Analyst Conference Summary


conference date: April 11, 2007 @ 2:00 PM PT
for quarter ending: March 31, 2007 (Q1 2007)

Forward-looking statements

Overview: Solid continuing growth in revenues and profits. Some strengths and weaknesses in invididual drug sales.

Basic data:

Revenues were $2.843 billion, up 4.7% sequentially from $2.714 billion and up 43% from Q1 2006.

GAAP net income was $706 million for an EPS of $0.66, up 69% from year-earlier.

Non-GAAP net income claimed $782 million, or EPS of $0.74, up 61% from year-earlier.

$4.9 billion in cash and equivalent investments.


Expect sales to collaborators to be lower in remainder of 2007, but 2007 will still double compared to 2006.

Royalties to grow 25% 2007 over 2006.

EPS 25% to 30% growth relative to 2006 for all 2007.

Conference Highlights:

Net U.S. product sales were $2.037 billion, up 30% from year-earlier, by product as follows:

 Sales (millions) Q1 2007 Q1 2006 % change








































Sales to collaborators were $292 million. Total product sales were $2.329 billion. Royalties were $419 million. Contract revenue was $95 million.

Non-GAAP, cost of sales was $376 million. Research and development expense was $572 million. Marketing, general and administrative expense was $445 million. MG&A expenses to ramp up in remainder of year, but will continue to be 17 to 18% of revenues. 37% non-GAAP tax rate.

$100 million in employee stock-based compensation expense in quarter.

$550 million free cash flow. $392 million on share repurchases.

With Biogen Idec asked FDA to expand Rituxan use to inhibition of structural damage from rheumatoid arthritis. Completed Phase II/III enrollment for Rituxan for systemic lupus glioblasoma multiforme and Phase II glioblasoma multiforme; four Phase II Avastin studies for small cell lung cancer, matastatic melanoma and breast cancer. Also decided to go ahead with Phase II trials of Apomab and Apo2L/TRAIL. Many more updates on pipeline study plans. There are lots of milestones in Q2.

FDA requested additional safety information on Xolair label, which may have impacted sales towards the end of the quarter. Talking to FDA about updating language.

Lucentis uses 6 doses the first year, physicians intend to use 4 doses in second year.

Tanox acquisition still likely to close in first half of 2007.


$43 million Avastin sequential increase source? Tracking does not go that deep, but mostly lung cancer, a bit of breast cancer, not gaining market share in colorectal cancer.

Rituxan percentage from immunology? Hard to split out oncology from immunology. Last year was $135 immunology out of $2 billion cancer. So small percentage.

Avastin dosing? Avail data not yet presented. Avail data is an outlier. Will be continuing to evaluate low v. high dose results. High dose seems to be needed for survival improvement.

Lucentis in pre-filled syringe? No timeline yet, but working on it. Does require a supplemental filing for pre-filled.

Lucentis? NEI initiatives? Has concerns about safety of Avastin versus Lucentis trials. Looking at DME (macular edema) trials.

Avastin second-line pickup? Has seen some use and growth in second line. Believes has 25% with potential to go to 55% for first-line, so that is main source of growth.

Is very happy with Lucentis safety profile, does not know about Avastin because IND was done by another company.

Omnitard with Herceptin? Don't know yet, learning about the HER pathways. Has not seen enough data.

25% Avastin patients on lower dose? Seems to follow physician choice, perhaps for fragile patients. No hard data.

Possible HER2 negative patients being treated? Not seen any evidence of that. Can always be wrongly-identified patients.

Data shows Avastin is active in non-small cell lung cancer. But survival is always worse in lung cancer than in breast and colorectal cancer.

Zolair anaphylaxis risk? Would give physicians information on how long to monitor for adverse events.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2007 William P. Meyers