Biogen Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 25, 2023

Key Takeaways

  • Three potential launches in 2023: Biogen expects FDA decisions and U.S. rollouts of lecanemab (Alzheimer’s) in July, zuranolone (MDD/PPD) in August, and tofersen (SOD1 ALS), creating an unprecedented near‐term commercial opportunity.
  • Pipeline prioritization and early tau data: Biogen advanced BIIB080, a tau‐targeting antisense oligonucleotide, showing up to 50% CSF tau reduction and PET signal decline in Phase 1b, and is enrolling the Phase 2 Celia study while discontinuing lower‐conviction assets.
  • “Fit for Growth” cost optimization: Having secured $1 billion of prior savings, Biogen launched a broader transformation to align its cost base with revenue and reinvest in key launches, with modest impact in 2023 and more meaningful savings from 2024 onward.
  • MS franchise pressure: Q1 multiple sclerosis revenues fell 19% YoY due to Tecfidera generic entries, interferon declines and inventory destocking, though Biogen sees a slower H2 decline and secured EU exclusivity for Tecfidera until at least February 2024.
  • Q1 financials and guidance: Reported revenue of $2.5 billion (flat CC), non-GAAP EPS of $3.40 (–6%), and reaffirmed full‐year outlook of mid‐single‐digit revenue decline with $15–16 EPS, supported by a $7 billion cash position after the Samsung Bioepis stake sale.
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Earnings Conference Call
Biogen Q1 2023
00:00 / 00:00

There are 14 speakers on the call.

Operator

Good morning. My name is Bettina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen First Quarter 2023 Earnings Call and Business Update. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Today's conference is being recorded. Thank you. I would now like to turn the conference over to Mr. Chuck Triano, Head of Investor Relations, Mr. Triano.

Operator

You may begin your conference.

Speaker 1

Thank you, Bettina. Good morning, and welcome to Biogen's Q1 2023 earnings call. Before we begin, I encourage everyone to go to the Investors section to the physician of biogen.com to find the earnings release and related financial tables, including our GAAP financial measures and a reconciliation of the GAAP to non GAAP financial measures that we will discuss today on the call. Our GAAP financials are provided in Tables 12 and Table 4 includes a reconciliation of our GAAP to non GAAP financial results. We believe non GAAP financial results Better represent the ongoing economics of our business and reflect how we manage the business internally.

Speaker 1

We've also posted slides on our website that follow the discussion related to this call. I'd like to point out that we will be making forward looking statements, which are based on our current expectations. These statements are subject to certain risks and uncertainties and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. On today's call, I'm joined by our President and Chief Executive to Officer, Chris Feibacher Doctor.

Speaker 1

Priya Singhal, Head of Development and our CFO, Mike McDonnell. Chris, Priya and Mike will each make opening comments and then we'll move to the Q and A session. To allow us to get through as many questions as possible, we kindly ask that you limit yourself to one question. I'll now turn the call over to Chris.

Speaker 2

Thank you, Chuck. Good morning, everybody. I'll start by first welcoming Chuck Triano as our new Head of Investor Relations. Great to have you on the team, Chuck. On our last call, we described 5 priorities for the business that you see on the first slide here.

Speaker 2

And during the Q1, I think we made a lot of good progress against those five priorities. We are continuing to work toward potential launches of lekembi and Alzheimer's disease and zuranolone in both MDD and PPD. And I'm going to cover that on the next slide because that's Really in some ways a super priority. On the next point on improving the risk profile and productivity of R and D, Priya will review the steps taken to improve the risk profile and the productivity of R and D, and you'll see that in greater detail. So I'm going to cover a little bit more on the cost base.

Speaker 2

The first thing I'd like to say is that we've made good progress on the previous program that had announced $1,000,000,000 of cost savings. Those $1,000,000,000 have been secured and have been that program is complete. Over the last several months, I've been getting a better understanding of how the company operates, working with our senior leaders and thinking about how we operate at all levels of the company, particularly at a global regional and affiliate level. And as we said before, we do have a higher revenue, while leaving enough money for the upcoming launches. And we internally refer to this program as Fit for Growth.

Speaker 2

And really what we're trying to do is balance the opportunity for profitable growth by investing in our product launches and the R and D projects that we deem priority with an attempt to try to reduce that cost base and get that back to something that looks a little bit more in line with our competitors. Now that's not just a simple job of Taking out cost. What we're really trying to do is redesign the company. We have these two launches. They're going to have different geographic points of focus at the start.

Speaker 2

We won't have ziranolone for a few years outside of the U. S. Ziranolone is clearly a top priority in the short term in the U. S. In the outside the U.

Speaker 2

S, we're going to be certainly focused on the LoKenbi launch in the first instance. So one of the things we want to do is make sure that we don't lose what is good in the company and what has been working. We also have to remember that we are still a leader in multiple sclerosis. There are a lot of patients who depend upon our products and we have to make sure that the physicians who treat those patients have adequate information. So there's a balancing act, as we try to shift our resources behind the growth opportunities, while still supporting our historic MS business.

Speaker 2

And so we're taking Essentially, a bottoms up and a methodical approach to this. This could have a much different approach to our operating model. We've Been 45 years in multiple sclerosis with a limited product profile. Yes, we had at one point some products in hemophilia and obviously we have SPINRAZA. And as a result, we had an awful lot of centralized cost.

Speaker 2

Right now, we're looking at how do we get a lot more of our resource and our attention closer to the customer. So it's a redesign effort, And it's meant to be durable. So we do recognize that there's an opportunity to reduce cost, but we really are looking at Something more transformational that really sets the company up for growth. We'll be able to say more about that in Q2. Then another priority is really managing the base business.

Speaker 2

There's 2 dynamics in the company. We are a leader in MS, but that business is increasingly affected by competition. And we have growth opportunities with Lekendi and zarenolone. So on the base business, the idea is how do we manage that business as profitably as we can. We did receive a favorable decision from the Court of Justice So the European Union related to TECFIDERA Regulatory Data and Marketing Protection, which was an important reinforcement of Intellectual Property and Exclusivity Rights.

Speaker 2

We believe this provides us marketing protection until at least February of next year, And we are looking to enforce that protection, but it will take a little time for the market to settle. And separately, we also continue to enforce our 2028 patent for TECFIDERA in the EU. We're also looking to aim to we're looking to maximize the profitability of the MS to the franchise. Up until now, the goal has been to defend revenue at all costs. I think now we want to take a little bit more of a nuanced approach of looking at where are the opportunities in MS, where do we have intellectual property, Where do we have still sales promotion sensitivity and try to align our resources with that and perhaps look at other means of promoting products that are a little less expensive.

