On January 25, 2018 Biogen Inc. (Nasdaq: BIIB) reported full year and fourth quarter 2017 financial results, including (Press release, Biogen, JAN 25, 2018, View Source [SID1234523573]):
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Full year total revenues of $12.3 billion, a 7% increase versus the prior year or a 15% increase excluding hemophilia revenues*.
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Full year multiple sclerosis (MS) revenues grew 4% versus prior year to $9.1 billion, which included $159 million in royalties on our estimate of OCREVUS sales.
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For the fourth quarter of 2017, MS revenues grew 5% versus prior year to $2.3 billion, which included $77 million in royalties on our estimate of OCREVUS sales.
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U.S. MS revenues in the fourth quarter of 2017 benefitted by approximately $40 million from increased inventory in the channel for TECFIDERA, AVONEX, PLEGRIDY, and TYSABRI compared to the third quarter of 2017.
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Full year global TECFIDERA revenues were $4.2 billion, an increase of 6% versus prior year.
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Full year global TYSABRI revenues were stable at $2.0 billion.
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Full year revenue growth was driven by the launch of SPINRAZA, which contributed $884 million in global revenues.
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Full year GAAP net income and diluted earnings per share (EPS) attributable to Biogen Inc. of $2.5 billion and $11.92, respectively.
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GAAP net income and EPS 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.
◦
GAAP net income and EPS were negatively impacted by $110 million and $0.52, respectively, related to the payment to Neurimmune to reduce the royalty payments on potential commercial sales of aducanumab, Biogen’s investigational treatment for Alzheimer’s disease.
◦
GAAP net income and EPS were negatively impacted by $84 million and $0.39, respectively, related to the impairment of ZINBRYTA related assets as a result of the Article 20 procedure of ZINBRYTA in the European Union.
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Full year non-GAAP net income and diluted EPS attributable to Biogen Inc. of $4.6 billion and $21.81, respectively.
◦
Non-GAAP net income and EPS were negatively impacted by $61 million and $0.29, respectively, related to the impairment of ZINBRYTA related assets.
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Full year GAAP and non-GAAP net income and diluted EPS were reduced by $73 million and $0.34, respectively, for R&D charges associated with business development transactions with Alkermes plc and Ionis Pharmaceuticals Inc. (Ionis) in the fourth quarter of 2017.
* In Q1 2017, Biogen completed the spin-off of its global hemophilia business into a new company, known as Bioverativ. The 15% increase in total revenues excludes all hemophilia revenues from 2016 through January 2017. Hemophilia revenues include ELOCTATE and ALPROLIX product revenues as well as royalty and contract manufacturing revenue related to Sobi.
(In millions, except per share amounts)
Q4 ’17
Q3 ’17
Q4 ’16
Q4 ’17 v. Q3 ’17
Q4 ’17 v. Q4 ’16
FY ’17
FY ’16
FY ’17 v. FY ’16
Total revenues#
$
3,307
$
3,078
$
2,872
7%
15%
$
12,274
$
11,449
7%
GAAP net income^
$
(297
)
$
1,226
$
649
(124%)
(146%)
$
2,539
$
3,703
(31%)
GAAP diluted EPS
$
(1.40
)
$
5.79
$
2.99
(124%)
(147%)
$
11.92
$
16.93
(30%)
Non-GAAP net income^
$
1,116
$
1,337
$
1,093
(17%)
2%
$
4,645
$
4,423
5%
Non-GAAP diluted EPS
$
5.26
$
6.31
$
5.04
(17%)
4%
$
21.81
$
20.22
8%
# Q4 2017 total revenues grew 26% versus Q4 2016 excluding hemophilia. FY 2017 total revenues grew
15% versus FY 2016 excluding hemophilia for 2016 through January 2017.
^ Net income attributable to Biogen Inc.
Note: Percent changes represented as favorable/(unfavorable)
A reconciliation of GAAP to Non-GAAP full year and quarterly financial results can be found in Table 3 at the end of this press release.
"2017 was a year of strong execution at Biogen," said Michel Vounatsos, Biogen’s Chief Executive Officer. "With a renewed focus on our strategic priorities, we delivered record full year revenues, solid earnings, and significant progress in strengthening the foundation for our future with seven additions to our neuroscience pipeline in 2017."
