01—Abstract
Summary
Summary of the 10-K filed February 3, 2022. Cited figures are marked; the original filing is the authoritative source.
Biogen's FY2021 10-K shows a sharp earnings reset driven by the erosion of its TECFIDERA franchise.
Total revenue fell 18.3% to $10,981.7 milliona from $13,444.6 million, and product revenue, net declined 17.3% to $8,846.9 million, led by a 22.2% drop in MS product revenue as multiple U.S. TECFIDERA generics launched. Diluted EPS fell 58.1% to $10.40 from $24.80. Operating income declined to $2,840.7 million from $4,550.1 million, and net other expense of $1,095.5 million, which includes $824.9 million of investment losses on equity stakes in Denali, Sage, Sangamo and Ionis, further compressed results.
Total cost and expense fell 8.5% to $8,141.0 millionb, but this was largely due to 2020's $1.9 billion in collaboration upfront payments, and cost of sales rose 16.9% on a $164.0 million ADUHELM inventory charge. The balance sheet and cash generation remain solid. Operating cash flow was $3,639.9 million, cash and marketable securities totaled $4,694.5 million, and the company repurchased $1.8 billion of stock during 2021.
Management expects TECFIDERA revenue to keep declining in 2022, SPINRAZA to face more competition, and only minimal ADUHELM sales, which is a notable concern given the product's accelerated approval and the uncertain final Medicare coverage decision (NCD). Strategically, Biogen is pivoting toward neuroscience and specialized immunology through licensing and collaboration deals (InnoCare, BIIB115, mosunetuzumab) and by selling its Samsung Bioepis stake for $1.0 billionc at closing plus $1.3 billion in deferred payments, with closing expected in mid-2022. Pipeline setbacks included the BIIB067 (tofersen) Phase 3 failure and the discontinuation of several gene therapy and tau programs, with $629.3 million in impairments.
02—Key points
Key Highlights
- Total revenue fell 18.3% to $10,981.7 million, driven by a 22.2% decline in MS product revenue as TECFIDERA faced multiple U.S. generic entrants
- Diluted EPS declined 58.1% to $10.40 (vs. $24.80 in 2020), with net other expense of $1,095.5 million including $824.9 million in investment losses on Denali, Sage, Sangamo and Ionis holdings
- Operating cash flow of $3,639.9 million and $4,694.5 million in cash and marketable securities; $1.8 billion used for share repurchases in 2021
- Samsung Bioepis stake to be sold to Samsung Biologics for $1.0 billion at closing plus $1.3 billion deferred over two years (closing expected mid-2022)
- ADUHELM faces uncertainty: a $164.0 million Q4 2021 charge for excess inventory and purchase commitments, a negative CHMP opinion in the EU, and a proposed CMS NCD that would limit Medicare coverage to clinical trial enrollees
- Management expects continued declines in TECFIDERA and SPINRAZA revenue in 2022, flat TYSABRI revenue, and minimal ADUHELM sales
- Pipeline setbacks included the BIIB067 (tofersen) Phase 3 VALOR miss and discontinued gene therapy and tau programs, with $629.3 million in impairment charges
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Biogen Inc. kept $0.14.
- Revenue$10.98B100.0%
- Cost of revenue−$2.11B19.2%
- Gross profit$8.87B80.8%
- Operating costs−$6.03B54.9%
- Operating income$2.84B25.9%
- Interest, other & tax−$1.28B11.7%
- Net income$1.56B14.2%
Where FY2021 revenue went
$10.98B- Other operating costs: $3.36B, 31% of revenue
- SG&A: $2.67B, 24% of revenue
- Cost of revenue: $2.11B, 19% of revenue
- Net income: $1.56B, 14% of revenue
- Interest, other & tax: $1.28B, 12% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 3, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $10.98B$13.44B | −18.3% |
| Cost of Revenue | $2.11B$1.81B | +16.9% |
| Gross Profit | $8.87B$11.64B | −23.8% |
| SG&A Expenses | $2.67B$2.50B | +6.8% |
| Operating Expenses | $9.24B$8.40B | +10.0% |
| Operating Income | $2.84B$4.55B | −37.6% |
| Interest Expense | $253.60M$222.50M | +14.0% |
| Net Income | $1.56B$4.00B | −61.1% |
| EPS (Basic) | $10.44$24.86 | −58.0% |
| EPS (Diluted) | $10.40$24.80 | −58.1% |
| Shares Outstanding (Basic) | 149.10M160.90M | −7.3% |
| Shares Outstanding (Diluted) | 149.60M161.30M | −7.3% |
05—Questions
Frequently Asked Questions
Why did Biogen's earnings fall so sharply in 2021?
Earnings fell because of a steep decline in MS revenue from TECFIDERA, which faced multiple U.S. generic entrants, along with a sharp rise in non-operating losses. Revenue dropped $2.46 billion, and operating income fell from $4.55 billion to $2.84 billion. Net other expense of $1.10 billion, mainly unrealized losses on equity investments, cut pre-tax income to $1.75 billion. The 2020 comparison was also inflated by $1.9 billion in upfront payments that reduced 2020 R&D, so 2021 R&D fell only because those payments were absent in 2021, not because spending was reduced.
What is the outlook for TECFIDERA, SPINRAZA and ADUHELM?
Management expects TECFIDERA revenue to keep declining in 2022 as generic competition grows, and the EU generic risk could arrive as early as the first half of 2022 if regulatory data protection is not upheld. SPINRAZA is expected to face more competition, leading to continued patient discontinuations and lower new patient starts. ADUHELM is expected to generate minimal sales in 2022, and final Medicare coverage through the NCD expected in Q2 2022 could lead to further inventory write-downs if it is narrower than the proposed version.
What is the status of the Samsung Bioepis transaction?
Biogen agreed in January 2022 to sell its approximately 49.9% stake in Samsung Bioepis to Samsung Biologics. The deal provides $1.0 billion in cash at closing, $1.3 billion in deferred payments due at the first and second anniversaries ($812.5 million and $437.5 million), and up to $50.0 million in commercial milestones. Closing is expected in mid-2022, subject to the effectiveness of a securities registration statement filed by Samsung Biologics and regulatory approvals. Biogen also plans to unwind its related net investment hedges at closing.
What are the main legal and regulatory risks flagged in the filing?
Key risks include a qui tam False Claims Act suit seeking $981.1 million plus trebling damages (trial scheduled for Q3 2022), an ADUHELM securities class action, government investigations by House committees, the HHS OIG, the FTC and the SEC into ADUHELM, a $200.0 million claim from former Convergence shareholders, an ICC arbitration with Samsung BioLogics, and an ERISA class action. Patent challenges to TECFIDERA and TYSABRI are also ongoing, and pending U.S. Build Back Better drug pricing legislation could affect Medicare Part B and D economics.
How much capital does Biogen have for its investment program and debt obligations?
Biogen had $4.69 billion in cash and marketable securities and $3.56 billion in working capital at year-end 2021. Total borrowings were $7.27 billion, including a $1.0 billion Senior Note due September 2022 that the company plans to repay or refinance. The company has a $1.0 billion undrawn revolving credit facility. Management believes existing resources are sufficient for its operating needs, milestone obligations and debt service for the foreseeable future, though it expects interest expense to increase moderately in 2022 and capital spending to continue for the Solothurn and North Carolina manufacturing projects.
06—Continue