Biogen, Inc. (BIIB) Q4 2021 Earnings Call Transcript

Biogen, Inc. (NASDAQ: BIIB) Q4 2021 earnings call dated Feb. 03, 2022

Corporate Participants:

Michael Hencke — Head of Investor Relations

Michel Vounatsos — Chief Executive Officer

Priya Singhal — Head of Global Safety & Regulatory Sciences and interim Head of Research & Development

Michael McDonnell — Chief Financial Officer

Alisha Alaimo — President, US Organization

Analysts:

Robyn Karnauskas — Truist Securities — Analyst

Michael Yee — Jefferies — Analyst

Matthew Harrison — Morgan Stanley — Analyst

Umer Raffat — Evercore ISI — Analyst

Marc Goodman — SVB Leerink — Analyst

Salveen Richter — Goldman Sachs — Analyst

Cory Kasimov — JP Morgan — Analyst

Jay Olson — Oppenheimer — Analyst

Jason Zemansky — Bank of America Merrill Lynch — Analyst

Brian Abrahams — RBC Capital Markets — Analyst

Salim Syed — Mizuho Securities — Analyst

Presentation:

Operator

Good morning, my name of Madison, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen’s Fourth Quarter Earnings Call and Financial Update. [Operator Instructions] After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions]

Thank you. I would now like to turn the conference over to Mr. Mike Hencke, Head of Investor Relations. Mr. Hencke, you may begin your conference.

Michael Hencke — Head of Investor Relations

Good morning, and welcome to Biogen’s fourth quarter 2021 earnings call. Before we begin, I encourage everyone to go to the Investors section of biogen.com to find the earnings release and related financial tables, including our GAAP financial measures and a reconciliation of the GAAP to non-GAAP financial measures that we will discuss today.

Our GAAP financials are provided in Tables 1 and 2, and Table 4 includes a reconciliation of our GAAP to non-GAAP financial results. We believe non-GAAP financial results better represent the ongoing economics of our business and reflect how we manage the business internally. We have also posted Slides on our website that follow the discussions related to this call.

I would like to point out that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail.

Today we will be discussing ADUHELM. ADUHELM is indicated for the treatment of Alzheimer’s disease. Treatment with ADUHELM should be initiated in patients with mild cognitive impairment or mild dementia stage of disease, the population in which treatment was initiated in clinical trials. There are no safety or effectiveness data on initiating treatment at earlier or later stages of the disease then were studied. This indication is approved under accelerated approval based on reduction in amyloid beta plaques observed in patients treated with ADUHELM.

Continued approval for this indication, may be contingent upon verification of clinical benefit in a confirmatory trial or trials. ADUHELM can cause serious side effects, including amyloid related imaging abnormality or ARIA. ARIA is a common side effect that does not usually cause any symptoms, but can be serious. ADUHELM can cause serious allergic reactions. The most common side effects include ARIA, headache and fall. Please see full prescribing information and patient medication guide at ADUHELM.com.

On today’s call, I am joined by our Chief Executive Officer, Michel Vounatsos; Dr. Priya Singhal, Interim Head of Research & Development; and our CFO, Mike McDonnell. We will also be joined for the Q&A portion of our call by Alisha Alaimo, President of our US Organization. As a reminder, during the Q&A portion of the call, we kindly ask that you limit yourself to one question.

I will now turn the call over to Michel.

Michel Vounatsos — Chief Executive Officer

Good morning, everyone, and thank you for joining us. I will start by briefly reviewing our financial performance and Mike will provide more details. For the fourth quarter Biogen generated approximately $2.7 billion in revenue, representing a decrease of 4% year-over-year, as we continued to experience the erosion of TECFIDERA revenue in the US, due to the impact of generic entry.

Fourth quarter 2021 non-GAAP earnings were $3.39 a share. We believe this performance reinforces Biogen’s ability to execute well. However, given a number of challenges we have faced recently, we announced that we will implement cost reduction measures, which are expected to yield approximately $500 million in annualized savings and Mike will provide additional details.

Let me now say a few words regarding the proposed National Coverage Determination or NCD for the class of monoclonal antibodies directed against amyloid for the treatment of Alzheimer’s disease. As currently written the proposed NCD calls for coverage with evidence development or CED, which will provide reimbursement only for Medicare beneficiaries enrolled in an approved randomized controlled trial. In reaching this proposed recommendation the Center for Medicare and Medicaid Services or CMS highlighted three key areas of focus for this class of therapies, all of which have implications for ADUHELM.

First, CMS believes that gaps in the data on the clinical benefit of these therapies. Second CMS believes more information is needed about the potential risks of removing amyloid principally ARIA. And third, CMS would like additional data to be generated on the underrepresented communities in which Alzheimer’s disease is more prevalent. These are also areas of focus for Biogen with many important initiatives already underway. We are committed to constructive engagement with CMS to address their concerns and we agree with CMS that additional data maybe helpful to continue to characterize the benefit risk profile for this class of therapies.

Now, that ADUHELM is approved by the FDA, we believe the most helpful data generation can really only be generated from greater drug utilization in real world practice. We also agree with CMS that the final NCD decision should not lead to a duplication of ongoing activities. As currently postured, however, we believe the proposed CED requirements will be [Indecipherable] for patients, overly burdensome, costly to companies, and duplicative of the data that will be generated from ongoing trials and the FDA’s existing required post-marketing requirements.

We believe the best way to address the concerns of CMS is to supplement the data from the ADUHELM Phase 3 studies, we generated data over 3,000 patients by taking a multi-pronged approach, leveraging the Phase 4 confirmatory study and vision. Our EMBARK re-dosing study, which has enrolled approximately 1,700 patients. The ongoing ICARE AD registry. The ongoing Phase 3 studies of all the antibodies in the class and order ongoing and anticipated real world data generation efforts.

