Biogen - Q4 2025

Transcript

Operator (participant)

Good morning, my name is Ruth and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen fourth quarter and full year 2025 earnings call and business update. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. Please limit yourself to one question to allow other participants time for questions. If you require any further follow-up, you may press star one again to rejoin the queue. Today's conference is being recorded. Thank you. I would now like to turn the conference over to Mr. Tim Power, Head of Investor Relations. Mr. Power, you may begin your conference.

Tim Power (Head of Investor Relations)

Well, thanks, Ruth, and good morning, everyone. Welcome to Biogen's fourth quarter and full year 2025 earnings call. During this call, we'll make forward-looking statements which involve 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 in the Investor section of biogen.com.

We've also posted the slides to our website that we'll be using 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; and Robin Kramer, our Chief Financial Officer. We'll make some opening comments and then we'll move to the Q&A session. To allow us to get through as many questions as possible, we kindly ask that you limit yourself to just one question, and I'll now hand the call over to Chris.

Christopher A. Viehbacher (President and CEO)

Thank you, Tim. Good morning, everybody, and welcome to Biogen's fourth quarter earnings. We finished the year strongly with a very good fourth quarter, and I think finished the year in a very satisfactory manner. We finished slightly above the upper end of our guidance. I think as we look at the business here, we've principally focused on our growth products, and they generated $3.3 billion in fiscal 2025. That's up 19%. Now, you notice we actually include Vumerity now in our growth products. We've tended to just look at MS as one group. Actually, when you look at the oral segment, Vumerity is about the only branded medicine left in that. We have found that actually with intelligent investments, we've been able to grow that brand very nicely. So we're including that in our growth products going forward.

When you look at just the products we've launched since 2023, the four, Leqembi, Skyclarys, Zurzuvae, and Qalsody, they are now generating around $1 billion in revenue, and they have also grown very strongly. And even the MS business actually still generated $3 billion. So from a commercial performance point of view, I think Biogen is functioning and firing on all cylinders and doing very well. I think the big story of 2025 is really the advance we've made in our pipeline. Priya will show a chart later on our pipeline, and that chart has really expanded over the course of the year. In this year, we expect to see a number of key readouts. Leqembi, Iqlik, and I'll come back to that. That's under review in the U.S., Japan, and China.

In the U.S., as you know, we got a priority review and have a PDUFA date of May 24th. litifilimab, which is an important new medicine in lupus, has been granted FDA breakthrough designation for the cutaneous form of lupus. We are actually starting to expand our early-stage pipeline. We put a BTK degrader into the clinic early this year. But I'd also point out the acquisition of Alcyone Therapeutics, which will really, I think, improve the experience of patients who get intrathecal injections. I think Spinraza, in the eyes of many physicians I talk to, has the highest efficacy, but at some point, patients do consider that the intrathecal is a problem. And this is an opportunity to replace the intrathecal with a much more convenient delivery mechanism.

We also have been active in business development, and in the fourth quarter, we had new collaborations with Vanqua and Dayra Therapeutics. If we'll go to the next slide. So Leqembi is still the market leader and continues to be the market leader with over 60% of the anti-amyloid therapy market share. I would remind everybody that we tend to want to look at new Rxs as a measure of a launch. And this is one of those areas where that might not be the most appropriate thing to look at because the competitor product really is only in therapeutic use for a limited period of time. And only Leqembi actually has a maintenance indication. So I think in this case, actually looking at total prescriptions is the most appropriate way, and that's where Leqembi clearly continues to be the market leader.

Now, this year, we're going to see, hopefully, the approval of the Iqlik. We've had the Iqlik approved for maintenance last year along with getting the maintenance indication. That's already important. We're seeing a lot of patients come to the end of the plaque removal phase, and the persistency data suggests that we have about a 70% persistency. So that's people who are continuing on with therapy even after the plaque removal position. The Iqlik was introduced in October of last year. Now, that's a Part D reimbursement, and we won't have that reimbursed fully until 01/01/27. However, patients who want that are able to request formulary exemptions, and from what we've heard, that virtually everybody who has been asking for that seems to be getting that. We don't have, obviously, very clear data on that. Now, the game changer could be really the Iqlik for induction.

One of the competitive aspects of donanemab is that it has once-monthly infusions where we have once every two-week infusions. Once you move to a subcutaneous injection, now we're not talking about infusions at all anymore. And we're hearing certainly stories that people want to travel, and people aren't always able to drive long distances to infusion centers. So we think that the Iqlik could actually create a whole new opportunity and certainly reduce the burden for neurologists. Remember, there are about 500,000 new patients diagnosed every year with Alzheimer's and only really 13,000 neurologists. So to the extent that we can make this care pathway more convenient for both the physician and the patient, we hope that that can increase the throughput.

We're already seeing with the increased use of blood-based diagnostics that those patients who have their diagnosis validated and who are actually eligible for therapy have actually increased from about 50%-70%. So all of these things, I think, are moving in the right direction. I remind everybody that the market has more than doubled for anti-amyloid therapy. And I think we're seeing a growing. We're certainly hearing a number of stories from the physicians that they're actually seeing benefit in patients. The CDR sum of boxes is really only used in clinical trials and not in actual practice. And so, as I say, I think this all augurs well for continued growth in this business, and perhaps going into next year, we might even see an acceleration of that growth. Go to the next slide.

