Biogen Inc (BIIB) 2001 Q1 法說會逐字稿

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Good day, ladies and gentlemen, and welcome to the Biogen first quarter conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference please press * and 0 on your touch-tone telephone, and as a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mrs. Elizabeth Woo of Biogen. Mrs. Woo you may begin.

Good morning everyone. Thank you for joining us early this morning for Biogen's first quarter of 2001 conference call. With us this morning on the line, we have Jim Mullen, president and CEO, joining us from Tokyo; Peter Kellogg, vice president and CFO; Burt Adelman, vice president, Medical Research; and myself Elizabeth Woo, associate director, Investor Relations. Now for the safe harbor statement, comments made in this conference call may contain forward-looking statements within the meaning of the safe harbor provisions of the 2 Private Security Litigation Reform Act of 1995, references made in particular to statements regarding market expansion, Avonex revenues, EPS growth, anticipated regulatory approvals, litigation outcomes, future royalty revenues, [current] clinical trials, potential in-licensing and potential efficacy or safety of future products. These statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements. In particular, careful consideration should be given to cautionary statements made in the various reports Biogen has filed with the Securities and Exchange Commission, including the [outlet session of the NDNA] in the Companies' Form 10-K and 10-Q. After that statement, I am going to turn it over to Peter Kellogg, CFO, and he is going to review the results for the quarter and outlook for the remainder of the year.

Okay, thank-you Elizabeth. I am very pleased to discuss Biogen's outstanding quarter. In fact, we put together now two great quarters in a row, and just before I start with all the financials, I'd just like to 3 make a couple of highlights about Q1 on the commercial side first. Our product revenue growth, as you can see in the press release, grew 26% in the first quarter versus prior year, and our earnings per share grew 12% on an operating basis, and that's after we excluded gains from sale of equities in both years. We had some gains this year. We had some very significant gains as you may recall last year. Last year, our Q1 earnings per share in the first quarter was 41 cents per share. Secondly, we now have about a 103,000, patients worldwide using Avonex regularly. We have broken through the 100,000 barrier with really great strength and momentum, so we are pretty proud about that, and market shares appear to be trending up in both the US and Europe, so the commercial side has had a great quarter, and additionally, the R&D teams at Biogen have also had a great quarter. I am just going to touch a couple of highlights there. We continue to build an impressive efficacy story on Avonex. The Antegren phase II results that were announced in January were successful. We had two research projects enter the clinic, and there are several others right behind, and probably most importantly of all, Amevive has progressed right on schedule. We are looking forward to the Q2 4 opening of the phase III data, so stay tuned. But I think in total, when you look those results, I hope you will agree that this has been an excellent quarter for Biogen. Now, let's walk through the financials. I am going to start today with royalties because that's certainly been an area with a lot of interest, and royalty revenue in Q1 was $17 million. As we have indicated in all of our earlier guidance, indeed, the royalty revenue line has declined in 2001. This is due to some patents expiring, and most importantly, the impact of our Schering-Plough dispute. Our guidance has always factored in these types of risks. Now, Schering-Plough has

taken a very aggressive position. They have contested their obligation to pay royalties on products manufactured before January 2001 that is now in their inventory. They have indicated that they will not pay royalties on the [sale through] of those inventories in Q1. Now, regarding that position, we are not in agreement with those statements, and there is a sort of an ongoing contractual dispute. Since, this will probably be settled formally, we will not be discussing this matter in further detail today. The second factor, a much smaller impact of the royalty 5 line, and that was Eli Lilly also notified us during the quarter that they will contest the need for royalty payments. This is roughly a $2 to $3 million impact per quarter. Now, the first quarter royalty revenue line is not the run rate for the year. The royalty revenue will be higher in Q2, Q3, and Q4, leading to the $85 and $95 million range that we provided as guidance earlier this month or last month. So, as we look ahead, we see royalties will grow [so much for] the balance of 2001. At the end of the day, this royalty change is really something of a one-timer. It's just spread over a few quarters. And as most of the analysts have already noted, this is not a major impact on shareholder value. Interestingly, actually from here forward, we now anticipate what will be eventually a near-term upside, when either disputes are settled and the royalties resume, or buying that when the relationship reverts to the formal contract, that begins in July 2002. In either case, full royalties on the US sales will resume for both Intron A and PEG-Intron. Our performance will enjoy that as an upside. We also have some other areas where royalties have strengthened going forward. Angiomax is a product that we have licensed to The Medicines Company. Now that's 6 been approved and is expected to launched this year, and Biogen is entitled to receive royalties on those sales. So, that's the royalty revenue line. What I'd like to do now is turn to what

really is important to shareholder value, and that is the operating performance of Biogen. In the first quarter, product revenue was $220 million, and that is a very strong quarter. It's a 26% increase versus prior year, and it's an 8% increase versus Q4. It's based on [solid] demand in patient growth driven by Avonex's fact-based selling story. You do not see any unusual inventory changes in the distribution channel this quarter, and as I mentioned in the introduction, Avonex achieved a major milestone at the 100,000 patient level. We ended with about 103,000 patients at the end of Q1. We are also pleased that market shares over the last few months in both the US and Europe appears to be trending in the right direction, and that's up. I'll be discussing more of that when I talk about the US and international businesses separately. Complimenting this marketplace success was a price increase taken in the US only, the key to Avonex [in line] with competition, and I'll cover that specifically when we discuss the US 7 performance. Moving down to the cost of sales line, cost of sales was $29 million. This represents about 12% of revenues for Q1. Now this is slightly more favorable in the past, and we expect this favorability to continue in the future. Let me explain, and the main point is that price increase reduces the cost of sales as a percent of revenues. There are other items in the cost of sales line, and those items in sales are improving. We are getting some efficiencies in the cost of producing Avonex, and also some of the royalty payments that we are obligated to pay to other companies for intellectual property rights, some of those patents on the foreign side are expiring, so the effective rates paid for patent obligation are going down. But in terms of thinking about the business going forward, in Q1, Biogen's gross margin was 88% and for the balance of 2001, we expect our gross margins to stay in the 87 to 88% range. R&D was $73 million; that's 31% of revenues, and it's a 16% increase versus prior year. Now, as you move

