Good morning. My name is Jack and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Fourth Quarter Full Year 2018 Financial Results and Business Update Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer you.
Rejoin the queue. Thank you. I would now like to turn the conference over to Mr. Matt Calistri, Vice President, Investor Relations. You may begin your conference.
Thank you, and welcome to Biogen's 4th quarter 2018 earnings conference call. Before we begin, I encourage everyone to go to the Investors section of Biogen dot com, to find the earnings release and related financial tables, including a reconciliation of the GAAP to non GAAP financial measures that we will discuss today. Our GAAP financials are provided in Tables 12. Table 3 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. Encourage you to consult the risk factors discussed in our SEC filings for additional detail. On today's call, I am joined by our Chief Executive Officer, Michelle Panatos, Doctor.
Michael Ehlers, EVP of Research And Development, and our CFO, Jeff Capello. We will also be joined for this Q and A portion of the call, by our Chief Medical Officer, Doctor. Al Sanrock. Before I conclude, I would also like to remind everyone that we now post releases related to earnings calls and investor events, the Investors section of Biogen's website, www.biogen.com and issue a statement on Twitter when they become available. We do this instead of publishing earnings releases, and any releases related to investor events and earnings calls via newswire services.
Our Twitter handle is at Biogen. Now, I will turn the call over to Michelle.
Good morning, everyone, and thank you for joining us. 1st, let me start with some financial highlights. Biogen closed 20 with an all time high in quarterly revenues of $3,500,000,000, an increase of approximately 7% compared to the same period a year ago. Of $13,500,000,000 in revenues representing growth of 10% year over year. Full year 2018 GAAP earnings were $21.58 a share, an 81% increase versus full year 2017.
Full year 2018 non GAAP earnings were $26.20 a share, a 20% increase versus full year 2017. To execute on our strategy to solidify our long term leadership position in neuroscience. Now let me review the year. 1st, full year MS revenues including OCREVUS royalties were 9.1 $1,000,000,000 demonstrating resilience. The number of patients on our MS products globally remain relatively stable versus the prior year.
Importantly, we continue to see improving trends for our MS business in the US on a year over year basis. 2nd, SPINRAZA, which we pioneered in collaboration with Ionis as the first treatment for SMA generated full year global revenues of $1,700,000,000, nearly double the revenues we delivered in 2017. This blockbuster performance was driven by strong year over year revenue growth in the U. S. And even greater revenue growth outside of the U.
S. Over the past year, including the expanded program and clinical trials, we have more than doubled the number of patients on SPINRAZA to over 6600 patients. SPINRAZA is the standard of care in SMA with approval in over 40 countries and formal reimbursement in 30 countries. 3rd, we continue to expand and progress our neuroscience pipeline with strong momentum building depth in our core growth areas. We are leveraging the interconnectivity within neuroscience as we aim to create multiple franchises beyond MS SMA and Alzheimer's disease.
2018 was one of the most productive years we have had in research and development as we aim to further de risk our pipeline and prepare for multiple potential launches in the early 2020s. Starting with our core growth areas, we made significant progress in our MS pipeline, including raising investment in our R&D portfolio to develop potentially transformative new treatments, which Mike will discuss in more details. In Alzheimer's and dementia, we completed Phase III enrollment of aducanumab, We initiated a Phase II study of B92 in Alzheimer's disease, and we announced top line results of BAN2401 with our partner SI. In neuromuscular disorders, we made impressive progress building depth we acquired PIP-one hundred and ten, a muscle enhancement program from a live gen. We initiated a Phase I study of BIIP 78 targeting SINA North in ALS.
And we announced positive Phase 1 interim results for BIIP 67 in SOD1 ALS. In Movement disorders, we created strong momentum we initiated a phase 2 study of BiTE54 in Parkinson's disease, and we completed enrollment of our phase 2 study of B92 in PSP. In our emerging growth areas of acute neurology, neurocognitive disorders and pain. We did initiate 4 new studies. We expanded our pipeline with the addition of B-one hundred and four for cognitive impairments associated with schizophrenia and our option for TMS7 for acute ischemic stroke.
We are also advancing the program, the Phase III program for BIIB093 in large hemispheric infarction with a potential to generate peak revenues of over $1,000,000,000 with initial launches as early as 2022. Moving on to our biosimilars business, full year biosimilars revenues were $545,000,000, which represents 44% growth year over year. In the fourth quarter, we launched Imhaldi, our adalimumab biosimilar referencing Imira in several European markets. Imhaldi has generated $17,000,000 in revenue since its launch in mid October, making it our most successful first quarter launch of a biosimilar. Importantly, our cash generation remained very strong and continue to provide us with significant optionality and flexibility to allocate capital.
In 2018, we spent a total of approximately $1,800,000,000 through 6 development deals and the increase in our share of the Samsung BioAP's joint venture. We continue to diligently evaluate new opportunities for more potential business development and M And A. We also repurchased approximately 14,800,000 shares for $4,400,000,000. And we have about $2,000,000,000 remaining in our share repurchase program. In addition, we began 2019 with a new collaboration with Sky Hope Therapeutics with the aim of developing oral splicing modulator for multiple diseases, including MS and SMA.
We continue to be financially disciplined and we are focused on implementing a lean and simple operating model with a goal of continuous operational improvements. As we have demonstrated in the past, we are committed to maximizing returns for our shoulders while continuing to bring innovative therapies to patients, something that demands a thoughtful approach towards all our investments over both the short and the long term. In summary, 2018 was clearly a very positive successful year for Biogen as we executed on our strategy and continued to deliver noticeable progress. Our core MS business demonstrated resilience. SPINRAZA continued to grow in the U.
S. And even more outside of the U. S. And we remain committed to our goal of being the long term standout of care in SMA. We expanded and progressed our pipeline by adding 6 new clinical programs and completing enrollment of 3 late stage studies.
We grew our biosimilar business and launched Imhaladi in Europe. We are actively implementing a leaner and simpler operating model and we are generated ample cash as we focus on strategically allocating capital to develop and build debt in our neuroscience portfolio, again, with a goal of maximizing shareholder returns and bringing innovative therapies to patients. Overall, we continue to make progress towards our goal of building a multi franchise neuroscience portfolio, and we are very excited about our upcoming data readouts. I will now turn the call over to Mike for a more detailed update on our recent progress in R&D.
