Analyst Conference Call Summary

conference date: January 29, 2015 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2014 (fourth quarter, Q4 2014)

Forward-looking statements

Overview: Continued rapid revenue and profit ramp. Very strong Tecfidera ramp.

Basic data (GAAP):

Revenues were $2.64 billion, up 5% sequentially from $2.511 billion and 34% from $1.97 billion in the year-earlier quarter.

Net income was $883.5 million, up 3% sequentially from $856.9 million and up 93% from $457.3 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $3.74, up 3% sequentially from $3.62 and up 95% from $1.92 year-earlier.

Guidance:

For the full year 2015 revenue is expected to grow 14% to 16% over 2014. GAAP EPS expected between $15.45 and $15.85; non-GAAP EPS $16.60 to $16.70. $400 to $450 million capital expenditures, notably for manufacturing capability and IT infrastructure.

Conference Highlights:

Outstanding revenue ramp of Tecfidera led the way; it is now the most-prescribed oral MS therapy in the U.S. 2014 was a very successful year for Biogen Idec.

Non-GAAP net income was $966 million, up 7% sequentially from $900 million and up 73% y/y. Non-GAAP EPS was $4.09, up 8% sequentially from $3.80 and up 74% y/y. The main item excluded to get non-GAAP numbers was $101.4 million of amortization of acquired intangibles.

Tecfidera for MS (multiple sclerosis) revenues were $916.0 million, up 18% sequentially from $778 million and up 130% from $397.6 million year-earlier.

Avonex (interferon beta-1a) revenue was $736.0 million, down 1% sequentially from $741.8 million, and down 2% y/y from $751.5 million.

Tysabri (natalizumab) revenue was $483.9 million, down 3% sequentially from $501 million, and up 13% y/y from $426.6 million. Positive new patient adds in quarter.

Plegridy for relapsing MS revenue was in its second quarter of sales, at $41.1 million way up sequentially from $3.4 million, with launches planned in multiple countries.

Rituxan and Gazyva for NHL, CLL and RA (rheumatoid arthritis) revenue was $305 million, up sequentially from $290.7 million. This is the unconsolidated joint business revenue.

Alprolix for hemophilia B revenue was $40.3 million, up sequentially from $25.3 million in its second quarter of revenue. Most patients are choosing to take it once weekly.

Eloctate (recombinant factor VIII Fc fusion protein) for hemophilia A had $36.8 million following $21.6 million revenue in its first quarter of sales. This is a competitive market, requiring more educational effort.

Fampyra revenue was $18.5 million, up 7% from $17.3 million year-earlier.

Fumaderm revenue was $14.4 million, up 2% from $14.1 million year-earlier.

Total product revenue was $2.29 billion, up 8% sequentially from $2.12 billion and up 42% from $1.61 billion year-earlier.

Royalty revenue was $31.4 million, down sequentially from $67.1 million and down from $60.6 million year-earlier. Corporate partner revenue was $17.8 million, down sequentially from $36.3 million, and down from $28.7 million year-earlier.

Cash and equivalents (including marketable securities) balance ended at $3.32 billion. $585 million notes payable liability.

Cost of sales was $297.3 million. Research and development expense was $500.1 million. Selling, general and administrative expense $573.6 million. Amortization of acquired intangible assets $107.2 million. Fair value adjustment of contingent consideration $7.3 million expense. Total cost and expenses $1.49 billion. Gain on sale of rights $4.6 million. Leaving income from operations of $1.16 billion. Other expense $9 million. Income taxes $268 million (including a benefit from the R&D tax credit). Loss to non-controlling interests $0.9 million.

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

Major potential R&D pipeline events in 2015 include data for BIIB037 for Alzheimer's; anti-LINGO for acute optic neuritis; Neublastin for neuropathic pain; and Tysabri in secondary progressive MS and stroke ASCEND data. ZNBRYTA for MS had positive Phase III results and will file for approval this year.

Biogen is also working to bring biosimilars to market.

In January a collaboration with Columbia U. was announced for genetic discovery, and a collaboration with San Raffaele Hospital in Italy for gene therapy for hemophilia. Biogen also agreed to acquire Convergence Pharmaceuticals which specializes in neuropathic pain, including a candidate that demonstrated positive Phase 2 data.

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

Q&A:

Tecfidera weakness outside the U.S.? We are happy about how things are moving along. We are doing better as we launch country by country.

Dose, Phase 3 trials BIIB037 for Alzheimer's? In discussion with regulators. The intent is to try to design a study that reproduces the type of patient in the Phase 1b study and with the same endpoints. We will give details on the study when we start enrolling patients. There are still a couple of blinded cohorts in the 1b study; we won't choose a dose until we see that data.

Clinical significance vs. statistical significance in Alzheimer's? CDR is a better endpoint for prodromal and mild disease. Our current view is we believe we have seen a treatment effect that is sufficient to meet the criteria for clinical significance.

Interferon MS franchise group, can it grow this year? Growth is a bit of a stretch. It depends on how fast orals move along. We believe there is something special about Plegridy as an interferon, which could possibly drive growth.

AVCR class when Copaxone goes generic (re biosimilars)? An unbranded Copaxone should not have an effect on interferons.

Anti-LINGO plans? There won't be much more data on Optic Neuritis after AAN meeting. The MS study is fully enrolled. We will look at data internally at the 12 month line to begin discussions with regulators. We want endpoints that correlate well with remyelination.

Competition in Hemophilia A market? Eloctate is going to plan, we knew we had to do education and get leaders started. The product profile should create a virtuous cycle of patient adoption.

New gene therapy program for hemophilia? It is using a lenti-virus in system delivery mode. It is an early program with intriguing data, but a number of technical hurdles.

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