Biogen Inc (BIIB) 2020 Q3 法說會逐字稿

Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Third Quarter Earnings Call and Financial Update. (Operator Instructions)

Thank you. And I would now like to turn the conference over to Mr. Joe Mara, Vice President, Investor Relations. Mr. Mara, you may begin your conference.

Thank you, and good morning, and welcome to Biogen's Third 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 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 3 includes a reconciliation of our GAAP to non-GAAP financial results and our GAAP to non-GAAP financial guidance. 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. Now I will turn the call over to Michel.

Good morning, everyone, and thank you for joining us. As you all know, the aducanumab Advisory Committee meeting is scheduled for November 6. This is our highest priority, and we are very focused on preparing for this meeting. At the same time, the TECFIDERA situation in the U.S. is clearly a near term challenge, which we will discuss.

Before I continue, I'd like to welcome Mike McDonnell, our new CFO. Mike's background and track record of accomplishment make him well prepared to be a very strong contributor to Biogen, and I know he looks forward to getting to know many of you.

Now let me review some key recent developments. First, we are very pleased that the FDA has accepted our BLA for aducanumab with priority review and has stated that, if possible, the plan to act early. As I mentioned, the Advisory Committee is, of course, an important event on the path to potential approval, and we are actively preparing to participate and share our perspective on our clinical data.

Outside the U.S., early this month, we submitted a marketing authorization application in Europe, and we are preparing for a regulatory submission in Japan following a recent formal meeting with the PMDA.

We have progressed in our U.S. launch readiness as we remain focused on appropriate engagement with scientific leaders, treatment sites, defining aducanumab's value proposition and establishing collaboration across multiple stakeholders to help prepare for the potential introduction of the first therapy to meaningfully change the course of Alzheimer's disease.

Outside the U.S., we are continuing to ramp up our launch readiness, particularly in Europe and Japan. Beyond aducanumab, we continue to advance our broader Alzheimer's disease portfolio, including BAN2401 in Phase III and multiple targeting programs targeting tau.

Also in neurodegeneration, we are proud to be collaborating with Denali, a premier innovative neuroscience company pioneering novel approaches for treating brain diseases. This collaboration provides us a mid-stage small molecule LRRK2 inhibitor program, which expands our pipeline of potential therapies in Parkinson's disease across multiple modalities.

We also received exclusive options rights to 2 programs for neurodegenerative diseases using Denali's innovative transport vehicle platform, including for amyloid beta antibodies.

With a deep pipeline, aducanumab now under review and our recent collaboration with Denali, we believe we are well positioned to lead in the fight against both Alzheimer's disease and Parkinson's disease, the #1 and #2 most common neurodegenerative diseases with an urgent need for novel treatments.

More broadly, we have continued to develop and expand our deep pipeline, which now includes 30 clinical assets with 8 in Phase III or filed, including the recent initiation of the Phase III program for dapirolizumab pegol in lupus with UCB.

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, something that demands a thoughtful approach towards all our investments over both the short and the long term.

Let me now discuss where we see Biogen strategically as we believe we are in a transitional period with several upcoming inflection points. As we manage through the erosion of TECFIDERA in the U.S., Biogen remains focused on strong execution against our strategy. We are the leader in neuroscience with differentiated core capabilities as we aim to leverage breaking science to address the tremendous unmet medical need in this space. We are leveraging better understanding of disease biology, including the underlying genetics as well as advances in biomarkers, such as novel imaging of the brain to help reduce the risk in developing therapies for many previously intractable diseases. We are building on a strong financial track record with a core business in MS, SMA and biosimilars, and we believe we are entering a new phase of important clinical readouts and value creation opportunities.

We will continue to work to maximize the potential of our broad MS portfolio, including the launch of VUMERITY and life cycle management for TYSABRI and the interferons.

Despite increased competition, we believe SPINRAZA can continue to grow and serve as a foundation of care based on the most well-established efficacy and safety profile in SMA. SPINRAZA has demonstrated sustained clinically meaningful benefit from presymptomatic infants to adults, and its safety profile has enabled us to begin assessing a higher dose for potentially even greater efficacy. We see biosimilars as another potential growth driver while providing headroom for innovation. We are working to expand into the U.S. and China with the potential to commercialize 2 new ophthalmology biosimilars with a global market opportunity of approximately $11 billion.

Importantly, Samsung Bioepis recently announced that the marketing authorization application was accepted by the EMA for SB11, a potential biosimilar, referencing Lucentis.

We remain optimistic about the prospect of launching aducanumab as the first therapy to meaningfully change the cost of Alzheimer's disease, and this will be an important short-term and long-term growth driver for the company.

In addition to aducanumab, we believe our pipeline could enable a second wave of growth in the mid-2020s driven by areas such as ophthalmology, stroke, lupus and ALS.

Importantly, we expect 6 mid- to late-stage data readouts by the end of 2021. We plan to continue pursuing external business development opportunities to further expand our pipeline. In just under 4 years, we have committed nearly $5 billion to business development and executed 20 transactions.

