Welcome to the TD Cowen 43rd Annual Healthcare Conference. I'm Phil Nadeau, one of the biotech analysts here at Cowen. It's my pleasure to moderate a fireside chat with Biogen. We're really happy to have with us today Chris Viehbacher, the new CEO. Chris, congratulations on assuming the role of CEO. As BioCentury said this weekend, you have a tiger by the tail. Maybe we'll start just with a general question. What's, what's your view of the state of Biogen now, and what do you think Biogen needs to do over the next five years to create shareholder value? Thanks, Phil. It's good to be with you this morning. You know, Biogen is in kind of two situations. You know, on the one hand, we have the Biogen that has been successful over 45 years in multiple sclerosis, and now we're shifting it. We're in Boston, so I think it's legitimate to quote our local newspaper. The Boston Globe had not so long ago an article about the top and most interesting launches for 2023, and Biogen was the only company up there with two of those. You know, we've got two priority reviews now following Friday's announcement, so that's a unique opportunity. I have to say, in even my 35 years, getting two significant launches is unique. Now we have to do a lot to prepare for those launches. First, Biogen has been very, very focused on MS. You know, with zuranolone, for example, we're going into a much broader patient population as well as physician population than we're used to dealing with. We'll probably be looking at direct-to-consumer advertising, which we haven't really done before. Obviously on LEQEMBI, you know, this is a whole new therapeutic category that is about to open up after, you know, decades of trying to figure out something that will actually have a beneficial impact on cognition. There are a whole plethora of issues that we're gonna have to deal with on that. You know, we do have $5 billion of profit less, this year than we did in 2019, and we haven't necessarily adapted our cost base for that. There's a piece of this which is, you know, aligning our cost base, with best practice in the industry, but there's also a piece of how do we shift resource to support these new launches. Lots going on. We will dive into the launches, in a bit more detail, but maybe staying at the corporate level. You just mentioned the possibility for cost cutting. Biogen has already announced one initiative. It sounds like there could perhaps be another one at some point. This is a question we get from investors all the time. Where could the cost come from? How would you align your expenses better with where you think Biogen's gonna be over the next few years? The first thing we've started doing is we start benchmarking our pharma business by taking out the CD20 revenues. You know, a lot of companies do have tail product revenue, which is also passive income. I have to say, the CD20 revenue has been an enormous contributor to profits at Biogen, but it doesn't require any effort on the part of Biogen to support. And when you include those numbers, you know, some of the OPEX to sales ratios look a little more look more flattering. We start to look at, okay, what's the right spend on both SG&A as well as R&D? We spend well above our peers on those. You know, the interesting thing is there's a lot of good things going on. You know, our first step is, what's the right amount of money to be spending on R&D? That means we have to go through really the pipeline with a lot more rigor. You know, we appointed Dr. Priya Singhal as our head of development. Priya is not only an enormously smart, and well experienced person, but she's got a nice objectivity. She doesn't mind evaluating our own children, you know, in a very objective way, and that's huge. You know, Biogen has a business model that is focused on the brain, if I can put it that way. You know, in a lot of neurological conditions, they progress slowly. And you really can't do a phase II. We have an awful lot of very long and very expensive studies. As we think about the R&D spend, we have to think also about, well, you know, what is our portfolio gonna look like? I very much subscribe to the mission of Biogen, which is to go after really difficult disease states that others really don't. We can't have our whole portfolio look like that. There's a first step to really saying, "What is our R&D pipeline really gonna look like?" Then we need to engineer the cost structure to support that. That might be smaller, that might be the same. We haven't really decided on that. you know, we're spending $hundreds of millions on pre-launching LEQEMBI and zuranolone, whatever we do, we don't wanna create any distraction from that. you know, you look at the rest. Because Biogen has had a relatively low volume, high value product portfolio, it's got a lot of centralized structures. As we look at cost savings, we have to really look at, does it make sense to keep those centralized structures? Do we need to decentralize a little bit? How do we improve accountability for those costs? you know, there has been a first cost reduction wave, which I would argue is the low-hanging fruit. Now we're actually redesigning the organization for where it needs to be. We are looking at OPEX to sales ratios of our competitors and aspirationally targeting those for our company. You touched on