Q2 2025 Earnings Call Transcript

Good morning. My name is Cynthia and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Second Quarter 2025 Earnings Call and Business Update. [Operator Instructions]. Today's conference is being recorded. I would now like to turn the conference over to Mr. Tim Power, Head of Investor Relations. Mr. Power, you may begin your conference.

Thanks, Cynthia and good morning, everyone. Welcome to Biogen's Second Quarter 2025 Earnings Call. During this call, we will make forward-looking statements, which involves risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. We provide a comprehensive list of risk factors in our SEC filings, which I encourage you to review.

Our earnings release and other documents related to our results as well as reconciliations between GAAP and non-GAAP results discussed on this call can be found on the Investors section of biogen.com. We've also posted the slides to our website that we'll use during the call. On today's call, I'm joined by our President and Chief Executive Officer, Chris Viehbacher; Dr. Priya Singhal, Head of Development; Alisha Alaimo, our President and of North America; and Robin Kramer, our Chief Financial Officer.

We'll make some opening comments and then move to Q&A and to allow us to get through as many questions as possible, we kindly ask that you limit yourself to just 1 question. I'll now turn the call over to Chris.

Thank you, Tim. Good morning, everybody. We're very pleased with the performance in the second quarter. In particular, we've seen growth -- the growth from our new product launches offsetting our MS decline.

MS has also proven to be a little bit more resilient this quarter. There was some gross to net adjustment. But then I would like to call out the performance of VUMERITY. I think Alisha and her team in the U.S., in particular, have put a lot of emphasis on VUMERITY over the last 2 years and we've been seeing some nice growth.

And this is a product where we still got a lot of market exclusivity into the future. As we look at the growth products, I think we're also seeing continued consistent growth with LEQEMBI. We've got a number of enablers coming along that hopefully will remove some of the bottlenecks in the system. Those are things like the blood-based biomarkers.

The first one has now been approved but there are now multiple biomarker tests out there. We have a PDUFA date for our subcutaneous formulation for maintenance coming at the end of August. And I think those are all things that are starting to generate some potential shift in momentum in LEQEMBI but Alisha will talk about that more. But I'd say, I think we're feeling pretty encouraged by what we're seeing there.

SKYCLARYS, again, now is available in 29 markets. We have probably as many, if not more patients outside the U.S. as inside the U.S. It's rolling out extremely well. Not all patients are on -- reimbursed yet.

And I think as we progress each country, we've been able to get a lot of patients on early access programs. What we have seen is extremely strong take-up in those programs and then we work basically country by country to get reimbursement. ZURZUVAE has had an extremely nice quarter. And again, I think Alisha will be able to give some more color, commentary.

But I think that's a bit of a sleeper in our portfolio. I think this is certainly outperforming our internal expectations. We also had good news in the quarter. We got approval in Europe, and we're looking forward to planning the launch there.

As we turn to the pipeline, Priya is going to obviously be able to say more but we've had some very good news there. All Phase III studies for felzartamab have been initiated. We potentially have another study being started in microvascular inflammation that could add to that portfolio. We saw some really interesting results for salanersen.

This is our next-generation product for SMA and we're quite excited about that, and that will be another Phase III that starts this year. On business development, we continue to look across the spectrum of our development pipeline. We're very excited about the research agreement that we concluded in the past quarter with City Therapeutics. And we would expect to see several more of those research collaborations this year.

We continue to look at later stage, both M&A and collaborations. But again, we remain disciplined in terms of ensuring that anything we do would drive shareholder value. So I think if I look at the quarter, we've got growth top and bottom line. We've had very strong discipline on costs.

And so I think the company is performing well. And with that, I'll turn it over to Priya who can give us a lot more detail about the pipeline.

Thank you, Chris. This quarter, we made significant progress in continuing to build the breadth and depth across the pipeline in key areas. We obtained a positive CHMP opinion for zuranolone in Europe, initiated 3 Phase III studies, the pediatric Phase III study for SKYCLARYS as well as felzartamab Phase III study for IgAN and PMN. And we are working with Stoke Therapeutics towards an imminent [ FPI ] for zorevunersen.

We're also working to further expand felzartamab into a fourth indication called late microvascular inflammation or MVI, in patients who have had kidney transplant. In support of our continued scientific leadership, we have also presented new data across our key franchises at medical congresses, including Cure SMA, EPNS, EULAR and LUPUS 2025. And just yesterday at AAIC, new long-term data on LEQEMBI, showing treatment benefits over 4 years with the continued use and bioequivalence data for the initiation dose of subcutaneous lecanemab was presented. This quarter, we also announced exciting new interim Phase Ib data for salanersen in SMA, as Chris mentioned, demonstrating proof of concept.

As the company that led transformation in SMA, we are excited about the potential to continue that journey and potentially address the residual unmet needs for patients. Salanersen leverages the same mechanism of action as SPINRAZA but was designed to be a more potent molecule. And hence, enable the potential for high efficacy with once yearly dosing, a profile, we believe that can further address the needs of the SMA's community. The Phase Ib study included children who had previously been treated with gene therapy but had not achieved the expected motor milestones based on their age, such as sitting, standing or walking despite the extended period of time since having received the gene therapy.

We presented the interim results of this study at the Cure SMA meeting last month. And I would like to review the key features of that data with you next. While this is a small dataset, several features are compelling. First, salanersen was evaluated as a once-a-year administration.

