Biogen : Reports Q4 2021 Earnings

BIOGEN REPORTS FOURTH QUARTER AND FULL YEAR 2021 RESULTS

Revenue: Fourth quarter $2,734 million; Full Year $10,982 million

GAAP diluted EPS: Fourth quarter $2.50; Full Year $10.40

Non-GAAP diluted EPS: Fourth quarter $3.39; Full Year $19.22

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Cambridge, Mass., February 3, 2022 -- Biogen Inc. (Nasdaq: BIIB) today reported fourth quarter and full year 2021 financial results.

"Biogen continued to execute well in the fourth quarter despite the challenges we have faced," said Michel Vounatsos, Biogen's Chief Executive Officer. "We have introduced the first FDA approved treatment for Alzheimer's disease in nearly 20 years, and we are engaging with the Centers for Medicare and Medicaid Services with the hope of finding a path for immediate patient access."

Fourth Quarter 2021 Operating Results

• Fourth quarter total revenue of $2,734 million decreased 4% versus the prior year at both actual currency and constant currency*.
  o Multiple sclerosis (MS) revenue, including royalties on sales of OCREVUS®, of $1,789 million decreased 1% versus the prior year at both actual currency and constant currency.
  o SPINRAZA® revenue of $441 million decreased 12% versus the prior year at actual currency and 10% at constant currency.
  o ADUHELM® revenue was $1 million.
  o Biosimilars revenue of $221 million increased 12% versus the prior year at actual currency and 13% at constant currency.
• Fourth quarter GAAP net income and diluted earnings per share (EPS) attributable to Biogen Inc. were $368 million and $2.50, respectively.

• Fourth quarter Non-GAAP net income and diluted EPS attributable to Biogen Inc. were $500 million and $3.39, respectively.

A reconciliation of GAAP to Non-GAAP financial measures can be found in Table 4 at the end of this news release.

• Percentage changes in revenue growth at constant currency are presented excluding the impact of changes in foreign currency exchange rates and hedging gains or losses. The current period's foreign currency revenue values are converted into U.S. dollars using the average exchange rates from the prior period.

• Fourth quarter GAAP and Non-GAAP cost of sales was $660 million as compared to $491 million in the fourth quarter of 2020.
  o Fourth quarter 2021 GAAP and Non-GAAP cost of sales includes approximately $164 million in charges associated with inventory and purchase commitments in excess of forecasted demand related to ADUHELM. Eisai Co., Ltd.'s (Eisai's) share of these charges (approximately 45%) is reflected in collaboration profit sharing.
• Fourth quarter GAAP and Non-GAAP R&D expense was $700 million as compared to $1,726 million in the fourth quarter of 2020.
  o Fourth quarter 2020 GAAP and Non-GAAP R&D expense includes a $1,084 million charge related to the collaboration with Sage Therapeutics Inc. (Sage).
  o Fourth quarter 2021 GAAP and Non-GAAP R&D expense includes a $60 million opt-in payment to Ionis Pharmaceuticals, Inc. (Ionis) to obtain exclusive rights to develop and commercialize BIIB115, a preclinical investigational antisense oligonucleotide (ASO) for the treatment of spinal muscular atrophy (SMA), and approximately $50 million related to the exercise of our option to participate in a profit-sharing arrangement with Genentech, Inc. for the development and commercialization of mosunetuzumab, a late-stage bispecific antibody in development for B-cellnon-Hodgkin's lymphoma and other therapeutic areas.
• Fourth quarter GAAP SG&A expense was $788 million as compared to $806 million in the fourth quarter of 2020. Fourth quarter Non-GAAP SG&A expense was $785 million as compared to $803 million in the fourth quarter of 2020.
  o Beginning in the second quarter of 2021, upon FDA approval, the reimbursement from Eisai for its share of U.S. ADUHELM SG&A expense is reflected in collaboration profit sharing rather than SG&A.
  o Fourth quarter 2021 GAAP and Non-GAAP SG&A expense includes approximately $155 million related to ADUHELM commercialization. Eisai's reimbursement of U.S. ADUHELM SG&A expense of approximately $45 million is reflected in collaboration profit sharing.
• Fourth quarter GAAP and Non-GAAP amortization and impairment of acquired intangible assets was $68 million and $8 million, respectively.
• Fourth quarter GAAP and Non-GAAP collaboration profit sharing reduced our net operating expense by $67 million, which includes reimbursement of approximately $140 million from Eisai related to the commercialization of ADUHELM in the U.S. partially offset by $75 million of net profit sharing expense related to our collaboration with Samsung Bioepis.

