Biogen Inc. Price & Performance (BIIB)

On today's call, I'm joined by our President and Chief Executive Officer, Chris Vibacher Doctor. Priya Singhal, Head of Development Mike McDonald, Chief Financial Officer We'll make some opening comments and then move to Q and A. And to allow us to get through as many questions as possible, we'll kindly ask that you limit yourself to just one question. And with that, I'll hand over to Chris. Thank you, Tim. Good morning, everybody. Perhaps before we get started, just like to note that this is Mike McDonald's last quarterly presentation as CFO of Biogen. Mike, I believe this is your ninety seventh quarter as a publicly quoted CFO So congratulations on that amazing career and I'll just take the opportunity to thank you. You've been a terrific partner and team member and it's been great working with you and we will miss you and we of course are joined here also by Robin Kramer, I'm also proud to say that we've been able to promote from within. It's a great source of pride that we have that level of talent within the organization. So let's turn to Q4. As you all know, we have been faced with increased competition for our multiple sclerosis franchise.

And really all of our priorities are thinking about how do we now build a new Biogen, how do we build a new phase of growth And we are focused really around three core priorities. The first are clearly the four products that we launched last year in Alzheimer's, Friedreich ataxia, depression and ALS. Now each of those products is not only a first in class, but first disease modifying agent in each of these diseases. That's a source of pride in the level of innovation that Biogen is capable of. Equally from a commercial point of view, this is a significant challenge since the level of education when you're a pioneer in an area is so much greater. And we'll come back and talk a little bit more about that. The next is, we have really reprioritized the pipeline It's certainly been my experience over the years that focusing on a number of of key projects is core to business success. And I'm pretty grateful to both Priya Singhal and Jane Grogan, because they have both really I think, cleaned out the pipeline for development in PRIOS case and research In Jane's case, And we're actually excited now by the products that are in there.

We've got a number of key developments that will start reading out in 2026. We think this is a multibillion dollar portfolio and probably one of the few companies that can look at a pipeline that could be more than could be more than our current biopharmaceutical business when it gets to peak sales. If it all obviously comes to market. So if we could go to the oh, and the third point course, is we have redesigned the company with a reduction of operating not just saving costs for the sake of cost, but the ability to release resources for investing in growth, and that's what we're continuing to do. We're excited about our pipeline, but we've also freed up an awful lot of cash flow as you'll see later that cash flow, we're investing for more substrate in growth. So yes now Dan? Please next slide. So So the race really that we are faced with is seeing the erosion of our multiple sclerosis product revenue But I'm particularly happy to see in 2024 that the revenue from our launch products really offset the more than offset the the decline in our multiple sclerosis product revenue. And indeed, when you actually look at total revenue declined by $160,000,000 And you note that contract manufacturing declined by $247,000,000 It meant that really our core pharma business actually grew and that's for the first time in four years.

And that's really what we're we're all about in the near term is trying to make sure that the revenue can exceed the multiple sclerosis product decline. Multiple sclerosis product decline obviously driven by a number of factors going forward including the timing of a TASABRI, biosimilar in The U. S. And timing of TECFIDERA generics in in Europe. Go to the next slide please, Dan.

So as I said, we've got actually four very innovative pioneering products. Lekimbi will come on and talk about in some detail. Skyclaris in Friedreich's ataxia, again, very first treatment Friedreich's ataxia. We have been able to determine from from basically medical claims data that there are approximately four thousand eight hundred patients in The U. S. That's about what we thought. One of the complexities is that it's harder to find these patients because you could have a primary care physician in a rural setting that has one single patient and you have to go find them. And we're talking to primary care physicians, talking to cardiologists, talking to pediatricians. So it's quite a large prescriber base for a very narrow patient population. But that of course is the core of what rare diseases us. I remember years ago when we acquired Genzyme when I was at Sanofi and the marketing folks are saying our marketing strategy is looking for needles in haystacks. And that is exactly what rare disease is all about. And it's what Biogen is also very good at. And of course today, we've got a lot more technology. We can use tools such as AI and genetic testing to help find those patients.

But by its very nature, it is unfortunately not going to be the nice smooth progression quarter on quarter. That said, we're particularly proud to say that we have been able to double the number of patients on treatment in the past year. Not all of those are yet being reimbursed. We are able to get a lot of patients on drug and then negotiate governments, particularly in Europe to get the reimbursement And once we do that, the patients flip from being free goods patients to actually revenue generating treatments. There's always a bit of a in each country, a number of patients who are diagnosed, who have been waiting for treatment and you can get those quite easily. There are a number of older patients who actually have lived with this disease for thirty forty years, and they're the ones we actually have to go hunt for. We will see another growth driver this year and that we expect to get approval for Sky Claris in Latin America. I was in Brazil last year and there are quite a number of patients in Latin America. So as we started with The U. S, moved to Europe and then we're moving to South America.

And indeed areas of The Middle East. We expect to see continued steady growth out of Sky Claris, but again, I can appreciate that it's going to be hard for some of you to model on a quarterly basis. Zuubay was a very nice One of the things that was different from our expectations was that the the main prescriber is actually OBGYN and OBGYN. We had actually been targeting originally high prescribing psychiatrists. We still see some of those, but as you can see, 80% of the prescriptions are driven by OB GYNs. This is also an area where you could have potentially more people who have ever prescribed for PPD than you actually have patients. And again, targeting and thinking about multichannel marketing commercial approaches are extremely important. We have filed Europe and would hope to see an approval from some later this year. Kalsodi is is not necessarily a big revenue generator, but this is really a breakthrough treatment in ALS. This is the first time we've been able to demonstrate that neurofilament can really help predict drugs early in development as to whether or not they are likely to work or not. And that allows just the whole research and development in ALS to be accelerated.

