Biogen Inc (BIIB) 2021 Q1 法說會逐字稿

Good morning. My name is Ashley, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen First Quarter Earnings Call and Financial Update. (Operator Instructions) Thank you.

I would now like to turn the conference over to Mr. Mike Hencke, Director, Investor Relations. Mr. Hencke, you may begin your conference.

Good morning, and welcome to Biogen's First Quarter 2021 Earnings Call. Before we begin, I encourage everyone to go to the Investors section of biogen.com to find the earnings release and related financial tables, including our GAAP financial measures and the reconciliation of the GAAP to non-GAAP financial measures that we will discuss today. 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 discussions related to this call.

I would like to point out that we will be making forward-looking statements, which are based on our current expectations and beliefs. 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.

On today's call, I am joined by our Chief Executive Officer, Michel Vounatsos Dr. Al Sandrock, Head of Research and Development; and our CFO, Mike McDonnell. As a reminder, during the Q&A portion of the call, we kindly ask that you limit yourself to one question.

I will now turn the call over to Michel.

Good morning, everyone, and thank you for joining us. With a strong focus on operational execution, we have continued to serve patients and advance our strategic priorities. While we know that 2021 will be a financial restructure for the company, we are pleased with our operational performance during Q1, with first quarter total revenues of $2.7 billion and first quarter non-GAAP EPS of $5.34. These results were driven by solid performance across MS, SMA and biosimilars, together with continued strong cost management.

We are ready to launch aducanumab in the U.S. should we receive the regulatory approval, and we anticipate an FDA decision by the June 7 PDUFA date. If approved, aducanumab will be the first therapy to meaningfully change the course of Alzheimer's disease and will represent a significant growth and value creation opportunity.

Our cross-functional team in the U.S. has been working for months in preparation for the potential launch of aducanumab. We have identified and evaluated key sites of care that have the necessary infrastructure for Alzheimer's patients. We believe that more than 600 of these sites will be ready to treat patients shortly after a potential approval. Our team is currently working to evaluate the capacity at these and other sites to absorb an influx of Alzheimer's patients.

Together with Eisai, we were pleased to support UsAgainstAlzheimer's in the development of BrainGuide, a platform which is powered by Amazon Web Services. BrainGuide aims to increase brain health awareness and empower people to take action based upon responses to a memory questionnaire. We hope that BrainGuide, along with our collaboration with Apple aiming to identify digital biomarkers of cognitive health, will enable people to seek care sooner in order to maximize the benefits of treatment.

We are also working to ensure an equitable launch to facilitate broad access to aducanumab, should it be approved, including underserved population, a critical issue that has been highlighted by the COVID-19 pandemic. I am pleased to announce that outside the U.S., we recently submitted additional regulatory filings in Brazil, Canada, Switzerland and Australia, adding to our earlier submissions in Europe and Japan.

Turning to our progress towards our strategic priorities. First, Q1 overall MS revenue, including OCREVUS royalties, was $1.7 billion. Putting aside the entry of TECFIDERA in the U.S., our broader MS business continued to demonstrate resilience and progress. Excluding TECFIDERA in the U.S., the number of patients on our MS products worldwide increased approximately 5% versus the prior year. Importantly, in the current COVID-19 environment, we believe our MS products are well positioned versus the competition based on our current treatment guidelines.

We were very pleased to see strong revenue growth for VUMERITY, which is now the #1 oral MS product in terms of new prescription in the U.S. We believe this performance is a testament to a strong product profile and our team's ability to execute well, validating our plan announced mid last year to accelerate the launch of VUMERITY. We are also excited that TECFIDERA recently received regulatory approval in China.

Furthermore, we continue to advance new approaches to help address the remaining unmet medical need in MS. This quarter, we launched an intramuscular formulation of PLEGRIDY in both the U.S. and EU, which we believe offers an improved tolerability profile. And we obtained approval for subcutaneous administration of TYSABRI in the EU with the first expected launch in Germany, while we await a regulatory decision in the U.S. We also continue to advance the potential use of extended interval dosing for TYSABRI with important data expected in the middle of this year.

Second, SPINRAZA generated first quarter global revenues of $521 million. While SPINRAZA is facing competition in the U.S., which has been exacerbated by the impacts of COVID-19, we were encouraged to see that SPINRAZA discontinuation decreased versus Q4 of last year. Outside the U.S., SPINRAZA continued to perform very well with 13% revenue growth versus Q1 of last year. Overall, SPINRAZA remains the market-leading treatment for SMA, and we believe it will remain a foundation of care.

Third, our biosimilars business delivered revenue of $205 million. We are pleased with this performance as the continued impact of the COVID-19 pandemic has resulted in a slowdown in new treatment starts and reduced clinic capacity for immunology patients in Europe.

We aim to continue to grow our biosimilars business and create additional financial headroom for innovation by launching new products. To that end, we recently announced a collaboration with Bio-Thera Solutions to develop and commercialize BAT1806, a proposed biosimilar referencing ACTEMRA, currently in Phase III development. Biogen will have the right to commercialize BAT1806 globally in countries outside of China, which will expand our global biosimilars footprint.

