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# Biogen Inc. Biogen Inc. - Q3 2023 Earnings Call

Wednesday, November 8, 2023 8:00 AM

## Event Participants

#### Executives 4

Charles Triano, Christopher Viehbacher, Priya Singhal, Michael McDonnell

#### Analysts 9

Salveen Richter, Geo!rey Meacham, Brian Abrahams, Robyn Karnauskas, Umer Ra!at, Michael Yee, Terence Flynn, Paul Matteis, Philip Nadeau

#### Operator Operator

Good morning. My name is Ali, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Third Quarter 2023 Earnings Call and Business Update. [Operator Instructions] Today's conference is being recorded. Thank you.

I would now like to turn the conference over to Mr. Chuck Triano, Head of Investor Relations. Mr. Triano, you may begin your conference.

## Charles Triano Executive

Thank you, Ali. Good morning, and welcome to Biogen's Third Quarter 2023 Earnings Call. Before we begin, I'll remind you that the earnings release and related "nancial tables, including ...

# Biogen Inc. Biogen Inc. - Q3 2023 Earnings Call

Wednesday, November 8, 2023 8:00 AM

## Event Participants

#### Executives 4

Charles Triano, Christopher Viehbacher, Priya Singhal, Michael McDonnell

#### Analysts 9

Salveen Richter, Geo!rey Meacham, Brian Abrahams, Robyn Karnauskas, Umer Ra!at, Michael Yee, Terence Flynn, Paul Matteis, Philip Nadeau

#### Operator Operator

Good morning. My name is Ali, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Third Quarter 2023 Earnings Call and Business Update. [Operator Instructions] Today's conference is being recorded. Thank you.

I would now like to turn the conference over to Mr. Chuck Triano, Head of Investor Relations. Mr. Triano, you may begin your conference.

## Charles Triano Executive

Thank you, Ali. Good morning, and welcome to Biogen's Third Quarter 2023 Earnings Call. Before we begin, I'll remind you that the earnings release and related "nancial tables, including our GAAP "nancial measures and a reconciliation of the GAAP to non-GAAP "nancial measures that we will discuss today are located in the Investors section of biogen.com. Our GAAP "nancials are provided in Tables 1 and 2, and Table 4 includes a reconciliation of our GAAP to non-GAAP "nancial results. We believe non-GAAP "nancial results better represent the ongoing economics of our business and re#ect how we manage the business internally.

We have also posted slides on our website that follow the discussion related to this call.

I'd like to point out that we will be making forward-looking statements, which are based on our expectations. These statements are subject to certain risks and uncertainties, and our actual results may di!er materially. I encourage you to consult the risk factors discussed in our SEC "lings for additional detail.

So on today's call, I am joined by our President and Chief Executive O\$cer, Chris Viehbacher; Dr. Priya Singhal, Head of Development; and our CFO, Mike McDonnell. Chris, Priya and Mike will each make some opening comments, and then we'll move to a Q&A session, and to allow

us to get through as many questions as possible, we kindly ask that you limit yourself to one question.

I'll now turn the call over to Chris.

## Christopher Viehbacher Executive

Thank you very much, Chuck. Good morning, all. I think we released a very good set of results this morning ahead of expectations. But of course, we're all too consciously aware that really what most of you are interested in is where is Biogen going?

To that end, we outlined 5 priorities that we believe we needed to achieve to put Biogen in a position to be able to grow again sustainably. And I think in the "rst 9 months of the year, we've made an awful lot of progress. And indeed, I would say the third quarter was a particularly busy quarter.

To remind you all what those priorities were really was to focus our teams and our resources on new product launches. And that is a little easier said than done. We're a company that has a long heritage in the treatment of multiple sclerosis. And teams get very passionate about patient outcomes and working with physicians, and to move them to new areas does require a concerted e!ort.

The other thing we want to do is to stabilize and grow again those existing products that still have market exclusivity for a signi"cant period of time, notably VUMERITY and SPINRAZA.

The third thing was to really look at our cost base. Although we had a relatively mature product portfolio, we had -- one of the higher OpEx to sales ratios in our -- among our peer group, and we needed to address that. But more than that, we needed to really reallocate our resources.

Fourth was to really look at our research and development pipeline, particularly for the longer-term growth outlook. We have really taken a deep dive into research and development, looked at those products -- projects that perhaps no longer ful"lled their original target product pro"le where the practice of medicine has changed, where the probability of success had changed, and we have terminated those programs so that we can focus on those assets that we think have the most promise. And I think we have a number of those, any one of which could actually meaningfully add to our longer-term growth.

And then the "nal thing was we said right at the outset, we were interested in external growth. We always knew that the LEQEMBI launch was going to be a gradual launch. We always knew that also even the zuranolone launch was a nonconventional launch. And to derisk that pro"le, we wanted to look at external growth. And of course, we've been able to do that.

So as I look at where we are in the third quarter, we actually had LEQEMBI was the "rst antiamyloid antibody to receive traditional approval for early Alzheimer's disease. ZURZUVAE was a mixed bag. We got an important indication with postpartum depression. But of course, we missed on the major depressive disorder. As expected, we received schedule IV listing from the DEA, and we also had QALSODY approved for treating a genetic cause of ALS.

This is not necessarily a product that is going to be of interest to many of you from the

revenue potential, but scienti"cally, this is a major milestone and validating the biomarker neuro"lament, I think will enable so many researchers to "nd further treatments for ALS and perhaps other diseases.

As I noted, we closed the acquisition of Reata Pharmaceuticals, and that gives us a whole new growth opportunity. SKYCLARYS is o! to a very strong launch, and we'll talk about that in a minute. But it also builds out our rare disease portfolio. As you know, we are trying to move into some adjacencies, just given the risk of the neurological conditions that we have tended to focus on, and rare diseases has been a logical place for us to go.