So we're particularly proud of that. The impact patients is absolutely extraordinary. And so we will we may not be making a big impact on revenue, we're certainly making a big impact on patient to the next slide please, Dan. Now I showed this slide in JPMorgan there were several investors who looked at that chart and said, this is not the chart of a small product. And we've all been in this business and looked at a lot of launch curves and we all know that we like to see an acceleration in the curve. But any curve that goes from bottom left to upper right is in my books good unless we're talking about operating expenses. And this is good, steady, quarter on quarter progress.

We have seen some questions on the ex U. S. Launch Clearly, the ex U. S. Launch is contributing more than we have seen in prior launches in other areas. I think part of that is first, I think, Eisai is extremely strong in Asia. And they are leading that launch there. But second, I think the single payer system removes a lot of the obstacles that we're dealing with in The U. S. When you have a single payer, you're not having to negotiate quite so much on terms of pet scans and MRIs and infusion beds. And that has facilitated the progress. And it's it's as strong in China as it is in Japan, not necessarily patient numbers, but we're seeing very strong growth in China and that is a that is a cash pay market. And those two really demonstration of how people value the importance of Lokembe. So we'll go to the next chart, please. Now I talked about some of those obstacles and we certainly see that making this easier for both patients and physicians is is going to accelerate the launch. And we have a number of these catalysts. The first one has already been achieved.

So we have Lecanbe IV maintenance that's now FDA approved. We now have the first patients who are hitting that eighteen month mark. They've cleared their plaque. But as the data have demonstrated, you've got to stay on treatment. Otherwise, some forms of the plaque actually come back. And we have demonstrated three year data to show that staying on treatment patients do better than those who stop treatment. And that's an important message because our competition is actually not able to say that. And so this is also important for the education of the disease. It's not just about clot clearance, it's about maintaining that clearance. The second is really the introduction of blood based diagnostics. Certainly LabCorp and Quest continue to see rising sales of these diagnostics. What I think will really make a difference is getting FDA approval for some of these diagnostics with an evidence base that will give physicians the confidence to be able to confirm diagnosis without the need for a PET scan or a lumbar puncture. And so again, this is something that could not only facilitate the work of the neurologist, but we might also be able to see this being used increasingly to triage patients.

Something like fifty percent of patients who actually manage to get into a neurologist are actually not eligible for treatment because they're too far advanced in their disease. So if we could actually triage some of these patients, particularly at the primary care level, then we can actually get a higher quotient of patients who visit a neurologist actually being eligible for treatment. The subcutaneous form for For maintenance, we would expect now on we have a PDUFA date on August 31. That again will really facilitate the journey both for the patient as well as for the physician. No longer needing the infusion beds and people patients can actually take the drug from the comfort of their own home. A major game changer we see as subcutaneous for initiation, which we expect to have in the first half of next year. And that obviously would also facilitate that for the same reasons of not having to deal with infusion beds and and patients can have that in the comfort of their own home. The AHEAD-three 45 study is fully recruited. We expect a readout in 2028 This is a landmark study because this is where we could see the promise of potentially prevention of Alzheimer's.

We know that before patients actually exhibit symptoms, they've been accumulating plaques in their brains for many, many years. And unfortunately, a lot of damage is done already by the time patients actually exhibit symptoms. So if we can get patients earlier, we think that we can actually have even better efficacy. And in fact Priya is going to show shortly again, the low tau patients, which is a marker for earlier stage patient [indiscernible] there we see dramatically improved efficacy versus just the twenty seven percent on the CDR sum of box that was demonstrated in the CLARITY study. So next slide please. So, those are the four products Clearly, we're also looking at our pipeline.

And I think there are three key areas in this to look at. The first is continued investment and commitment to Alzheimer's. We gather some of the top leading experts in Alzheimer's from around the world are the ones who are telling us, one, that nobody is really doing so much research in a broad area of modalities as Biogen. But the other is they are extremely excited about the opportunity to reduce tau and the impact that that could have on Alzheimer's. So Alzheimer's is going to be a core franchise for Biogen for decades to come. We had very positive data on dapiriluzumab back in September. And we've already initiated the second Phase three But we also have lidafilumab in both CLE and SLE. So we got a nice lupus portfolio of assets coming along. I'd remind everybody, yes, people are looking at a lot of potential competitors in Phase one, Phase two. But out of the dozens and dozens and dozens of molecules that entered the clinic, only three molecules have ever demonstrated a positive Phase three result, two are already on the market and dapiroluzumab is third. So we know that you can get excited about a lot of things but it's not until you actually see Phase three results that you can really have conviction.

But that's a potentially significant market and fits nicely with Biogen Biogen we can take a lot of the learnings from MS and apply that to lupus. And of course, the third area are really these auto antibodies. We have our anti CD38. We are entering expect to enter into three Phase three trials and three separate indications with antibody mediated resistance, the iGAN, the PMN. And we have very compelling Phase two results here. There are no guarantees anytime in research and development, but I think we feel particularly excited about feldsartumab and the potential that this could have in rare kidney disease. And of course, then we have a whole phase of readouts coming along and I think that will become the story of Biogen as we get increasingly more data and people can gain increasing confidence and excitement share our excitement in our pipeline. And so with that, I think I'm going to let's continue the story on R and D, Priya, and I'll turn it over to you.