"Our core MS business demonstrated resilience in an increasingly competitive market, and SPINRAZA has had one of the most successful rare disease launches of all time, bringing new hope to patients and their families. We are also proud of our achievements in business development, with 2017 being one of the most productive years in Biogen’s history."
"And over the next 12 to 18 months, we expect several important data readouts across both our core and emerging growth areas as we continue to advance an industry-leading neuroscience portfolio."
Revenue Highlights
(In millions)
Q4 ’17
Q3 ’17
Q4 ’16
Q4 ’17 v. Q3 ’17
Q4 ’17 v. Q4 ’16
FY ’17
FY ’16
FY ’17 v. FY ’16
Multiple Sclerosis:
TECFIDERA
$
1,076
$
1,070
$
1,002
1%
7%
$
4,214
$
3,968
6%
Total Interferon
$
645
$
662
$
688
(3%)
(6%)
$
2,646
$
2,795
(5%)
AVONEX
$
520
$
538
$
564
(3%)
(8%)
$
2,152
$
2,314
(7%)
PLEGRIDY
$
125
$
124
$
125
0%
0%
$
494
$
482
3%
TYSABRI
$
463
$
469
$
474
(1%)
(2%)
$
1,973
$
1,964
0%
FAMPYRATM
$
24
$
24
$
22
0%
10%
$
92
$
85
8%
ZINBRYTA
$
12
$
14
$
6
(18%)
98%
$
53
$
8
NMF
Spinal Muscular Atrophy
SPINRAZA
$
363
$
271
$
5
34%
NMF
$
884
$
5
NMF
Hemophilia*:
ELOCTATE
$
—
$
—
$
149
NMF
(100%)
$
48
$
513
(91%)
ALPROLIX
$
—
$
—
$
93
NMF
(100%)
$
26
$
334
(92%)
Other Product Revenues:
Biosimilars
$
122
$
101
$
53
21%
130%
$
380
$
101
277%
FUMADERMTM
$
9
$
11
$
11
(17%)
(22%)
$
40
$
46
(14%)
Total Product Revenues:
$
2,712
$
2,623
$
2,503
3%
8%
$
10,355
$
9,818
5%
OCREVUS Royalties
$
77
$
65
$
—
19%
NMF
$
159
$
—
NMF
RITUXAN/GAZYVA Revenues
$
338
$
342
$
318
(1%)
6%
$
1,400
$
1,315
6%
Other Revenues
$
180
$
49
$
51
267%
252%
$
360
$
316
14%
Total Revenues#
$
3,307
$
3,078
$
2,872
7%
15%
$
12,274
$
11,449
7%
MS Product Revenues + OCREVUS Royalties
$
2,296
$
2,304
$
2,192
(0%)
5%
$
9,137
$
8,820
4%
Note: Numbers may not foot due to rounding; percent changes represented as favorable/(unfavorable)
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In the fourth quarter of 2017 SPINRAZA revenues comprised $218 million in sales in the U.S. and $144 million in sales outside the U.S. Inventory levels for SPINRAZA in the U.S. were relatively flat versus the third quarter of 2017. Outside the U.S., SPINRAZA revenues were primarily from Germany, Turkey, and Japan.
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In the fourth quarter of 2017 other revenues were $180 million, benefitting from increased contract manufacturing.
Expense Highlights
(In millions)
Q4 ’17
Q3 ’17
Q4 ’16
Q4 ’17 v. Q3 ’17
Q4 ’17 v. Q4 ’16
FY ’17
FY ’16
FY ’17 v. FY ’16
GAAP cost of sales
$
509
$
370
$
378
(38%)
(35%)
$
1,630
$
1,479
(10%)
Non-GAAP cost of sales
$
509
$
370
$
363
(38%)
(40%)
$
1,630
$
1,426
(14%)
GAAP R&D
$
588
$
446
$
534
(32%)
(10%)
$
2,254
$
1,973
(14%)
Non-GAAP R&D
$
588
$
446
$
531
(32%)
(11%)
$
2,251
$
1,970
(14%)
GAAP SG&A
$
572
$
434
$
496
(32%)
(16%)
$
1,936
$
1,948
1%
Non-GAAP SG&A
$
554
$
434
$
484
(28%)
(15%)
$
1,901
$
1,930
2%
Note: Percent changes represented as favorable & (unfavorable)
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Cost of sales in the fourth quarter of 2017 increased versus the third quarter of 2017 primarily due to the increase in contract manufacturing and the impairment of ZINBRYTA related assets.