Fourth, this quarter, we continue to meaningfully progress on our pipeline. We reported Phase II data in essential tremor, and we expect 7 additional mid- to late-stage results this year. Gene therapy represents a key area of focus for Biogen as we continue to pursue multiple modalities. To this end, we recently announced our plan to build a new state-of-the-art gene therapy manufacturing facility at our RTP site in North Carolina.

Fifth, our cash flow generation remains strong and continue to provide us with significant flexibility. To allocate capital in Q1, we generated approximately $769 million in cash flow from operations and $676 million in free cash flow. As we have demonstrated in the past, we are committed to maximizing returns for our shareholders as we aim to bring innovative therapies to patients.

I will now turn the call over to Al for a more detailed update on our recent progress in R&D.

Thank you, Michel, and good morning, everyone. As always, I'd like to start by thanking the Biogen team for their hard work as we continue to advance our R&D programs. We achieved a number of key milestones this quarter, and we look forward to 7 additional readouts anticipated this year, including pivotal trials in major depressive disorder, postpartum depression, ALS and choroideremia. Let me now turn to the advances we made across our pipeline in the first quarter.

Starting with Alzheimer's disease. As Michel mentioned, this quarter, we submitted additional regulatory filings for aducanumab in Brazil, Switzerland, Canada and Australia. Together with our prior filings in the U.S., EU and Japan, we have now submitted filings in 7 key geographies and continue to engage with regulators as they review the aducanumab data.

Turning to lecanemab, or BAN2401, our collaboration partner, Eisai, has recently enrolled the last patient in the Phase III Clarity study in early Alzheimer's disease. We look forward to the readout in Q3 of next year. Additionally, we plan to present detailed results from the Phase Ib study of BIIB080 in mild Alzheimer's disease at the upcoming AAIC meeting later this year. BIIB080 is a tau-targeted antisense oligonucleotide that aims to reduce the production of all forms of tau, both intracellular and extracellular. The Phase Ib study demonstrated that BIIB080 was generally well tolerated and resulted in a dose and time-dependent reduction from baseline in CSF total tau and phospho-tau with durability of effect. We are currently finalizing plans to advance BIIB080 into a Phase II study in Alzheimer's disease.

Moving to MS. We are presenting new data across our portfolio at the AA (sic) [AAN] meeting this week. An updated analysis of data from the TOUCH Prescribing Program of TYSABRI showed an 88% reduction in the risk of PML when used with extended interval dosing or EID as compared with standard interval dosing. This supports previous findings that showed that EID is associated with a lower incidence of PML.

We continue to generate state-of-the-art real-world data through MS PATHS. In MS PATHS, Biogen is collaborating with 10 leading MS centers in the U.S. and Europe to generate standardized, quantitative data from a diverse MS patient population as they are being seen in the clinic. More than 17,000 patients have been enrolled in MS PATHS to date, and we aim to use quantitative measurements across a range of key clinical dimensions, high position MRI measurements of MS disease activity, patient-reported data using a validated quality of life instrument, blood biomarkers such as neurofilament and electronic health records to obtain a more holistic view of MS and gain insights on how currently approved drugs are affecting real-world outcomes. Moreover, with the use of modern analytical methods such as machine learning, we hope to make new discoveries about the key subtypes and stages of MS as well as its pathogenesis.

At the AAN meeting, we are showing data from the MS PATHS that showed that extended interval dosing of TYSABRI may maintain comparable efficacy to standard interval dosing as assessed by the rate of new or newly enlarging T2 lesions on MRI scans, quantified by advanced image analysis software, which we developed in collaboration with Siemens. A prospective study of the efficacy of extended interval dosing is being assessed in the ongoing NOVA study from which we expect top line results around midyear.

Also being presented at AAN, another study leveraging data collected using MS PATHS demonstrated that TYSABRI can lead to clinically meaningful improvements in aspects of mental and social health, as assessed by the Neuro-QoL, a validated instrument that evaluates physical, mental and social effects reported by patients with neurological disorders. For 11 of the 12 domains tested, the adjusted rate of improvement was greater for patients treated with TYSABRI than for those treated with OCREVUS.

Also being presented at AAN is the first real-world analysis of VUMERITY-treated patients. The retrospective study of 160 patients found that overall persistence was high, with 88% of individuals remaining on VUMERITY at 8 months, and that treatment discontinuation due to GI adverse events was low at 3.8%. And these results follow a recent publication of EVOLVE-MS-2, a Phase III, 5-week randomized multicenter study that assessed the GI tolerability of VUMERITY and TECFIDERA using self-administered questionnaires. The study demonstrated that only 9.5% of VUMERITY-treated patients indicated that GI symptoms interfered quite a bit or extremely with regular activities as compared to almost 29% of TECFIDERA patients. We believe that the differentiated tolerability profile of VUMERITY will lead to improved adherence to therapy.

