Analyst Conference Call Summary

Biogen Idec Corporation

conference date: October 28, 2013 @ 6:00 AM Pacific Time
for quarter ending: September 30, 2013 (third quarter, Q3 2013)

Forward-looking statements

Overview: Continued strong revenue growth; guidance raised; strong pipeline; but note high P/E ratio.

Basic data (GAAP):

Revenues were $1.828 billion, up 6% sequentially from $1.723 billion, and up 32% from $1.386 billion in the year-earlier quarter.

Net income was $487.6 million, down 1% sequentially from $490.7 million, but up 22% from $398.4 million year-earlier.

EPS (earnings per share) were $2.05, down 0.5% sequentially from $2.06, but up 23% from $1.67 year-earlier.


Full year 2013 guidance was increased: y/y revenue growth is expected between 23% and 25%, depending mainly on when Italy pays up. Non-GAAP EPS is expected between $8.65 and $8.85. GAAP EPS expected between $7.50 and $7.70. Capital expenditures are expected between $250 and $270 million.

Conference Highlights:

Record revenue. Preparing for three major product launches in 2014.

Non-GAAP net income was $561 million, up 2% sequentially from $549 million and up 23% y/y. Non-GAAP EPS was $2.35, also up 23% y/y.

Tecfidera for MS (multiple sclerosis) (formerly BG-12, dimethyl fumarate) revenues were $286, up sequentially from $192 million. "Tecfidera is now the leading oral MS therapy in the United States after only six months on the market." Waiting to hear if will receive regulatory data protection in Europe. Over 5000 doctors have now prescribed tecfidera. About 1/4 of patients were not on prior therapy. Some patients are have GI side effects, but they appear to be manageable for most patients. Approved in Australia in July; both Canada and Australia should see reimbursement approval in early 2014.

Avonex (interferon beta-1a) revenue was $733, down 5% sequentially from $774 million, but only down slightly y/y from $736.2 million.

Tysabri (natalizumab) revenue was $401, up 4% sequentially from $387 million and up 46% y/y from $275 million. However, this was due to acquiring full rights from Elan in Q2 and excludes $13 million in deferred revenue in Italy. New prescriptions continued in the U.S., with less discontinuations, and many that discontinued switched to Tecfidera.

Rituxan for NHL and RA (rheumatoid arthritis) revenue was $303 million, up 5% sequentially from $289 million and also up 5% y/y.

Fampyra and Fumaderm revenue was $33 million, flat sequentially from $33 million, and up 18% y/y

Royalty revenue was $54 million, up sequentially from $48.7 million and up from $47 million year-earlier. Corporate partner revenue was $17 million, up from $12 million year-earlier.

Cash and equivalents balance ended at $1.0 billion. $360 million was spend for stock repurchases. Notes payable $695 million.

In September a collaboration with Isis Pharmaceuticals to develop antisense therapies for neurological diseases was announced. In October a program to offer genetic testing to people with hemophilia was announced.

Cost of sales was $234.7 million. Research and development expense $410.0 million. Selling, general and administrative expense $405.6 million. Amortization of acquired intangible assets $100.0 million. Fair value adjustment of contingent consideration $0.1 million gain. Total cost and expenses $1.150 billion. Gain on sale of rights $7 million. Leaving income from operations of $684.5 million. Other expense $4.6 million. Income taxes $186 million. Equity loss $6.2 million.

Of a $100 million payment to Isis, $75 million was expensed as R&D during the quarter.

Plegridy (peginterferon beta-1a) for MS pivotal Phase III data met all primary and secondary endpoints after 1 year cutoff of a two-year study. Filed with FDA and EMA in May. Potential introduction in 2014. Has same efficacy as other interferon therapies, but with less frequent doses, and patient-administered auto-injector.

Daclizumab-HYP Phase III data readout expected in 2014. The Phase IIb study data show strong efficacy. Would be a once-monthly subcutaneous therapy.

Filed for FDA approval of Eloctate (recombinant factor VIII Fc fusion protein) for hemophilia A in May. It is possible there will be a delay in approval due to some issues in the manufacturing process. Alprolix for hemophilia B submission was made to FDA, launch expected in Q1 2014.

Tecfidera interim analysis supported the safety profile with relapsing/remitting MS, and long term (multi-year) efficacy. Tysabri also had new long-term (up to 6 years) efficacy data released (TOP study).

GA101 had positive trial results for chronic lymphocytic leukemia (CLL). Showed superiority to Rituxan. Usually does not discuss GA101 because partner Roche is "operationalizing the program." Additional data will be presented at ASH.

Expects to invest in new, high-quality Phase I and II asset acquisitions. Expects to have meaningful readouts on 6 candidates in 2014.

See also the Biogen-Idec product pipeline for information on Biogen Idec's Phase I and Phase II candidates.


Factor VIII FDA issue? There were no changes between the Phase III and the commercial product. We can't give more details at this time.

Tecfidera market share? We believe we were the leading oral MS therapy in the quarter, so probably in low-double digit range of total market share.

Clarify EU status of Tecfidera? Nothing to add because of complexity of the process. But we are getting closer to a decision.

MS market size expansion? We have seen acceleration in the switch market. We have only annecdotal evidence about returning quitters.

Lymphocyte monitoring on Tecfidera? The label is appropriate for monitoring patients for lymphocytes and white cells.

Share buy backs? Main aim is to compensate for share compensation dilution. As we generate cash we will continue to "look to be good stewards of shareholder value."

Tax rate implies high 20s or higher in Q4? Tax guidance was for the full year. In Q4 we think around 26%. Result of Tecfidera products in U.S. being robust.

GI intolerability with Tecfidera? It really varies from physician to physician. So far discontinuations are within expectations.

Oral MS competition? Impact in U.S. has been on the discontinuation from Tysabri JCV positive patients. Oral competition in Europe is mainly an execution issue.

Factor VIII manufacturing is done by Biogen in house. There is no jeapardy to approval, we are just talking about timelines.

Comment on increasing discounts for Tecfidera? We believe Tecfidera inventories are near a steady state. We expect gross to net characteristics to be similar to other MS products. As we progress we will have the normal commercial payer rebates.

Interferon MS franchise? We want to emphasize the convenience of the Avonex pen. Plegridy will be an extension to the franchise because of its ease of use.

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Copyright 2013 William P. Meyers