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R&D expense in the fourth quarter of 2017 included $78 million related to the exclusive global license and collaboration agreement with Alkermes plc to develop and commercialize BIIB098, a monomethyl fumarate (MMF) small drug molecule.
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R&D expense in the fourth quarter of 2017 included a $25 million milestone to Ionis related to a new collaboration agreement to identify new antisense oligonucleotide (ASO) drug candidates for the treatment of spinal muscular atrophy (SMA).
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R&D expense in the fourth quarter of 2016 included a $50 million milestone to Eisai Co. Ltd. following the initiation of Phase 3 trials for elenbecestat (E2609), a beta secretase cleaving enzyme (BACE) inhibitor in development for Alzheimer’s disease.
•
SG&A expense in the fourth quarter of 2017 increased versus the prior quarter 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
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For 2017 the Company’s effective full year GAAP tax rate was 48%, and the Company’s effective full year non-GAAP tax rate was 25%. For the fourth quarter of 2017 the Company’s effective GAAP tax rate was 112%, and the Company’s effective non-GAAP tax rate was 29%.
◦
In the fourth quarter of 2017 Biogen booked a GAAP tax charge of $1.2 billion related to the U.S. corporate tax reform legislation.
◦
In the fourth quarter of 2017 Biogen booked a GAAP and non-GAAP tax charge of $42 million and $50 million, respectively, related to the impairment of ZINBRYTA related tax assets.
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Throughout 2017 Biogen repurchased approximately 4.9 million shares of the Company’s common stock for a total value of $1.4 billion.
•
In the fourth quarter of 2017 Biogen repaid its Senior Notes due March 1, 2018 for $558 million.
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As of December 31, 2017, Biogen had cash, cash equivalents, and marketable securities totaling approximately $6.7 billion, and approximately $5.9 billion in notes payable and other financing arrangements.
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For 2017 the Company’s full year weighted average diluted shares were 213 million. For the fourth quarter of 2017 the Company’s weighted average diluted shares were 212 million.
2018 Financial Guidance
Biogen also announced its full year 2018 financial guidance. This guidance consists of the following components:
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Revenue is expected to be approximately $12.7 billion to $13.0 billion.
•
GAAP and non-GAAP R&D expense is expected to be approximately 16% to 17% of total revenue.
◦
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 15% to 16% of total revenue.
•
GAAP tax rate is expected to be approximately 23.5% to 24.5%; non-GAAP tax rate is expected to be approximately 22.5% to 23.5%.
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GAAP diluted EPS is expected to be between $22.20 and $23.20.
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Non-GAAP diluted EPS is expected to be between $24.20 and $25.20.
Biogen may incur charges, realize gains, or experience other events in 2018 that could cause actual results to vary from this guidance.
Recent Events
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In 2017, Biogen added seven clinical programs to its neuroscience pipeline including BIIB098 (MMF prodrug) for MS, BIIB092 (anti-tau antibody) for both Alzheimer’s disease and progressive supranuclear palsy, BIIB076 (anti-tau antibody) for Alzheimer’s disease, BIIB080 (tau antisense oligonucleotide) for Alzheimer’s disease, BIIB093 (IV glibenclamide) for large hemispheric infarction, and natalizumab for drug-resistant focal epilepsy.
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In January 2018, Biogen acquired the exclusive worldwide rights to develop and commercialize Karyopharm Therapeutics Inc.’s Phase 1 ready investigational oral compound KPT-350 for the treatment of certain neurological and neurodegenerative conditions, primarily amyotrophic lateral sclerosis (ALS). KPT-350 is a novel therapeutic candidate that works by inhibiting XPO1, with the goal of reducing inflammation and neurotoxicity, along with increasing neuroprotective responses. Biogen will pay Karyopharm a one-time upfront payment of $10 million and up to an additional $207 million in milestones, plus tiered royalty payments on potential sales of KPT-350.
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In January 2018, Biogen dosed the first patient in the Phase 2 SPARK study of BIIB054 (anti-alpha-synuclein antibody) in Parkinson’s disease.
