Biogen Inc (BIIB) 2018 Q1 法說會逐字稿

Good morning. My name is Dan, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Biogen First Quarter 2018 Financial Results and Business Update. (Operator Instructions)

I would now like to turn the conference over to Mr. Matt Calistri, Vice President, Investor Relations. You may begin your conference.

Thanks, Dan. Thank you and welcome to Biogen's First Quarter 2018 Earnings Conference Call. Before we begin, I encourage everyone to go to the Investors section of biogen.com to find the press release and related financial tables, including a reconciliation of the GAAP to non-GAAP financial measures that we'll discuss today. Our GAAP financials are provided in Tables 1 and 2. Table 3 includes a reconciliation of our GAAP to non-GAAP financial results.

We believe non-GAAP financial results better represent the ongoing economics of our business and reflect how we manage the business internally. We've 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'm joined by our Chief Executive Officer, Michel Vounatsos; Dr. Michael Ehlers, EVP of Research and Development; and our CFO, Jeff Capello.

Before I conclude, I would also like to note that starting with the Q2 2018 earnings call, we will post press releases related to future earnings calls, materials and investor events on the Investors section of Biogen's website, www.biogen.com, and issue a statement on Twitter when they become available. We will do this instead of publishing press releases related to future earnings calls, earnings releases and investor events via newswire services. Our Twitter handle is @Biogen.

Now I will turn the call over to Michel.

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

First, let me begin with some financial highlights. Biogen started 2018 with first quarter revenues of $3.1 billion.

On an apples-to-apples basis, excluding hemophilia, revenues grew 15% versus the same period a year ago, including hemophilia revenue grew 11%.

First quarter 2018 GAAP earnings were $5.54 a share, a 60% increase versus the same period a year ago. And non-GAAP EPS was $6.05, a 16% increase versus the same period a year ago.

We are pleased with our double-digit top line and bottom line growth.

Our new management team is taking meaningful action to secure our long-term leadership in neuroscience, including strong execution on our core business, a renewed focus on business development, ramping up our internal R&D productivity and implementing an enhanced operating model designed for the future.

Now let me review the solid progress we made in the first quarter.

First, our MS core business including OCREVUS royalties delivered revenues of $2.1 billion. Globally, our core franchise remained resilient as reflected by continued growth in number of MS patients and new starts on Biogen therapy.

In the U.S., the good news is that we saw improving demand of our MS products and our discontinuations remain relatively stable.

However, we saw the usual seasonality and a larger-than-expected inventory drawdown.

Outside of the U.S., our volumes grew in our priority markets and we continued our strong progress in the emerging markets. Overall, this performance is in line with our expectations. But there are some puts and takes that Jeff will discuss in more details.

We remain absolutely committed to our MS business and we are furthering our life cycle management initiatives by advancing the development of BIIB098 with our partner, Alkermes, with a plan to file for regulatory approval in the U.S. later this year; by initiating efficacy studies and further data generation for the extended interval dosing for TYSABRI, as we build on the data presented at ACTRIMS; by beginning the development of PLEGRIDY IM as another potential convenient and efficacious option to bolster our market-leading interferon franchise; and by continuing to pursue opicinumab as a potential remyelination therapy.

Second, SPINRAZA, the only approved medicine for SMA with global revenues of $364 million. The number of patients on SPINRAZA grew to approximately 4,100, an increase of over 25% from last quarter and Jeff will be providing more details on this performance.

Overall, worldwide SPINRAZA performance was slightly ahead of our expectations as lower-than-expected U.S. uptake in the adult segment was offset by stronger-than-anticipated performance ex U.S.

We continue to focus our efforts and resources on the more than 5,000 untreated pediatric and adult patients in the U.S. and even greater number of untreated patients outside of the U.S. that we believe could benefit from SPINRAZA.

In the U.S., we believe we have dosed more than half of infants and close to half of pediatric patients where we believe much more opportunity remains.

At the end of the first quarter, approximately 25% of patients treated in the U.S. were adults, 18-years or older and increased from 20% last quarter. We believe this is very encouraging trend, particularly now that we have expanded our sales team and can dedicate more resources and efforts to the large pediatric and adult segment of the SMA population.

Outside of the U.S., we continue to expand access and we are now treating over 1,800 patients.

We believe the rapid and sequential reimbursement approvals and future launches are critical to achieve our long-term goals. I am especially proud of our team's success, securing reimbursement in an additional 7 markets, meaning we now have reimbursement in 24 countries, of which 17 achieved formal reimbursement and 7 have individual case-by-case reimbursement. We now have formal reimbursement for over 400 million covered lives ex U.S. And we expect to receive formal reimbursement in at least 7 more countries by the end of 2018.

In summary, beyond the seasonality and channel dynamics, our core MS business continued to be resilient and we continue to see significant future growth potential for SPINRAZA.

Third, we expanded further our neuroscience pipeline and capabilities. We added BIIB104, a Phase II asset for neuropsychiatry and we entered into an exclusive 10-years collaboration agreement with Ionis, that we believe will differentiate Biogen as the leader in developing ASO therapies for neurological diseases.

We believe our exclusive access to Ionis' market-leading ASO platform for the CNS is a remarkable competitive advantage that has the potential to generate a steady flow of transformative medicines into our pipeline.

Our cash generation remains very strong and continues to provide us with significant optionality and flexibility in terms of capital allocation.

Importantly, and as we have demonstrated in the past, we are committed to maximizing returns over the long term for our shareholders, something that demands a thoughtful approach towards all our investment.

As you can see, our newly aligned management team is implementing our updated strategy and delivering noticeable results. We remain highly focused on implementing well on both our MS and SMA core businesses. We are working to create a leaner and simpler operating model and we are strategically allocating capital as we invest to develop and expand our neuroscience portfolio, again with the objective of maximizing shareholder returns.