In addition to our established treatments, we aim to leverage our MS pipeline to address the remaining unmet need in MS. This includes our oral remyelination program, BIIB061, our oral BTK inhibitor BIIB091, as well as our next-generation anti-VLA-4 antibody that seeks to build on the success of TYSABRI in the high efficacy space.

Turning to neuromuscular disorders. We are presenting an update on the ongoing DEVOTE study, testing a higher dose of SPINRAZA at the AAN meeting this week. Data from the patients enrolled in the Part A open-label safety evaluation cohort, followed for up to approximately five months, were consistent with the well-characterized safety profile of the currently approved 12 milligram dose of SPINRAZA. The emerging safety profile of the higher dose supports its continued development as we evaluate the potential for greater efficacy.

We also added an additional cohort to the Phase I study of BIIB078, our C9orf ASO for ALS. Safety data has been supportive of escalating the dose, enabling us to conduct a more complete evaluation of the therapeutic index. The Phase I study containing the additional cohort is now expected to read out in the first half of next year.

In neuropsychiatry, last month, Sage Therapeutics released an interim analysis of the ongoing open-label Phase III SHORELINE naturalistic study of zuranolone in major depressive disorder. The data showed that in the completed 30 milligram zuranolone cohort, approximately 70% of participants with a positive response to an initial 2-week treatment required at most 1 additional zuranolone treatment during the 1-year study. SHORELINE also showed that following the 2-week treatment, more than 70% of patients in the 30 milligram cohort and 80% of patients in the 50 milligram cohort achieved a positive response as evaluated by the 17-item Hamilton rating scale for depression.

In both the 30 and 50 milligram cohorts, zuranolone demonstrated an adverse event profile consistent with previously reported data. Adverse events, including somnolence, dizziness and sedation, were observed to be more frequent in the 50 milligram cohort, but were similar in severity to events seen with the 30 milligram treatment of zuranolone. We believe these data further supports the potential therapeutic effect of zuranolone, and we look forward to the readout of the WATERFALL study of zuranolone in major depressive disorder anticipated later this quarter.

Next, I would like to turn to movement disorders. In collaboration with Sage, we recently announced that SAGE-324, also known as BIIB124, met the primary end point of a statistically significant reduction from baseline compared to placebo in the upper limb tremor score on prespecified components of The Essential Tremor Rating Assessment Scale, or TETRAS, at day 29. This corresponded to a 36% reduction from baseline in upper limb tremor amplitude in patients receiving BIIB124 compared to a 21% reduction with placebo. BIIB124 also demonstrated a safety profile consistent with previously reported data.

This trial was designed to test the higher -- the high end of the dose range established in Phase I studies, 60 milligrams, in an effort to determine whether or not proof of concept could be established in essential tremor. BIIB124 clearly shows efficacy in essential tremor. But at this dose, the incidence of somnolence was 68% with 62% of patients going to a lower dose and 38% of patients discontinuing treatment. We are working closely with Sage to plan next steps for the development of BIIB124.

The unmet need in tremor, essential tremor, is significant. There have been no new drugs approved for essential tremor in more than 5 decades. The drugs currently used to treat essential tremor have tolerability issues of their own, which limits their use in clinical practice. We believe more can be done to help patients with this most common movement disorder that interferes with activities of daily living and hamper social engagement.

In Parkinson's disease, the Phase I and Phase Ib studies of BIIB122, a small molecule LRRK2 inhibitor, are now complete, and the safety and biomarker goals were achieved, which we believe support continued development of BIIB122. As previously announced with our collaboration partner, Denali, we expect to initiate late-stage clinical development in Parkinson's disease patients by the end of this year.

Our R&D organization delivered a number of important milestones in the first quarter of the year. We believe there is much to be excited about with 7 additional readouts expected by the end of the year, including pivotal readouts in major depressive disorder, postpartum depression, ALS and choroideremia.

I will now pass the call over to Mike.

Thank you, Al. Biogen had another solid quarter despite the challenges from TECFIDERA U.S. generics and COVID-19 as we continue to execute well across our core businesses. We remain in a very strong financial position with significant cash and financial capacity to continue to grow the business over the long term. I will now review our financial performance for the quarter and share with you an update to our full year guidance for 2021.

Total revenue for the first quarter of $2.7 billion declined 24% versus the prior year at actual currency and 25% at constant currency. This decline was mostly driven by the continued impact of TECFIDERA generics in the United States.

Total MS revenue for the first quarter, including OCREVUS royalties of $1.7 billion, decreased 26% versus the prior year at both actual and at constant currency. This decline was also driven by the continued impact of TECFIDERA generics in the U.S. Excluding U.S. TECFIDERA, total MS revenue, including OCREVUS royalties, were relatively flat, demonstrating the resilience of our MS business in a competitive market.

Global TECFIDERA revenue for the first quarter of $479 million declined 56% versus the prior year. Outside of the U.S., first quarter TECFIDERA revenue of $317 million declined 2% versus the prior year. Normalizing for accelerated shipments due to COVID-19 of approximately $28 million in Q1 of 2020, revenue outside the U.S. increased 7%, with continued patient growth.