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In January 2018, Biogen joined Regeneron Pharmaceuticals, Inc., Pfizer Inc., AbbVie Inc., AstraZeneca PLC, and Alnylam Pharmaceuticals, Inc. in a collaboration to collect genetic information on 500,000 people in the UK Biobank database, a project that could help accelerate new drug discovery and improve approval success rates. Biogen has committed $10 million toward this effort.
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In January 2018, the European Medicines Agency’s Article 20 Procedure of ZINBRYTA was concluded as the European Commission adopted restrictions to minimize the risk of serious liver injury with ZINBRYTA, including restriction of its use to adult patients with relapsing forms of MS who have had an inadequate response to at least two disease modifying therapies (DMTs) and for whom treatment with any other DMT is contraindicated or otherwise unsuitable.
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In December 2017, Biogen and Eisai Co., Ltd. announced that an Independent Data Monitoring Committee determined that BAN2401, an anti-amyloid beta protofibril antibody, did not meet the criteria for success based on a Bayesian analysis at 12 months as the primary endpoint in an 856-patient Phase II clinical study (Study 201) for early Alzheimer’s disease. Following the predefined study protocol, the blinded study will continue and a comprehensive final analysis will be conducted at 18 months seeking to demonstrate clinically significant results. The results of the final analysis are expected to be obtained during the second half of 2018.
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In December 2017, Biogen and Ionis entered into a new collaboration agreement to identify new ASO drug candidates for the treatment of SMA. Biogen will have the option to license therapies arising out of this collaboration and will be responsible for their development and commercialization.
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In November 2017, Biogen and Alkermes plc entered into a global license and collaboration agreement to develop and commercialize BIIB098, an oral MMF small drug molecule in Phase 3 development for the treatment of relapsing forms of MS.
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In November 2017, Biogen presented new data from the long-term extension of its ongoing Phase 1b study of aducanumab at the Clinical Trials on Alzheimer’s Disease (CTAD) meeting in Boston, MA. This data includes results from patients in the Phase 1b study who were treated with a gradually increased dose of aducanumab for up to 24 months and those who were treated with a fixed dose of 3, 6, or 10 mg/kg aducanumab for up to 36 months. The results are consistent with previously reported analyses from the Phase 1b study and support the design of the ongoing Phase 3 studies of aducanumab for early Alzheimer’s disease.
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In November 2017, the end of study results from ENDEAR, the Phase 3 study of SPINRAZA for the treatment of SMA, were published in The New England Journal of Medicine.
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In October 2017, Biogen and Ionis were awarded the prestigious 2017 Prix Galien USA Award for Best Biotechnology Product for SPINRAZA. The Prix Galien USA Award recognizes extraordinary achievement in scientific innovation that improves the state of human health.
Management Updates
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In December 2017, Jeffrey D. Capello joined Biogen as Executive Vice President and Chief Financial Officer. Mr. Capello brings 26 years of experience in finance. Most recently he was Executive Vice President and Chief Financial Officer of Beacon Health Options Inc. His previous experience includes founding and running his own company, Monomy Advisors, and serving as Chief Financial Officer of Ortho Clinical Diagnostics, Boston Scientific Corporation, and Perkin Elmer. Earlier in his career he was also a partner in the Boston and Amsterdam offices of PwC.
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In December 2017, Mark Hernon joined Biogen as Senior Vice President, Chief Information Officer. Mr. Hernon brings more than 30 years of experience in IT and strategic leadership. Most recently he was the Global Head of R&D Site Strategy and Operations at Takeda Pharmaceuticals,
where he led the global transformation of Takeda’s R&D footprint. His previous experience with Takeda Pharmaceuticals also included roles as the Regional Chief Information Officer for the Americas, Global Head of R&D, QA and HR Systems, and Vice President of Operations for the Cambridge, MA site.
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In November 2017, Chirfi Guindo joined Biogen as Executive Vice President and Head of Global Marketing, Market Access, and Customer Innovation. Mr. Guindo brings 27 years of experience in the global pharmaceutical industry and has held several leadership positions at Merck in Canada, the U.S., France, Africa, and the Netherlands. Most recently Mr. Guindo was President & Managing Director of Merck Canada.
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 25, 2018, 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 Future Earnings Releases and Calls
Starting with the first quarter 2018 earnings release, Biogen intends to cease 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.