Analyst Conference Call Summary

conference date: July 23, 2014 @ 6:00 AM Pacific Time
for quarter ending: June 30, 2014 (second quarter, Q2 2014)

Forward-looking statements

Overview: Strong sales and profits, including a boost from recognition of $54 million of previously deferred revenue due to a price dispute with Italy. Increased full year guidance.

Basic data (GAAP):

Revenues were $2.421 billion, up 14% sequentially from $2.129 billion and up 75% from $1.386 billion in the year-earlier quarter.

Net income was $723.1 million, up 51% sequentially from $479.9 million and up 47% from $490.7 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $3.01, up 49% sequentially from $2.02 and up 46% from $2.06 year-earlier.

Guidance:

Increased full year 2014 guidance. Now includes about $96 million of revenue from Italy agreement, compared to prior guidance, but also stronger Tecfidera revenue.

Revenue growth is expected between 38% and 41% y/y. R&D expense is expected to be 20% to 21% of total revenue. SG&A expense 22% to 23%.

Non-GAAP EPS estimated between $12.90 and $13.10. GAAP EPS $11.26 to $11.46.

Conference Highlights:

Tecfidera launch continued to lead growth.

Non-GAAP net income was $829 million, up 41% sequentially from $587 million and up 52% y/y. Non-GAAP EPS was $3.49, up 41% sequentially from $2.47 and up 52% y/y.

The agreement with the Italian National Medicines Agency re payments for Tysabri from February 2013 to March 2014 benefited non-GAAP EPS by $0.015 and GAAP EPS by $0.13.

Tecfidera for MS (multiple sclerosis) revenues were $700 million, up 38% sequentially from $506 million. $585 million was U.S. revenue, $115 million international, mostly from the launch in Germany. Believes can make progress against competing oral therapies in Europe. Received a favorable pricing decision in the U.K.

Avonex (interferon beta-1a) revenue was $773.8 million, up 2% sequentially from $761 million, and flat y/y from $774.4 million.

Tysabri (natalizumab) revenue was $533 million, up 21% sequentially from $441 million, and up 38% y/y from $387 million. This includes the $54 million recognition of deferred revenue from Italy. Revenue will be booked at the full reimbursed price in Italy going forward. Obtained marketing approval in Japan.

Rituxan for NHL, CLL and RA (rheumatoid arthritis) revenue was $303 million, up 2% sequentially from $296.9 million, and up 5% from $289 year-earlier. This is the unconsolidated joint business revenue.

Alprolix for hemophilia B revenue was $10 million; first quarter of revenue. Obtained marketing approval in Japan in July.

Eloctate (recombinant factor VIII Fc fusion protein) for hemophilia A was approved by the FDA in the quarter. Believes label is favorable.

Fampyra and Fumaderm revenue was $38 million, up 9% sequentially from $35 million, and up 15% from $33 million year-earlier.

Total product revenue was $2.06 billion, up 48% from $1.39 billion year-earlier.

Royalty revenue was $40.3 million, up sequentially from $37.9 million and up from $38.1 million year-earlier. Corporate partner revenue was $21.5 million, down sequentially from $52.2 million, but up from $10.7 million year-earlier.

Cash and equivalents (inlcuding marketable securities) balance ended at $2.58 billion. Debt and liabilities was $3.3 billion. $340 million was used to repurchase sales.

Cost of sales was $291.9 million. Research and development expense $447.3 million. Selling, general and administrative expense $576.6 million. Amortization of acquired intangible assets $116.8 million. Fair value adjustment of contingent consideration $4 million gain. Total cost and expenses $1.43 billion. Gain on sale of rights $3.9 million. Leaving income from operations of $988.7 million. Other income $4.9 million. Income taxes $268.5 million. Equity loss $1.9 million. Loss to noncontrolling interests $8.6 million.

Plegridy (peginterferon beta-1a) for MS received a positive CHMP opinion in Europe and just this morning received an approval in Europe.

Daclizumab-HYP Phase III data readout showed strong efficacy in relapsing remitting MS. 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 the second half of 2015.

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

Q&A:

Tecfidera compliance? Very pleased with quarter results from both Europe and U.S. We are using the number of pills a patient uses in a month is what we mean by compliance. We think discontinuations are about as expected.

M&A, domestic & foreign tax strategy? Inversion is something we have thought about over the years. Our asset purchase agreement with Elan, we thought about it then. Our effective tax rate results from the Rituxan cash flow from the U.S. So redomiciling without IP migratin would not affect the Rituxan tax rate. We don't think redomiciling is sufficient reason alone for a business combination. For Biogen, for long-term shareholders, such a combination would result in a meaningful capital gain [and taxes from that].

Domains for mid-stage deals? Continue strategy to build out pipeline to generate value. Nothing different than in the past. We have money in the budget for additional deals, but that does not mean we will spend it. We we keep to our current areas of expertise.

The Anti-LINGO study is designed to capture as much information about re-mylenation as we can. It also helps us with earlier-pipeline therapies also aiming at re-mylenation. In Phase 3 we would hope to cause improvements in MS patients, as opposed to the current paradigm of stabilizing the disease.

German price for Tecfidera? It is in the low 20s in Euros annually, or about $30,000 per year. But the price will be renegotiated in 2015.

LINGO MS study result timing details? Our internal team will have access to the 12 month data, but to prevent bias, after the study is complete, we will disclose in 2016. The timing of re-mylenation, axon preservation, and mental responses requires the full 18 months.

Capital allocation, dividend, buy-back? We have rebuilt the cash position over the past 12 months. Our strategic bias for cash is tuck-in acquisitions. But we still should have excess cash over the next few years. Stockholders have various preferences for returning cash, but we have made no decision yet.

Lingo plus Avonex? In DAE it is not surprising adding Avonex does not improve Lingo. What we might use with Lingo in Phase III has not been determined yet.

Alprolix early adopters, Eloctate? We are please with Alprolix introduction. It is a very patient-driven market. We have captured some early adopters, but the harder work begins now. It it too early to comment on Eloctate's performance, but it is easier for competitors to counter-position to Eloctate than to Alprolix.

IPF drugs with XGS100? At the moment the issue of combination vs. later stage patients can be throught about in a variety of ways. We are still looking at the intermune and BI study. They have different safety profiles, with intermune "having a leg up." The differential mechanisms lend themselves to multiple entries or combination.

Alzheimer's program? A drug that binds to soluble forms has a hard time getting to the plaque. We seek to remove the plaque, which is the core of the problem.

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