Biogen has been very successful with the launch of SPINRAZA, and we think we can do the same with SKYCLARYS. And as I mentioned earlier, we had the Fit for Growth program. And this wasn't just about cost reduction, because we do want to reinvest some of that, but we really needed to simplify the organizational structure to empower the organization more and move more of the decision-making closer to markets and customers. We have ended up taking an entire layer enterprise-wide out of the organization and in some parts of the organization, even 2 layers of that.

So we do think those cost savings will add meaningfully to our earnings per share as we look forward. But I'm also looking forward to a signi"cant change culturally in how we allocate capital and the agility and ability to take decisions in the organization. Could I move to the next slide, please?

So let's talk about LEQEMBI. Subject, I'm sure all of you are very interested in. We have always guided that this was going to be a gradual launch. And we know that partly from the ADUHELM experience, but also just from the fundamentals of what we're doing.

This is a product that needs to be administered within a treatment process or care network. And those care networks did not exist at the time of the launch. So they have to be built, and doing that requires actually quite a signi"cant change to the work patterns within clinics. And while IDNs and clinics are working really hard to put these in place, it, of course, takes time. And I think a terri"c example of that is the announcement recently by the Cleveland Clinic.

We all know that the Cleveland Clinic is one of the most widely respected medical centers anywhere in the world, and they recently announced that they had just infused their "rst patient with LEQEMBI, months after the approval. And I think that just speaks to the complexity that we're dealing with. And in a lot of ways, we not only are pioneering science, we're pioneering this commercial approach.

So of course, we have an aim of getting to 10,000 patients by the end of March. We're at 800 now. What gives us the con"dence that we think we can get there? Well, I think we have a number of green shoots here, signs of progress. The "rst is, as we look at our internal metrics of intent to treat and patient demand, we are seeing all of those things progress extremely nicely.

The FDA not only provided traditional approval, but EMS actually moved very quickly. The day of traditional approval, as they promised, they actually have provided reimbursement, and the patient registry has so far from what we hear from the market has been relatively easy to use.

We had some confusion around the reimbursement of amyloid PET and CMS has clari"ed that. Now of course, it's going to take a little time for that to #ow down through to the MAX. But I think that will also relieve some of the confusion out there.

I think one of the most interesting things is we've got 60% of the top 100 targeted IDNs now having P&T approval. One of the things that really gives me a lot of inspiration is usually, these P&T committees meet twice a year, but a number of them actually have organized special meetings just for LEQEMBI and not wait until the next meeting. And that says to me that there's a recognition of the importance of this treatment and being able to get patients on treatment.

So where we also go from here, remember, a year from -- a year ago from here, there were still skepticism about whether reducing amyloid plaque would really have a bene"t. And it wasn't really until the CLARITY study was "nally presented at CTAD last year, that we really have, for the "rst time, clear compelling evidence of the bene"t of removing these amyloid plaques.

And now, of course, we can go and say, "All right, that's tremendous. But why is that so? Well, for years, we've been trying to develop antibodies, and those antibodies failed. And that was -- that's what gave rise to the skepticism, which were the right patients, which was the right antibody that was going to get the right amount of drug into the brain. And LEQEMBI is really the "rst one to show that clear compelling evidence that, that has occurred.

Now of course, we don't want to get fancy. And that's where we're going. And we just had CTAD this year and think about what we've just done. We are generating more data to really demonstrate the bene"t of this treatment. We've seen, for instance, that the subcutaneous treatment is going to work, that we have comparability with the infusion.

And this means so much for the convenience of patients.

But this is no mean task either. Others have tried to do this. How do you get enough drug through the muscle tissue and into the brain? That has been achieved and is a major milestone. We've been looking at maintenance dosing.

What happens when you've cleared the plaque? Does the plaque come back? Well, we have 24 months data now that shows a lot of bene"t of staying on treatment.

Then the question is still who's the right patient? And data were shown with early -- with early stage patients with low levels of tau. And those are fascinating data. We had 76% of those patients stable over the course of measurement, and very intriguing and very interesting, we actually saw with 60% of those patients that we actually saw some clinical bene"t as measured by the CDR sum of boxes, completely unexpected that generated an awful lot of discussion at CTAD.

So now, of course, we're also looking at executing on geographic expansion. We've had the recent approval of Japan, and I'm traveling to Japan early in the new year to be with my friend and colleague, the CEO of Eisai to launch LEQEMBI in Japan. And of course, we've got global "lings under review in the EU, China and 10 other markets. So this is one where we're going to have to be patient, but all the signs are green at this moment. And for us internally, we see a launch that is on track.

But as we've always said, there's no real analogs. And every month, we learn something new. If I could move to the next slide, please, Chuck.

Now let's talk about SKYCLARYS, something that is much di!erent. And as you know, we now have 1,180 start forms to date, with about 860 patients actually on drug. When we look at all of the known analogs, we're actually exceeding all of those, including SPINRAZA at the same point in time.

Now we have to be a little cautious, because we all know that there would likely have been a number of patients ready and waiting by physicians. And I think that was even more of the case because you may recall that the product was actually approved in the spring, but then delayed for a couple of months due to a technical and temporary challenge on supply. And so I think it was an anticipation.

Nonetheless, there is a very strong desire to see this product come, and we're actually seeing a lot of requests from countries around the world to make SKYCLARYS available. And that just speaks to, I think, the understanding that this is the very "rst treatment that has ever been approved for Friedreich's ataxia. This is an incredibly debilitating disease that a!ects so many young people right in the prime of their life. And so it's extremely important that they bene"t from that. We had about \$43 million of sales in the third quarter.

