Biogen Forward

2016 Annual Report

Michel Vounatsos

Dear Fellow Shareholders

I am honored and humbled to write to you as the new CEO of Biogen, a company that for nearly four decades has maintained an unwavering commitment to transforming the lives of patients and pursuing some of the most difficult challenges in medicine. It is a remarkable time to lead this company as we move into the next phase of our evolution and expand our focus on developing breakthrough treatments with a priority in neurology and neurodegeneration.

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Michel Vounatsos

Chief Executive Officer

Financial Highlights


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For Complete 2016 Financials

download report and 10-k

Non-GAAP diluted Earnings Per Share (EPS) and free cash flow are non-GAAP financial measures. A reconciliation of GAAP to non-GAAP diluted EPS and free cash flow amounts is set forth on pages 15 and 16 of this annual report.

Patient Perspectives


Multiple sclerosis patient

“I realize that my slow walk might be the best sprint of my life. I just have to keep my own pace and everything will happen in its own time.”


Multiple sclerosis patient

“As I learned to manage my health care and my condition, I learned that it’s not only being transparent about what’s going on in my life and my physical responses, but your emotional responses when you’re living with MS are just as important.”


Spinal muscular atrophy patients

“We all have challenges and if I knew what other people’s challenges were, I’d probably keep my own.”

Mother of Landon and Ruby

Executive Committee

(Pictured from left-to-right)

Executive Committee

Paul McKenzie, Ph.D.

Executive Vice President
Pharmaceutical Operations & Technology

Alfred W. Sandrock, Jr., M.D., Ph.D.

Executive Vice President and Chief Medical Officer

Susan H. Alexander

Executive Vice President, Chief Legal,
Corporate Services and Secretary

Michel Vounatsos

Chief Executive Officer

Kenneth DiPietro

Executive Vice President,
Human Resources

Michael Ehlers, M.D., Ph.D.

Executive Vice President,
Research & Development

Paul J. Clancy

Executive Vice President,
Finance and Chief Financial Officer

Executive Committee

Board of Directors

Stelios Papadopoulos, Ph.D.

Chairman, Biogen
Chairman, Exelixis, Inc. and Regulus Therapeutics, Inc.

Michel Vounatsos

Chief Executive Officer, Biogen

Alexander J. Denner, Ph.D.

Founding Partner, Sarissa Capital

Caroline D. Dorsa

Retired Executive Vice President and Chief Financial Officer, Public Service Enterprise Group, Incorporated

Nancy L. Leaming

Retired Chief Executive Officer and President, Tufts Health Plan

Richard C. Mulligan, Ph.D.

Portfolio Manager, Icahn Capital LP and Mallinckrodt Professor of Genetics, Emeritus, Harvard Medical School

Robert W. Pangia

Partner, Ivy Capital Partners, LLC

Brian S. Posner

President, Point Rider Group LLC and Private Investor

Eric K. Rowinsky, M.D.

President and Executive Chairman,
RGenix, Inc..

The Honorable Lynn Schenk

Attorney, Former Chief of Staff to the Governor of California and Former U.S. Congresswoman

Stephen A. Sherwin, M.D.

Clinical Professor of Medicine, University of California, San Francisco, and advisor to life sciences companies

© 2017 Biogen

Dear Fellow Shareholders

Michel Vounatsos

Michel Vounatsos

Chief Executive Officer

I am honored and humbled to write to you as the new CEO of Biogen, a company that for nearly four decades has maintained an unwavering commitment to transforming the lives of patients and pursuing some of the most difficult challenges in medicine. It is a remarkable time to lead this company as we move into the next phase of our evolution and expand our focus on developing breakthrough treatments with a priority in neurology and neurodegeneration.

Biogen’s heritage is rooted in an ability to translate innovative science into real patient benefits. This has been central to our mission and vital to our growth. Under my predecessor, George Scangos, Biogen had the most productive years in its history, both in its growth and the introduction of new medicines. I am fortunate to have inherited a company with a strong and healthy commercial business and a rich foundation in science; one that is well-positioned to pursue a promising pipeline with truly novel programs.