Thank you, Chris. Biogen's development organization had another very productive quarter. We achieved several important milestones across key strategic areas for the company. I would like to begin with immunology where in collaboration with UCB, as Chris mentioned, we initiated the second Phase three study [indiscernible] This follows the positive readout of the first Phase three study and sharing of detailed study results as a late breaker at the ACR Annual Meeting last year. DAPI PEGOLE, as Chris mentioned, is only the third agent with a positive global Phase three study in SLE. Additionally, selzartumab was granted orphan drug designation in the EU for both solid organ transplantation and IgA nephropathy. We believe this designation, which is intended to support development of treatments with significant unmet medical need, underscores the potential for filzartumab become a meaningful new therapy for serious immune mediated diseases like AMR, iGAN and PMN Globally. In rare disease, we continued unlocking new geographies [indiscernible] And Qualsodi, SORD1 ALS. Leveraging the results of the SkyClaris Positive Mock Trial We Obtained Approval In Chile, and currently have 13 additional regulatory filings under review. This includes additional filings in Latin America, where we expect regulatory decisions this year in countries such as Brazil, and Argentina as we continue our global rollout.

Importantly, we also took significant steps towards expanding the value of key portfolio products for patients. In SMA, regulatory filings for high dose nuisanceers have now been accepted in The U. S. And EU and we expect an FDA decision in And in Alzheimer's disease, we recently received FDA approval for Lkembi less frequent IV maintenance dosing. This is both a significant step for Lkembi, and a meaningful advancement in the evolution of Alzheimer's treatment more broadly. I would like to briefly review why there is an urgency to treat now and why maintenance is important based on Lkembi data that we have obtained to date. First, the CLARITY AD study is unique in that it did not exclude patients based upon tau brain pathology. Therefore, we have placebo controlled clinical trial data across the full early Alzheimer's disease population including individuals with no and low tau, which represent the earlier stages of AD. In this population, seventy six percent of patients showed no decline and sixty percent showed clinical improvement at eighteen months as assessed by CDR Somavox.

What this means is that in over three fourths of early AD patients, their disease was stabilized and more than half the patients showed improved symptoms when treated with leukembe. The reason why this is important is that this data suggests that patients treated early in their disease can see a profound benefit which underscores the importance of initiating treatment early. Furthermore, this data also supports the potential of our ongoing pre symptomatic AHEAD-three forty five trial. And now that I've shown you why early treatment initiation is important, let me remind you why the new maintenance IV approval is also very critical. And that is because data shows that Alzheimer's does not stop after plaque removal. Importantly, prior data from the LIKEMBI Phase two study and its open label extension show that discontinuation of treatment is associated with reaccumulation of Alzheimer's biomarkers including amyloid plaques and importantly a reversion back to the placebo rate of clinical decline. With its differentiated mechanism of action, we believe Lokembi is uniquely positioned as it is the only disease modifying therapy NASHANOS today to show additional benefit with continued treatment after plaque reduction. As you can see from this slide, the three year data from the Clarity AD study and its open label extension support the potential for long term benefit to patients by showing that continued LKEMBI treatment resulted in a doubling of the clinical benefit observed at eighteen months as compared to a matched natural history cohort.

With these findings in mind, we are working with Eisai to deliver additional options for patients with the aim of maximizing both the convenience and the clinical benefit of LIKEMBI. This includes a subcutaneous formulation, with the potential for at home administration to further add to patient optionality and convenience. For subcutaneous maintenance dosing, we now have a PDUFA date of August 2025. Next year in 2026, we aim to introduce subcutaneous dosing for treatment initiation which we believe will allow even more patients to get started on therapy. And building upon the encouraging results we obtained in the no or low tau population in Clarity AD, we continue to advance evaluating the AHEAD-three 45, evaluating Lekembe in individuals who have amyloid plaque pathology in the brain. But before the onset of symptoms, which has the potential to further expand the use of leukemias. Turning now to the pipeline. We have previously discussed our efforts to augment our pipeline with the objective of rebalancing the risk profile and investing to win in key areas of expected future growth. As a result, we have focused our development efforts on a smaller set of clinical stage programs that we believe are high conviction and well positioned to deliver a regular cadence of pivotal readouts and potential launches.

This includes key late stage programs that have the potential as you see on this slide to deliver innovation to benefit patients across Alzheimer's and immunology. We will continue to remain disciplined in our approach as we continue to assess inflection points for our internal development pipeline. But also as we evaluate potential external innovation opportunities that we believe can help support Biogen's goal of sustainable growth. With that, I would now like to hand the call over to Mike for financial updates.

Thank you, Priya. Good morning to everyone. I'd like to begin by providing some highlights from the reported results. Total revenue for the quarter was $2,500,000,000 which represents 3% growth from the fourth quarter of twenty twenty three. Fourth quarter non GAAP diluted EPS was $3.44 and that's 17% higher than the fourth quarter of twenty twenty three. For the full year of 2024, total revenue of $9,700,000,000 represents a decline of 2% from 2023 consistent with our most recent guidance of a low single digit decline. And full year 2024 non GAAP diluted EPS was $16.47 that's 12% higher than the full year 2023 Also consistent with our most recent guidance range of $6.1 to $6.1 and $16.6 EPS growth and operating income expansion in both the fourth quarter and full year was supported by our fit for growth and R and D prioritization initiatives. We are pleased that this performance allowed us to generate $722,000,000 of free cash flow in the quarter, [indiscernible] and that's an improvement of $1,400,000,000 from $1,300,000,000 generated in 2023. Now I'll turn to a few comments on revenue and commercial dynamics from the fourth quarter. Our MS product revenue declined roughly 8% at actual currency and 9% at constant currency as compared to the fourth quarter of twenty twenty three and that was driven primarily by [indiscernible] by some seasonal channel dynamics.