One of the things that we are now working on, and I think this is where Biogen can really add value is, why is there 1,180 on start forms and 860 on the drug? Well, there are a number of things, trying to get reimbursement, we need genetic tests, we need to measure your liver enzymes before you go on the product.

And one of the di!erences from SPINRAZA is that they're not all incentives. They could be out there in primary care physician care. And the Biogen is well equipped to do that. We are used to providing genetic tests, we don't worry about the reimbursement, we provide those. We have mobile labs so that we can help patients who are not near to major medical centers to get, for instance, the lab implants done.

And also, we know how to pull through these start forms and navigate the di\$cult reimbursement situation. So I think not only is there an advantage for Biogen in getting this important medicine to patients around the world. But I think even in the United States, we can actually make this more rapidly available to patients.

So with that, I'll turn it over to Priya.

# Priya Singhal Executive

Thank you, Chris. This was an exciting quarter for Biogen's development organization, with the approval of ZURZUVAE in postpartum depression, as well as important new data presented for LEQEMBI and our tau-targeting ASO, BIIB080. Two programs we believe that are critical to expanding Biogen's leadership in Alzheimer's disease.

Starting with LEQEMBI, at CTAD last month, Eisai presented new data on a subcutaneous formulation of LEQEMBI. We believe the interim results at 6 months showed that subcutaneous LEQEMBI was comparable to the IV formulation on the basis of drug exposure as assessed by area under the drug as well as plaque -- amyloid plaque removal.

In terms of safety, we believe the timing, frequency and severity of ARIA-E was similar across IV and subcutaneous formulations. Additionally, overall, the incidence rate of systemic reactions with subcutaneous LEQEMBI was also lower with mild symptoms as compared to "rst-time LEQEMBI IV-treated patients from the CLARITY AD Core Study.

We believe these results further support the intent to develop subcutaneous formulation of LEQEMBI and if approved, may allow for greater patient access, improved compliance and convenience.

We've made signi"cant progress in our understanding of the potential clinical bene"t that is associated with amyloid removal in Alzheimer's disease. However, there's still very many key questions remaining on how to maximize the clinical bene"t with these agents, including when to begin treatment.

We believe the di!erentiated and straightforward design of the CLARITY AD study, allowing entry of Alzheimer's patients with con"rmed amyloid pathology but low tau burden, allows us to gain additional insights into the clinical pro"le of LEQEMBI across various stages of Alzheimer's disease.

The data show that in the low tau subpopulation, which represents the earliest stages of early AD, 76% of patients showed no decline and 60% showed clinical improvement at 18 months, as assessed by CDR sum of boxes compared to 55% and 28% for placebo, respectively. We are very encouraged by these results.

A second key question for the "eld is what happens when you continue treating after amyloid plaques have been removed, and why would this be bene"cial? We believe that dual-acting LEQEMBI continues to support brain neuron function by also removing soluble highly toxic proto"brils that can cause neuronal injury and death even after plaque removal. Therefore, with LEQEMBI, we believe there is a potential for longer-term treatment to sustain or further the clinical bene"t observed within the initial plaque removal phase.

In terms of data supporting this potential bene"t, when examining the 24-month data from the CLARITY AD Core Study and the open-label extension, we see a potential clinical bene"t from continuing to treat with LEQEMBI. Speci"cally, the separation in CDR sum of boxes between the group that continued to receive LEQEMBI or the early start group, and the group who switched from placebo to LEQEMBI, the delayed start group was maintained during the 6-month open-label extension following the core study, suggesting a disease-modifying e!ect.

The clinical bene"t observed in the early start group at 24 months is further supported by the comparison against participants from the ADME observational natural history cohort that was selected to match the baseline demographics and clinical characteristics of the CLARITY AD population.

Additionally, while the delayed start LEQEMBI cohort does not catch up to the early start group, we do believe a potential slowing of decline with 6 months of LEQEMBI treatment as compared to the ADME cohort at the 24-month time point.

We believe the totality of these data support both the importance of initiating treatment early, as well as the durability of e!ect observed with continued LEQEMBI treatment.

As we aim to provide options for patients, Eisai is currently evaluating maintenance dosing or every 4-week LEQEMBI dosing after the removal of plaque and plans to submit a regulatory "ling by the end of Q1 2024.

Also at CTAD, Biogen presented new data from the Phase Ib study of our antisense oligonucleotide targeting tau. In the new results in this small study for patients treated with the 2 highest doses of BIIB080, we observed favorable trends on multiple exploratory end points of cognition and function as assessed by the CDR sum of boxes, MMSE and Functional Activities Questionnaire, when compared to the baseline matched external controls at week 100. These "ndings build upon previously reported results from the BIIB080 Phase Ib, showing strong target engagement in the CSF and a reduction in the brain tau pathology as measured by Tau-PET.

Biomarker data from the placebo-controlled period and long-term extension phase of this study were just recently published in JAMA Neurology. Viewed as an underlying pathology of Alzheimer's disease, tau has long been an area of focus in Alzheimer's drug development. While many prior attempts using monoclonal antibodies have failed, we now see from the Phase Ib study of an [indiscernible] a convergence of evidence across soluble biomarkers, tau PET and exploratory clinical measures, suggesting a link between the reduction in tau pathology and potential clinical bene"t.

As a reminder, our tau targeting ASO is a completely new mechanism, which unlike the antibodies is designed to reduce production of all forms of tau, including both intracellular and extracellular species.

One clear challenge that we saw with antibodies was their inability to target intracellular species. We believe these results, while early, are encouraging, and we are excited to be enrolling the Phase II CELIA study of BIIB080 in early AD.

Over the last few months, I have spoken about our e!orts to reprioritize Biogen's development pipeline in an e!ort to optimize R&D value and productivity. This presented us with an opportunity to take a fresh look at our pipeline, and identify areas where we believe we have both su\$cient expertise and con"dence in the science as well as our ability to deliver meaningful new treatments to patients while prioritizing resources accordingly.