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• Fourth quarter GAAP other expense was $182 million, primarily driven by net unrealized losses on our strategic equity investments of $116 million. Fourth quarter Non-GAAP other expense was $67 million, primarily driven by interest expense.
• Fourth quarter effective GAAP and Non-GAAP tax rates were 109.5% and 17.2%, respectively. The fourth quarter 2021 effective GAAP tax rate was impacted by a deferred tax valuation allowance expense of approximately $390 million on Neurimmune SubOne AG's (Neurimmune) tax basis in ADUHELM. An equal and offsetting amount was attributed to noncontrolling interest, resulting in zero net impact to net income attributable to Biogen Inc.
• Fourth quarter 2021 GAAP loss attributable to noncontrolling interest was $389 million, which includes the recognition of a deferred tax valuation allowance expense related to
  Neurimmune's tax basis in ADUHELM of approximately $390 million. Fourth quarter 2021
  Non-GAAP income attributable to noncontrolling interest was $7 million.

Full Year 2021 Operating Results

• Full year total revenue of $10,982 million decreased 18% versus the prior year at actual currency and 19% at constant currency*.
  o Multiple sclerosis (MS) revenue, including royalties on sales of OCREVUS, of $7,088 million decreased 18% versus the prior year at actual currency and 19% at constant currency.
  o SPINRAZA revenue of $1,905 million decreased 7% versus the prior year at actual currency and 9% at constant currency.
  o ADUHELM revenue was $3 million.
  o Biosimilars revenue of $831 million increased 4% versus the prior year at actual currency and 1% at constant currency.
• Full year GAAP net income and diluted EPS attributable to Biogen Inc. were $1,556 million and $10.40, respectively.
• Full year Non-GAAP net income and diluted EPS attributable to Biogen Inc. were $2,875 million and $19.22, respectively.

A reconciliation of GAAP to Non-GAAP financial measures can be found in Table 4 at the end of this news release.

• Percentage changes in revenue growth at constant currency are presented excluding the impact of changes in foreign currency exchange rates and hedging gains or losses. The current period's foreign currency revenue values are converted into U.S. dollars using the average exchange rates from the prior period.

• Full year GAAP and Non-GAAP cost of sales was $2,110 million as compared to $1,805 million for the full year 2020.
• Full year GAAP and Non-GAAP R&D expense was $2,501 million as compared to $3,991 million for the full year 2020.

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1. Beginning in 2021, material upfront payments and premiums paid on the acquisition of common stock associated with significant collaboration and licensing arrangements along with the related transaction costs incurred are no longer excluded from Non-GAAP R&D and SG&A expenses. The 2020 Non-GAAP financial results have been updated to reflect payments totaling $1,894 million related to collaborations with Sangamo Therapeutics, Inc., Denali Therapeutics Inc., and Sage.

1. Full year 2020 GAAP and Non-GAAP R&D expense also includes a total of $68 million in upfront payments related to collaboration agreements with Scribe Therapeutics Inc., Atalanta Therapeutics, and ViGeneron GmbH.

