Analyst Conference Call Summary

Biogen Idec Corporation

conference date: January 29, 2014 @ 5:00 AM Pacific Time
for quarter ending: December 31, 2013 (fourth quarter, Q4 2013)

Forward-looking statements

Overview: Excellent sequential and y/y revenue growth.

Basic data (GAAP):

Revenues were $1.966 billion, up 7% sequentially from $1.828 billion, and up 39% from $1.418 billion in the year-earlier quarter.

Net income was $457.3 million, down 6% sequentially from $487.6 million, but up 56% from $292.1 million year-earlier.

EPS (earnings per share, diluted) were $1.92, down 6% sequentially from $2.05, but up 56% from $1.23 year-earlier.


For the full year 2014, estimated revenue growth rate of 22% to 25%. R&D expense targeted at 20% to 22% of total revenue. SG&A 22% to 23% of total revenue. Non-GAAP EPS $11.00 to $11.20. GAAP EPS $9.74 to $9.94. Capital expenditures $300 million. Tecfidera is expected to be the largest contributor to revenue growth, with a Q1 approval in Europe. Also plans on a mid-year launch in Plegridy, but little revenue from new hemophilia products.

Conference Highlights:

2013 was a very good year for Biogen Idec and its patients, including the successful launch of Tecfidera. Believes Biogen now has the leading oral, injectable, and high efficacy products for multiple sclerosis. Global MS market share grew.

Preparing for three major product launches in 2014.

Non-GAAP net income was $557 million, down 1% sequentially from $561 million. Non-GAAP EPS was $2.34, down 0.5% sequentially from $2.35 and up 65% y/y.

Tecfidera for MS (multiple sclerosis) (formerly BG-12, dimethyl fumarate) revenues were $398 million, up 39% sequentially from $286. However, $42 million was inventory build, indicating underlying demand was $348 million. The dimethyl fumarate in the therapy was ruled a new active substance by CHMP, providing 10 years of exclusivity in the European Union. If approved in Europe will launch first in Germany. Uptake in the U.S. has been broad and rapid. Over 30% of new Tecfidera patients were not on a previous therapy.

Avonex (interferon beta-1a) revenue was $751, up 2% sequentially from $733 million, but flat y/y. $475 million was U.S., $277 million international. Believes injectables will decline over time, but remain meaningful in the mid-term.

Tysabri (natalizumab) revenue was $427 million, up 6% sequentially from $401 million, and up 45% y/y. Tysabri remains the therapy of choice for patients needing high efficacy. But in Europe seeing competition from oral therapies. Expects marketing approval decision in Japan in 2014.

Rituxan for NHL, CLL and RA (rheumatoid arthritis) revenue was $269 million, down 11% sequentially from $303 million, and down 4% from year-earlier.

Fampyra and Fumaderm revenue was $31 million, down 6% sequentially from $33 million, but up 19% from $26 million year-earlier.

Royalty revenue was $60.6 million, up sequentially from $54 million. Corporate partner revenue was $28.7, up sequentially from $17 million

Cash and equivalents balance ended at $1.8 billion. $ million was spend for stock repurchases. Notes payable $695 million.

Cost of sales was $258.6 million. Research and development expense $422.2 million. Selling, general and administrative expense $522.9 million. Amortization of acquired intangible assets $109.4 million. Fair value adjustment of contingent consideration $2.4 million gain. Total cost and expenses $1.31b billion. Gain on sale of rights $7.6 million. Leaving income from operations of $657.9 million. Other expense $5.4 million. Income taxes $190.3 million. Equity loss $5.0 million.

Tax rate 28.8%, expected to stay nearly flat in 2014 then decline starting in 2015.

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 2013. 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. Meanwhile positive phase III data was published in Blood. Preparing for U.S. launch this year.

Alprolix for hemophilia B submission was made to FDA. Detailed results of Phase III were published in the New England Journal of Medicine. Preparing for U.S. launch this year.

Biogen exercised its right to enter into an agreement Samsung Bioepis to commercialize anti-TNF candidates in Europe for immunological diseases. Biogen, after the end of the quarter, partnered with Sangamo BioSciences for therapies for hemoglobinopathies.

In November Gazyva for CLL (chronic lymphocytic leukemia) was approved by the FDA. Gazyva is owned by Genentech, but Biogen Idec is responsible for 35% of commercialization costs and will receive 35% to 39% of the profits upon achieving certain sales milestones.

Expects to invest in new, high-quality Phase I and II asset acquisitions. Expects to have meaningful readouts on 6 candidates in 2014. Anti-Lingo is in 2 phase 2 proof of concept studies to improve conduction in the optic nerve and relapsing MS. Neublastin is in trials for pain relief and nerve repair.

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

Full year 2013 revenue was $6.9 million, up 26% y/y.


Any deals envisioned for 2014? We have earmarked $200 million for business development in 2014. We are looking for late pre-clinical, Phase I and Phase II compounds. Also to improve our platforms for internal R&D.

Copaxone competition? It will create noise in the marketplace and put 85,000 patients in play for switch. It will add to the toolkit the payers have to add to pricing pressures. It is figured into guidance.

What is your target return for R&D spend? Nothing specific, but we don't want to continue spending on projects that are not likely to have a good outcome. We eliminated some earlier projects. All our candidates are good bets, but that does not mean they will all succeed.

Anti-Lingo science details? It does cross the blood-brain barrier well, as shown in the Phase I trial, in doses equivalent to the animal model. Only choose one dose, the highest dose, for this proof-of-biology study to measure remyelination. In vitro it showed cells undergoing mylenation. Also shown in lingo-knocked out mice, and in mice with myelin destroyed in various ways. In the relapsing-remitting study, with 4 different doses, we are also learning about endpoints for the design of the Phase III study.

Tysabri SPMS market? There are 2 SPMS theories: it is purely neuro-degenerative; ongoing inflamation behind the blood-brain barrier. Tysabri disrupts the formation of lymphoid follicles that generate the immune response. We have a SPA agreement with the FDA for the novel endpoint. We are cautiously optimistic.

Tecfidera inventory? The five weeks of inventory includes specialty pharmacies and wholesale. Two weeks wholesale, 3 weeks SPTs. We believe that is the run rate going forward.

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Copyright 2014 William P. Meyers