Second, we are seeing a significant reduction in neurofilament, which as you know, is a marker of neurodegeneration. And third, we observed meaningful improvements in motor function, including achievement of significant motor milestones. And on the right-hand side of this slide, you can see 2 examples of participants who were previously treated with gene therapy several years prior to receiving salanersen. The first row represents a child who received gene therapy at around 1 year of age and could not sit when they enrolled in this trial at approximately 5 years of age.

They received salanersen 80 milligrams, 1 dose and by their 90-day visit they were able to sit independently. Naturally, these results need to be confirmed in a registrational trial. But these types of data support the potential of salanersen to transform the standard of care in SMA and we're working with urgency as we engage with global regulators and finalize the Phase III study design. Turning to the lupus pipeline.

Together with UCB, we were excited to present new data from the positive Phase III dapi study in SLE. We know from patients that fatigue is a very common symptom in lupus. It affects up to 90% of patients and is often described as the most disabling symptom of the disease. It can present as a profound, persistent and debilitating tiredness and has proven to be a difficult-to-treat symptom of lupus.

What's important about this new analysis that we presented at EULAR, is that dapi demonstrated consistent improvements across multiple domains of fatigue beyond what was achieved with just standard of care alone. This includes the newly developed FATIGUE-PRO which is a novel fatigue measure in patients with SLE. These results further reinforce the potential for dapi to address the unmet need and become an important new treatment for SLE. Reflecting on our achievements this quarter, I believe that we're making steady progress towards our goal of transforming the pipeline and delivering the new Biogen.

The next 12 to 18 months are marked by multiple key expected scientific milestones and regulatory outcomes, including LEQEMBI subcutaneous maintenance and high dose SPINRAZA. And given the central role of the pipeline for our long-term growth strategy, we plan to build upon last quarter's felzartamab investor webcast by hosting a second thematic seminar this fall, now focused on our lupus pipeline. With that, I would like to now hand the call over to Alisha for an update on our commercial business. Thank you.

Thank you, Priya and good morning, everyone. Today, I'll review the strong commercial execution we delivered in Q2 and how evolving market dynamics have created new opportunities that drove our most recent growth. As many of you may remember, more than 18 months ago, we reallocated capital as part of our Fit for Growth initiative to prepare for 4 new launches in the U.S. market. We took a hard look at our investments in MS to determine where they deliver the strongest return.

And today, we believe we're seeing the results of those decisions. Before turning to the launch products, let me remind you that our MS business has remained resilient and an important contributor to our cash flow. Looking at Q2 performance, in addition to some onetime items benefiting the quarter, I am encouraged by the strength of VUMERITY as it continued to grow. We believe these results demonstrate the value of our team's deep institutional knowledge, strong access and relationships in immunology.

Moving on to SKYCLARYS. We are delivering on our commitment to bring the first Friedreich ataxia treatment to patients around the world. SKYCLARYS is now available in 29 markets globally, including key European countries and Brazil. Expanding into new markets is helping us realize the full potential of SKYCLARYS and we grew revenue 5% globally compared to last quarter.

Last year at this time, I shared the deliberate pivot made by our U.S. rare disease team to redirect investments to reach the remaining patients treated in the community as opposed to our initial patients who were primarily at centers of excellence. We learned patients in the community had a different profile. They are generally older, averaging older than 40 years old and often with slower progressing forms of FA. Now keep in mind, community neurologists and primary care providers may only treat 1 or 2 FA patients in their career, so they can require more education.

We have deployed advanced rare disease capabilities to identify patients in need and help HCPs understand the progressive nature of the disease and the potential urgency to start treatment on SKYCLARYS. I believe this shift in focus was a key factor behind the 13% quarter-over-quarter revenue growth in the U.S. And in Q2, approximately 70% of new start forms were written by the community neurologists and PCPs. This reinforces our belief in our ability to reach the remaining patient population in need.

As we have noted before, while we anticipate continued growth in the U.S. the pace may fluctuate from quarter-to-quarter due to the time it can take to identify and reach potential patients. We remain optimistic about the global opportunity and we're encouraged that new clinical guidelines from the leading patient advocacy group and [ KMEs ] across the world are recommending intervention with SKYCLARYS. We believe this is helping to build momentum and prescriber awareness for the only DMT to slow the progression of FA. Next, turning to ZURZUVAE.

We delivered 68% quarter-over-quarter revenue growth in the U.S., supported by a 29% increase in new prescribers. Earlier this year, we expanded our field team and in just a few months, their impact is reinforcing our belief in ZURZUVAE's potential for sustained growth. Repeat prescribers now account for nearly 70% of scripts which we believe indicates HCP's growing trust and willingness to treat PPD with ZURZUVAE. And last quarter, 80% of ZURZUVAE prescriptions were written as first-line therapy.

Today, most reimbursement policies do not require step edits or complex prior authorizations, helping to accelerate patient access. Looking ahead, we are hopeful to bring ZURZUVAE to patients outside the United States. And lastly, shifting to LEQEMBI. The U.S.

Alzheimer's market is undergoing a significant evolution that began with LEQEMBI's FDA approval just 2 years ago. To accelerate this large-scale change, our efforts at launch were primarily focused on helping health systems establish capabilities to diagnose, treat and safely monitor a high volume of Alzheimer's patients. We believe sites are making progress. For example, we estimate that since the beginning of LEQEMBI's launch, nearly 1/3 of customers have begun diagnosing MCI in mild AD patients for the very first time.

