Biogen Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited consolidated results. Biogen is a global biopharmaceutical company focused on neurology, specialized immunology and rare diseases. Results include Reata from its September 2023 acquisition.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $2.291 billion | $2.463 billion | Down $172.5 million, or 7.0% |
| Product revenue | $1.712 billion | $1.763 billion | Down $51.4 million, or 2.9% |
| Income before tax | $464.8 million | $438.3 million | Up $26.5 million |
| Net income attributable to Biogen | $393.4 million | $387.9 million | Up $5.5 million |
| Diluted EPS | $2.70 | $2.67 | Up $0.03 |
| Operating cash flow | $553.2 million | $455.3 million | Up 21.5% |
- Total expenses were $1.826 billion, down 9.8%. R&D fell 20.6% to $452.9 million and SG&A fell 3.9% to $581.5 million; acquired-intangible amortization rose to $78.3 million from $50.2 million.
- Cost of sales excluding acquired-intangible amortization was $542.2 million. On that basis, gross margin was approximately 76.3%, versus 73.1% in Q1 2023. Income before tax was approximately 20.3% of revenue, versus 17.8%; net income attributable to Biogen was approximately 17.2% of revenue, versus 15.8%.
- Cash and cash equivalents were $1.074 billion at March 31, up $24.5 million from year-end. Working capital was $3.533 billion; the current ratio was approximately 2.1.
- Total borrowings, including current term-loan debt, were $6.540 billion, down $398.1 million from year-end. Cash less borrowings was approximately negative $5.466 billion. Biogen repaid $400 million of term loans during the quarter; $250 million remained outstanding at March 31.
- Operating, investing and financing cash flows were $553.2 million, negative $66.0 million and negative $439.6 million, respectively. The prior-year investing outflow was substantially larger, primarily due to marketable-security purchases.
Material changes and business developments
- MS product revenue declined 4.4% to $1.076 billion, including lower TECFIDERA and TYSABRI sales. Management expects MS revenue to continue declining amid competition.
- Rare-disease revenue declined 4.4% to $423.9 million. SPINRAZA revenue outside the U.S. fell 35.0%, largely because of shipment timing; management expects much of the timing impact to normalize during 2024. SKYCLARYS contributed $78.0 million, including initial European sales following EU approval.
- Anti-CD20 program revenue was down 1.4% to $394.0 million: higher OCREVUS royalties were offset by lower U.S. profit share from RITUXAN, GAZYVA and LUNSUMIO.
- Contract manufacturing, royalty and other revenue fell 38.5% to $184.6 million, primarily reflecting lower contract manufacturing revenue and prior-year production timing.
- LEQEMBI collaboration sales and marketing expense attributable to Biogen was $86.9 million, versus $5.3 million a year earlier, as launches expanded. Biogen shares LEQEMBI development, commercialization costs and U.S. profits and losses equally with Eisai.
Outlook, risks and unusual items
- Management expects 2024 growth in rare-disease revenue as SKYCLARYS launches continue, and expects global SPINRAZA revenue to decline by low single digits. It anticipates modest biosimilars revenue growth, but notes supply constraints and is evaluating strategic options for that business.
- Excluding milestone and upfront payments, Biogen expects core R&D expense to decrease in 2024 while continuing pipeline investment. Fit for Growth is expected to generate approximately $1.0 billion in gross operating-expense savings by the end of 2025, with some savings reinvested; the program includes an estimated net reduction of about 1,000 employees.
- Q1 includes $44.1 million of cost-of-sales amortization from the SKYCLARYS acquired-inventory fair-value step-up. No acquired-intangible impairment charges were recorded.
- Key risks include generic and biosimilar competition, pricing and reimbursement pressure, product-launch execution, clinical and regulatory uncertainty, reliance on collaborators and third-party manufacturers, foreign-exchange exposure, and geopolitical and supply-chain disruption. Certain early SKYCLARYS processes rely on a single China-based supplier. Solothurn’s second manufacturing suite became operational, but underutilized capacity may generate charges.
- Potential third-party development, regulatory and commercial milestone payments total up to approximately $5.1 billion; these contingencies were not recorded because achievement was not considered probable. Up to approximately $82.5 million could be payable in 2024 under current agreements, excluding potential opt-in payments.
- Disclosed legal matters include a Genentech royalty claim of approximately $88.3 million related to TYSABRI and an April 2024 lender suit seeking approximately $23.2 million plus interest and costs. The filing says loss estimates for some matters cannot currently be made. The SEC and DOJ have also sought information concerning ADUHELM and foreign operations.
- Subsequent to quarter-end, Biogen received the remaining $437.5 million Samsung BioLogics payment in April and sold a pediatric priority review voucher for $103.0 million. Management also planned repayment during 2024 of the remaining $250 million term-loan balance.
Important facts for investors to verify
- Whether Q1’s SPINRAZA shipment-timing decline normalizes as management expects, and whether SKYCLARYS launches support the forecast rare-disease growth.
- How rapidly competition, discounts and reimbursement changes affect TECFIDERA, TYSABRI and other established products.
- LEQEMBI and SKYCLARYS launch progress, reimbursement, collaboration spending and any related regulatory developments.
- Execution of Fit for Growth savings, remaining restructuring costs, and utilization of Biogen’s manufacturing capacity.
- Future debt repayment, cash generation and the resolution or financial impact of disclosed legal proceedings and contingencies.