Thank you, Michelle, and good morning, everyone. Neuroscience is experiencing a revolution in science and medicine. There is no larger area of unmet need than diseases the nervous system, and we believe that our focus on neuroscience offers a key strategic advantage. Before I discuss our pipeline in more detail, me comment on our recent progress on building a multi franchise neuroscience portfolio supported by a broad range of therapeutic modalities. Complementing our expanded collaboration with Ionis to leverage their antisense oligonucleotide platform.
Earlier this month, we announced a strategic set of collaborations with C4 Therapeutics and Skyhawk Therapeutics to discover and develop novel small molecule approaches for neurological diseases. Our collaboration with C4 Therapeutics will utilize C4's platform to discover small molecules and engage the endogenous ubiquitin proteasome system, to selectively tag disease discover small molecules capable of modulating RNA splicing at selective pre messenger RNAs, including SMN2. With these collaborations, we have further expanded the breadth of modalities we are pursuing, which now includes biologics, antisense oligonucleotides, oral protein degraders and splicing modulators and gene therapy. As Michel discussed, looking over 2018, We added 6 clinical programs to our pipeline and transitioned 5 pipeline candidates from research to development. The same number as the previous year which nearly doubled Biogen's historical productivity.
Thus once again, 2018 represented a substantial enhancement of our differentiated clinical portfolio of potential breakthrough medicines. Turning to advances in the fourth quarter, let me start with the depth we are building in neuromuscular disorders. Last month, we, along with our partner IONIS, received data from an interim analysis of the phase 1 study of BIIB067 in a form of familial ALS. BIB-sixty seven is an antisense oligonucleotide targeting superoxide dismutase 1 or SOD1 mutations in which confer a toxic gain of function cause a familial form of ALS that constitutes approximately 2 demonstrated both proof of biology and proof of concept with a concordance across multiple clinical and biomarker endpoints. Specifically, At the highest dose tested, we saw a statistically significant lowering of SOD1 protein in the CSF with a P value of 0.002 and a trend trend across 3 dimensions of clinical efficacy, consistent with the potentially meaningful clinical benefit as compared to Placebo.
Specifically we observed slowing of clinical decline as measured using the ALS functional rating scale, slowing of decline in respiratory function as measured by slow vital and slowing of decline in muscle strength as measured by handheld dynamometry. Based on these positive data, we devastating genetic form of ALS, we believe this additional cohort could provide important new data to support a rapid path for registration More broadly, we believe that these data have positive implications for additional antisense oligonucleotides in our pipeline, including BIIB-seventy eight which targets C9 ORF-seventy two BIIB080, which targets TAO and up to 2 antisense oligonucleotides physician clinic this year. Additionally, we believe that these data exemplify the depth we are building in neuromuscular disorders, including ALS, and highlight the interconnectivity across our pipeline. Turning to SMA. As the leader in this space, we welcome additional therapeutic options for patients including the potential launch of Novartis gene therapy AVXS101, which we believe will be initially indicated for infants.
A number of questions remain for this experimental approach as data on the safety, efficacy and durability of ABXS-one hundred and one remain limited with results reported to date for only 15 patients followed for up to 2.5 years, 7 of whom are reported to have subsequently initiated treatment with SPINRAZA. This is in contrast to the SPINRAZA clinical trial program which has included more than 300 patients followed for up to 6 years. It is important to note that there are significant differences in the age and severity of the patient populations between the sham controlled and deer study of INRAZA and the phase 1 open label study of AVXS101. We believe that earlier treatment initiation positively impacts the clinical of agents designed to boost full length SMN protein production. Patients in the Endeere study were older with the mean age at 1st dose of 5.3 months REST participants in the phase 1 open label study of ABXS-one hundred and one initiated treatment earlier with a mean age of 1st dose of 3.4 months.
Thus, direct comparisons between these data sets are not scientifically valid. In addition to Endeere, We are very encouraged by the data from the nurture study of SPINRAZA in presymptomatic infants, which shows patients on average achieving motor milestones consistent or nearly consistent with normal development. We believe these data, combined with real world reports of significant efficacy across all patient types and ages, support SPINRAZA remaining the standard of care and SMA, even after the introduction of alternative modalities. Turning to MS And Neuro Immunology. Biogen's strategy to extend our leadership position in MS is focused on 3 strategic comparisons.
First is the pursuit of next generation therapies for relapsing forms of MS, while also advancing lifecycle management for our current portfolio. 2nd, we aim to advance the care of progressive forms of MS by leveraging emerging insights and new drug targets. 3rd, We aim to slow or reverse disability progression and restore function through remyelination and axonal repair or protection. As Michel discussed, we've made significant progress this quarter across these imperatives, including submitting the NDA for diroximel fumarate or VUMERITY in the U. S.
With head to head data versus TECFIDERA expected mid year. Re initiating development of fib61, a small molecule remyelination agent, dosing the first patient in the Nova study, examining the efficacy of extended interval dosing of Tysabri and dosing the first patient in a bioequivalence study of an intramuscular formulation of plegr team. For more details on We also had exciting new developments within our industry leading Alzheimer's disease and dementia portfolio. At the clinical trials in Alzheimer's disease meeting, or CTAD, We presented updated analyses of the long term extension of the phase 1b PRIME study of aducanumab, which were generally consistent with previous analyses. In addition, there were no changes to the risk benefit profile of aducanumab.
We also showed data from the PRIME study suggesting that following treatment with aducanumab the reduction in brain amyloid correlates with slowing of clinical decline. We expect final data from ENGAGE and EMERGE the Phase III studies of aducanumab in early 2020. Also at CTAD, our collaboration partner Eisai presented additional analyses of the phase 2 study of VAN2401. Data from pre specified subgroup analysis showed the treatment with BAN2401 was associated with a reduction in brain amyloid as well as clinical benefit across subgroups of apoegenotype, clinical stage and concomitant use of AD medications. Importantly, while the study was carriers with small sample sizes potentially explaining the numerical differences in clinical efficacy between these subgroups.