Speaker 2

We do believe that SPINRAZA Rosa can return to growth and we are seeing stabilization out there in the marketplace. Gene therapy is not for everyone and the oral therapy has its limits. And there are still quite a few patients that suffer from SMA that don't benefit from any treatment. And as we announced at the previous quarter, we do have a formal process underway to evaluate strategic options for our biosimilars business. This is a very good business and I think especially with the launch of biosimilars for Humira, we are seeing an opportunity for the healthcare system to make important economies that help fund innovation, and we need to think about who is the and how is the best way to manage this business and who might be the best owner of that on external growth.

Speaker 2

We're looking at external growth really from 2 perspectives. 1 is, How do we balance the company a little bit more on its pipeline? It has been very neuroscience focused. But as I've argued in the past, I think with MS, which is basically an autoimmune disease, I think we could migrate into immunology. With SPINRAZA, I think we have an experience in rare diseases and that will be reinforced with Tifersen.

Speaker 2

And of course, we're in neuropsychiatry with zarenolone. So these offer opportunities to think about how do we build out some of those franchises. Yes, there is no, I did describe this dynamic of the MS franchise declining slightly and new growth coming. And we may look at external growth as a way of making sure that that transition is as smooth as possible from I'm pleased to say that we've appointed Adam Keeney as our Head of Corporate Development. Adam has over 20 years of experience, Not just in business development, but also in R and D and strategy across both large pharma and he was the CEO Biotech.

Speaker 2

So I think he's got some entrepreneurial spirit that will be very welcome at Biogen. We do see bekembi and ziranalone as major contributors to revenue, but we want to continue to think about business development to support the growth trajectory and diversify, as I said. So if I could have the next slide, please. So we really got an unprecedented opportunity. We have today a PDUFA date for Tufersen.

Speaker 2

We have a PDUFA date in July for McKenbi and a PDUFA date in August for zarenolone. I can't think of another major biopharmaceutical company that has that many new significant products to launch. That's a huge opportunity. But as I said earlier, we have to think about capabilities on that. These are going to be in different areas.

Speaker 2

Obviously, the Kemi is a little closer to home since it's still the neurologist, but there's an awful lot of market building will have to be done there. And of course, sironolone takes us into a much different area and a much different physician franchise. But we're making our milestones. We received accelerated approval in the U. S.

Speaker 2

Back in January. We filed for traditional approval in the U. S. On the same day in the and within the EU, Japan and when and but Eisai initiated regulatory filing in China. Filing all of those dossiers in that kind of timeframe is really quite significant and I have to congratulate our colleagues at A site for this effort.

Speaker 2

These filings have received priority review in the U. S, Japan and China, And of course, a major milestone in that the Veterans Health Administration has decided to reimburse the lekembi. Now the KemBI is going to be the 1st anti amyloid antibody to receive traditional approval globally, hopefully in July. As we said, this is not a straightforward launch. It's a complex diagnosis involving PET scans, lump or puncture for amyloid confirmation, specialists who are already busy MRI imaging, biweekly infusion.

Speaker 2

And we know that capacity could be an issue initially. CMS reimbursement will be the next major milestone, which we expect to have an answer on once The product has received full approval as expected following the PDUFA date in July. More importantly though, we're looking at How do we right now alleviate those bottlenecks? Yes, CMS is there, but both companies are already thinking about what we can do to make this easier for patients and actually reduce cost. Eisai and Biogen are pursuing maintenance dosing and the Subcu formulation.

Speaker 2

Blood based diagnostics, as I've said in the past, are really going to be a game changer in this space. And we believe that over time, capacity is going to expand to meet the need. For reimbursement, This is a big question. The Veterans Association is certainly helpful. I would just point out that Compared to the situation that Aduhelm faced, we are getting a lot more support from Congress.

Speaker 2

The American Association of Neurologists has written in support, and I know that a number of patient advocacy groups are active ensuring that patients have access to this important therapy. So Eisai is responsible under the contract for engaging with CMS And we would hope to see broad coverage coming out of the CMS decision. Now I'd like to talk about zuranolone just a few minutes, I mean, Zoran alone is still, I think, an underestimated asset in our portfolio. Unfortunately, a lot of people suffer from depression, so it is a large market. There are clearly a number of older medicines that are available.

Speaker 2

The The main problem with those are the side effects of those medicines and the length of time it takes for them to work. And ziranolone works Potentially in 3 days. And it's going to be a different type of launch because we're talking about a treatment that works in 2 weeks. The only analog I can find that is in way similar was ZYPTOMAX. So we do know that there is going to be some need for physicians are used to treating on a chronic basis.

Speaker 2

As we launch even, we're going to have to think about different metrics. One of the things in The launch that you look for is when do NRX is switched to TRxs. Well, we're not going to see that. There are not going to be TRxs with the product. So I think there are these changes in physician behavior.

Speaker 2

This is a paradigm shift and Paradigm Shift is not always a good thing in pharmaceutical marketing as we know. However, what really drives us, this is a product that really makes a difference for patients. This is a product that will is efficacious. It works fast. And think about the freedom Knowing that after 2 weeks that you can stop taking ziranolone.

Speaker 2

So I think that is going to be an enormous opportunity. And I'll just finish with Tafersen on this. It is not a big product, obviously, about 300 patients, It's classic Biogen. There's a we have a long history in ALS, a lot of setbacks, but the organization has an ability to learn and adapt and Biogen was able to partner with the scientific community to help characterize neurofilament as a biomarker in neuromuscular disorders. It's a huge deal because neurofilament will be relevant to a lot of researchers who are looking at ALS.

Speaker 2

So I think we've got some groundbreaking science here. And this is where Biogen has had the resilience to go after a lot of significant unmet need that And has resolved things in a way that not everybody has been able to do. Next slide, if I could. We've got a number of milestones coming, as you can see here on the slide. By our Q2 call, we would expect to be in a different place with lekembi.

Speaker 2

We should hopefully have the PDUFA date behind us successfully. Hopefully, we've received a traditional approval and broader CMS coverage in the U. S. And of course, we'll be communicating more about our fit for growth, cost optimization program. By the end of this year, hopefully, we've got the first ex U.

Speaker 2

S. Approval of lekembi in Japan, and hopefully, we'll have received the approval for zuranolone in both MDD and PPD, as well as having completed a 3 month DEA scheduling period and initiated the launch. And if I look further ahead by the end of by this time next year, I think we have an opportunity to build the global footprint of Lekenbi with approvals in Europe and China. And of course, we'll take the next steps on evolving the treatment to Paradigm, an Alzheimer's disease with an expected regulatory filing of can be maintenance dosing. We would also expect regulatory filing for subcutaneous So in conclusion, through a combination of groundbreaking signs, high potential near term commercial opportunities, diligent capital allocation.

