Biogen Inc (BIIB) 2020 Q4 法說會逐字稿

Ladies and gentlemen, please stand by.

Good morning.

My name is Jake, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Biogen Fourth quarter and Full Year 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.

Thank you, Jake.

Good morning, and welcome to Biogen's Fourth Quarter 2020 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 a 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 the 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, EVP, Research and Development; and our CFO, Mike McDonnell.

I will now turn the call over to Michel.

Good morning, everyone, and thank you for joining us.

I would like to start by thanking Joe Mara for his excellent contribution to Biogen during the past 14 years and also congratulation for his well-deserved promotion.

At the same time, I am delighted to have Mike Hencke stepping into the role.

As we have announced last week, the FDA has extended the review time line for aducanumab in the U.S. to June 7. We are committed to working with the FDA as it completes its review of the aducanumab publication, and we continue to stand behind our clinical data.

We believe our results support approval.

Let me now review the year.

2020 was a year of uncertainties due to COVID-19 for both society at large and also for our industry, and I am proud of what the Biogen team delivered.

For the full year 2020, Biogen generated $13.4 billion in revenue, representing a 6% decrease year-over-year as we're experiencing the erosion of TECFIDERA revenue in the U.S. due to the impact of generic entry.

Full year 2020 non-GAAP earnings were $33.70 a share, a slight increase versus full year 2019.

Now let me review our progress against our strategic priorities.

First, full year MS revenues, including OCREVUS royalties, were $8.7 billion, a decrease of 6% versus the prior year.

Excluding TECFIDERA in the U.S., our global MS revenue remained relatively stable for both Q4 and the full year versus 2019.

Despite the challenges of launching a new product during COVID-19, we were pleased to see strong improvement in trends for VUMERITY, which has become the #2 MS product and the #1 oral in terms of new prescriptions in the U.S. We believe these results demonstrate our ability to maintain leadership and execute well despite increased competition, the erosion of TECFIDERA revenue in the U.S. and COVID-19.

Second, SPINRAZA generated full year global revenues of $2.1 billion, a 2% decrease versus the prior year.

Q4 global revenues were stable versus Q3.

While SPINRAZA is facing increased competition in the U.S., which has been exacerbated by the impact of COVID-19, this was offset by continued growth outside the U.S. We remain committed to further exploring the potential to enhance outcomes for patients with SPINRAZA.

This includes the DEVOTE study testing a higher dose as well as the recent initiation of the RESPOND study, evaluating SPINRAZA in patients with a suboptimal clinical response to gene therapy.

There are important questions that remain unanswered on the other approved treatment options, and we are committed to generating relevant data to further inform treatment choices.

We believe that SPINRAZA will remain a foundation of care in the treatment of SMA.

Third, biosimilars delivered solid performance despite continued COVID-19 impact with revenues of $796 million for 2020, which represents 8% growth year-over-year.

We estimate that the use of our biosimilar generated approximately EUR 2.4 billion of savings to the European healthcare systems in 2020, which should help expand access and create headroom for new innovation.

We also made important progress towards potential geographic expansion and future growth for our biosimilars business with the filing of SB11 referencing LUCENTIS in the U.S., where, over the next 5 years, biosimilars are expected to generate over $100 billion in savings.

Fourth, 2020 was a very productive year for our R&D organization.

Last year, we submitted regulatory filing for aducanumab in the U.S., EU and Japan.

We remain ready to launch aducanumab in the U.S., if and when it is approved.

Our teams have evaluated the availability of specialists, infusion capacity, the ability to confirm the pathology of amyloid beta, MRI capacity and formulary approval processes.

We believe there are several hundred sites in the U.S. that are ready to start treating patients should aducanumab be approved.

Beyond aducanumab, we addressed or advanced 12 new clinical programs last year across MS, ALS, Parkinson's disease, depression, and biosimilars, including 4 in Phase III.

Importantly, we entered new strategic collaboration with Sage and Denali, providing access to potential first-in-class therapies for serious neurological disorders, such as depression and Parkinson's disease.

Our collaboration with Sage adds important late-stage diversification through Phase III programs in both major depressive disorders and postpartum depression with critical readouts expected this year.

An asset in depression would offer multiple synergies across Biogen's existing portfolio.

Overall, in 2021, we expect 8 mid-to-late-stage data readouts, including 4 programs in Phase III.

Fifth, our cash flow generation continues to provide us with significant flexibility to allocate capital.

During 2020, we returned approximately $6.7 billion of capital to shareholders and allocated roughly $3 billion for business development to enhance our pipeline.

In summary, 2020 was a very productive year for the company as we have executed on our strategy.

Despite the challenges from COVID-19 and TECFIDERA generics, we have maintained global leadership across our core businesses in MS, SMA and biosimilars, and we have made significant progress towards building a multi-franchise portfolio.

As Mike will outline with our guidance, we believe 2021 will be a reset year for the company financially on both the top and bottom lines, but we believe we can grow the company over the long term.

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.

I'd like to begin by thanking my colleagues in R&D for their dedication to discovering and developing innovative, potentially life-changing therapies for patients in need.

As a result of their hard work, 2020 was a year of milestones for Biogen.

We made significant progress toward building a multi-franchise portfolio with 10 programs now in either Phase III or filed across a number of key therapeutic areas.