Overall, we continue to believe that the data for BAN2401 increases the probability of success for both this asset as well as aducanumab. BAN2401 and aducanumab share important features distinguishing them from other anti beta amyloid antibodies, including specificity for binding aggregated forms of beta amyloid. Full effector function, which we believe is important for inducing amyloid clearance by microglia. Data demonstrating robust removal of amyloid plaque in humans and signals of potentially clinically meaningful slowing of cognitive decline across multiple measures. To our knowledge, amongst clinical a beta antibodies, only aducanumab and BAN2401 share these features.
Together with Eisai, we are pursuing large Phase III studies to confirm these findings, including the planned initiation of a Phase III BAN2401, following the conclusion of ongoing regulatory dialogues. Eisai also presented safety and efficacy data from the phase 2 study of elenbecestat, a small molecule base inhibitor being evaluated in 2 Phase III studies. And in response to external data presented at CTAD suggesting that treatment other base inhibitors has been associated with trends toward cognitive worsening, a cognitive safety monitoring plan has been implemented in the ongoing elenbecestat studies to ensure that patient safety is paramount. The independent data monitoring committee has reviewed data from the Phase III studies and recommended that the studies proceed. We will continue to monitor safety including cognitive safety as the study progresses.
Finally, given the that beta amyloid pathology begins to accumulate in the brain decades prior to the clinical onset of Alzheimer's disease, I am pleased to announce that we, along with our partner Eisai, are planning to initiate a Phase III study to evaluate whether early use of aducanumab can prevent or delay the clinical onset of Alzheimer's disease fees. This study will include patients with evidence of amyloid pathology in the brain with or without subjective cognitive complaints. This represents an earlier phase 2 in the FDA draft guidance on the treatment of early Alzheimer's disease. We look forward to sharing more details about this study in the near future. Moving to our progress in neuropathic pain.
In October, we indicated that we had paused the initiation of the phase 3 program of VIXautragene or BIIB74 a state and use dependent voltage gated sodium channel blocker in trigeminal neuralgia. Now based on recent feedback from the FDA, I'm pleased to say that we are planning to initiate a Phase III program for the development of Xotra gene in trigenal neuralgia by the end of the year. And in parallel, we continue to enroll a phase 2 study of Vixotra gene for small fiber neuropathy. Within neurocognitive disorders. Last month, we dosed the 1st patient in the Phase 2b study of BIIB-one hundred and four for the treatment of cognitive impairment associated with schizophrenia, BIB-one hundred and four is a 1st in class ampereceptor potentiator that we believe has compelling data from a number of distinct early clinical studies demonstrating functional circuit activation is measured by F MRI, treatment effects on relevant domains of cognition such as working memory, short term memory, verbal recall and reasoning and the potential for a favorable benefit risk profile.
Broadly speaking, We believe neurocognitive impairment is a central node in the network of symptomatology that defines many neurological diseases. Therefore, we believe BIV-one hundred and four may have and leader, we continue to prioritize our activities and build depth in what we believe are our most promising programs and disease areas. With that in mind, last month, we made the strategic decision to terminate our collaboration with AGTC to develop AAV based gene therapies for excellent retinos cases, or XLRS and X linked retinitis pigmentosa or XLRP based in part on recent clinical data in XLRS. We have also decided to terminate specific programs included in our collaboration with the University of Pennsylvania. To be clear, our SMA gene therapy program with UPenn which remains on clinical hold with the FDA is not affected by this decision.
Overall, Biogen R and D delivered significant progress in 2018, We believe we are in a strong position today with 4 programs in phase 3, 13 in phase 2 and 7 in phase 1, with a deep preclinical pipeline across multiple modalities, we continue to generate clinical data that reinforce our commitment to neuroscience and the intrinsic interconnectivity of this space. For instance, we believe our recent positive data on BIIB067 in SOD1 ALS resonate across our pipeline, supporting the depth we are building in ALS and highlighting the promise of our collaboration with Ionis to leverage the antisense oligonucleotide platform across a range of neurological disorders. And we capabilities with the goal of developing innovative medicines with the potential to transform the lives of patients living with devastating neurological diseases. I will now pass the call to Jeff.
Thanks, Mike. Good morning, everyone. Let me now provide some detail on our financial performance for 2018 and share with you our guidance for 2019. Let's start with revenues. As Michelle mentioned earlier, we had a strong Q4 2018 from a revenue perspective.
Total revenue for the fourth quarter grew 7 percent year over year for approximately $3,500,000,000 and grew 10% for the full year to $13,500,000,000. Overall, our MS business delivered revenues of $2,300,000,000 in the fourth quarter of 2018, including OCREVUS royalties of approximately 152,000,000 MS revenues in the fourth quarter of 2018 decreased 1% versus the prior year without OCREVUS royalties and increased 2% including OCREVUS royalties. U. S. MS revenues in the fourth quarter 2018 benefited from a channel inventory build of approximately $115,000,000.
Compared to a build of approximately $50,000,000 in Q4 2017. Our U. S. Business continued to show signs of stabilization in the fourth quarter, continuing the trend of improving year over year performance we saw throughout 2018. Full year MS revenues were $9,100,000,000, including OCREVUS royalties approximately $478,000,000, representing a decrease of less than 1% versus the prior year.
Excluding OCREVUS royalties, MS revenues decreased 4% versus the prior year. Full year 2018 MS revenues benefited by approximately 86,000,000 versus the prior year due to changes in foreign exchange rates net of hedging. Global 4th quarter TECFIDERA revenues $1,100,000,000, a 3% increase versus the prior year. This included revenues of $856,000,000 an increase of 3% versus the fourth quarter of 2017 and $254,000,000 outside the U. S, an increase of 4% versus the fourth quarter of 2017.
Tech fedura benefited from an increase in channel inventory in the U. S. Of approximately $65,000,000 in the fourth quarter of 2018 compared to an increase of approximately 40,000,000 in Q4 2017. We were pleased to exceed continued relative stability in new prescriptions in the U. S.