Speaker 2

I think Biogen is going to be well positioned for the sustainable long term growth. I'd like to now turn it over to Priya for an update on our progress in R and D.

Speaker 3

Thank you, Chris. Last quarter, we made important progress advancing key pipeline programs. As Chris just pointed out, we now have the opportunity to deliver 3 potential new drug launches across 4 indications this year, all in areas of high unmet need, including Alzheimer's disease, to major depressive disorder, postpartum depression and SOD1 ALS. We also continue to evaluate potential opportunities for geographic and indication expansion for zuranolone as we work with our collaborator Sage to prepare for a potential U. S.

Speaker 3

Launch later this year. I will share key highlights from the quarter across broader efforts in Alzheimer's disease, the 2 person program in SORC1 ALS and the progress that we're making to rebalance the risk profile and improve productivity of the R and D pipeline. I will now share highlights of additional analyses Eisai recently presented or published, consistent with both companies' commitment to transparency. 1st, regarding activities of daily living. To the new analysis of ADCS MCI ADL presented at ADPD last month showed that all individual items of this scale to the Q1 of 2019.

Speaker 3

We also have a very strong year of record label and we expect to be able to achieve the same goal as the year of year. This result also mirrors CLARITY-eighty study outcome on the CDR suboxone, where LAKEEMBI treatment slowed decline across all 6 individual domains at 18 months versus placebo. Additionally, results from CLARITY AD showed that at 18 months lekembi treatment resulted in a 50% less decline from baseline on scales designed to assess quality of life and reduced care partner burden as compared to placebo. In addition was also presented an updated analysis of ARIA from the CLARITY-eighty study to evaluate ARIA incidence in lekembe treated participants on antiplatelet or anticoagulant drugs as compared to lekembe treated participants that were not on either. The results were encouraging and showed that ARIA incidence was similar as the 2 groups.

Speaker 3

In addition to the data presented at ADPD, newly published analyses from lekambi Phase 2 study reinforce to the finding that while plaque levels begin to return slowly after treatment discontinuation, other biomarkers of ED biology such as plasma A beta 42:forty ratio reaccumulate quickly. We believe these findings further support to the potential benefit of continued treatment with lekembi after plaques have been removed. Building on their prior work, to Eisai published a new analysis of the long term health outcomes associated with the lechemic treatment. To the Q1. Updated analyses incorporated data from the Phase 3 CLARITY-eighty study replacing the prior modeling that used Phase 2b study results.

Speaker 3

The analysis of the Phase 3 data consistent with the analysis of the prior Phase 2b study results Showed that lekembi resulted in a delay of approximately 2 to 3 years in meantime to progression to mild, moderate and severe AV dementia versus standard of care alone. We believe these results can build upon and reinforce to the significant body of evidence that has been generated on lekembe. Biogen is committed to building on its deep to the expertise and experience in Alzheimer's disease by advancing an industry leading Alzheimer's pipeline that is diversified across therapeutic modalities and molecular targets. This includes focusing on tau, Intracellular neurofibrillary tango, which represents a pathological hallmark of Alzheimer's, composed of hyperphosphorylated tau protein. Unlike amyloid plaque, which are observed to build up in the brain years before the onset of cognitive symptoms.

Speaker 3

Tau tangles are more closely related to the neuronal cell loss at onset of clinical symptoms. To address tau pathology, we are advancing BIIB080, an antisense oligonucleotide targeting tau mRNA aiming to reduce all forms of tau protein. Importantly, this is a very different approach than utilizing a tau directed antibody, which is hypothesized to target only extracellular tau. We were encouraged by the early results of this ASO based approach as evidenced by the BIIB080 Phase 1b data in Alzheimer's disease, which were presented last month at ADPD and also published in Nature Medicine, which went live online yesterday. Phase 1b data shown here on the slide.

Speaker 3

VABAT was generally well tolerated. Majority of adverse events were mild or moderate in severity, of which the most common were headache, back pain and post lumbar puncture syndrome. We observed a time and dose dependent reduction in CSF total and thoughts for tau across the multiple ascending dose and long term extension periods. Total tau continued to decline 16 weeks following the last dose in the MAD portion of the study, both in the high dose Q4 weekly and the Q12 weekly, and we saw a 50% reduction from baselines. We observed its effect on neurofibrillary tango as visualized by TAO PET as early as 25 weeks across all brain regions assessed.

Speaker 3

To the next slide. To the BIIB080 study is the first to demonstrate this magnitude of tau PET reduction across brain regions. Encouraged by these early results, we continue to enroll the Phase 2 Celia study of VIV80 in early Alzheimer's disease, where we are exploring different dosing regimens, including every 12 week and every 24 week dosing. Last month, an advisory committee by the FDA met to review the Tofersen data in SOD1 ALS. To the advisory committee unanimously agreed that reduction in plasma neurofilament light is reasonably likely to predict clinical benefit of Tofersen for the treatment of SOD1 ALS, and they also reached a consensus that the benefit risk profile was favorable.

Speaker 3

As Krish mentioned, Biogen has spent years collaborating with the scientific community to characterize neurofilament as a marker of axonal injury and neurodegeneration, and we view the outcome of the advisory committee as a significant advancement for the field. We believe these developments also inform our other programs in ALS, including LIB-one hundred and five, an antisense oligonucleotide targeting ATAXIN-two, which may have therapeutic potential in the broader ALS population. With 1 105 aims to reduce ATAXA2 protein levels, which we hypothesize with reduced toxic TDP-forty three clusters that are observed in nearly all people living with ALS. Preclinical experiments confirm that reduction of ATAXA2 levels modified survival and function in a mouse model of TDP-forty three ALS. The Phase III study of BIIB-one hundred and five in ALS is expected to read out early next year.

Speaker 3

We continue to advance our R and D prioritization efforts with the goals of optimizing the value that our pipeline can deliver. This includes investing in areas where we have a strong conviction in the disease biology. We continue to invest in further data generation for and remain focused on executing key clinical studies, including BIIB080 and BIIB105, as well as for litifilumab in lupus. We also made the decision to opt in to Denali antibody transport vehicle A beta program. With the ATV A beta, we aim to safely increase closure of A beta antibody in the brain.