So here's where what we've been trying to do really is build a bridge to growth. Really, the growth we see in three different ways. The first is, obviously, to grow those new medicines that we have. And you see them on the chart. That's the today. And when you actually look at this chart, with the exception of Vumerity, all of these were not only first-in-class but also first-ever treatments for diseases. So that's meant that we actually are going in with breakthrough medicines, but we also have to create those markets. Leqembi, we've talked about. Spinraza, we've been able to launch the high dose in Japan. Early signs from the Japanese market are that we're actually going ahead of expectations on adoption and actually seeing some switchbacks. We look forward to seeing more data as it comes along. Europe will be next up.

And of course, we have a PDUFA date in April for high dose in the U.S. Zurzuvae has really been a surprise to all of us. Again, we more than doubled sales in 2025. This is really, I think, also opening people's understanding to the real burden of postpartum depression. And we're seeing a number of prominent people like Jennifer Lawrence. Zurzuvae was just featured in People magazine. And this is not only leading to some commercial success, but I think really changing the perception of postpartum depression. This is still highly undiagnosed. Approximately 500,000 mothers every year suffer from this, and only about 80,000 are diagnosed, and still fewer, obviously, treated on Zurzuvae. So there's a real opportunity to both grow this market, but I think also really make a real difference in postpartum depression. Skyclarys continues to grow.

We saw approval in Brazil this past year, and we're looking for launching that this year. We're now into launching this product pretty much everywhere around the world except in Asia, of course, where this disease doesn't really exist for genetic reasons. We often are running ahead on the numbers of patients versus sales because we're providing the product through early access programs and then negotiating as we go along. So I think we'll continue to see steady progress. Like Spinraza, these are medicines that tend to have a bit of a lumpy sales trajectory. Personally, I like to look at rolling four quarters of these. We're in the low volume, high value products. If you take Spinraza, there are some countries where we only ship once or twice in the year. So the timing of shipments can distort actual trends if you're just looking at a single quarter.

But then now that we've got those growing and I just told you about how strong those products have been, we've got a whole next layer and next wave of potential growth with litifilimab, the SLE data coming, hopefully, by the end of the year. Felzartamab will show data in AMR potentially next year. Zorevunersen, our partner, Stoke, has indicated that they might be able to be having a data readout in 2027 as well. Dapirolizumab pegol, we already have one positive phase III, and we're executing on a second phase III. Nusinersen had extremely interesting results after phase II. We were administering the drug in children who had already had gene therapy, for example, in infancy, but at age four or five, we're still not able to sit or stand. And we saw some examples of that.

Obviously, all of this has to be confirmed in a phase III study, which we have ongoing. Then Leqembi preclinical is also potentially a real game changer. We all have to remember that this disease is really a silent disease for many, many years before people ever get symptoms. And throughout that period of time, people are losing neurons. And so it would seem to make sense that treating patients earlier and being able to preserve a maximum number of neurons should have a benefit. And that's really what this clinical trial is designed to show, is going into early-stage patients, can we see that we can either prevent potentially ever getting symptoms or at least deferring the disease much later into the future? That's a huge undertaking. We began recruiting for that study in 2020. It's been fully recruited, and we would expect to see results in 2028.

So you can see that this is going to be a very rigorous study. It'll be a landmark study. This will be not only important from a commercial point of view, but this is really groundbreaking science and will inform the entire neurology community. And then, of course, we still are investing in earlier stage. We have potential readouts for some high-risk, high-reward projects like the LRRK2 in Parkinson's. We have a new modality, which could be extremely interesting, which is the anti-tau ASO that will also read out a phase II this year. And we're really focusing on our research portfolio. I talked about some of the collaborations we've been doing. We've got the BTK. We've got an IRAK4 for lupus going into the clinic.

We're looking to add more early-stage BD deals, but I think we've also got a few more INDs that could come into the clinic over the next 18 months. So next slide, please. So what are we focusing on really in 2026? Obviously, we have an important date with the Leqembi approval for the subcutaneous AI initiation coming up on May 24th, and we'll obviously hope to see that get approved. We also have, hopefully, the approval of the high-dose regimen for Spinraza in the U.S. that has a PDUFA date in April. We've got the two phase III studies in litifilimab and SLE, and I want to congratulate Priya because there are about 55 other clinical trials ongoing in lupus. And Priya and her team were actually able to accelerate. Originally, this was not going to read out until 2027.

So for me, from a commercial point of view, I like to see accelerated development because it augurs well for later-stage commercial potential. And finally, we're advancing that high-risk, high-reward pre-POC pipeline. I would say today, we feel pretty good about where our late-stage pipeline is, but we do need to build up our earlier-stage pipeline. And that's going to lead to our full-year guidance on a non-GAAP diluted EPS basis of about $15.25-$16.25. So I think with that, I'm going to be turning that over to Priya.

Priya Singhal (Head of Development)

Thank you, Chris. I'm really encouraged by the progress that we've made to rebuild and transform our development pipeline. As you can see from the slide, most of these late-stage, high-scientific conviction opportunities are new, having been added in just the last 12 months. As we announced last quarter, we have accelerated TOPAZ-2, our second SLE study for litifilimab, which is now expected to read out by the end of this year. What you can also appreciate from this slide is that 2026 is an important year that begins a multi-year registrational data flow for over the next several years. In just the next 18 months, we could see data from litifilimab for both SLE and CLE and data from felzartamab in AMR, all of these being registrational readouts.

Importantly, as you have seen, we've recently announced securing priority review for Leqembi Iqlik initiation and received breakthrough therapy designation for litifilimab in CLE. It is very encouraging to see that these programs are also being recognized externally as potentially impactful. We also continue to demonstrate and emphasize scientific leadership. We recently presented new data across some of our key franchises at medical congresses, including meetings hosted by the American Society of Nephrology and the American Epilepsy Society. In December, we also presented at CTAD, where we highlighted the importance of continued utilization of Leqembi in a maintenance setting. And just this week, we published pivotal Spinraza high-dose data in Nature Medicine. All of this put together reinforces our belief that our pipeline will continue to play a critical role in delivering the new Biogen.

