Biogen Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unaudited consolidated results. Biogen is a global biopharmaceutical company focused primarily on neurological and neurodegenerative diseases and also commercializes biosimilars.
Financial results
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $2,694.0 million | $3,534.3 million | Down 23.8% |
| Operating income | $973.9 million | $1,819.9 million | Down 46.5% |
| Operating margin | 36.2% | 51.5% | Down 15.3 percentage points |
| Net income attributable to Biogen | $410.2 million | $1,399.1 million | Down 70.7% |
| Diluted EPS | $2.69 | $8.08 | Down 66.7% |
| Cash from operating activities | $769.0 million | $1,467.3 million | Down 47.6% |
Q1 2021 net income margin was 15.2%, compared with 39.6% a year earlier. Total cost and expense was nearly flat at $1,720.1 million, up 0.3%. Research and development expense rose 8.0% to $514.2 million; SG&A rose 4.4% to $595.0 million.
Revenue and operating drivers
- Product revenue fell 23.9% to $2,211.7 million. U.S. product revenue declined 43.2%, while rest-of-world revenue was nearly flat.
- Multiple sclerosis revenue fell 30.0% to $1,483.3 million. Fumarate revenue, including TECFIDERA and VUMERITY, fell 49.8% to $552.9 million, primarily due to U.S. TECFIDERA generic competition and higher discounts. Interferon revenue fell 14.1% and TYSABRI fell 3.7%.
- SPINRAZA revenue declined 7.9% to $520.5 million: U.S. sales fell amid competition and COVID-related treatment dynamics, partly offset by growth outside the U.S.
- Anti-CD20 program revenue fell 25.2% to $389.0 million. Biogen’s U.S. share of RITUXAN and GAZYVA profits fell to $174.1 million from $341.3 million, reflecting RITUXAN biosimilar competition. OCREVUS royalties increased to $209.3 million from $162.2 million.
- Management estimated COVID-related sales acceleration increased Q1 2020 revenue by approximately $100 million, primarily in Europe, making the comparison less favorable.
Liquidity, debt and capital allocation
- Cash, cash equivalents and marketable securities totaled $3,359.4 million at March 31, 2021, versus $3,382.2 million at year-end 2020. Cash and cash equivalents alone were $1,217.5 million.
- Notes payable were $7,267.2 million, down from $7,426.2 million. Cash and marketable securities were below reported debt. Working capital was $3,553.7 million; current assets were $6,719.5 million and current liabilities $3,165.8 million.
- Operating cash flow was $769.0 million; capital expenditures were $92.6 million. Financing used $785.0 million, including $600.0 million for repurchases and $169.3 million in debt exchange-related payments.
- Biogen exchanged approximately $624.6 million principal of 2045 notes for approximately $700.7 million principal of 2051 notes and cash. It repurchased 2.2 million shares for $600 million; approximately $4.0 billion remained under its $5.0 billion authorization.
- The company reported no borrowings on its $1.0 billion revolving credit facility and said it was in compliance with its covenants.
Outlook, risks and unusual items
- Aducanumab: FDA review was extended, with a June 7, 2021 action date. Biogen said that, if approved in the U.S., it expected an immediate launch but only modest 2021 revenue, ramping thereafter. Pre-launch inventory was $124.7 million; if U.S. approval is not obtained, Biogen expects to expense it, with Eisai reimbursing 45% under the collaboration agreement.
- Investment-related loss: Other expense, net was $506.9 million, including a $436.6 million net investment loss. The company reported $442.3 million of net unrealized losses on equity securities, primarily reflecting lower values for Ionis, Sangamo, Denali and Sage. This was a major reason earnings declined more sharply than operating income.
- Pipeline and manufacturing: Biogen recorded a $44.3 million impairment for vixotrigine related to delayed Phase 3 plans. It continued to monitor third-party manufacturing delays affecting BIIB111. The Solothurn facility was expected to be partially operational in the first half of 2021; a planned North Carolina gene-therapy facility was expected to be operational by 2023, with an estimated investment of $200 million.
- Business outlook: Management expected continued TECFIDERA pressure from U.S. generics, continued Interferon declines, SPINRAZA competition and pricing pressure, modest TYSABRI volume growth, and modest-to-moderate biosimilar revenue growth. The filing does not provide a clear numeric full-year revenue or EPS forecast in the supplied text. Management said existing funds, operating cash generation and financing access should cover foreseeable requirements, while warning that TECFIDERA competition would significantly reduce 2021 and future operating cash flow.
- Contingencies: Potential future collaboration milestones totaled up to approximately $10.1 billion, contingent on achievement and not recorded as liabilities. Certain legal matters, including aducanumab securities litigation and a Samsung BioLogics arbitration, had no estimable loss range. TECFIDERA patent judgments were under appeal; generic entrants were already in the U.S. market.
- Other risks: COVID-19 could affect product demand, clinical timelines, operations and manufacturing. The filing also highlights pricing and reimbursement pressure, competition, patent and regulatory uncertainty, foreign exchange exposure, and reliance on collaborators and third-party manufacturers.
Key facts investors should verify
- Whether aducanumab received FDA approval on the stated June 7, 2021 action date, and the resulting launch costs, sales and inventory accounting.
- Whether TECFIDERA generic competition and RITUXAN biosimilar erosion continue at the rates implied by Q1 results, and whether growth in OCREVUS royalties and VUMERITY offsets declines.
- How much of the Q1 investment loss is non-cash and whether equity-investment values or resulting earnings volatility persist.
- Whether operating cash flow remains sufficient alongside share repurchases, debt service, facility investment and contingent collaboration milestones.
- Developments in TECFIDERA and other patent cases, the Samsung BioLogics arbitration, and other proceedings for which loss estimates were unavailable.