Interferons continued to be impacted by competition as patients transition to higher efficacy therapies and Tecfidera Biogen globally. Tysabri has seen some impacts from a biosimilar enter in Europe Plumeriti saw an increase in demand in the quarter and also benefited from some seasonal channel dynamics. Next, our rare disease franchise produced revenue of $535,000,000 in the fourth quarter and that represented growth of 13% at actual currency and 15% at constant currency from the fourth quarter of twenty twenty three. Global Sky Claris revenue in the fourth quarter was $102,000,000 an increase of 83% versus the fourth quarter of twenty twenty three, with nearly double the number of patients on therapy. U. S. Skyclaris revenue in the fourth quarter was $71,000,000 We continue to add patients in the quarter, but revenue was sequentially impacted by an inventory build in the third quarter that was drawn down in the fourth quarter as well as some Medicare discount dynamics. Global SPINRAZA revenue of $421,000,000 in the fourth grew 2% year over year including growth in The U. S. Of 6% year over year. We are encouraged by the performance here and look forward to a potential future loss launch of the high dose option.

XERZUVAY delivered approximately $23,000,000 of revenue in the quarter and that was was driven by an increase in demand partially offset by channel dynamics. And we again saw steady sequential growth for Lekambi with fourth quarter global in market sales booked by Eisai of approximately $87,000,000 and that's up approximately 30% sequentially from the third quarter of twenty twenty four. [indiscernible] and that's up roughly 28% sequentially from the third quarter of twenty twenty four. I'll now turn to a few comments comments on dynamics from a few key expense lines. Non GAAP cost of sales as a percentage of revenue improved 300 basis points in the fourth quarter as compared to the fourth quarter of twenty twenty three and that was driven primarily by lower idle capacity charges. Fourth quarter non GAAP core operating expense or R and D plus SG and A expense increased 4% year over year as the benefits from our R and D prioritization and fit for growth initiatives allowed us to mostly absorb incremental spend associated with our launches. Non GAAP other expense was $72,000,000 in the quarter that was driven primarily by net interest expense. Non GAAP diluted EPS was $3.44 in the fourth quarter, representing growth of 17% versus the fourth quarter of twenty twenty three.

Now a brief update on our balance sheet. We generated $2,700,000,000 of free cash flow in 2024, Please note that the timing of certain cash tax payments in 2024 also benefited free cash flow. We ended 2024 with $2,400,000,000 of cash and roughly $3,900,000,000 of net debt and continue to believe that our balance sheet remains strong and allows us to continue to invest in both internal and external growth opportunities. Turning now to our full year 2025 guidance ranges and assumptions. We expect full year 2025 non GAAP diluted earnings of between $15.25 and $16.25 This guidance range, which is based upon FX rates on 02/07/2025 includes a $0.35 EPS headwind from foreign exchange, when compared to average exchange rates in 2024. Total revenue for 2025 is expected to decline by a mid single digit This is driven primarily by an increased decline in our MS business as compared to 2024. The pressure on our MS business is expected to be driven by potential biosimilar entry for Tysabri in The U. S. This year and potential generic entry for TECFIDERA in certain European markets. We expect this decline to be partially offset by continued strong and increasing revenue growth from our new product launches, Please note this revenue range also includes a roughly 1% headwind from foreign exchange.

In 2025, we expect an impact from Medicare Part D redesign at the total company level to be limited, approximately $50,000,000 to $100,000,000 We expect approximately one third of this impact to be related to Skyclaris with the remainder coming from MS. On operating expenses, we remain on track to deliver the $1,000,000,000 of gross and $800,000,000 of net savings from our Fit for Growth initiative, by the end of this year. With this in mind, we expect full year 2025 combined non GAAP R and D and SG and A expense to total approximately $3,900,000,000 And as it will take time for the savings to crystallize, we expect to see higher OpEx in the beginning of the year. We expect non GAAP operating margin percentage to remain relatively flat in 2025 as compared to 2024 And on the non operating side of expenses, I would highlight the components of our non GAAP other income expense line. This line includes interest expense on our debt and some other expenses partially offset by interest income on our cash balances. For full year 2025, we expect other income and expense to be a net expense of of approximately $180,000,000 to $220,000,000 And finally, some additional considerations as you think about your models.

As has been the case in previous years, we expect the first quarter to be pressured due to seasonality, driven by higher discount and that will mostly impact our MS business. I would also note with regard to Fampura that we terminated the license and collaboration agreement effective 01/01/2025. As I just mentioned, our current year guidance takes account of the stronger dollar today compared with the same time last year. For modeling purposes, each cent change in the euro versus the U. S. Dollar impacts revenue by approximately $15,000,000 current slide as well as our press release for other important guidance assumptions. And in closing, we welcome Robin Kramer as Biogen's CFO following my retirement later this quarter. This orderly transition plan has been in process for some time now and I have full confidence that Robin will be a great CFO. I'm excited about Biogen's future and will remain a supporter and shareholder of Biogen in the years to come.

Great. Thanks, Mike. Jennifer, can we go to the first question, please? Yes.

This Your first question comes from the line of Salveen Richter with Goldman Sachs. Good morning. Thanks for taking my question.

What is your latest thinking on the capacity preference and potential timelines for external BD? And in terms of your growth outlook, just help us understand the balance between the assets you could bring in?

Thank you.