Turning now to our full development pipeline, which we believe we have transformed into a more balanced portfolio across the risk-reward spectrum. This is the result of a very deliberate process that we have carried out over the last few years to discontinue lower-value projects and bring in new, potentially higher-value assets. Today, our late-stage registrational pipeline consists of high-scientific conviction programs with significant commercial potential. This is different than the Biogen approach in the past. It is also balanced alongside our early-stage pre-POC pipeline with the high-risk, high-reward assets, where we continue to follow the science to determine next steps. We remain focused on broadening our early-stage pipeline from both internal research assets and potentially business development opportunities. Today, we continue to make progress by adding BIIB145, our BTK degrader, into the clinic, having recently initiated a phase I study in normal healthy volunteers.

We continue to look to potentially add more INDs into our pipeline over the next several years and months. Turning to the future and looking forward to the next 18 months, I'm really encouraged by the number of expected data readouts and key milestones. I would now like to highlight some of these. Starting with SMA, we now have Spinraza high-dose approval in Europe and Japan while we await a regulatory decision in April in the U.S. With Nusinersen, which we believe could transform the standard of care in SMA, we expect to present exciting follow-up phase I-B data at the Muscular Dystrophy Association meeting next month.

With litifilimab and building on our recent breakthrough designation for CLE, we are now planning and preparing to share new data from the phase II portion of the phase II/III seamless Amethyst CLE trial at a medical meeting, hopefully, in the first half of this year. Excitingly, for Leqembi, with priority review, we now expect to have an FDA decision for Iqlik initiation in May. Importantly, we also have regulatory filings underway both in Japan and China. We believe Iqlik is a differentiated, important opportunity that could provide additional optionality for patients as this important market continues to grow. We also expect to have data from our pre-POC pipeline for BIIB122 in Parkinson's disease and BIIB080 in early Alzheimer's disease sometime around mid-year. These data sets will guide us in determining the further development for these assets.

Most importantly, for 2026, we are looking forward to the litifilimab phase III data in SLE expected at the end of this year. We continue to be encouraged by the opportunity in CLE, where we expect to see data around mid-year next year, and in a similar time frame, we'll start to see data reading out for felzartamab in AMR. In conclusion, I hope you can appreciate the increased momentum of our pipeline over the next 18 months, and we believe this will drive our goal of delivering the new Biogen. I would now like to hand the call over to Robin for an update on our financial performance.

Robin C. Kramer (EVP and CFO)

Thank you, Priya. I'd like to provide some key highlights about our strong fourth quarter and full-year financial results. Unless otherwise noted, the comparisons I make during my remarks are versus 2024 and refer to non-GAAP unless otherwise stated. Starting with earnings, our fourth quarter and full-year 2025 non-GAAP EPS came in above our expectations. Fourth quarter non-GAAP diluted EPS was $1.99. Full-year non-GAAP diluted EPS was $15.28. As expected, our Q4 2025 GAAP and non-GAAP results reflected $222 million of IPR&D charges for our fourth quarter business development transactions, including the license agreements with Vanqua Bio, Dayra Therapeutics, and the acquisition of Alcyone Therapeutics. This had a $1.26 impact on EPS. I'd like to point out that our GAAP operating income was impacted by approximately $180 million of one-time charges that occurred in the quarter relating to litigation and other matters. We achieved strong revenue performance for the year.

Our growth products performed well, generating over $800 million in Q4 2025 and $3.3 billion for the full year 2025, up 6% and 9% respectively versus 2024. In addition, we continued to see resilient performance from our U.S. MS business. Total revenue for the full year 2025 was $9.9 billion, up 2% versus 2024. Our strong commercial execution, combined with disciplined expense management, enabled robust cash flow generation. As a result, we delivered $2.1 billion in free cash flow for the year, exiting the year with $4.2 billion in cash and marketable securities. This further strengthened our balance sheet and provides us with flexibility as we continue to invest for growth. I'll now cover our Q4 revenue performance. In Q4, revenue from our growth products exceeded revenue from our MS business, excluding Vumerity, which we include in our growth products.

Leqembi continued to see steady sequential demand growth globally, with fourth quarter in-market sales booked by Eisai of approximately $134 million, up 10% and 54% versus Q3 2025 and Q4 2024 respectively. Leqembi delivered steady sequential and year-over-year growth in the U.S. and internationally. Skyclarys saw sequential global patient demand growth with Q4 global revenue of $133 million, representing 30% growth year-over-year. In the U.S., Q4 revenue was $89 million. This represents sequential growth of $14 million, which benefited from approximately $9 million of favorable inventory dynamics. We expect this inventory build will be drawn down in Q1 2026. Outside the U.S., fourth quarter revenue of $44 million was impacted by approximately $12 million in net pricing adjustments. Looking forward, we are optimistic about the future growth as we bring on new markets. Global Spinraza revenue in the fourth quarter was $356 million.