On average, Medicare claims data has shown that prescribers have reduced the time from diagnosis to first infusion by 6 weeks since the beginning of last year. This year, we also see significant improvements in the time it takes sites to add patients beyond their first one and in their depth of prescribing. Monthly PET testing has increased approximately fivefold over the last 1.5 years. Blood-based biomarker testing has grown by 50% in the past 6 months from 2 of the major lab companies and has nearly tripled in the past year.

We think this is an early promising indication that there is high awareness and willingness to adopt blood-based biomarkers. We will work in partnership with the Alzheimer's community to educate about the quality of these tests and explore the opportunity for widespread use. This maturing of the market infrastructure gave us confidence earlier this year to launch new initiatives with Eisai, including sharper messaging, a targeted brand campaign and a more precised focus on physicians with the highest potential to prescribe and we believe these are driving momentum. In Q2, U.S. revenue grew 20% quarter-over-quarter, and we increased new LEQEMBI prescribers 34% year-to-date.

It is particularly encouraging to see [Technical Difficulty] signals that we believe the anti-amyloid market is now growing approximately 15% in Q2. These dynamics are prompting us to deploy the next phase of initiatives designed to further increase LEQEMBI prescribing. Today, awareness about Alzheimer's disease is high. Unfortunately, patient and caregiver awareness of new treatments is low. However, our research shows that when patients ask about LEQEMBI, an HCP will prescribe it most of the time.

With health systems having advanced their capabilities to treat, we activated our direct-to-consumer campaign across TV and digital platforms to build patient demand and awareness. In our campaign testing, patients and caregivers felt empowered to pursue treatments and earlier intervention if LEQEMBI can help them still be like themselves longer. In parallel, we plan to pilot later this year an expanded field team to understand how to improve PCP referrals in key geographies. We are also preparing for the potential subcutaneous formulations of LEQEMBI which we believe would add convenience and optionality for patients, caregivers and HCPs.

Looking ahead, we believe that our disciplined execution, efficient investments and our ability to adapt to evolving market dynamics positions us to sustain this momentum and deliver continued growth. I will now turn it over to Robin for an update on our financial results.

Thank you, Alisha. I'd like to provide some key highlights from our strong second quarter financial results. Unless otherwise noted, each of the comparisons I make during my remarks are versus the second quarter of 2024. We delivered 7% revenue growth in the quarter on strong commercial execution, particularly from our 4 launch products, which generated $252 million in revenue in the quarter and our MS business in the U.S. This strong commercial execution, combined with our disciplined operating expense management, resulted in non-GAAP diluted EPS growth of 4% in the quarter, absent the approximately $0.26 impact from the acquired IPR&D upfront and milestone expense in the quarter, non-GAAP diluted EPS would have been $5.73, up 9%.

Based on the strength of the business performance in the first half of the year, we are raising our full year 2025 financial guidance. I will provide details on guidance shortly. First, I will cover our Q2 performance. Starting with our MS franchise.

In the U.S., as Alisha noted, we had a strong quarter with revenue of $657 million. This was driven in part by higher VUMERITY demand approximately $32 million of favorable inventory dynamics from [Technical Difficulty] and TYSABRI and an approximately $48 million favorable gross to net change in estimate impact across the franchise with $27 million of this gross to net dynamic favorably impacting VUMERITY. Outside the U.S., sales are primarily impacted by expected generic pressures for TECFIDERA and a biosimilar for TYSABRI in Europe. We continue to defend our IP.

However, we expect accelerating competitive pressures on the ex U.S. MS business in the second half of 2025, particularly for TECFIDERA in Europe. For SPINRAZA, we continue to be encouraged by the consistency in demand globally. And as expected, ex U.S.

SPINRAZA was impacted by the drawdown of the inventory build from the first quarter, which we expect to continue into Q3. We continue to expect full year global SPINRAZA revenue to be relatively similar in 2025 as compared to 2024. Due to timing of shipments, we expect revenue in the second half of the year to be lower than the first half. Our 4 launch products each saw increases in demand in the second quarter and together delivered $252 million of revenue to Biogen, which was an increase of 26% quarter-over-quarter and 91% year-over-year. Again, this quarter, the year-over-year performance of these products together offset the decline in our MS portfolio.

We continued to see steady sequential demand growth for LEQEMBI globally with second quarter global end market sales booked by Eisai of approximately $160 million. This includes the favorable impact of the timing of shipments to China of approximately $35 million as the collaboration optimized global inventory positions in Q2. We expect this inventory build to work down in the second half of the year. What is encouraging is that excluding the China shipment timing impact, global sales grew 29% sequentially and 211% year-over-year. SKYCLARYS saw continued demand growth globally and the U.S. demand growth more than offset the expected Medicare discount dynamics in the quarter.

Internationally, SKYCLARYS was negatively impacted by the timing of shipments in certain markets. We expect SKYCLARYS to continue to grow globally and we are working to secure reimbursement in certain European markets as well as in Brazil. We experienced strong demand growth for ZURZUVAE in the quarter. And as Alisha noted, Q2 revenue was $46 million, up 213% year-over-year and 68% quarter-over-quarter.