We are proud that after more than a decade of work aimed at introducing the first treatments that treat the underlying pathophysiology of Alzheimer's disease, we have completed regulatory filings of aducanumab in multiple geographies.

We hope that these filings will pave the way to the introduction of the first therapy that may slow the inevitable clinical decline in patients around the world suffering from Alzheimer's disease.

Moreover, our collaboration partners at Eisai initiated the AHEAD 3-45 trial designed to evaluate whether BAN2401 may be of benefit in people with the early pathology of Alzheimer's disease even before they are aware of cognitive impairment.

Finally, we bolstered our early and late-stage pipeline through both internal development and collaborations with leading neuroscience companies, including Denali, Sage and Sangamo.

Let me now turn to the progress we made in the fourth quarter, starting with Alzheimer's disease and dementia.

The clinical trials of aducanumab were the first to show in randomized, double-blind, placebo-controlled studies that an antibody that targets aggregated forms of amyloid results in the robust removal of amyloid plaque and reduces clinical decline in Alzheimer's disease.

Recently, Eli Lilly released results from the Phase II trial of donanemab, another anti-amyloid antibody for Alzheimer's disease.

These top line results indicate that donanemab is now the third molecule after aducanumab and BAN2401 to show that antibodies that target the amyloid plaque and produce a robust effect on amyloid plaque reduction also produce a clinical benefit.

These Phase II results seen with donanemab were comparable to what was demonstrated by aducanumab in its Phase III trials in terms of amyloid plaque reduction as measured in Centiloids as well as clinical effect as measured on a composite scale of ADAS-Cog and activities of daily living.

We plan to present further details on these data at the upcoming AD/PD meeting in March.

These data continue to strengthen our belief than antibodies that target the forms of Abeta concentrated in the amyloid plaque may produce therapeutic benefits, thus distinguishing these molecules from earlier anti-amyloid antibodies.

Thus, we are optimistic about the potential for BAN2401 that is currently being evaluated in the CLARITY Phase III trial.

The target enrollment for CLARITY has recently been increased by approximately 200 patients to mitigate COVID-19-related dosing challenges in consultation with the FDA.

Nevertheless, the anticipated readout timing of Q3 2022 remains unchanged.

In addition to anti-amyloid therapies, we continue to pursue a number of approaches targeting tau, which, when misfolded, is the principal constituent of neurofibrillary tangles, another hallmark of Alzheimer's pathology.

We expect data from the Phase II study of gosuranemab, our anti-tau antibody that aims to prevent the spread of tau in the brain, in the first half of this year.

We also have BIIB080, a tau-targeted antisense oligonucleotide that aims to reduce the production of all forms of tau.

In collaboration with Ionis, we recently learned that the Phase Ib multiple ascending dose study in mild Alzheimer's disease patients in BIIB080 treatment 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 plan to present additional details at an upcoming scientific meeting.

We are currently finalizing plans to advance BIIB080 into a Phase II study in Alzheimer's disease.

In summary, across amyloid and tau as well as other targets in the preclinical stage, we are advancing an industry-leading pipeline that seeks to alter the course of Alzheimer's disease.

Turning to MS. We have made significant progress in bolstering our existing MS franchise.

This includes the approval of intramuscular PLEGRIDY in the United States and the European Union, a positive CHMP opinion for subcutaneous TYSABRI and the submission of a marketing authorization application for VUMERITY in the EU.

Additionally, we expect the readout for the NOVA study, evaluating the efficacy of extended interval dosing of TYSABRI, by midyear.

We recently added BIIB107, an antibody that targets alpha 4 integrin to our MS pipeline.

The clinical utility of targeting alpha 4 integrin has been proved with TYSABRI, a highly efficacious treatment for relapsing MS. BIIB107 is a new molecular entity that has demonstrated higher binding affinity, reduced Fc effector function and a predictable pharmacological effect in preclinical studies.

Our intent is to integrate all of our learnings from TYSABRI, including extended interval dosing, so as to optimize safety, the dosing regimen and patient convenience while maintaining the high efficacy of TYSABRI.

In neuromuscular disorders, we aim to continue enhancing the therapeutic benefit of SPINRAZA and recently announced that we dosed the first patient in the RESPOND study, which will evaluate the effect of SPINRAZA in patients who have had a suboptimal clinical response to gene therapy.

We also continue to enroll patients in the DEVOTE study, which is evaluating whether the higher doses of SPINRAZA can provide greater efficacy than the currently approved dose.

In ALS, we recently enrolled the last patient in the Phase III trial evaluating tofersen in SOD1 ALS, and we look forward to the readout in the second half of this year.

In movement disorders, we were disappointed to learn that the Phase II study of BIIB54 in Parkinson's disease did not meet the primary or secondary endpoints.

Based on our Phase I data in CSF samples with BIIB54, we believe we have tested doses in the Phase II trial that were sufficient to engage extracellular alpha-synuclein in the central nervous system.

As a result, we have decided to discontinue development of BIIB54 and plan to present detailed studies at a future scientific -- study results at a future scientific meeting.

Nevertheless, we believe that the study provides a high-quality clinical dataset that can be used to inform our future efforts in Parkinson's disease.

Denali recently announced completion of the Phase Ib study for BIIB122, otherwise known as DNL151, a small molecule inhibitor of LRRK2, which met target and pathway engagement goals.

