Analyst Conference Call Summary

conference date: April 24, 2015 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2015 (first quarter, Q1 2015)

Forward-looking statements

Overview: Continued strong y/y revenue and earnings ramp, but that is the minimum needed to support a high P/E ratio.

Basic data (GAAP):

Revenues were $2.55 billion, down 3% sequentially from $2.64 billion and up 20% from $2.13 billion in the year-earlier quarter.

Net income was $822.5 million, down 7% sequentially from $883.5 million and up 71% from $480.0 million in the year-earlier quarter.

EPS (earnings per share, diluted) were $3.49, down 7% sequentially from $3.74 and up 73% from $2.02 year-earlier.

Guidance:

Not updated for full 2015. See Q4 2014

Conference Highlights:

The company that was Biogen Idec is now just plain ol' Biogen.

Commercial results in the quarter were not as good as management had hoped. There was some impact from foreign exchange rates, despite hedging.

Biogen continued to gain share in the multiple sclerosis (MS) market, but not as quickly as in the past. Growth in Tecfidera has begun to moderate but was up 63% y/y, and the ramp of Plegridy continues. Tecfidera sales were likely hurt by the report of its first PML case last year.

Non-GAAP net income was $900 million, down 7% sequentially from $966 million and up 53% y/y. Non-GAAP EPS was $3.82, down 7% sequentially from $4.09 and up 55% y/y.

Total product revenue was $2.17 billion, down 5% sequentially from $2.29 billion but up 25% from $1.74 billion year-earlier.

*unconsolidated joint business revenue

Royalty revenue was $19.8 million, down sequentially from $31.4 million and down from $37.9 million year-earlier. Corporate partner revenue was $32.2 million, up sequentially from $17.8 million, and down from $52.2 million year-earlier.

Cash and equivalents (including marketable securities) balance ended at $3.5 billion. $581 million notes payable liability.

Cost of sales was $312.4 million. Research and development expense was $460.5 million. Selling, general and administrative expense $560.4 million. Amortization of acquired intangible assets $95.9 million. Fair value adjustment of contingent consideration $7.8 million expense. Total cost and expenses $1.44 billion. Leaving income from operations of $1.12 billion. Other expense $15 million. Income taxes $281.9 million. Loss to non-controlling interests $2.4 million.

In March Biogen presented Phase 1data for BIIB037 (aducanumab) for Alzheimer's. The therapy will go straight to a Phase 3 trial later this year. There will be two identical 1300 subject placebo-controlled trials, evaluating 2 doses in each trial. Some subjects will be early Alzheimer's patients who may not yet be diagnosed, both carriers and non-carriers.

Phase 2 data presented in January for anti-LINGO for acute optic neuritis showed it has the ability to remyelinate damaged neurons. Phase 2 data for MS will be available in 2016.

Other major potential R&D pipeline events in 2015 include data for Neublastin for neuropathic pain; Phase 3 data for Tysabri in secondary progressive MS; Phase 2 data for Tysabri in acute ischemic stroke; and Phase 2 data for Neublastin for neuropathic pain.

In January Biogen entered a partnership with Google Life Sciences for analytical tools for MS. Biogen also joined a worldwide collaboration to develop gene therapies for hemophilia.

Biogen is also working to bring biosimilars to market. Partner Samsung Bioepis received European acceptance of its etanercept (Enbrel) and infliximab (Remicade) biosimilars.

Biogen acquired Convergence Pharmaceuticals in February.

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

Q&A:

Tecfidera and PML? We are seeing more hesitancy among patients, the physicians not so much. There is not real change in the risk/benefit of the drug.

Aducanumab for Alzheimer's trial concerns? The placebo group behaved as expected. Keep in mind they were confirmed with amyloid, unlike previous placebo groups. On the unblinding issue, we anticipated the problem and had safeguards in place. Raters were not the treating physicians. 92% of ARIA (amyloid imaging related abnormalities) events were soon after dosing, while the treatment results came much later. There is still a lot to learn about ARIA.

Aducanumab 6 mg dose cohort that did not perform as well at 26 weeks? Our view is that the results were roughly in line with what we expected. The real data will be at the 54 week time point.

On Anti-Lingo, dosing and cost of goods? The study was a proof of biology study. We are not planning to go into acute optic neuritis per say. We wanted to prove remyelenation in man, with safety, so we did a large dose. Twice as many in the treated group as in the placebo group returned to normal latency, which indicated myelenation. The Phase 2 study is exploring a range of doses so we can pick the minimum effective dose.

Subcutaneous dosing of BIIB037? The Phase 3 trial will do dosing like the Phase 1b, but we are thinking about more convenient dosing regimes. Typically that would be a bridging study, if confirmed by the regulators.

Final meeting with FDA on 037? We are still in active discussions, but we feel we have nailed down a lot of key issues. There are a few remaining issues, and we want to be able to meet regulatory requirements around the world.

Tecfidera gross to net in quarter? We saw the ratio drift upward compared to the last 4 quarters because of the normal Q1 donut hole and an adjustment in managed care.

037 Titration? We will likely begin the Phase 3 data before the titration readout, given our confidence.

Cash balance, will you do any close to market asset deals? We have no formal strategy that says we will only in-license early stage therapies. We do look at value as well as data. We are not changing our strategy.

TOW inhibitor, how soon to clinic? We have a couple of different approaches, both pre-clinical. The antibody approach is likely to move into the clinic next year. We are beginning to look at combination therapies, and we see the market moving in that direction long term.

Tysabri and therapy for stroke? Data should come in the second half of 2015. There is data showing the size of the infarction is reduced by this pathway. There is a cascade that Tysabri should block, limiting the growth of an infarc.

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