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

Thank you, Michel, and good morning, everyone.

Last July, we communicated our vision for securing definitive leadership in neuroscience. This past quarter, we have executed against our goal to meaningfully enhance our pipeline by adding or advancing 5 clinical-stage programs, improving our research productivity and bolstering our portfolio of preclinical assets. I'd like to talk about how we continued that momentum in the first quarter across our core and emerging growth areas.

Starting with MS and neuroimmunology. This week, we are presenting data at the 70th Annual Meeting of the American Academy of Neurology, or AAN, which was also presented at ACTRIMS, regarding real-world use of TYSABRI and the potential impact of extended-interval dosing on the risk of PML.

A post-hoc analysis of data from the TOUCH database supported an approximately 90% reduction in the risk of PML when taking TYSABRI using extended-interval dosing as compared to the standard dosing. Based on these data, we are accelerating efforts to generate more data, evaluating the efficacy of alternate dosing.

If this additional research supports a high level of efficacy, with a lower risk of PML, we believe it would represent a significant advancement in the treatment of MS. This builds on our broader risk stratification efforts for TYSABRI, including the use of JCV index values.

Earlier this month, the FDA approved an updated label highlighting the association between index values and the risk of PML.

Further, Alkermes will be presenting data at AAN from the evolved MS-1 study, which is a Phase III open-label long-term study of our partnered monomethyl fumarate prodrug BIIB098 in patients with relapsing-remitting MS with 528 patients enrolled to date. In a 1-year interim analysis of exploratory efficacy endpoints, the annualized relapse rate in patients treated with BIIB098 was 0.16 and there was a significant reduction in the number of gadolinium-positive lesions from baseline to year 1.

These preliminary results for annualized relapse rate and MRI parameters support BIIB098 as a potential oral treatment option for patients with relapsing-remitting MS. Alkermes is planning to file with the FDA by the end of the year.

In other areas of MS, given their well-characterized efficacy and safety profile and many years of patient experience, we believe that interferon therapies will continue to play an important role for MS patients. To that end, and as Michel mentioned, we are pleased to announce plans to develop an intramuscular formulation of PLEGRIDY with the goal of reducing injection-site reactions, ultimately, with the aim of delivering a therapy with safety and tolerability comparable to AVONEX, but with the efficacy and dosing convenience of PLEGRIDY.

Finally, we continue to advance the Phase IIb study of opicinumab as a potentially transformative therapy for many MS patients, by promoting remyelination with the goal of improving pre-existing disability.

All of these are examples of how we continue to innovate, aspire to create new options for MS patients and aim to maintain our long-term leadership position in MS.

We believe our current MS portfolio uniquely benefits patients across the full spectrum of the disease. And we are committed to pursuing new advancements to address the remaining unmet needs of MS patients.

I'll now turn to our progress in Alzheimer's disease and dementia.

We continue to advance our leading Alzheimer's portfolio with multiple assets across complementary modalities and pathways, including the industry's most advanced program targeting beta-amyloid.

We presented a new analysis of the Phase Ib PRIME study of aducanumab at AAN. In the 10 milligram per kilogram group, aducanumab demonstrated up to 71% reduction in amyloid plaque on the Centiloid scale, a method used to standardize PET results.

This is the largest degree of plaque reduction ever observed in the field. We believe each new analysis of the Phase Ib data reinforces aducanumab's position as the most advanced potential disease-modifying therapy for Alzheimer's disease across the industry.

Also targeting beta-amyloid, BAN2401, the Abeta antibody currently being developed by our collaboration partner, Eisai, is continuing to the final 18-month readout in the third quarter of this year. And the base inhibitor, elenbecestat, continues to recruit in Phase III studies also being conducted by our collaboration partner, Eisai.

Beyond Abeta, we believe that tau plays an important and complementary role in Alzheimer's disease pathology and we are advancing a suite of tau assets.

We have begun screening patients in the Phase II Alzheimer's disease trial of BIIB092, the anti-tau antibody we licensed from BMS last year. And we expect data from the Phase I study of BIIB076, another anti-tau antibody, by the end of this year.

Further, our first-in-class tau antisense oligonucleotide, BIIB080, is advancing in Phase I studies.

Turning to neuromuscular disorders. We made significant progress in our strategic priority of spinal muscular atrophy. In March, we presented important new data for SPINRAZA at the Muscular Dystrophy Association Clinical Conference. New interim Phase II results from NURTURE, studying presymptomatic infants with SMA, showed that all infants treated with SPINRAZA were alive, did not require permanent ventilation and showed improvement in motor function and motor milestone achievements, compared to the decline normally seen over the course of the disease.

All NURTURE participants achieved the age-expected WHO motor milestone of sitting without support.

We also presented a case series of 5 SPINRAZA-treated patients with SMA type 2 or 3, between the ages of 17 and 19 upon their last visit, showing stable or improved motor function and improved quality of life. These data are important and support the clinical value of SPINRAZA for older patients, who represent the majority of the current prevalence of the disease. We aim to continue to build on the body of data in this patient population over time.

At AAN this week, we are representing interim results from the SHINE open-label extension study for patients who had transitioned from the ENDEAR study, demonstrating long-term benefits for infantile-onset SMA in terms of both improved motor function and longer event-free survival.

And in collaboration with Columbia University, we are also presenting a case study of 14 later-onset patients, between the ages of 2 and 15, showing that with SPINRAZA treatment, they were able to walk longer distances while experiencing decreases in fatigue.

In February, the end-of-study results from the SPINRAZA Phase III CHERISH study were published in The New England Journal of Medicine, another important acknowledgment of the unprecedented benefits that SPINRAZA provides to later-onset patients.