Today we are working to reinforce the core of our business, optimizing the value of our portfolio and increasing our overall commitment to long-term value creation for our shareholders. As a company we need to be increasingly nimble and agile, working to meet the needs of our worldwide customer base and dedicated to compliance and integrity. We need to be an organization that attracts the very best people and develops the remarkable talent that is the foundation and future of our company.

In 2016 we delivered strong performance, with $11.4 billion in full year total revenues, a six percent increase over 2015. During this period, full year GAAP diluted earnings per share (EPS) grew 10 percent as compared with 2015. Throughout 2016, we launched four new therapies, continued to be the leader in multiple sclerosis (MS), and saw strong uptake in our emerging biosimilars business.

But it was the approval of SPINRAZATM for the treatment of spinal muscular atrophy (SMA) that demonstrated the kind of breakthrough medicine we aspire to develop as we pursue truly transformative therapies in critical areas of unmet need. Through novel science, innovative trial design, and collaborative relationships with patient advocates and industry partners, we brought forth the first and only approved therapy to treat this rare motor neuron disease. And we did so with remarkable efficiency, moving from initial dosing in patients to US approval in only five years.

“Today we are working to reinforce the core of our business,
optimizing the value of our portfolio and increasing our overall commitment
to long-term value creation for our shareholders.”

The successful launch of SPINRAZA in the US and markets around the world is a key priority for us in 2017 as we work with the utmost urgency to deliver this therapy to the patients and families who so desperately need it.

As we continue to advance our neurology research, we will be assertive, deliberate, and disciplined in setting a path forward for the company. We demonstrated that mindset with the successful spin off of our hemophilia business. By putting that portion of the company in the hands of a dedicated management team, we believe the new company – Bioverativ – can deliver greater advancements for patients and returns for its shareholders. Earlier this year we also made the important decision to enter into a settlement and license agreement with Forward Pharma that we believe clarifies and strengthens the intellectual property for TECFIDERA®, the leading oral therapy for MS. The agreement brings greater certainty to our business and allows us to focus on our priorities.

We are working to improve commercial execution, enhance our geographic footprint, and continue to bolster our MS franchise. As CEO, I will work with our senior management to evaluate all aspects of our business to ensure that we are acting in the best interests of our shareholders.

We will focus on building our pipeline and are actively pursuing a mix of pre-clinical and early-stage compounds. There is little question that today we are a company at the forefront of research and development in neuroscience – and we remain committed to this critical area where there is so much unmet need, as we look to turn our leading science into novel therapies. Developing and expanding our neurology portfolio is core to our mission. This is an area where we believe we have both the world-class team and the development experience to lead.

Commercial Performance and Opportunities

Today, Biogen remains the global leader in all three segments of the MS market: oral, high-efficacy, and interferons. In 2016, we continued to increase the number of patients treated with a Biogen product even in the face of growing competition. At the end of 2016, 38 percent of all MS patients globally and 42 percent of all MS patients in our direct markets were treated with one of our medicines.

TECFIDERA was a major driver of our revenue growth in 2016, with total patient growth of nine percent globally. In addition, TYSABRI® further strengthened its position in the market. We believe this is due to an improved safety perception in the US and a shift away from platform therapies to high-efficacy and oral products. Moving forward, we expect our ongoing rollout of ZINBRYTA® in global markets to further strengthen our position in the high-efficacy segment. We are also looking at new approaches to commercial growth and strengthening our MS leadership, including an increased emphasis on life-cycle management opportunities.

As competition intensifies, we anticipate that price will be a key focus in the MS market. We are committed to working with payers to explore innovative value-based approaches to contracting, while generating real-world data on the value our products provide.

“2016 was a positive year for the company but also put a spotlight on areas
that demand more attention. I believe we can become a more efficient company, making
greater use of technology and digital insights to build our portfolio and work to create more
innovative and personalized customer engagements.”