the idea of an R&D portfolio structure. In your mind, what would be the ideal R&D portfolio structure in terms of spectrum of risk, spectrum of maturity, overall R&D as a% of revenue? Well, I mean, right now we're probably at over 30%. Our peers are probably at 20%. You know, I'm not really saying we necessarily have to be there. What I would say is, let's make sure that we're spending money on products that we have a higher degree of confidence will actually reach the market. There's no question that if Biogen hadn't really done that phase II study somewhere around 2012, at a time when, you know, 15 or 20 other molecules had all failed, you know. Those molecules had reduced plaque, but had not demonstrated any cognition. That phase 1 study demonstrated that there was still hope. Most people, I can tell you, I was at Sanofi at the time, I said, "Well, you know, looking at all that, there's just no way we can really continue to think about investing in Alzheimer's when we don't really understand the underlying disease biology." Biogen believed in that, Biogen and Eisai have spent literally billions dollars on the clinical development of that. If companies like Biogen don't do that, and don't do that for Parkinson's, we're never gonna find a cure. We also are a business, and so we need to have some things that where we can actually do a phase II and get a better sense of safety and efficacy, and then go into a phase III that doesn't take forever and doesn't cost an awful lot. Trying to balance, making sure we're still going after some of those hard things. You know, immunology, I think is an area, rare diseases and neuropsychiatry, which we're now in through zuranolone. It's a question of balance. I have to say I'm treading somewhat carefully because I think there are an awful lot of fundamental strengths in there. You can break things. How do we adapt the culture and how do we adapt the organization? We're certainly recognizing that we can't keep having a declining revenue stream, and we can't have an inflated cost base. I think one of the most notable quotes from the recent earnings call was when you said, "I don't know why they would have hired me if they don't wanna do deals." I think people are expecting business development to be a part of Biogen's future. In the past, Biogen's maybe been criticized for not pulling the trigger on deals or perhaps not evaluating what we externally thought they should do correctly, which we could be wrong. How do you think business development should go in the future? How will Biogen and its board decide which deals to do and which don't make sense? It's always amazing the quotes that get picked up. They... The reason I said that was there is this perception that Biogen doesn't do deals. You know, to me, a lot of investors don't wanna say that that's taken off the table. It's not meant to be a signal that we're gonna go do deals. I would say that, you know, our board is certainly open if there is a good proposition. Now, we all know that a lot of M&A does not deliver value, it's not easy to do good deals. You know, where I sit, you know, we're not necessarily in a hurry to do anything because we have these two terrific product launches. To me, the two areas I would be looking at is, you know, for instance, can we build out more of a rare disease franchise with some tuck-in type acquisitions? Is there something that comes along that really generates return on investment, you know, that would help de-risk some of the growth profile? While I believe LEQEMBI and zuranolone are gonna be major contributors to revenue growth, the actual offtake is not gonna be so easy. We may wanna have something that de-risks it. Now, you know, way back when I was at Sanofi and we were doing Genzyme, you know, we could have made the deal go a lot faster if I'd have just paid $80 a share. To me, I knew our investors saw that there was value creation if we could buy this for $75 or less. That's why it became a hostile deal, and we acquired it for $74, and it created an awful lot of value for Sanofi. I'm very much conscious that if we're gonna do a deal, it can't just be a strategic type thing. It's gotta financially make an awful lot of sense. There's no particular plan for an acquisition, but I did also wanna signal that we're not taking it off the table just because we're Biogen. One of the more interesting aspects of the BioCentury article, an interview with you over the weekend, was the idea that you broke, I think it was at Sanofi, of the NPV method. can you talk a bit about that and is that something that Biogen does now? Is that something that you're gonna try to also break Biogen of? Well, you know, a net present value, and then you take an expected net present value calculations in the hands of a scientist is actually a dangerous thing in my view. you know, there's. The number of times I have sat in corporate meetings where someone puts up, you know, a number and says, "Well, the number is 482.5, and therefore we're not gonna do the deal." you know, if you think about an expected net present value calculation of a product that is in phase II, I mean, think about the error bars just around the sales forecasts, right? you know, the infamous probability of success. you're gonna get into, well, how much are we gonna spend? Then we got to think about