As we have now anniversaried the launch of BrokerVitz. Outside the U. S, we performed very well in Q4 2018, with double digit volume increases in Europe and Japan, versus the prior year, $300,000,000, an increase of 1% versus prior year. This included $3,300,000,000 in the U. S.
And $1,000,000,000 in sales outside the U. S. Interferon revenues, including both Avanix and PLEBRity, were $597,000,000 during the 4th quarter, a decrease of 7% versus Q4 2017 due to continued shift from the injectable platforms to oral or high efficacy therapies. This included $431,000,000 a channel inventory build of approximately $40,000,000 compared to a build of approximately $10,000,000 in the fourth quarter of 2017. For the full year, worldwide interferon revenues were $2,400,000,000, consisting of $1,700,000,000 in the U.
S. $695,000,000 in sales outside the U. S. Tysabri worldwide revenues were $464,000,000 this stable versus the fourth quarter of 2017. This included $257,000,000 and $208,000,000 outside the U.
S. In the U. S, revenues increased 2% versus the prior year. Within the U. S.
Tesabri benefited from a channel inventory bill of approximately $10,000,000, compared to relatively stable inventory levels in the fourth quarter of 2017. Within the fourth quarter, we saw continued improvement in Solvary performance in the U. S, with the highest new prescription share since the launch brokers. Outside the U. S, Dysabri revenue decreased 1% versus prior year.
For the full year, worldwide TESSAV revenues were approximately $1,900,000,000, a decrease of 6% versus the prior year, primarily due to launch of OCREVUS. Recorded U. S. Revenues of $1,000,000,000 in the U. S.
And $839,000,000 internationally. As expected, across our MS business, we saw an increase discounts and allowances in the U. S. In fourth quarter, primarily due to seasonality. Throughout 2019, we expect another couple of 100 basis points of pressure on discounts and allowances.
With a typical seasonality in the 1st 4th quarters. Overall, we were very pleased with the performance of our MS business in 2018. And are focused on maintaining the resilience of this franchise in light of new competition entering the market. We expect the rate of change in full year global MS product revenues excluding OpEx to be similar in 2019 versus 2018, mostly offset by expected growth of OCREVUS royalties. Additionally, we expect a potential inventory drawdown in the first quarter 2019.
Let me now move on to SPINRAZA. Global 4th quarter SPINRAZA revenues were $470,000,000, a 30% increase versus the prior year and relatively flat versus the 3rd quarter. This included revenues of $236,000,000, an increase of 5% versus the 3rd quarter and $234,000,000 outside the U. S, a decrease of 4% versus Q3. For the full year 2018, worldwide spend rising revenues were nearly doubled to 1,700,000,000 This included $854,000,000 and $870,000,000 in sales outside the U.
S. The number of patients on therapy in the U. S. Increased by 9% as compared to the end of third quarter of 2018 and discontinuations remained relatively low. In the U.
S, we continue to make strong progress with adults. In the fourth quarter, more than 50% of new starts were adults. Increasing the total number of adult patients on SPINRAZA to nearly 1000, an increase of approximately 20% versus the third quarter of 2018. We saw a continued increase in the revenue of contribution from maintenance doses this quarter. In the U.
S, approximately 65% of SPINRAZA units in the 4th quarter were attributed to maintenance doses. As compared to approximately 60 were dispensed through our free drug program similar to the 3rd quarter and a decrease from approximately 20% a year ago. Outside the U. S, the number of commercial SPINRAZA patients increased approximately 18% versus the prior quarter, and there are approximately 260 patients active in the expanded access program. We recorded revenue from over 40 international markets in the 4th quarter.
Despite overall excuse me, despite strong overall patient growth, 4th quarter ex U. S. SPINRAZA revenues decreased slightly versus the 3rd quarter a combination of lower volumes in certain markets due to low dose dynamics, the timing of shipments in certain distributor markets, and pricing dynamics in certain markets. In 2019, we expect global SPINRAZA revenues to grow in the mid to high teens and we expect growth in both the U. S.
And outside the U. S. We expect global SPINRAZA revenues to be relatively stable in Q1 2019 versus Q4 2018 due to seasonality, followed by quarter over quarter growth. Outside of the U. S, we expect continued patient growth in 2019, although at a slower pace in 2018.
Overall, we were very pleased with both the performance and outlook for Cinera as we continue to believe that has delivered the best launch of an orphan drug
ever
and continue to deliver strong growth for the company. Let me now move on to our biosimilars business, which generated $156,000,000 in revenues this quarter, an increase of 28% versus the prior year. Full year biosimilar revenues were $545,000,000, an increase of 44% versus the prior year. Vinapali continued to be the market leader in countries such as the UK, Denmark and Norway and became the market leader in Germany in the fourth quarter. But Sabi revenues grew 24 percent quarter over quarter.
In October 17th, we launched Yimeralty, our biosimilar reference in HUMIRA, While it is too early to comment on specific share data, we can say that we are very pleased with our Maraldi sales performance in the first quarter in the market. In many cases surpassing the initial rate of uptake for Metabolic. With the launch of IMRALDI, Biogen became the 1st company to offer all of the 3 main anti TNF biosimilars across Europe. In 2019, we expect double digit revenue growth for our biosimilars business, primarily driven by the launch of IMRALDI. Turning to our anti CD20 revenues, we recorded $535,000,000 for the 4th quarter, an increase of 29% versus the prior year, primarily driven by OCREVUS royalties.
Full year anti CD20 revenues were $2,000,000,000, a 27% increase versus 2017. Within NTCD20 revenues, our estimated OCREVUS royalties were $152,000,000 for the 4th quarter $478,000,000 for the full year. We expect a slight decline in NTCD20 revenue in 2019, driven by the expected launch of Ritux and biosimilars in the second half of the year. Total other revenues were $166,000,000 4th quarter, a decrease of 8% versus the prior year. Other revenues were $586,000,000 for the full year, an increase of 63% versus 2017.
