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conference date: May 2, 2007 @ 5:30 AM Pacific
Time
for quarter ending: March 31, 2007 (1st quarter)
Overview: Strong year-over-year revenue growth, but earnings lagged a bit and second quarter of sequential revenue growth of only 1%.
Basic data:
$716 million total revenue, up 1% sequentially. Up 17% from year-earlier.
GAAP net income was $132 million, up 7% from prior year.
GAAP earnings per share (EPS) $0.38, up 6% from prior year.
Non-GAAP net income was $202 million, up 7% earlier. Non-GAAP EPS $0.59, up 7% on year-earlier.
Guidance:
For 2007 expects mid-teens revenue growth. Non-GAAP EPS of $2.50 to $2.65 (excludes option compensation expense and other items). GAAP EPS guidance for 2007 is $1.69 to $1.84.
Conference Highlights:
On track for 2007 guidance. Gaining share in MS (multiple sclerosis) market.
Slower growth of bottom line in first half of 2007 due to costs of reintroducing Tysabri; EPS growth to accelerate in the second half due to cost leverage.
$449 million Avonex revenues, up 14% from year earlier. US sales (up 16%) did better than international (up 11%).
$207 million RITUXAN revenues, up 13% from year earlier. All US sales are recognized by Genentech; BIIB records its share of the pretax co-promotion profits. Total US sales of Rituxan were $535 million.
$30 million of Tysabri revenue based on $48 million in global sales. In US approximately 6,600 patients; in Europe 2,500. An additional 1000 patients are using it in clinical trial settings. Expect to launch in several more countries in 2007.
Other product revenue was $6 million, down from $13 million year-earlier. Fumaderm revenues are expected to start in Q2. Prior year amount included Amevive, which has been divested.
Royalties were $23 million, up from $21 million year-earlier.
No shares were repurchased in Q1.
In Q1 initiated Phase III tiral for BG-12 for MS. Initiated Phase III trial of galiximab for lymphoma. Initiated registration trial of lumiliximab for CLL (chronic lymphocytic leukemia). Daclizumab Phase II trial for MS patients with interferon beta met its primary endpoint.
Non-GAAP measures exclude stock-based compensation of $9 million, $60 million amortization of intangibles; $18 million R&D charge from Syntonix acquisition; tax benefit of $17 million from all this.
Expenses (non-GAAP) include $82 million cost of sales, $188 million R&D, $182 SG&A.
Q&A:
European market color? Direct market volume is up. Distributor market was soft. Adding Japan was a strategic win but is not yet generating much income. Avonex has continued to do well and we have launched Tysabri. Was a currency benefit.
Rituxan in MS? Interesting and exciting data, but a small study. Should progress into pivotal trials, but decision has not been made yet. Comparable to Phase II Tysabri data.
Discontinuation rate for Tysabri? Trend is still emerging, but are looking at it closely. Some physicians are waiting for updates to safety and efficacy.
Shrinkage between enrollment and beginning therapy? There is always a bit of shrinkage.
Treatments for PML? We are getting some good data, we will discuss on May 17 how to remove patients with PML or help them continue.
Rituxan joint venture revenues percent down? Does not run that calculation. Three parts to line item and includes investment in trials. So that should improve over time. Royalty revenue is a flat percentage of international business. Also, we are reimbursed for costs on our RA business.
The three companies have a variety of compounds that they are getting data on, trying to match compounds to diseases. That's why they need to think about how to go forward with Rituxan trials.
PML warning impact? Q1 was up versus Q1 year ago, but sequentially not a high, not unusual for Q1 to be seasonally down. NHL has been saturated. Hopeful to see expanded label indications in Rituxan for RA. Becoming experts in PML, which is actually becoming an advantage. Higher incidence of PML in Lupus population. Does not think it is having a huge impact at this stage.
Safety data on Tysabri to drive inflection point? Tomorrow morning we will get a big set of data, which will inform many doctors, but some will want longer term data. But patients are starting to push physicians because of benefit experience.
Rituxanam Phase II data? About 15% of MS patients begin with progressive form. Phase II data is unclear. PPMS v. RRMS are clinically distinct, so overlap issues are unclear. So RRMS data is not a predictor for PPMS.
Oral MS drugs? In era of highly effective but somewhat risky drugs or very safe but only moderately effective drugs. Always be a place for the ABCR drugs like interferon because some patients respond very well. Oral drugs, if they hold up in trials, will have a place in the market. Don't have enough information on individual effects.
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Copyright 2007 William P. Meyers