I believe our most exciting commercial opportunity in 2017 is the launch of SPINRAZA for SMA. There is significant demand for SPINRAZA and we anticipate a gradual uptake throughout the year as treatment centers manage the complexities in administration and insurers develop coverage policies. Our goal is that no patient will forgo treatment because of financial limitations or insurance status. Navigating these dynamics will be our central focus over the next 12 months. We are also working to make SPINRAZA available to a broad global patient population, with regulatory applications pending in the EU, Japan, Australia, and Canada.

We are also very pleased with the launch of our biosimilars portfolio in Europe. We believe that this business – which is already profitable and includes the anti-TNFs BENEPALI® (an etanercept biosimilar referencing Enbrel®) and FLIXABI® (an infliximab biosimilar referencing Remicade®) – can be a key contributor to our business in the future. In some European markets, we are already the overall etanercept segment leader, a testament to the quality of the product and the value it brings to patients.

As we go forward, we will closely evaluate opportunities to optimize our biosimilars joint venture with Samsung Bioepis, which has a broad pipeline including biosimilars referencing top-selling therapies such as Lantus®, Herceptin®, and Avastin®. Our biosimilar referencing Humira® has been filed with European regulators and in 2017 we will evaluate additional opportunities, including our option to acquire a 49.9 percent equity stake in the joint venture. We have seen strong demand for these high-quality biosimilar offerings and the potential for further growth and we will continue our work to increase access to these therapeutic options for patients, payers, and providers throughout Europe.

2016 was a positive year for the company but also put a spotlight on areas that demand more attention. I believe we can become a more efficient company, making greater use of technology and digital insights to build our portfolio and work to create more innovative and personalized customer engagements. To continue to expand our MS franchise, I believe we need to evolve our customer-centered engagement strategy, operating in new channels and leveraging deeper analytics. Biogen’s advantage is its leading therapeutic portfolio and its science focus and we must build on those strengths with a growth and winning mindset


Our Pipeline and Focus on Transforming Neurology

SPINRAZA is an example of the kind of transformative advance we look to pursue in neurology. And we believe we are at the forefront of a similar transformation in the treatment of Alzheimer’s disease. Alzheimer’s disease is unquestionably one of today’s leading epidemiologic priorities; to better understand the puzzle of this neurodegenerative disease and find treatments will be a tremendous public health breakthrough, and we intend to be among the first companies to do so.

Based on the recent outcomes of our own research – as well as certain findings from others – we continue to believe that beta amyloid represents a valid and important therapeutic target. Early data suggest that treatment with aducanumab, our most advanced Alzheimer’s candidate, may have a clinically meaningful effect on cognitive decline. We have committed significant resources to two large-scale Phase 3 trials to confirm these benefits and the enrollment in these studies is a top priority. Our partner Eisai has also commenced a Phase 3 trial for elenbecestat, a BACE inhibitor, which targets amyloid through a different mechanism than aducanumab.

We believe that the underpinnings of Alzheimer’s pathophysiology may be multifaceted, perhaps requiring a combination or sequence of therapies, and we continue to investigate other therapeutic approaches. These include an anti-tau antibody developed using the same reverse-translational medicine program that was used to create aducanumab, and an antisense oligonucleotide being developed with Ionis Pharmaceuticals, also targeting tau.

We also remain fully committed to new therapeutic approaches for transforming the treatment of MS and unlocking a pathway to neuro-repair through remyelination. Although we reported in 2016 that a Phase 2 study of our remyelination candidate opicinumab did not meet its primary endpoints, a post-hoc analysis of that trial demonstrated a benefit in a study subgroup. We believe there is a path forward and are planning to initiate a Phase 2b study based on this analysis in 2017.

Beyond our novel pipeline compounds, we are exploring the potential of natalizumab (TYSABRI) to address cognitive and functional deficits caused by acute ischemic stroke, one of the leading causes of death and neurological disability worldwide.