We expect to initiate late-stage clinical development in Parkinson's disease patients by the end of this year.

In stroke, TMS completed enrollment for the Phase II trial of TMS-007 in acute ischemic stroke in Q4 of 2020, and we are excited about the upcoming readout expected in the first half of this year.

TMS-007 is a small molecule modulator of plasminogen and is hypothesized to facilitate thrombolysis selectively at the site of the clot, while simultaneously exerting an anti-inflammatory effect to help reduce the risk of additional tissue damage.

We believe the targeted mechanism of action of TMS-007 may result in significant advantages over recombinant tissue plasminogen activator, or TPA, which currently remains a standard of care for ischemic stroke.

This includes potentially extending the therapeutic window to 12 hours or beyond, up from the 3 or 4.5-hour window of TPA and reduce the risk of adverse bleeding events.

For these reasons, we believe TMS-007 represents a potential best-in-class thrombolytic agent.

We continue to enroll patients in the Phase III trial of BIIB93 for the treatment of cerebral edema caused by large hematitic infarction despite the challenges posed by the COVID-19 pandemic.

Finally, we have had a very productive quarter on the business development front, executing a number of collaborations that provide access to innovative potential first-in-class therapies.

Significantly accelerating our expansion into neuropsychiatry, we entered into a collaboration with Sage, a leader in psychiatry.

Major depressive disorder, or MDD, and postpartum depression, or PPD, are highly prevalent disorders, and we believe that Sage's lead asset, zuranolone, has the potential to be a first-in-class oral therapy for both.

We look forward to multiple Phase III -- upcoming Phase III readouts for zuranolone this year, which includes WATERFALL for the episodic treatment of MDD, CORAL for rapid response therapy when co-initiated with standard antidepressive therapy in MDD, and SKYLARK in PPD.

Beyond zuranolone, we will also collaborate on SAGE-324, currently in development for essential tremor with a readout of the Phase II study expected in early 2021.

Furthering our commitment in ophthalmology, we entered into a collaboration with ViGeneron with the goal of developing gene therapies to treat inherited retinal diseases.

With this collaboration, we aim to use ViGeneron's proprietary AAV capsids to sufficiently transduce retinal cells via intravitreal injections, which could potentially be performed in the clinic and offer efficacy via significantly enhanced retinal area coverage as compared to subretinal injection through surgery.

More recently, we entered into a collaboration with Atalanta Therapeutics based on technology that comes from the RNA Therapeutics Institute at the University of Massachusetts, started by Nobel Laureate, Dr. Craig Mello.

As part of this collaboration, Atalanta will utilize its proprietary branched siRNA platform to develop potential treatments for multiple CNS targets, including HTT for the treatment of Huntington's disease.

This collaboration with Atalanta, combined with our recent collaborations with Sangamo, Scribe, ViGeneron and the Massachusetts Eye and Ear Infirmary as well as our long-term collaboration with Ionis extend our ASO and RNAi capabilities and complement our ongoing efforts in gene therapy, including the development of our gene therapy assets for inherited retinal disorders.

Additionally, we created a gene therapy accelerator unit to focus on solving the key technological challenges in the field with the goal of bringing to market more gene therapies that may transform the lives of patients.

In 2020, Biogen R&D assembled and progressed a cutting-edge neuroscience pipeline, employing state-of-the-art therapeutic modalities against genetically well-validated drug targets.

As a result, we believe we are well-positioned for growth in a transformative year with 8 clinical trial readouts anticipated, including 4 pivotal programs.

We remain optimistic on the opportunities ahead of us, and we believe we are entering a promising time for neurotherapeutics and their ability to meaningfully impact the lives of patients, including potentially bringing the first therapy to change the course of Alzheimer's disease.

I will now pass the call over to Mike.

Thank you, Al, and good morning, everyone.

Biogen had another solid quarter despite the challenges from COVID-19 and TECFIDERA U.S. generics as we continue to execute well and maintain global leadership 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 also share with you our guidance for 2021.

Total revenue for the fourth quarter of $2.9 billion declined 22% versus the prior year in both actual and constant currency.

Total revenue for the full year of $13.4 billion declined 6% versus the prior year at both actual and constant currency.

This decline was mostly driven by TECFIDERA generic entry in the U.S.

Total MS revenue for the fourth quarter, including OCREVUS royalties of $1.8 billion, decreased 24% versus the prior year at both actual and constant currency.

Total MS revenue for the full year, including OCREVUS royalties of $8.7 billion, decreased 6% versus the prior year at actual currency and 5% at constant currency.

This decline was also driven by the entrance of multiple generics of TECFIDERA in the U.S. Excluding U.S. TECFIDERA, total MS revenue, including OCREVUS royalties, was relatively flat, both in the fourth quarter and the full year versus the prior year, demonstrating the resilience of our MS business in a competitive market.

Global TECFIDERA revenue for the fourth quarter of $608 million declined 48% versus the prior year and revenue for the full year of $3.8 billion declined 13%.

Outside of the U.S., fourth quarter TECFIDERA revenue of $288 million increased 1% versus the prior year, and full year revenue of $1.2 billion increased 3% with continued patient growth.

During the quarter, we saw continued improvement in VUMERITY trends.

VUMERITY revenue was $39 million in the fourth quarter.