Speaker 3

This may enable improved plaque clearance and or lower incidence of ARIA. We are also de prioritizing programs based upon our integrated view of development, regulatory and on commercialization challenges. Recent updates include that we decided to terminate involvement in the development of BIIB093 programs in large hemispheric infarction and brain confusion due to operational challenges and strategic considerations. We decided to pause initiation of the Phase 2b study of BIIB131 in acute ischemic stroke as we reassess whether we need to initiate the study. We discontinued BIIB132 in spinocerebellar ataxia type 3.

Speaker 3

To the Q and A session. We previously announced that we had refocused our investment in gene therapy and we will continue to look to advance technology associated with the safe delivery of these therapies to the right targets in the body, which we believe is one of the most critical scientific and technical challenges that is currently associated with this modality. We also had previously announced that we exited ophthalmology to the Board of Directors and Research with goals of reallocating resources to areas where we believe there is a greater probability of success. This will be an ongoing process involving dynamic scientific prioritization and investment based on an ongoing assessment of probability of success, but we expect to complete our initial substantial review by mid year. In conclusion, Biogen has had a significant number of accomplishments this past quarter, which we believe highlight the ability of our R and D organization to capitalize and deliver on groundbreaking science in the pursuit of new medicines for patients.

Speaker 3

With key assets in areas like Alzheimer's disease, to depression, ALS and lupus. We believe the Biogen pipeline has the potential to deliver significant growth over the medium and long term. I will now pass the call over to Mike for the financial results.

Speaker 4

Thank you, Priya. Good morning, everyone. So I'll provide some highlights of our financial performance for the Q1 and Please note that all financial comparisons that you will hear are versus the Q1 of 2022. Total revenue for the first Quarter was $2,500,000,000 and that's a decrease of 3% at actual currency and it's flat at constant currency. Non GAAP diluted earnings per share in the Q1 was $3.40 a decrease of 6%.

Speaker 4

Total MS product revenue was $1,100,000,000 a decrease of 19% at actual currency and 17% at constant currency. I'd like to provide a few points here regarding MS during the quarter. In the U. S, we continue to see the impact of TECFIDERA generics Declines in the interferons and competition for Tysabri. As we noted in our last call, Q1 is typically a seasonally weaker quarter for our MS business in the U.

Speaker 4

S. And that's driven by higher discounts and allowances and some channel dynamics. And as it relates to channel dynamics, we did see a greater than expected decrease in channel inventory, which added a few percentage points to the overall global decline. And we believe this is likely related to tighter working capital management at wholesalers and specialty pharmacies due to the rising interest rate environment. In addition, VUMERITY is being impacted by both pricing pressure and a contraction of the oral segment of the market in the U.

Speaker 4

S. And as a reminder, In Q1 of last year, VUMERITY did benefit from a favorable Medicaid related sales adjustment, which also impacts the year over year comparison. As far as Europe, as you know, we received a favorable decision relating to the TECFIDERA regulatory data and marketing protection in the EU, And that was assumed in our guidance. So we believe that Tecfidera is entitled to regulatory marketing protection in EU until at least February of 2024, and we are working to enforce this protection. I would add that we did expect it would take some time following the decision for all generic products to be off the market, and we are assuming that this exit will accelerate in the near term.

Speaker 4

Separately, we continue to enforce Our patent which expires in 2028. So as we look toward the remainder of the year, we do expect to see a lower rate of decline on a year over year basis versus what we saw in Q1. We've taken some actions which aim to improve the underlying revenue trajectory for MS portfolio in the second half, including for PUMERITY in the U. S, and we're continuing to closely monitor the underlying market dynamics in MS closely. Moving to SMA, global SPINRAZA revenue of $443,000,000 was a decrease of 6% in actual currency and 2% In the U.

Speaker 4

S, SPINRAZA revenue decreased 10% due to fewer new patient starts and some channel dynamics as compared to the Q1 of last year. However, we do continue to see what we believe are signs of stabilization in our patient base. Outside the U. S. Revenue for SPINRAZA decreased 4% at actual currency and increased 2% at constant currency with competition more than offset by the timing of shipments in certain markets.

Speaker 4

Biosimilars revenue was $192,000,000 and that's decline of 1% at actual currency and an increase of 4% at constant currency, and that's due to volume growth driven by the launch of our BioViz product partially offset by continued pricing pressure for our anti TNF products in Europe. Alzheimer's disease revenue, which includes revenue from Aduhelm and the lekembi collaboration equated to a headwind of $18,000,000 to revenue. As a reminder, beginning this quarter, our share of lekembi commercial expenses in the U. S. Is recorded as a component of revenue, thus the negative number this quarter.

Speaker 4

And for this line item, we expect it to continue to be negative in 2023 as ramping Lekambi commercialization expenses throughout the year are expected to exceed initial revenue. Total anti CD20 revenue of $399,000,000 Flat. Revenue from OCREVUS royalties increased 12%, which was partially offset by a 25 percent decline in revenue from our profit share on RITUXAN and that was driven by biosimilar competition. The anti CD20 revenue line also included a $10,000,000 operating loss related to Lonsumio. I'd note that our R and D spans for Lonsumio is also recorded as a component of the anti CD20 revenue line.

Speaker 4

Important to note that starting in the Q2, our pretax profit share percentage on rituxan, gazyva and LENSUMIA will decrease from 37.5 percent to 35% and that's to agreement with Genentech. Contract manufacturing royalty and other revenue of $319,000,000 benefited from the timing of production of Some contract manufacturing batches, which includes lekembi. While this line tends to vary from quarter to quarter, We do not expect this level of contract manufacturing revenue to continue throughout the remainder of 2023. Couple of details regarding Q1 expenses for the Q1. Non GAAP cost of sales was $663,000,000 or 27 percent of revenue.

Speaker 4

This includes $45,000,000 of idle capacity charges, which Eisai no longer shares. During Q1, we did see pressure on cost of sales associated with product mix. We saw increased contract manufacturing revenue, which has a higher cost of sales, including manufacturing revenue for Lokembi, which is at minimal gross margin. We continue to expect our cost of sales as a percentage of revenue for the remainder of the year to be higher than the 22.4% that we saw for full year of 2022, And that's primarily as a result of product mix and idle capacity charges. 1st quarter non GAAP R and D expense was $571,000,000 and that compares to $552,000,000 in the Q1 of last year.