We believe this extensive data generation opportunity will adequately address any open question regarding the clinical efficacy and safety of amyloid beta lowering therapies. On this note, we expect to begin patient screening for the ENVISION study in May of this year with the primary completion date anticipated approximately four years later. This is expected to be a global placebo-controlled trial, aiming to enroll 1,500 patients with MCI due to Alzheimer’s disease or mild Alzheimer’s disease with confirmation of amyloid-beta pathology. The plant [Technical Issues] and endpoint will be CDR Sum of Boxes at 18-months with the plan long-term extension for up to 48-months. We believe this study combined with the other studies I mentioned should address the questions raised by CMS. Therefore, we will continue to advocate for an NCD that provides rapid and equitable patient access by providing coverage only for the patients identified as most appropriate for treatment in our FDA-approved label will generally aligns to our Phase 3 clinical trial population.

Sorry, we also believe this multi-pronged approach will allow for more equal access in all communities. We have concerns that the restrictions of the proposed CED would unfairly exclude access for patients in underserved communities and geographically remote areas. In contrast, we expect both ENVISION and our ICARE-AD registry, which 6 — to enroll up to 6,000 participant to obtain more representative data from those communities by aiming to enroll 16% to 18% of US participants from black and Hispanic population.

In summary, we will advocate for a final CED that strikes, a better balance between patient access for an FDA-approved therapy today and the desire for additional data that can only be guided over time and with higher levels of drug utilization in the real world. We look forward to discussing these consideration with CMS and working towards a final decision that is in the best interest of patients.

Beyond the NCD last quarter, we presented additional data from the ADUHELM Phase 3 clinical trial showing the effect on downstream tau Alzheimer’s biology and the correlation between plasma p-tau reduction and less cognitive and functional decline. In addition, we published the Phase 3 ARIA findings in JAMA neurology. As we look forward, we aim to expand both within and beyond neuroscience with a focus on four pillars to drive growth and value creation.

First, we intend as a company to build on our strong foundation in neuroscience, where we currently have 26 programs in clinical development. Second, we have what we believe to be two comparing Phase 3 programs in lupus. This is a therapeutic area with a different risk profile and we are continuing to evaluate additional opportunities in specialized immunology.

Third, over the last several years, we have also built a very successful new business with our biosimilars. We recently announced an agreement to sell our stake in the Samsung Bioepis joint venture to Samsung Biologics with Biogen remaining in our current role as the commercialization partner for the Samsung Bioepis anti-TNF portfolio and ophthalmology programs. We’re currently anticipate — we currently anticipate that this transaction will close in mid-2022. Once closed, going forward, we will have an expanded ability to pursue the biosimilars business on our own as we aim to bring more biosimilar product to more patients in more geographies. Mike will provide more details.

And lastly, we are also focused on accelerating our efforts in digital health to support our commercial and pipeline programs, while also creating opportunities for potential digital therapeutics. To this point, we have built a dedicated digital health portfolio, which includes the recently announced new collaboration with the TheraPanacea with the aim of leveraging our significant database, but also machine learning, artificial intelligence to develop digital health solution that may improve patient care, accelerate drug development and further the understanding of underlying pathologies.

Our progress across these four pillars provides us with the potential for two future waves of growth as we launch in new therapeutic areas and build new franchises. First, over the next few years, we believe we have a significant potential in Alzheimer’s disease and depression. Two large therapeutic areas with significant and unmet needs. In Alzheimer’s disease, we have a deep pipeline of clinical and preclinical assets, leveraging multiple modalities and targets, including both amyloid and tau with ADUHELM and lecanemab, Biogen and Eisai have two out of the four potential anti-amyloid antibody therapies that are either approved or in late-stage development.

In depression, we are collaborating with Sage Therapeutics on zuranolone [Phonetic], which we believe has the potential to provide a valuable new option for patients suffering from major depressive disorder and postpartum depression. We believe our second future waves of growth anticipated in the mid to late 2020s will be driven by a number of diverse therapeutic areas including stroke, Parkinson’s disease and lupus with some of these programs already in Phase 3. These anticipated future waves of growth will be supported by our diversified pipeline which today includes 32 clinical programs, 10 of which are in Phase 3 are filed.

Additionally, outside of our core business, we are pleased to have recently exercised an option for mosunetuzumab, a late-stage investigational bispecific antibody, targeting CD20 and CD3 in development by Genentech for oncology and potentially other indication. Exercise of these options will provide Biogen with the profit share, while Genentech will lead strategy and implementation with an expected FDA filing in the near future. This builds on Biogen and Genentech’s long history of productive collaboration, which began with rituximab.

Our focus in 2022 will remain on execution and agility as we expect a number of important milestones. This includes the continued launch of ADUHELM in the US, the launch of VUMERITY in the EU and our expected entry into the US biosimilars market with BYOOVIZ. We expect five data readouts, three of which are in Phase 3 and the completion of three regulatory filings in Alzheimer’s disease, depression and biosimilars.

Before, I turn the call over to Priya for an update on our progress in R&D, I want to first say how impressed I am by what I’ve seen from Priya both as the Head of Safety and Regulatory Science and most recently as our Acting Head of R&D. Her ability to lead, her strategic thinking and her subject matter expertise give me the utmost confidence in her ability to advance our pipeline, while we work to name a permanent successor.

Please go ahead, Priya.

Priya Singhal — Head of Global Safety & Regulatory Sciences and interim Head of Research & Development

Thank you, Michel, and good morning everyone. First, I want to say what an honor it is to serve as Acting Head of R&D at Biogen. Biogen has a track record in developing life-changing therapies in MS and SMA. With a deep and diverse R&D pipeline, Biogen aims to bring impactful medicines to patients suffering from neurological and immunological diseases characterized by significant unmet need.