Thanks, Alveen. I mean, I think we'll get Mike to give you an update on on capacity. As I said, we are very excited about the pipeline that we have. But I think one of the things that we'd like to do is is continue to reinforce that pipeline. The years, I've come to the conclusion that you can never have enough pipeline. First element is we we've done a major restructuring of research because I think as companies in our industry, It's very expensive to bring in late stage assets. And we would like to have research be our primary source of innovation. Obviously internally, but also externally. And so I think we have completely restructured research to create the financial capacity as well as the talent capacity to do more collaborations and bring assets in particularly pre GLP tox. Beyond that, we are looking at virtually every phase, the early phase development right now, I would say, Priya, probably would agree with me that our early stage development pipeline is still relatively thin. And but even if we can find things in Phase three, if it's got a really solid Phase two, I'm not big on taking a lot of risk on Phase three clinical trials because that gets expensive.

And in terms of acquisitions, We have been migrating new areas such as immunology and rare diseases. And if we can find acquisitions that can bolster our positions in that, we will do so. We don't have a particular size that we're looking for. It could be late stage development. It could be early stage commercial. The one thing it has to do is make financial sense. I think where we as a company, we don't need to be taking a huge amount of risk on acquisitions. That said, are always looking we always have about at least 15 to 20 different projects that we're looking at at any one time. But as you know, you kind of have to look at 100 things before you find something that is of interest. And Mike, maybe you want to talk about capacity? Yes. And Salvi, on capacity, the balance sheet remains in excellent shape. We mentioned in the prepared remarks, we ended the year with $2,400,000,000 of cash on hand, The EBITDA run rate is north of $3,000,000,000 a year. So So with $6,300,000,000 of gross debt and $3,900,000,000 of net debt You're in the zip code of maybe two turns gross and 1.5 turns net.

And we were very pleased with the free cash flow results this year in 2020. Or last year, I should say 2024, dollars 2,700,000,000.0. So that cash balance will continue to grow. So when you look at the modest amount of leverage, $2,400,000,000 of cash on hand and the growing free cash flow, The balance sheet is in an excellent position. As Chris said, the plan will be to stay very disciplined and only do things that make good financial sense, but we've got significant capacity to to do a series of smaller things or perhaps a larger thing if it does make good financial sense.

Thanks, Mike. Let's go to the next question please.

Our next question from Michael Yee with Jefferies. Thanks.

Priya, you mentioned that on the Lkembi slide that one of the important developments is the potential for blood based diagnostics. And my understanding is that that coming this year. Can you walk through how important that is in terms of any bottlenecks and specifically whether that totally would be able to replace pet or how that actually works since, diagnostics are a little bit complicated? Thank you.

Yes. Thanks, Mike. So overall, I think that accurate diagnosis of Alzheimer's disease and confirmation of amyloid remains very important And it is the entry point for the kind of care path we're here. So it's important. I think with the advent of the anti amyloid therapies, we've seen amazing momentum there. And as Chris mentioned, we have tests available today that are at triage sort of level. The question here is, what is the what is going to be the availability in the near term for an in vitro diagnostic approved by the FDA that can be used widely and can also be reimbursed and give physicians and neurologists confidence that they can actually trust that outcome and that result versus a pet. And we think that this is likely going to happen in the near term. Fujire Bio is already filed. We know there are a couple of others like C2N and Roche that are sort of working on these IVDs or in vitro diagnostic Q3 Biogen filed last year. We believe that usually the timeframe is about six months. I think the next stage will be generating data so that payers and others are confident that it can adequately represent the Medicare population, which tends to be the broader population.

So I think concordance is important. As is reimbursement, but we think this is moving really fast and we think we'll see quite a few milestones occur in the near term. Thanks, Bria. Let's go to the next question please, Jennifer. The next question comes from Tim Anderson with Bank of America.

Thank you. On your spend guidance, you're saying $3,900,000,000 combined R and D and SG and A is about $200,000,000 lower than consensus revenues are also a little bit lower than consensus, so it offsets each other. My question is, how much does the royalty pharma deal take out of the R and line in 2025 specifically? Know it's $250,000,000 in aggregate that they'll fund, but What's that What's that relief to 2025 R and D And then on Royalty Pharma, can we expect Bajan to do more of these off balance sheet types of transactions with pipeline programs over the next one to two years.

So Tim, Mike speaking on the Royalty Pharma transaction, the $200,000,000 that we would receive in 2025 from Royalty Pharma would be accounted for as a reduction to R and D expense.

So that would be a dollar for dollar reduction that's in the mix of our guidance. [indiscernible] Well, just in terms of other deals, the remuneration to those providing financing is usually through royalties It's not easy to make work for every product. So I think at the moment we look at this as a one off transaction, but it is a useful model to take risk off the table and be able to spread the investment across more assets. I mean, it's essentially a way of getting more shots on goal.

Thanks, Chris. Let's go to the next one, please. We'll go next to Brian Abrahams with RBC Capital Markets. Hey, good morning. Thanks for taking my question. On Sky Claris, Can you elaborate a little bit more on the dynamics you're seeing in The U. S? Like are there ways to accelerate patient identification to meaningfully grow revenue there? Should we be expecting this to more be an ex U. S. International growth product? And how big are the hurdles in terms of reimbursement outside The U. S? Thanks.