Speaker 4

Non GAAP SG and A was $603,000,000 and this compares to $635,000,000 in the Q1 of 2022. The decrease in non GAAP SG and A expense was driven primarily by cost savings initiatives, which importantly were partially offset by investments to support new product launches and $31,000,000 related to the termination of the co promotion agreement with Eisai for Biogen's MS products in Japan. We continue to expect operating expenses to be lower in the second half of twenty twenty three than in the first half. And as Chris mentioned, separate from the previously announced $1,000,000,000 cost savings initiative, we have initiated our Fit for Growth program in order to align our cost base with expected revenue while also investing in our growth opportunities. And we expect This program to have a modest impact on 2023 expenses and more meaningful impact in 2024 and beyond, and we'll have more to say about this on our 2nd quarter to earnings call.

Speaker 4

As for our balance sheet, we ended the quarter with $6,000,000,000 in cash and marketable securities, $6,300,000,000 in debt and roughly $300,000,000 in net debt. Subsequent to the end of the quarter, we received approximately $813,000,000 related to the sale of our equity stake in Samsung Bioepis, which is not included in these cash figures. And this payment is the 2nd payment related to this transaction, which closed around this time last year, and we're expecting a Quarter, we generated $455,000,000 in cash flow from operations. CapEx was $67,000,000 Free cash flow was $389,000,000 So overall, we remain in a very strong financial position with significant cash and financial capacity to invest in growing the business over time. Let me now turn to financial guidance for full year 2023.

Speaker 4

We are reaffirming our full year guidance of a full year 2023 revenue decline in the mid single digit percentage range as compared to 2022 reported results and full year 2023 non GAAP diluted earnings per share of between $15 $16 and I would refer you to our press release for other important guidance assumptions. So in closing, Biogen continued to make strong progress against our business priorities in the Q1. We remain focused on 3 potential launches in 2023, while continuing to be diligent in prioritizing our R and D pipeline, optimizing our operating model and also evaluating external opportunities. We expect that execution of these priorities will position us well for returning Biogen to sustainable growth and creating long term value for our shareholders. And with that, we will now open the call for questions.

Operator

Thank you. Our first question comes from Phil Nadeau of TD Cone. Please go ahead.

Speaker 5

Good morning. Thanks for taking our question. Our question is on Bikumbe reimbursement. What is Biogen's expectation for reimbursement post full approval to expect coverage with evidence development or some other form? And second, When do you think that will be clear?

Speaker 5

CMS has suggested that the coverage will be revised on the day of approval. Is that going to be the final determination or will there be subsequent revisions after that.

Speaker 6

Thank you.

Speaker 4

Chris, do we have you? Do you want to start?

Speaker 2

Yes. I hope that I got off mute. Yes, thanks Phil. Nothing really new to report there, at least as far as CMS. CMS has said that following full approval that they will be making sure that the product is broadly available.

Speaker 2

I think there will be a question of just in the registry, what type of registry, is there A cap on the registry that hasn't been defined at the moment. I think what really is encouraging is that we're seeing an awful lot of support being mustered and encouragement of CMS to reimburse. As I noted earlier, the American Association of Neurologists has Come out strongly in favor. As a reminder, they sided more with CMS at the time of Andrew Helm, so this is a change in position. Over twice as many members of Congress have written to CMS than did for Aduhelm.

Speaker 2

And some of you may have been following the budget available. So we continue to believe that the product will be made available. We would hope that it's not with a registry. There's no real need for a registry and we don't really see why this Product wouldn't be reimbursed like any other product for Medicare, but we're probably not going to see anything until after the PDUFA date.

Operator

We will now take a question from Paul Matteis of Stifel. Please go ahead.

Speaker 7

Thanks so much for taking my question. I wanted to follow-up a little bit more on external investments as it relates to reshaping your pipeline. Chris, you've outlined rare disease, psychiatry and immunology historically. It would seem like if you're going to decrease the risk profile of your R and strategy that immunology and rare would be more on the developmental side, whereas for a psychiatry asset, you'd want something that was either clinically de risked or commercial. Is that the right way to think about it?

Speaker 7

And what's your appetite today for transacting before shoring up everything in house? Thank you.

Speaker 2

Thanks, Paula. No, I think you've got that correct. I mean, you could certainly look at some tuck in acquisitions on on the rare side. We have, as I noted earlier, appointed Adam as Head of Corporate Development and Business Development. I think another key figure will be the appointment of a new Head of Research.

Speaker 2

And I would hope to have that person in place at least by the end of the summer. And that person along with Priya and Adam are really going to The 3 that I'll be working with to think about certainly from a licensing point of view. In terms of more transactions, I think we would be more inclined to find something that is revenue generating in the near term. If you look at Biogen, Really from 2025 onwards, I think the company has an ability to grow pretty significantly. But in the next couple of years, that's where we're in this The tide going out on MS and the tide coming in on new products, we obviously have a lever with cost We can use, but external growth could also help us to manage that transition period.

Operator

We will now take a question from Jeff Meacham of Bank of America.

Speaker 8

Good morning, guys. Thanks so much for the question. Chris or Priya, on BIVV80, we've seen a lot of tau assets Underwhelmed in trials as a monotherapy and you guys are in a unique position to assess tau along with lekembe. So the question is, What do you need to see in Phase 2 to advance a combo and strategically how much of a priority you think this would be? Thank you.

Speaker 3

Yes. Thanks, Jeff. Great question. So I'll just Step back and say, obviously, Alzheimer's disease is a very complex disease with multiple biologies and complex pathophysiology. We do see ourselves as pioneers in the space, and we have been successful with demonstrating the A beta to Plax as being central.

Speaker 3

And now we've kind of shifted gears to looking at tau. As you know, we had a lot of experience with extracellular tau and this was actually not successful because BIV92 didn't work, which was gothrenumab. And we have really focused now on knocking down all post translational isoforms of tau. So that's what BIIB080 is aiming to do. As we've shared, I mean, obviously, these numbers are small in the Phase 1b study that I went online in a publication yesterday in Nature Medicine, but very encouraging because we have seen close to 50% reduction of Total Tiao and the sustained reduction post dosing.

Speaker 3

So this is very encouraging. As we kind of think about Alzheimer's leadership as we think about multiple therapies, we have to assess how tau knockdown kind of Translates into clinical outcomes, how much is required. Because when you look at the mouse models, transgenic mouse models for tau, You do see that about 50% actually can rescue neuronal cell loss and memory. So it's encouraging, but we need to see more data from Phase 2. That's exactly how we're approaching it.

Speaker 3

Eventually, I think we do believe strongly that this is going to be a multi to the modality space and patients will probably need more than one therapy. Now whether it will be combination which you have to determine whether it's synergistic or whether it could be additive. That remains to be seen. And I think we're going to let the data drive us on many of these questions, but we're looking at all of this very, very carefully. Right now, we're focusing on tau knockdown, all isoforms as well as our Phase 1 asset, which has BIM113, which is looking at preventing tau aggregation.