In 2019, we anticipate a modest increase in these revenues with revenue heavily loaded in the first quarter due to expected timing of sale of approximately $200,000,000 of remaining inventory associated with the BioTherative spin off, which carries a low gross margin. Let me now turn to gross margin performance. Q44 2018 gross margin was 86 percent of revenues versus approximately 86% in the fourth quarter of 2017, driven by unfavorable mix of revenue in Q4 2017. Gross margins for the full year of 2018 were approximately 86%, relatively flat compared to the full year of 2017. In 2019, we expect gross margin compression due to the sale of the remaining fiber inventory just discussed.
Substantially all the impact anticipated in the first quarter. Q4 GAAP R and D expense was 17 percent of revenue or $612,000,000. Q44 non GAAP R and D expense was also 17 percent of revenue or $602,000,000. Q4 R and D expense includes the 35,000,000 often payment in major Aonas related to BIIB067 for ALS and $17,000,000 related to a collaboration agreement in C4 Therapeutics. Full year GAAP R and D expense was 19 percent of revenue or $2,600,000,000.
Full year non GAAP R and D expense was 18 percent of revenue or 2,400,000,000 We expect Q1 2019 R and D expense to include approximately $35,000,000 related to our collaboration agreement with Skyhawk. Q4 GAAP and non GAAP SG and A were both 17 percent of revenue or $591,000,000. Full year GAAP and non GAAP SG and A were both 16 percent of sales or $2,100,000,000. Both GAAP and non GAAP SG and A increased versus the prior quarter due to the timing of total OpEx per quarter to be slightly above $1,100,000,000 as we continue to invest in our pipeline and prepare for the potential launch of aducanumab. GAAP other net expense, which includes interest, was $29,000,000 in Q4, and GAAP other net income was $11,000,000 for the full year.
Non GAAP other net expense was $16,000,000 in Q4 $117,000,000 for the full year. We expect other net expense to be lower in 2019 due to higher interest income resulted from larger cash balances and higher interest rates versus 2018. In Q4, our GAAP to the initial recognition of deferred taxes on the guilty tax of international earnings, a component of U. S. Corporate tax reform legislation.
In Q4, our non GAAP tax rate was approximately 21%. For the full year, our GAAP tax rate was approximately 24%. And our non GAAP tax rate was roughly 21%. In 2019, we expect the underlying run rate for our tax rates to benefit by approximately 200 basis points as a result of U. S.
Corporate tax reform. Our weighted average diluted share count was approximately $200,000,000 for the 4th quarter, and 205,000,000 for the full year. We repurchased approximately 4,300,000 shares in the 4th quarter at an average price of $311.24 for total value of approximately $1,400,000,000, which now brings us to our diluted earnings per share. In the fourth quarter, we booked GAAP EPS $4.73 compared to GAAP loss of $1.40 per share in the fourth quarter of 2017 and non GAAP earnings of $6.99 share, a 33% increase versus the prior year. For the full year, GAAP EPS was $21.58, an 81% increase versus 2017 and non GAAP EPS was $26.20, a 20% increase versus 2017.
As a reminder, 4th quarter and full year 2017 GAAP EPS was negatively impacted by $5.51 due to U. S. Corporate tax reform. We generated approximately $1,900,000,000 in net cash flows from operations in the 4th quarter and approximately $6,200,000,000 for the full year. We ended the quarter with approximately $4,400,000,000 in cash and marketable securities and $5,900,000,000 in debt.
Let me now turn to our full year guidance for 2019. We expect revenues of approximately 13,600,000,000 to 13,800,000,000 assuming current foreign exchange rates. We anticipate gross margins of 85% to 86%, driven by the unfavorable mix issues I discussed earlier. We anticipate R and D expense between 16% 17% of revenue. Of note, guidance does not include any impact from potential acquisitions, large business development transactions as both are hard to predict.
We expect SG and A expense to be approximately 16% to 17% of revenues, as we expected, began meaningful investment in launch preparation activities for Dukeinimat. We anticipate our GAAP tax rate for 2019 to be between 18.5 percent to 19.5 percent and our non GAAP tax rate to be between 18% to 19%. We anticipate full year GAAP diluted EPS results of $26.65 to 27.65 representing growth of 23 percent to 28 percent and non GAAP diluted EPS to be $28 to $29, representing growth of 7% to 11%. From a quarterly perspective, it's important to recognize that we had a large business development expense in Q2 2018 affecting the year over year comparisons for Q2 2019. I'll now turn the call back over to Michelle for his closing comments.
Thank you, Jeff. We closed 2018 with strong commercial performance, double digit earnings growth versus a year ago and strong execution of our strategy. We opened 2019 with the announcement of 2 business development deals. We have enhanced our neuroscience pipeline and broadened our capability across multiple modalities as we prepare for multiple upcoming important readouts. Biogen's vision and strategy are clear.
As a pioneer, we aim to capture the significant unmet medical need in neuroscience, with the goal of bringing potential new therapies faster and more efficiently to patients. For 2019, we aim to continue our momentum and achieve our guidance. To deliver on our aspirations, we remain focused on executing well on our strategic priorities to fortify our core business in MS and SMA and also allocate capital to expand and progress our neuroscience pipeline while opportunistically returning capital to shareholders Biogen will continue to actively pursue business development and M And A. Within the next 12 to 18 months, we expect further progress as we aim to build a multi franchise neuroscience portfolio, including The data readouts in Alzheimer's, including the final phase 3 data for aducanumab, as well as MS and PSP up to 5 new assets advancing into the clinic and potentially regulatory approval in the US for VUMERITY in MS. Finally, I want to reiterate our commitment to maximizing returns to our shareholders and bringing innovative therapies to patients over the long term.
These demands that we continue to allocate capital efficiently, effectively and appropriately. As we have demonstrated in the past, we will always strive to have an optimal superior return from a positive impact on patients' lives and all of the physician care givers and participants in our clinical development programs our past and future achievements could not be realized without a passion and commitment. With that, we'll open the call for questions. Certainly.
Session. Your first question comes from the line of Geoff Meacham with Barclays. Your line is open.
