourth quarter of 2018 the Company’s weighted average diluted shares were 200 million.

2019 Financial Guidance

Biogen also announced its full year 2019 financial guidance. This guidance consists of the following components: • Revenue is expected to be approximately $13.6 billion to $13.8 billion.

• GAAP and Non-GAAP R&D expense is expected to be approximately 16% to 17% of total revenue. o This guidance does not include any impact from potential acquisitions or large business development transactions, as both are hard to predict.
• GAAP and Non-GAAP SG&A expense is expected to be approximately 16% to 17% of total revenue.
• GAAP tax rate is expected to be approximately 18.5% to 19.5%; Non-GAAP tax rate is expected to be approximately 18% to 19%. • GAAP diluted EPS is expected to be between $26.65 and $27.65.
• Non-GAAP diluted EPS is expected to be between $28.00 and $29.00. Biogen may incur charges, realize gains or losses, or experience other events in 2019 that could cause actual results to vary from this guidance.

Recent Events

• In January 2019 Biogen and Skyhawk Therapeutics, Inc. (Skyhawk) entered into a collaboration and research and development services agreement pursuant to which the companies will leverage Skyhawk’s SkySTAR technology platform with the goal of discovering innovative small molecule RNA splicing modifiers for MS, spinal muscular atrophy (SMA), and other neurological diseases. Biogen paid Skyhawk an upfront payment of $74 million and may also pay additional milestone payments as well as potential royalties. Biogen expects to record a research and development expense of approximately $35 million in the first quarter of 2019 related to this collaboration, with the remaining portion of the upfront payment to be allocated to future research services.

• In 2018 Biogen added six clinical programs to its neuroscience pipeline, including BIIB078 (IONIS-C9Rx) for C9ORF72-associated ALS, BIIB110 (ActRIIA/B ligand trap) for muscle enhancement in diseases such as SMA, an option to acquire TMS-007 for acute ischemic stroke, BIIB104 (AMPA receptor potentiator) for cognitive 6 impairment associated with schizophrenia (CIAS), BIIB074 (vixotrigine) for small fiber neuropathy, and BIIB095 for neuropathic pain.

• In December 2018 Biogen and C4T entered into a collaboration and research and development services agreement to investigate the use of C4T’s novel protein degradation platform to discover and develop potential new treatments for neurological conditions, such as Alzheimer’s disease (AD) and Parkinson’s disease. Biogen will pay C4T up to a total of $415 million in upfront and additional milestone payments as well as potential royalties. Biogen recorded a research and development expense of $17 million in the fourth quarter of 2018 related to this collaboration.

• In December 2018 Biogen enrolled the first patient in a global Phase 3b study evaluating the efficacy and safety of extended interval dosing (EID) for natalizumab compared to standard interval dosing (SID) in patients with relapsing MS. Currently commercialized under the brand name TYSABRI, natalizumab 300 mg dosed every four weeks is the only approved dosing regimen. The new study, NOVA, is a two-year, prospective, randomized, interventional, controlled, open-label, rater-blinded, international Phase 3b study that will assess the efficacy of six-week natalizumab dosing intervals in people with relapsing-remitting MS with a primary endpoint measuring the number of new or newly enlarging T2 hyperintense lesions at week 48. The NOVA study was initiated following analyses of observational data that showed that EID was associated with a significant reduction in the risk of progressive multifocal leukoencephalopathy (PML), a rare but serious brain infection. The NOVA study aims to assess the efficacy of EID natalizumab to further evaluate the drug’s benefit-risk profile.

• In December 2018 Biogen received feedback from the U.S. Food and Drug Administration (FDA) on its proposed Phase 3 development plan for BIIB074 (vixotrigine) in trigeminal neuralgia (TGN). Biogen is now planning to initiate a Phase 3 program for the development of vixotrigine in TGN by the end of 2019.

• In December 2018 Biogen and Alkermes plc (Alkermes) announced that Alkermes has submitted a New Drug Application (NDA) to the FDA for diroximel fumarate (BIIB098), a novel oral fumarate in development for the treatment of relapsing forms of MS. Alkermes is seeking approval of diroximel fumarate under the 505(b)(2) regulatory pathway, and the NDA submission includes data from EVOLVE-1, a Phase 3 pivotal trial that evaluated long-term safety in relapsing-remitting MS with approximately 700 patients dosed with diroximel fumarate. If approved, Biogen intends to market diroximel fumarate under the brand name VUMERITY. This name has been conditionally accepted by the FDA and will be confirmed upon approval.