Going forward, we will continue to prioritize the stability of our organization to support our current portfolio while preparing for the potential introduction of a number of new products, starting with aducanumab. We'll be focused on diligent execution, capturing every opportunity for efficiency and cost savings.

In summary, we have continued to execute well on our strategy. We believe we are well positioned to serve our current and future patients as we build a multi-franchise portfolio, leveraging the interconnectivity of our deep neuroscience pipeline. We have a very strong balance sheet, and we will remain focused on maximizing long-term shareholder value creation.

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 the Biogen team for their hard work in making significant progress advancing our R&D programs. This includes milestones across key areas, such as the regulatory filings of aducanumab, pipeline progression and business development.

Starting with Alzheimer's disease. As Michel mentioned, we are working through the regulatory procedures for aducanumab around the world. We are also diligently preparing for the FDA Advisory Committee meeting on November 6.

Also in Alzheimer's disease, our collaboration partner, Eisai, dosed the first patient in the AHEAD 345 clinical program, which is designed to evaluate BAN2401 in individuals with preclinical Alzheimer's disease. Through the results of this trial, we hope to learn whether BAN2401 can suppress the progression of amyloid and tau pathology and reduce cognitive decline in the very early stages of Alzheimer's disease.

This quarter, we also announced an exciting collaboration with Denali Therapeutics to co-develop and co-commercialize Denali's small molecule LRRK2 inhibitor, DNL151, in Parkinson's disease, the second most common neurodegenerative disease.

LRRK2 is a negative regulator of lysosomal function, and certain mutations in the LRRK2 gene increased the risk of Parkinson's disease. We will examine the therapeutic potential of LRRK2 kinase inhibition in patients with and without known genetic risks for Parkinson's disease. Our hope is that 151 could be a first-in-class oral therapy that slows the progression of the disease.

This collaboration also provides us with the exclusive option to license 2 preclinical programs utilizing Denali's transport vehicle platform. This platform is designed to enhance the brain uptake of large therapeutic molecules by leveraging the transferrin receptor, which is highly expressed at the blood-brain barrier. One of these 2 programs seeks to enhance the delivery of an anti-beta amyloid antibody across the blood-brain barrier.

We are pleased to be collaborating on this platform with Denali, a pioneer in enhancing the delivery of large molecules into the central nervous system.

Moving to our MS portfolio. At the ECTRIMS meeting last month, we presented new data from the EVOLVE-MS-2 trial that further reinforced the clinically meaningful improvement in gastrointestinal tolerability associated with VUMERITY as compared to TECFIDERA.

Specifically, patients taking VUMERITY reported a lower likelihood of experiencing GI symptoms that interfered with daily activities or were associated with missed work and use less concomitant medication to treat GI symptoms.

Also at ECTRIMS, an analysis of real-world data in patients receiving TYSABRI extended interval dosing showed no significant differences in the rates of new T2 lesions, T2 lesion volumes or brain atrophy on brain MRI scans when compared to patients receiving the currently approved every 4-week dosing regimen. These data contribute to a growing body of evidence that suggests that TYSABRI extended interval dosing has similar efficacy to that of standard dosing, while reducing the risk of PML.

The efficacy of extended interval dosing as compared to the standard dosing regimen is being assessed prospectively in the ongoing NOVA study, which is expected to read out next year.

Additionally, we presented real-world data showing that treatment with TYSABRI was associated with significant improvement in 9 of 12 patient-reported neuro quality of life domains whereas in patients treated with OCREVUS, there were improvements in 4 of 12 domains.

Moving to our MS pipeline. We were disappointed to learn that AFFINITY, the Phase IIb study of opicinumab did not meet its primary end point or secondary end points. As a result, we have decided to discontinue development of opicinumab. Nevertheless, we remain committed to the therapeutic approach of repairing the central nervous system and still believe that remyelination has the potential to provide a therapeutic benefit for MS patients.

We are continuing to analyze a significant data set from this study to further inform our MS research in this area, including for BIIB061.

Turning to neuromuscular disorders. Following productive engagement with the FDA, we are advancing plans for a study to evaluate the benefit of tofersen when initiated in presymptomatic carriers of SOD1 mutations that have been linked to ALS. Akin to the NURTURE study of SPINRAZA in SMA, this study is designed to evaluate the ability of tofersen to delay clinical onset or slow disease progression of ALS when initiated prior to clinical symptom onset. We plan to initiate this study next year.

Also in ALS, I am happy to report that we dosed the first patient in our Phase I study of BIIB105, an antisense oligonucleotide targeting ataxin-2. Ataxin-2 was originally identified as a modifier of TDP-43 toxicity, a pathology common to more than 90% of the ALS population, suggesting that reduction in ataxin-2 could be therapeutic across most ALS populations other than that due to SOD1.

Additionally, I would like to provide an update on our SMA gene therapy asset, BIIB089. The FDA had previously placed a clinical hold on BIIB089 due to dorsal root ganglion toxicity, a pathology commonly observed in preclinical studies and which may also occur following use of the currently available AAV-mediated SMA gene therapy. Thus, we've made the decision to discontinue the BIIB089 and will instead focus on the pursuit of next-generation SMA gene therapy technology that we believe will address the DRG toxicity.