In the U.S., we were pleased to see Spinraza growth year-over-year, where fourth quarter revenue was $169 million. Outside the U.S., fourth quarter revenue of $188 million was impacted by the timing of shipments. Overall, Spinraza continued to demonstrate resilience in a competitive market, with full-year revenue down 2% year-over-year. Vumerity fourth quarter revenue was $181 million, driven by steady year-over-year demand growth boosted by improved affordability in the U.S. with the IRA Part D redesign. Q4 U.S. revenue was negatively impacted by timing of shipments associated with the favorable inventory build we discussed on our Q3 earnings call. For the full year, Vumerity generated $747 million, representing 19% year-over-year growth. We are pleased to see strong performance from Zurzuvae and Qalsody, driven primarily by increased demand. For our remaining MS products, global Tysabri revenue in the fourth quarter was $398 million, demonstrating continued resilience.

In the U.S., we generated $244 million of revenue. Ex-U.S. revenue was $153 million, where the impact of biosimilar competition for the IV formulation in the EU was partially offset by continued demand growth for our subcutaneous formulation. Tecfidera saw the expected acceleration of generic erosion in the EU, which we expect to continue in 2026. Revenue from our anti-CD20 therapeutic programs was $521 million in Q4 2025, up 12% year-over-year. This increase was driven largely by royalties from Ocrevus, which benefited from the subcutaneous launch. Now, a few comments on the rest of the P&L. In the quarter, cost of sales benefited from favorable product mix due primarily to the expected minimal low-margin contract manufacturing revenue in the quarter.

Non-GAAP R&D expense decreased 6% Q4 2025 versus Q4 2024 and 10% for the full year 2025 versus the full year 2024, primarily driven by continued cost reduction measures realized in connection with our portfolio prioritization initiatives and our Fit for Growth program, offset in part by our investment in our phase III clinical programs, including felzartamab and litifilimab, which was funded in part by an R&D funding arrangement. SG&A was up roughly 1% for Q4 and full year 2025 versus 2024, driven primarily by planned pre-launch activities supporting lupus and nephrology and direct-to-consumer advertising for Leqembi and Vumerity. As I discussed earlier, our GAAP and non-GAAP results include a $1.26 impact from our Q4 business development transactions. Our GAAP and non-GAAP tax rates in the quarter benefited from the release of reserves upon the expiry of a statute of limitations.

We are pleased with the quarter and our full year 2025 results. This strong commercial execution, coupled with disciplined financial management, drove continued robust cash flow performance for both Q4 and full year 2025, with free cash flow of $2.1 billion for the full year 2025. Turning to the balance sheet, as a result, we have further strengthened our financial position and closed the year with $4.2 billion in cash and marketable securities and $2 billion of net debt. The financial strength provides us with flexibility to support strategic investments as we look to drive meaningful innovation for patients and long-term value for our shareholders. Looking ahead, we believe the transformation activities we have taken so far have established a strong foundation to deliver on the vision of the new Biogen.

A crucial element of realizing this vision is our commitment to strategically invest in pre-launch activities to support our lupus and nephrology portfolio. We are focused on ensuring that we are well-positioned for the portfolio of the future while continuing to maintain our focus on financial discipline. With our first phase III data expected at the end of this year for litifilimab and SLE and next year for felzartamab and AMR, we are making critical investments now to position ourselves to launch these products successfully. And at the same time, we are expecting to keep our core OpEx in 2026 roughly consistent with 2025. Now, turning to our outlook for 2026, we expect full-year non-GAAP diluted EPS to be between $15.25 and $16.25, reflecting growth versus our full year 2025 results. Total revenue is expected to decline by a mid-single-digit % for 2026 compared to 2025.

Competitive pressures in MS are partially offset by increased revenue from our growth products. We expect our full-year revenue for our MS products, excluding Vumerity, to decline by a mid-teens percentage versus 2025. We expect our full-year contract manufacturing revenue to be roughly $300 million in each half of 2026. Moving to the P&L, we expect gross margin to be roughly consistent with 2025. Building on my comments regarding consistent OpEx for the year, we expect Q1 expense to be roughly 10% higher than Q1 of last year due to phasing of spend in 2026. Please be sure to review this slide and our press release for other important guidance assumptions. Now, I'll pass the call back to Tim for Q&A.

Tim Power (Head of Investor Relations)

Thanks, Robin. Let's go to our first question, please.

Operator (participant)

Thank you. If you're dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach your equipment. Again, that is star one to ask a question. Your first question comes from the line of Alex Hammond with Wolfe Research.

Alexandria Hammond (Director and Head of Therapeutics)

Hey, guys. Thanks for taking the question. I guess one on Leqembi. Can you walk us through how to think about the cadence of sales growth this year? We're really just trying to understand the timing and percent of patients likely to go on to maintenance and how that may impact revenue. Thank you very much.

Christopher A. Viehbacher (President and CEO)

Sure. Thanks very much. So like I say, we don't really have clear data about how many patients actually go on to maintenance since we really only know how many vials we sell. But the data that we do have suggests that there is this persistency of about 70%. So that suggests that quite a number of people come to the end of the plaque removal period and go on to maintenance. Now, the vast majority of those are still on the monthly infusion because you switch from a biweekly infusion during the plaque removal period. And once you go on to maintenance, that becomes once a month. Now, we're also seeing a progressive take-up of the subcutaneous pen. But again, we don't have full reimbursement for that, so patients have to go through the formulary exemption process.

So I think what you're going to see is pretty much continued sequential quarter-on-quarter growth. There's increased use of blood-based diagnostics. And that is, as I said earlier, helping to make sure that those patients who are eligible for treatment are actually getting to see the neurologist. An increasing number of neurologists—again, right now, our estimate is about 10%-15%, but that's expected to grow—are using the blood-based diagnostics to validate the diagnosis, which will hopefully reduce the number of PET scans and lumbar punctures. There's an economic reason for that, too. A PET scan costs about $5,000. The cost of a test is, I think, somewhere around $140. So there'll be an economic reason to move to the blood-based diagnostic. Obviously, if we can get the pen for induction approved, that is a major benefit.

