Analyst Conference Call Summary

Biogen Idec Corporation

conference date: July 25, 2013 @ 5:00 AM Pacific Time
for quarter ending: June 30, 2013 (second quarter, Q2 2013)

Forward-looking statements

Overview: Strong revenue and profit growth led by introduction of Tecfidera. Increased 2013 guidance.

Basic data (GAAP):

Revenues were $1.723 billion, up 22% sequentially from $1.415 billion and up 21% from $1.421 billion in the year-earlier quarter.

Net income was $490.7 million, up 15% sequentially from $426.7 million and up 27% from $387.1 million year-earlier.

EPS (earnings per share) were $2.06, up 15% sequentially from $1.79, and up 28% from $1.61 year-earlier.


2013 guidance was increased. Revenue growth y/y is now expected near 22% to 23%. Non-GAAP diluted EPS between $8.25 and $8.50, and GAAP diluted EPS between $7.28 and $7.53. Capital expense range $250 to $270 million.

Conference Highlights:

"A very strong quarter ... represents the beginning of a new era," said CEO George A. Scangos. In particular the hemophilia franchise should generate significant revenue in 2014.

Tecfidera for MS (multiple sclerosis) (formerly BG-12, dimethyl fumarate) was approved by the FDA on March 27, 2013, at the end of the quarter. It is now for sale in the U.S. and generated very strong revenue in Q2.

"With three regulatory filings completed, three potential launches in 2014, and data readouts expected in 2015 and 2016, we have entered a new era of growth for the benefit of patients, clinicians and our shareholders."

Non-GAAP numbers: net income was $549 million, up 17% sequentially from $469.4 million. EPS was $2.30, up 17% sequentially from $1.97 and up 26% y/y.

Avonex (interferon beta-1a) revenue was $774 million, up 4% sequentially from $746.1 million and up 2% y/y.

Tysabri (natalizumab) revenue was $387 million, up 24% sequentially from $312 million and up 38% y/y. Increase was mainly from acquisition of Elan's Tysabri rights. Global sales of Tysabri declined 2% y/y. $218 million U.S. sales, $169 million ex-U.S. Biogen has applied for marketing approval in Japan, with a commercial launch likely in 2014. May have been impacted by introduction of Tecfidera, particularly JVC positive patients, but label and international expansion should lead to future growth.

Rituxan for NHL and RA (rheumatoid arthritis) revenue was $289 million, up 9% sequentially from $264.6 million, but up just 1% y/y.

Tecfidera for MS revenue was $192 million; this was the first quarter of sales. However, an estimated $82 million of this was inventory build; $110 million was sell-through. Expects revenue to moderate in Q3. Tecfidera has since been approved in Canada and Australia. Approval in Europe has been delayed to ensure IP protection. Expects to see some PML in cased that have switched from Tysabri.

Fampyra revenue was $16.8 million, down 24% sequentially from $22.2 million, and down 19% from $19.7 million year-earlier.

Fumaderm revenue was $15.8 million, up 10% sequentially from $14.3 million and up 8% from $14.6 million year-earlier.

Royalty and collaboration revenue was $48.7 million, up sequentially from $32.8 million

Cash and equivalents balance ended at $775 million, down due to acquisition of rights from Elan. Debt was $729.6 million. Cash flow from operations was not given.

After the quarter ended, an agreement was reached with the Italian National Medicines Agency regarding Tysabri pricing. This resulted in a $20 million reduction in revenue, but a remaining portion will be recorded as an increase in revenue when the settlement is approved, likely over $80 million in Q4.

Cost of sales was $270.7 million. Research and development expense $ 327.5 million. Selling, general and administrative expense $ 431.0 million. Collaboration profit sharing million fell to zero. Amortization of acquired intangible assets $82.2 million. Fair value adjustment of contingent consideration $5.2 million gain. Gain on sale of rights $5.3 million. Other expense $10.4 million. Income taxes $159.1 million. Equity loss $2.3 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. Filed with FDA and EMA in May.

Daclizumab-HYP Phase III data readout expected in 2014.

Filed for FDA approval of Eloctate (recombinant factor VIII Fc fusion protein) for hemophilia A in May. Approval is expected in Q2 2014. Alprolix for hemophilia B submission was made to FDA, launch expected in Q1 2014.

Expects to invest in new, high-quality Phase I and II asset acquisitions.

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


Tecfidera inventory, tax rate impact? By definition divide channel inventory by 13 weeks. We did not want to manage down inventory during launch. In Q3 and 4 our reported Tecfidera numbers will line up with end market demand. Tax rate mirrors projected cash flow, so Tecfidera pushes that up, which is a good problem to have.

PML rate to be expected with Tysabri transfers? Difficult to predict a rate. Many are beyond 2 years of therapy and are JCV positive. We would expect to see cases relatively soon. Tysabri label says to continue to monitor for PML for 6 months after use ends.

Regulatory data protection? Only an issue in Europe, not in Canada or Australia or U.S.

Tecfidera side effect scares? There is no reason to expect other issues. We had an erroneously reported case this week. Main risk is PML. About 12% of PML cases come from patients who discontinued therapy. We issue monthly PML reports.

Plegridy? We think orals will grow against injectables, but inectables will remain a portion of the market. Plegridy requires less frequency and has a good side effect profile.

Percent of Tysabri patients with positive JVC? We think about 1/3 are positive, with a shift continuing towards negative patients.

Any discontinuations on Tecfidera in quarter? Very small number.

Quitter pool? North of 100,000. They are diverse. We believe about one-quarter of new Tecfidera patients are returning quitters.

Pipeline readouts? For which go from Phase II to Phase III, certainly Isis data is going to be very important in early 2014. All of the Phase II programs are likely to be important. Lingo would be proof of biology, not necessarily the data that would get us excited about the product; that data would be in 2015.

We will be seeing some increase in SG&A, but we wisely made big investments for Tecfidera, so that major build should be complete after Tecfidera Europe introduction and hemophilia launch.

The particular death of a patient taking Tecfidera was due to pneumonia and does not appear to be related to Tecfidera. We don't have lymphocyte counts, and we are still investigating the case. The patient was on drug for 5.5 weeks, then off for 2 weeks before death. In Phase III we saw no increased infection risk to patients. It was not GI complications as reported in the media. It was an unfortunate set of circumstances.

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Copyright 2013 William P. Meyers