Analyst Conference Call Summary

conference date: April 23, 2014 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2014 (first quarter, Q1 2014)

Forward-looking statements

Overview: Another quarter of strong revenue growth, but earnings grew more slowly due to greatly increased R&D and SG&A expense.

Basic data (GAAP):

Revenues were $2.129 billion, up 8% sequentially from $1.966 billion and up 51% from $1.415 billion in the year-earlier quarter.

Net income was $479.9 million, up 5% sequentially from $457.3 million and up 12% from $426.7 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $2.02, up 5% sequentially from $1.92 and up 13% from $1.79 year-earlier.

Guidance:

Updated full-year 2014 guidance up. Revenue expected up 26% to 28% y/y. R&D expense to run 20% to 22% of revenue. SG&A 22% to 23% of revenue. Non-GAAP EPS between $11.35 and $11.45. GAAP EPS between $9.85 and $9.95.

Conference Highlights:

Y/Y revenue growth was driven by Tecfidera sales and from acquisition of complete rights for Tysabri.

Preparing for three major product launches in 2014.

Non-GAAP net income was $587 million, up 5% sequentially from $557 million and up 25% y/y. Non-GAAP EPS was $2.47, up 5.5% sequentially from $2.34 and up 25% y/y. Excludes $4.9 million stock option expense, $139.8 amortization, a $0.8 million benefit from contingent consideration, and a positive $37 million tax impact.

The new Alzheimer's disease collaboration with Eisai resulted in $118 million in R&D expense in the quarter, including a $100 million up-front payment. Also y/y comparisons for net income were difficult because of a tax benefit in Q1 2013 that did not recur in 2014.

Alprolix for hemophilia B was approved in the U.S. and Canada, but did not show significant revenue in the quarter, as the FDA approval came near the last day of the quarter. Launch is expected in early May.

Tecfidera for MS (multiple sclerosis) (formerly BG-12, dimethyl fumarate) revenues were $506 million, up 27% sequentially from $398 million. Approved in Europe in February and off to a "solid start" in Germany. Tecfidera has expanded the U.S. MS market and become the number one oral therapy.

Avonex (interferon beta-1a) revenue was $761 million, up 1% sequentially from $751 million, and up 2% y/y.

Tysabri (natalizumab) revenue was $441 million, up 3% sequentially from $427 million, and up 41% y/y. Tysabri remains the therapy of choice for patients needing high efficacy. But in Europe seeing competition from oral therapies. Obtained marketing approval in Japan.

Rituxan for NHL, CLL and RA (rheumatoid arthritis) revenue was $296.9 million, up 10% sequentially from $269 million, and up 12% from $264.6 year-earlier. This is the unconsolidated joint business revenue.

Fampyra and Fumaderm revenue was $35 million, up 13% sequentially from $31 million, and down 8% from $38 million year-earlier.

Royalty revenue was $37.9 million, down sequentially from $60.6 million but up from $32.8 million year-earlier. Corporate partner revenue was $52.2 million, up from $21.9 million year-earlier.

Cash and equivalents balance ended at $2.0 billion. Debt was $591 million.

Cost of sales was $279.2 million. Research and development expense $528.9 million. Selling, general and administrative expense $511.7 million. Amortization of acquired intangible assets $143.3 million. Fair value adjustment of contingent consideration $0.8 million gain. Total cost and expenses $1.46 billion. Gain on sale of rights $3.9 million. Leaving income from operations of $671.3 million. Other expense $5.6 million. Income taxes $178.4 million. Equity loss $7.6 million. Loss to noncontrolling interests $0.2 million.

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. The FDA extended the PDUFA date for three months, but Biogen still sees its commercial 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. In April positive data was released from the Kids A-LONG Phase 3 study for children with severe hemophilia A. Preparing for U.S. launch this year.

In January entered into a collaboration with Sangamo BioSciences for hemoglobinopathy therapies. In March entered into a collaboration with Eisai for two Alzheimer's clinical candidates.

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.

William D. Young will retire from his position as Chairman of the Board of Directors. Stelios Papadopoulos will become Chairman of the Board at the annual meeting.

Q&A:

Biomarkers in MS, in particular Lingo? Biomarkers are an important part of our research activities. We are looking for markers for aggressiveness of the disease. We would like to have algorithms to predict responsiveness and safety for particular patients to our particular therapies. There is Lingo data that indicates lesions have cells capable of re-myelination, but are blocked by Lingo.

Gross to net in hemophilia? Suggests gross to net is higher than in MS. It depends a lot on the mix of the patients, particularly those going to 340b centers.

Tecfidera, by patient pools in Europe? It is the third oral to market in Europe, so it will take some work to get a response. We are encouraged by our German experience. It is too early to comment by type of customer. Our focus is currently getting access to customers.

Cash payment on Fumaderm? Yes, believe was $25 million paid in Q1 for Q4 sales.

Why is Avonex doing so well? Tecfidera has probably taken more patients from high-dose high-frequency interferons than from Avonex.

Eisai transaction is essentially a 50/50 split with some country exceptions, in particular Japan. This includes development costs and profits.

We consciously made the decision to not be "penny wise and pound foolish" in SG&A spending. We are making sure we appropriately fund the launches this year. Later we will try to get SG&A leverage.

Tecfidera inventory? We likely will see a flattening of inventory in the channel going forward.

New Tecfidera USA patients, types? Profile has been stable. At first we got a large portion of newly diagnosed and switched. Same today, but some change in nature of switch pool. We think Tecfidera is keeping people from leaving the market.

Phase I data for anti-Lingo shows we are getting drugs into the brain in amounts that were effective in the animal model. But relatively more get delivered to a new lesion than to established lesions.

Tysabri low sequential growth, was it due to Tecfidera? There has been noise in the last 5 quarters due to inventory movement. In Q1 2014 had 12 shipping weeks, while all quarters in 2013 had 13 shipping weeks. Overall, looking at adds and discontinuations, the metrics are moving in the right direction despite some patients moving to Tecfidera.

Tecfidera dropout rates due to GI issues? We don't say any strong signal that GI (gastrointestinal) dropouts are moving up or down, and we do monitor that.

Anti-Lingo time of trial vs. steroid response? We took the response times into effect in powering the trial. It is a double-blind trial with respect to standard of care.

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