This starts with Alzheimer's, where we believe we have demonstrated scienti"c leadership and are taking steps to build long-term impact. This includes, "rst, working with Eisai on several initiatives aimed at di!erentiating LEQEMBI and providing options to patients.

Second, continuing to advance our ASO targeting tau, as well as preclinical programs that span di!erent molecular targets and approaches across the Alzheimer's disease biology.

Lastly, continuing to deliver new insights on Alzheimer's disease biology and long-term treatment with anti-amyloid antibodies.

On this point, at CTAD, we also presented new data from aducanumab, including new data

from the EMERGE long-term extension and the EMBARK redosing study. We believe these "ndings can help support the "eld's understanding of the potential long-term treatment bene"ts associated with anti-amyloid antibodies.

Beyond Alzheimer's disease, we have multiple near-term in#ection points across various programs and therapeutic areas over the next year. This includes regulatory outcomes for LEQEMBI in several geographies as well as regulatory outcomes for other products.

In addition, we have important readouts for BIIB105 in ALS, BIIB121 in Angelman syndrome and dapirolizumab pegol in SLE, all expected midyear 2024.

Combined with the long-term potential of programs like liti"limab, our homegrown assets currently being evaluated in 2 Phase III studies for SLE and a Phase II/III study for CLE, we believe our pipeline has the potential to support Biogen's return to sustainable growth. And with our partners on the research and business development teams, we continue to evaluate external opportunities.

I will now pass the call over to Mike.

# Michael McDonnell Executive

Thank you, Priya. Good morning, everyone. I'm going to provide some highlights and color regarding our "nancial performance for the third quarter of 2023, and all the "nancial comparisons that you'll hear are versus the third quarter of 2022. Total revenue for the third quarter was \$2.5 billion. That's an increase of 1% at actual currency and 3% at constant currency.

Non-GAAP diluted EPS in the third quarter was \$4.36.

Total MS product revenue was \$1.2 billion. That's a decrease of 14% at actual currency and 12% at constant currency. And that decline is primarily attributable to generic entrants for TECFIDERA as well as broad competition in the MS market.

I would like to provide a few updates to the MS business this quarter. First, in Europe, we continue to see that some generics have not yet fully exited some of the EU markets, and we do believe that there may still be some generic product remaining in the channel. The pace of generic withdrawal has been slower than we expected, but we continue to closely monitor the situation and are working to enforce our legal rights to market protection.

TYSABRI biosimilar was approved in the U.S. and EU, which we had previously assumed. At this point, we are not expecting a launch this year, but we are aware that there are plans to launch a biosimilar in the "rst half of 2024. Biogen still has patents relating to TYSABRI and we will continue to enforce our IP.

VUMERITY was a bright spot in the third quarter. We did see revenue increase 20%, and that was driven primarily by global patient growth. However, we are seeing continued e!ects from both pricing pressure and an overall contraction of the oral segment of the market in the United States.

Next, Global SPINRAZA revenue of \$448 million increased 4% at actual currency and 7% at

constant currency. The 7% growth that we saw included 7% growth in the U.S. as well, and that was driven by patient growth, while outside the U.S., SPINRAZA bene"ted from the timing of shipments in certain markets.

We continue to be encouraged by the performance of SPINRAZA in the past few quarters and continue to believe that we're making good progress against our goal of returning SPINRAZA to consistent growth over time.

Biosimilars. The third quarter revenue of \$194 million, increased 4% at actual currency and 7% at constant currency.

During the third quarter, we updated how we present commercialization expenses incurred within the LEQEMBI collaboration. Our 50% portion of LEQEMBI net product revenue and cost of sales which includes royalties will continue to be classi"ed as a component of revenue. Now Biogen's 50% share of all global commercialization sales and marketing expenses for the LEQEMBI collaboration will be presented in the SG&A expense line and will no longer be presented as a reduction to revenue.

During the third quarter of 2023, we reclassi"ed approximately \$39 million of commercial collaboration costs from the "rst and second quarters of 2023 to re#ect this change in presentation. These costs were moved out of the revenue line and into the SG&A expense line, resulting in a \$39 million increase to both revenue and SG&A for the third quarter, with no bottom line impact.

This change in presentation does not a!ect any of our agreements with Eisai, and we continue to share LEQEMBI collaboration revenue and commercialization expenses 50-50. This change will allow us to be more transparent in our reporting and it's consistent with how some others in our industry report collaborations. This change will have no impact to Biogen's bottom line.

As Eisai reported in-market product revenue for LEQEMBI in the third quarter was approximately \$2 million. Our anti-CD20 revenue was \$421 million, and that included an \$11 million operating loss related to LUNSUMIO.

Contract manufacturing royalty and other revenue of \$304 million was notably higher yearover-year, and that was driven mainly by the timing of batches, and it also includes the reclassi"ed \$39 million, which I just mentioned.

A couple of things to note regarding the third quarter expenses. Third quarter non-GAAP cost of sales was 26% of total revenue, and that includes \$35 million of idle capacity charges. Cost of sales as a percentage of revenue continues to be impacted by product mix and in particular, this quarter, increases in contract manufacturing revenue.

Third quarter non-GAAP R&D expense includes approximately \$44 million related to our portion of the LEQEMBI collaboration, and approximately \$37 million in closeout costs related to the EMBARK trial for ADUHELM.

Third quarter non-GAAP SG&A expense includes approximately \$82 million related to our portion of the LEQEMBI collaboration, and that includes the previously mentioned

reclassi"cation of \$39 million in collaboration costs from the "rst and second quarters of 2023 from revenue to SG&A expense.