Hey guys, good morning. Thanks a lot for the question. Michelle, when I look at 2019 guidance, it reflects a slower growth profile for both revenue and earnings. So the question is from a strategy perspective, does this alter your view on BD or capital allocation or do you look at 2019 growth as more of a temporary trend? And then Mike or Al, real quick, I just wanted to ask you guys on the new Phase III study for umab and earlier stage Alzheimer's, was this informed at all from Engage, IMerge or PRIME or something else?
Thanks.
Thanks for the good question. So the strategy, as you know, is clear and simple and very leasable. Three main reasons to believe First, we have a strong underlying momentum, solid base, value proposition improving with the offer of biosimilars. And we are working on the operating model. 2nd, we have a strong and stronger engine engine for growth with all the enhanced pipeline that Mike spoke about.
And we have very important landmark study readouts in the coming period. So this is a very exciting place to be. 3rd, we have financial strengths. So concerning the BD and M and A, the drive first will be to continue to accelerate scientific and strategic alignment. We will not go for bridging a potential gap because we are not on a burning platform.
The team is building up very well. The management team is spending a lot of time on those activities. We have a broad range of targets, and we are working on that, but with pace and calmer.
So, hi, Jeff, this is Al. On your second question, we've been considering doing this preclinical study. We call it for a few years now, and it's part of our broader lifecycle management strategy. I'd say the reasons why we're doing it are that many of our advisors and investigators have been encouraging us to do it for some time. And, I would say also that the BAN2401 results that we got roughly 6 months ago increases our level of confidence in aducanumab.
And then finally, as you know, FDA put out on that contemplates how you might get approval for early AD. So we believe one day the standard of care will be to treat with amyloid lowering drugs as early as possible and this trial will go a long way toward informing that.
Your next question comes from the line of Michael Yee with Jefferies. Your line is open.
Thanks. Good morning. Congrats on a good quarter. I know everyone's focused on interim analysis. I'm not asking if there'll be an interim analysis on aducanumab, but SaaS can actually it feels like the Street would like to know if you had 1 or if you had a futility analysis, whether that would be disclosable if you passed either of those I think Roche talks about the futility and how that's a material piece of information.
So just wanted to understand your view on whether you took either of those or if there will be on futility. Whether that's disposable? Thanks so much.
Mike, this is Al. I'm really sorry, but we continue to have a policy here that
next question comes from the line of Terence Flynn with Goldman Sachs. Your line is open.
Hi, thanks for taking the question. With respect to SPINRAZA ex U. S, was just wondering if you can give us a little bit more detail on the impact in the fourth quarter from pricing versus loading dose and then maybe help us think about the pacing going into 2019 and ex U. S. Reimbursement progress?
Any new countries that you guys are expecting to come on board in 2019? Thanks.
Sure. Thanks for the question. So just to reiterate, we're very pleased with the performance of SPINRAZA both in the U. S. And outside the U.
Think it has a very strong growth profile. It was up 60% year over year, although down a little bit sequentially. As I mentioned, really, there were 3 factors that drove the sequential decline. And that was, 1, a shift from loading, to maintenance doses in some of the more mature market in Europe, the timing of shipments in certain distributor markets, which are hard to predict, and then pricing dynamics, including unfavorable country mix. So as we look forward in 2019, we expect, for that franchise to resume growth We expect that to come from several sources.
Number 1, in the mature markets, just like we saw the dynamic of the shift in the U. S, we expect some of these larger markets will continue to be lumpy. They're a good source of growth of us. So we expect that to grow as well. And then if you look at new markets, either entry into new markets or expansion into markets that we've just recently entered.
There's a number of kind of interesting things that are happening. If we look at Europe first, We expect to enter the UK at some point in 2019, which will be a good sized opportunity. Turkey, we've been very successful in type 1. We expect to kind of Type 2 and Type 3. Saudi Arabia, Poland and Portugal are all markets we expect to enter as well from the European perspective.
Moving around the world Canada, we just recently got approval in the fourth quarter of 2018. We expect that to be a good growth opportunity for us in a good market. And then if you look across the rest of the world, Asia Pacific, South Korea, we expect to get reimbursement in that market. In 2019, Taiwan is another good sized market, Hong Kong, then China, we expect to get in on a self pay basis. And then Latin America, Brazil could be a sizable country.
Today it's on a 1 off approval pay us. We expect to get reimbursement and the epidemiology is in the thousands in Brazil. So there's ample opportunity for us to grow It's diversified regionally and by country. That's a real testament to both the effectiveness and reception of SPINRAZA worldwide.
So we expect to grow SPINRAZA during 2019 in the U. S. And ex U S. Remember, in the U. S, 1 year ago, we're not sure about the ability of the organization to penetrate the large adult segment of the prevalence.
And we are at 15%. This has driven more than 50% of the new start in Q4. There is still a very long way to go. The organization is ready working on that. And beyond the U.
S, Jeff gave some color.
Your next question comes from the line of Jeffrey Porges. With SVB Leer Inc. Your line is open.
Thank you very much. And I appreciate all the information on the call. I had a question on BIIB067. Mike, could you talk a little bit about the data when we might see it, whether you've had a chance to discuss it with the FDA the size of the cohort, and how quickly this could advance. You seem quite excited about the signal.
And then perhaps you could just address the general principles you take away from this finding, for the rest of your program? Thanks.
Yes, thanks, Jeff. For this question, a few things I hope you'll touch on each of these points. We will plan to present the data at an upcoming scientific meeting. We haven't quite yet determined that, but that will be in the coming months. We'll be able to talk about it in some length.
We wouldn't really comment on our regulatory strategy at this point. I guess what I would say is, that we know this is a very severe disease. There's really little to nothing for these patients. So our anticipation here is that there would be good receptivity for the kind of efficacy that we think that we can see here. Just on the data itself, so this is a phase 1 study.
Keep in mind, it was designed to be a safety study as primary endpoint in these patients largely. But we incorporated a number of biomarker pharmacodynamic and clinical endpoints in this. And as I described, It has been the collection of these, both the lowering of SOD1 and the CSF, statistically significant a trend towards lowering in CSF neurofilament as well as 3 separate clinical outcomes, the ALSFRS, the slow vital capacity for respiratory function the handheld Dynaometry for muscle straight and the concordance between these endpoints that have led to our excitement for this program. And I would say more the general takeaways that you're asking about, it's really 2 dimensions. One is this is very, very encouraging to us across our ASO platform, I would say.