where's the market gonna be in 10 years when this product comes to market. It would be foolish, in my view, to do that. When you actually discount this thing back and you look at it, nothing is worth doing in some ways. To me, what I have found over the years is, having been involved with a lot of product launches, if I can see a really clear unmet need and I can have someone explain in very clear terms why this drug could really help that unmet need better than anything else that's out there in the market or anything else that is already in development, I can sell that drug. Then, you know, let's develop that further. I never believed in. You know, a lot of people like an expected net present value because they're not comfortable with judgment. If you can quantify it, you know, then you can be less criticized. Our business is around managing risk. We have to figure out which risks we're gonna take, and we have to be explicit about that and how we're gonna mitigate those risks. You can't really hide behind an expected net present value. That's why I don't really like them. Obviously, you got late-stage assets. If we're gonna do if we had to do an acquisition, then, you know, we're gonna be pretty robust on the financial analysis. At an early stage, I don't think it's the right way to do it. I think you have to have that belief in your, what you're trying to address with your product. Turning to the product launches, LEQEMBI is obviously a big one. Can you discuss Biogen Eisai's strategy for the initial launch once reimbursement is secured? In particular, what are Biogen Eisai gonna do to eliminate the bottlenecks like infusion seats and diagnosis in order to get patients on therapy? Well, I mean, this is a really interesting launch. I mean, first you take the neurology community. You know, it obviously varies by physician, but quite a few neurologists will tell you that really, they typically don't have more than about 10% of their patient population today as Alzheimer's patients because, you know, quite frankly, there hasn't been that much to be able to do for them. They're not necessarily well reimbursed for that, and these are very complex patients. The neurologist is already busy, so we're gonna have more Alzheimer's patients coming in. You know, the diagnosis is not simple. We either need to have a PET scan or you need to have a lumbar puncture. You know, a PET scan costs about $7,000. Lumbar puncture is not necessarily an easy thing to organize, and there's a capacity constraint around that. Probably in Europe, almost everything will be lumbar puncture because of the lack of availability of PET scans. You know, in the first 14 weeks, you probably need three MRIs according to the label. You have biweekly infusions. One of the things that we have is a drug that walks and talks like a specialty drug, but we've got primary care-like volumes. The first thing we're really gonna have to do is help think about how does the capacity expand. We all know that that doesn't help overnight. There's a number of things that we can do. One is, you know, blood diagnostics could be a real game changer here. They have been around for some time, but nobody really wants to develop a blood diagnostic commercially if there is no treatment. There's just no market. Now we have a treatment, everybody is racing to bring those blood diagnostics. The blood diagnostics will be really important not only because you could save the system money. If we can get a blood diagnostic that you know, has been validated against PET scans, maybe we don't need the PET scans, maybe we don't need the lumbar puncture. The other is, you know, today we talk about early stage, Alzheimer's patients as being mild cognitive impairment, the MCI. Now, as a lot of neurologists have said, well, actually, they're not that early stage at all. In fact, it turns out that the plaque levels are probably at their peak just before you have symptoms. Now, up to now, it's been very difficult to do any studies. We have a study called AHEAD going on in preclinical patients, but blood diagnostics would really help. When you think about it, if you could actually find people earlier before a lot of neuronal damage has occurred, you could have an even bigger benefit. That would, you know, short term, we'll have to wait 'til that AHEAD study clearly comes in. Short term, that could really ease some of the capacity. It would also mean that you could potentially have other physician types who could be involved, not just a neurologist who's busy. You know, there will be a maintenance therapy probably as well. There will be a growth in capacity, but I think we have to be realistic that that's not gonna happen overnight. There's a lot of site activations. The companies identify, you know, where are sites willing to take on these patients and have the capacity. I think as physicians get experience with the drug, then they'll also have the confidence to go and invest in the capacity to actually treat them. It's gonna probably be a more constrained patient population. One of the most important things for us is that we are educating the physician populations around all the safety aspects, but also who is the really the right patient. You know, they're everybody talks about huge numbers of patients but, you know, at least at the beginning, we