As compared to the prior year, the decrease in third quarter non-GAAP SG&A expense was driven by approximately \$100 million in cost savings initiative, partially o!set by an increase in commercialization expense for LEQEMBI and ZURZUVAE as well as the \$39 million reclassi"cation that I just mentioned.

Next, a few brief comments on our balance sheet. We ended the quarter with \$2.3 billion in cash and marketable securities and \$7.3 billion in debt, and that puts us in a net debt position of approximately \$5 billion. Even though these "gures include the majority of the payments related to the close of the Reata transaction, it is important to note that we expect to utilize an additional approximately \$1.3 billion of cash for outstanding payment obligations related to the transaction, and that should occur in the fourth quarter. We do continue to generate steady positive cash #ow from operations and generated \$518 million of free cash #ow during the third quarter.

In the coming quarters, we will be utilizing a portion of our cash #ow to pay down some of the newly acquired \$1 billion of short-term debt that we used to partially fund the Reata transaction.

And next, I'd like to provide an update to our full year 2023 "nancial guidance, which takes into consideration 3 key recent events. One is the completed acquisition of Reata. Second is the regulatory approval for ZURZUVAE in postpartum depression. And the third is the modi"cation that we made to our presentation of the LEQEMBI expenses.

We're updating our full year 2023 revenue guidance to a low-single-digit percentage decline, and that is an improvement from our previous guidance, which was a mid-single-digit decline. And that's, of course, compared to full year 2022 reported results. This is primarily driven by the update to how we present LEQEMBI commercial expenses, which are no longer presented as a reduction to revenue.

We are also updating and narrowing our full year 2023 non-GAAP diluted earnings per share guidance to be between \$14.50 and \$15. As we have previously noted, the acquisition of Reata will be slightly dilutive to our 2023 non-GAAP EPS, with an expected impact of approximately \$0.75. Much of this impact comes from "nancing the transaction, which a!ects our operating income and expense line, including incremental interest expense, a signi"cant decrease in interest income. Absent this impact from the Reata transaction, our EPS guidance would be narrowed to \$15.25 to \$15.75 and that's consistent with the midpoint of our previous guidance.

Further, for 2023, we expect some incremental OpEx associated with the Reata acquisition, and that will be largely o!set by decreased spending for ZURZUVAE as we prepare to launch in the PPD indication. We also expect some savings from our Fit for Growth program in 2023.

Looking forward to 2024, it is very important to note that as a result of the Reata transaction, we will have approximately \$6 billion less in cash that was generating interest income at approximately 5%, as well as an incremental \$1 billion in debt at a blended rate of approximately 6.7%.
I'd also note that for the full year 2023, we've absorbed a headwind of approximately \$0.30 to EPS due to currency #uctuations, and this is a dynamic that we're watching very closely for 2024. I'd o!er that we estimate every \$0.01 change in the euro versus the U.S. dollar has a roughly \$18 million impact to our P&L. I'd also refer you to our press release for other important guidance assumptions.

Finally, a brief update on our Fit for Growth cost savings initiatives. I'd start by reiterating that the program maintains the target of approximately \$1 billion in gross savings by 2025 as compared to full year 2023. Since we "rst announced the program, we have not made any changes to our planned level of reinvestment other than the acquisition of Reata and the regulatory approval for ZURZUVAE in PPD-only, neither of which were included in our original assumption.

The expected impact of Reata and ZURZUVAE to the original program is approximately a net decrease in the expected reinvestment of \$100 million, or said di!erently, we now expect an additional \$100 million in net savings. So the original \$700 million in expected net savings increases to approximately \$800 million.

I would also just highlight that these "gures do not include the impact of the LEQEMBI commercial spend, which will now be re#ected in our SG&A line and will, of course, continue to ramp up as commercial activity and sales increase.

I'd also like to point out that as before, the expense estimates presented today did not contemplate any incremental business development or any transactions related to the biosimilars business, and they assume continued R&D spend on ADUHELM through at least 2025.

I'm going to now turn the call back to Chris for some closing remarks.

# Christopher Viehbacher Executive

Thank you, Mike. So we're already into 2024 in our AOP planning. And as we look to next year, we actually have a number of milestones, which is nice to see. As I mentioned earlier, we have an EMA decision on LEQEMBI in the EU and in China. We'll have a decision on SKYCLARYS in the EU and QALSODY in the EU, all in the "rst half of next year.

We intend to have 2 more important regulatory submissions, one for the subcu formulation and also for the IV maintenance dosing, both for LEQEMBI. And then "nally, we're actually starting to see some development readouts in the pipeline. We expect dapirolizumab Phase III in SLE in the new year. We have our ASO for sporadic ALS, reading out on a Phase I/II, Phase I in Angelman syndrome. And of course, with Sage, the SAGE-324 program in the essential tremor.

So I think we'll have a number of interesting news points for next year.

And with that, Chuck, I think we can turn it over for questions.

# Charles Triano Executive

Thank you, Chris. Ali, can we please poll for questions?

## Operator Operator

[Operator Instructions] And our "rst question comes from the line of Salveen Richter with Goldman Sachs.

# Salveen Richter Analyst

Just on the Reata assets here, now with the acquisition closed and the launch progressing well, could you just give us your thoughts around key near-term value drivers, including the launch trajectory, the EMA approval outlook for early next year and then expansion into the pediatric population?

# Christopher Viehbacher Executive

Right. So when -- actually, when you look at SPINRAZA. SPINRAZA is a good analog. One of the nice things about the rare disease space is that we tend not to be so U.S.-centric. So when you look at SPINRAZA sales, it's broadly, not quite, but it's roughly 1/3, 1/3, 1/3 between the U.S., EU and then the international area.

And we expect the same really for SKYCLARYS.