As this is my first earnings call within this role, I would like to review a few areas that I’m especially excited about. First, we believe that Biogen has a unique opportunity to lead in Alzheimer’s disease. Not only because we are advancing an industry-leading Alzheimer’s pipeline, but also because of the proactive focus we have placed on continued data generation for aducanumab. This includes ENVISION, the planned post-marketing Phase 4 study, the ongoing EMBARK re-dosing study and obtaining real world data through the ICARE-AD registry.

We believe data from patients treated with aducanumab in the real world settings with greater drug utilization is the best way to complement the extensive clinical data generated on aducanumab to-date in addition to the ongoing and planned clinical trials. We also continue to gain potential insights from the aducanumab Phase 3 clinical data regarding Alzheimer’s disease biology and the treatment effect of aducanumab.

On this particular point, Biogen recently presented additional data from the ENGAGE and EMERGE Phase 3 trials at the annual CTAD meeting last November. The important analysis of this data showed that in addition to reducing amyloid plaques in the brain, aducanumab treatment also resulted in changes in downstream tau Alzheimer’s disease biology, specifically soluble phospho-tau or p-tau as seen in both CSF and plasma. In this analysis, we evaluated over 7,000 plasma samples from more than 1,800 subjects from the EMERGE and ENGAGE Phase 3 trials to investigate the effect of aducanumab treatment on plasma p-tau181.

The results showed a time and those dependent reduction in p-tau181 over 78-weeks with aducanumab treatment in both Phase 3 trials. The reduction in plasma p-tau181 from baseline to week 78 in this analysis was significantly correlated with change in amyloid PET over the same time period, and was also significantly associated with less clinical decline across all primary and secondary outcome measures assessing cognition and function in both studies. These findings are consistent with the hypothesis that aggregated forms of amyloid may mediate soluble tau phosphorylation.

With regard to our AD pipeline, we are excited about lecanemab our other anti-amyloid antibody in Alzheimer’s disease that is being developed in collaboration with Eisai. In Phase 2, lecanemab did not utilize a titration period, demonstrated rapid and robust reduction of amyloid plaques and showed an ARIA incidence of around 10%. We look forward to the Phase 3 readout expected in the second half of this year.

Beyond our programs targeting amyloid, we are also pursuing a multi-modality approach focused on other targets in Alzheimer’s. First, we have BIIB080, which is an ASO that we believe facilitates tau mRNA degradation and has demonstrated both a time and dose-dependent reduction of CSF phospho and total tau in Phase 1. We anticipate starting the Phase 2 study of BIIB080 by mid-year.

Second, we are also planning for the near-term initiation of a Phase 1 study for BIIB113, a small molecule inhibitor of O-GlcNAcase or OGA, an enzyme believe to catalyze the removal of O-GlcNAC, post translational modification of tau protein. Evidence suggests that O-GlcNacylation of tau attenuates aggregation. By inhibiting OGA, we aim to increase the O-GlcNacylation of tau to potentially inhibit tau aggregation and thereby slow clinical decline.

Having developed the first FDA approved therapy to address a defining pathology of Alzheimer’s, we believe that Biogen is uniquely positioned with the right expertise, experience and access to modalities to lead in Alzheimer’s disease. This is a complex disease requiring a multifaceted approach and continued investment as we work to build on the scientific learnings of ADUHELM and develop the next wave of potential Alzheimer’s therapies.

I would now like to talk about depression. I believe that zuranolone with a novel mechanism of action may provide an important new treatment option for patients suffering from major depressive disorder and postpartum depression. The reported clinical data generated to-date from multiple clinical trials showed the following. First, in earlier studies, an improvement in depressive symptoms has been observed as early as day three. Second, zuranolone has displayed a consistent safety and tolerability profile with no observed evidence of weight gain, sexual dysfunction, euphoria or increased suicidal ideation.

Third, the SHORELINE Phase 3 open-label study showed that approximately 80% of patients, who responded to the initial course of 50 milligrams of zuranolone needed at most one additional treatment total during their time in the one-year study. Fourth, in the WATERFALL Phase 3 study, zuranalone reduced depressive symptoms in patients suffering from MDD both with and without elevated anxiety.

Fifth, zuranolone has shown improvements in depressive symptoms in postpartum depression. For zuranolone, we look forward to two Phase 3 readouts this year, the CORAL study in MDD and the SKYLARK study in PPD.

The next area I would like to highlight is stroke. Last year, we were excited by the results from the Phase 2 study of BIIB131, formerly known as TMS-007 in acute ischemic stroke. Administration of the current standard-of-care, pharmacological thrombolytic TPA, is limited to a short therapeutic window within 4.5 hours following the acute onset of stroke symptoms. This short time window is meant to mitigate the risk of intracranial hemorrhage, which is the most concerning adverse event associated with TPA.

In the Phase 2a study of BIIB131, acute stroke patients were randomized to receive BIIB131 or placebo out to 12 hours from their last known normal. The primary objective of the study was safety. And of the 52 patients, who received BIIB131, none experienced symptomatic intracranial hemorrhage, compared to one out of the 38 patients, who received placebo. This was despite an extended treatment window where patients, on average received BIIB131 at 9.5 hours after the onset of acute stroke symptoms.

Additionally, BIIB131 showed a statistically significant improvement versus placebo on the modified Rankin Scale, or MRS, a registrational endpoint of functional independence. Furthermore, the rate of recanalization or improvement of vessel blood flow in patients, who had a visible vessel occlusion was approximately 58% at 24 hours, in those who had received BIIB131, as compared to 27% of patients who received placebo. We believe BIIB131 may have the potential to be a best-in-class thrombolytic for the treatment of acute ischemic stroke by extending the time — treatment time window out to 24 hours with an appropriate efficacy and safety profile. We are currently evaluating the next steps in the development for BIIB131.

In addition to BIIB131, we also continue to advance a Phase 3 study for BIIB093 in large hemispheric infarction based upon the effects observed on mortality and cerebral edema in the Phase 2 study. I would now like to turn my attention to specialized immunology. We currently have two Phase 3 assets in SLE, including dapirolizumab pegol in collaboration with UCB and BIIB059, our anti-BDCA2 antibody developed in-house at Biogen. These two assets represent potential first-in-class molecules in SLE.