Biogen remains committed to advancing the standard of care in SMA beyond SPINRAZA. We continue to advance our gene therapy program in collaboration with the University of Pennsylvania with study initiation expected in the middle of the year. But we are not stopping there. We believe that the future treatment landscape may involve combination or sequential therapy across different modalities.

We have heard reports that 7 of the 15 patients in AveXis' Phase I gene therapy study have subsequently gone on to SPINRAZA, suggesting that clinical experience to date may support the utility of ASOs in combination with gene therapy. Sequential or additive benefits of gene therapy and ASOs could include additive effects on protein levels on a per cell basis, complementary distribution and transduction across the CNS and durability and stability of episomal transgene expression.

These are some of the reasons we are actively pursuing a strategy to evaluate SPINRAZA in combination with gene therapy. Put simply, we do not believe that gene therapy will replace ASOs but rather provide a complementary modality.

Moving to our progress in movement disorders. At AAN, we are presenting Phase I data for BIIB054, our anti-alpha-synuclein antibody for Parkinson's disease. BIIB054 demonstrated favorable pharmacokinetics as well as a safety and tolerability profile which support advancement into the ongoing Phase II trial.

At AAN, we're also presenting Phase I data for our anti-tau antibody BIIB092 in progressive supranuclear palsy, which was well tolerated and demonstrated reductions in CSF free tau levels of over 90%.

We laid the foundation for our entry into neuropsychiatry this quarter, with our agreement to acquire a Phase IIb ready AMPA receptor potentiator, now called BIIB104 from Pfizer. This transaction has now closed. BIIB104 is a first-in-class molecule, initially targeting cognitive impairment associated with schizophrenia, or CIAS, a devastating aspect of schizophrenia with no current treatment options.

We believe BIIB104 has compelling data from a number of distinct early clinical studies, demonstrating functional circuit activation as measured by FMRI, treatment effects on relevant domains of cognition and the potential for a favorable benefit-risk profile. In particular, the multiple ascending dose study in stable subjects with schizophrenia demonstrated dose-dependent effects on improvement from baseline to Day 14, across multiple cognitive domains including working memory, short-term memory, verbal recall and reasoning. Importantly, we saw a correlation of this clinical efficacy with plasma exposure.

We believe this molecule is differentiated from prior compounds in the class due to its high potency and favorable PK/PD profile, which we believe allows for an improved therapeutic index. We plan to initiate a Phase IIb trial in CIAS by the end of the year, in parallel to exploring additional studies across other indications, supporting our core growth areas.

Within acute neurology, we are excited about the potential for BIIB093, our first-in-class IV glibenclamide therapeutic targeting brain edema in large hemispheric infarcts. We plan to start our Phase III study in the middle of this year.

We also recently initiated the Phase II study of natalizumab in drug-resistant focal epilepsy and we dosed the first patient last month.

Within neuropathic pain, we are advancing BIIB074 into Phase III for trigeminal neuralgia with startup activities outside the U.S. in parallel to FDA engagement. We expect to dose the first patient by the end of the year.

We have completed enrollment in the Phase II study of BIIB074 for painful lumbosacral radiculopathy with data expected towards the end of the year.

And we've begun screening patients in a Phase II trial of BIIB074 in small fiber neuropathy as we explore multiple potential indications.

Given the high unmet medical needs of neuropathic pain patients, especially in light of the growing opioid epidemic, we are excited to expand our pain portfolio with the recent initiation of a Phase I study for BIIB095, our second Nav 1.7 inhibitor.

Within ophthalmology, our partner AGTC recently completed enrollment in the Phase I/II trial of its AAV-based gene therapy program for X-linked retinoschisis, or XLRS. Top line data are anticipated by Q4 with the final analysis at the 12-month time point.

Last week, AGTC also dosed the first patient in the Phase I/II study in X-linked retinitis pigmentosa, or XLRP.

Underpinning all of our efforts across our core and emerging growth areas is investing in core capabilities, platforms and modalities to enhance our translational machine in neuroscience.

To that end, last week we announced a new exclusive 10-year collaboration agreement with Ionis Pharmaceuticals to develop novel antisense oligonucleotide drug candidates for a range of neurological diseases. This partnership brings together the industry leader in ASO drug discovery with the industry leader in neuroscience drug development, to create what we believe will be a powerful CNS genetic medicine engine.

Based on our experience with SPINRAZA and other ASOs we have in development, we believe that intrathecal ASOs may address many genetic diseases and genetic targets of the central nervous system, including some pathways that were previously undruggable with small molecules or monoclonal antibodies. Given their ability to directly intervene at the genetic origin of disease, we believe ASO approaches have a higher probability of success than traditional modalities with a more efficient development path and greater potential speed to patients.

We believe this collaboration solidifies a key pillar of our R&D strategy to become the leader in neuroscience. We aim to advance several SPINRAZA-like drugs to patients in the future.

Importantly, ASOs are now validated as a transformative therapeutic modality for CNS, in particular. Now with an industry-leading CNS ASO platform partnership secured, we further aim to build emerging synergistic modalities, including gene therapy, to further augment Biogen's leadership in neurological diseases.

We see high complementarity for ASO therapeutics and gene therapy. Intrathecal ASOs can be well tolerated, exquisitely selected, can up or down regulate gene expression, may be readily manufactured, may not be subject to immune surveillance and exert effects that may be reversed based on drug pharmacokinetics.

We further believe that a powerhouse ASO platform will significantly augment our overall approach to genetic diseases and targets of the CNS.

Please refer to our webcast from Friday, April 20, which is available on our website, for more details on this new collaboration.

Overall, we had a remarkably productive quarter across our pipeline in both our core and emerging growth areas and we aim to maintain this momentum through the rest of this year and beyond.