As a reminder, Biogen shares 50% of the profit or loss on ZURZUVAE, which is recognized in the collaboration profit sharing line on our P&L. I would like to note we understand that earlier this month, IQVIA updated their methodology for reporting shipped prescriptions for ZURZUVAE and other products as part of their routine data review. This may mean the capture rate may be lower. We are encouraged by the opportunity for ZURZUVAE, including the potential in Europe with the recent positive CHMP opinion.

Turning to contract manufacturing revenue. The increase in revenue was driven by the acceleration of timing for manufacturing batch releases, some of which were associated with LEQEMBI due to our Q4 planned plant maintenance activities. We continue to believe that contract manufacturing revenue will be roughly consistent when comparing full year 2025 with full year 2024 and we expect minimal revenue in Q4 2025 due to the planned maintenance activity. Now a few comments on the rest of the P&L.

Non-GAAP cost of sales was impacted by higher lower-margin contract manufacturing revenue in Q2 2025, a continuation of the trend we saw in the first quarter as we accelerated batches ahead of the planned Q4 plant maintenance I just mentioned. Non-GAAP core operating expense or R&D plus SG&A expense decreased 2% year-over-year as we continued to deliver on our R&D prioritization and Fit for Growth initiatives. Non-GAAP operating income included approximately $47 million of acquired in-process R&D charges. This includes $16 million related to City Therapeutics transaction and a $30 million milestone related to initiation of the second Phase III study for felzartamab.

Excluding the impact from acquired IPR&D, non-GAAP operating income would have been approximately $1 billion, up 5% year-over-year. Now I'd like to provide a brief update on our balance sheet. We generated $134 million of free cash flow in the second quarter. This reflects $745 million in cash tax payments in the quarter.

Our cash tax payments for the year are heavily concentrated in Q2. Also in the second quarter, we used the proceeds of the $1.75 billion of newly issued debt to fully redeem our $1.75 billion of senior notes that were due in September. And while this financial transaction resulted in no net change to our overall debt profile, we expect roughly $15 million to $20 million of incremental interest expense in the second half of 2025, which we have factored into our updated guidance for the year. We ended the second quarter with $2.8 billion of cash and approximately $3.5 billion of net debt and we believe that our balance sheet remains strong, allowing us to continue to invest in both internal and external growth opportunities.

We believe the structure of our business model positions us to be potentially more resilient to macroeconomic factors and policy uncertainty. Today, a significant portion of our U.S. product revenue is derived from products which are largely manufactured in the United States. And we recently announced a plan to continue to invest in our North Carolina manufacturing operations. This is a combination of capital and operating expense over several years that is intended to modernize and add manufacturing capabilities to fuel the continued advancement of Biogen's late-stage pipeline and support our next wave of potential products.

It is also important to note that there are other aspects of our business model that we believe are important to our ability to be resilient in an uncertain environment. We generate a relatively high percentage of our revenue outside of the U.S. We also have a significant rare disease business and our payer channel mix in the U.S. is diversified and skewed more towards commercial payers. We believe these are important considerations as we navigate the current environment and we will continue to monitor the evolving landscape.

Turning now to guidance, where we have raised our full year 2025 non-GAAP diluted earnings per share to be in the range of between $15.50 and $16 from $14.50 to $15.50. We are raising our guidance to reflect a stronger expected business outlook for the full year, largely reflecting the strong first half revenue performance including the resilient performance of the U.S. business and MS and the performance of our launch products, partially offset by the impact of the City Therapeutics transaction in the second quarter. Please note that the impact from the $30 million felzartamab milestone I mentioned earlier was already contemplated in our previous guidance.

The following are some key considerations underlying the guidance raise. We now expect total revenue for 2025 to be approximately flat compared to full year 2024. This reflects the strong first half revenue performance, including the resilient performance of the U.S. MS business. Excluding the $75 million of favorability from inventory and the onetime gross to net adjustments in the second quarter, we expect U.S. revenue trends for the second half of 2025 to be roughly in line with the first half.

We also expect increased competitive pressures on the ex U.S. MS business in the second half of 2025, particularly for TECFIDERA in Europe. And as I mentioned previously, we expect minimal contract manufacturing revenue in Q4 this year due to planned plant maintenance activities. Importantly, we remain on track to deliver the $1 billion of gross savings and $800 million of net savings under our Fit for Growth initiative.

In the second half of 2025, we plan to make additional investments in R&D to enable acceleration and expansion of clinical development activities, primarily in support of rare disease. On this call, we talked about our excitement around moving salanersen to registrational studies and plans for our fourth indication for felzartamab. As we continue to expand our increasingly exciting pipeline, we believe it's important to make these investments in support of our long-term growth objectives. We now expect combined non- GAAP R&D and SG&A expense for the full year 2025 to be approximately $4 billion.

Please be sure to review this slide and our press release for other important guidance assumptions. Finally, we continue to focus on capital deployment that provides long-term value for our shareholders. And with that, I will pass the call back to Tim to open the call for questions.

Thanks, Robin. Cynthia, could we go to the first question, please?

[Operator Instructions] Your first question comes from the line of Phil Nadeau with TD Cowen.

