conference date: July 26, 2006
for quarter ending: June 31, 2006 (1st quarter)

Overview: Continued revenue growth masked by GAAP earnings loss related primarily to acquisitions.

Basic data:

Revenues of $660 million were up 8% sequentially from $611 million the prior quarter and up 10% from $606 in the prior-year quarter. GAAP net loss was $171 million for a loss of $.50 per share, down from Q2 2005 when they earned GAAP $35 million/ .10 per share.

Company claimed non-GAAP earnings of .57 per share. GAAP earnings loss reflects a $331 million write-off of acquired R&D, acquisition related adjustments, and the impact of share-based payment expense, and share count difference.

Cash and equivalents ended at $713.7 million.

Revenues from AVONEX increased 12% (annual increase) to $429 million. RITUXAN revenues $206 million (11% annual increase). Other products $7 million, down 59%. Royalties $18 million, down 18%.


Non-GAAP full 2006 earnings to be $1.95 to 2.10 per share.

Conference Highlights:

Recapitulation of quarter's news: acquired Conforma and Fumafarm; BG-12 Phase II positive results for MS; TYSABRI approval by FDA for MS and in Europe; positive phase III results for RITUXAN + MTX for rheumatoid arthritis.

RITUXAN for rheumatoid arthritis is gaining ground as physicians gain confidence in it.

AVONEX approved for MS in Japan.

Expects TYSABRI sales to get underway soon (possibly Sept. quarter); physician interest high, with some patients already identified.

Working on approval of RITUXAN for lymphomas. Possible action by end of September.

Conforma gives them two strategies against HSP90 chaperone proteins, which protect disordered messenger proteins in malignant cells.


Neurologists on Touch program (for Tysabri)? Most practices do not anticipate monthly exam requirement to be a problem. Just providing guidelines for physicians. (Two analysts said neurologists they contacted are worried about patient evaluation requirements).

BG 12 Phase III plans? Still discussing with FDA.

Tysabri coverage? Physician must sign enrollment form, then at infusion site patient must complete a questionnaire. Insurance verification varies. Reimbursement could take 5 to 10 weeks.

AVONEX is trending flat.

Genentech dispute? Disagreement about indications not covered in development plan.

$200 million for business development set aside? Likely to use more in second half than first, intends to use these dollars before end of year, but essentially a lumpy process. Could be R&D, or an acquisition, or a licensing. The idea is to spend $200 million annually as part of strategy; but will not roll one year's leftover into the next.


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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. Before making or terminating an investment you should verify any factual basis of your decision.

Copyright 2006 William P. Meyers