Lastly, we are happy to announce that in collaboration with UCB, we have dosed the first patient in our Phase III program for dapirolizumab pegol in patients with systemic lupus erythematosus with active disease despite being on standard of care therapies.

In summary, we continue to build and advance a deep neuroscience pipeline that seeks to enhance -- to address patients' needs by leveraging both organic growth and external collaboration. This approach is evidenced by our recent agreement with Denali and also Scribe Therapeutics, where we are pursuing cutting-edge CRISPR technology to potentially develop gene therapies for ALS. We believe this mix of internal development and external collaboration allows us to maximize the value of our R&D programs and provides a source of sustained innovation to help drive long-term growth of the company.

I will now pass the call to Mike.

Thank you, Al, and good morning, everyone. I'm excited to join Biogen and look forward to getting to know many of you. Biogen had another solid quarter despite the recent entrance of generic TECFIDERA and the continued impacts of COVID-19 as we continue to execute well. 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 in the quarter and also provide an update to our full year guidance. Total revenue for Q3 was $3.4 billion, a decline of 6% versus the prior year. This decline was mostly driven by TECFIDERA generic entry and is inclusive of a 1% unfavorable currency impact. Total MS revenue, including OCREVUS royalties, was $2.3 billion, a decrease of 4% versus the prior year.

MS revenue during the third quarter began to experience the impact of the entrance of multiple generics of TECFIDERA in the U.S. while Q3 TECFIDERA revenue outside the U.S. was $283 million, representing an increase of 1% versus the prior year with continued patient growth.

During the quarter, we saw improvement in VUMERITY trends, including an increased number of new starts. We believe VUMERITY can be an important product, given its differentiated GI tolerability profile as Al mentioned.

TYSABRI had a strong quarter with Q3 global revenue of $516 million, growing 7% versus the prior year. We were pleased to see continued global patient growth of 4% for TYSABRI versus the prior year.

We believe TYSABRI is well positioned to play an increasingly important role in the treatment of MS, and we're working on several important initiatives, including subcutaneous administration, an option for home infusion and an option for extended interval dosing.

Moving now to SMA. Global third quarter SPINRAZA revenue was $495 million, a decrease of 10% versus the prior year and stable versus the prior quarter. In the U.S., SPINRAZA revenue decreased by 23% versus the prior year as we continued to see an impact of COVID-19 on both new starts and maintenance doses as well as additional competition.

Outside the U.S., SPINRAZA revenue was stable versus the prior year and grew 10% versus the prior quarter. Although COVID-19 and new competition have had an impact on SPINRAZA, we see the potential for global growth, given a very strong efficacy and safety profile and a significant number of untreated patients across many established and emerging markets.

Moving to our biosimilars business. Revenue was $208 million this quarter, an increase of 13% versus Q3 2019. Q3 biosimilars revenue, despite returning to growth, continued to be negatively impacted by a slowdown in new treatments and reduced clinic capacity for immunology patients as a result of COVID-19. BENEPALI, our first and largest biosimilar became the #1 prescribed etanercept product across Europe. We estimate there are now approximately 220,000 patients using our biosimilars in Europe, and we believe we have the opportunity to continue to grow in Europe as well as potentially within the U.S. and other geographies.

Total anti-CD20 revenue in Q3 was $560 million, a decrease of 6% versus the prior year, with increased previous royalties offset by decreased revenue from RITUXAN due to COVID-19 and continued erosion from biosimilars, a trend we expect to continue to impact RITUXAN.

Total other revenue in the third quarter increased 15% versus Q3 2019 to approximately $126 million.

Turning now to expenses. Q3 GAAP R&D expense was $1.1 billion or 34% of revenue. Non-GAAP R&D expense, which excludes $601 million related to our collaboration with Denali, was $540 million or 16% of revenue.

Beginning in Q3, material upfront payments associated with significant collaboration and licensing arrangements are excluded from non-GAAP R&D expense in order to better reflect our core operating performance. Year-to-date non-GAAP results also reflect this change as the $125 million upfront payment related to the collaboration with Sangamo in the second quarter of 2020 has also now been excluded from non-GAAP R&D expense.

Q3 GAAP SG&A expense of $573 million and non-GAAP SG&A of $569 million were both 17% of revenue. Within the U.S., we are reallocating some TECFIDERA resources to support the launch of VUMERITY as well as aducanumab, although we will continue to fully support our broader MS portfolio.

In addition, we are ramping up our commercial preparations for aducanumab, which will create some upward pressure on SG&A. However, as always, we will continue to diligently manage our operating expenses to ensure we remain efficient across the organization.

In Q3 of this year, our effective GAAP tax rate was approximately 25%, an increase from approximately 12% in the third quarter of 2019. This increase is primarily due to prior year favorability from Swiss tax reform as well as current year unfavorability, primarily driven by noncash deferred tax adjustments related to TECFIDERA.