TYSABRI fourth quarter global revenue of $475 million was relatively flat versus the prior year, and full year revenue of $1.9 billion grew 3% for the full year.

We were pleased to see continued global patient growth throughout the year, and believe TYSABRI is well-positioned to play an increasingly important role in the treatment of MS as we progressed several important initiatives, including subcutaneous administration and extended interval dosing.

Moving now to SMA.

Global fourth quarter SPINRAZA revenue of $498 million decreased 8% versus the prior year at actual currency and 10% at constant currency.

In the U.S., SPINRAZA revenue decreased by 34% versus the prior year as we see an impact from competition, which is exacerbated by COVID-19.

Outside the U.S., SPINRAZA revenue grew 13% versus the prior year with strong growth in emerging markets, partially offset by the maturation of larger European markets.

For the full year, global SPINRAZA revenue of $2.1 billion decreased 2% versus the prior year at actual currency and 1% at constant currency.

Full year U.S. SPINRAZA revenue decreased 16%, and full year revenue outside the U.S. grew 9%.

Although new competition and COVID-19 have had an impact on SPINRAZA, as you heard from Michel and Al, we believe SPINRAZA has a very strong efficacy and safety profile and will continue to be a foundation of care.

Moving to our biosimilars business.

Fourth quarter revenue of $197 million was flat versus the prior year at actual currency and declined 4% at constant currency.

Full year revenue of $796 million grew 8% versus the prior year at actual currency and grew 6% at constant currency.

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 continue 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 developed by our Samsung Bioepis JV and other biosimilar products.

Total anti-CD20 revenue in the fourth quarter of $419 million decreased 30% versus the prior year with relatively flat OCREVUS royalties and a 45% decrease in revenue from RITUXAN.

Total anti-CD20 revenue for the full year of $2 billion decreased 14% versus the prior year with a 23% increase in OCREVUS royalties and a 29% decrease in revenue from RITUXAN.

The decrease in RITUXAN revenue is due to the impact of COVID-19 and accelerating erosion from biosimilars.

Turning now to gross margin.

Fourth quarter gross margin was 83% of revenue versus 88% in the fourth quarter of 2019.

The decrease was due to the declines in TECFIDERA and RITUXAN, both of which are high-margin products, as well as higher costs related to our corporate partner revenue due to product mix.

Gross margin for the full year 2020 was 87% versus 86% in 2019.

Moving now to expenses.

Q4 non-GAAP R&D expense was $642 million and includes $68 million related to external collaboration agreements with Scribe, Atalanta and ViGeneron.

Full year non-GAAP R&D expense was $2.1 billion.

Q4 non-GAAP SG&A was $793 million, including approximately $100 million related to launch preparations for aducanumab.

Full year non-GAAP SG&A was $2.5 billion, including approximately $250 million related to aducanumab.

In Q4 of this year, our effective non-GAAP tax rate was approximately 16%, flat versus the fourth quarter of 2019.

Our full year effective non-GAAP tax rate was approximately 18% versus approximately 16% in 2019.

During the fourth quarter, we repurchased 1.6 million shares of the company's common stock for a total value of $400 million.

Throughout 2020, we repurchased 22.4 million shares for a total value of $6.7 billion.

As of December 31, 2020, there was $4.6 billion remaining under the share repurchase program, which was authorized in October of 2020.

Our weighted average diluted share count was approximately 154 million shares for the fourth quarter and 161 million shares for the full year.

Non-GAAP diluted earnings per share in the fourth quarter was $4.58.

Full year non-GAAP diluted earnings per share was $33.70, a $0.13 increase versus the prior year, and above our most recent guidance range.

In 2020, we generated approximately $4.2 billion in net cash flow from operations.

Capital expenditures for the full year were $425 million and free cash flow was approximately $3.8 billion.

We ended the year with $3.4 billion in cash and marketable securities and $7.4 billion in debt, resulting in $4 billion in net debt.

Additionally, our $1 billion revolving credit facility was undrawn as of the end of the year.

Let me now turn to our full year guidance for 2021.

We expect full year 2021 revenue to be between $10.45 billion and $10.75 billion, non-GAAP diluted EPS to be between $17 and $18.50 per share, and capital expenditures to be between $375 million and $425 million.

It is important to note that this guidance is based on a number of critical assumptions which are currently uncertain.

Changes in these assumptions could materially impact our results.

Our guidance assumes aducanumab will be approved in the U.S. by June 7, 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.

As a result, we would expect only modest revenue for aducanumab in 2021, ramping thereafter.

Post-commercialization, we would book 100% of net revenue in the U.S., and Eisai's profit share of 45% would be booked in a separate line item, which is not part of R&D or SG&A.

In addition, while the erosion of our U.S. TECFIDERA business to date has been slower than anticipated, if we are unsuccessful in our legal appeals, we expect a sharp decline during the first half of 2021, and this is our guidance assumption.

We also expect significant erosion of RITUXAN in the U.S. Along with TECFIDERA, we expect that the reduction in revenue from these high-margin products will put pressure on our gross margin percentage.

Also, as a reminder, in Q2 of 2020, we recorded $330 million in revenues related to the onetime license of certain manufacturing-related intellectual property, which was at 100% gross margin.

We expect non-GAAP R&D expenses will be between $2.35 billion and $2.45 billion.