Speaker 3

So that's how we're focusing our efforts.

Speaker 2

If I could just follow-up on that though, I think, Priya. I mean, this is Priya noted that We've been through the pipeline and we have deprioritized some programs. But that's not just in an effort to reduce cost. It's really to be able to focus resources on those assets that we think are most promising. I can tell you following the announcement of these results in Sweden and then also publication of the article in Nature.

Speaker 2

There's been a lot of on BIVV80, particularly from neurology community. And I think this is one of those assets that we really want to focus on. We've actually already allocated more resource to accelerate this program. And as Priya said, This is really one of the first manifestations of what it means to build a leadership position in Alzheimer's as opposed to just launching one product in this space. Most complex diseases do end up being combination therapies and there is some likelihood that that will be the case in Alzheimer's.

Speaker 2

And to your point, I think Biogen is pretty well placed in that regard. We're certainly getting even external interest in this program. To

Speaker 6

the operator.

Operator

We will now take a question from Salveen Richter of Goldman Sachs. Please go ahead.

Speaker 9

Good morning. Thanks for taking my question. On lekembe, could you discuss your strategy here with respect to infrastructure, particularly infusion centers and testing post a potential full approval and assuming broad coverage by CMS.

Speaker 2

Sure. Thanks for the question. One of the most interesting things is that The company's actually went through a launch planning process with Aduhelm and actually Commissioned a study to actually have a look and understand what the learnings of that are. And there's an awful lot of chicken and egg syndrome going on here. Until there's been an approved therapy and reimbursement, there often isn't enough investment in other areas.

Speaker 2

We see this with blood based diagnostics, for example. They've been around, but there's no market for a blood based diagnostic until you actually have an approved drug and a treatment. And the same is true really for the investment in infusion capacity and PET scans and lumbar punctures and even the neurology capacity. So what we certainly are seeing is that there is a lot more interest or a lot of parties who are looking to invest in some of this infrastructure. But right now, the world is almost in a point of Well, the starting gate is really CMS approval.

Speaker 2

One of the things that we also learned was You want to flex your commercial investment with the ability of the system to actually meet patients. I think one of the things that We would do differently and are doing differently is that, at the time Biogen ramped up a huge commercial machine In advance of reimbursement and in advance of some of that expansion. As we work with Eisai, we're being a lot more Prudent in looking at, okay, let's make sure we're out there, we're educating physicians, we're thinking about who's the right patient for this and working with the different centers to make sure we know which centers are have the ability to see patients and Process the patients with this complex treatment paradigm. So It will expand and I think some of that expanded already at the time of Adduhelm. And but I do think that we'll see we'll get a better sense of where that's going once we have the confirmation of CMS' reimbursement.

Operator

We will now take a question from Umer Raffat of Evercore.

Speaker 10

Hi, guys. Good morning. Thanks for taking my question. I thought I would get some clarity on the minus $19,000,000 in collaboration profit share on leucanumab. And specifically, is there any color we can get on what the end user revenues could look like from this minus $38,000,000 for the franchise for 1Q, Even if it's a fraction of $1,000,000 it would just be very helpful.

Speaker 10

And also has Eisai indicated to you on where they are or what percentage of the commercial build out has already been baked into this 1Q number or not? Because you can imagine there's a lot of investor concern around how much SG and A they could possibly build into this collaboration, especially in light of some of the concerns around the strained relationship from the past, etcetera. Thank you very much.

Speaker 2

Thanks, Umer. Mike, do you want to take the first part of the question and I'll talk about the commercial infrastructure spend?

Speaker 4

Sure. No, happy to. So, Umer, as you know, the line item that you're referring to Is the net of any revenue and commercial expense divided by 2 basically, as you noted. And We don't have a number that we're going to disclose on the revenue. What I can say is there was revenue during the quarter.

Speaker 4

It was minimal. The majority of patients on drug are cash pay. There's not reimbursement yet, as you know. And I think the real game, so to speak, starts when we have reimbursement, should we get approval and get to that point. Yes, revenue was minimal.

Speaker 4

The majority of it was cost divided by 2, and I'll let Chris speak to the ramp from here.

Speaker 2

Yes. Thanks, Mike. Just in terms of relationship, I was in Japan last week and CEO of Eisai and I had dinner and I think our view is that the relationship and the partnership is actually working pretty effectively around the world. And As I said earlier and I've said on a number of occasions, this is not a reach and frequency launch. So let's not think about the fact that we're just sending reps out and then that's going to have some impact directly on sales.

Speaker 2

There is an awful lot of certainly education that's being done. We actually Eisai has already reps out there in the field in the U. S. We as Biogen will likely will add reps at some point in the future, perhaps as early as next year once Reimbursement situation is known and the capacity increases. As I say, one of the lessons that we have to learn is that you don't want to get ahead of that.

Speaker 2

This is the initial launch period is going to be really one that's constrained by the capacity. And so there's an awful lot of work working with the neurology community to educate, how you diagnose a patient, the whole process, in a practice So when do you get the PET scan or the lumbar puncture? When are the how do you schedule the MRIs getting the reimbursement, understanding where the infusion centers are? So it's a pretty high touch sell and customer relations at the start. There, I would say there's an initial investment, there'll be a second wave of investment once the CMS Decision is known and then probably a third wave of investment as the capacity builds and the patient numbers increase.

Operator

Our next question comes from Tim Anderson of Wolfe Research. Hi, thank you for taking our question.

Speaker 11

This is Alice Nettleton on for Tim Anderson. Just on Alzheimer's, so We're wondering what is Biogen's working assumption on how the profile of Lilly's denanimab will look relative to Lekembe. And past data would suggest it would be less safe with efficacy about the same. Is that how Biogen views the most likely outcome? Thank you.

Speaker 2

Yes, thanks for the question. I don't think we really Look at it that way. When I think that the world changed with the CLARITY study. If we went back 2 years ago, 3 years ago, a lot of still Doubt amongst the neurology community, does the amyloid beta hypothesis really hold water? There's been a huge debate within the community about whether that's a valid target or not.

Speaker 2

Clarity, I think, Really starts to put that debate to rest. And the studies were done over in the case of Clarit an 18 month timeframe. But actually what we're seeing is that the world has moved on that those 18 months, Yes, we dramatically reduced plaque and we actually see that there is a benefit in terms of slower cognitive decline. But that's not where it's going to end. In all likelihood, the way this is shaping up is that you're going to have at some point a Plaque clearing phase.