During the quarter, we saw continued improvement in VUMERITY trends. VUMERITY revenue was $74 million in the first quarter and is now the #1 MS oral product in terms of new prescription share in the U.S.

TYSABRI first quarter global revenue of $503 million declined 4% versus the prior year. As a reminder, in Q1 of 2020, TYSABRI revenue benefited by approximately $40 million due to a combination of extra shipping days in the U.S. and a pricing adjustment in Italy. Normalizing for these dynamics, revenue grew 4% year-over-year, as we saw a 5% increase in global TYSABRI patients. We continue to believe TYSABRI is well positioned to play an increasingly important role in the treatment of MS as we progress several important initiatives, including subcutaneous administration and extended interval dosing.

Moving now to SMA. Global first quarter SPINRAZA revenue of $521 million decreased 8% versus the prior year at actual currency and 12% at constant currency, although we were pleased to see 5% growth in global SPINRAZA patients versus the prior year. In the U.S., SPINRAZA revenue decreased 37% versus the prior year, as we continued to see impact from competition, exacerbated by the impacts of COVID-19. Outside the U.S., SPINRAZA revenue grew 13% versus the prior year, including approximately $40 million due to timing of shipments in Q1 of 2021.

Moving now to our biosimilars business. First quarter revenue of $205 million decreased 6% versus the prior year at actual currency and 13% at constant currency. Normalizing for accelerated shipments due to COVID-19 of approximately $15 million in Q1 of 2020, revenue was flat year-over-year. Our biosimilars business continues to be negatively impacted by pricing pressure as well as a slowdown in new treatments and reduced clinic capacity due to COVID-19. Despite the continued impact of COVID-19, we continued to be the leading anti-TNF biosimilar provider in Europe, and BENEPALI continues to be the #1 prescribed etanercept product across Europe. We believe we have the opportunity to continue to grow in Europe as well as within the U.S. and other geographies by commercializing new products.

Total anti-CD20 revenue in the first quarter of $389 million decreased 25% versus the prior year. RITUXAN revenue decreased approximately 50% versus the prior year, partially offset by a 29% increase in OCREVUS royalties. We expect continued erosion of RITUXAN due to biosimilars.

Turning now to gross margin. First quarter gross margin was 82% of revenue, down versus 83% in the prior quarter and down versus 87% in Q1 of 2020. The continued reduction in gross margin was primarily due to the declines in TECFIDERA and RITUXAN, both of which are high-margin products. We expect to continue to experience downward pressure on gross margins.

Moving to expenses and the balance sheet. First quarter non-GAAP R&D expense was $514 million. First quarter non-GAAP SG&A was $595 million, including approximately $75 million related to the launch preparations for aducanumab, net of reimbursement from Eisai. In the first quarter of this year, our effective non-GAAP tax rate was approximately 16% versus approximately 17% in the first quarter of 2020.

During the first quarter, we repurchased 2.2 million shares of the company's common stock for $600 million. As of March 31, 2021, there was $4 billion remaining under the share repurchase program authorized in October of 2020, and we expect to utilize a portion of this throughout the remainder of the year. Our weighted average diluted share count was approximately 152 million shares for the quarter.

Non-GAAP diluted earnings per share in the first quarter was $5.34. In the first quarter, we generated approximately $769 million in cash flow from operations. Capital expenditures were $93 million and free cash flow was approximately $676 million. We ended the quarter with $7.3 billion in debt and $3.4 billion in cash and marketable securities, resulting in $3.9 billion in net debt. In addition, our $1 billion revolving credit facility was undrawn as of the end of the quarter.

Let me now turn to our updated full year guidance for 2021. Our full year 2021 revenue guidance remains at $10.45 billion to $10.75 billion, despite unfavorable currency dynamics, which I will explain in a moment. We are increasing our non-GAAP diluted EPS guidance from our previous range of $17 to $18.50 to a range of between $17.50 to $19. Our capital expenditure guidance is unchanged at $375 million to $425 million.

This financial guidance assumes that foreign exchange rates as of March 31, 2021, will remain in effect for the remainder of the year, net of hedging activities. It is important to note that we are reaffirming our revenue guidance despite an expected currency headwind of approximately $80 million net of hedging activities to our full year 2021 revenue guidance, due primarily to the strengthening of the U.S. dollar from January 1, 2021, through March 31, 2021.

Our guidance continues to assume that aducanumab will be approved in the U.S. by June 7, 2021, although uncertainty remains on the FDA's decision. If aducanumab is approved in the U.S., we would expect an immediate launch. However, dose titration will result in less revenue per patient in the initial months of treatment. And as a result, we would expect only modest revenue for aducanumab in 2021, ramping thereafter.

We continued to expect rapid erosion of our U.S. TECFIDERA business as well as significant erosion of RITUXAN in the U.S. We expect that the decreased revenue from these high-margin products will put pressure on our gross margin percentage. Note that our gross margin in Q1 2021 was 82% of revenue, which reflects this dynamic.