Congrats on a strong quarter. Our question is actually on the AHEAD 3-45 trial with potential for an interim in the Kisunla TRAILBLAZER-ALZ 3 trial coming up, there's a lot of focus on early Alzheimer's. Could you remind us whether there's a similar interim in AHEAD 3-45 and maybe more broadly discuss the differences in design between AHEAD 3-45 and TRAILBLAZER-ALZ 3?

Thank you. So I think stepping back, we believe that the potential for amyloid therapies in the presymptomatic population is very significant. It's very important for patients. We would be interested in seeing what our competitor generates.

But if they have a successful trial, I think that would be helpful for patients and the amyloid class. But there are very important and significant differences between how we have attempted to address the questions that face prescribers when they think about drugs for -- anti- amyloid drugs for the presymptomatic population. The first and most important one is the scientific questions we are asking. So in AHEAD 3-45, these are 2 trials, AHEAD 3, which attempts to ask the question of whether we can prevent further accumulation of amyloids.

And AHEAD 45 is asking the question of whether we can actually prevent cognitive decline in patients who have greater than 40 centiloids amyloid already in the brain. The second piece here is that we were quite specific in our recruitment and inclusion of patients. We used amyloid PET to screen patients before we brought them in. And we used a CDR global score of 0, which is actually no cognitive decline at all, whereas our competitor has used a mixed inclusion criteria, which included telephone interviews for inclusion but also the CDR global score of 0.5 and 1 were included, which means mild and MCI dementia were included at the baseline.

So that's an important aspect. Finally, I think that it's the endpoints. So I think for us, for AHEAD 3, we're looking at a biomarker endpoint, which we believe will be very important. But for AHEAD 3-45, we're looking at a sensitive specific preclinical Alzheimer's disease composite endpoint.

So I think overall, this is going to be very different trials and we are looking for a readout in 2028. With a question of interim analysis, we reserve optionality, of course. But at the moment, we are planning for 2028.

Your next question comes from the line of Eric Schmidt with Cantor.

And what a pleasure to follow Phil Nadeau on this call. I also have a question on LEQEMBI. Maybe this one for Alisha, more on the market side. We've seen some third-party data that suggests that LEQEMBI may be losing a little bit of share in the U.S.

So wonder if you might comment on the competitive dynamic. Obviously, donanemab, has had a recent label update for safety, which might enhance their competitive positioning.

Thank you for the question. As we anticipated and shared in the past, and I mentioned on the call, we did believe a second therapy would help expand the market by driving more physician patient caregiver awareness. And as I also mentioned, this is the first time we've seen this market grow approximately by 15% based on total new patient starts. And this is what we believe to be a very encouraging development.

However, as far as the competitive dynamics, we are seeing that Kisunla faces the same friction points that we did with health systems that we have been actively addressing for the past 2 years. And it's notable that we believe the growth from our competitor is primarily among HCPs who are already prescribing LEQEMBI or physicians who are working alongside LEQEMBI prescribers at the same site. So LEQEMBI still continues to hold the majority of the market share, which is almost 70%. I think when you look at new patient starts, physicians are going to try new medications that enter the market.

But we're also encouraged that -- we've had very strong new writer growth year-to-date. And also, 70% of that new writer growth came from physicians at new sites of care. And so LEQEMBI is really driving this expansion of new writers at new sites quarter-to-quarter. And looking ahead, also with our maintenance option and our potential subcu options, this is going to provide really great optionality that obviously, our competitor also doesn't have.

Now when we think about the new label update, it's really too early to say how that will influence a physician's choice but what I can share is if we base it off of market research that we've done, it does indicate that several doctors were already using this type of schedule and dosing regimen prior to the label update. And also keep in mind HCPs still need to conduct the same amount of MRIs. And so that has also not changed. And [indiscernible] has always been an important consideration and the [ RAH ] numbers obviously did not change that much in the dosing regimen.

So it's helpful that physicians do gain more real-world experience, especially with LEQEMBI and we're going to keep a close eye on it as we move forward.

I can add also -- thank you, Alisha. I was just going to add that there was actually an independent presentation at AAIC by Sabbagh [indiscernible] and presented by Dr. Burke. And this was an indirect treatment comparison talking about the lecanemab ARIA events and the donanemab ARIA events based on the modified titration.

And I think the conclusion from this group was that really the modified titration seems to be confined mainly to the homozygotes and that the number of patients that were in TRAILBLAZER-6 that assessed this modified titration was much smaller. And so there really wasn't a conclusion that it was very distinctly different. So I think that's an important consideration as well.

Your next question comes from the line of Michael Yee with Jefferies.

Congrats on continued great progress. We had a question on the SMA market dynamics. I appreciate your development with salanersen. There are also myostatin products that could be coming in a month or 2, competitor, Roche, is also very bullish on their myostatin program to drive SMA share.

Maybe just comment about how you think myostatin would change the dynamics, whether you think that is additive to SMN correctors, and how would that impact you if competitors have combination products?

I'll go ahead and I'll start the answer for that one. We've been looking at the myostatin dynamic for quite some time and we do believe that will be a good additive benefit for patients. We don't see it as a main competitor for SPINRAZA or for the SMA therapies that are currently being used. So we don't think that, that's going to be an issue for us.

Your next question comes from the line of David Amsellem with Piper Sandler.

Wanted to ask a question about the lupus pipeline. First on dapirolizumab, maybe give us a sense of when the earliest -- when is the earliest you can -- we can see data from that second Phase III? And just more broadly, you're taking a multi-mechanistic approach to lupus drug development. But I wanted to pick your brain on the competitive landscape.