BIIB059 also has the potential to be a first-in-class biologic in cutaneous lupus erythematosus or CLE. CLE is a skin-based autoimmune disease that can be associated with severe scarring and dyspigmentation. In the Phase 2 LILAC study, the CLE part of the study also met its primary endpoint by demonstrating a dose response of BIIB059 on the percent change from baseline in the CLASI-A score, a standardized scale measuring CLE disease activity at week 16 in individuals with CLE. Furthermore, a higher CLASI-50 response rate or number of individuals with a 50% or greater improvement from baseline in the CLASI-A score was observed in patients, who received BIIB059 at week 16. Based upon these results, we are currently planning to also initiate a pivotal study for BIIB059 in CLE this year.

Next, I will touch upon ALS. ALS has been a very key focus area for Biogen for many years. And we remain encouraged by the data from the Phase 3 VALOR study of tofersen, where despite missing the primary endpoint of a statistically significant change from baseline to week 28 in the ALSFRS, we believe there are trends favoring to a person across multiple secondary and exploratory measures of biological and clinical activity.

We are continuing to collect data in the VALOR open-label extension, and we are actively recruiting for the ATLAS presymptomatic study. Many SOD1-ALS patients have received access to tofersen through the global expanded access program, which is available in countries where local regulations permit it and where we hope to secure long-term access. Further, we are engaged with regulators to determine the next steps for the program.

Aside from the areas I’ve highlighted, Biogen continues to grow and diversify the R&D pipeline, which now includes 32 clinical programs. New additions include the exercise of the option with Ionis on BIIB115, an investigational ASO with the potential for extended dosing intervals in SMA, as well as the recent initiation of a Phase 1 study in Angelman syndrome, a rare genetic neurodevelopmental disorder that affects the nervous system and causes severe physical and learning disabilities with symptoms beginning in infancy.

Importantly, I believe that 2022 will be a significant year for Biogen’s pipeline given the number of important readouts expected, including the lecanemab Phase 3 in Alzheimer’s disease, key readouts in neuropsychiatry for both zuranolone in depression and BIIB104 in schizophrenia and BIIB078 in ALS.In closing, I believe Biogen has assembled an extensive pipeline of programs informed by generics, a deep understanding of disease biology, specialized modality expertise and digitalization. Therefore, I believe Biogen is uniquely positioned to shape the future of therapeutics in neurology and specialized immunology and make a difference in patients’ and their caregivers’ lives.

I will now pass the call over to Mike.

Michael McDonnell — Chief Financial Officer

Thank you, Priya, and good morning, everyone. Thank you for joining us. I’ll focus my commentary on fourth quarter results, along with some discussion regarding the full-year 2021.

Total revenue for the fourth quarter of $2.7 billion, declined 4% versus the prior year at both actual and constant currency. Total revenue for the full-year of $11 billion declined 18% versus the prior year at actual currency and 19% at constant currency. This decline was mostly driven by TECFIDERA generic entry in the United States.

Non-GAAP diluted earnings per share in the fourth quarter was $3.39. Full-year non-GAAP diluted earnings per share was $19.22. Total MS revenue inclusive of OCREVUS royalties in the fourth quarter was $1.8 billion. Global TECFIDERA revenue in the fourth quarter was $486 million, US revenue was $161 million. Outside of the US, TECFIDERA revenue of $326 million increased by 13% versus the prior year with 7% growth in underlying patients.

VUMERITY fourth quarter global revenue was $125 million, as compared to $39 million in the fourth quarter of 2020. We expect VUMERITY to continue to grow both in the US and outside the US. TYSABRI fourth quarter global revenue of $513 million increased 8% versus the prior year, benefiting from positive channel dynamics in the US, and we were pleased to see continued global patient growth.

Moving to SMA. Global fourth quarter SPINRAZA revenue of $441 million decreased 12% versus the prior year. In the US, SPINRAZA revenue of $150 million decreased by 6% versus the prior year, as we saw continued impact from competition. However, we were encouraged to see that discontinuations moderated somewhat versus Q3 of this year. US SPINRAZA revenue increased 7% versus the prior quarter, inclusive of some favorable pricing and channel dynamics.

Outside the US, SPINRAZA revenue of $291 million decreased 14% versus the prior year, due to competition and pricing pressure. We continue to believe that SPINRAZA can return to growth over the medium to long-term. Total ADUHELM revenue for the fourth quarter was $1 million.

Moving to our biosimilars business. Fourth quarter revenue of $221 million increased 12% versus the prior year, with increased volume partially offset by pricing pressure. Our Q4 biosimilars revenue benefited from a one-time price adjustment of approximately $10 million.

Last week, we announced that we have entered into an agreement to sell our equity stake in our biosimilar joint venture, Samsung Bioepis to Samsung Biologics for aggregate consideration of up to $2.3 billion. We believe this represents an attractive financial return given that our cumulative investment in the joint venture was $727 million. It’s important to note that we will continue to record revenue and costs associated with the commercialization of BENEPALI, IMRALDI and FLIXABI with economics that will be substantially unchanged from what you have seen previously. So we are pleased with this transaction, because we not only maintain the commercialization rights that we have, but we will also have an expanded ability to pursue additional biosimilars products on our own going forward.

Closing of this transaction is currently anticipated in mid-2022, contingent on the effectiveness of a securities registration statement filed by Samsung Biologics and satisfaction of certain regulatory and other customary closing conditions.

Total anti-CD20 revenue in the fourth quarter of $414 million decreased 1% versus the prior year. RITUXAN revenue of $153 million decreased 29% versus the prior year, due to the impacts of COVID-19 and continued erosion from biosimilar competition. OCREVUS royalty revenue of $261 million increased 29% versus the prior year. As a reminder, the effective royalty rate for OCREVUS royalties resets each calendar year.