U. S, I think there have been already [indiscernible] One is using AI and and looking across social media to be able to identify where patients are. As I said before, there's there's quite a large number of potential prescribers you could go to. The question is how do you zero that down to a geography and a type of physician that makes the visit efficient. And so we've let's say we've used the AI Obviously, as whenever you develop a treatment for a disease, there's a greater interest in diagnosing it. And so I think one of the things that we're seeing is a much greater use of genetic testing. Genetic testing does have a cost and physicians have not always been interested in using it. If it wasn't going to lead to a treatment. But now that that Sky Claris is there, we are seeing that increased utilization. Now final thing is using multi and omni channel marketing to be able to reach physicians, just to educate them about what is Friedreich's ataxia, There are also multiple ataxias out there And so that's where the genetic testing become important. But when you listen to the patient journeys, it can take often three, four years before a patient gets a definitive diagnosis.

A lot of particularly younger people are just kind of thought to be clumsy for a period of time and then progressively lose mobility And it takes a while because there are a lot of physicians who've never even heard of, as I said, Freedom Ataxia. And so that's where the education is needed. I would say today with the technology we have, we have a lot of tools that we didn't have even fifteen years ago, but it is still finding patient by patient. We look at how many patients we found every week And then it's the reimbursement isn't really an issue in The U. S. There are hurdles to it. This is where Biogen is particularly good. We have a very adept group can help patients navigate the reimbursement system. In Europe, I don't think we're necessarily seeing any and then find any issues of reimbursement. It's mostly getting through whole process, presenting the cost effectiveness data, But we are very encouraged by the uptake and once you have uptake, then that's a good demonstration of the value of the medicine when it comes to discussing things with reimbursing countries. So it will be progressive. I think there are 10 countries today in Europe which reimburse and every quarter we'll be adding more countries.

And the same will be true ex Europe and Latin America, for example.

The next question please, Jennifer.

We'll next to Mark Goodman with Leerink Partners.

Good morning. Could you give us a little more flavor on what's happened with SPINRAZA in The U. S. And The U. S. Just dynamics and how much inventory is mattering and what's happening with pricing? Just a little more color there. Thanks.

Mike, take the inventory question. So this is a very competitive market with a very limited number of of patients. So you've got a gene therapy, an oral therapy, and then intrathecal therapy all competing for a relatively small patient number There are actually quite a number of patients who have not been diagnosed or treated. So we tend to be in younger patients, but there is actually a much larger adult patient population. And getting at those is a lot like the same process that I just described for Friedreich's Ataxia. So, we are doing that. So the interesting thing is how do you compete in a market like that? And we've all grown up in this business and we sell okay, one pill a day beats two pills a day, a pill beats an injection. But the actual reality is in a lot of these devastating diseases, efficacy that matters. And that's really the story of SPINRAZA. The high dose, I think, will be important because you can get to the therapeutic levels of drug that you need much [indiscernible] neurodegenerative disease that's extremely important.

So we will be able to cut the number of loading doses if you like from four to One of the things that I think will be important is we are developing a device that hopefully will hit the market about I think 2026, Priya, The and it's a port that you can insert under the skin pretty much anywhere on the body, but certainly around the abdomen as an example and has tiny catheters that lead to the spinal column. And that means that you can actually just do the injection directly under the skin. That has had huge patient positive response. And that could actually make intrathecal injections a whole lot more patient friendly, not just in SMA, but pretty much for all of the intrathecal products that we're developing. So I think that one will also be a game changer going forward. And Mike, do you want to talk about the inventory dynamic?

Yes.

And Mark, nothing to call out on inventory. We did see some lumpiness in four due to some shipment timing and so forth. That's the fourth quarter, the global 2% growth and the 6% in The U. S, Nothing material to call out in terms of inventory or channel dynamics.

Let's go to the next question please.

We'll go next to Paul Matteis with Stifel.

Hey, good morning. Thanks so much for taking my question. Chris, if you take a step back now, you got to be at a point I would think with XERZUVA, SKYCLARIS, LOCKANIMAT to some degree, although maybe the variance of outcomes there is a little bit wider, where at least for the next couple of years, you probably have a pretty good window into the range of outcomes for these products. So I guess taking a step back, do you feel like you can get back to sustainable revenue growth based on what you have internally and what you have high visibility into? Or how important, I guess, is getting a big upside win from the pipeline or or buying growth externally via BD? Thanks so much.

Right.

Well, we've got about if you add in the everything, there's probably about $4,500,000,000 of revenue in MS left and probably about $3,000,000,000 of profit. So that's going to be the headwind over the next five to ten years because actually some of these products are actually quite sticky with patients because patients do well on these products and tend to stay on them. So it's a slower decline. So that's the problem we're solving for. When you look at it, the number one product that has the most potential to off is clearly Lkembi. And there I think we are encouraged by the more recent results and I think we feel pretty confident that these these catalysts could offer the potential to see some acceleration of growth So we do believe that there's a tremendous unmet need in Alzheimer's. People forget that this is a fatal disease. And when you look at the data that Priya showed, if you could get seventy six percent of patients stabilized on this, this is data that I think we really need to to do more of in demonstrating the value proposition of LIKIMB. So we have a number of different approaches. We've I think had extremely productive discussion on the commercial approach.

And there was an awful lot of effort at the start just to the side effects and reimbursement And I think now we can actually focus a lot more on the value proposition and why treating patients. I think there's a huge opportunity and expanding the prescriber base. We have focused on a smaller number just because of the effort involved by the neurologist. But I think with things like the subcutaneous formulations and the maintenance, we have an opportunity to go broader. There's about 13,000 physicians who are targets and we have a small fraction of those today. We're actually prescribing. So there's a lot there and Sky Claris will continue to grow as we said. XERZUVA is certainly an interesting I'd call it kind of a two base hit in baseball terms. In The U. S. Europe will probably be a more limited set of markets that will actually be able to reimburse this product. But I think we've got a lot that we can be doing. I think I think the real growth story is when you start to see the pipeline coming through because as the MS portfolio declines and the new products become a bigger part of the equation, then suddenly you add a pipeline product on top of that.