Speaker 2

Then what happens after you've cleared the plaque? If you don't continue treating, the plaque is going to come back. So there's going to be In all likelihood, a maintenance phase. That's where also the subcu formulation will be important. And then As we all know, MCI is not really early stage, Alzheimer's.

Speaker 2

By the time you have MCI, by the time you have symptoms, You probably already have a maximum load of plaque. There are probably people on this call Who are accumulating plaque in their brains as we speak and they don't know it. And by the time a certain amount of plaque has arisen, And you've already had a certain amount of neuronal death. And right now, we don't know how to restore neurons. So there's also going to be with the advance blood diagnostics, but also even Eisai Biogen study ahead and looking at earlier patients.

Speaker 2

As one neurologist said, we're not looking at this any longer as a 4 to 8 year disease, but we're looking at this over the timeframe of a 25 year So if I look at denanumab, fine, in some ways, it will be good if their data are Positive that it further reinforces the amyloid and the beta amyloid hypothesis. And also, There's we've always seen in new markets, if there's more players, that those markets develop faster. But this Donanumab thought process of I'm just treating to a certain amount of plaque reduction, most neurologists I talk to don't believe that fits anymore with the way we're thinking about the treatment of Alzheimer's. So I think it will be there, but I think it's going to be It's not really going to be adapted in the same way that people thought when that study was conceived. So Let's say, I think it will be good if there's other players in the market, but I don't think we are too concerned about competing with Denanumab.

Speaker 2

To

Speaker 6

the operator.

Operator

We will now take a question from Michael Yee of Jefferies. Please go ahead.

Speaker 6

Hi. Thank you. Good morning. We had a question around your expectations Post reimbursement around the lekembi launch, appreciating you can't give too many specifics, but How should we think about that in the context of consensus modeling $40,000,000 to $45,000,000 $400,000,000 for next year? Maybe you could help right size how things start off, whether there's a bolus or a number of patients ready in the queue and in the context of how we should be modeling the next 4 to 6 quarters.

Speaker 6

Thank you.

Speaker 2

Yes. I wish I could give you some more guidance on that. As I'd like I'm pretty confident in the 3 to 5 year outlook. The next 18 months are a little more difficult To model even for us, there is an awful lot of interest. There probably will be some queuing.

Speaker 2

There is going to be a question around the how quickly can the system flex. The way I would think about it is and the way I look at Biogen is, I think zuranolone actually The product that can actually contribute faster to our sales growth in 2024. And I do think that one, Yes, it's a paradigm shift, but there's a clear patient benefit and we don't have all of the infrastructure Challenges to overcome. So to me, I look to more to the impact of zuranolone next year. And We'll be able to give a lot better idea by the end of this year once we see what's the initial takeoff in the 1st 6 months once When CMS issues its reimbursement.

Operator

Our next question comes from Robin Kanauskas of Truist Securities.

Speaker 9

Hi. Thanks for taking my question. And all the colors, it was very helpful. So just on if there is a registry, can you just talk to if You would foresee a registry being how much of a bottleneck it might create? How might it be paid for?

Speaker 9

And help us when we see that decision, understand what the challenges would be or it may not be as cumbersome as some might take. Thanks.

Speaker 2

Well, there are certainly versions of a registry that are not particularly cumbersome and The devil is going to be in the detail. That's why again, we would hope that actually CMS reimburses this product just like any other product. When you think that diverse and underserved patients in the healthcare system Suffer disproportionately more, in Alzheimer's. It would seem that increasing the barriers for those patients By the need for navigating a registry would be highly unfair to those patients. But we'll wait and see.

Speaker 2

Our belief is that the data from Claroty are extremely clear. The benefits are by no means limited to what you see in the CDR somewhat boxes. As Priya said, when you look at those activities of daily life, Which are evaluated by people who are with these patients every single day. And you have Half dozen measures and each one of them individually is statistically significant. That says to me that and versus placebo, This says to me that the people who see these patients every day understand the benefit of this new medicine and treatment.

Speaker 2

And so, I think the data are compelling and we would hope that there isn't a registry and if there is a registry that It is minimally cumbersome for patients and their caregivers to navigate.

Operator

We will now take a question from Mark Goodman of SVB Securities.

Speaker 12

Good morning, Priya. Maybe you could just help us with what's similar about these programs that were stopped? I mean, Obviously, there's a few in stroke and a few others, but what is similar there? And it was interesting strokes in Phase 3. So does that mean that we could See some other late stage assets that get cold from the pipeline.

Speaker 12

Just philosophically, just big picture, how you've thought about these decisions? Thanks.

Speaker 3

Sure. So the way we've thought about these decisions is really we're looking at every program in great depth and several times over and thinking about what are the options, what are the operational and strategic and regulatory to challenges, but also opportunities. And so really it's an integrated view of where we believe that our resources would be better applied to other programs in our portfolio currently. That is, I would say, the common denominator across all the decisions that you're hearing from us today. We believe that we should be spending time elsewhere.

Speaker 3

Now, having said that, you said the VIB93 is in Phase 3. I can't really comment on what might be the outcome, but for now we are really discontinuing development.

Operator

We will now take a question from Terence Flynn of Morgan Stanley.

Speaker 8

Great. Thanks so much for taking the question. Maybe a follow-up for Chris on zuranolone. I think during your prepared remarks, you noted that this asset is underestimated. And based on your answer to your prior question, it sounds like Potentially, you think there's could be some upside to numbers.

Speaker 8

So should we read that as that's a takeaway that you think there's outside the outer year consensus estimates here for that asset. And then just any update on the commercial footprint in terms of the build and what that might ultimately look like over Thank you.

Speaker 2

Yes. Thanks, Mark. It is interesting when I look at it and I take what analysts and investors say very seriously. And But I definitely see that as a company, we see a much higher potential for zuranolone than what the Street says. I'm trying to figure out why there is that gap, haven't really come up with a good answer other than I think the investment community has Been so focused on things like rare diseases and oncology.

Speaker 2

We've got some very clear biomarkers, we've got some very precise Medicine, precision medicine is a big thing in both of those fields. And we're back into primary care. We're back into A disease state that has a lot more challenge in actually diagnosing even as you look at different indications. For instance, if you take something like bipolar depression and major depressive disorder and general anxiety disorder and These things are often seen in the same patient. And indeed, when you actually talk to psychiatrists, they'll tell you that This is truly personalized medicine.