We remain committed to our long-term growth through continued investment in our pipeline, which has now grown to a total of 33 programs across 10 therapeutic areas, including 10 programs which are in Phase III or filed.

Importantly, we expect our pipeline to generate 8 important mid-to-late-stage readouts this year, including 4 in Phase III.

We expect non-GAAP SG&A expenses will be between $2.6 billion and $2.7 billion.

This estimate includes 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.

In addition, it is important to note that we have allocated a significant portion of our manufacturing capacity to aducanumab, which could impact 2021 results if aducanumab is not approved.

We expect our non-GAAP tax rate for 2021 to be between 16% and 17%, and we assume we will utilize a portion of the remaining share repurchase authorization of $4.6 billion throughout the year, although this will depend on a variety of factors, including our business development activity.

Foreign exchange rates as of December 31, 2020, are assumed to remain in effect for the year, net of hedging activities, and we have not included any impact from potential tax or health care reform or any impact from potential acquisitions or large business development transactions.

Going forward, we plan to update our full year financial guidance each quarter.

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

Thank you, Mike.

Biogen demonstrated resilience and strong execution in 2020, positioning us well to manage the impact of TECFIDERA generics and to make 2021 a transformative year for the company as we continue executing on our strategy to build a multi-franchise portfolio.

We are advancing an industry-leading pipeline for Alzheimer's disease.

We are waiting an important decision on aducanumab in the U.S. now expected by early June.

As Al described, our belief in the therapeutic approach of targeting amyloid plaques has never been stronger.

We believe that our data supports the approval of aducanumab, and we are optimistic about BAN2401 in Phase III.

We are also pursuing complementary approaches targeting tau pathology with 3 clinical assets targeting either extracellular tau with an antibody or intracellular tau with an ASO.

We begin 2021 with an expanded and diversified pipeline, and we anticipate 8 mid-to-late-stage readouts by the end of this year.

These include 4 pivotal and 4 Phase II readouts across a number of therapeutic areas characterized by significant unmet medical need, such as ALS, stroke and the new Phase III programs in MDD and PPD with Sage.

We also expect significant milestone across our core business this year.

In MS, we are launching intramuscular PLEGRIDY, and we are planning for the potential launch of subcutaneous TYSABRI as well as important data on extended interval dosing in the middle of the year.

As we build for the medium to long term, we aim to scale our digital capabilities to further meet the need of patients.

As part of our vision to lead in Alzheimer's disease, we are excited to be collaborating with Apple to develop potential digital biomarkers that may aid in diagnosing and monitoring disease progression at the earlier stage of cognitive decline.

I want to reiterate our commitment to maximizing returns for our shareholders and bringing innovative therapies to patients over the long term.

This demands that we continue to allocate capital efficiently, effectively and appropriately.

As we have demonstrated in the past, we will always strive to have an optimal capital structure as well as aiming for superior 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 take a holistic view of health and strive to improve the broader society we serve.

Now more than ever, we continue to invest in climate and health, access and equity as well as diversity and inclusion.

In closing, I would like to thank our employees around the world who have demonstrated their dedication to making a positive impact on patients' life; and all of the physicians, caregivers and participants in our clinical development programs, our past and future achievements could not be realized without their passion and commitment.

We will now open the call for questions.

(Operator Instructions) Your first question comes from the line of Matthew Harrison with Morgan Stanley.

This is Max Skor on the line for Matthew Harrison.

Can you elaborate on the design of the RESPOND study?

How do you define suboptimal response to gene therapy?

And what are your expectations around how long it will take to enroll the study?

Thank you for this question.

Al will answer.

It demonstrates basically our commitment to best inform clinical practice based on the new modalities that we have for the good and for the benefit of patients.

It shows also our mindset in terms of having SPINRAZA as a foundation of care in SMA treatment.

Al?

Yes.

The RESPOND study will enroll about 60 patients.

It's based on physician determination that the response is suboptimal based, for example, on CHOP INTEND scores, and in the future, we may also be advocating for other measurements of suboptimal response.

But yes, it will be a 2-year study, and we'll look to see whether motor milestones based on a scale such as the Hammersmith score are improved by adding SPINRAZA.

We'll now move to our next question.

We'll hear from Terence Flynn with Goldman Sachs.

I just had a 2-part one.

I was just wondering if you can, Michel, maybe provide any perspective on the decision here to include aducanumab approval in your guidance.

And then anything you can share at this point regarding your pricing strategy broadly.

I know you're probably not going to give specifics, but can you just talk high level?

Do you see this more as a specialty priced drug versus a primary care biologic and any early read from payers?

While providing the guidance, it's basically the best reflection on how we see the business moving forward, even if these are assumptions that we decide on that may not represent the modality moving forward, which is basically the business in which we are, but this is the best belief that we have while we speak.

Concerning price, we are getting there.

We had very large engagements with many stakeholders.

And basically, there are 2 main dimensions.

The first one is the clinical meaningfulness and potentially in terms of cognitive functions, but also functional aspects on activity of daily living.

This is one side of the equation.

The second one is the cost of Alzheimer's to society, which is nowadays more than $550 billion a year in the U.S. The cost for caring for patients, and if I'm not mistaken, it's more than $0.5 million.

By the age of 80, 75% of the patients are in nursing home and this costs more than $100,000 a year.

