Business context and reporting period
Biogen Inc. is a global biopharmaceutical company focused on neuroscience and related therapies, including multiple sclerosis (MS), spinal muscular atrophy, Alzheimer’s disease and biosimilars. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2022; comparisons are with the corresponding 2021 periods. Financial amounts below are in U.S. dollars unless stated otherwise.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $2,508.5 million | $2,778.9 million | $7,629.4 million | $8,247.9 million |
| Net income attributable to Biogen | $1,134.7 million | $329.2 million | $2,496.5 million | $1,187.9 million |
| Diluted EPS | $7.84 | $2.22 | $17.07 | $7.90 |
| Operating cash flow | Not separately provided | Not separately provided | $1,559.3 million | $2,801.6 million |
- Q3 product revenue was $1,962.1 million, down 11.0%; anti-CD20 program revenue was $416.9 million, up 0.4%. Nine-month product revenue fell 8.6% to $6,083.3 million.
- Q3 total costs and expenses were $1,137.4 million, including the $503.7 million building-sale gain and $56.0 million of net other income. Nine-month expenses were $4,641.4 million. Reported earnings were materially affected by unusual items; the filing does not provide a clear standalone operating-margin measure in the supplied text.
- At September 30, cash, cash equivalents and marketable securities totaled $5,771.4 million. Notes payable were $6,279.2 million, with no current portion after redemption of $1.0 billion of notes in July. Working capital was $5,839.4 million.
- Operating cash flow declined 44.3% year over year for the first nine months, which the company attributed mainly to lower revenue, payment timing and higher income tax payments. Investing cash flow was $1,717.7 million, including proceeds from the Samsung Bioepis and building sales; financing cash outflow was $1,739.9 million, including debt repayment and $750.0 million of share repurchases.
Material changes versus the prior comparable period
- Revenue declines reflected generic competition for TECFIDERA, weaker interferon sales, lower SPINRAZA revenue and biosimilar pricing and foreign-exchange pressure. VUMERITY and OCREVUS royalty revenue increased.
- Net income benefited from the $1.5 billion pretax gain on the sale of Biogen’s Samsung Bioepis stake and the $503.7 million pretax gain on the 125 Broadway building sale. These gains were partly offset by a $900 million pretax charge for a qui tam litigation settlement. In Q3, investment results also swung to gains from substantial losses in the prior-year quarter.
- Cost and expense comparisons were affected by lower 2022 intangible-asset impairment charges than in 2021, lower R&D and SG&A spending, and 2022 restructuring charges. The company recorded $124.1 million of restructuring charges in the first nine months.
- Biogen sold its 49.9% Samsung Bioepis stake in April for approximately $1.0 billion cash at closing and expects a further approximately $1.3 billion in two deferred payments, plus potential commercial milestone payments of up to $50 million.
Outlook, management commentary and risks
- The filing provides no single numerical full-year revenue or EPS forecast in the supplied text. Management expected TECFIDERA revenue to continue declining in 2022, interferon revenue to decline, TYSABRI revenue to be relatively flat, and biosimilar revenue to decline slightly. It expected SPINRAZA to face continued competitive pressure.
- Management expected 2022 SG&A costs to decline through cost-saving measures and anticipated core R&D expense, excluding prior-year upfront payments, to be consistent with 2021. Restructuring charges were estimated at $130–$150 million, substantially incurred and paid by year-end 2022.
- CMS coverage for ADUHELM is limited to qualifying clinical trials. Biogen expected future demand to be minimal, substantially eliminated its commercial infrastructure and wrote off approximately $275 million of ADUHELM inventory in Q1. The FDA could withdraw accelerated approval if confirmatory evidence does not verify clinical benefit or other approval conditions are not met.
- Lecanemab’s FDA application received Priority Review, with an action date of January 6, 2023; its Phase 3 confirmatory study met its primary and key secondary endpoints. Biogen and Sage planned to complete a single zuranolone NDA submission for major depressive disorder and postpartum depression by year-end 2022 and seek Priority Review.
- Key risks include continued generic and biosimilar competition, pricing and reimbursement pressure (including the Inflation Reduction Act), clinical and regulatory uncertainty, manufacturing and supply constraints, foreign-exchange exposure, and possible effects of COVID-19 and the Ukraine conflict. The filing also describes patent disputes and other litigation; potential losses in several matters could not be estimated.
- Biogen agreed to the $900 million settlement without admitting liability; the court dismissed the case with prejudice in October 2022, and the company reported making the $900 million payment that month. Other disclosed proceedings include ADUHELM-related securities and derivative actions, a Humana suit, and TYSABRI and biosimilar patent disputes.
Important facts for investors to verify
- Whether revenue declines in TECFIDERA, interferons and SPINRAZA are offset by growth in VUMERITY, OCREVUS and pipeline launches.
- Cash conversion and future operating cash flow, separating recurring operations from Samsung Bioepis and real-estate sale proceeds and other unusual items.
- Receipt and timing of the deferred Samsung Bioepis payments, and the carrying values and risks of strategic equity investments.
- Progress and regulatory outcomes for lecanemab, zuranolone, ADUHELM and other key pipeline programs, including lecanemab’s stated FDA action date.
- Execution of restructuring plans, potential manufacturing constraints affecting VUMERITY and biosimilars, and exposure to pricing reforms and legal proceedings.