We also have several exciting early-stage assets to treat other neurological diseases with enormous unmet medical need. In Parkinson’s disease and amyotrophic lateral sclerosis (ALS) – two debilitating diseases for which few if any effective treatments exist – we hope to demonstrate clinical effect in Phase 1 trials that are currently underway,

with an eye toward advancing those development programs in the coming years.

Finally, as we look to advance our ability to transform outcomes for chronic diseases, we have forged a multi-year alliance with one of the leading institutions in the field of gene therapy – the University of Pennsylvania – to create a therapeutic platform for a broad range of diseases. Working with pioneers in the field, we will explore next-generation delivery in various tissues such as the retina, skeletal muscle, and central nervous system to determine the potential for extending gene therapy into a broader spectrum of complex diseases, including neurological conditions with SMA as a priority.

The strength of our current pipeline is one of the reasons why I chose to join Biogen. It has the vast potential to help underserved patients while driving future shareholder value. But good is never good enough. In the coming year, we will seek opportunities to augment the pipeline through strategic acquisitions and research collaborations as we work to become the partner of choice in the study and creation of new therapies for previously untreatable neurologic conditions.

Honoring our Commitments to Patients and Society

As we continue to evolve as an organization, we remain fully committed to excellence in all areas of our performance, including corporate citizenship. Thanks to the dedication of our employees and the strength of our programs in such areas as diversity, inclusion, and environmental sustainability, Biogen continues to garner the respect and admiration of its peers and the communities in which it operates.

Recognizing a societal obligation to inspire and train the next generation of innovators, Biogen’s pioneering Community Labs continue to lead the way in STEM education. During 2016, nearly 5,000 young students trained in our laboratories in Cambridge, Massachusetts and Research Triangle Park, North Carolina, gaining invaluable hands-on experience and exposure to the breadth of career opportunities in the life sciences. Since Biogen’s first Community Lab opened its doors in 2002, more than 40,000 students have learned through scientific experimentation in our facilities and it has become a model for the industry.

The Biogen Foundation continues its important work to train the next generation of scientists and educators by partnering with organizations that provide key learning opportunities for underprivileged students, develop teacher training programs, and help increase the number of under-represented minorities in the health profession and biomedical sciences.

Our patient assistance programs and services also remain a critical resource for our patients. We continued this commitment with the launch of a substantial Expanded Access Program for SPINRAZA in markets around the world and the rollout of a comprehensive patient program in the US called SMA 360oTM. AboveMS®, our support program for MS patients, served thousands last year and Biogen continues to offer

co-pay assistance – and in some instances free drugs – to ensure that all those who need our medicines can get them.

As a carbon neutral company, we continue to work proactively to improve the quality of our environment and measure the impact of our footprint. We are proud to remain a leader in key measures including the Dow Jones Sustainability Index. By thoughtfully deploying our resources – whether through our capital, our medicines, or human talent – we will succeed not only as a company but as a valued and valuable contributor to society as a whole.

Looking Ahead

Biogen is at the center of a dynamic and growing industry. As scientists and drug

developers, we are on the precipice of unlocking the mysteries of many diseases of the brain, which means life-changing medicines for millions of people are within view. As members of the vibrant biopharmaceuticals industry, we are working constantly to define the value of our therapies to patients, payers, and health care systems. And as global citizens, we are facing potential changes that may impact the ways in which we do business.

Today, we are in a position to attract, partner with, and acquire assets and opportunities that complement our core business as we prioritize our work in neuroscience. This is where public health is mandating that the industry lead and we intend to answer that call. An evolving payer landscape and possible changes to the regulatory environment are likely to impact our industry, but we will approach these variables with the same precision, diligence, and determination that we apply to our pursuit of new medicines.

In the year ahead, we will look to take calculated risks as we add to our pipeline and expand our global footprint. We will evolve our commercial model and bolster our business development capabilities to execute on new opportunities. As we approach Biogen’s 40th anniversary, I am energized by the opportunity to translate our mission into a compelling vision of growth and innovation and to work with our employees around the world to define the next 40 years for our company, our patients, and society.

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