And these are the main elements that we consider in our wide engagement on the important topic of price.

We are getting there, as I said, but too early to give more specifics.

We will now move to our next question.

We will hear from Marc Goodman with SVB Leerink.

On adu, I mean just -- we're all trying to understand, given your close working relationship with the FDA and how long it's been going on and how much data they have already gotten, it's hard for us to understand what else they could possibly need, what they don't know.

So I was wondering if there was any type of color you could just give us on that?

Was there any data from the EMBARK study that they were asking for?

Just any more clarity around the situation would be helpful.

And then just secondly, just on the SG&A of $600 million that you're committed to, can you just talk about how the gating of spend is going to be -- is that on launch, meaning it's all going to be in the second half of the year?

Or is half of that in the first half of the year?

Just trying to understand if adu is not approved in the middle of the year, how much of that spend is actually going to take place?

Thanks for the great question.

I will take the first part -- sorry, the second part on the SG&A, and Al will come back on the data aspect, the important data aspect.

So concerning the SG&A, basically, we have only one opportunity to potentially launch well such an important product.

So we basically, we sought to deliver a major launch for what could be the first product able to deliver meaningful clinical and functional value to patients affected by the disease, and these are potentially 10 million patients in the U.S. It's a multibillion opportunity for the company we resource to win.

Al?

Yes.

We've been saying all along that we're under review.

And as a normal course during the review process, there are information requests from FDA.

More recently, we had one that required the submission of additional analyses and clinical data, and that led to a major amendment, which led to the PDUFA delay.

Beyond that, I don't want to provide too much more detail on to the specifics.

So Mike will provide a bit more color on the part of your second question on the sequence.

Yes.

So Mark, I think it's -- a couple of points of note.

Obviously, we'll gate the spend as best we can in the event that we don't receive approval.

You should not expect that we would be able to mitigate 100% of those costs, but we would be able to mitigate a meaningful portion.

And obviously, we would maximize the amount that we would mitigate.

The other point that I would just remind on is that in the U.S., substantially all of the costs that we incur for aducanumab are subject to our agreement with Eisai, which in the U.S. is reimbursable at the rate of 45%.

And so when you look at the guidance that we gave, the $600 million that's in SG&A, there's about $200 million that would be reimbursable out of that that would come through on a different line in our P&L, on our collaboration sharing line.

And the reason why that ratio is a little bit different than you would expect is because the accounting is complex and it differs a bit, pre- and post-launch.

Some of the Eisai reimbursements are actually netted in that $600 million and the rest come through that collaboration line.

But at the end of the day, economically, it is a 45% reimbursement schedule that's important to remember.

We'll now move to our next caller in the queue.

We'll hear from Umer Raffat with Evercore.

Al, I was just looking to understand how you're thinking through the emerging data from EMBARK re-dosing study.

And I guess what I'm wondering is, when you look at, for example, the first interim 24-week efficacy results, do you overlay that with the last data point on a patient-by-patient basis coming off of Phase III?

Or are you comparing the curve in that first 24 weeks versus the curve in the first 24 weeks of the EMERGE and ENGAGE Phase IIIs?

I guess the challenge with that would be that the initial 2 Phase IIIs were dose titrating in the first 24 weeks.

I'm just curious how you're thinking about that.

Yes.

Umer, thank you.

Yes, well, we're still enrolling EMBARK.

We're part way through enrollment.

You're right that the first, as presented at the recent meeting, that the first analysis is at 6 months, roughly.

But -- and some of those issues that you just pointed out are good issues that will need to be addressed in the analytical plan.

But yes, we're still enrolling patients.

It's an important study, and we should be hopefully completing enrollment soon in the first half or so of this year.

We'll now move on to our next question.

We'll hear from Cory Kasimov with JPMorgan.

I guess, Al, just to follow-up on the EMBARK question.

Are you taking looks at this where if the FDA needed or was requesting information, you'd be able to provide it to them?

And then I just wanted to ask if you can kind of frame this pending Phase II readout for your anti-tau antibody BIIB92 that's coming up here in the first half?

Kind of remind us of the trial design, what you're hoping to show here.

Yes.

Thanks, Cory.

Yes.

So we will endeavor to provide FDA whatever they ask for in their information request.

And if that requires looks at trials that are still enrolling or are still ongoing, we will do so.

In terms of BIIB92, what we're looking for is an effect on Alzheimer's progression in this largely early-stage patients.

BIIB92 is -- has shown in Phase I trials to have a substantial decrease in extracellular tau.

And so -- and the hypothesis is that we're going to block the spread of tau from cell to cell.

It's hypothesized that there's a prion-like spread of tau in Alzheimer's disease.

So we're going to see over the course of about one year whether or not we affect the progression of Alzheimer's disease using the typical clinical outcome measures.

Now moving on to our next caller in the queue, Evan Seigerman, Credit Suisse.

So I'm referencing a comment you made earlier, Al, talking about 2021 being a reset year.

But taking aducanumab out of the picture, how do revenue and earnings grow in 2022 and beyond?

I'm really trying to understand if your outlook and kind of your comments mainly predicated on aducanumab, there are other significant drivers that we should be thinking about and referencing?

Mike?

Yes, thanks very much for the question.

And as we said in the prepared remarks, we do believe that we have the ability to grow the company over the longer term.