For the third quarter of 2020, our effective non-GAAP tax rate was approximately 18%, an increase from approximately 16% in the third quarter of 2019. Third quarter GAAP net income was $702 million and non-GAAP net income was $1.4 billion. GAAP diluted earnings per share in the third quarter was $4.46, a decrease of 47% versus the prior year, and non-GAAP diluted EPS was $8.84, a decrease of 4% versus the prior year. We repurchased approximately 4.5 million shares in Q3 for a total value of approximately $1.3 billion. The share repurchase program authorized in December of 2019 was completed as of September 30, 2020, and our Board of Directors has authorized a new $5 billion share repurchase program.

In Q3, we generated approximately $1.2 billion in net cash flows from operations. Capital expenditures in Q3 were $84 million, and free cash flow was approximately $1.1 billion. We ended the quarter with $4.6 billion in cash and marketable securities and $7.4 billion in debt. Additionally, our $1 billion revolving credit facility was undrawn as of the end of the quarter.

Let me now provide an update to our full year guidance for 2020. Our guidance was last updated in July and assumes no generic entry for TECFIDERA. During the third quarter, we began to experience the impact of generic entrants with more than 10 TECFIDERA generics approved and at least 6 now in the market and discounted prices of approximately 90%. Our guidance assumes significant erosion of TECFIDERA in the fourth quarter of 2020, the pace of which is difficult to predict. As a result, we now expect full year revenue to be between approximately $13.2 billion to $13.4 billion. We expect full year 2020 GAAP diluted EPS to be between $25.50 and $26.50 and non-GAAP diluted EPS to be between $32.50 and $33.50. Of note, this range excludes the upfront payments associated with the Sangamo and Denali collaborations during the second and third quarters of 2020, respectively. The upfront payment associated with the Q2 Sangamo transaction equates to roughly $0.65 per share.

It's important to note that this guidance does not include potential impacts from new acquisitions or large business development transactions as both have elements that are hard to predict. This financial guidance also assumes that foreign exchange rates as of September 30, 2020, remain in effect for the remainder of the year.

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

Sorry. Thank you, Mike. Biogen has remained focused on strong execution across our core business in MS, SMA and biosimilars, while continuing to advance our strategy of building a multi-franchise portfolio. I wanted to reiterate our commitment to maximizing returns to our shareholders and bringing innovative therapies to patients now and over the long term. This requires 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 aim for superior returns from investment we make. Again, we are actively preparing for the aducanumab Advisory Committee and a potential launch. The unmet medical need and cost to society for Alzheimer's are tremendous and mounting.

Alzheimer's creates a cost burden of approximately $550 billion per year in the U.S. and the cost 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 approval of aducanumab would be an unprecedented milestone for patients, their families and society at large and will represent an important short-term and long-term growth driver for the company.

Finally, we are focused on advancing our broader purpose as an organization as we aim to pioneer science for the betterment of humanity. This includes doing the right thing for patients, our employees, the environment and the community, while accelerating our efforts in diversity and inclusion, all of which we believe contribute to long-term sustainable shareholder value. These issues are all interrelated. For example, environmental issues are central to human health.

To that end, I am incredibly proud of our recently launched 20-year $250 million Healthy Climate, Healthy Lives initiative. This includes a goal to eliminate our fossil fuel emission by 2040 and to be a catalyst for positive change by advancing the science around how fossil fuel impacts human health and taking action to promote climate and health equity.

Finally, I would like to thank our employees around the world who are dedicated to making a positive impact on patients' lives, including ensuring access to our therapies during these challenging times.

With that, we will open the call for questions.

(Operator Instructions)

Your first question comes from Terence Flynn with Goldman Sachs.

As you've prepared for the Ad Comm, any notable new analyses or data points that we should expect to hear about as you try to frame the risk-benefit for the drug here? And then congratulations on the European filing. Anything notable in terms of similarities or differences here versus your discussions with the FDA that you can call out on the European side?

This is Al. We've done lots of analyses. We've been doing that for more than a year in collaboration with FDA. We're working exceptionally hard and the team is working exceptionally hard to prepare for the Ad Comm. And we're very excited about sharing our perspective on that day.

And on the EU difference, differences in the EU?

The EU, we just filed after some formal meetings, and we expect to hear back and start the engagement process. And in Japan, we are -- just had our formal interactions, and we'll be filing soon.

We will take our next question from Marc Goodman with SVB Leerink.

The question is really about expenses. You're about to lose $3 billion of TECFIDERA sales. And I was just curious, how come you're not announcing some type of restructuring plan or just significant cost-cutting to help offset that? I mean I understand that VUMERITY is still there, but clearly, there's a disconnect between the sales of those 2 and peak sales of those 2.

And then just secondarily, can you talk about any tax rate implications because of TECFIDERA sales going away?

So thanks for the good question. We are always obviously looking at savings opportunity and how to be an even more efficient operation, mostly when we face the potential launch of TEC in the U.S., which is certainly a material impact. We did extract approximately $400 million from our infrastructure in order to be a leaner and simpler organization, and we have an array of measures in place in order to simplify the back office and try to save additional resources.