really need to find the exact right patient, and those will be smaller numbers. In terms of reimbursement, TD Cowen's Washington Research Group expects, after full approval, reimbursement will convert to Coverage with Evidence Development with a registry requirement. Is that also Biogen's expectation? If so, what elements of a registry would basically allow broad access versus are there certain registries that could be designed that would still be constraining? Yeah, it's interesting. Under the terms of the contract, Eisai has the primary responsibility for discussions with CMS, so we're not in those discussions. What I would say, and it was one of the things that I saw in Washington last week, you know, I started my career when, you know, the biggest health concern was HIV. 1992, the FDA actually introduced the whole accelerated approval regulations, which then got codified in 2012 with FDASIA. So and it's for clear unmet need, and urgent unmet need. It's kind of strange that we have a different branch of government that is now looking at saying, "Well, we actually want a registry." And it's not really clear to me why you need a registry to begin with, because we have Clarity, which is the gold standard of clinical evidence. You know, that will be a subject of negotiation. You could argue that the data have been published and are available. It is our belief, though, that CMS will wait to make a decision until there is a full traditional approval. The registration will be a question not only of how much effort is it to get into the registry, and I think we have to be very careful because there are an awful lot of disadvantaged populations who suffer from Alzheimer's. I think care needs to be taken that those disadvantaged populations aren't excluded. There's also gonna be, well, how many patients are gonna be in the registry? In some ways, the registry has been used in other areas as almost a cap on how many people can be treated. We don't know yet, but it certainly is, you know, something to watch for. The real difference that we have today is that, you know, Clarity AD is very clear evidence that actually the removal of plaque below a certain level has had a beneficial impact on cognition, and that's huge. That's the first time since, you know, Alois Alzheimer discovered these plaques over 100 years ago. What is Biogen's outlook for LEQEMBI's long-term sales potential? Cowen predicts about $2.5 billion in sales in 2027. Is that aggressive? Is that conservative? Obviously, this is a huge patient population. Key question we're all trying to answer is what it will be the ultimate penetration. I can certainly feel comfortable that, you know, towards the end of this decade, this is quite a significant product. It's kinda one of the first times in my career where I figured I have more confidence in the long-term number than the short-term number. In terms of the next steps for LEQEMBI, sounds like Eisai is going to file for approval of both the subcutaneous formulation as well as maintenance dosing in the first quarter of next year. How important are the successes of those two improvements to the long-term potential? Well, we'll get a first signal with the EMBARK data from Biogen on Aduhelm because there is some anecdotal evidence that actually staying on the product can help stabilize the cognitive status of a patient. We need to get more evidence of that. There is an emerging belief that you will have a plaque removal process, which is really what Clarity studied. We have an 18-month period. We reduce the plaques to a certain level. We saw a benefit. What happens though, if you were to stop? Well, it looks like plaque will return. Staying on the product could have a benefit, which would be incremental revenue but probably at a different dosing regimen, 'cause once you've eliminated the plaques. Obviously in a longer-term treatment scenario, a subQ would be an awful lot more convenient for patients, because right now we're bi-weekly. We don't know what it would be on a maintenance basis. You know, it's one thing to do the infusions over an 18-month period during your plaque removal part, on the maintenance there, you know, the subQ could be quite important for that market. Turning to zuranolone, the PDUFA date's coming in August. What's Biogen's strategy for launching zuranolone into PPD and MDD? You know, I was at GSK when we had Paxil and Wellbutrin, and certainly saw, you know, the enormous need for mental health patients to have new options. The current therapies help a lot of people today, but they take six weeks to work. You have to stay on the treatments, and a lot of them have a number of side effects. Some of them it's weight gain, some of them it's sexual dysfunction, some of it's fatigue. I think to me, zuranolone looks like a terrific product. Here's a product that can work within potentially three days, is what we've seen in the data so far. You only stay on the drug for two weeks. You know, one of the things when you do market research over the years about what affects compliance, everybody thinks is this copay? Is it side effects? What is it? Well, one of the number one factor, in fact, is every time I take a pill, I'm reminded I'm sick. Now, if you have a mental health patient and you're dealing with all the stigma and you're taking pills, somebody says, "Well, what are you taking that for?" I mean, not everybody wants to say what it is. Here, you can take it and you feel much better. You're liberated from the, from the pill box. I think that will be an interesting phenomenon. We have a study called SHORELINE to say, "Okay, well, how long does that last?" It looks like quite a high percentage of them, one time is enough. For a smaller percentage, maybe it's twice. It is a much different marketing philosophy. I mean, the only analog I could find was Zithromax. 