Obviously, aducanumab is a catalyst, but we've also got a lot of other very interesting opportunities.

We've got 33 programs, including 10 in Phase III, as we talked about 8 readouts in 2021, including 4 in Phase III.

I would point you to our existing products, which are expanding in a lot of the international markets.

Biosimilars, I would say the same.

The pipeline is very rich.

I think Sage is a great addition, and we have others.

So obviously, aducanumab is the catalyst, but we do believe that we have the ability to grow the company for the longer term based on what we have in the pipeline and the other pieces that I just mentioned.

So we expect many readouts this year.

So that's why I qualified the year as being transformative.

Even if there is a financial reset, transformative in terms of data readout, which is somehow unprecedented for the company with 4 Phase IIIs and 4 Phase IIs and in terms of the largest potential based on epidemiology is certainly MDD and PPD.

So we -- for which the late stage, they had positive results in randomized studies in PPD and MDD, and we are hopeful.

And beyond those, there is choroideremia and ALS in Phase III.

But beyond aducanumab, we have this pipeline progressing very well.

And the core business is solid, it's resilient, and we count on that.

Financially, we are sitting on cash, and we can continue to complement this pipeline.

So there are plenty of reasons to believe.

We'll now move to our next caller, Michael Yee with Jefferies.

I just wanted to ask, Al, as a follow-up to his comments around Lilly, whether you believe that data is growing in confidence for the scientific community and possibly the regulators.

They had a very interesting design, but they also used a different endpoint, and obviously, (inaudible) people over to placebo.

So maybe you could just follow-on, Al, with some of those comments and how you're thinking about that as it relates to even people in the Alzheimer's community who are pretty outspoken about Abeta.

Yes.

I think it's helping to support the amyloid hypothesis and supports the concept of targeting amyloid in Alzheimer's disease in the early stages.

Lilly began working on this antibody, they started publishing on this back in 2012.

When they found that to remove pre-existing plaques, they had to go after -- they had to use an antibody that would get into the -- that would get to the plaque.

And they showed in animals that the pyroglut specific antibody achieved that, and they now have confirmed that you get the same thing in humans by amyloid PET imaging.

And I think it's great to see that they also seem to show an effect on clinical decline.

They use a composite measure of ADAS-Cog and IADL, which is -- which I think they did because it's a somewhat small study.

I think it's like a couple of hundred patients, 200 or 300 patients, and so they had to use a more sensitive endpoint.

But it is composed of endpoints that we all recognize in the Alzheimer's field as being important endpoints for the measurement of the disease.

So I think it adds to the body of evidence that suggests that targeting amyloid with the right antibody, that get to the plaque and removes plaque is the right approach.

We'll now take our next question from Paul Matteis with Stifel.

I was wondering if you could talk about where you are in refining some of the kind of key real-world elements for the usability of aducanumab.

Specifically, I think in studies, you had 6 MRIs in the first year.

Is that something you expect to be the case in the real world if this is approved?

And if so, what can you do on your end to actually make this more usable beyond just kind of a small number of core academic centers that have these intrinsic capabilities?

Al?

Yes.

So MRI is useful for monitoring ARIA, and we do expect that there'll be MRI monitoring requirements once aducanumab is approved, if it's approved.

But the quantity and the timing will require further discussions with regulators around the world.

Yes.

Concerning the launch sequence, we are obviously starting with the most important high-volume centers that are getting ready to treat, and as mentioned earlier, these are hundreds, and this is already substantial.

Keep in mind that there is an amyloid beta confirmation most probably that will have to be done.

And obviously, over time, we will expand down the pyramid to larger targets.

Our next question will come from Phil Nadeau with Cowen & Company.

One on financials.

In SPINRAZA's U.S. trends, it looks like there was about a 34% decline in Q4 '20 versus Q4 '19.

You referenced COVID and then also competition in those trends.

Curious if you could quantify the impact of COVID.

And so how much will rebound once the pandemic subsides versus competition in the patients that might be lost more permanently?

Thank you for the question.

And we are watching this trend very carefully, and I will start and then Mike will add.

First of all, we are pleased with the -- with $2.1 billion overall revenue for SPINRAZA in 2020 despite COVID.

So in the U.S., the majority of the impact is COVID as per the input from the team.

Patients are scared to go to the centers, so they delay the dosing.

Some sites are being closed or limited capacity or staffing in order to dose the patients.

And last but not least, COVID is accelerating some switches to alternative treatment that exists.

We've seen the peak of switch in September and then we've seen a decline of those.

And we've seen also, very encouragingly for us, some patients deciding to return to SPINRAZA for reasons of efficacy, perceived efficacy or for reasons of side effects.

And last but not least, following the spike of launch, we've seen a rebound in demand for SPINRAZA in towards the end of the year.

Mike?

Yes.

Not a lot to add to that.

I would say that we would describe it as in the U.S. competition, which is exacerbated by COVID.

We are still growing outside of the U.S. Obviously, in a pandemic that makes the idea of an oral more attractive because you can avoid coming to a health care facility.

So the idea that somebody would switch from an injection to an oral becomes more prominent in our current environment.

And conversely, it's a little less likely that somebody would switch off of an oral to an injection in that situation.

So the impacts that you saw in the fourth quarter in the U.S., we would attribute it all to competition exacerbated by COVID.