I think we're also going to see, though, that not everybody is going to immediately go to that. I think certainly for those patients who are perhaps more rural-based and have a long drive to an infusion center, you might see a more rapid uptake. We've certainly heard some physicians who talk about the desire to continue to have the patient come in, at least in the early phase of plaque removal, to monitor the potential for ARIA and do the MRIs. So now, what we do hope is that with the approval of the subcutaneous for induction, that as payers start to look at their formularies for 2027, I think there is a good chance that some payers will take the subcutaneous for both induction and maintenance and that both of those become fully reimbursed on 1st of January.

Now, that's kind of an individual payer decision, and we won't know until they announce their formularies in the fall of this year. So I think you're going to continue to see, as I said, that linear growth pattern. But I think we're also seeing some very strong response to direct-to-consumer advertising. So all of these factors are accumulating. We're certainly hearing anecdotal evidence that physicians seem to be appreciating the benefit that they see in their patients. So I think in the first half, it's probably continued linear growth. Sometime in the latter half of the year and certainly potentially going into 2027, there's a potential for acceleration in that. But I think we really need to see the full reimbursement to make sure we take full advantage of the subcutaneous pens.

Tim Power (Head of Investor Relations)

Thanks, Chris. I suppose can we get a Ruth? Thank you, Hammond. Can we get to the next question, please?

Operator (participant)

Yes. We'll go to Phil Nadeau with TD Cowen.

Philip Nadeau (Managing Director and Senior Research Analyst)

Good morning. Thanks for taking our question. Chris, I think the number one thing investors are debating is when Biogen's top line could return to growth. What are your thoughts on that? When do you think the growth products could overtake the declines in the legacy franchises, and what role could business development have in that? Thanks.

Christopher A. Viehbacher (President and CEO)

Well, so far, the growth products in the last two years or certainly last year did outstrip the decline of the MS. Now, this year, we'll see a full year of Tecfidera generic erosion in Europe. We had about six months of that in 2025. So I think we will see a little bit more erosion of the MS portfolio as a result of that. At the end of the last year, we also saw the introduction of a biosimilar for Tysabri. It's early days yet, so we can't really determine the erosion. But I think we're reasonably optimistic that we can maintain a strong market share for Tysabri brand. There's a limited number of physicians who are very strongly believers in the importance of Tysabri. So that's what we're going to rely on. We also have an extraordinarily strong patient services organization in our U.S. company.

I think to really return to growth, I think there's two things that really need to happen. One is we do need to start seeing the positive phase III results come out and the launch of products. So if we assume that the phase III for litifilimab is positive for SLE, that could be launching in 2028. If we assume that the AMR data are positive, that could be a launch in 2028 as well. And I think particularly AMR could be a launch that takes off quite quickly, just given the identified patient base that exists and the fact that there's no treatment. The other, of course, is BD, and we continue to look for potential acquisition opportunities. These are companies that are post-phase III results and early or early stage in their commercialization. And certainly no more than around the $5 billion-ish, $5 billion-$6 billion mark.

But the reality is that it's hard to find things that actually generate value for our shareholders. There are certainly companies out there, but we haven't found one that we can acquire for a price that we think makes sense for our shareholders. But we continue to look. We are looking every day out there in the marketplace, and I think that's an opportunity. But equally, I would say we have some pretty high conviction in our late-stage pipeline. Now, nothing is ever given in research and development, as we all know. But 10 phase III programs, that's a real achievement from over the past year because at the end of 2024, we really only had litifilimab.

Now, we not only have those programs, but we've got a potential let's see what happens with BIIB080 and the LRRK2. And we're starting to put programs into the clinic. So we're continuing to look, but I think it's really seeing these products launch and if we can find an acquisition. But otherwise, I think we've been able to really, again, create that bridge to growth. We're generating cash. We're generating profits, and we're investing significantly in our growth brands.

Tim Power (Head of Investor Relations)

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

Operator (participant)

Our next question comes from the line of Brian Skorney with Baird.

Brian P. Skorney (Senior Research Analyst)

Hey, good morning, everyone. Thank you for taking my question. With the BIIB080 data coming up, I was just wondering if maybe I could get a comment from Chris or maybe Alisha, if she's on the call. Obviously, you guys have been very successful with Spinraza as an intrathecal injection, even in the face of oral competition. But Leqembi has been much harder in Alzheimer's as an IV, which I think most would agree is an easier mode of administration than intrathecal. So I guess how would we be thinking about the commercial opportunity for BIIB080, and what sort of clinical data is really needed to kind of see the next level of commercial success over Leqembi?

Christopher A. Viehbacher (President and CEO)

Well, I think we really want to see the data. What I can tell you is that the neurology community is going to be also looking at these data very closely. Every Alzheimer's expert I talk to really thinks tau is an important target. And if you look at the severity of Alzheimer's, that's really related to the level of tau. So there's a logic there. And with BIIB080, we know we can actually reduce tau. The question will be, how long do you have to reduce the tau for to move the needle on cognition? And I think you've seen from the GLP-1 data that it's quite hard to move that level of cognition. So I think we want to see the data first. I think if there is, then you also want to see what the side effect profile is.

There's a belief that we're not going to have anything like ARIA. But again, we need to see those data. This is a phase II data that is really breakthrough science. Nobody knows. Nobody has been able to move the needle so far. Our belief is also that it's the intracellular tau that matters as opposed to the extracellular tau, which is why the antibodies haven't worked. I do think it's a complex disease, Alzheimer's, and most complex diseases require multiple modalities. And so from a commercial point of view, obviously, there's already a lot of speculation about what would be the sequencing of these treatments. Would you treat the tau first? Would you treat the A beta first? Or would you put these in combination? And then there's also an opportunity once you see the data, can you go into other tauopathies?