We now expect full year non-GAAP R&D expenses will be between $2.3 billion and $2.4 billion, and non-GAAP SG&A expenses will be between $2.6 billion and $2.7 billion. This guidance reflects our expectation that both R&D and SG&A will increase beginning in the second quarter due to new collaborations, program readouts and aducanumab investments as we prepare for the potential launch.

Our full year SG&A estimate continues to include an approximate $600 million investment in support of the potential launch of aducanumab. Of this amount, approximately $200 million would be reimbursable by Eisai and would be reflected as collaboration profit sharing post commercialization and not part of SG&A.

We expect we will utilize a portion of the remaining share repurchase authorization of $4 billion throughout the year, although this will depend on a variety of factors, including our business development activities. We have not included any impact from potential tax or health care reform or any impact from potential acquisitions or large business development transactions in our guidance.

And with that, I'll now turn the call back over to Michel for his closing comments.

Thank you, Mike. Biogen continued to demonstrate resilience and strong execution in the first quarter of the year. And we believe we remain on track to make 2021 a transformative year for the company. This, of course, starts with the potential approval of aducanumab in the U.S.

The unmet need and cost to society for Alzheimer's disease are tremendous and mounting. Alzheimer's creates a cost burden of over $600 billion per year in the U.S. and the costs for caring for an Alzheimer's patient can be over $0.5 million. Alzheimer's deprives many patients of their independence. By the age of 80, approximately 75% of people with Alzheimer's disease live in a nursing home at a per patient cost of approximately $100,000 per year. The potential approval of aducanumab will be an unprecedented milestones for patients, their families and society at large.

Beyond aducanumab, we continue to advance our neuroscience pipeline as we work to create a multi-franchise portfolio. We look forward to the 7 expected mid- to late-stage readouts this year across a range of therapeutic areas, such as Alzheimer's disease, ALS, ophthalmology, depression and stroke, including 4 in Phase III.

I want to reiterate our commitment to maximizing returns to our shareholders and bringing innovative therapies to patients over the long term. This demands that we continue to allocate capital efficiently and effectively, while maintaining operational discipline and managing costs. As we have demonstrated in the past, we will always strive to have an optimal capital structure as well as aim for super returns from the investment we make.

Lastly, I would like to reflect upon Biogen's long-standing commitment to corporate responsibility. Our dedication to patients and the broader society is not only limited to developing novel therapeutics for patients suffering from serious diseases, but extends much further. At Biogen, we work with purpose to advance science to address the urgent and long-term challenge facing humanity. Now more than ever, we continued to strengthen environmental, social and governance priorities across the company. To underscore this commitment, we have decided to incorporate an ESG metric into our corporate scorecard to help ensure that we accelerate actions across these critical issues.

In closing, I would like to thank our employees around the world who have demonstrated the dedication to making a positive impact on patients' lives and all of the physician caregivers and participants in our clinical development programs. We are living through challenging times with COVID-19, and our achievements could not be realized without passion and commitment. We will now open the call for questions.

(Operator Instructions) Your first question comes from Michael Yee of Jefferies.

It sounds like you remain quite optimistic about a potential approval for adu. I was just wondering if you could make some comments about the work you've done with both sites and payers. I know that if this does get approved, there's a lot of uncertainty around PET reimbursement and logistics and MRI monitoring and things of that nature. So could you just maybe comment about the work you've done there and how confident you are that, that will be fairly smooth?

Thanks for the question, Michael. I mean the focus of the team since many months in the U.S. was, first, to identify and assist the sites of care in terms of infrastructure advice and processes, because we anticipate that there will be, if approved, a very large influx of patients. We know that the availability of specialists and diagnosis capabilities are a bottleneck, so we had to prepare the sites of cares. And we have worked all around the country in order to identify those. Today, we anticipate approximately 600 ready to treat, but many more are on the works.

So this was -- this work was managed by a cross-functional team. And obviously, we started with the medical engagement and scientific leadership. And we are pleased with where we are in terms of those sites and their ability to welcome the patients, to diagnose the patients, to dose the patients, to monitor the patients, including the fine processes such as formulary listing. Who is in charge of what? So the team has done a very thorough work, and I am pleased with the progress. Each time I review the operation in the U.S. and the launch readiness, we are bridging -- we are passing some new milestones.

I am also pleased with the digital capability. That is an overlay of rich contact and awareness building towards different stakeholders, not only the physicians, but also the patients and patient services.

As you know, so far, neither PET or CSF amyloid are reimbursed in the U.S. CSF is reimbursed in Europe, not in the U.S., but we believe there is a path forward.

Concerning price, I think that we are there, Mike. We have done a thorough engagement with different stakeholders, considering the burden of the disease and the clinical meaningfulness that aducanumab will bring. And we have engaged with pharmacoeconomics, including ICER, many times and others in the U.S. and beyond. So I think that the team is ready, and I'm pleased with the progress.