You need, obviously, to understand that we still have a $6 plus billion business with MS in a highly competitive environment where we need to absolutely resource in order to defend our leadership position. VUMERITY is immaterial for now, but is signing -- is demonstrating some good signs and we'll come back to it. So we need to stay on and continue to resource the launch of VUMERITY. And obviously, there is aducanumab. We use the learning from COVID and digitalization also to gain efficiency. But again, we need to continue to resource the base business. We need to prepare for the launch of aducanumab because we are optimistic and at the same time, we try really to save what we can.

Yes. So I'll just quickly add to that, Marc. Thanks very much for the question, Mike speaking. I think just to add to what Michel was saying, a little bit of color. Running at about 17% of revenue, SG&A, we feel like it runs pretty efficiently. As Michel said, we are reallocating some cost and resources to the aducanumab launch and to the support of VUMERITY. And obviously, we do need to continue to support the MS franchise. But I would just point out that any cost savings that we have, we've guided for only the fourth quarter. We're not guiding for '21 at this time. But obviously, you wouldn't see cost impacts around this until 2021, which we'll talk more about when we get to 2021.

On your question around the tax rate, I think you were reacting to a comment in the prepared remarks. Given the change in the cash flow profile and the profitability profile for TECFIDERA, there was a deferred tax adjustment that was required to be booked relating to a valuation allowance, which had a modest impact on the effective tax rate for the quarter. So hopefully, that's helpful.

So if I may add to what Mike said. TECFIDERA is still above $1 billion ex U.S. if we remove completely the U.S. market and is growing. And there are some countries where we are launching TECFIDERA. So we still continue to resource the overall $6 billion plus MS franchise and also TECFIDERA ex-U.S.

We will take our next question from Matthew Harrison with Morgan Stanley.

I guess as you guys think about the Advisory Committee and you think about potential path to approval, what do you think is the risk that the FDA may think about approving aducanumab in a certain subgroup of patients where they think the risk-benefit is better compared to the overall patient population. If you could comment on that, that would be helpful. And then Mike, can you just comment on inventory trends in the quarter?

Matthew, this is Al. We -- look, the FDA has all the data. We continue to believe that aducanumab has substantial evidence of efficacy. If we didn't believe that, we wouldn't have filed. And we look forward to sharing all the data at the FDA Advisory Committee, including potential subgroups. And it's in the FDA's hands at this point.

Yes. And this is Joe. In terms of your question on inventory, I would just say, it wasn't a significant impact in the quarter and not something that we called out.

We will take our next question from Umer Raffat with Evercore ISI.

Michel, I know you were super excited the day you guys decided to file with FDA. I don't know if it's just the virtual nature of this call today, but I'm not quite hearing that, at least on the call for the EU filing. Is there something EU is raising which is different than FDA? I'd be curious what you say on that, Michel.

And Al, I know when the data was presented, there were several very important aspects of the data that weren't shown. And I think the assumption was they're probably consistent with the overall analysis. But can you speak to whether you're expecting FDA to focus on the APOE4 carriers versus noncarriers? And can you remind us if the efficacy is consistent in those 2 groups? As well as if we only looked at patients without ARIA, if you expect -- is the efficacy delta consistent with the overall conclusion?

So let me take the first part of your question, Umer. So we are equally excited about all the interactions with regulators all around the world. Having said that, the U.S. FDA will certainly influence, as a cascade, all the regulators. We had actually to refocus our team on the U.S. FDA because we were [pulled] by other agencies who wanted to meet and wanted us to share the data. So I will not speak about China and other markets, Australia, Canada, Switzerland, et cetera. So certainly, the focus is on the U.S. FDA, the November 6. We are excited and we're optimistic. And then the others will unfold naturally, hopefully.

Umer, on your question about carriers versus noncarriers, look, I don't want to speculate as to what the FDA will ask the advisers at the Advisory Committee. But if they go there, we're prepared. We're -- there's -- we haven't shown our subgroup data yet. We will, at some point. And for all I know, it may come up at the Advisory Committee. But we're eager to share our perspective on the data, whatever comes up.

We will take our next question from Evan Seigerman with Crédit Suisse.

So one for Michael, nice to meet you on the phone. So with the erosion of TECFIDERA, why did you opt to authorize an additional share repurchase program versus, say, allocating your capital elsewhere to maybe help grow revenues? Aside from aducanumab, how do you plan on addressing this decline in revenue and earnings that we're now seeing?

Sure. No, Evan, nice to meet you, and thanks very much for the question. Look, Biogen for a period of time now has been very active in allocating capital. As Michel mentioned in the prepared remarks, just in the last 4 years, 20 transactions, approaching $5 billion. And obviously, the company has returned significant capital to shareholders in the form of share buybacks. And we expect both of those activities are going to continue. Obviously, we're going to continue to be active on the BD front as the company has been before. And notwithstanding the situation with TECFIDERA, we've got $4.6 billion of cash on hand as of the end of September, a modest amount of debt. Net debt, I think, $2.8 billion. We've got still very significant cash flow. And a very pristine balance sheet, and we intend to utilize that for both BD and share repurchases and the logic of the share repurchases completely aligns with that.