So it's a little premature to say, but I can say that if it is positive, I think the neurology community is going to be very excited about that. But I would also remind everybody that we would then have to go into a phase III program. And anything in Alzheimer's doesn't happen on a very quick basis. So this would take several years, again, to be able to do that phase III and launch the product.

Tim Power (Head of Investor Relations)

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

Operator (participant)

Yes. Our next question comes from the line of Michael Yee with UBS.

Mike Yee (Global Head of Biotechnology Research)

Hey, guys. Thanks for the question. Following up on BIIB080, which I think is going to be really an important readout, I understand the primary endpoint is CDR sum of boxes after 18 months, which is great. I think the study is well designed. But how important is looking at subgroups, for example, high tau versus low tau, or any of those pre-specified? And how important is the tau sub-study where, obviously, PET tau imaging is going to be critically important to see if we're actually doing anything? Thank you.

Tim Power (Head of Investor Relations)

Yeah, Priya.

Priya Singhal (Head of Development)

Thanks, Michael. No, it's very important, I would say. I think, as Chris just outlined, this is a very important test of the scientific hypotheses. So we'll be looking at tau PET. We'll be looking at fluid biomarkers. We'll be looking for trends in clinical data. And we'll be trying to triangulate all of that. And importantly, I think we've set it up well because we do have a tau sub-study. And we are testing as I'll just remind everyone, we are testing three doses and two dosing regimens. And it is a randomized controlled trial. So all of that will be very informative. We believe this will be very important to assess, yeah, all of it.

Tim Power (Head of Investor Relations)

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

Operator (participant)

Yes. We will go to Salveen Richter with Goldman Sachs.

Salveen Richter (Biotechnology Equity Research Analyst)

Good morning. Thanks for taking my question. When I look at your late-stage registrational pipeline, you've put that whole basket under high conviction here. And I just wanted to understand, in the context of litifilimab with these phase III trials weeding out and the kind of mixed phase II datasets here and just the innate risk around lupus, what it is that leads you to believe that this is high that you have high conviction here in the outcomes in the phase III.

Tim Power (Head of Investor Relations)

Priya?

Priya Singhal (Head of Development)

Thank you, Salveen. Well, I'll just start off by saying that we really believe that litifilimab is a high scientific conviction late-stage program. The reason for this is that it targets the BDCA2 pathway, as you know. We know that BDCA2 is really a receptor that is expressed exclusively on what we know as the pDC cells, the human plasmacytoid dendritic cells, which regulate immune response and then control the type 1 interferon signature pathway. I think that what we've shown and we have published this in the New England Journal of Medicine, both the parts of the LILAC study where in the first part of the study, we looked at systemic lupus, and in the second part, we looked at cutaneous lupus. In both independently, we believe we had important data that we would classify as proof of concept.

So I think we have designed the trials to really be assessing that and confirming that. Our primary endpoint is also similarly established as SRI-4, which is the SLE responder index. And what's important about this primary endpoint is that it requires more than a 4-point or greater reduction with no worsening, so really captures disease activity. And I think that because of the pathway, which is very relevant for skin and joints, we have targeted our inclusion in the litifilimab TOPAZ-1 and TOPAZ-2 trials to be really appropriate for the mechanism of action. So overall, we remain encouraged and optimistic. Of course, we have to wait for the readout. And again, the readout for SLE is end of the year, and CLE will be sometime mid-year next year.

Tim Power (Head of Investor Relations)

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

Operator (participant)

Yes. We have a question from Umer Raffat with Evercore.

Umer Raffat (Senior Managing Director)

Good morning, guys. Thanks for taking my question. Maybe I'll switch gears to felzartamab for a quick second. How important is it for you to hit on the eGFR endpoint beyond the primary endpoint? I'm asking because back in phase II, it was hard to evaluate that endpoint given the massive imbalance on eGFR. On this felzartamab point too, I guess, how do you think about limiting the scope of development to just kidney transplant AMR? Why not AMR and other organ transplants as well? Thank you very much.

Priya Singhal (Head of Development)

Thanks, Umer. So overall, I think it's a very important endpoint. I think as we've set it up, the primary endpoint is what we'll be focusing on, but we'll be definitely looking at all the secondary endpoints. And I think eventually, as is in most cases, the totality of data will matter. We remain really excited about it based on the proof of concept. It was a small trial, but the magnitude of effect of greater than 80% that we saw in that small phase II trial was really compelling. And I think that's really the piece that is very encouraging.

Now, speaking of other transplants, thank you for that question because we are ourselves evaluating the impact of addressing the CD38 autoantibodies in other transplants. So it remains an important area of internal evaluation and query. And obviously, we'll communicate more on that as this becomes important. I also wanted to call out that we are in the process of initiating another sort of sister indication trial with the microvascular inflammation, which we think is going to be a very important aspect as we continue to think about what do patients and prescribers really need in the field of antibody-mediated rejection for kidneys.

Christopher A. Viehbacher (President and CEO)

Yeah. I think the only thing I would add is we are aware of some physicians who are experimenting with CD38. I know of some physicians, for example, in heart transplant. And we'll be monitoring, obviously, a lot of that activity. We're not sponsoring any of that, but certainly be looking to learn from whatever experience they have.

Tim Power (Head of Investor Relations)

Can we go to the next question, please?