Fourth quarter gross margin was 76% of revenue, down from 83% in Q4 of 2020. The reduction in gross margin versus prior year was primarily, due to a $164 million charge for ADUHELM inventory and purchase commitments in excess of forecasted demand.

Moving now to expenses in the balance sheet. Q4 non-GAAP R&D expense was $700 million, which includes a $60 million opt-in payment to Ionis for BIIB115 and a cost of approximately $50 million for the exercise of our option with Genentech for the biospecific antibody mentioned earlier. We will share any operating profits and losses for this program in the low to mid-30% range in the United States.

Non-GAAP SG&A was $785 million, including approximately $155 million related to ADUHELM. Eisai’s reimbursement of US SG&A costs of approximately $45 million is reflected in the collaboration profit-sharing line. Fourth quarter collaboration profit-sharing reduced our net operating expense by $67 million, which includes reimbursement of approximately $140 million from Eisai related to ADUHELM commercialization, partially offset by $75 million of net profit-sharing expense related to our collaboration with Samsung Bioepis.

During Q4 of this year, our effective non-GAAP tax rate was approximately 17%. During 2021, we repurchased approximately 6 million shares of our common stock for a total value of $1.8 billion. No shares were repurchased in the fourth quarter of 2021. As of December 31st 2021, there was $2.8 billion remaining under the share repurchase program, which was authorized in October of 2020. Our weighted average diluted share count was approximately 147 million shares for the fourth quarter.

In 2021, we generated approximately $3.6 billion in cash flow from operations. Capital expenditures were $258 million, and free cash flow was approximately $3.4 billion. We ended the year with $7.3 billion in debt, $4.7 billion in cash and marketable securities and $2.6 billion in net debt. In addition, our $1 billion revolving credit facility was undrawn as of the end of the year. Overall, we remain in a very strong financial position with significant cash and financial capacity to grow the business over the long-term.

Let me now turn to our full year guidance for 2022. We expect full-year 2022 revenue to be between $9.7 billion and $10 billion. This financial guidance assumes minimal ADUHELM revenue in 2022, continued declines in RITUXAN revenue, due to biosimilar competition, as well as continued erosion of TECFIDERA revenue in the US due to generic entry. This guidance also assumes the potential entry of TECFIDERA generics in the EU as early as the first half of 2022 as the outcome of the ongoing challenges to TECFIDERA market protection is difficult to predict. We expect the decreased revenue from these high-margin products to reduce our gross margin percentage, as compared to 2021.

We expect full-year 2022 non-GAAP diluted EPS to be between $14.25 and $16. Our guidance assumptions are highly dependent on the final national coverage determination, which is currently uncertain. If the final NCD, which is expected in April, is not broader than the draft NCD, our anticipated results and guidance may be impacted. This guidance assumes that we will not have any write-offs of ADUHELM inventory in 2022, which is valued at approximately $225 million as of the end of 2021. This guidance also assumes reasonable levels of utilization of our manufacturing capacity dedicated to our Alzheimer’s disease programs. If our manufacturing capacity is underutilized, we will incur incremental period costs, which are not reflected in our guidance.

We expect non-GAAP R&D expense to be between $2.2 billion and $2.3 billion, and our non-GAAP SG&A expense to be between $2.5 billion and $2.6 billion. This non-GAAP SG&A expense estimate includes approximately $400 million in support of the launch of ADUHELM, of which approximately $145 million would be reimbursable by Eisai and reflected in the collaboration profit sharing line.

These R&D and SG&A expense estimates reflect the implementation of previously disclosed cost reduction measures, which are expected to yield approximately $500 million in annualized savings, of which approximately $350 million is expected to be realized in 2022.

These savings are expected to be achieved through various initiatives, which may include downsizing of our global Alzheimer’s infrastructure, the savings from which would be shared with Eisai and operating efficiency gains across SG&A and R&D. These savings are expected to be offset by approximately $200 million in additional investments in our pipeline and strategic initiatives.

In the event of a final NCD that is not broader than the draft NCD, we anticipate taking further cost reduction measures, which are not reflected in our guidance to further align our cost base with our revenue base. Some of the savings from these further cost reduction measures would be shared with Eisai.

We expect our non-GAAP tax rate for 2022 to be between 15.5% and 16.5%, and we assume that we will utilize a portion of the remaining share repurchase authorization of $2.8 billion throughout the year, although this will depend on a variety of factors, including our business development activities.

Foreign exchange rates as of December 31st, 2021, are assumed to remain in effect for the year, net of hedging activities, we have not included any impact from potential acquisitions or large business development transactions as both are hard to predict or any impact of potential tax or health care reform.

I will now turn the call back over to Michel for his closing remarks.

Michel Vounatsos — Chief Executive Officer

Thank you, Mike. In summary, 2021 was an eventful year for Biogen. ADUHELM is now the first FDA-approved treatment targeting a defining pathology of Alzheimer’s disease. But as we all know, this is a complex disease, which will require continued investment in research over the years to come. ADUHELM is an important first step, and we remain focused on advancing our leading portfolio with the goal of further addressing the remaining unmet needs for patients. We hope that over time, we’ll be able to bring additional impactful treatment options, which will build on the scientific learnings from ADUHELM similar to the waves of innovation we have seen in oncology.

Before I conclude, let me touch on Biogen’s strong commitment to corporate responsibility, climate, health and equity are deeply interrelated challenges that demand bold action, and that’s why we are working to advance a healthier, more sustainable and equitable world. Through our signature initiative, Healthy Climate, Healthy Lives and other efforts, our goal is to create new ways of doing business that positively impact the way we live and the way we deliver for patients.

We are proud that our leadership actions and transparency in this area has been recognized recently by the Dow Jones Sustainability World Index, Corporate Knights Global 100 and JUST 100. Through this work, we aim to create shareholder value by meeting the needs of our patients, employees, the environment and the communities we serve.