So we do remain, Evan, very active on BD. And the organization can continue to do both, return shareholder to the -- capital to the shareholders and also add to the business momentum. And we are prepared for both, working very hard on that.

We will take our next question from Phil Nadeau with Cowen & Company.

Al, one for you. I'm curious, you've been asked a few times about the Ad Comm but kind of dodged the questions of what your argument is going to be. I'm curious if you could maybe just give us a brief preview of what the key elements are of your argument that the aducanumab has a positive benefit risk. What parts of the data will you highlight? And then on the risk side, how will you deal with the area? And then just kind of a follow-up question to that. It is 2 weeks before we expect to see the proofing documents released publicly, has Biogen received them yet?

So look, our argument rests on the fact that we have a robustly positive study in EMERGE, positive on the prespecified primary and all secondary end points. We have a supportive study in the Phase Ib trial, which was published in Nature a few years ago. And then we have ENGAGE, and we believe we understand why ENGAGE was a negative study. And our belief is that it doesn't detract from the positive study.

And in terms of the risks, the main risk is ARIA. We believe it's manageable, that we've learned how to deal with it with MRI monitoring, with titration. And so we believe the benefit risk is worthy of approval. If we didn't think that, we wouldn't have filed.

And so that's -- and in terms of the briefing book, we're not going to comment on the briefing book. It'll -- as stated in the FDA register, it will be made publicly available 2 days prior to the actual Advisory Committee meeting.

We will take our next question from Michael Yee with Jefferies.

Just following up, can you just comment about the language around how the FDA may plan to act early? What does that mean? Is that way earlier and just maybe -- you keep (inaudible) that. So just maybe add some color on that. And if you -- if it was early, would you actually be ready to launch literally any day if that actually happened? And if it's not the case that it goes that way, can you just rightsize which way expenses would be going? Because I think you spent a lot preparing for this, which is optimistic, but just would that need to be adjusted? Just maybe some color there.

I'll take the first part, Michael. In terms of acting early, the FDA has had the data since last June, our first -- right after our first Type C meeting, we sent them all the primary data. That could be one reason why they said that they could act early. And we see the Advisory Committee has been scheduled pretty early relative to the time frame that they have until the PDUFA date of early March. Go ahead.

Concerning the launch readiness, the short answer is absolutely yes. We have continued -- we have increased the medical engagement with scientific leaders, we have engaged with payers. We are working on the value proposition and the potential price. We are making progress. There is a cross-functional team working on the site readiness. They are willing to meet and to engage despite COVID. We have certainly enhanced the digital capability for which the baseline was already very strong. Patient engagement and patient services has been increased because we anticipate many, many requests, call advice from patients. We have a very rigorous approach to the potential launch by specializing, focusing first on the most important treatment centers, the specialists and then going to the broader population. Obviously, engaging with the Medicare. And again, the burden of this disease is so high that there is a high interest from all the parties we meet even if we are the only one building the infrastructure somehow, which is a challenge. But very pleased with the progress. We'll be ready.

You address the last part, which is just expenses and...

Yes. I mean, look, I think, hopefully, our optimism is clear. And the scenario we're planning toward is a successful launch of aducanumab and the hopefully unlikely event that we don't have approval, of course, we would have an obligation to look at our cost base.

We will take our next question from Cory Kasimov with JPMorgan.

I just wanted to follow-up on something, Michel, that you just mentioned around pricing, I'll acknowledge upfront, it's putting a giant cart before the horse. But if aducanumab is approved, can you just talk about your latest thoughts on how to potentially to price this to best maximize the product's potential and accessibility? And since everyone seems to be asking too, just a housekeeping for Michael. With SPINRAZA sales down 10% this quarter, I mean, you alluded to both competition as well as kind of the continued effects of COVID. Is there any way to delineate that a little bit and talk about, roughly speaking, what's due to each one?

So we are also making progress on the potential price for aducanumab should it be approved. It's still premature, but we are engaging broadly with pharmacoeconomists, ICER and other advisers. As I alluded into the note earlier, the cost to society is so high. We are working on certainly assessing very clearly the clinical meaningfulness and what will be the value that aducanumab will provide to the different set of customers, starting by the patients, the caregivers, the payers and all aspects related to this value creation that aducanumab will bring, not only the year 1, but over the entire life of the product. Even beyond potentially the patent -- when the patent expires.

So it's too early. We'll come back to that. And we are taking this question with a lot of, I will say, serious focus and dedication and advice from others.

So Cory, on the second part of your question, I'll try to give you some data points that are hopefully helpful and just kind of speaking in year-over-year terms. So globally, SPINRAZA was down 10% year-over-year. And you'll see in some of the charts that we put up that patients are actually up 21% year-over-year. And the dynamics that factor into this are a few things.