So we do expect signi"cant value to come out of both EU but also in Latin America, perhaps some in the Middle East, Turkey. Obviously, for genetic reasons, there is none in the Asia region. But we do know that there are quite a few patients, for instance, in Brazil and in Argentina. So we are accelerating our e!orts to "le for approval in Latin America.

On the EU, you never want to try to predict entirely the regulators. They have to respect their ability to make a decision until the end. But everything we've seen so far doesn't really change anything in our view of the probability of this being approved in the EU. And that represented, if you may remember at the time of the transaction, we estimate about 1/3 of the value of the transaction.

And then the pediatric study, we are in discussion with regulators. That will be actually quite important, because there are a number of patients who start to become diagnosed as early as 5 or 6 years old, but certainly in that 8- to 10-year-old time frame. So it's quite important that we get the pediatric study underway.

## Charles Triano Executive

Thank you, Chris. Can we move to our next question, please?

#### Operator Operator

And our next question comes from Brian Abrahams from RBC Capital.

# Christopher Viehbacher Executive

I'm not hearing you, Brian.

#### Operator Operator

We move on next to Geo! Meacham from Bank of America.

# Geo!rey Meacham Analyst

Just had one on LEQEMBI maintenance. When we think about the strategy, I guess the question is, do you have regulatory color on a separate maintenance claim, just given the emphasis on plaque reduction initially? And related to that, would there have to be an initial level of evidence when you think about maintenance for -- with respect to CMS reimbursement?

### Christopher Viehbacher Executive

I'll pass that one, Geo!, to Priya.

#### Priya Singhal Executive

Thank you, Geo!. With regards to maintenance, what I can tell you is that Eisai has communicated that as you know, we are testing it every 4 weeks. This is with the intravenous infusion. And this data is expected to be "led by Q1 2024. I won't be able to comment on what it would lead to in terms of indication and such, but we are preparing the data for a potential "ling.

### Charles Triano Executive

Thanks, Priya. Next question please, operator.

### Operator Operator

And next, we'll go back to Brian Abrahams with RBC Capital Markets.

#### Brian Abrahams Analyst

Can you hear me now?

#### Christopher Viehbacher Executive

Yes, we can, Brian.

### Brian Abrahams Analyst

Okay. Sorry, I don't know what happened there before. Congrats on all the progress. So coming out of CTAD on subcu LEQEMBI. I realize FDA discussions are still to be had there.

Can you -- can you maybe help us understand your latest thinking as to what's likely to be required for approval? How much, if any, additional patient data do you think you might need to generate at the dose you might go forward with, might you expect to be able to "le for a lower dose based on PK modeling? And maybe you could con"rm whether additional patients you're still seeing #ows through the trials there are still seeing exposure below the 125% upper bound?

# Christopher Viehbacher Executive

Did you get all that, Priya?

# Priya Singhal Executive

Yes. Thank you, Brian. So this is really -- we are encouraged with the subcutaneous interim data that we shared and Eisai shared at CTAD. Just stepping back, the subcutaneous study was a sub-study in the open-label extension for CLARITY AD. The patient population that was treatment naive and where we were really assessing the PK/PD, which is the PK parameters as well as the PD outcome of amyloid plaque reduction was a subset of 72 patients.

And in addition, the study was set up to gather safety and tolerability in an additional 324 subjects. So the total study population was 394.

And what we shared was that we believe that the subcutaneous formulation showed comparability and bioequivalents with the intravenous formulation. And it was between the con"dence intervals of 80% and 120% -- and 125% of exposure.

What we also noted was that the overall area under the curve was about 11% higher with subcutaneous, and we also noted that there was a 14% increased plaque reduction at the 6 month time point.

So these are kind of the observations that we have from the data. We have had prior regulatory discussions, and we're now embarking upon additional meetings with the FDA to share the data with them and discuss next steps.

So at this point, that's where we are. The plan is as communicated by Eisai to "le for a BLA in Q1 -- by Q1 2024. And that's really the update.

When -- Eisai has also commented potentially on a maintenance subcutaneous formulation and "ling, but that is much later in the 2025 time frame. So that's where we are right now.

I hope I answered all your questions. Happy to follow up if not.

#### Charles Triano Executive

Thanks, Priya. Let's go to our next question, please.

#### Operator Operator

[Operator Instructions] So while we do, we're going to take our next question from Terence Flynn from Morgan Stanley. I apologize. We next can now go to Robyn Karnauskas from Truist Securities.

#### Robyn Karnauskas Analyst

I just want to get a sense of how you think about duration of therapy, given your maintenance data, how should we think about modeling how long people might be in drug at this time with the knowledge that you have for LEQEMBI?

#### Christopher Viehbacher Executive

Why don't you start with that, Priya, and then I can "nish maybe from a commercial point of view.

# Priya Singhal Executive

Yes. Thank you, Robyn. So just stepping back, as we think about the Alzheimer's disease progression, we know that patients actually have plaque reduction. But we have data from several sources now, LEQEMBI, ADUHELM and others that show that while plaque reaccumulates slowly at the rate of about 3% to 4% based on current understanding annually, the biomarkers actually re#ecting disease progression continue to accumulate as soon as patients are o! drug at least with LEQEMBI and ADUHELM. And this is based on the A-beta 42/40 ratio but also other pathological biomarkers.

We've also shown most recently at CTAD that actually continuing patients on the 24 months, and we showed data on that, which I also shared in my prepared remarks. We saw that while patients who were on placebo, during CLARITY AD study at 18 months and then transitioned on to drug in the open-label extension, they never really caught up with the what we call the early stage early start cohort. However, they maintained their di!erence with the early start, which we believe is a disease-modifying e!ect.