In closing, I would like to reiterate that we are committed to engaging with CMS and other stakeholders with the hope of finding an appropriate path forward for the patients in excess of ADUHELM.

We will now open the call for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from the line of Robyn Karnauskas with Truist Securities.

Robyn Karnauskas — Truist Securities — Analyst

You know, given the recent deal that you did with Sangamo, you now — Samsung you now have more cash. Could you just talk a little bit about your thoughts on how you might want to utilize that cash? And is that a — was there a near-term acquisition or things that you’re looking at? Or is it just something that gives you optionality? Thanks.

Michel Vounatsos — Chief Executive Officer

Thanks for the question. As you know, we have a strong balance sheet, and we are continuously looking at how we can deliver long-term shareholder value. So we are actively working on some business development opportunities to enrich our pipeline, complement our portfolio in line with our strategy. And we will look at the deals based on their own merit, and we are working on that.

Michael McDonnell — Chief Financial Officer

And I’ll just add to that, Robyn. I mean, as we said in our prepared remarks, we’re pleased with the transaction. It represents a very attractive return relative to the capital that we invested. And the first priority will be to get the transaction closed, as you saw in the release around the deal. The proceeds will come in gradually over time. And so the first priority would be to get the transaction closed and we’ll continue to explore all of our options around BD deals of all sizes and we will continue our share buyback program as well. And the pipeline remains robust. We look at a lot of opportunities, and we have an extremely healthy balance sheet, as Michel said, and this will only make it healthier.

Michel Vounatsos — Chief Executive Officer

And Robyn, if I may, an important consideration is now that we can create more value with our biosimilars portfolio, more products, more geographies.

Operator

Okay. We’ll go ahead and take our next question from Michael Yee with Jefferies.

Michael Yee — Jefferies — Analyst

Thank you. Good morning. I guess my question is in regards to ADUHELM, what you are actively doing to try and change the NCD decision. And again, to reiterate, if it’s not changed dramatically, you guys would look to cut — further cut expenses. So can you talk about what that would entail? And under what scenario that might change, for example, if [Indecipherable] was positive. Maybe just outline the thoughts on the roadmap for ADUHELM in 2022. Thank you.

Michel Vounatsos — Chief Executive Officer

Thank you, Mike. I will get started and then my colleagues will come in. First of all, we take into account with a lot of caution, all the areas of focus that CMS has communicated. And based on those, we look at all the initiatives underway in order to scientifically fulfill the question they have being on the benefits risk, being on ARIA, being on disparity. And we have a lot going on.From international studies, EMBARK and ENVISION on top of the Phase 3. And now the time together with CMS to engage into a broad real-world evidence set of initiatives already underway like ICARE-AD, but we are contemplating even more that could be disease registry and more. So we are engaging with CMS constructively, demonstrating empathy in order to try to find the path forward that will be the best for patients. Alisha?

Alisha Alaimo — President, US Organization

Yes. Thank you, Michel, and hello, Michael. Thank you for the question. In regards to what we’ve been doing as an organization, during the past three weeks, we have met with CMS to share our perspective and answer any of the questions that they have. And you will see that we’ll be submitting our in-depth comments in the coming days, obviously, during this comment period.

In parallel, we’ve also been educating physicians and policymakers and advocates about what this would actually mean for patients. I think a lot of people, as you’ve seen, have been quite confused by the draft NCD and what a CED actually means to them. And as you’ve likely seen, many stakeholders have had similar concerns. So we’ve seen patients, patient advocates, HCPs, other manufacturers and industry groups like bio and pharma also sharing their perspectives quite publicly.

And there is one week remaining for the open comment period, and we are very much looking forward to this final decision in April, so the community has more clarity. And that brings me now to the comment period. We you may have seen over and I think as of today, it’s around 2,600, 2,700 public comments submitted to CMS and again, with still one week remaining. I think it’s important for everyone to remember and to keep in mind that CMS indicates on their website that the most helpful comments are ones the site published clinical evidence. And when you actually separate the comments out from the dementia specialist, you will see that many of them are against this draft NCD.

With prior comment periods, we have seen that in the final days, you tend to see more letters that are heavily researched and referenced. And as I’ve said before, you will see ours being posted in the coming days. So we do remain engaged actively with all stakeholders. We do remain engaged, obviously, still with CMS, and we are looking forward to the final decision in April.

Michael McDonnell — Chief Financial Officer

And so Mike, in your question on the cost measures, as we said in our prepared remarks, our guidance does assume that the final NCD would allow for meaningful patient access over time that does not translate into material revenue in 2022, but it would create a more open access than what we saw in the draft. Should that not be the case, we are doing scenario planning now.

On the cost measures, we mentioned our plan of a $500 million cost measure, of which we estimate we will get $350 million in 2022, which is assumed in our guidance, and we will invest about $200 million of that in a variety of different initiatives, including product launches. And in the event that we have a much more restrictive NCD, we will need to look at the elements of that. We certainly will be flexible in looking at allocating resources between ADUHELM and lecanemab.

We mentioned in our SG&A, it’s assumed that we have a $400 million ADUHELM support estimate, and we obviously would take a hard look at that as well other costs we could take out in order to offset any potential impacts on inventory, potential write-downs and excess capacity charges, which are not reflected in our guidance.

Michel Vounatsos — Chief Executive Officer

And Mike, as a closing comment, if I may. As a company, we are fully committed to deliver on this data being the international study being the real-world ones. And we believe that this extensive data generation will adequately address any open question raised by CMS.

Operator

And we’ll go ahead and take our next question from Matthew Harrison with Morgan Stanley.

Matthew Harrison — Morgan Stanley — Analyst

Great. Good morning. Thanks for taking the question. I was hoping you could just clarify on the TECFIDERA EU contribution to guidance and what we’re going to learn this year, which may either help us understand if that revenue is at risk this year? Or if you could continue to expect to see it and that could be potential upside to your current guidance? Thanks.