How much of each is a little bit hard to parse out exactly, but it is both.

And I think at the end of the day, the important point is that we continue to really believe in the efficacy of SPINRAZA and its safety profile, and we do believe it will continue to become a -- it will remain a very important treatment option, particularly once we get through the pandemic.

So we remain hopeful for SPINRAZA.

Again, this is a very important asset.

As we said many times, it's an efficacy play.

And hopefully, with the rates of vaccination, this will be better reflected into the drug utilization rather than a perceived convenience.

At the end of the day, the SUNFISH data remains.

The part 2 of SUNFISH remains, 1 out of 2 patients experiencing disease progression.

And our product remains extremely well-documented with the broadest label, and we continue to invest in innovative research.

We'll now move to Jay Olson with Oppenheimer.

You spoke about the positive read across from Lilly's Phase II data for donanemab.

Can you please remind us how the binding profile, the specificity and PK profile for aducanumab compares to donanemab?

Yes.

This is Al.

So aducanumab binds to aggregated forms of Abeta, both soluble oligomers as well as insoluble fibrils.

And as such, since both are concentrated in the plaque, aducanumab binds to the plaque.

It was actually initially discovered based on a plaque -- amyloid plaque immunoreactivity assay.

And by targeting the plaque, it removes amyloid quite efficiently in the brain.

Donanemab binds to the pyroglutamated form of Abeta, which is present early in the plaque.

It's thought to kind of seed the plaque, if you will, and it forms part of the dense core.

So in that way, it targets plaque as well.

So different ways of targeting the plaque essentially.

In terms of PK, I don't know too much about the PK of donanemab, but I can -- I suspect since it's an antibody, it has roughly similar characteristics to other monoclonal antibodies, roughly a half-life of 2 weeks, et cetera.

We'll now move to our next question.

We will hear from Robyn Karnauskas with Truist.

Another one for you, Al, on donanemab.

So the CSO of Lilly had mentioned that given the unique clearing mechanism that it could have the potential to provide high levels of plaque clearance after limited duration dosing.

And I was just curious, as you think about the competitive landscape, assuming aducanumab is approved, how do you see intermittent dosing as being competitive to aducanumab?

And how do you think the competitive landscape could shape up with that profile?

Yes.

Thanks, Robyn.

It's going to be interesting.

I think it's a large market, and I think it will accommodate multiple therapeutic options, which hopefully will be available for patients.

The concept of intermediate dosing or down dosing perhaps after changing the dose after plaque removal is an interesting one.

It's something that can be tested and is being evaluated across multiple drugs, aducanumab, BAN2401 as well as donanemab.

I'd say that one thing is there's the effect on neurodegeneration with respect to plaque removal, but there may also be other effects, more acute effects.

When you listen to patients, in particular, you may have heard at the FDA advisory committee that patients seem to have -- have untoward effects after stopping aducanumab, and then they regain some of these benefits after restarting in a relatively short period of time.

And that's -- and something similar has been seen with other antibodies, including BAN2401.

That second piece maybe something more associated with synaptic function, which may be more associated with the soluble oligomer side of things, and I think that will remain to be learned about in the future study.

It looks like we have time for one final question.

We will now hear from Salim Syed with Mizuho.

I appreciate all the color on aducanumab as well specifically.

Al, just one for me on donanemab as well.

So when I go back to the FDA Adcom docs, and this is a line in there in the quote, this anti-amyloid beta antibodies cannot be considered as a single class.

They are distinct at the molecular level and the differences have an impact on their mechanism of action, including -- and then it lists, including binding characteristics, et cetera.

That was a pretty strong point that the FDA had made in the briefing docs, and it seems like now you're saying that donanemab is helping the case.

So I'm just curious how all this is getting reconciled.

Should people be looking at beta amyloid antibody as a single class or not?

No.

That's a really good question, and I tried to sort of make that point in my prepared comments this morning.

But the first generation of antibodies did not really target the amyloid plaque.

For example, solanezumab, which was a Lilly antibody, bound to mono-soluble monomeric amyloid Abeta.

And if you read the 2012 paper on the plaque specific antibody, they were concerned that such an antibody will not get to the plaque and remove plaque -- pre-existing plaque.

So even while they had solanezumab in development, Lilly began working on a plaque specific antibody.

And so I think that's what those FDA documents might have been pointing to that it's not just that you have an anti-amyloid antibodies.

We have to have those that will target the plaque and remove preexisting amyloid plaque in patients.

I think also bapineuzumab, bapineuzumab was nonselective.

It bound to soluble monomeric as well as insoluble aggregated forms of amyloid as well as soluble aggregated, and that led to issues with dosing.

And so I think that's what they've meant is perhaps solanezumab and bapineuzumab may not have shown clinical efficacy for these kinds of reasons.

But I think that we should not assume that this next generation of antibodies that target the plaque better.

Look, we all learned from the early studies, right?

And so I think donanemab is another example where those that target the plaque and remove amyloid robustly in humans.

And if you study early-stage patients selected for carefully, you will see efficacy.

Okay.

So we believe 2021 will be a transformative year for Biogen.

And I want to thank you all for your attention to our call.

Have a good day.

And with that, ladies and gentlemen, this will conclude your conference for today.

We do thank you for your participation, and you may now disconnect.