And actually, the 3 months addition were like a gift for the team because we are never fully ready for such a launch. And I must also appreciate the collaboration from Eisai in this launch readiness.

We'll take our next question from Ronny Gal of Bernstein.

Just one on TECFIDERA. To the extent that you are successful in prosecuting the appeal or getting an extended patent, can you discuss how that will impact the market? That is, I know you got a few settlements, and I'm wondering if those products were going to stay on the market. Or can -- or will they have to exit the market if you -- based on your agreements, if you are able to win the appeal?

Yes. So Ronny, it's Mike. Thank you for the question. And as we said, we do expect to hear something on the appeal in the first half of this year. And as we sit here on April 22, that could really come at any time now. There are many generics on the market, as you know. And our legal team has worked extremely hard to try to win this appeal and overturn this decision.

To the extent that we are successful, obviously, that would be very good news on winning the appeal, but there would be a course forward from there. And so in order to come up with a quantification of potential financial benefits, it would be premature and it would be hard to calculate immediately.

It would be the type of situation where we would get the good news, and we would have to navigate from there on a number of additional steps that we would have to go through to get to finalization. And how the generics that are in the market now would react, it's a little bit hard to predict before that would actually happen.

So I would say that, obviously, it would be a very good day and good news, and we're working very hard, and we believe in our case. But we would have to sort of evaluate the ruling, what it says. And we would communicate more in terms of potential benefits as soon as we knew what that course looked like.

Let me harp on this just a little bit. Do you have any settlement that will allow any genetic to stay on the market longer term even if you win?

Yes. That's not something that we can kind of comment on with specificity, Ronny. Again, yes, we're -- and I apologize for that, but this is one where, again, we have a great legal team that's working very hard in overturning this appeal, and we're very -- hopefully hear something very soon, and we'll communicate more on exactly what it all means. We'd have to look at the ruling and the specifics, and we'd have to see the reaction of the generics that are in the market before we really could answer that.

Our next question comes from Marc Goodman of SVB Leerink.

Yes. Can you give us more color on SPINRAZA outside the United States when you talk about some of the regions and just the underlying trends and what's going on there? And then just additionally, TECFIDERA China, can you just help us? Are you booking sales? Is that something that you view as a big opportunity?

So thanks for the question. We are very pleased with the performance of SPINRAZA ex U.S. And I'm also pleased with the performance in the U.S. even if we did face some discontinuation due to the compounded effect of COVID and also the perceived enhanced modality with the oral of Evrysdi, the convenience. And so there are a lot of learning that are coming from the U.S. to apply to Europe and ex Europe. We can see a very strong resilience in core European markets. And we can see a very fast momentum of growth in the emerging geographies. So all in all, I am very pleased.

I think that, moving forward, with the pandemia improving with the rate of vaccination, the fear to visit institution will gradually decrease. And the SUNFISH 2 data continues to reinforce the said thesis that basically, the product is not that efficacious for the toddlers above the age of 5. The dose limitation, because of all the reasons that we all know, basically set the limit in terms of efficacy, while the weight of the young adult or toddler or young adult increase, which is the largest part of the market and where we have faced some switches.

So obviously, the learning from the U.S. will benefit probably ex U.S. in an environment where we should have less of the pandemia. I am pleased with the emerging economies where rare diseases were not the priority for so long, and nowadays are on the agenda in terms of resource allocation. So very good momentum.

Concerning TECFIDERA in China, it's a second product approved in China for Biogen, and I am delighted about that. As you know, I was posted there for my previous company during 4 years with my family. And I fundamentally believe into the long-term potential of this market, that is already the #2 in the world. So the demand is tremendous. And epidemiology is rapidly emerging with similarities with the one of the west.

So incidence is lower for MS, but there are still more than 100,000 patients. The rate of diagnosis and the rate of treatment with DMTs is extremely low. It's less than 5% of the market. So disabilities are high, and it gives a great opportunity to establish TECFIDERA, together with the rest of the portfolio with a bit more time hopefully.

China is an important market for Biogen. We are managing Asia-Pac without Japan from China. We have partnered with a Chinese company on a biosimilar. So it's an invest geography. Obviously, we don't lose the focus on the rest. But good momentum in China. We have a great team, more than 200 people. And it's only the beginning. Thank you for the questions.

We'll take our next question from Yatin Suneja of Guggenheim Partners.

I have a question on zuranolone. The -- can you maybe talk about the expectation from the upcoming WATERFALL study, the importance of durability? And how should we think about durability beyond the 2-week dosing period? Do you need to hit stat sig beyond day 15? And how the powering might be structured after the primary end point?

This is Al. Yes. So the primary end point is the efficacy at day 15. And a key secondary end point is the durability, if you will, at day 42. And it's -- there's 2 ways to look at that. One is, does it stay separated from placebo? Or perhaps, more importantly, what happens between day 15 and day 42 on the efficacy on the HAM-D score in the treated patients? And so I think that if you look at prior precedents, the latter is probably more important than the former. But I think both will need to be looked at.