Michael McDonnell — Chief Financial Officer

Sure, Matthew. Thanks for the question. And there is a — we believe there is the potential for generic entry at some point in the first half of 2022. We do believe that we’re entitled to market protection, and we’re certainly going to do all we can to assert that. But we did reflect in our guidance, as we mentioned, in our opening remarks and in our press release that we do assume that there could be some generic entry somewhere in the first half of 2022.

Michel Vounatsos — Chief Executive Officer

So this is assumption-driven at the same time for tech, at the same time, as already communicated, we are launching VUMERITY in 20 markets within the EU.

Operator

And we’ll go ahead and take our next question from Umer Raffat with Evercore ISI.

Umer Raffat — Evercore ISI — Analyst

Hi, guys. Thanks for taking my question. I wanted to focus on BAN2401 for a second and really just two questions there. One, can you help us understand the magnitude of missed doses in the Phase 3? Because, I recall you increased the sample size by 200 patients and I wonder if that percentage increase versus the original sample size reflects the amount of missed doses?

And secondly, the primary analysis, is that ITT? Or will that screen out the rapid progressors or certain subsets of patients based on some of the learnings from ADUHELM? Thank you very much.

Michel Vounatsos — Chief Executive Officer

Priya?

Priya Singhal — Head of Global Safety & Regulatory Sciences and interim Head of Research & Development

Thank you for the question. So just stepping back, I just want to reiterate that Clarity AD will read out in Q3 this year, and we remain very excited about that outcome. I cannot really comment on the details of the statistical analysis plan. But what I can tell you is that any learnings that can be incorporated have been incorporated and that the primary endpoint remains the CDR Sum of Boxes. So we look forward to the readout. Thank you.

Operator

And we’ll go ahead and take our next question from Marc Goodman with SVB Leerink.

Marc Goodman — SVB Leerink — Analyst

Yes. Good morning. So look, there’s two key events, right? We have the CMS decision that we’re waiting on. And then obviously, we have the lecanemab data in the third quarter. So just kind of wondering your thought process of if the first one goes disappointing, do you make the changes? Or are you waiting for the lecanemab data because we’re kind of wondering whether you’re going to break down the Alzheimer’s infrastructure before you get that data?

And how much business development is being impacted by those two decisions? I mean are you looking at these BD opportunities right now regardless of what happens with those events? Thanks.

Michel Vounatsos — Chief Executive Officer

Thanks for the very fair question. As I communicated, we will remain as a team, agile and flexible. And obviously, we will do everything we can to preserve our operating results, while delivering on the strategy. We do believe in leca, but we will take some aggressive steps should the NCD remain on the current form.

Michael McDonnell — Chief Financial Officer

And I think, Marc, I would just add that the — how much of our infrastructure we would allocate to lecanemab versus not, etc, that really depends on what the final NCD says. It’s across the entire class, and that would really depend on the specifics of how the final NCD reads. I would say on BD, we will continue our BD efforts regardless. Those are ongoing, and they’re always ongoing.

Operator

And we’ll go ahead and take our next question from Salveen Richter with Goldman Sachs.

Salveen Richter — Goldman Sachs — Analyst

Good morning. Thanks for taking my question. In light of the recent opt-in for the Roche compound, does this signal a greater structural move into oncology? And are there any other areas you’re looking at as you pursue BD?

Michel Vounatsos — Chief Executive Officer

No. I mean it’s a continuation of the very good partnership that we have with Genentech since rituximab, and we have benefited from a remarkable cash flow contribution that we all appreciate. And even now, even if they are biosimilars. So it’s a continuation, it’s not a shift of strategy. I communicated the four pillars of growth, and we remain focused on those. And we believe that we are set for long-term shareholder value generation by sticking — by staying the course and delivering on those.

Operator

And we’ll go ahead and take our next question from Cory Kasimov with JP Morgan.

Cory Kasimov — JP Morgan — Analyst

Hey, good morning guys. Thanks for taking the question. I wanted to follow up on the Phase 3 lecanemab study and can you comment on the enrolled patient population in terms of adequate representation for underrepresented communities that may address the CMS concerns you spoke to?

And just with regards to Mike’s comment you just made on NCD and waiting for this data, wouldn’t it be your expectation that a final NCD could be changed if we have robust positive Phase 3 results from other Alzheimer’s programs later on in the year? Thank you.

Michel Vounatsos — Chief Executive Officer

Priya?

Priya Singhal — Head of Global Safety & Regulatory Sciences and interim Head of Research & Development

Yes. Thank you for the question. I think that Eisai will comment on the underrepresented population percentage, but it is actually very robust, and we are very encouraged by the efforts made to include this population in the Clarity AD. With regards to the outcome of the NCD and how it might impact lecanemab, I think that, that remains to be seen currently. It is a class — the NCD is addressing the entire class, but we believe that there is hope at the end of the road here. So we look forward to seeing the final outcome in April. Thank you.

Michel Vounatsos — Chief Executive Officer

So I think that we all have to do a better job, including diverse population, unfortunately affected with a high level of incidence for the disease in interventional studies and real-world studies. And this is what we are doing. And I think — I hope that this will be well received by CMS. And we did communicate that for the ENVISION study, we aim to reach from 16% to 18% of diverse population, the same in real world with ICARE-AD. So moving forward, we’ll gather much more data and the same for the other real world evidence opportunities that we are sharing with CMS.

Operator

And we’ll go ahead and take our next question from Jay Olson with Oppenheimer.

Jay Olson — Oppenheimer — Analyst

Hey, thanks for the update and for taking the question. Since self-administered subcu formulation of ADUHELM could fall under the purview of Medicare Part D and therefore, lie outside the scope of a potential CED if it’s finalized, could you comment on where Biogen stands with regard to the development of subcu ADUHELM? I think you did a bioequivalent study a few years ago. So is subcu something that could be a relatively near-term option?