I will now pass the call to Jeff.

Thanks, Mike. Good morning, everyone. I'll now review our financial performance for the first quarter 2018, starting with revenues.

As Michel mentioned earlier, results for the first quarter were largely in line with our expectations.

Total revenue for Q1 were $3.1 billion, growing 11% year-over-year or 15%, excluding hemophilia.

Let me now provide more detail on our MS franchise revenues. While we experienced seasonality and greater-than-anticipated inventory impacts in the U.S., we believe the fundamentals of the business are healthy across our portfolio as we continue to drive stability in the U.S. and strong growth outside the U.S.

Global first quarter TECFIDERA revenues were $987 million, a 3% increase versus the prior year. This included revenues of $729 million in the U.S., a decrease of 3% versus Q1 2017, and $258 million outside the U.S., an increase of 25% versus the first quarter 2017.

In the U.S., we saw an inventory drawdown of approximately $80 million. This compares to a drawdown of approximately $60 million in Q1 '17, thus driving a difference of $20 million year-over-year. Excluding this impact, U.S. TECFIDERA revenues would have been stable versus Q1 of last year, as net pricing increases offset the impact of OCREVUS.

On a sequential basis, we saw stable U.S. volumes for TECFIDERA versus the prior year, when accounting for the inventory dynamics, with improving demand-generation trends within the quarter leading to increased share of new prescriptions and stable share of total prescriptions.

In addition, we were very pleased with TECFIDERA's performance outside the U.S. driven by strong year-over-year patient growth across each large European market and solid emerging market growth, particularly in Japan where TECFIDERA has reached 16% market share in its first year in the market.

We believe there is significant opportunity remaining for TECFIDERA outside the U.S. with continued momentum expected in Europe and further geographic expansion into new markets such as Latin America.

Ex U.S., TECFIDERA revenues benefited by approximately $12 million versus the prior year due to changes in foreign exchange rates net of hedging.

TYSABRI worldwide revenues were $462 million this quarter, a decrease of 15% versus the first quarter of 2017. This included $250 million in the U.S. and $212 million outside the U.S. In the U.S., revenues declined 18% versus prior year, primarily due to the launch of OCREVUS and disproportionally higher gross-to-net charges, driven by seasonality and timing. We saw stable U.S. volumes for TYSABRI versus the prior quarter, with improving share of new prescriptions and stable share of total prescriptions. Outside the U.S., TYSABRI revenues decreased 11% versus the prior year.

As a reminder, in Q1 '17, we recorded a $45 million benefit following our agreement with the Italian National Medicines Agency, AIFA, related to prior periods. Ex U.S., TYSABRI revenues this quarter benefited by approximately $17 million versus the prior year due to changes in foreign exchange rates net of hedging.

TYSABRI patients increased in most major European markets versus the prior year, along with strong double-digit patient growth in the emerging markets.

Interferon revenues, including both AVONEX and PLEGRIDY, were $550 million during the first quarter, a decrease of 15% versus Q1 '17. This included $371 million in the U.S. and $179 million in sales outside the U.S.

In the U.S., we saw a decrease of Interferon inventory of approximately $50 million in Q1 '18, as compared to a decrease of $20 million, driving a $30 million delta year-over-year due to channel dynamics.

Ex U.S. Interferon revenues benefited by approximately $11 million versus the prior year due to changes in foreign exchange rates net of hedging.

Overall, the U.S. MS performance versus prior year was impacted by both the launch of OCREVUS and channel dynamics. Despite these factors, our U.S. sales team demonstrated resilience in driving stability and underlying demand sequentially for TECFIDERA and TYSABRI. We expect both factors to be less significant on a year-over-year basis, as we move throughout the year with a potential benefit if there is a channel build towards the end of the year.

We are encouraged by the momentum we saw in underlying demand as we enter the second quarter.

Let me now move on to SPINRAZA. Global first quarter SPINRAZA revenues were $364 million. This included $188 million in the U.S., and $176 million outside the U.S.

We saw a 16% increase in the number of patients on therapy in the U.S. as compared to the end of the fourth quarter. However, revenues decreased versus Q4 due to a lower rate of new patient starts, combined with the impact of the loading dose dynamics.

We believe we have now worked through a good majority of the bolus of urgent infant and pediatric patients we saw earlier in the launch, and we continue to see significant growth opportunity in both pediatric and adult populations.

We saw an increased contribution from maintenance doses as many patients have transitioned to dosing once every 4 months on a chronic basis. In the U.S., approximately 40% of SPINRAZA revenues in the first quarter were attributed to maintenance doses as compared to 25% in the fourth quarter.

This correlates with the continued decline in the average doses per patient from 1.6 to 1.1 from Q4 last year to Q1 of this year.

In the first quarter, approximately 20% of U.S. SPINRAZA units were dispensed through a free drug program, highlighting our goal that no patient will forgo treatment because of financial limitation or an insurance denial in the U.S.

We believe both inventory levels and discounts and allowances for SPINRAZA were relatively flat in the first quarter versus Q4 of last year.

We continue to be encouraged by the opportunity to reach the large number of untreated pediatric and adult patients in the U.S. We expect to see stable U.S. revenue sequentially for the next couple quarters with a potential inflection point by the end of the year as we remain focused on increasing our efforts around lead patient identification, reimbursement and sales and marketing to reach older patients.

Outside the U.S., the number of commercial SPINRAZA patients increased over 50% versus the prior quarter. And there are still approximately 290 patients active in the expanded access program. We saw an increase in contribution from multiple markets, which recently secured reimbursement with over 2/3 of ex U.S. SPINRAZA revenues in the first quarter coming from Germany, Japan, Italy and France.

Overall, we believe that the international opportunity for SPINRAZA is even greater than in the U.S. given the uniform epistemology across geographies and the growing level of market access that can generate future growth momentum.