Speaker 2

Psychiatrists tend to be less swayed by guidelines, by what KOLs say, And more about understanding the individual patient needs. So this is not What people have been used to looking at, it's all clinical data and everything else. And so I think from a commercial model point of view, The market is having a little bit more difficulty understanding how does a physician make a decision about their patient. I can tell you is that we've talked to a lot of patients. We've had patients into our Global Executive Committee.

Speaker 2

We've had physicians talk to our Global Executive Committee. It is a much different approach than certainly what our company has been used to in terms of dealing with neurologists. But what is also really clear is that there is a significant unmet need. Patients cycle through therapy. They're not adequately satisfied by those therapies.

Speaker 2

There's an awful lot of stigma here and staying on medicine only reinforces that stigma. I've talked to physicians who say, we have people coming into the emergency room And we can't help them. There are no beds. We give them an SSRI or something like that and hope that someone is going to watch them for 6 weeks. The fact that you can have a medicine that responds quickly, if you're in a depressed phase, This is a very dark part of people's lives.

Speaker 2

And when you hear the patient stories about how suddenly their life has changed, we had A patient who'd been suffering on and off for almost 20 years, a mother of 3 children, grandmother of 5 children. And within days, she felt better. She's gotten her qualifications as a fitness instructor. She's going now for a pilot's license. I mean, this is really transformational for so many patients and that's what I really go by.

Speaker 2

And another way I look at it, Mark, is I look at when you're recruiting salespeople. We have 27 roles, the first line Manager roles in our field force that we're looking at. We had over 4,000 applications for those roles. And these are people who are working for great companies and supporting great products. And I remember when we were launching And there weren't high expectations of Labagio.

Speaker 2

But boy, when we built that field force, we were able to recruit a great team. And salespeople do their own diligence. They tend to want to be a part of medicines that they see as important. And So I see a lot of signs where I think this is going to resonate with the patient. It is certainly resonating with the salespeople and folks that we are recruiting and I certainly hear it from a lot of key opinion leaders.

Speaker 2

It's hard to the only thing that I see where there's a note of caution is that it is clearly a paradigm shift. And I'd like to say it's easier to change your spouse of 20 years than it is sometimes a physician's prescribing habits. But because physicians do rely on their experience, but I do think there is a major unmet need here. And I actually think there's an awful lot of potential. I'm very excited about this product.

Speaker 2

I think if I just listen to patients, I always like to say if there is an unmet need and I can see a differentiation versus existing therapy, The drug will be a success.

Operator

Our next question comes from Jay Olson of Oppenheimer.

Speaker 5

Thank you for the update and congrats on all the progress. Could you talk about the ideal capital structure for Biogen? And how much incremental debt Could you take on for the purpose of business development? Thanks for taking the question.

Speaker 2

Mike, do you want to take that one?

Speaker 4

Yes, I'll take that one. Thank you for the question, Jay. So we ended the quarter with about $1,000,000,000 in cash. And as we mentioned, we received the payment from Samsung for roughly 8 $13,000,000 subsequent to the end of the quarter. So we're approaching $7,000,000,000 of cash on hand.

Speaker 4

Our EBITDA level is roughly $3,000,000,000 and on a gross debt basis, we've got roughly 2 turns. Obviously, net debt is Close to 0, it's actually negative if you pro form a for the Samsung payment. So there is incremental room, I Thanks that just illustratively, if you added a turn of leverage, you'd be at 3 times gross, you'd It'll be very modest net and you add that to the cash that puts you kind of north of or in the zip code of about $10,000,000,000 that you've got of kind of dry powder, so to speak. I wouldn't suggest that we would add incremental debt just to add it, but for the right opportunity, the right BD opportunity, etcetera. I think we've got a lot of flexibility in our capital structure.

Speaker 1

We know you all have other calls to get to. So operator, can we please take one more question?

Operator

We now take a question from Colin Bristol of UBS.

Speaker 13

Hey, good morning and thanks for squeezing me in. And also welcome, Chuck. We're excited to be working with you again. So on subcut lekembe, What does FDA specifically said is required for approval? And then can you just speak to how important the subcut formulation is for the commercial What proportion of patients would it allow you access to that the infusion will not?

Speaker 13

And then just sort of a subpart on the commercial part, The VHS excluding APOE4 homozygous. Can you just speak to the risk that you see either as a labeling Commercial risk on full approval of Novakis broadens. Thank you.

Speaker 3

Okay. Thanks, Colin. I can start yes. I can start with the subcutaneous formulation. So the plan is on track and Isai has said that they would be filing by Q1 2024.

Speaker 3

Just to back up, the evaluation is being conducted in the Phase 3 open label extension via subcutaneous substudy. And Eisai has also stated that they have discussed the requirements for proceeding with this filing and generating the data and then subsequent filing with FDA and other regulators. And we believe that the strategy currently does allow for an evaluation of PKPD and safety, which would be required. I'll move to the next Aspect, I think that you asked was about the APOE4 phomozygous. So Eisai presented some of these data at ADPD and also made comments on this topic.

Speaker 3

And they believe that really the data set was rather small. The number of APOE4 homozygous is quite small. They don't believe that the overall conclusions are different in terms of clarity, AD and confidence in the data. The other aspect here to keep in mind is that Many of the secondary endpoints favored Lecambi. So there could be a component of placebo not declining as much in this competitor group and that was one of the points that they made as well.

Speaker 3

Now with regards to the commercial view on subcutaneous, cutaneous. I want to turn it to either Chris or Mike.

Speaker 4

Yes, I mean I think on the

Speaker 2

go ahead, Mike.

Speaker 4

Go ahead, Chris. Yes. No, I was going to say on the commercial view of subcutaneous, this will be kind groundbreaking and then we'll have to see how that plays out over time as patients with Alzheimer's Along with their caretakers are maybe moving to more of a maintenance mode for their treatment. This Could be something that could be very valuable and particularly for patients who have a distance to travel to get to an infusion center to be able to self administered home and something that we think could have a lot of potential. So more to come on that over time.

Speaker 4

We'll expect to hear more about it over the next 9 or so months and we think it could be an important differentiator if it comes together.

Speaker 2

I mean, just for what we're

Speaker 4

going to do

Speaker 2

for now. I was just going to add, Chuck, We don't really see that the biweekly infusion has been the limiter right now for that plaque infusion. But it does, As Mike said, as we think about if we are able to get a maintenance indication and we are able to get blood diagnostics, The length of time that a patient will be on drug potentially will change in future and then therefore the subcu would certainly make a difference in that scenario. Back to you Chuck.

Speaker 1

Thanks Chris. So thank you all for your attention this morning. You can always follow-up with the Investor Relations team and this will conclude our call.

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