Analyst Conference Summary

conference date: October 20, 2009 @ 5:30 AM Pacific Time
for quarter ending: September 30, 2009 (third quarter)

At least at the time this summary was written.
Forward-looking statements

Overview: Continues solid performance, but revenue growth has slowed due to foreign exchange impact and other factors.

Basic data (GAAP):

Revenues were $1.12 billion, 3% sequentially from $1.09 billion and up 3% from $1.09 billion in the year-earlier quarter.

Net income was $279.6 million, up 95% sequentially from $143 million, and up 35% from $207.8 million year-earlier.

EPS (earnings per share) were $0.95, 94% sequentially from $0.49, and up 36% from $0.70 year-earlier.

Guidance:

Above $3.85 EPS for full 2009, with cash flow better. $2.97 GAAP EPS. $150 to $160 million capital expenditures for 2009. Revenue growth is expected to be in mid to high single digits, y/y.

Conference Highlights:

Hurt by normal seasonality and negative 4% foreign exchange impact, plus continuing expiration of Rituxan royalties overseas.

$1.12 non-GAAP EPS, up 14% y/y. $51 million amortization of intangible assets $8 million stock-based compensation excluded from GAAP to get this.

Share repurchase of up to $1 billion authorized in order to return part of $3 billion in cash to shareholders. This is in addition to prior program for share number stabilization. Will be able to fund future growth in the pipeline with future cash flow.

Product revenue was $802 million, up 6% y/y. Unconsolidated joint business revenue was $284 million, down 5%. Royalties were $35 million.

Revenue by product:

Avonex (interferon beta-1a) revenues $580 million, up 1% y/y. In U.S. revenue up 8%, but down 8% in international market. Believes can increase market share in the U.S. Sees no evidence of efficacy of biosimilars so far. Increased number of patients in U.S. on free program.

Tysabri (natalizumab) revenues $282 million, up 19% y/y. Patient growth slowed somewhat. Returned to number 1 switched-to therapy in the U.S.

Rituxan for NHL and RA (rheumatoid arthritis) produced $284 million revenue, down 5% y/y. Decline due to ongoing expiration of royalties outside the U.S. Units declined 1% y/y, compensated for by price increase.

Continued reports on Tysabri for MS (multiple sclerosis), with Elan, PML risk increases with number of Tysabri doses. May add this to label. PML is rare and outcomes when there is PML are now much better than in the past. Identifying PML risk factors and working on ways to mitigate PML. JC virus assay is being developed.

Reviewing biologics manufacturing capacity.

Cost of sales was $93.5 million. Research and development expense was $304.1 million. Selling, general and administrative $266.8 million. Amortization of intangibles $51.3 million. Profit sharing to collaborators $60.7 million. Leaving operating income of $384.2 million. Other income was $9.4 million. Taxes $113.9 million. Net income attributable to noncontrolling interests expense $1.9 million.

Pipeline

New BG12 registrational Phase III trials for MS fully enrolled.

Positive Factor IX (9) Phase I/II data for hemophilia B; now preparing for registrational study.

Daclizumab for MS decision to go to Phase III trials was made.

Lixivaptan BALANCE study enrolled enough patients to trigger a $20 million milestone payment.

Rituxan for follicular lymphoma maintenance had positive data. However, Rituxan for Lupus may be discontinued. Rituxan expansion to a larger population is delayed because the FDA has expressed concern about long term of B-cell depletion.

Fampridine-SR for MS vote was 10-2 in favor.

Ocrelizumab studies were stopped because of concerns about imbalances in opportunistic infections.

Numerous other therapies and indications are in studies ranging from pre-clinical to Phase III.

Q&A:

Ocrelizumab opportunistic infections? Not talking about type of infections. They were seen in Asia and we don't know why yet.

Fampridine-SR filing time moved up? We needed a pediatric plan for this MS therapy, and now have a verbal agreement with the NEA, now planning to file in early 2010.

Tysabri label change? We are not specifying how long patients should be treated, or recommending a termination date. The label change is mainly to harmonize about duration worldwide. Believes risk benefit for PML remains favorable.

Will discontinued programs impact R&D spending? It does have an impact, but we are not just turning them off automatically. We should have more visibility next quarter.

PML, JC virus assay? Looking at anti-JC virus assay. Still also looking at immune function assays.

BG-12 data for 52 weeks? The 2 trials are full 2 year trials. They will be completed before announcing data. Combination therapy trials could begin early next year.

Manufacturing capacity review is because new Tysabri process is four times as efficient as older process. We do, however, need backup capacity. On the whole, we may have too much capacity for the next 2 years.

Avonex U.S. market share loss? It is due to increased competitiveness. It will come back to old-fashioned marketing and messaging, much as we have done in international markets.

We are getting more clarity about long-term PML risk for Tysabri as we have more long-term patients. Our thinking is that even in the third year of treatment the risk is still within what is implied in the label. We are seeing only isolated cases of drug holidays.

Factor 8 program? IND has been submitted, we are waiting for feedback. Phase I trials would come soon after FDA feedback.

Deals to fill pipeline, now that some late-stage therapies are being dropped? Share buy-back is not about willingness to do deals. We continue to look for late-stage program deals.

Is 17 the new PML case number? We are no longer updating counts for analysts. We will update at medical meetings.

Less amortization of intangibles this quarter? This is based on economic useful life of assets from merger of Biogen and Idec. Q4 run rate should be about the same as Q3, then on into 2010 until the next reassessment.

Buy back impact on Q4 earnings? Due to timing there should not be any significant impact.

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