We do have oral agents like SOTYKTU, for instance, that are in late-stage development here. Obviously, we have to see what the data looks like. But how are you thinking about dapirolizumab and litifilimab in the context of a more crowded landscape that potentially could include oral agents?

Thank you, David. So I think overall, I think the first comment I'd like to make is the fact that the way we've tackled lupus is really looking at the unmet need. And when you look at the unmet need, I think it quickly becomes apparent that despite a very competitive investigational landscape, dapi was actually only the third agent ever to have a positive Phase III trial. And that tells you quite a bit about the heterogeneity, the variability in the patient population and the need, the unmet need that is still outstanding.

The second piece here is, we have attempted to tackle this from like a very broad holistic perspective. And that I mean by mechanism of action. So with litifilimab we are really trying to tackle the type 1 interferon signature. We are looking at the BDCA2 and we have proof- of-concept in Phase II with our Part A and Part B, both in cutaneous and systemic lupus.

And with dapi, we are looking at a much broader perspective of the CD40 ligand, CD40 pathway, which affects both T and B cells. And the data that we generated from our first Phase III gives us confidence that really we are being able to target the disease in an effective manner because we showed the impact on BICLA. But importantly, not just BICLA, we also showed the importance of dapi on severe -- moderate to severe patient population and in decreasing flares, so decreasing 50% of the severe flares and then also steroid sparing. And then I just presented today, of course, the fatigue data that we also presented earlier this year at EULAR.

So we think that this is a very important high unmet need area and we're tackling it from a scientific perspective by looking at different phenotypes and we think these will be complementary. I'll also say that we are trying felzartamab, which is an anti-CD38 and it's in Phase I but we remain excited about the mechanism of action for lupus nephritis. So we are continuing to look at different aspects. And to the question about when we might see data, I think we expect it in the '27, '28 time frame for the second Phase III.

But we expect litifilimab SLE data as early as late next year.

Yes. And Michael, we have, as you may have seen in the press release planned a seminar on -- to do a deep dive on lupus, much as we just did with felzartamab in the past quarter. I think this notion of heterogeneity is extremely important. We had a panel of 4 patients talk to our senior executives.

And one of the things I remember very distinctive from that is one patient saying to another, your lupus is not my lupus. And I think that is what's made it very difficult to develop drugs here. I think one of the things that benefits Biogen is our experience in MS. Yes, there will be oral therapies.

But I think if you look at the MS market, Alisha, what was the total share of the orals in the total MS market?

It's 1/3..

It was about 1/3. So I wouldn't just go and automatically say an oral is going to beat an injectable in this market. Efficacy, I think, is going to matter. But there are also different symptoms. Some have expressed fatigue and then there's the flares and there's the joint pain.

There's the skin issues. So it's a complex disease. And as I say, I think we'll have an opportunity to do a deeper dive then in September and we welcome everybody to that seminar.

Your next question comes from the line of Umer Raffat with Evercore.

I wanted to touch up briefly on your long-term commitment to Alzheimer's and the status of Eisai relationship. I'm asking in part because it seems like there's been an arbitration initiated by Biogen on commercialization allocations in Europe and whether it's equitable or not. So I'm just curious how the Eisai relationship is going and where the disagreements may be?

So I'll start with -- first, we are very committed to Alzheimer's and have been for years. Actually, the partnership with Eisai, I think, goes back at least 10 years. And obviously, our investment in BIIB080 is extremely important to the future of the company. And we continue to actually do research in other modalities.

Biogen has a history of multiple partnerships and collaborations. It's not always easy for companies to work together. And it's normal because a lot of things are just never black and white in terms of how we approach them. I would say the relationship with Eisai is better than it has ever been.

And when I look at the amount of executive time at Biogen that we spend actually in different committees with our colleagues at Eisai, I think the relationship that Alisha and her team have with her counterparts is extremely strong. Manufacturing, our Head of Manufacturing, just recently had a one-on-one meeting with the CEO of Eisai in Japan and that was since the arbitration was filed. We have this on the development side. I think there's a very close working relationship.

But there are times where there is going to be a disagreement. And I think we have that in terms of how we launch in Europe. And we're just following the process in our contract. And so I think that will go to arbitration.

I don't think there's anything particular about it. It happens in relationships, but it hasn't affected the overall working relationship with Eisai.

Your next question comes from the line of Brian Abrahams with RBC Capital Markets.

Congrats on the quarter. It seems like the use of the blood-based biomarkers is expanding pretty considerably. I was wondering if you could talk a little bit more about how you educate further around proper patient triage leveraging these new diagnostics. And what your sense is just from being in the field on what it's going to take to convince neurologists that these can be used in place of PET or CSF.

Is this something that could potentially happen soon? And what sort of inflection might we see in beta amyloid adoption after that?

Yes. Alisha, I think you can say that you're seeing an awful lot of activity on this in the market. Can you perhaps give a little more color or commentary there?

Yes. Thank you for the question. the Alzheimer's blood tests are evolving at an incredible pace right now. In fact, it's way more than what we thought it was going to be at this time point. And so we do believe this is a pivotal moment, especially when it comes to diagnosing patients.