Michel Vounatsos — Chief Executive Officer

So we will comment certainly on the life cycle management opportunity. Priya will say a few words. But I just want to outline and come back to the first area of concern communicated in the draft NCD, which is basically benefit-risk and questioning the hypothesis and the class in terms of mode of action and positive impact on the patients. And this obviously is independent from any formulation. Priya?

Priya Singhal — Head of Global Safety & Regulatory Sciences and interim Head of Research & Development

Thank you for the question, and thanks, Michel, for those comments. We will definitely be building on our prior learnings in ADUHELM subcutaneous formulation development, and we are currently engaging with regulators on having a robust plan forward for this development. So that is ongoing. Thank you.

Operator

And we will take our next question from Geoff Meacham with Bank of America.

Jason Zemansky — Bank of America Merrill Lynch — Analyst

Good morning, everyone. This is Jason on for Geoff. Thanks so much for taking our questions and the color. I wanted to connect the dots a little bit on your earlier comments about capital allocation. Specifically, what are the priorities here? And what is going to be the deciding factor? Is it candidly going to be the final NCD decision in terms of how things are meted out? Or are activities ongoing? Thank you.

Michael McDonnell — Chief Financial Officer

Yes, Jason, thanks for the question. It’s Mike speaking. And just reiterating a bit of what we said before. We are constantly looking at options around BD deals of all sizes, different opportunities, early stage, late stage across — it runs the gamut, primarily focused on neuroscience, which is our focus. And we will continue to do that, and we will continue to invest in our pipeline, and that is regardless of the outcome on the NCD and it’s regardless of the fact that we have now incremental cash if we get the — once the Samsung transaction closes.

So I think we have a healthy balance sheet. That’s unchanged $4.7 billion of cash and marketable securities at the end of the year, a modest amount of net debt less than one turn, and we have a $1 billion revolver that’s undrawn. So we will continue to actively pursue BD. That strategy is unchanged, and I don’t see a significant shift in strategy in terms of NCD outcome or Samsung transaction or anything else. We will continue to explore all of our options around BD actively, and we are doing that.

Operator

And we will take our next question from Brian Abrahams with RBC Capital Markets.

Brian Abrahams — RBC Capital Markets — Analyst

Hey, guys. Thanks so much for taking my question. On lecanemab, just a couple of quick follow-ups on that. Just can you give us a sense of any COVID impact to data collection in that study? Are your plans for accelerated filing for accelerated approval still intact in light of the NCD? And any modifications that you might need to make to infrastructure upon success to accommodate for the more frequent dosing versus ADUHELM? Thanks.

Michel Vounatsos — Chief Executive Officer

Priya?

Priya Singhal — Head of Global Safety & Regulatory Sciences and interim Head of Research & Development

Thank you for the question. So I can say that lecanemab is on track to readout. As previously communicated, this will be in Q3 of 2022. So at this point, we don’t expect any changes to that along with Eisai. So that’s number one.

And second, I think that there are no real other changes to communicate on the outcomes or on the measures that have been included in the study. So is there another question that I’m missing here? Okay.

Brian Abrahams — RBC Capital Markets — Analyst

Patient follow-ups due to the pandemic. I know it’s a global study with a lot of sites.

Priya Singhal — Head of Global Safety & Regulatory Sciences and interim Head of Research & Development

Yes. And I think that it’s been managed really well. So I don’t expect any delays in terms of the readouts. And I think your second question was about accelerated approval. As you know, they have breakthrough — we have breakthrough designation on this product. And there will be a filing. We are intent on filing. The filing — many components have already been filed. And once the filing is complete, that will be communicated.

I think that the most important thing to remember here is that while it might go in as an accelerated filing, the confirmatory study for lecanemab is the Clarity AD, which will read out this year. So I do expect the Clarity AD confirmatory study to read out during the review period for this program. I hope that clarifies.

Michel Vounatsos — Chief Executive Officer

I just want to outline once more that we are working very closely with Eisai at finding synergies in terms of capabilities of both organizations and how we can optimize the value for both compounds.

Michael Hencke — Head of Investor Relations

I think we have time for one more question.

Operator

And we will take our last question from the Salim Syed from Mizuho.

Salim Syed — Mizuho Securities — Analyst

Great. Thanks so much for the question, guys. Michel, I wanted to address a bit of an elephant in the room. And I asked this question constructively, and I hope you can appreciate that. So obviously, people talk about misalignment between management and the Board at Biogen, and business development is obviously a key focus for you guys, and I appreciate all the commentary that you guys are looking at deals of all sizes, early stage, late stage. But in your view, is there a misalignment here that would make meaningful BD something difficult in 2022? Or has something changed that we can now expect that to occur? Thanks so much.

Michel Vounatsos — Chief Executive Officer

Thank you, Salim, for giving me the opportunity to answer this question. I will invite you to look at all the BD deals that were performed during the past five years versus the previous five years. And I think this will give you an idea about the alignment, but it doesn’t mean that it’s an easy road. It means that we have challenges management, we really need to have open discussion between the Board and management to secure that we are in the best position to allocate capital, but we were able and we continue to be able to work together in order to move forward the organization in the best strategic position the way we believe we are today compared with the period before.

Look at the four pillars of growth, look what we are doing with biosimilars, we are enriching the cash flow generation opportunity. And even if we are in the unfortunate situation of losing the RITUXAN [Indecipherable] TECFIDERA and a delay launch by almost a year eventually, if NCD is positive for ADUHELM, we are still in the multibillion cash flow generation opportunity. We work together very closely.

So thank you all for this good engagement, and I would like really to reiterate that we are committed to engaging with CMS and all the other stakeholders with the hope of finding an appropriate path for immediate patient access to ADUHELM. Thank you all for your attention today.

Operator

[Operator Closing Remarks]