And then, of course, the key durability comes from the data from SHORELINE, which shows that the patients who responded to the initial course of treatment need at most one additional treatment. About 70% needed at most 1 additional treatment for an entire year. So I think that both kinds of durability are important.

We'll take our next question from Umer Raffat of Evercore.

Michel, Michael, I would just like to understand the stock repurchase trends better. And I'm specifically looking at over $10 billion worth of repurchases that were done between 4Q '19 through 3Q '20 versus around $1 billion that's been done in 4Q '20 and 1Q '21. I'm just trying to understand the drop in magnitude better. And I realize we can't necessarily correlate that to one specific thing, but I would just love to understand the thought process there.

Sure. Umer, it's Mike. Thanks for the question. So a couple of comments. I would say that we did buy back $600 million in the quarter. And we continue to be very committed to our share repurchase program, and we continue to see our stock as a very accretive investment. And we will continue to buy back stock and utilize a portion of the remaining $4 billion authorization throughout the rest of the year, as we said.

If you look back 5 years, Biogen's repurchased something on the order of 71 million shares for a total value of about $20 billion. And I would say that we've certainly availed ourselves of a great opportunity there. And I think that you do have to differentiate levels of cash flow prior to the entry of generics for TECFIDERA. Obviously, that was a highly profitable product, with a large revenue base in the U.S. that's now eroding pretty rapidly. So we don't have the level of free cash flow that we had prior to that.

But with that said, we still do have a meaningful amount of cash with $3.4 billion on hand at the end of the quarter. And we remain very committed to share repurchases. There is a differential, obviously, in the level of free cash flow. And we had a lot of excess cash on hand during various periods of time, even more than we have now prior to the generic situation.

So within the confines of what we can do, we remain very committed. $600 million is still a pretty meaningful number, and we will continue to evaluate a very robust pipeline of BD opportunities. We will continue to invest in those. You probably saw that we announced an investment in a biosimilar opportunity with Bio-Thera that we're excited about. And we will continue to repurchase shares, and we have the wherewithal to do that. So I wouldn't read too much into to the volume as being a sign that we're not committed to it because we're something -- it's something that we continue to see as a very accretive investment.

We'll take our next question from Matthew Harrison of Morgan Stanley.

Al, I was wondering if you could just comment on tau. And just given what we've seen from some of the other studies, what your level of confidence is in this Phase II readout that's coming up?

Well, you're talking about gosuranemab, BIIB092, which is our antibody that targets essentially extracellular tau, trying to prevent the spread of tow from cell to cell. And you're right. I mean the Roche negative results do make us think that it's tough to target tau with an antibody. But we remain hopeful. We haven't seen the data from our own Phase II results yet. It's a large study, 650-plus patients testing several doses. And we're testing it in the early stages of Alzheimer's. So I think it's a robust study that will enable a very good go, no-go decision to Phase III.

I did mention BIIB080 in my prepared comments because it's a different approach to tau. It's using an antisense to decrease the production of tau. And it should affect both intracellular and extracellular forms of tau, very different approach. And we're excited about the results that we found in Phase I in terms of dose and time-dependent reduction in tau expression as seen in the CSF. And we're looking forward to sharing those results later this year at a scientific meeting.

We will take our next question from Brian Abrahams of RBC Capital Markets.

On aducanumab, can you maybe remind us again of the Phase III monitoring requirements for safety in those studies? And maybe your latest views on what you think would be most appropriate in a real-world setting. I guess what preparation centers would need to have for both management and monitoring as well as optimizing benefit risk on the patients who start adu.

Brian, the main adverse event associated with adu is ARIA-E, and that's readily monitored by a very standard sequence used for MRI scans. And in the Phase III trial, most of the -- almost all the monitoring was done within the first year of treatment because the risk of ARIA goes down with time as you -- the longer you treat, the less likely you are to get ARIA-E. And I believe we had 6 or 9 scans in the trial. We don't think that you'll need that many. We were being extra cautious in our Phase III trial. Exactly how many we'll need will obviously depend on our discussions if we get to them or when we get to them in terms of the label, which we don't have yet.

I would remind you that most of the ARIA-E is -- were asymptomatic. I'd say about 2/3 were asymptomatic. And when symptomatic, they were -- the symptoms were generally mild, such as headache and confusion. So I think it's a readily dealt with, readily managed adverse event. And I think the sites, because almost all -- I mean, virtually every center, even private practice clinics have access -- ready access to MRI. And as I said, it's a standard sequence. So I don't think it's going to be a major problem to monitor for ARIA.

We'll take our next question from Colin Bristow of UBI.

And congrats on the quarter. On the EMBARK trial, I believe you reduced the planned enrollment from 2,400 to 1,800. I was just wondering, could you give us some color on the drivers of this. Was it just slower enrollment than your expectation? But most importantly, I wondered if you could give us -- do you have any data around the enrollment rates from the active aducanumab arms versus placebo arms for the feeder trial?