One is product dosing dynamics. We have fewer loading doses versus maintenance doses as the product matures. Secondly, there are COVID impacts. We can't precisely tell you what that number is. It's kind of hard to tease out, but there are certainly -- when we see fewer new patient adds going through loading doses and some dosing delays, we know that part of the reason is related to COVID and patients not getting in to get those treatments. There's some country mix in the mix here, so to speak, and some of the patient growth that we've had is coming from countries where the prices are lower. And lastly, there is competition from ZOLGENSMA and Evrysdi. So those are kind of all in the mix, to precisely say what the COVID piece is, is not something that we can completely tease out. We know it is in the mix. And hopefully, those metrics that I gave you are somewhat helpful.

We will take our next question from Ronny Gal with Bernstein.

Congratulations. One, just a clarification. And again, nice meeting you and [hear you] on the phone. The message basically on the cost structure that, "Look, we might have to take a look at our cost structure, but we will wait until we know the outcome of aducanumab before we decide how to do this." Just clarifying that this is kind of the message as we think about the cost structure in 2021. And second, just staying on the SMA side. Can you guys give us a feel for your share of new starts in the U.S. and internationally? Just so we can kind of have a model forward of how the market will split up.

Sure. So Ronny, it's Mike speaking. So on your interpretation on the cost, as we've said, we're gearing up for a launch of aducanumab that does add some pressure to SG&A. And that is something that we're very focused on obviously getting right. We have reallocated some resources, as I said in the prepared remarks from TECFIDERA to aducanumab as well as the support of VUMERITY. We are going to continue to support the MS platform. As Michel said, we have over $1 billion franchise outside of the U.S. in TECFIDERA, which is important to remember. And so that's kind of the state of play in terms of the fourth quarter that we've guided to today. And we'll have more to say about all of our financial metrics as we get into 2021 and provide, presumably, guidance for next year at that time.

Yes, Ron, in the second part of your question, I don't think we've gotten to that level of detail in terms of kind of shares on new starts and whatnot.

But if you want, I can add a bit more color on what we see in terms of market dynamic, at least in the U.S. with Evrysdi launch. Evrysdi combined with the COVID environment is certainly generating some switch from SPINRAZA and this is understandable because of the perceived convenience. But the SUNFISH data is showing clearly some mutation, mostly because of the off-target [tox] potentially and the 5-milligram ceiling that may impact efficacy while the weight of the kids increases and patients and physicians start to be aware about that. But nevertheless, at the time of launch, patients are attracted by a potential oral medication. But it's not that easy, 365 times a year with a challenging dosing versus 3 times a year only and being sure that you get the dose.

So we believe that based on the data that we have and all the real-world evidence from infants presymptomatic to symptomatic adults, at the end of the day, safety and efficacy profile, efficacy profile mostly will prevail, should prevail. That's why we remain reasonably optimistic about SPINRAZA once this wave of enthusiasm is a bit behind us.

We will take our next question from Geoff Meacham with Bank of America.

I just had a couple of quick ones. Michel, on the chance that the panel isn't favorable or FDA doesn't approve, what do you think could be some of these changes to the strategy, if it's more aggressive BD, does the $5 billion buyback announced today preclude the potential for doing a larger, more transformational deal?

And then just a quick follow-up on SPINRAZA. Just can you speak directionally to how much of the switch dynamic was in play in the U.S. this quarter? And would that be an indicator for the bigger OUS market?

So just on -- to start on SPINRAZA, we saw approximately 200 patients, if I'm not mistaken, being switched to the new launch of Evrysdi. But again, we are confident that over time, SPINRAZA will remain the foundational therapy for the treatment of SMA.

Concerning the first question on, what you think about the strategy if? Well, I would like to start by reminding, reasserting that we remain optimistic about the potential launch of adu, and this is the underlying assumption. But nevertheless, if adu fails, we are still in a very strong position, we'll still be very profitable. We have a deep pipeline, we have a strong balance sheet, and we have a large portfolio in CNS. And this will enable long-term growth and value creation. So the prospects are not solely defined by the binary event, but they will be certainly affected in case of adu filing. We have a pipeline. We have opportunity in optha, in stroke, in lupus, in ALS and biosimilars. We have the big deal with Denali. We have the rest of the portfolio in AD. The leadership position in neurodegenerative disease is still here, and we have overall 30 clinical assets, 8 filed or in Phase III. And we have the entire portfolio with life cycle management opportunities. And as I said, I believe that in SMA, SPINRAZA, will remain the foundational therapy. So the cost discipline will be there all the time as discussed by Mike.

Yes. I think the other point that I would just add is, you mentioned -- you asked whether the share repurchase authorization precludes BD. And the answer, as we said before, it doesn't. We will continue to do both. And I would just remind that the authorization is very flexible. There's no time stamp on it. So we'll continue to do both and be active, and we have a balance sheet that's in a great position, which we're pleased about.

We will take our next question from Sumant Kulkarni with Canaccord.