And the nice thing about Biogen is that $1,000,000,000 really moves the needle. So we don't need a lot here to really have a meaningful impact on our growth. And so I think it's a combination of of all of the above, Paul. We will see an increasing percentage of our business coming from these new products and the pipeline can only augment that.

Thanks, Chris. Let's go to the next question, please. We'll go next to Umer Raffat with Evercore.

Hi guys. Thanks for taking my question. And I want to say thank you to Mike for all your help over time and welcome to Tim. I have two questions today if I may.

First, maybe for Priya, Priya, in a scenario where Lilly hits Trailblazer Alzheimer's III in preclinical on the progression endpoint, How does that factor into your thinking around how you could accelerate timelines for AHEAD three forty five and also your comfort with the endpoint being used there.

And secondly, Chris, maybe a big picture question. It seems like with where the valuation stands today around $20,000,000,000 in market cap, relative to the amount paid for Reata as well as the amount of balance sheet available for additional deal coming up. I guess market is almost reflecting somewhat of a view that M and A choices in the last couple of years may not have been what market was expecting or perhaps the expectations were higher. I guess how do you think about all of that? What learnings are you taking from that into additional capital deployment? Because it will be a very significant move if there were to be a $10,000,000,000 deal again. I can get started. Thanks, Umer.

So I think overall, we remain excited as I shared in my prepared remarks about the potential for AHEAD three forty five. Just a reminder is that we completed enrollment last year. It's a four year therapy. And so we expect and ESA has recently actually reiterated the outcome expected in 2028. Now that said, we always retain and we always continue to evaluate optionality for earlier readouts and earlier cuts and we continue to engage with regulators like very closely on this and all of that is progressing well.

Now the most so that's kind of the acceleration piece. I think the important piece here is the way we've designed the trial. It is quite specific for amyloid load. And as you know, it's two sister trials one with a lower amyloid load that's a head three and then 4.5 which is the higher amyloid load. Now in the AHEAD three, we have a biomarker outcome, which is amyloid clearance essentially. But in the four-five where patients have a higher load of amyloid, we are looking at a very important endpoint that's called the PAC five, which is the preclinical Alzheimer's cognition composite. This comprises elements of memory, the intelligence test, MMS and other components. And it is supposed to be quite sensitive and specific Trailblazer three has different outcomes like CDR, some of CDR global score and is also doing a time to event. So I think we'll wait to see more on how that unfolds But I think we feel very confident about the design of this trial and what it can actually tell us about preventing or slowing down onset. Of Alzheimer's disease? Over to you, Chris.

Yes. I mean, Umer, like there's a a human factor here, right? One of the things I have seen over the years is that your interest in doing significant acquisitions is kind of inversely proportional to your your level of confidence in what you've already got in your pipeline. So you don't think you have a lot in your pipeline, you're more likely to be interested [indiscernible] And whether that's logical or not, it is tended to be where you are. And I have to say coming into Biogen, we tended to to go after the the hardest problems to solve where we didn't understand the underlying disease biology, where We didn't really have Phase II data that could really predict where we were in Phase three, And And at that point, you sort of say, well, if you don't know what you've got, you're more interested in looking at things. I would say where we are now two years down the road is I think PrioWither's steely eye has really taken a lot of the the stuff out of our pipeline that either was never going to make it to market or if it did make it to market was never going to have much impact.

And what we do have and we've got more data now us a whole lot more confidence. I mean, when you got a dapiroluzumab now with [indiscernible] pipeline because that is exactly what we would like to see more of is data and Phase two that really gives you a sense of some level of conviction into Phase three, recognizing that there are never any guarantees in R and D. So So I think where we are is we could continue to do more of the high Biogen transactions We actually like the Riata transaction. Maybe The Street had a different really completely understands how some of these rare diseases really work. For us over time, we believe that Sky Claris is going to be a significant product. I think it is already a significant product. If we found another Riata where we you've got a product that is about to be launched on the market, and you could buy it for a price that generates a return for our shareholders, Then we would do it. But I think part of the problem is I don't think the the people who are selling companies have quite integrated a lot of the pressures that are on this industry.

The IRA is a de facto reduction in patent life for our And there's a lot of pricing pressure from around the world. So the total commercial return for any one molecule today is not what it was even five years ago. And yet, I don't see really any shift in the the premiums being paid or the price being paid. And there's always an asymmetry between the products that you know and the products that you're going to buy. And so I think right now, say we will look if we could find another Reata, we would probably do it. We don't particularly want to do one deal that takes all of our cash flow because I think is an interest in building the pipeline with multiple assets. If we could do more high Biogen, that's probably a nice sweet spot for us. We've kind of concluded that actually we can probably manage quite nicely until they pipeline matures even further. So we don't feel any particular pressure to do things. But I do think it's the job of every leadership person in this in this business to constantly look outside if we can find other sources of innovation.

But I'm actually feeling very good about where Biogen is. Our share price may or may not reflect it, but I'm I'm certainly not alone in this interest in thinking that the share price doesn't reflect where we are. And I think that's a function of a lot of the uncertainty around our industry. But we are just keeping our heads down and executing on our launches. And making sure these products get to market. And and finding if there are shareholder value enhancing transactions that can be done at pretty much any stage of the value chain.

Let's go to the next one please, Jennifer.

We'll go next to Chris Schott with JPMorgan.

Great.

