01—Abstract
Summary
Summary of the 10-K filed February 3, 2021. Cited figures are marked; the original filing is the authoritative source.
Biogen's FY2020 10-K (filed February 3, 2021) shows a year of heavy investment and pipeline expansion that compressed reported earnings.
Total revenues fell 6.5% to $13.44 billiona, driven by an 8.2% decline in MS product revenues and a 31.7% drop in U.S. RITUXAN revenues as biosimilars entered the market. TECFIDERA faced multiple U.S. generic entrants, which significantly reduced its revenues and is expected to keep weighing on results. Diluted EPS fell 21.1% to $24.80, net income attributable to Biogen was $4.0 billion, and operating cash flow was $4.23 billion, down from $7.08 billion in 2019.
R&D expense rose 75% to $3.99 billionb, largely due to roughly $1.9 billion in upfront payments and collaboration equity premiums tied to new deals with Sangamo, Denali and Sage. The company also deployed significant capital to shareholders, repurchasing about $6.7 billion of stock in 2020 and issuing $3.0 billion of senior notes, which pushed total borrowings to $7.4 billion. Cash and marketable securities declined to $3.4 billion from $5.9 billion.
A $5.0 billionc repurchase program was authorized in October 2020. The near-term outlook is dominated by aducanumab for Alzheimer's disease, where the PDUFA date was extended to June 7, 2021 after a majority of the FDA advisory committee voted against efficacy.
Management expects SG&A to rise significantly in 2021 to support a potential launch, and expects declining TECFIDERA and interferon sales. Investors should weigh the upside of a potential Alzheimer's launch and the pipeline against near-term revenue pressure, a large valuation allowance on deferred tax assets, and the ongoing litigation, including a new securities class action tied to aducanumab.
02—Key points
Key Highlights
- Total revenues declined 6.5% to $13.44B; product revenues fell 6.0% to $10.69B, led by TECFIDERA generic erosion in the U.S.
- Diluted EPS of $24.80 fell 21.1% from $31.42, reflecting higher R&D and a $1.7B deferred tax asset valuation allowance tied to TECFIDERA.
- R&D expense rose 75% to $3.99B, including about $1.89B in upfront payments and equity premiums for the Sangamo, Denali and Sage collaborations.
- RITUXAN U.S. revenues dropped 31.7% as biosimilars launched, while OCREVUS royalties grew 23.0% to $845M in 2020.
- Aducanumab BLA PDUFA date extended to June 7, 2021 after a negative FDA advisory committee vote; $93.8M of pre-launch inventory capitalized.
- Repurchased about $6.7B of stock in 2020 and issued $3.0B of senior notes; total borrowings rose to $7.4B while cash and securities fell to $3.4B.
- Operating cash flow declined 40% to $4.23B, and management expects SG&A to rise significantly in 2021 for potential aducanumab launch preparations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Biogen Inc. kept $0.30.
- Revenue$13.44B100.0%
- Cost of revenue−$1.81B13.4%
- Gross profit$11.64B86.6%
- Operating costs−$7.09B52.7%
- Operating income$4.55B33.8%
- Interest, other & tax−$549.5M4.1%
- Net income$4.00B29.8%
Where FY2020 revenue went
$13.44B- Other operating costs: $4.58B, 34% of revenue
- Net income: $4.00B, 30% of revenue
- SG&A: $2.50B, 19% of revenue
- Cost of revenue: $1.81B, 13% of revenue
- Interest, other & tax: $549.5M, 4.1% of revenue
Kept 30% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 3, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $13.44B$14.38B | −6.5% |
| Cost of Revenue | $1.81B$1.96B | −7.7% |
| Gross Profit | $11.64B$12.42B | −6.3% |
| SG&A Expenses | $2.50B$2.37B | +5.5% |
| Operating Expenses | $8.40B$7.34B | +14.5% |
| Operating Income | $4.55B$7.04B | −35.4% |
| Interest Expense | $222.50M$187.40M | +18.7% |
| Net Income | $4.00B$5.89B | −32.1% |
| EPS (Basic) | $24.86$31.47 | −21.0% |
| EPS (Diluted) | $24.80$31.42 | −21.1% |
| Shares Outstanding (Basic) | 160.90M187.10M | −14.0% |
| Shares Outstanding (Diluted) | 161.30M187.40M | −13.9% |
05—Questions
Frequently Asked Questions
What is driving the decline in Biogen's revenue and earnings in 2020?
The main driver is generic competition for TECFIDERA in the U.S., which significantly reduced U.S. Fumarate revenues by about 17%. Biosimilar competition also cut U.S. RITUXAN revenues by 31.7%. Earnings fell further because R&D expense jumped 75% on upfront payments for new collaborations, and the company recorded a valuation allowance against deferred tax assets, pushing its effective tax rate to 19.7%.
What is the status of aducanumab and why does it matter to investors?
Aducanumab is an Alzheimer's antibody in FDA review with a PDUFA action date of June 7, 2021, after a three-month extension. The FDA considered a late information response a Major Amendment. A majority of the Advisory Committee voted against efficacy in November 2020. Approval would open a major new indication, and management expects significantly higher SG&A in 2021 to prepare for launch. A rejection would leave the company with about $93.8M of capitalized inventory that would be expensed, and Eisai would reimburse 45% of those costs.
How much capital has Biogen returned to shareholders, and how is its balance sheet positioned?
In 2020 Biogen repurchased and retired about 22.4 million shares for roughly $6.7 billion. The company also authorized a new $5.0 billion program in October 2020 with no expiration date. To fund these activities and collaborations, it issued $3.0 billion of senior notes in April 2020 and redeemed $1.5 billion of 2.90% notes. Notes payable rose to $7.4 billion, cash and marketable securities fell to $3.4 billion, and the company has a $1.0 billion undrawn revolving credit facility.
What are the main risks flagged in the filing?
Key risks include continued erosion of TECFIDERA and interferon sales, biosimilar competition for RITUXAN and other biologics, and drug pricing pressure in the U.S. and Europe, including a CMS most-favored-nation rule affecting TYSABRI. The filing also highlights intellectual property challenges, including the TECFIDERA Hatch-Waxman judgments on appeal and the IMRALDI patent litigation in Europe. Other risks include dependence on the Solothurn manufacturing facility, which is expected to be partially operational in the first half of 2021, and a new securities class action tied to aducanumab disclosures.
06—Continue