Biogen CEO Plots A Slow Return To Growth As Revenue Set To Shrink Again In 2023

Christopher Viehbacher told his first earnings call as CEO that a review is under way to reverse Biogen’s fortunes, but noted Leqembi will not be a meaningful contributor while treatment and reimbursement bottlenecks remain.

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Biogen reported a 7% revenue decline for Q4 and the full year of 2022

A return to growth at Biogen, Inc. will not be fast, but new CEO Christopher Viehbacher provided assurances during the company’s fourth quarter earnings call on 1 February that a thorough review of operations is under way with options for cutting costs and improving revenue all on the table. However, Viehbacher also noted its Eisai Co., Ltd.-partnered Alzheimer’s disease therapy Leqembi (lecanemab) is not likely to be a meaningful contributor until certain bottlenecks are cleared.

Biogen reported $2.54bn in fourth quarter 2022 revenue and $10.17bn for the full year, down 7% for Q4 and for the year – this is after Q4 and full-year revenue respectively fell 4% and 18% in 2021 and 22% and 6% in 2020. Losses of patent exclusivity in the company’s multiple sclerosis portfolio, particularly for Tecfidera (dimethyl fumarate), have driven the declines and will continue to drive lower revenue in 2023. Viehbacher said he aims to build on Biogen’s efforts in MS and other neurological diseases, and expand in other therapeutic areas.

“Biogen new management is still early into their tenure and business review is ongoing,” Evercore ISI analyst Umer Raffat pointed out in a 1 February note. “It was pretty clear that while management is looking at cost cuts and [business development], etc., we may not get a definitive update till the summer.”

Leqembi won accelerated approval in early Alzheimer’s disease from the US Food and Drug Administration on 6 January and Eisai submitted a supplemental biologics license application the same day seeking full approval. But while the drug has launched in the US, Eisai has said it does not expect to win a favorable Medicare coverage decision from the Centers for Medicare and Medicaid Services (CMS) until the FDA makes its decision on full approval, which could come as soon as this summer, depending on whether the agency grants priority review.

In addition to the reimbursement bottleneck, however, diagnosis and treatment challenges also will limit the number of patients accessing Leqembi for the foreseeable future, Viehbacher said. These bottlenecks include a limited numbers of neurologists to manage patients, the requirement for PET scans or cerebrospinal fluid (CSF) testing to diagnose Alzheimer’s with amyloid pathology, access to infusion centers for the I.V.-administered drug, and the requirement for frequent MRI monitoring to assess patients for amyloid-related imaging abnormalities (ARIA).

“I would say for the next two to three years, the demand for the product is probably more limited by capacity of the system to actually diagnose and treat patients,” Viehbacher said.

Biogen and Eisai are working to address some of these health care infrastructure issues, but these are not challenges that the companies expect to overcome in short order. Eisai has said previously that it expects 100,000 patients in the US to access Leqembi treatment within the first three years. Part of this is related to the difficulty in ensuring only eligible patients receive treatment with the amyloid protofibril-targeting therapy, starting with a PET scan or CSF testing to confirm amyloid pathology.

“We're talking about $26,500 for the drug cost, but there's a lot more cost to the system for the treatment of patients,” Viehbacher said. “A PET scan, for instance, costs around $7,000, as an example. And you have the MRIs and you have the treatment. And that's why, to me, blood diagnostics could play a bigger role in actually reducing the overall cost.” However, he noted, the blood-based tests still are a couple of years away from reaching the market.

Testing is also under way for a subcutaneous version of Leqembi, which would eliminate the need for infusion centers, and for a maintenance regimen, which could help reduce drug costs with lower or less frequent dosing. Eisai plans to submit both subcutaneous Leqembi and the maintenance dosing regimen for US FDA approval before the end of its 2023 fiscal year, which ends 31 March 2024.

Biogen is no longer investing in the commercialization of Aduhelm (adalimumab), its first Eisai-partnered amyloid-clearing antibody approved in the US, after the product’s failed launch following CMS’s decision to decline Medicare coverage for anti-amyloid antibodies cleared through the accelerated approval process outside of their use in clinical trials. (Also see "How Biogen’s Aduhelm Bet Became A Commercial Bust" - Scrip, 6 Jun, 2022.) This is the first year under the companies’ renegotiated partnership agreement, under which Eisai no longer contributes funding for research or commercialization of Aduhelm. (Also see "Eisai Gives Full Aduhelm Responsibility To Biogen Under Amended Agreement" - Scrip, 14 Mar, 2022.)