Let me now move onto our biosimilars business, which generated $128 million in revenues this quarter, nearly doubling versus prior year.

We have seen continued steady market share gains across the large European markets, following the rapid initial conversion in the Nordics.

In addition to a continued expected uptake for BENEPALI, we believe the expected launch of IMRALDI in October of this year will be an additional growth driver for our biosimilars business going forward.

In the coming months, we plan to exercise our option to increase our equity stake in the Samsung Bioepis joint venture. We believe this an attractive value-creation opportunity.

Turning to our anti-CD20 revenues. We recorded $443 million in Q1, an increase of 30% versus the prior year, primarily driven by OCREVUS royalties as well as strong performance from RITUXAN. This includes our estimated OCREVUS royalties of $77 million for the first quarter.

Total other revenues were $164 million in the first quarter, an 83% increase versus Q1 '17, as we continue to benefit from greater contract manufacturing.

Q1 GAAP and non-GAAP gross margins were 86%, a slight improvement versus the fourth quarter due to lower contract manufacturing and the impact of the ZINBRYTA write-off last quarter.

Q1 GAAP and non-GAAP R&D expense was 16% of revenue or $497 million, including approximately $13 million of trial closeout costs for ZINBRYTA. There were no meaningful milestone payments booked in the first quarter.

The increase in R&D compared to Q1 '17 was principally driven by higher clinical trial costs as we invest to grow our product pipeline.

In Q2, we expect to record $75 million of GAAP in-process R&D expense related to the closing of our asset acquisition with Pfizer for BIIB104. We also expect to record the substantial majority of the $375 million upfront payment to Ionis as a both GAAP and non-GAAP R&D expense, along with the equity premium as GAAP-only R&D.

Q1 GAAP SG&A was 16% of revenue or $501 million. Q1 non-GAAP SG&A was also 16% of revenue at $498 million.

As a percentage of revenues, both GAAP and non-GAAP SG&A decreased versus the prior year, primarily due to the timing of spend across sales and marketing and G&A.

GAAP other net expense, which includes interest, was $41 million in the first quarter versus $38 million in Q1 of last year.

Non-GAAP other net expense was $35 million in Q1 versus $38 million in Q1 of last year.

In Q1, our GAAP tax rate was approximately 22% and our non-GAAP tax rate was approximately 21%, both benefiting by approximately 250 to 300 basis points versus the prior year due to the recently enacted U.S. corporate tax reform legislation as well as the expected closing of the Ionis transaction and mix of profits by geography.

Our weighted average diluted share count for Q1 was approximately 212 million. We repurchased approximately 900,000 shares in Q1 for a total value of $250 million, leaving $2.75 billion remaining under our current share repurchase authorization.

Which now brings us to diluted earnings per share. In the first quarter, we booked GAAP earnings of $5.54 per share, an increase of 60% versus last year; and non-GAAP earnings of $6.05 per share, an increase of 16% versus last year.

We generated approximately $1.5 billion of cash flow from operations in Q1, and ended the quarter with approximately $7.1 billion in cash and marketable securities and $5.9 billion in debt.

After repatriating $3.5 billion in Q1, approximately 85% of our cash is now held in the U.S.

We believe we have and will continue to have ample capacity to execute meaningful future business development M&A as well as return capital to shareholders. We will also continue to be disciplined in our approach and focused on value creation.

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

Thank you, Jeff. We closed the first quarter with solid double-digit revenue and earnings growth and with the momentum across our business that we anticipated. In line with our strategic priorities, we allocated capital to both invest in our differentiated pipeline and opportunistically return capital to shareholders. We do not intend to pause or slow down here. We believe there will be plenty more we can accomplish through the rest of 2018.

Looking forward, within the next 12 months, we expect further progress across our neuroscience pipeline, including: completing enrollment of aducanumab; dosing the first patient with our gene therapy for SMA; data readouts across MS, Alzheimer's, neuropathic pain, ophthalmology and ALS; initiation of Phase III studies in stroke and neuropathic pain; and filing for regulatory approval in the U.S. for BIIB098 in MS.

Overall, as we have communicated in the past, our goal is to secure the long-term growth potential of Biogen beyond just aducanumab.

We believe we have made progress between the potential 2019 U.S. launch of BIIB098, the potential launch of late-stage assets for stroke, PSP neuropathic pain in the early 2020s, and our continued progress to bolster our early and mid-stage pipeline, but we clearly have more work to do to achieve these goals.

Importantly, and for the long-term growth of Biogen, we are focused on our 8 priority markets with the U.S. remaining the most significant driver. However, as we execute on our strategy and selectively expand our global footprint, we are seeing evidence that there is likely more long-term growth opportunity than we expected in the EU and in the emerging markets. Our MS volumes continue to grow outside of the U.S. and it is still an underdiagnosed disease in many developed countries.

Our biosimilars business in Europe is now tracking at a potential run rate of at least $0.5 billion a year and we plan to launch IMRALDI in October of this year.

SPINRAZA is paving the way for Biogen to establish a presence in selected new geographies, which will support further global growth.

In the first quarter, our ex U.S. product revenues were $986 million, an increase of over 30% from the same period a year ago. And we have recently opened affiliates in China, Korea, Taiwan and Colombia.

Finally, I want to reiterate our commitment to maximizing returns to our shareholders 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 aim for superior returns from the investment we make.

I would like to thank our employees around the world who have dedicated to making a positive impact on patients' life, and all of the physicians, caregivers and participants in our clinical development programs. Next month, Biogen will be celebrating its 40th anniversary. Our past and future achievement could not be realized without their passion and commitment.

With that, we will open the call for questions.

(Operator Instructions) Your first question today comes from the line of Umer Raffat with Evercore ISI.