Thanks so much for the question. Just was want to come back to the OpEx space. I know the company is wrapping up its fit for growth program and there's some moving pieces here with the Royalty Pharma deal. But as we think about the P and L going forward, is this kind of $3,900,000,000 or so OpEx space a good rough number to think about for Biogen going forward? Or is there any other color how to think about margin progression as we think about the next few years? [indiscernible] Yes, Chris, I think that's right. The Fit for Growth program was designed to take our OpEx to a level that supports our revenue expectations and I think that as we head as we exit 2020, '5 and go into future years, obviously, if we have launched this to support other things, we'll need to invest in those appropriately. But I think the way that you [indiscernible] the program will be completed at the end of this year and the $3,900,000,000 rate is a good number to use as your baseline model. Yes. And clearly, business development every time you you do a deal, you bring in potentially new R and D expense.

But I think what you've seen us do prioritized. We've actually stopped a number of internal programs, which actually creates the financial capacity to bring other assets in. One of the biggest problems of business development typically has been is that the R and D budget is full. And there isn't any room to bring in new things. We are actually making some of those difficult choices. And the same is true on research. We have dramatically reduced our research. We budget the idea was not necessarily to just save cost. The idea was that we wanted a different mix in there and by prioritizing, we can actually do business development without having to increase our overall expenditure, at least that's what we've been able to do so far.

I know we're running short on time.

Maybe get to squeeze one or two last ones in. Let's go to the next one.

We'll go next to Evan Seagerman with BMO Capital Markets. Hi, guys. Thank you so much for taking my question. Mike, congrats on your retirement. You will be missed. Robin, I'm really looking forward to working with you. And Tim, congrats on your first buy in earnings call. I got that all in. I want to touch very briefly on the use of GLP-one in Alzheimer's disease.

Novo Nordisk has talked a lot about the Evoque trial, high risk, high reward What happens if that hits and this could evolve the standard of care for the kind of prevention of all Alzheimer's disease? Pradeem, maybe I would love your thoughts there. Thank you.

Yes. Thank you, Evan. It's a very interesting hypothesis. Hypothesis and it's supported by some preclinical data. As well as meta analysis that was looking at all cause dementia and then some subsets which also had Alzheimer's disease. And really the scientific hypothesis with behind it is thinking about is thinking through about how glucose metabolism or regulation of that can impact neuroinflammation, vascular health, all of that and contribute to kind of more brain health situation. And I think that that is a it's worthy of exploring. I mean, I think we need to remember that some randomized controlled trials have failed in the space. Takeda with bioglitazone, and then actually Novo with Laraglutide small trial, 72 subjects, the LAD trial, they didn't meet their primary endpoints. That said, I think we look forward to seeing the outcomes. What I think is really important to continue to remember is that when you're tackling something like Alzheimer's disease, you need to tackle the central pathology. We also know that the central pathology is not an overnight buildup, but builds up over years. So for that reason, we continue to believe that an anti amyloid agent like LeKEMBI that really addresses plaque but continues to address soluble toxic species after plaque clearance will have an important role to play.

So I think we're looking forward to the results of Evoqu and Evoqua plus just like everybody. But I think we continue to believe that this is going to be Lecanbe is going to play and continue to play an important role.

Okay. Let's go to our last one, please.

Our last question comes from Phil Nadeau with TD Good morning. Thanks for fitting us in. Let me add our congratulations to Mike, Robin and Tim on their transitions.

Just to drill down on McKimbe short term, trajectory a little bit more closely. In Q4, revenue was up 30% but the revenue recognized was only up $1,000,000 Can you talk about the dynamics behind that? Were there one time issues or is there an increase in spend that we should project into 2025? And looking at 2025 trends, growth in 2024 was largely driven not entirely driven, but largely driven by Ex U. S. Is that replicable in 2025 or are the low hanging fruit of those markets already picked?

Well, I think Lokembia in The U. S. Was certainly up 200% Q4 on Q1. And so we are seeing significant growth in The U. S. Yes, the Ex U. S. Has certainly been strong as well. But I think it's both. So I think I think for 2025, in the absence of anything else, we see pretty much continuing trends would be our best guess at this. There may be some acceleration with the the IV maintenance. But we're not going to get the subcutaneous for maintenance until really in the last part of the year. The blood based diagnostics could play a role, but we all know that it takes a while to get diagnostics to be actually accepted and reimbursed. So I think we're going to just see good steady progress quarter on quarter.

There hasn't been that much impact yet of dinanumab. That that could have a role at some point, but I think they're dealing with the same issues that that we are. I think the big thing is really to, as I say, to expand the prescriber base. I think really focus on the benefit of treatment. And roll out these new formulations. So I think it's going to be continued progress.

We obviously continue to believe that Alzheimer's can be a significant market and that's why we're investing not only in 500,000 new patients every year. It's one of the leading causes of death. Certainly amongst over 65 year olds, but it's even a top 10 cause of death just in the general population. So not to mention the devastation that this causes to families. So the unmet need is huge. It is clear that in the short term, we have a lot of capacity constraints, but I think we've made a lot of progress in relieving some of those And so I think now with these new formulations and such as subcu and with the blood based diagnosis, we have an opportunity to accelerate our growth. Would say, over the next two to three years. And Phil on the numbers, just to reiterate something we said in the prepared remarks, the Lekambi fourth quarter end market revenue was $87,000,000 globally. That's up about 30% sequentially from the third quarter of twenty twenty four. In The U. S, it was of the $87,000,000 $50,000,000 in The U. S. And that's up about 28% sequentially.

Thanks, Mike. And thanks everybody for your time today. The IR team is available if you've got questions. Thank you. This does conclude today's conference. We thank you for your participation.