As I mentioned in my opening remarks, testing nearly tripled in the past year and just this week, the Alzheimer's Association issued their first practice guidelines for blood-based biomarkers. So these tests, as you're probably well aware, are more convenient, faster and cheaper compared to what's out there now with CSF or PET. So the market dynamics are fluid. But I can share with you what we understand as of today, which I'm sure is going to even change when we get to the next earnings call.

So first and foremost, our market research shows that neurologists have an extremely high awareness and many are already using these tests. Now if you're already prescribing an anti-amyloid therapy, you also have a higher propensity for writing these tests as well and performing them on patients. But according to claims data, PCPs are also adopting them. However, we believe these early adopters are only using them for a fraction of their patients.

So they're not being used all the time in the offices but they are being used for a fraction. So while the utilization is growing significantly, physicians are primarily using them for triage. So this means the physician, if the test is negative, will rule out Alzheimer's. However, even when the test is positive or even indeterminant, we believe most physicians are still confirming with CSF and PET scans today.

The majority opportunity and the major opportunity ahead of us is to establish these tests as the standard for amyloid confirmation. In order to make the shift, we are actively positioning ourselves to drive the awareness, the education and we need real- world evidence for physicians. So specifically, we believe education is needed about the new guidelines. Those just came out and so we are definitely going to need to be able to disseminate that.

And there are multiple tests that hit the 90% sensitivity and specificity threshold that are in the guidelines. So we also believe physicians need clarity whether these tests are sufficient for therapy reimbursement. And when I say therapy reimbursement, that will be specifically around CSF. And that is since PET -- or sorry, with CMS.

And that is because only PET and CSF are mainly used today. So physicians won't know until they try to put that into their CMS database but because not many are doing it right now instead of CSF or PET, we don't know whether they're going to get reimbursement. So we are going to work through clarity with the payers and with the physicians to make sure that they have that. So it is rapidly evolving but there is significant potential to accelerate the diagnosis for patients.

And so we are very much encouraged by what we're seeing in the market today. And we do see that the amount of tests are really accelerating even our predictions until year-end.

Your next question comes from the line of Jay Olson with Oppenheimer.

Congrats on the quarter. Our question is about subcu LEQEMBI. You had important data updates on LEQEMBI at AAIC. And as Alisha indicated earlier, subcu seems like a key differentiator from donanemab.

So can you talk about any feedback you got from physicians at AAIC? How large is the incremental patient population you can address with subcu? And is there an opportunity for a direct-to-consumer education about subcu LEQEMBI?

Do you want to start maybe on the AAIC, Priya and then Alisha?

I can start. Yes, I can start. Thanks, Jay. So overall, we're really excited because as we had mentioned at the outset of 2025, we believe that blood-based biomarkers was going to be an important catalyst.

I think you just heard from Alisha that this is ongoing. And the second one really was the intravenous maintenance that we got approval for, for LEQEMBI. And now we are on to weeks away from our PDUFA date for subcutaneous maintenance. So we think that this is -- if we get approval, this would be a really important movement in the field because it adds convenience and optionality, removes some of the barriers to treat and streamlines the infrastructure.

The goal with subcutaneous auto-injector maintenance is really to give patients the option to transition to weekly at- home injections after completing the intravenous LEQEMBI initiation period. And we are also getting ready to file for subcutaneous initiation LEQEMBI therapy and we shared data on bioequivalents just yesterday at AAIC. So overall, we are really excited about the opportunity. And yes, it's a differentiator.

It also has a safety advantage because we don't see -- it's a very big difference and very much smaller number of infusion reactions that we see with subcutaneous versus intravenous. So we think it's quite an advantage with safety and efficacy really being -- looking very equivalent. With that, I'm going to turn it over to Alisha. And before I do, overall, we have conducted a lot of ad boards and talked to a lot of our key opinion leaders and there's a lot of enthusiasm for subcutaneous.

But I'm going to turn to Alisha for more details on that.

Thank you, Priya. As with any market, physicians and patients love options and they love flexibility. So any time we come out with anything that offers those 2 things, the market gets excited over them. With that being said and I know the question is about subcu but even IV maintenance has been really welcomed by the community.

And even though patients are just hitting their 18-month marks, we are getting feedback that patients are rolling off, they are moving on to the IV maintenance. And honestly, it gives them, again, more optionality and flexibility, not having to come in twice a month. And so that's already been a positive. Now we introduce subcu.

Physicians have said in market research and also in conversations that we've had then they will, if we do have the potential approval of this happening for either initiation or for maintenance, they will offer all the options to the patients and they will allow the patient to decide what is best for them. We do have many patients that live in rural areas and we are hearing that those in rural areas will probably want to go on subcu and they will choose to go on subcu. And yet we also have patients who are on IV, who enjoy coming into the infusion centers. And so it really will be a patient choice and what's going to be good for their lifestyle.

But I will say that physicians love that they are going to have so many different options when it comes to LEQEMBI.

Your next question comes from the line of Salveen Richter with Goldman Sachs.

Just following up on the business development commentary earlier. How important of a lever is this for you now as you do have a cadence of pipeline drivers that you're -- as you look to year-end and beyond? And so in that context, are you looking for earlier stage assets? And is I&I the main focus, given the interest in building out that vertical?

Yes. Thanks, Salveen. I mean definitely early stage is on the cards because I do think we actually have a very strong late-stage pipeline. And I think -- one of the things I have seen in my long career is we don't -- we haven't spent enough time, particularly at senior management levels on research.