I wanted to focus on Alzheimer's for a minute maybe and your sample size re-estimation because of the higher variability. And I guess my question is this.

You added patients to the trials despite lesser dropouts, which implies to me that perhaps the higher variance has to do with the assumptions you made on both the trials, both on the treatment effect and perhaps also on variance.

So my question is, were your assumptions on the placebo arm informed by prior trials that have been reported large ones or were they more informed by the Phase Ib data that you presented previously?

Umer, this is Mike. I'll take that. So essentially, you're correct about this, let me clarify. The variability that was observed was -- and the powering of this study was initially designed based on our known data in the Phase Ib PRIME study as well as other previously conducted studies. So both were contributing to our estimations of that.

Of course, it's always an estimation of the variability that we would expect to see and the blinded sample size readjustment was put in place in order to take care of the situation where, in fact, our assumptions were not quite accurate.

And that's what we found in this case where our assumptions, as we had initially going in, were not exactly the same as the behavior that we were observing across the blinded sample size. So as a consequence, we increased the sample size of the trial as a whole in order to preserve 90% power.

Got it. And just to be clear, when Lilly ran their third trial they used the higher end of the standard deviation and they basically took the higher standard deviation from the first 2 trials. Is that a practice you guys continue to implement as well?

Well, I mean, we haven't gotten into that level of detail on exactly the statistics underlying our initial assumptions. But just for a little bit of perspective, I mean, this blinded sample size re-estimation, as you know, is a pretty standard method used in trials and we did the same thing actually and increased the sample size for both our TECFIDERA and PLEGRIDY trials, and they were ongoing.

And your next question comes from the line of Geoff Meacham with Barclays.

Just had a question on commercial SPINRAZA. I realize that trends can be lumpy on a sequential basis, just given dosing, but it does look like new starts moderated in the U.S. Can you speak to the dynamics in the U.S. end of the market?

And then obviously OUS, you do have some nice sequential growth and good new ads and maybe just speak to kind of where you are with respect to adoption in some of the major markets.

So thanks for the question, this is Michel. We don't see the start forms really at the trend line, and we are working hard really to capture now the rest of the pediatric population and the adult population, and this takes a bit more time than we anticipated.

But if we step back, there was a bolus of patients a year ago that were waiting for this only hope for treating SMA. And they came pretty fast to treatment and we have basically outpaced all estimate that we had and that external stakeholders had also. So we did extremely well and the model worked very well.

Now the second phase is absolutely to do the same, but for the pediatric and adult population, this is the biggest [cutter] of SMA patients. So we are basically enhancing and increasing the field team. We have now an adult campaign that we are launching and we start to see traction. We have patients' ambassadors as adults and we are encouraged by the momentum actually.

So we are really focused on implementation. There is still more than 5,000 patients to go. The team is putting their head down and implementing better than ever and actually I have good confidence in our U.S. team.

Your next question comes from the line of Eric Schmidt with Cowen.

Maybe another question for Michel on biz dev. You mentioned a renewed focus here. Is there a specific goal that you're trying to achieve via business development? Maybe you can comment on what that is? And what exactly you and the board have alignment on with regard to your focus here?

So let me take that one, this is Jeff. So as Michel had said and I've said as well, we've got an enviable position here, where we're well capitalized and we generate a lot of cash. And so we're in an enviable position where we have a lot of cash available to create shareholder value.

Our premium is on adding to the pipeline, given our commercial footprint and our manufacturing footprint and trying to bring in assets that are closer to being market-ready. So there's certainly a preference to kind of look at those types of transactions.

However, as we go along, we'll continue to add to the pipeline with mid-stage assets and later-stage assets, where they fill in and Mike's done a great job with his team doing that. But at the same time, given our capital situation and our cash flow generation, we can both add to the pipeline both later-stage assets and mid-stage assets and also return capital to shareholders.

And I do want to reiterate, we have $2.75 billion remaining under our share repurchase program and we expect to be active on that front as well.

So if I can add on Jeff's comments, the priority capital allocation will go -- in terms of BD, will go on the priority growth areas. So we will retain some capital and we'll distribute. We continue to distribute the way we have done but even more eventually.

But the investment, in terms of BD, will be primarily dedicated to the priority growth areas. MS, neuroimmunology, movement disorders, neuromuscular diseases and the last one, Mike?

Alzheimer's disease.

Alzheimer's disease, absolutely.

Your next question comes from the line of Cory Kasimov with JPMorgan.

I guess following up on Eric's, I also wanted to ask about BD, but in a different way, as it relates to the growth outlook for the company from here. So with SPINRAZA flattening out, at least in the U.S. as you've been predicting and a stable MS franchise, I'm curious if you think you can continue to grow the business over the intermediate term without bringing in a later-stage pipeline from the outside.

Let me start with a comment on MS, SPINRAZA flattening out in the U.S. I don't think we're saying that the U.S. is going to flatten out indefinitely. I think what we're saying is, because we were so successful in getting through the bolus of patients when we first introduced the drug that we had kind of a benefit -- onetime benefit of a number of patients, particularly in kind of the infants and the pediatrics.

And so we've worked our way through that, which is why kind of the loading doses have come down a bit, which is kind of impacting our sequential growth. We think that as we -- as Michel said, penetrated the adult segment, which is the largest segment, that growth will resume and we're kind of predicting that to happen, at kind of the end of this year as our sales force gets focused on the different centers that treat adults, we get through reimbursement, we identify those patients. So there's still a very good growth opportunity in the U.S.

Outside the U.S., there's an even bigger opportunity and you can see and we've said clearly that we think the market is going to be greater. We won't face exactly the same dynamics because some of the outside U.S. patients don't go through the normal loading doses, they come through the expanded access program. So we'll have more of a regular growth outside the U.S. So we're still very confident that the SPINRAZA has a very growth -- good growth opportunity ahead of it.