Operator (participant)

Yes. Our next question comes from the line of Evan Seigerman from BMO Capital Markets.

Evan David Seigerman (Managing Director and Head of Healthcare Research)

Hi, guys. Thank you so much for taking my question. I want to touch on high-dose Spinraza with the potential approval in the U.S. coming in April. How should we think about what that could do to your top-line growth for 2026 in the rare disease business? Thank you.

Christopher A. Viehbacher (President and CEO)

So like I said before, the first country to approve this was Japan. Again, we are seeing higher results initially. I mean, we're in the first few months of launch, so it's difficult to draw definitive conclusions. But we're certainly off to a better start than we even had expected. It's not just, as I said, in terms of adoption, but it's also switchbacks. We certainly have seen much higher levels of efficacy in the study, which suggests that there is an increased benefit to getting to a therapeutic level faster. I know in Europe, our teams are very excited about the launch, and they'll be next up, and we'll see results from that. The feedback, again, is from the community as everybody's been waiting for these data. So the big thing in the SMA market is really efficacy versus convenience.

Most physicians I talk to and I like to go and talk to physicians who prescribe Spinraza around the world. If you ask them about efficacy, most of them believe that it's really Spinraza. At some point, the convenience of the oral starts to attract patients. Now, here, we're going to be dramatically increasing the level of efficacy. I think the choice between oral and efficacy will be harder for some physicians and parents.

Market research suggests that there could be an increase in sales, but I think I always say there's no market research like actual sales. I think there is an opportunity for upside here. How fast physicians will be willing to transition patients is something that I think we have to wait and see for practical purposes. It is an important launch. And again, it's been highly looked toward from the part of the patient advocacy groups as well as the physician community.

Tim Power (Head of Investor Relations)

Ruth, can we go to the next question, please?

Operator (participant)

Yes. We will go to Brian Abrahams with RBC Capital Markets.

Brian Abrahams (Managing Director and Co-Head of Biotechnology Research)

Hey. Good morning. Congrats on all the progress, and thanks for taking my question. You have a slide detailing some of the pre-launch activities. I guess I was wondering if you could maybe talk through the on-the-ground process of pivoting and redeploying the existing commercial infrastructure ahead of the potential lupus and nephrology launches. While it sounds like cost structure won't change much this year, broadly speaking, I guess I'm wondering how you would expect commercial investments will need to evolve longer term in order to support the potential growth that you're bridging to. Do you have a long-term margin target? Thanks.

Christopher A. Viehbacher (President and CEO)

Well, the first thing is acquisition of experience and capability because we're going into areas where Biogen has not been present in the past. With AMR, we'll be seeing transplant nephrologists. With IgAN, we'll be seeing nephrologists. With lupus, we're going to see rheumatologists. And so in each of these and, of course, outside of U.S., we're going to see epileptologists and neurologists. So we need to build capabilities. And there, I think I'm extremely encouraged. Market research is always hard to do because it's a little theoretical for physicians. So one of the surrogate markers I look for is the ability to attract talent. And we've brought in a number of people from companies who have already a strong presence in those areas. And when you're betting your career on a product, I think that's an important move for people.

So people who are joining Biogen are joining because they see potential in these products. I'm already encouraged by that. The interesting thing is I remember when we were developing Dupixent, all of the indications that Dupixent has today are areas where Sanofi previously had no experience. Yet, actually, by recruiting really not very many people in medical and commercial, Sanofi's obviously made that a successful product. The reality is that you don't need to have the entire team necessarily have that experience. You need to have enough medical capability. On the commercial side, at least the commercial leaders with that. I don't foresee that this is going to have a massive impact on our OpEx trajectory. It is important that we have people who understand these spaces because, as I always say, if you've launched one product, you've launched one product.

There's so many differences between physician types, the patient. We have to really understand the patient journey. So today, we're investing mostly, actually, in market research. We're going to be obviously present in congresses and presenting the data as they come along. But it's more of a getting ready at a global level and then progressively at a regional and local level. And we're not, at this stage, really looking at seeing any major change, as I say, in the actual level of investment.

Robin C. Kramer (EVP and CFO)

Yeah. Chris, what I might add is that we look to the largest degree possible to reallocate resources from our legacy business towards our growth products, both in launch and those that are in the pipeline where we may have the opportunity to bring them to market.

Tim Power (Head of Investor Relations)

Great. Let's go to our next question, please.

Operator (participant)

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

Jay Olson (Managing Director and Senior Analyst)

Oh, hey. Congrats on the quarter. Thanks for taking the question. We have a financial question to follow up on part of what Brian was asking. We're curious about the product margin for Leqembi. Can you talk about the level of expenses that you're investing in Leqembi? How does it compare to where you would like it to be longer term? And what's the steady-state target for Leqembi's product margin? Thank you.

Robin C. Kramer (EVP and CFO)

Yeah. So we don't get into the specific product margin associated with Leqembi. But as was the case with most launch products, as the launch progresses and we continue to make enhancements on the manufacturing processes, we would expect that we would see improved margins over the near to mid-term.

Christopher A. Viehbacher (President and CEO)

Yeah. Like most products, I mean, this is really going to be driven by revenue, right? I mean, we are certainly investing significantly still in R&D. We have the AHEAD 3-45 study. We've been developing the subcutaneous formulations. And all of those are extremely important for the development of Leqembi. From a commercial point of view, there's still a significant investment. This is an area, again, where we're having to create the market and educate. And so I wouldn't necessarily expect, though, to see the OpEx level totally to expand. But I would see if we're going to see margin expansion, it's going to be because the revenue starts to grow into the OpEx level, if you like. So I would say we should see increasing margins over time as long as the revenue increases.

