Biogen Inc. — Q2 2021 Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2021. Amounts are in millions of U.S. dollars except per-share data. The financial statements are unaudited.
Business context and financial performance
Biogen is a biopharmaceutical company focused principally on neurological and neurodegenerative diseases, with marketed multiple sclerosis (MS), spinal muscular atrophy (SMA), Alzheimer’s disease and biosimilar products. It also earns revenue from anti-CD20 collaborations.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $2,775.0 | $3,681.6 | $5,469.0 | $7,215.9 |
| Operating income | $485.7 | $1,974.5 | $1,459.6 | $3,794.3 |
| Net income attributable to Biogen | $448.5 | $1,542.1 | $858.7 | $2,941.2 |
| Diluted EPS | $2.99 | $9.59 | $5.68 | $17.61 |
| Operating margin | 17.5% | 53.6% | 26.7% | 52.6% |
Q2 total revenue fell 24.6%; product revenue declined 20.0%, anti-CD20 program revenue 8.0%, and other revenue 75.7%. For the six-month period, revenue declined 24.2% and Biogen-attributable net income declined 70.8%. Q2 consolidated net income was $1,025.5 million, including $577.0 million attributable to noncontrolling interests.
- Revenue drivers: Q2 MS product revenue declined 28.1%, led by a 51.4% decline in fumarate revenue, primarily reflecting U.S. TECFIDERA generic competition. TYSABRI revenue rose 21.3%. SPINRAZA revenue was nearly flat in Q2 but down 3.7% for the six months, with U.S. declines partly offset by international growth. Biosimilar revenue rose 17.9% in Q2.
- Comparability: Q2 2020 other revenue included $329.4 million from delivery of a manufacturing-related intellectual-property license. The Q2 2021 expense increase also included $541.6 million of BIIB111 and BIIB112 impairment charges.
- Cash flow: Operating cash flow was $1,996.3 million for the six months, down 41.6% from $3,415.8 million. Investing cash outflow was $217.4 million and financing cash outflow was $1,349.5 million.
- Liquidity and debt: Cash, cash equivalents and marketable securities totaled $3,965.9 million at June 30, 2021, versus $3,382.2 million at year-end 2020. Working capital was $3,836.5 million. Notes payable were $7,269.2 million, down from $7,426.2 million; the company also had an undrawn $1.0 billion revolving credit facility and reported covenant compliance.
Material changes and unusual items
- FDA granted ADUHELM accelerated approval in June 2021; Q2 U.S. product revenue was $1.6 million. The approval triggered a $100 million milestone payment to Neurimmune. Biogen reported a $500 million net deferred tax asset related to Neurimmune’s tax basis in ADUHELM, subject to future sales and Swiss tax authority approval; an equal offset was attributed to noncontrolling interests, with no net impact on Biogen-attributable net income.
- Amortization and impairment of acquired intangibles was $604.1 million in Q2, including $350.0 million for BIIB111 after its Phase 3 study missed primary and key secondary endpoints, and $191.6 million for BIIB112 after its Phase 2/3 study missed its primary endpoint. Further impairment remains possible; discontinuing the programs and related manufacturing agreements could also result in charges, including up to approximately $30 million for inventory and other discontinuation costs.
- Six-month other expense, net was $410.5 million, substantially reflecting $288.4 million of unrealized losses on equity securities. Q2 instead included $153.9 million of net unrealized investment gains.
- Biogen repurchased 3.8 million shares for $1.05 billion in the first half; approximately $3.6 billion remained under its $5.0 billion authorization at June 30.
Outlook, commentary and risks
The filing does not provide consolidated numerical full-year revenue or EPS guidance in the supplied text. Management expected modest U.S. ADUHELM sales in 2021 and gradual uptake, citing patient identification, diagnostic and care pathways, provider readiness, reimbursement, and concerns about the accelerated approval and supporting data. A confirmatory trial is required; FDA may withdraw approval if clinical benefit is not verified or other approval conditions are not met.
- Management expected U.S. TECFIDERA generic competition to continue materially reducing revenue and cash flow. A European regulatory-data-protection reassessment was expected in Q4 2021; an adverse outcome could expose TECFIDERA to generic competition in the E.U.
- Management expected continued declines in interferon revenue, modest global TYSABRI volume growth, modest biosimilar growth, and ongoing competitive pressure on SPINRAZA. COVID-19 remained a potential source of sales, manufacturing and clinical-trial disruption; the BIIB093 Phase 3 study had been delayed.
- Biogen stated existing funds, operating cash generation and potential financing access were sufficient for foreseeable requirements. It also expected moderate higher interest expense in 2021, partly because less interest would be capitalized as assets entered service.
- Key risks include pricing and reimbursement pressure, generic and biosimilar competition, ADUHELM launch and confirmatory-trial uncertainty, clinical and regulatory setbacks, manufacturing and supply risks, foreign-exchange exposure, and litigation. The company disclosed securities litigation concerning ADUHELM, TECFIDERA patent appeals and a Samsung BioLogics arbitration; possible loss estimates were not clear or could not be made for several matters.
Subsequent event: In July 2021 Biogen entered a conditional collaboration for orelabrutinib, including a $125 million upfront payment and potential milestone payments and royalties.
Important facts for investors to verify
- Whether ADUHELM uptake, reimbursement and the confirmatory trial support meaningful commercial revenue, and how the launch affects spending and cash flow.
- Further developments in U.S. and E.U. TECFIDERA generic exposure and the resulting sales, discount and patent-protection effects.
- Future development decisions and potential additional impairment or termination costs for BIIB111, BIIB112 and vixotrigine.
- Underlying operating performance excluding investment fair-value movements, unusual license revenue in the prior-year comparison, impairments and tax/noncontrolling-interest effects.
- Progress and potential exposure in material litigation, collaboration disputes, contingent milestones and manufacturing commitments.