So I can only reinforce the focus of the organization on executing well all around the world, including in the U.S. As I said, we are very encouraged by the leadership and the implementation that we see in the U.S., even if they have some bumps sometimes on the way. This is the nature for our business. So it's all about growth and this, hopefully, will be generated in the U.S., more moderately, but mostly ex U.S.

Concerning SPINRAZA, with the rapid and sequential reimbursement that we are gaining and the objective by the end of the year, we are unlocking new opportunities in terms of treating SMA population. So this paves the way, hopefully, to us achieving the peak sales that we anticipate. And we always said this will be one of the largest asset of the organization.

Obviously, we look at complementing eventually the momentum with some acquisition, but we'll be very wise always on the way we invest our capital. And if we believe we can do this, these assets can do better in Biogen hands, then we'll propose that to the board. But we'll be always very cautious, but we are actively looking, absolutely.

Your next question comes from the line of Geoffrey Porges with Leerink.

Just following up on SPINRAZA. You gave us good information on the distribution of patient types by age in the U.S., but could you provide the same color for the 2,300-or-so patients outside the U.S.? I think that's the right number.

And then could you just comment on treatment persistence in the U.S. where you've been in the market the longest, for those 3 different patient populations: infant, pediatric and then adolescents and adults?

Yes. So let me give you the numbers as it relates to kind of Europe, but I don't have all the numbers around the world, but kind of our type 1 patients were roughly 810 in the first quarter, type 2 were 590 and type 3 were 138. That's how it breaks out EU plus, Geoff.

Your next question comes from the line of Michael Yee with Jefferies.

In regards to the Samsung Bioepis stake, of which you made a comment about planning to exercise in the coming months, can you just remind us, I guess, how that would work? When you do that, do you have to integrate to your P&L? Are you just going to hold the equity stake?

Obviously, that would be worth billions of dollars. So maybe just the plans on that, and how that strategically would fit with what you guys are trying to do, et cetera, et cetera.

So this is Michel. Before we come to this question, I just wanted to answer the second part of the previous question. The discontinuations on SPINRAZA are extremely low. And this speaks to the efficacy of the product and the progress that the patients are making on the product. Now biosimilars.

Yes. So as it relates to kind of exercising that option, that would be an equity investment we'd make. It would still be below the level that would require us to consolidate. So it would be an equity investment where we would just pick up their share or our share of the net profits with regard to that collaboration. So it would be booked kind of below the line, below nonoperating.

Your next question comes from the line of Ying Huang with Bank of America Merrill Lynch.

Another quick one on SPINRAZA as well. You mentioned previously that 7 patients from the AveXis-101 Phase I trial in type 1 SMA patients have already been receiving SPINRAZA treatment. Can you talk about whether those 7 patients saw additional function improvement from SPINRAZA?

And then secondly, in light of the recent failures of the Merck BACE inhibitor in 2 Phase III trials, does that change your thought on your BACE program in Phase III or not?

Ying, this is Mike. Thanks for the questions there. I mean, so the short answer is that we really don't have direct information on the clinical status or outcome of the patients in the AveXis trials that have subsequently gone on SPINRAZA.

All we can really say is that medical experience to date, and as reported by AveXis, indicates that number, a large number of patients who receive gene therapies, have subsequently gone on to SPINRAZA. But while we don't know the exact reasons, they're not hard to imagine and in any event suggest that even with a gene therapy product on the market, we can anticipate substantial need and use for combination therapy, which is something that we're actively exploring in terms of preclinical studies.

With regard to the Merck BACE inhibitor results, of course, these are things that we've been looking at very carefully. I think they do raise a number of very valid questions about the right patient population, study design, when you might anticipate potential benefit or not and these are things that we're looking at very closely in active discussions with our collaboration partner, Eisai.

Your next question comes from the line of Matthew Harrison with Morgan Stanley.

I was hoping maybe we could just talk a little bit about your neuropathic pain asset. Obviously, you're going to have some -- probably have some data from the radiculopathy study sometime in the second half of this year.

Maybe you can just help us think about what we're going to see out of that data set? And how you would frame that data in terms of insights into the overall program?

Yes. So this is Mike, Matthew. Thanks for the question on that. So right now, this is -- we've got BIIB074, it's -- will be starting its Phase III trial in trigeminal neuralgia, as I mentioned. It has completed enrollment in a Phase II study in painful lumbosacral radiculopathy.

These are 2 different pain syndromes, I think, as you know. And one of the challenges and opportunities in the neuropathic pain space is you've got a variety of different specific indications that have different features of neuropathic pain.

Trigeminal neuralgia, very episodic, pain crisis and somewhere we've got strong proof-of-concept data. Lumbosacral radiculopathy or sciatica, this is a little bit more of a mixed neuropathic and inflammatory pain state that's a little bit more of a mix -- mixture. We've started screening on our -- on the trial in small fiber neuropathy, again, this would be a small fiber, more episodic pain disease.

In each of these cases, a lot depends on the specific pain state and the mechanism that you're going after. That's why we are trying it in each of these 3. The strongest clinical evidence that we have to date is in trigeminal neuralgia, and we're looking to explore where that might provide additional benefit beyond trigeminal neuralgia.

Your next question comes from the line of Terence Flynn with Goldman Sachs.

Maybe just on SPINRAZA in Europe, was wondering if you can give us a little bit more detail on the percent of patients that are getting a loading versus maintenance dosing. And then roughly, where you'd expect that to end up by the end of the year?

And then, for Jeff, you had repurchased $250 million of stock in the quarter. You've mentioned you still have a pretty sizable amount outstanding. How should we think about the pace on the forward there?