Tim Power (Head of Investor Relations)

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

Operator (participant)

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

Eric Schmidt (Biotechnology Analyst)

Thanks. Maybe another one for Robin on capital redeployment. Your balance sheet is meaningfully stronger than it was. You're still creating a lot of cash flow. And Chris just asserted a lot of confidence in the pipeline, including the late-stage pipeline. Is this the right time for a share buyback or otherwise a return of capital to shareholders? Thanks.

Robin C. Kramer (EVP and CFO)

Yeah. So as it relates to deployment of capital, we're focused on deploying capital in a manner that creates long-term shareholder growth. As Chris mentioned, we are looking to deploy capital towards business development transactions. But we do think about capital deployment in a broad manner. And so it's not out of the question that we might consider share buyback. But at this point, we're primarily focused on growing that top line.

Tim Power (Head of Investor Relations)

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

Operator (participant)

Yes. Our next question comes from Chris Schott with JPMorgan.

Chris Schott (Managing Director)

Great. Thanks so much for the question. Just a bigger picture one on the pipeline. Chris, I know one of your priorities when you joined was creating a more balanced pipeline. Seems like you've clearly been doing that in the late stage. But on the earlier stage pipeline, could you just elaborate a little bit more on your priorities here? Should we just be thinking about there being more of these kind of high-risk, high-reward type assets? Or is that the part of the pipeline we should think about that same kind of balancing out approach playing out over time? Thank you.

Christopher A. Viehbacher (President and CEO)

No. I don't think we have the size as a company to be in the high-risk, high-reward business. So I think we do have a lot of capability in Alzheimer's and ALS. So I think ALS, I think we believe that we can still invest there without so much risk because, for us at least, the neurofilament is an important biomarker. And so we believe that we'll get an early read as to whether a molecule is working or not in ALS. And that makes it a whole lot less high-risk. But it's still a very high-reward area, obviously, if you could do something for the sporadic ALS population. So we haven't abandoned that. In fact, we have several targets in preclinical that we're working on. Alzheimer's is an area that we believe is going to be a core part of Biogen going forward.

Beyond tau, we are working on some other areas and mechanisms. That's pretty much the extent of our neuroscience. There's still MS. We are working on MS. The area of unmet need in MS is pretty narrow now. It's really progressive MS. That's an extremely important area of unmet need. It has equally been a very difficult target to hit. There is some limited work on MS. Most everything else in the early stage, we're really looking to immunology. Immunology is obviously a big space. I would say if I'm in a five-year time horizon, we're really sticking with this rare immunology space as we've seen with felzartamab, for example, and another products. As you get into earlier stage, then I think we can open up the aperture a lot more.

If you look at something like Dayra or even the Vanqua, both are opportunities to have a portfolio in a product. That's the really interesting thing about immunology is that as you follow these immune pathways, you're going to have a principal target. But once you have de-risked the safety of that, it's relatively cost-efficient to be able to go and do signal-seeking studies in other areas. And so I think that's one of the areas we are looking for because it's a highly cost-efficient area for a company of our size. And I would say there's going to be probably a lot more in immunology than neuroscience. But as I say, ALS and Alzheimer's and, to a degree, MS continue to be a target for us.

Tim Power (Head of Investor Relations)

Thanks, Chris. Let's go to our last question, please.

Operator (participant)

Our next question comes from the line of Danielle Brill with Truist Securities.

Danielle Brill (Managing Director)

Hey, guys. Good morning. Thanks so much for the question. Maybe a couple of modeling items here. You mentioned the one-time reimbursement true-up for Skyclarys. What was the magnitude of that? And how should we be modeling the quarterly run rate in 2026? And then additionally for Zurzuvae, how should we be thinking about the impact of the European rollout? Thank you.

Robin C. Kramer (EVP and CFO)

Yeah. So in respect to Skyclarys and the true-up that was occurring in ex-U.S., that was $12 million. And I would look at that in relation to the occurring in the fourth quarter. Now, as Chris has mentioned in the past, as we go and launch ex-U.S., you have a situation where you have reimbursement occurring on a country-by-country basis. And so you have timing of looking to an estimate until you get finalization of that reimbursement in place. And so periodically, you may see true-ups or changes in estimate. But in respect to this, it related to two countries in Europe. And it was a one-time item in the fourth quarter.

Christopher A. Viehbacher (President and CEO)

But I think you're going to continue to see nice, steady growth of Friedreich's Ataxia. We still see this as a major opportunity. There are a lot of patients in South America. And so I think the launch in Brazil will be particularly important for us. That'll be initially in a private market. And then we'll progressively get state reimbursement as well. Zurzuvae will be interesting in Europe. Initially, the pricing assessments were coming back such that it didn't make sense. But I think one of the things that we have seen from the success in the U.S. is that some of that is translating into Europe as well. So I think we are going to be doing a highly selective rollout in Europe. It's not going to be pan-European because of the pricing questions.

I think we're already seeing pricing levels that are actually enough to be able to launch. Obviously, we are very mindful of the MFN environment. While we're not one of the companies that signed an agreement, as you've seen, there are demonstration projects now that have been launched by the administration. As we launch new products, we are certainly looking at this from an MFN point of view. That will mean that it's probably a target of about three or four countries that we're going to be starting with as opposed to the whole 2027.

Tim Power (Head of Investor Relations)

Great. Well, that concludes the call. Thanks, everybody, for your time today. If you've got more questions, just reach out to any of us in the IR team. Thank you.

Operator (participant)

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