And that's really where you can bring in assets on a very cost-effective basis. And you can use some of the strength of the larger company to really shape those molecules into medicines. And we've done a complete revamp of our research organization and significantly reduced the headcount but not with the idea of investing less but investing differently. And so we will be doing a lot more of the City Therapeutics type deals.

And I think even actually as we look at HI-Bio, we've been able to retain the entire organization and have found a way culturally within Biogen so that the large company capabilities such as procurement, being able to do clinical trials worldwide can assist actually the entrepreneurial and agile team of HI-Bio, for example. And that's what we'd like to do on the early stage and really make sure that we're not in this same period of having a pipeline gap 10 years from now. Now that said, we are still also looking at other assets. Your interest in doing late-stage M&A is inversely proportional to your confidence in the pipeline.

And that's not just because of the confidence but you're also concerned about distraction. I think we're pioneering in a number of new areas. We're building up a huge team on lupus and looking at nephrology, really prelaunching these programs. So as we look at opportunities and I always say you can never have enough pipeline, it has to fit strategically with what we're already doing.

We don't want to stretch our teams more than we need to. And it has to make financial sense. And there are some assets out there, not everybody thinks that they're appropriately valued and that makes it difficult sometimes to get deals done. And there are some things that are overvalued.

But we're looking. But I think we're increasingly confident in the future of Biogen. I think we've got the company really firing on all cylinders. It's performing well.

So if we find something that really we believe will add shareholder value, we'll do it. But otherwise, I think we're really focused on the whole spectrum of the development chain.

Your next question comes from the line of Paul Matteis with Stifel.

This is Julian for Paul. I guess just specifically, again, following up on subcutaneous lecanemab, I think people are really trying to better understand the logistics of tau subcutaneous initiation would actually work when that eventually comes online? And do you foresee this primarily being administered initially in centers and then patients are slowly sort of rolled out to having this drug administered at home? Or I'm just curious on how you see this playing out?

And what sort of value this will ultimately bring just given the concerns over ARIA for this class of agents?

I can start, Julian. So this is Priya. So overall, the way we've conducted the trials and the way we've generated the data, we actually have optionality that this is a self-administration that can be done by the patient, the caregiver, medical staff or the physician. So we retain that optionality.

Exactly how we are envisaging and projecting that it will be used, I'm actually going to turn it over to Alisha. And before I do, we did talk about at AAIC, we presented data from our human factors study. It was very encouraging. I encourage you all to look at that because it shows that actually patients with training were able to do this on their own.

And the auto-injector is fairly simple to use. So it was very encouraging and exciting data. But I'm going to turn it to Alisha to talk more about the actual logistics.

Thank you, Priya. With the initiation of subcu, we believe that, that's going to be an excellent opportunity, not only for patients but also the physicians and especially these high-writing physicians which we now have many of them, gives them an opportunity not to take up a chair for a patient who might need them, especially if they decide to go on to IV. So with the subcu, when we speak to physicians or we look at market research, what it shows is it will depend on the patient situation, whether they have a caregiver or not and whether that physician feels that they are very good at obviously managing ARIA.

You have some physicians now who are earlier in their writing stages of LEQEMBI and they still like to have the hands on and want to see the patient and have them come in. You have others who have hundreds of patients and they feel totally fine with starting a patient on subcu. And so I do believe that it will come down to that conversation and the patient that's sitting in front of them, whether the patient wants to inject themselves, do they have a caregiver. We're also looking at, is there a possibility of giving them support at home with injections, so they don't have to come into the office.

And also, we do have the optionality of them coming into the office. So again, this will be something where they really will have a lot of flexibility on that decision-making and it will be tailored towards what that patient needs at that point in time.

And your last question comes from the line of Myles Minter with William Blair.

This is Jake on for Myles. Question about felzartamab in AMR. Just wondering how you guys are modeling that potential market and how the results from the [ DARE ] study with DARZALEX have sort of influenced your expectations about potential expansion into the pretransplantation setting?

Yes. I think on the addressable market, as we noted on the thematic seminar, there's about 11,000 patients per year. If you take the average IgAN price, just as one idea of where value could be, that's about $150,000. So if you look at the addressable market, it's probably in the order of something around $1.5 billion. So it's a significant opportunity in itself.

We do think that basically felzartamab will be the best positioned. We're doing all of the studies for this. This is precision immunology here. So we still think we're going to be first to market here and we will be able to make the most use of that -- take the most advantage of that market.

I'll just add one point. Thanks, Chris. I'll just add that we announced today that we are also going to be investigating felzartamab opportunity in late MVI. And this is important because the late MVI is actually a newly classified kidney transplant rejection phenotype.

And it's just been added to the [indiscernible] classification because it was previously classified. These patients were classified as no AMR because they had a lack of donor-specific antibodies, which has a very high risk of graft failure. And now here, we're thinking about the felzartamab mechanism of action targeting the CD38 positive natural killer cells, which we believe are very important for disease and pathology. And so there's a scientific rationale.

This itself is also about 5,000 to 6,000 patients. So we think it will augment the potential opportunity in AMR.

Thanks, Priya. Well, that's all the time we have for today. Thanks for your participation. If you've got questions and want to follow up, just reach out to the IR team. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.