So I will get started on the SMA question, ex U.S. So you recall that we had many patients on the early access program. So we don't have the hockey stick and the bolus of the dosing those, in most of the market. So this is helping the trend be much more smooth.

And in addition, there is the sequential access and reimbursement progress we are making. And this should pave the way combined with the U.S. performance for long-term growth on SPINRAZA.

And with regard to the share repurchase question, so I would look at -- based on the stock price today, we think the company is very undervalued. I would look for us to kind of pick up our pace with regard to the share repurchase and actively get at to $2.75 billion over a reasonable time frame.

Your next question comes from the line of Alethia Young with Credit Suisse.

I was just curious actually about the Alkermes program, BIIB098, just how you're thinking about the potential opportunity there? From the relationship of payers and physicians in thinking about differentiated profile in -- to TECFIDERA in particular, the Gilenya generic, which may come in August of 2019.

Okay. Alethia, this is Mike. I'll start with this and then pass it on a little bit. So I mean, the status is that Alkermes is presenting day-to-day and demonstrating clear benefits I've mentioned on annualized relapse rate and MRI lesions.

We're in the midst of generating and gathering data in head-to-head comparison with TECFIDERA, which we'll be talking about more at the beginning of next year. We do anticipate being able to file this year.

And look, the profile that we're looking for here is to date, we've seen strong evidence of efficacy, we've seen a safety profile that looks favorable and we're very interested to know how that lines up relative to our experience with TECFIDERA.

And we imagine that upon filing, and making this available to patients that this would provide an additional potential option with potentially differentiated tolerability profiles.

And if I may add, this is Michel. This will be another opportunity to expand the fastest-growing segment of the MS DMTs, which is the orals and TECFIDERA is doing great, but here we'll have another opportunity with potentially an upgrade. And coming back to the overall growth questions, and the reason to believe also for MS, we continue to take price, and we have seen that the generics are mostly impacting the originator. The unmet medical need is tremendous. We have an entire portfolio where we are leaders of the platforms, the orals and the high efficacy. We are generating more data and we have a pipeline. So these are additional reasons to believe in our ability to compete and to grow.

And your next question comes from the line of Robyn Karnauskas with Citi.

So just a little bit along the lines with TECFIDERA, thinking about next year. We are hearing from doctors that they view TECFIDERA and Gilenya very similarly and so typically patients don't get both, and I was curious whether or not your market research was supportive of that? And then on the lines, if you think that a generic will really only impact the brand, what gives you the confidence, is it just the rebating? And would you be surprised if there were, going forward next year, there would be stuff added forcing people to use the generic ahead of a different type of brand in the oral class? So maybe give us some comfort around what your market research is telling you?

So the way the market so far has managed those DMTs was with open formularies, because of this type of disease. And they do believe that there's -- that it's not a blanket formulary that will increase the value for the patients. We are talking here about radically different therapies, different classes. As you know, the monitoring on the Gilenya is pretty intense during the first period on the product. I don't see how evidence-based medicines will be completely overshadowed by formularies in order to prescribe first a generic of S1P that has its baggage of efficacy and risk profile that is different from the other DMTs. This will be a bad day for evidence-based medicine in this country and this will be a first time for neurological diseases, and mostly MS. I don't see that as a credible assumption. We will not take that in our long-range plan assumption.

And Robyn, I might add just a little bit here, this is Mike. I think in our experience in discussions with practicing neurologists out there is that there would be a very strong aversion, we believe, to patients potentially having to have a multi-hour first dose cardiac monitoring as a step-through for some other therapy. So there is an initial clinical burden that would generally be viewed negatively by a number of MS neurologists, we believe.

And your final question today will come from the line of Ronny Gal from Bernstein.

Just want to talk a little bit about the pattern of buying that you're seeing with the MS product. It feels a little bit like buyers are buying in the fourth quarter ahead of anticipated price increases in the first quarter. Is this what's going on? And this is something -- is this something you can manage through contracting? And similarly, can you talk a little bit about copay accumulators and as you switch your patients from kind of insurance type cards to more of a credit card format in terms of your copay assistance program?

So Ronny, it's Jeff. Let me help you with the inventory channel dynamics and reiterate some of the numbers for you. So I think as you saw in our press release, we disclosed the channel inventory overall for U.S, MS came down about $130 million in the first quarter. If you look at that compared to the fourth quarter, channel inventory went up $50 million. So we had about a $180 million swing that has nothing to do with fundamental demand, as far as we can see, it's just a channel dynamic. So that's a good overall sense of what happened in Q4 to Q1 and we expect that the case is in fact because of expected price increases we've done fairly regularly in the first quarter. So that we can't control to a certain degree that we have a larger channel building, that's their prerogative in the fourth quarter and then some draw-down in the first quarter. Fundamentally though, as we look at kind of share, and we looked at it carefully with regard to going from the fourth to the first quarter, as I said in the script, we believe we picked up share in both TECFIDERA and TYSABRI from the fourth quarter to the first quarter in the U.S., in terms of new prescriptions and kind of flat and total prescriptions. So we think the business underlying are pretty healthy and it's going in the right direction, but we can't control always the channel inventory dynamics.

Yes, we are pleased to see that, basically, we cross-backed during the month of March in MDRX OCREVUS, with a growth momentum for the BIIB portfolio. So we are pleased to see that. But still, a long way to go. So concerning the patient accumulator, understand this is the last question. So we believe that some PBMs have started to account the copays element differently according to this new copay evaluator formula. There is absolutely no impact at this stage. We need to monitor that very carefully, but at this stage there is nothing more to report.

So thank you all for attending our Q1 call and have a good day. Thank you.

Thank you to everyone for attending today. This will conclude today's call and you may now disconnect.