This is our 2nd foray after SPINRAZA. We've got many other clinical programs, new molecules that we the clinic. It shows us that in adult onset neurological disease, where we're targeting an RNAs H dependent mechanism, that we are seeing signs of clinical efficacy. I believe it may be the first demonstration of proof of clinical concept in adults with an RNA's age mechanism per se. So we're excited about that.
That's one to mention. The other is that the promise that this holds broadly speaking for us in ALS and neuromuscular disease in general.
Your next question comes from the line of Cory Kasimov with JP Morgan. Your line is open.
So Al, I know you won't comment on any potential internal interim analyses, but I'm curious to get your thoughts around the expected upcoming interim readout for Roche's tranezumab and Alzheimer's in so far is what you see as some of the kind of the key similarities and differences between your drug and Roche's drug? And that's whether you see much of a read through to aducanumab based on these pending results?
Hi, Corey. Yeah, I'd be cautious about too much read through. First of all, these are not the same antibodies. Crenezumab binds to sort of a mid domain in abeta40 2 peptide, aducanumab and BAN both are in terminal Aducanumab and BAN are highly selective for aggregated forms of A beta, both soluble ligomers as well as insoluble fibrils. Crenezumab doesn't have that same level of specificity.
I think it's important to note that crenezumab is an IgG4. Which, doesn't have fully factor function, whereas BAN and add you both have fully factor function, And finally, we just saw the results published recently on crenezumab phase 2 where even their high dose IV arm They did not show statistically significant lowering of amyloid plaque, whether you used the subcortical white matter or cerebellum as the reference region. So So, so that's another important difference between aducanumab and BAN, both of which show a substantial reduction in amyloid plaque burden in humans. So I think there's some notable differences and I'd be cautious about too much of a read through.
Your next question comes from the line of Chris Raymond with Piper Jaffray. Your line is open.
Just a couple of financial questions. Just on the tax guidance, I think you're guiding to 200 to 300 bps lower year on year. And then I know you cited corporate tax reform as a driver, but can you just maybe talk about the step down from 2018 or even in the Q4 rate, which presumably should have benefited contacts reform? And is that number sustainable beyond 2019? And then just on the inventory, I think last year you guys had a 50 $1,000,000 Q4 inventory build for the MS franchise.
This year, I think it looks like it's more than double. Can you talk about what's driving that difference? Thanks.
Yes. So on the tax rate, if you back up to 20 18, when we, when U. S. Tax reform got passed, we dropped our tax rate about 300 basis points. And at that point, we said that there was a further reduction in the tax rate due to tax reform that because of the way our legal structure works from an from an international perspective, there was inventory that would turn to the system and there would be a further reduction of the rate.
But that two hundred basis points is really kind of the higher simplistically think about it as higher priced inventory from a tax perspective that turned to the system in 20 So now in 2019, that inventory is gone and now the rate has dropped. So I'm not able to kind of give you a long term tax rate at this point. Don't do long term guidance, but we're comfortable with the rate pulling down 200 basis points, from, from 2018 to 2019. And then thereafter, it'll depend on a lot of things, including the distribution of earnings and other things. But for now, I think the guidance 2019 is something you can rely on.
With regard to inventory, yes, so we built about $165,000,000 worth of inventory in the fourth quarter compared to a build of roughly $50,000,000 in the fourth quarter of last year. A lot of that's outside our control we distribute our product through distributors and they decide to either build inventory or not, and we recognize revenue on ship into the channel, which is different than kind of the flow through or consumption of that inventory, which is why we highlight it for people so it can normalize. It's just beyond our control. It's not something that we have control over. So it's driven by external factors and we do our best kind of manage through those and make sure it's clear to people in terms of what's driving demand.
Your next question comes from the line of Omar Rafal with Evercore. Your line is open.
Hi guys. Hi guys. Thanks for taking my question. First on aducanumab, my question is and I fully acknowledge and I don't think I ever asked about the interim. But my question is this.
I realize there's a policy of not commenting on it, but once you do get a notification from the DSMB, Given the sheer materiality of this, will you not put out a statement? And I guess that's really what I'm trying to get at. Like, for example, trial continues as planned. Like, will that happen or not happen once there is a notification to the management? And then, Jeff, on inventory, my question is, So the Q4, the inventory we saw on the slides, and the disclosure for last year is obviously different than the inventory numbers that were reported last year because you guys implemented in 2Q.
But my question is in 2Q that inventory slide has 2 different metrics. And it's been a little confusing to figure out
So, this is Al. I'm sorry, but we just can't comment on interim analysis.
With regard to inventory, what we disclose is the change within the quarter, from the beginning of the quarter to the end of the quarter. That's the number I think consistently disclosed in the press releases. And so that is literally, inventory built up by $115,000,000 from the beginning of the fourth quarter to the end of the 4th fourth quarter of 2018, similarly in 2017 from the beginning of 3rd, the fourth quarter of 'seventeen to the end, it built by $50,000,000. So the change within the quarter is up $115,000,000 in the fourth quarter of 'eighteen and up $50,000,000 in the fourth quarter of 'seventeen. So we think the relevant metric people should look at is what was the change in the quarter.
And if you want to know what the change was comparatively, you take the difference or the change in the change. Is $65,000,000. I think that's pretty clear.
Your next question comes from the line of Matthew Harrison with Morgan Stanley. Your line is open.
Great. Good morning. Thanks for taking the question. I just wanted to clarify some comments you made about rebates and your outlook on the MS business broadly. Can you just speak in a little bit more detail?
It sounded like you were expecting a few 100 basis points of additional chargeback rebate pressure this year in the U. S, but you thought that would be offset by OCREVUS. Maybe you could just comment broadly on your outlook for the MS business in the U. S. And outside the U.
S. Thanks.
So I think you're referring to 2 different things. I think we said we expect that our discounts and allowances in the U. S. To go up another couple 100 basis points, which is very similar to what happened in 2018. And that's being driven by the mix of the business becoming more Medicaid, Medicare, and 340B hospital, reliant in terms of the channel goes through where there's higher discounts.