And then "nally, when we superimpose that with the ADME data and the natural history data, we see that the patients who even start at 18 months, actually maintained some level of stabilization on drug.

So all these areas of evidence point us to the fact that really continuing drug at this point some level is going to be important.

You're absolutely right that I think we are still evaluating what is the right frequency and for how long, and that is what the maintenance sub study, which is part of the Phase II open-label extension is evaluating, and that's the data that we are gathering. But we believe that drug will need to be continued for a certain period of time, and patients will need to be monitored.

# Christopher Viehbacher Executive

I mean more broadly, I would say, I've heard many neurologists say, we used to think of Alzheimer's disease as a 4- to 8-year disease, largely beginning with the onset of symptoms. With what we know now, a lot of them are saying, we're thinking about this in 25-year terms. We know that patients start to accumulate plaques long before they have symptoms. And as Priya just said, that even after you remove the plaque, there seems to be some bene"t in continuing therapy. And as we think about that commercially, "rst, we have this AHEAD study that has launched, looking at presymptomatic patients.

It also raises the importance of blood-based biomarkers, because that's the only way we're going to be able to detect and diagnose or at least triage patients initially at an earlier stage.

And of course, that's where the subcu formulation also becomes important, because if we are thinking of people staying on drug for longer and I'm certainly not suggesting 25 years. But this could be a much longer period certainly than the 18 months. And therefore, the convenience of the subcu formulation is even more important.

So we are learning every day. I mean, I think we saw that at CTAD with -- we understand increasingly the importance of early treatment. We're seeing the importance of staying or the bene"t of potentially staying on treatment, and so that has all kinds of commercial implications and how we do "nd -- do more studies and develop di!erent formulations. And it's actually quite exciting.

#### Charles Triano Executive

Thanks, Chris. Let's move to the next question, please.

### Operator Operator

We're next is going to go to Umer Ra!at from Evercore.

# Umer Ra!at Analyst

I wanted to focus on lucanumab subcu. And Priya, I think you mentioned 2 things. One, that there's a subcu maintenance "ling, which is separate, which could be in '25. Could you con"rm if the dose is lower if it's a single shot instead of 2?

And also, the FDA interactions on subcu that you mentioned, are they a follow-up to previously agreed upon trial design for subcu? Or do you think you need clarity whether plaque reduction alone will su\$ce for "ling?

# Priya Singhal Executive

Thanks, Umer. So "rst of all, I think on the maintenance subcu that is really a much later potential evaluation and "lings. So I won't be able to comment further on that speci"cally with regards to dose, because we "rst need to evaluate IV maintenance, and that is really the next milestone that's on the docket here.

And then going back to your other question of what is the purpose of the FDA regulatory meetings. So maybe just stepping back, Eisai had a number of meetings with FDA prior to the launch of the subcutaneous open-label extension substudy that I spoke about and from CLARITY AD. And so what we do know is that we do need to show bioequivalence on both PK and then we need to show comparability on plaque reduction.

And based on the 6-month data that we just shared and Eisai spoke to at CTAD, we believe we have achieved that. And so that's the "rst part. The second part is with that because we have an 11% increase in overall AUC and area under the curve exposure and 14% increased plaque removal, at the 6-month time point, does that result in a di!erent dose? I think that, that is really a matter of discussion, and we would have to discuss that with the FDA, so I can't really comment more on that. But most importantly, I think the goal here was to show bioequivalence, which we believe we have achieved.

#### Operator Operator

And next, we'll go to Michael Yee with Je!eries.

# Michael Yee Analyst

I wanted to come back to a topic on the AHEAD 3-45 study. I believe that your partner recently commented there could be an interim analysis based on 400 patients and

biomarkers. I noticed that he's been enrolling for a while, but maybe it's just sort of is picking up steam. Can you just maybe talk a little bit about the progress of that study, how you see that study and the status of patients getting in there?

### Priya Singhal Executive

So what I can tell you is that it's a very important part, the AHEAD 3-45 study is a very important part of the overall development plan for LEQEMBI as an anti-amyloid agent.

And the reason for this is that I think Chris mentioned it as well, just a few minutes ago. that we know that plaque builds up -- amyloid plaque builds up for many years, and then there's sort of a shift where tau tangles start appearing and then you have the appearance of symptoms.

So over the last several years, there's been a lot of work on clinical staging and such, and we know that the anti-amyloid agents that are currently like -- just like LEQEMBI, which is really the only one with traditional approval is targeting mild cognitive impairment, patients with mild cognitive impairment as well as mild dementia. But these patients already have symptoms and potentially a burden of tau.

The purpose of AHEAD 3-45 is to look at di!erent levels of amyloid plaque in patients who do not have symptoms, and see whether the addition of an anti-amyloid agent like LEQEMBI can alter the course of disease. So that's really the overarching aim of a study like AHEAD 3-45. It's a very large study. As you can imagine, it's hard to "nd the patients, but we are very pleased with the progress that the study is making.

And as Eisai commented very recently, there is the potential to do an interim analysis and think about whether other regulatory pathways are open with interim data. But we haven't really commented beyond that. These remain possibilities, but I think it will depend on how well we do with the recruitment and what the goals of eventual patient access are. Thank you.

#### Operator Operator

And next, we'll go to Terence Flynn with Morgan Stanley.

#### Terence Flynn Analyst

Great. Just 2-part for me. Just was wondering if you can provide any more detail on the breadth of prescribing for LEQEMBI? I know you gave us the 800 patient number, but if you look at how many centers that's across, that would be helpful.

And then I know you made some comments on some progress on the MAC coverage. Any more details on the time lines there for when we might get broader coverage at the MAC level? I know there's a couple MAC is already covering, but anything there would be helpful.