If aducanumab is approved, do you expect a formal risk evaluation and mitigation strategy program to be put in place? And we know you said you're ready to launch on day 1, but what about the infrastructure around the burden caused by a potential REMS program?

This is Al. With respect to a REMS program, it's hard to say at this point. We're still in the review process. I would say that we believe that the risk of ARIA is manageable, and the community has learned how to manage this risk over the years, whether that requires a REMS or not is up to the FDA.

Maybe you can repeat that, the other part of the question for us, if you don't mind.

Just about the infrastructure around the burden caused by a potential REMS program. Is that ready to go in case you need to have one in place?

Well, we've done that before. We know how to do REMS programs, whatever they may be. And so we'd be ready for that, yes, including the education piece, which is typically one of the most important aspects of REMS programs.

We will take our next question from Jay Olson with Oppenheimer.

I'd like to shift gears and ask about Parkinson's disease. As a leader in neurodegeneration, could you share your vision for the future treatment of Parkinson's disease where you have an alpha-synuclein antibody? And there's recently been signals of efficacy from Prothena and Roche. And then you also have your LRRK2 program with Denali, and then there are several gene therapies in development with competitors. So which of these approaches do you think is most promising? And where does Biogen fit into the competitive landscape?

Yes. Thank you very much. So we're very excited about the potential in Parkinson's disease. As you pointed out, the Prothena-Roche antibody looked like there was some efficacy in parts 2 and 3, I believe, of the UPDRS score, with additional support from digital measures and some imaging outcome measures as presented at the Movement Disorder Society meeting about a month or so ago. And we have our own alpha-synuclein antibody, it's different in the sense that it's more specific for aggregated forms of alpha-synuclein. But -- and we expect to read out on that in the coming months.

We also have antisense oligonucleotide programs directed against alpha-synuclein. You pointed out the LRRK2 inhibitor, we have the lead program there. It's the DNL151 program, an oral small molecule LLRK2 inhibitor. And that could work not just in patient with LRRK2 mutations, but also there's ample evidence of lysosomal hypofunction in other cases of PD, even patients that don't have LRRK2 mutations and so the potential is there that it could work in a broad range of Parkinson's patients.

And then as you pointed out, another lysosomal gene arguably is GBA. Patients who are homozygous for GBA have Gaucher's disease, a lysosomal storage disease. Those who are heterozygous have an increased risk of Parkinson's disease. And so we have preclinical programs directed against that as well. And as I said, we have the ability to license 2 programs with the transport vehicle program.

I'd also point out that earlier this year, we did a deal with Sangamo, which includes, not only opportunities, gene therapy programs in Alzheimer's disease, but also Parkinson's disease. One of our lead programs there is a gene therapy program on alpha-synuclein. So I think there's a broad range. I think there's a lot of very good validated targets, validated by human genetics and by clinical pathologic data in humans. And we have multiple modalities, gene therapy, small molecules as well as antisense oligonucleotides at our disposal.

We appreciate all the questions. We probably have time for about one more.

And we will take our next question from Brian Abrahams with RBC Capital Markets.

So you touched on some of the additional regulatory meetings you held outside the US on aducanumab. I'm curious on your feedback from Japan specifically, in particular, the role of the Phase I/II study that you had conducted there and whether you see potential for ex-U.S. regulators, such as those in Japan to act early. And then on the -- just really quickly on the MS franchise, you've got several next-generation agents like 091, 107 and 061 but they're all relatively early and would probably come online after additional exclusivity losses. So just wondering how you're thinking about the life cycle there, whether you have a predilection for flexing down spend long-term until lease come to fruition or thinking about augmenting the mid-stage MS portfolio to leverage the commercial infrastructure you have in place.

So Brian, I think with respect to ex-U.S. filings, I mean, as Michel said, we are equally optimistic about filings outside of the United States. We're just -- we just aren't as advanced in terms of the procedure. We just filed an EMA. We haven't even filed yet in Japan. And so we're eager to start the regulatory procedures. And as Michel said, we're equally optimistic. On the second part?

Yes, on the life cycle management of MS, we've never been that rich in terms of clinical program and advancements in our MS portfolio and pipe: the early pipe with the BTK and all the opportunities we have to develop or codevelop some of our products; and we have life cycle management opportunity with TYSABRI with the EID; with subcu, AVONEX, a new label; PLEGRIDY, IM. So we have plenty of opportunities to create market events. And as you saw, despite the potential launch of a high efficacy product, the ofatumumab that becomes -- the class becomes -- the segment becomes very crowded. TYSABRI continues to do very well because it's very well documented and well appreciated by the patients and the physicians. So we are confident in the rest of the portfolio, I would say, beyond the challenging situation we are facing with the TEC in the U.S. There is an entire franchise beyond this very specific case. And the commitment of the company beyond RMS for remuneration over the long term. So Biogen continues to support MS like the day 1.

So thank you all for your attention. Exciting time at Biogen, and we are all looking forward for early November for more news from the outcome and looking forward taking the company to the next step after these events. Thank you all. Have a good day.

Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.