No different than the trend we saw from 2017 to 2018. We'll see more pressure 2018 to 2019. With regard to the performance of the EMS business, I think we said that we expect, that business globally to perform similarly, excluding OCREVUS to what it did in 2018. And then for any difference to be made up by the OCREVUS royalties and the combination of both those to be resilient, which we kind of say flattish. So, expect to kind of the trends with regard to improvement to continue in the U.
S, which is very encouraging. And then outside the U. S, we'll continue to see some pricing pressure and competition with OCREVUS and through Europe.
Your next question comes from the line of Ying Huang with Bank of America Merrill Lynch. Your line is open.
Hi, good morning.
Thanks for taking my questions.
A quick one for maybe Al. We know that ClarityVIN is being in the restoration with FDA. I was wondering you have any thoughts on Clarity impact on the MS market? Could we see something like OCREVUS, in the U. S.
Dynamics And then secondly, on SPINRAZA, from last quarter to this quarter, your market share in incense and all so in pediatrics have been stable at about 50%. Do you see further growth in those two segments for us being rather in U. S. This year? Thank you.
Hi, Yang. This is Al. On Cladiraffeine, it's, we welcome any new therapy for MS patients. It's good for patients. And good for doctors to have multiple options for their patients because MS patients are different, every one of them.
Having said that, Cloudera being it's oral, it's very convenient in the sense that you give it every 6 months essentially, a cycle every 6 months, if you will. And the key question early on was the safety, which within some of the phase 3 data, there was some signals that were concerning, which prevented it from being approved a few years ago. And some of those questions may still remain which takes sort of, which makes the convenience of it less optimal, if you will. So I'll just stop there.
Concerning SPINRAZA in the U. S. For infants and children, if it was your question, we do believe that there will be still opportunity to improve the penetration. The reason why we had 50% for infants is that some are still too advanced and therefore they cannot be dosed. For children and toddlers, one of the challenge was the complex spine.
And we can see that the clinicians are able to those better nowadays that they have more experience. So we should be able to continue to make reasonable inroads. The biggest potential again remains with the adult, the 60% opportunity for which we penetrated solidly 15% and now we have the capability, the rich and the infrastructure in terms of dosing capability and coverage is established in the U. S.
But just as a reminder, we've got 26100 patients on therapy in the U. S. Today. We estimate that the total potential is 9000. There's a lot of room to grow from perspective and success.
Your next question comes from the line of Alethia Young with Cantor Fitzgerald. Your line is open.
Hey guys, thanks for taking my question. Congrats on the progress.
I guess I want to talk
a little bit more about what you think have been impactful in your efforts with adults with SMA? And I see that you're making some progress there. So just wanted to get some more color on that. Thank you.
I would like to say that it starts with a team and the capability that Biogen was able deploy in the marketplace, it takes a little bit of time for the more urgent infant population for which we knew what was a natural history, the outcome of it, the treatment centers were well identified for the adult population, less symptomatic that can live with some symptoms, but they can live quite a long life it was a bit more difficult and challenging to find treating centers and to mobilize them for a better quality of life. So this is why it took a little bit more time. So we enlarged the team. We did a lot of work in terms of medical affairs. And finally, we showed that for the adult population, there were incremental gains in functionality and displayed a very important role.
Al, do you want to add? Yes.
I mean, many of these patients weren't seeing neurologists anymore. They were, you know, they were maybe seeing rehab specialists, but they had you know, since there was no treatment, they really weren't seeing neurologists, even neuromuscular neurologists weren't really seeing them. But now that there is a treatment, they're starting to find doctors and the doctors, and it turns out they're neuromuscular doctors, adult are the same ones that are treating ALS patients, by the way, that are, that are now, treating SPINRAZA patients, that plus fact that interventional radiologists have gotten really good at finding ways to get into this into the intrathecal space when people with complex spine, spinal fusions and other things present. And so I think it's a combination of both.
Your final question comes from the line of Robin Karnauskas with Citi. Your line is open.
Hi, guys. Thank you for taking my question. So because of Exos, we'll be launching in kids sometime, people believe early for sometime middle of the year in the first half of twenty nineteen. How do you view that uptake? And do you think it's you mentioned that some of these babies have difficulty getting the intrathecal infusions.
Would you think that be the area in which they'd start to take share? Or do you still believe that everyone most likely will get a combination approach of gene therapy and SPINRAZA? I'm just trying to get a sense of when we start to see that impact how are you thinking about that for 2019 and your guidance? And then second question was just on the inventory drawdown. So do we still expect to have all of that inventory be taken out in the first quarter?
Or do you think that there'll be a higher level of inventory laying around, for the year? Thanks.
Okay, Robin, this is Mike. I'll start on this and turn it over. I think our assumptions around the Novartis AVXS101 gene therapy launches they've disclosed they've filed in the USCU and Japan for type 1. Our base case is that they launch in the middle of the year, and we expect that their initial label to be for type 1 patients and namely infants. And of course, we've been talking about on the call, the majority of patients are type increase.
So we really see this as probably being positioned for the type 1 or the infantile SMA. Then I think the latter part of your first question was, we do think that there is opportunity for territory between modalities. The nurture data in our mind with SPINRAZA demonstrates a nearly maximal potential efficacy in terms of normal motor development if you treat in that 1st 6 week period with SPINRAZA. That really, I think, sets the bar for the standard of care. And it highlights the fact that at some level, you really can't mess around on this.
You've got a time window where maximal SMN protein expression really matters. And I'd say the data that we've generated with SPINRAZA really sets the bar very high.
And then with regard to your question on inventory, we would expect the vast majority of the $200,000,000 worth of inventory would gets sold through in the first quarter. And there would be none left, although we need to do manufacturing for Biovera, but that's completely separate distinct from the legacy inventory.
So for 2019, we aim to continue our momentum while we are getting ready for very important readouts. Thank you all for joining us today on our call.
This concludes the Biogen Fourth Quarter and Full Year 2018 Financial Results and Business Update Call. We thank you for participation. You may now disconnect.