Growth Through Current Products, Cost Cuts, Deals

Without Leqembi or Aduhelm as a major growth driver in the near term, Biogen is focused on its existing commercial portfolio and other upcoming opportunities, but the immediate forecast is grim. In addition to the past three years of revenue declines, the company is forecasting a mid-single-digit decline in revenue for 2023, which is roughly in line or slightly above analyst consensus for this year. (See chart below for detailed Q4 and 2022 revenue performance.)

“Consensus estimates a 7% revenue decline while we currently expect closer to a 9.5% revenue decline,” William Blair analyst Myles Minter said in a 15 February note.

Wolfe Research analyst Tim Anderson said in a same-day note he anticipated a 4% decline this year. “On its conference call, BIIB generally painted a picture of reshaping the company that will take some time (investors hoping for an immediate change may be disappointed),” Anderson said. “At first, will be addressing cost base. Then, will reprioritize R&D efforts – sounds like additional pipeline terminations could occur (beyond a few announced today).”

Biogen said it took a $120m GAAP impairment charge related to its decision to discontinue development of vixotrigine (BIIB074) for neuropathic pain, but it also had a $195m pre-tax GAAP gain due to an adjustment to the value of contingent consideration obligations related to vixotrigine. The Phase II asset came from the company’s acquisition of Convergence Pharmaceuticals Ltd in 2015. (Also see "Biogen Idec buys analgesic developer Convergence for $200m+" - Scrip, 12 Jan, 2015.)

Biogen also said it notified partner InnoCare Pharma Ltd. in February that it decided to terminate a license and collaboration agreement for orelabrutinib, a BTK inhibitor in Phase II for MS. The company paid $125m up front in 2021 to access the program. (Also see "Biogen Partners With InnoCare To Keep Up With BTK Inhibitor Leaders in MS" - Scrip, 13 Jul, 2021.)

Viehbacher explained that there are five elements that Biogen is focused on as it plots a path to growth, one of which is a review of the company’s R&D pipeline. The other four include:

• Executing successful launches of Leqembi and the Sage Therapeutics, Inc.-partnered depression drug zuranolone, which is under FDA review with a 5 August action date; (Also see "Sage/Biogen See Big Potential Market For Zuranolone In PPD" - Scrip, 1 Jun, 2022.)

• Capitalizing on opportunities for existing products, including spinal muscular atrophy (SMA) blockbuster Spinraza (nusinersen) and Tecfidera follow-on Vumerity (diroximel fumarate);

• Aligning the company’s cost base with its revenue, even after $1bn in planned cuts; (Also see "CEO Vounatsos, Aduhelm Commercial Team To Exit As Biogen Shifts Focus" - Scrip, 3 May, 2022.) and

• Evaluating external opportunities, including both acquisitions and licensing deals.

“Any company should always be open to thinking about external growth opportunities,” Viehbacher said. “This hasn't always been a major thrust of the company in the past, but I do think that as we expand into other areas, such as immunology, rare diseases, psychiatry, that there may be opportunities to bolster those franchises through external growth.”

Biogen has an increasing cash stockpile to fund dealmaking, with $5.6bn on its balance sheet at the end of 2022 and with $812.5m coming from Samsung BioLogics in April. The company agreed in January 2022 to sell its interest in the Samsung Bioepis Co., Ltd. biosimilars joint venture to Samsung BioLogics for $1bn up front plus two future payments, including a final $437.5m payment due next year. (Also see "Bioepis JV Sale To Provide Needed Cash To Biogen" - Scrip, 27 Jan, 2022.)

Viehbacher said he’s thinking about business development in terms of areas where Biogen already has expertise, such as neurodegenerative diseases and immunology – both of which the company has experience with because of its MS legacy. It also has a growing immunology presence internally with two ongoing Phase III programs in lupus. Psychiatry and rare diseases also make sense, because Biogen can use the infrastructure it is building to support zuranolone in major depressive disorder and postpartum depression, and that it has built in rare diseases because of Spinraza for SMA.

Whether or not the company engages in M&A rather than only licensing transactions remains to be seen, however. “Biogen hasn't necessarily looked at acquisitions as part of its growth strategy,” Viehbacher noted. “Equally, I tell people, well, there wasn't a lot of point hiring me if you don't want to go do deals. So, it's not to say we are, but I think there is now an openness within the company to at least look at it.”