• In December 2018 Biogen notified Applied Genetic Technologies Corporation (AGTC) of the termination of its collaboration agreement related to the development of AAVbased gene therapies for the treatment of rare ophthalmologic diseases, including Xlinked retinoschisis (XLRS) and X-linked retinitis pigmentosa. This portfolio prioritization decision followed topline interim six-month data from a Phase 1/2 clinical trial in XLRS which demonstrated no signs of clinical activity. The termination will be effective in March 2019. 7

• In December 2018 Biogen reported positive Phase 1 data from an interim analysis of a randomized, placebo-controlled single-and multiple-ascending dose study (n=70) that achieved proof-of-biology and proof-of-concept for BIIB067, an investigational treatment for ALS with SOD1 mutations. At the highest dose tested (n=10), treatment with BIIB067 over a three month period resulted in a statistically significant lowering of SOD1 protein levels in the cerebrospinal fluid (p=0.002) and numerical trends across three efficacy endpoints: slowing of clinical decline as measured by the ALS Functional Rating Scale-Revised, slowing of decline in respiratory function as measured by slow vital capacity, and slowing of decline in muscle strength as measured by handheld dynamometry, all compared to placebo (n=12). Biogen paid Ionis a $35 million one-time upfront payment to exercise its option to obtain a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB067. The Company plans to add an additional cohort to this study with the potential to support registration.

• In December 2018 Biogen dosed the first patient in the Phase 2b study of BIIB104, an AMPA receptor potentiator, in patients with CIAS.

• In December 2018 Biogen dosed the first patient in a bioequivalence study to test whether exposure levels of PLEGRIDY are maintained with intramuscular administration as compared to subcutaneous administration. Biogen is pursuing an intramuscular formulation of PLEGRIDY with the goal of reducing injection site reactions.

• In November 2018 Biogen was awarded the 2018 International Prix Galien as Best Biotechnology Product for SPINRAZA, the first and only treatment for SMA. The prestigious honor marks the seventh Prix Galien for SPINRAZA, following country recognitions in the U.S., Germany, Italy, Belgium-Luxembourg, the Netherlands, and the U.K. The International Prix Galien is given every two years by Prix Galien International Committee members in recognition of excellence in scientific innovation to improve human health.

• In October 2018 Biogen presented results at the Clinical Trials on Alzheimer’s Disease (CTAD) meeting, in Barcelona, Spain, from the recent 36-and 48-month analyses of the ongoing long-term extension (LTE) of the Phase 1b PRIME study of aducanumab, an investigational treatment for mild cognitive impairment (MCI) due to AD and mild AD. A late-breaking oral presentation and a poster included data from patients treated with aducanumab for up to 36 and 48 months. Data from both analyses showed a reduction in amyloid plaque levels in a dose-and time-dependent manner, as measured by positron emission tomography (PET). In addition, analyses of exploratory clinical endpoints, Clinical Dementia Rating Sum of Boxes (CDR-SB) and the Mini-Mental State Examination (MMSE), suggested a continued slowing of clinical decline over 36 months and 48 months. The results in each dosing arm were generally consistent with previously reported analyses of this study, and there were no changes to the risk-benefit profile of aducanumab.

• In October 2018 Biogen’s collaboration partner Eisai Co., Ltd. (Eisai) presented the latest data from the Phase 2 clinical study (Study 201) of BAN2401, an anti-amyloid beta protofibril antibody, in 856 patients with early AD, at a symposium session titled "Clinical and Biomarker Updates from BAN2401 Study 201 in Early Alzheimer’s Disease" held on October 25 at CTAD. The study did not achieve its primary outcome measure which was designed to enable a potentially more rapid entry into Phase 3 development based on Bayesian analysis at 12 months of treatment. From conventional statistical analysis of the topline 18-month final results, the highest treatment dose demonstrated a statistically significant reduction in brain amyloid measured by PET at 18 months (p<0.0001). This dose also showed a statistically significant slowing of clinical decline on the Alzheimer’s disease composite score (ADCOMS) of 30% compared to placebo at 18 months (p=0.034). Eisai also presented analysis of clinical outcome measures in pre-specified subgroups, including in APOE4 positive versus APOE4 negative patients. Conference Call and Webcast The Company’s earnings conference call for the fourth quarter will be broadcast via the internet at 8:00 a.m. ET on January 29, 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. Note about Earnings Releases and Calls Starting with the second quarter 2018 earnings release, Biogen has ceased publishing press releases relating to future earnings calls, earnings releases, and investor events via newswire services. The Company will post these materials on the Investors section of Biogen’s website, www.biogen.com, and issue a statement on Twitter (@biogen) when they become available