'Cause that was also a 10-day treatment. You know, you had the Z-Pak. Unfortunately, they already have the Z-Pak trademarked. Otherwise, we might have swiped that as an analog. It will be different. That comes up in contracting with payers, for example. Even as we look at scripts, I mean, the traditional NRX, TRXs are not gonna work in the same way. It's a different philosophy not to treat chronically. From a physician point of view, this will be a new thing. I think from a patient point of view, this is gonna be a terrific thing. I'm quite excited about zur lone. How do you think about pricing a short-term therapy like this? Do you think of it trying to get the or price for the benefit of the average duration of response? Or do you comp it to the therapies that are out there? Generally, how do you go about pricing a change in paradigm like this? You do have to look at this as probably on an annual basis and try to price it on that basis. There'll be a question of are you looking at one treatment or two, or is this 1.2 treatments, you know? That's where SHORELINE will be important in assessing that. Are there specific patients or physicians that Biogen will target with the initial marketing message? Anyone in particular that you think would be particularly amenable to therapy? Well, you're certainly going to look at patients who are clearly not doing well on existing therapy. I mean, most patients churn through a lot of different therapies. Some of them on SSRIs have more of an anxious profile. We won't have anxiety as an indication. I think it's largely gonna be those who are really not responding to current therapy at the moment. Turning to other aspects of the business. There are also interesting comments about the biosimilars business, both on the Q4 call as well as the article over the weekend. What are your thoughts on the strategic rationale for maintaining a biosimilars business at Biogen? I mean, biosimilars are going to be important. you know, if you think particularly the U.S. market has always been maximally efficient. You finish your period of exclusivity. The generic industry was supremely efficient. I remember when we lost the Plavix patent, within six weeks we lost 90% of the business. So that drives a company to be constantly innovative. You innovate or die in that structure. Biologics, we haven't clearly seen that. To a degree, I think one of the reasons we have the IRA is that we were actually having an accumulation of cost because new biologics come onto the market, but the older ones are staying there at a high price. So biosimilars actually create the headroom for innovation. We do believe those are important, but it is gonna be a tough market. You have to invest significantly to develop a biosimilar. You have to actually go out there and market them, and then you're gonna compete on price. I think you're gonna see some consolidation in that sector, just like we saw with the small molecules. I'm not sure that culturally that's really where Biogen is naturally. I do think it's important business. I have to say that the team at Biogen have built a very successful business. It's close to a billion-dollar business. We have to think carefully about it. I, you know, I'm very much also of the mind that we have to focus on what really we're best at. That's why we're questioning what the future of that is. Times have clearly changed when we're doing a Biogen fireside chat. In the last minute, we're gonna ask about multiple sclerosis. What is the outlook for multiple sclerosis? How do you see the overall business trending over the next several years? You know, I'm feeling the level of disappointment that I have felt so many times in my career of being in a company that has really developed such strong relationships with the prescribing community, with the patients, and then we fail to come up with the next level of innovation. You know, we don't have a product to come along. A lot of physicians still love Tysabri, for example. We still have a lot of patients on Avonex, and we have to continue to serve those patients. It's, you know, we're gonna be faced increasingly with competition from biosimilars that we just talked about, and also from small molecule generics in the case of Tecfidera, for example, in Europe, which still hasn't been fully genericized. What's interesting is it doesn't seem to be anything new anywhere. I mean, I think what we haven't seen is a real disease-modifying approach. We are still investing in research and development. It's early. We are by no means abandoning multiple sclerosis, but we have to say that we would have otherwise a revenue growth gap if we don't expand beyond the horizon of multiple sclerosis. Great. With that, I think we're out of time. Thanks so much. On time, on budget. Well done, Phil. Thank you.