Biogen Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited consolidated results; dollar amounts are in millions except per-share data. Biogen is a biopharmaceutical company focused primarily on neurological and neurodegenerative diseases, with a biosimilar business.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Change | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|---|
| Total revenue | $2,778.9 | $3,376.1 | (17.7%) | $8,247.9 | $10,592.0 |
| Operating income | $794.0 | $1,086.4 | (26.9%) | $2,253.6 | $4,880.7 |
| Net income attributable to Biogen | $329.2 | $701.5 | (53.1%) | $1,187.9 | $3,642.7 |
| Diluted EPS | $2.22 | $4.46 | (50.2%) | $7.90 | $22.25 |
| Operating cash flow | Nine months: $2,801.6, down 39.1% from $4,596.9 |
Q3 operating margin was approximately 28.6%, versus 32.2% a year earlier; net margin attributable to Biogen was approximately 11.8%, versus 20.8%. These are calculated from reported figures.
Revenue drivers: Q3 product revenue fell 18.0% to $2,205.7. MS revenue declined 21.6% to $1,556.0, including a 36.0% fall in fumarate revenue, mainly due to U.S. generic competition for TECFIDERA. SPINRAZA revenue decreased 10.2% to $444.1, primarily reflecting competition. Anti-CD20 program revenue declined 25.8% to $415.4, mainly because of lower RITUXAN sales amid biosimilar competition. ADUHELM generated only $0.3 of Q3 revenue ($2.0 year to date). OCREVUS royalty revenue was $264.2 for Q3, compared with $272.5.
Costs and unusual items: Q3 research and development expense decreased 38.4% to $702.4, partly because the prior-year quarter included a $601.3 Denali collaboration upfront payment. Q3 SG&A rose 14.1% to $654.1, primarily reflecting ADUHELM launch support. Nine-month acquired-intangible amortization and impairment totaled $813.2, including $585.0 of impairments for BIIB111 and BIIB112; development of both programs was suspended. A further $39.1 of suspension-related manufacturing and other costs was recorded in Q3. Q3 other expense, net, was $502.9, principally reflecting $426.9 of unrealized equity-investment losses. These noncash investment losses materially affected earnings.
Balance sheet, liquidity and capital allocation
- At September 30, 2021, cash and cash equivalents were $1,541.8; current and noncurrent marketable securities totaled $2,381.6. Combined cash and marketable securities were $3,923.4, up from $3,382.2 at year-end 2020.
- Total notes payable were $7,271.1, including $998.8 classified as current; the $1.0 billion 2022 notes were reclassified to current liabilities. The company had no borrowings under its $1.0 billion revolving credit facility and reported covenant compliance.
- Working capital was $2,950.7, down from $3,144.9. Total liabilities were $12,925.0 and total equity was $10,881.7.
- Nine-month investing cash outflow was $451.0; financing cash outflow was $2,096.0. Biogen repurchased $1,800.0 of shares in the first nine months, with $2,800.0 remaining under its repurchase authorization at quarter-end.
Outlook, commentary and principal risks
- Management said existing funds, operating cash flow and potential access to financing were expected to cover operating, capital, strategic and debt-service needs for the foreseeable future. The filing does not provide a numerical full-year revenue or earnings guidance range.
- Management expected minimal U.S. ADUHELM sales in 2021 and gradual uptake, citing patient selection and diagnostic pathways, provider readiness, questions about accelerated approval and reimbursement uncertainty. A Medicare National Coverage Determination was expected by Q2 2022. FDA accelerated approval depends on a confirmatory trial verifying clinical benefit; the FDA may withdraw approval under specified circumstances.
- Management expected continued substantial TECFIDERA revenue pressure from U.S. generics; potential E.U. generic competition also depended on regulatory data-protection proceedings. It anticipated continued competition affecting SPINRAZA and RITUXAN, and declining interferon revenue. Biosimilar revenue was expected to be flat in 2021 versus 2020.
- Other pipeline updates included a planned zuranolone NDA submission for major depressive disorder in the second half of 2022, with rolling submission expected in early 2022 and a postpartum-depression filing anticipated in the first half of 2023. The filing also reported that the tofersen Phase 3 VALOR study missed its primary endpoint; next steps were under review.
- Risks include pricing and reimbursement pressure, generic and biosimilar competition, clinical and regulatory uncertainty, ADUHELM commercialization and confirmatory-trial outcomes, COVID-19 impacts on trials and supply, foreign-exchange exposure, and potential legal liabilities. Several lawsuits and patent disputes were disclosed; possible losses were not estimable for a number of matters. The company also disclosed up to approximately $10.9 billion of contingent development, regulatory and commercial milestones, which were not recorded because achievement was not considered probable.
Most important facts for investors to verify
- Whether TECFIDERA generic competition and other product-level declines continue to reduce revenue and operating cash flow.
- ADUHELM uptake, reimbursement, launch costs and progress and results of its required confirmatory trial.
- The sustainability of earnings excluding large noncash equity-investment losses, impairment charges and tax-related effects.
- Pipeline progress and commercial timing for zuranolone, lecanemab and other candidates, including the consequences of discontinued or unsuccessful programs.
- Debt repayment requirements, share repurchases, contingent milestone obligations and developments in material litigation and patent proceedings.