Yes. Thanks for the question. EMBARK is enrolling. The rate of enrollment is actually as predicted. It's enrolling on track. But as you noted, the total number of patients to be enrolled was reduced. And the main reason for that was that there were eligibility requirements, medical eligibility requirements that were not met by many of the patients who were seeking to enroll in EMBARK.

I'd say though that the interest level on the part of patients as well as investigators remains high. And as I said, the enrollment does remain on track. And I don't have the data on whether or not the -- there's differential enrollment from the different feeder arms.

We'll take our next question from Evan Seigerman of Crédit Suisse.

I just wanted to touch on the recent data readout of SAGE-324. So while you had the stat sig result on the primary, we did see a very high discontinuation rate in the treatment arm. Two things: Can you remind us how you plan to mitigate this in a pivotal trial? And what is the acceptable rate of somnolence for a successful commercial asset in ET?

Well, the -- you're correct that, as I stated in my comments, the primary end point was met, which I think -- and I want to congratulate my colleagues at Sage for that. That's a major result. The obvious thing to do now since we tested the high end of the dose range is to see whether we can reduce the dose, mitigate some of the adverse events while maintaining efficacy. There may be other maneuvers, such as changing the dosing algorithm, if you will, perhaps easing up to a dose, titrating. And other approaches would include potentially looking at key subgroups.

In terms of what's acceptable, I think that's a very tough thing to answer definitively. I think that every patient looks at the benefit they're receiving from a drug and the tolerability issues they have to accept with the drug. It's probably a day-to-day decision that patients make. And in this situation, they can see themselves how -- what's going on with the tremor. And perhaps there'll be several doses one day that will allow patients to choose between doses that optimize for them the benefit versus the risk.

Evan, I think that at this stage of development, the mindset of the team is to try to do better than what we have seen with this initial Phase II, 60% or so symptomatology and approximately 30% discontinuation. So it's a fascinating question that you asked. It's all about the benefits risk, but the mindset is just try to do better.

We'll take our next question from Jay Olson of Oppenheimer.

My question is about your subcu strategy. Do you consider subcu TYSABRI as a complement to IV TYSABRI or a substitute that will eventually replace IV TYSABRI? And since there was a study of subcu aducanumab, can you remind us about your plans for a subcu form of aducanumab and how you will apply your experience from subcu TYSABRI to aducanumab?

So thanks for the question. We are very excited by the momentum we see behind TYSABRI, high efficacy, and a mechanism that is eventually slightly favored in the current environment versus beta cell depleters. The stigma around TYSABRI was always the risk of PML. And with the data we generate and the extended interval dose, and hopefully, the data with the NOVA study midyear readout, we should really shed light on the optimal dose and most frequence of the treatment.

Subcu is an opportunity to enlarge the target. When we look at the prescribers landscape for TYSABRI, which is a tremendous success, it's extremely limited. And is it because of the infusion centers? Is it because of the risk of PML? Probably both. Here, we are combining the opportunity of accessing high efficacy with a subcutaneous dosing. So we should be in a position to enlarge the use and the targeting for TYSABRI.

We'll take our next question from Geoff Meacham of Bank of America.

On adu, just -- I was just curious if you guys have provided any more materials to regulator. I wasn't sure if further details from the EMBARK study were a gating factor. And just real quick on tau. Al, I want to just get your view of the tau imaging, what Lilly did, just to be able to assess Alzheimer's disease severity. Is that something that you think down the road could be implemented in your studies?

Yes, we remain on track for the PDUFA date of June 7. And obviously, if we had submitted major additional data, that would affect that. So -- but other than that, we don't want to comment on what we're submitting, our interactions with FDA, except to say that we continue to have regular meetings with them. And that to us, everything is on track for a PDUFA decision on -- by the PDUFA date.

In terms of tau, the concept of using tau imaging essentially to stage patients is a very interesting and novel concept. And they showed that there are certain -- if you look at the amyloid PET AS well as tau PET, you could potentially choose patients with the right stage of Alzheimer's disease that would maximally benefit from an amyloid lowering agents, such as donanemab and potentially aducanumab and BAN2401. So I think it's a very interesting concept. I think it's something that we need to look at again and with further study, but it's something that could potentially be useful.

We'll now take our last question from Sumant Kulkarni of Canaccord.

Given you're so deep in the FDA's review of aducanumab, other than perhaps stage of Alzheimer's disease of patients, what are your latest thoughts or expectations on any specific limitations in labeling of adu, perhaps by APOE4 carrier status? Are there more genetic-oriented variables?

Yes. I wish I could -- I just can't answer those types of questions. We're still in the middle of our review process, and I'm sensitive to the fact that we're under review. So one day soon, I hope to be able to discuss all that with you.

I want to thank you all for joining the Biogen call today. We remain focused on flawless execution and our operation in order to deliver on our guidance. We are also focused on the velocity of our pipe. And in the short run, we are very excited with the important readouts, and obviously, with the critically important regulatory decision for aducanumab.

Have a good day.

Thank you. That now concludes the call. Thank you for your participation. You may now disconnect.