• 1. Full year 2021 GAAP and Non-GAAP R&D expense includes a total of $285 million in payments related to our collaborations with InnoCare Pharma Limited, Ionis, Bio- Thera Solutions, Ltd., Genentech, Capsigen Inc., and Ginkgo Bioworks.
• Full year GAAP SG&A expense was $2,674 million as compared to $2,505 million for the full year 2020. Full year Non-GAAP SG&A expense was $2,666 million as compared to $2,502 million for the full year 2020.
• 1. Full year 2021 GAAP and Non-GAAP SG&A expense includes approximately $480 million related to ADUHELM. Eisai's reimbursement of U.S. ADUHELM SG&A expense of approximately $135 million is reflected in collaboration profit sharing.
• Full year GAAP and Non-GAAP amortization and impairment of acquired intangible assets was $881 million and $15 million, respectively.
• Full year GAAP and Non-GAAP collaboration profit sharing was a net expense of $7 million, which includes $285 million of net profit sharing expense related to our collaboration with Samsung Bioepis partially offset by reimbursement of approximately $275 million from Eisai related to the commercialization of ADUHELM in the U.S.
• Full year 2021 GAAP other expense was $1,096 million, primarily driven by net unrealized losses on our strategic equity investments of $821 million. Non-GAAP other expense was $265 million, primarily driven by interest expense.
• Full year effective GAAP and Non-GAAP tax rates were 3.0% and 15.7%, respectively. Full year 2021 GAAP effective tax rate included a $100 million net deferred tax benefit associated with the accelerated approval of ADUHELM by the FDA. This deferred tax benefit has an equal and offsetting amount assigned to noncontrolling interest, resulting in zero net impact to net income attributable to Biogen Inc. This net tax benefit included the initial recognition of a $490 million deferred tax benefit in Q2 2021, offset by a $390 million expense related to a valuation allowance established in Q4 2021.
• Full year 2021 GAAP and Non-GAAP income attributable to noncontrolling interest was $172 million and $79 million, respectively, which includes a milestone payment of $100 million to Neurimmune related to the approval of ADUHELM in the U.S. recognized in Q2 2021. GAAP income attributable to noncontrolling interest also includes a net deferred tax benefit related to Neurimmune's tax basis in ADUHELM of approximately $100 million.

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Financial Position

• As of December 31, 2021, Biogen had cash, cash equivalents, and marketable securities totaling $4,695 million and $7,273 million in total debt. This resulted in net debt of $2,578 million.
• Throughout 2021 Biogen repurchased approximately 6.0 million shares of the Company's common stock for a total value of $1,800 million. No shares were repurchased in the fourth quarter of 2021. As of December 31, 2021, there was $2,800 million remaining under the share repurchase program authorized in October 2020.
• For the fourth quarter of 2021 the Company's weighted average diluted shares were 147 million. For 2021 the Company's full year weighted average diluted shares were 150 million.
• Fourth quarter 2021 cash from operations was $838 million. Capital expenditures were $52 million, and free cash flow, defined as cash flow from operations less capital expenditures, was $787 million.
• Full year 2021 cash flow from operations was $3,640 million. Capital expenditures were $258 million, and free cash flow, defined as net cash flow from operations less capital expenditures, was $3,382 million.

Full Year 2022 Financial Guidance

Biogen expects full year 2022 revenue to be between $9.7 billion and $10.0 billion.

This financial guidance assumes minimal ADUHELM revenue in 2022. This guidance also assumes continued declines in RITUXAN revenue due to biosimilar competition, as well as continued erosion of TECFIDERA revenue in the U.S. due to generic entry. Further, this guidance assumes the potential entry of TECFIDERA generics in the E.U. as early as the first half of 2022 as the outcome of the ongoing challenges to TECFIDERA market protection is difficult to predict. Biogen expects the decreased revenue from these high margin products to reduce its gross margin percentage compared to 2021.

Biogen expects full year 2022 Non-GAAP diluted EPS to be between $14.25 and $16.00.

Our guidance assumptions are highly dependent on the final National Coverage Determination (NCD) for monoclonal antibodies directed against amyloid for the treatment of Alzheimer's disease, which is currently uncertain. If the final NCD is not broader than the proposed NCD, our anticipated results and guidance may be impacted.

This guidance assumes we will not have any write-offs of ADUHELM inventory in 2022, which is valued at approximately $225 million as of December 31, 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.

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