Biogen Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Financial statements are unaudited; amounts below are in U.S. dollars. Biogen is a global biopharmaceutical company focused on neurology and related diseases.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $2,456.0 million | $2,589.1 million | $4,919.0 million | $5,120.9 million |
| Net income attributable to Biogen | $591.6 million | $1,058.0 million | $979.5 million | $1,361.8 million |
| Diluted EPS | $4.07 | $7.24 | $6.74 | $9.27 |
| Operating cash flow | Not separately stated | Not separately stated | $942.3 million | $898.3 million |
- Q2 total revenue declined 5.1% year over year; product revenue fell 10.2% to $1,845.8 million. Six-month revenue declined 3.9% and product revenue fell 12.4%.
- Q2 net income attributable to Biogen fell 44.1%; diluted EPS declined 43.8%. The filing does not provide a clear company-reported gross or operating margin. R&D was 23.8% of revenue in Q2, versus 20.4% a year earlier.
- For the six months, investing cash outflow was $1,706.5 million, mainly reflecting purchases of marketable securities; financing cash outflow was $53.2 million. Cash and cash equivalents decreased to $2,617.8 million from $3,419.3 million at year-end.
- Cash, cash equivalents and marketable securities totaled $7,286.3 million at June 30, versus $5,598.5 million at December 31, 2022. Working capital was $7,245.2 million.
- Notes payable were $6,284.6 million. The company had no borrowings under its $1.0 billion revolving credit facility and reported covenant compliance.
Material changes versus prior period
- MS product revenue declined 15.2% in Q2, principally from generic competition for TECFIDERA and patients switching from interferons to higher-efficacy therapies. TECFIDERA Q2 revenue fell 36.1% to $254.2 million.
- SMA revenue rose 1.4% in Q2 to $437.1 million; U.S. SPINRAZA growth was partly offset by lower international sales. Anti-CD20 program revenue was approximately flat at $433.4 million; OCREVUS royalties increased, while U.S. RITUXAN, GAZYVA and LUNSUMIO profit share declined.
- Contract manufacturing, royalty and other revenue more than doubled in Q2 to $197.5 million, largely due to higher manufacturing volumes, including LEQEMBI batches. Biogen recorded a $20.7 million reduction to revenue for its LEQEMBI collaboration profit share in Q2.
- Q2 total costs and expenses increased 32.5% to $1,747.9 million. Cost of sales rose 22.5%, primarily due to contract manufacturing and production mix; R&D rose 10.5%, including trial spending and approximately $20.1 million of close-out costs.
- Comparisons are affected by prior-year unusual items: Q2 2022 included a $1.5 billion pre-tax gain on the Samsung Bioepis sale and a $900 million litigation-settlement charge. These materially affected other income/expense and make reported earnings comparisons less indicative of underlying trends.
Outlook, commentary and risks
- Management expected 2023 MS revenue to continue declining amid competition. It anticipated SPINRAZA revenue to be relatively flat and biosimilars revenue to grow modestly, subject to pricing and supply pressures.
- Management expected a LEQEMBI collaboration loss in 2023 as commercial expense exceeded initial revenue. In July 2023, after quarter-end, the FDA granted LEQEMBI traditional approval and CMS confirmed broader coverage.
- In July 2023, Biogen announced its Fit for Growth program, targeting approximately $1.0 billion in gross operating-expense savings, with about $300 million reinvested and approximately $700 million net savings by 2025; the plan was estimated to include a net reduction of about 1,000 positions. These are targets, not realized savings.
- QALSODY and COLUMVI received FDA accelerated approvals in Q2. Continued approval for each may depend on confirmatory evidence of clinical benefit.
- Biogen cited competition, pricing and reimbursement pressure, including potential effects of the Inflation Reduction Act; clinical-development and regulatory uncertainty; reliance on collaborators and contract manufacturers; foreign-exchange and investment-value volatility; and geopolitical, supply-chain and cyber risks.
- Potential future collaboration and licensing milestones total up to approximately $7.2 billion, not recorded because achievement was not considered probable. Up to approximately $242.2 million could be payable in 2023 if milestones are achieved, including $225 million tied to the first U.S. commercial sale of zuranolone.
- Significant legal matters include an SEC subpoena seeking information relating to ADUHELM, a Genentech royalty suit concerning TYSABRI, and other pending claims. The filing states that possible loss estimates cannot be made for some matters; it does not provide a clear aggregate exposure value.
Important facts for investors to verify
- Whether continued generic and biosimilar competition drives further declines in MS revenue, particularly TECFIDERA and TYSABRI.
- LEQEMBI’s uptake, reimbursement, commercial costs and resulting contribution to Biogen’s collaboration results following its July 2023 traditional approval.
- Progress against Fit for Growth savings targets and the timing and costs of implementation.
- Whether supply issues at third-party facilities affect IMRALDI or BENEPALI, and whether Biogen rebuilds adequate VUMERITY inventory.
- Developments in the SEC inquiry and other litigation, as well as achievement and cash impact of contingent milestone obligations.