#### Christopher Viehbacher Executive

Yes. Terence, I don't have any real update on the MAC. There's, I think, with a dozen of them, and they're at various stages. I think by the time that's more -- that most of them have got there, I think there's an assumption that, that takes anywhere from 60 to 90 days to get through. So towards the end of the year.

On coverage, it's -- one of the most interesting things is really just the diversity of situations that we see. I talked to some physicians and some major medical centers, they've got the protocol. They've got the treatment. They're putting patients through now on a regular basis. But I've been talking to some major medical centers that you might think that they've got this all handled, and they're still thinking about these protocols.

And it's protocols are around what's the right pro"le of the patient to put in this. There is a teamwork approach on this. And so people have to connect on that. For some of the IDNs, they have all of the elements, but they have to connect internally with their MRI centers with the infusion centers.

So it's a little hard to give you a broad brush. I would say every day, we are "nding more and more patients, obviously, getting through the course. We are looking upstream at a number of indicators because really revenue is a lagging indicator between even when we start looking at registry results, it's somewhere between 4 to 6 weeks before we actually see those patients going on drug. But some of those time lines are changing constantly.

So it's a pretty moving process here. It's just, every day it changes. And so that's where, at some point, we get enough momentum, we get enough of these barriers cleared. One of the biggest is still the getting an appointment with a neurologist. And that's where I think we're looking at, what can we do with blood-based biomarkers, which are now available, not obviously to replace PET scans or MRIs, but can we use them to triage patients so that those who actually get into a neurology clinic are the ones who are already eligible.

So there's an awful lot of thinking right on the #y as we learn from this experience. Again, this is really one where the -- there aren't really great analogs. Some people try to suggest the CAR-T approach. And while that is also a product in a process, the volumes, the scale of this is much di!erent, and we're not obviously anywhere near as complex as a CAR-T approach.

So for us, there's not really any analogs we can do, and so we're learning on the #y as we go along. But like I say, every day brings progress and all of the indicators are in green so far, and it is really just getting enough critical mass now of all the centers who've got these care networks and Care Pathways in place.

#### Operator Operator

And next, we're going to go to Paul Matteis from Stifel.

# Paul Matteis Analyst

Chris, you just mentioned getting an appointment with neurologists. And then earlier in the call, you talked about the registry requirement not being as much of a challenge. I wanted to ask about the other components of the infrastructure here with LEQEMBI, IVs, PET scans and MRIs. How would you rank order these components of the equation as it relates to most and least challenging percenters to navigate? And how do you envision this kind of whole infrastructure network looking by, say, next summer?

# Christopher Viehbacher Executive

Yes. The situation is a little heterogeneous. I mean it's not quite the same situation in every

center. But I would say based on what we know today, I do think there is -- there's clearly, at the moment, the need to get an appointment with the neurologist.

The reality is that there weren't that many patients already in neurology practices. They tend to be in PCP practices. And the neurology practices -- neurologists were already busy. So - and we have quite a volume of patients now to put through those neurology practices. And a lot of them are realizing -- and then we have to sta! up on here.

Do I have enough business to justify sta\$ng up and not necessarily with neurologists, but with nurse practitioners, others who can take on some of the parts of the care pathway.

With some of them, it's going through their internal governance process and determining which patients, I think, appropriately at this stage, there's clearly an awful lot of caution around ARIA. My personal belief is that over time, neurologists will become more accustomed to understanding ARIA. Is there a di!erence between the asymptomatic and the symptomatic, and they'll have a lot more experience, but they're looking at making sure that the patients who go through are trying to get to have the least risk of ARIA.

I don't think the infusion center capacity seems to be a big issue for most centers. PET scans, there are enough PET scans as far as we can tell. It's really been around how do I get reimbursement for it? Is it just one? And it was more of the confusion around it.

So I think the clarity of that will just take one of the factors of discussion and time out of the process.

And there is just -- at each stage, if you send someone out to the PET scan, the scans got to come back. It's been interpreted by a PET scan reader there, but sometimes a physician will want to have someone in that practice read that. So -- and it's just connecting, sending the patient to all these di!erent points even if you're in an integrated delivery network.

So I don't think it's necessarily any one thing, although I would say if we can do a better job of getting patients triage even before they can get to the neurologist, that could certainly be helpful. But I think it really is -- this is changing the practice paradigm for a lot of clinics, and they're all having to work through it. And these, of course, are super busy people. They've got other needs and so trying to "t in the time to actually manage all this is actually a challenge.

So I think it's completely natural and expected that this is progressing slowly. But again, you see some who are racing ahead, and that certainly gives me the con"dence that others are going to "gure this out, too.

# Operator Operator

We can go to our last question, and that will be from Phil Nadeau from TD Cowen.

# Philip Nadeau Analyst

I want to ask about the SKYCLARYS EMA review. Could you give a bit more of an update on what the status of that review is? Has there been a need for an oral explanation? And generally, what's Biogen's con"dence that a positive CHMP opinion will be secured in the "rst half of 2024?

# Christopher Viehbacher Executive

Priya, do you want to take that one?

# Priya Singhal Executive

Sure. Thanks for the question. So overall, just stepping back during diligence, we reviewed regulatory correspondence and we had a certain level of understanding of the topics. And subsequent to closing the deal, we have had more regulatory interactions and nothing has changed our view, as Chris mentioned. We still expect to see an outcome in early 2024, so that remains on track.

With regards to whether or not there will be an oral explanation, that is really something we don't comment on because it's under review, and that's part of the review detail. So I hope that helps.

### Charles Triano Executive

Thanks, Priya, and this will conclude our call. Thanks, everyone, for joining us today. And the IR team will be available later on, of course, for any other follow-up questions.

#### Operator Operator

Thank you. And ladies and gentlemen, that does conclude today's conference. We appreciate your participation. Have a wonderful day.