Analyst Conference Call Summary

Biogen Idec Corporation

conference date: October 22, 2014 @ 5:30 AM Pacific Time
for quarter ending: September 30, 2014 (third quarter, Q3 2014)

Forward-looking statements

Overview: Continued strong revenue and earning growth. But first PML death associated with Tecfidera sends a cautionary note.

Basic data (GAAP):

Revenues were $2.511 billion, up 4% sequentially from $2.421 billion and up 37% from $1.827 billion in the year-earlier quarter.

Net income was $856.9 million, up 19% sequentially from $723.1 million and up 76% from $487.6 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $3.62, up 20% sequentially from $3.01 and up 77% from $2.05 year-earlier.


Full year 2014 revenue growth is unchanged from prior guidance at between 38% and 41%. R&D is expected to be at the low end of the range of between 20% and 21% of total revenues. This includes $50 million in Q4 for business development opportunities. SG&A 22% to 23% of total revenue. Non-GAAP EPS between $13.45 and $13.55, with GAAP EPS between $12 and $12.10, which is a slight increase from prior guidance.

Conference Highlights:

Tecfidera launch continued to lead growth. Plegridy was approved and Eloctate was launched in the quarter. While Avonex and Tysabri had sequential declines, the overall multiple sclerosis franchise continued to gain market share.

Believes entering a period of growth propelled by new MS and hemophilia therapies.

Non-GAAP net income was $900 million, up 9% sequentially from $829 million and up 60% y/y. Non-GAAP EPS was $3.80, up 9% sequentially from $3.49 and up 61% y/y.

Tecfidera for MS (multiple sclerosis) revenues were $787 million, up 12% sequentially from $700 million. $638 million was U.S. revenue, $149 million international, with launches or reimbursement approvals in several European countries. Now over 100,000 patients treated. But the first Tecfidera case of PML (progressive multifocal leukoencephalopathy) resulted in the death of a patient. The patient had been part of the study to approve the therapy.

Avonex (interferon beta-1a) revenue was $741.8 million, down 4% sequentially from $773.8 million, but up 1% y/y from $733.4 million.

Tysabri (natalizumab) revenue was $501 million, down 6% sequentially from $533 million, and up 25% y/y from $401.0 million. Net new patient adds were positive. [See French Q2 payments note below]

Plegridy for MS revenue was $3.4 million in its first quarter of sales, with launches planned in multiple countries.

Rituxan and Gazyva for NHL, CLL and RA (rheumatoid arthritis) revenue was $290.7 million, down 4% sequentially from $303 million, and also down 4% from $303 year-earlier. This is the unconsolidated joint business revenue. This includes a $21 million expense related to the drug fee under ACA.

Alprolix for hemophilia B revenue was $25.3 million, up sequentially from $10 million in its first quarter of revenue.

Eloctate (recombinant factor VIII Fc fusion protein) for hemophilia A had $21.6 million revenue in its first quarter of sales. There appears to be broad interest in this longer-acting therapy.

Fampyra and Fumaderm revenue was $37 million, down 3% sequentially from $38 million, and up % from $33 million year-earlier.

Total product revenue was $2.12 billion, up 3% equentially from $2.06 billion and up 46% from $1.45 billion year-earlier.

Royalty revenue was $67.1 million, up sequentially from $40.3 million and up from $54.1 million year-earlier. Corporate partner revenue was $36.3 million, up sequentially from $21.5 million, and up from $16.9 million year-earlier.

Cash and equivalents (inlcuding marketable securities) balance ended at $3.2 billion.

Cost of sales was $302.6 million. Research and development expense $417.2 million. Selling, general and administrative expense $570.4 million. Amortization of acquired intangible assets $122.4 million. Fair value adjustment of contingent consideration $49.4 million gain. Total cost and expenses $1.36 billion. Gain on sale of rights $4.4 million. Leaving income from operations of $1.15 billion. Other expense $16.3 million. Income taxes $274.8 million. Equity loss $5.4 million. Loss to noncontrolling interests $0.7 million.

Tecfidera is and will be generating royalty payments in the future, which will affect cash flow.

In making sequential comparisons, recall that in Q2 the agreement with the Italian National Medicines Agency re payments for Tysabri from February 2013 to March 2014 had benefited non-GAAP EPS by $0.015 and GAAP EPS by $0.13.

Plegridy (peginterferon beta-1a) for MS received approval in Europe during the quarter.

Zinbryta (Daclizumab-HYP Phase) III DECIDE data readout showed superior efficacy compared to IFN-beta-1a in reducing annualized MS relapse rate. Would be a once-monthly subcutaneous therapy. Preparing application for approval.

Anti-LINGO is in 2 Phase II studies, one for acute optic neuritis and one for MS. Top-line data is due in January 2015.

Is strengthening the Biogen pipeline by hiring a number of highly-accomplished scientists.

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


Tecfidera growth rate reduction? There was no major one-time nature influence. We expected Tecfidera's growth rate to moderate over time. We are on plan.

PML patient, had he been on Tysabri too? This patient had not been on Tysabri, but did have severe lymphopenia for 3 years. We believe this is a case that results from the lymphopenia, not Tecfidera use. There is lymphopenia screening advised on the current Tecfidera label.

Plegridy, capturing share from other interferons, and price reductions? Interferon still is used by over half of patients, but its use was already declining. We think Plegridy is the leading interferon and should take share from the other interferons on the market.

Sequential growth weakness in quarter, is it the new normal? As we move into 2015 we will give expectations for growth rates for the future. We are optimistic that we can do better than 3% sequentially. Tecfidera rollout should help, with some larger market reimbursement approvals still ahead. Plegridy launch is just starting.

PML patient, was it first for Tecfidera? This is the first. He was part of the ENDORSE study and was on the drug for 4 years, with over 3 years of lymphopenia, which is a risk factor for PML.

Anti-LINGO MVP? We don't use MVP as a clinically meaningful endpoint, just as a biological measure.

Tecfidera life-cycle management? It is a key issue for us, we are doing a lot of work on it. We are looking for incremental improvements, including for efficacy.

Daclizumab commercial positioning? Phase III data was encouraging, we believe it has a place in the market.

We are very comfortable with our IP situation in 514 dosing patents, re Forward Pharma and their IPO.

Would you prefer that severly lymphopenic patients not be on Tecfidera? We are not in a position to make medical recommendations. Tecfidera does result in lymphopenia for a small proportion of patients. We have reported this case to the regulatory authorities. But what is done with the lymphocyte results is up to the physician caring for the patient.

Types of patients starting Eloctate and Alprolix? The vast majority are existing patients looking for a longer-acting therapy.

Hemophilia long-term strategy? We have pre-clinical research programs to eventually bring new therapies to market. This includes a gene therapy program.

Reduced business development spend guidance? Our capabilities are already at an all time high. But you never know when discussions can turn into a deal. Tuck-in acquisitions have the potential to give shareholders outsize returns, as we have seen.

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