forward into 2001, there will be some quarter-to-quarter volatility in our R&D line, based on more expensive phase III trials that are progressing and in some cases beginning to overlap. We expect that we will see a [terrible] 8 bulge of phase III activity in Q2, and that's because Amevive phase III trials are completing, and Antegren phase III trials are starting up at force. This overlap of phase III activity in Q2 creates the peak of R&D spending in 2001. We expect R&D to reach little over 33% of Q2 sales, but then they fall off again in the second half. This, of course, is all [outstanding] news from the R&D standpoint. Burt will cover the details later, but in short, our phase II and phase III activities are barreling ahead on or ahead of schedule, and our research teams have delivered two great additions to the clinic already this year, and there are a couple more awaiting kickoff in the balance of the year. SG&A was $48.6 million, 20% of revenues and 15% increase versus prior year. This represents a healthy increase in sales and marketing, partially offset by [G&A's] efficiency in leverage. Since last year, we have prioritized a steady increase in our commercial investment, and boy, it is really paying off. We have developed a very powerful efficacy position around Avonex supported by clear clinical results. We have redoubled our efforts to bringing this story to the market with clarity and conviction since last summer, and as 9 you can see in the sales lines and the volumes and the market shares, the market is responding to our fact-based selling approach. The other income and expense line was $16.5 million in Q1. That Q1 OIE line was enhanced by some gains on the sale of equities. The gains were $2.5 million. Additionally, our portfolio performance improved, and this has been driven by a much higher cash balance, as you will see on the

balance sheet, our cash position at the end of Q1 was almost $750 million, and we have had some very favorable portfolio performance. We would expect a slower accumulation of cash in the balance of 2001 as we kick off some capital spending programs, but we would guide expectations for OIE to be in the $10 to $13 million range per quarter. Now, this of course did not factor in any extraordinary use of cash for [M&A] or in-licensing. Factors for Q1 were $31 million, that's a 30% rate, that's pretty consistent for the operating business of Biogen. In earnings per share, as you saw in the press release, they were 46 cents on an operating basis, 47 cents on a reported basis, and as I said earlier, that's a 12% increase in operating performance. We have the $2.5 million gain this year in Q1, and then, as you may recall, from Q1 10 last year, the earnings per share of last year was 41 cents, and that was after $90 million in gains from equity sales that we reported in Q1 last year. Now, I'd like to comment on the sales results in our US and international operations. On the US side, sales were $162 million. Well, our US team has just enjoyed a fantastic quarter, and we are very proud of their great work. Avonex finished with more than 74,000 patients, adding over 3000 patients in the quarter. That's a 28% revenue growth over the prior year which is really quite noteworthy, and it was a great quarter-to-quarter performance; versus Q4, it was an 8% increase. Now as I mentioned earlier, there was a price increase taken in January, and that price increase was 6.5%. While it was taken in January, it really only impacted sales in February and March. So accordingly, if you look at the financials in Q1, the impact for the US sales was only about 4%. And this pricing action follows the action of one of our competitors taken in December which is Teva, and leaves us still below the cost on an annual basis of our

other US competitor Betaseron. And it's only the second price increase since the launch of the product in 1996, so since that time our pricing 11 has been below CPI. Avonex market share in the US remains in the upper 50s and has been moving up slightly over the last few months, and very importantly, this has been driven by a great effort to communicate a strong [_______________] efficacy story of Avonex throughout the US [sales] organization. In fact two-thirds of our territories across the US enjoyed market share gains over the last few months. Additionally, Biogen has launched two new websites this quarter and continues to be reinforcing our strong and professional relationship with MS patients. Our call center continues to receive well over a thousand calls per day, and we are receiving very positive feedback from our internet services. Now lets turn to the international front. International sales in Q1 were $58 million. Our results on the international front were really very impressive as well. We ended the quarter with nearly 29,000 patients and added almost 2000 patients. On a volume basis, Avonex outside the US grew 26% over the prior year, and revenue increased to 20% versus prior year and 8% versus Q4. So, when you look at the international business, it really was a great quarter. Now, we are often asked how the market share trends are in Europe, so it's worth giving you a sense of 12 just how strong the Avonex is doing right now. Let me start by just saying that in Europe, we have three well-established competitors, and well, if you compare it with markets throughout Europe they are regional strengths. Schering is number one in its home market, Germany. Avonex is number one in the significant French, Italian, and then the [_______________] markets, and [_______________] has done well in the [Nordic] markets. We recognize that in the first half of 2000; this was basically a year ago, our trends did soften. But since last summer, we've really stepped up our efforts, again using a fact-based

message supported by our great clinical data, and we have corrected those trends. Our market share in Europe is stable and now appears to be trending up, and this is supported by independent third-party research. So, a great first quarter, and let's look ahead for a moment to Q2. We would expect to see continued solid performance on the revenue line and an increased R&D spend against the bulge of activity that I referenced earlier. As a result, we're expecting to have consistent EPS results, but the heavier spending in the pipeline and some milestone payments that are due for Antegren to Elan will offset the 13 top-line commercial momentum established in the last two quarters. Based on all those factors, we would expect earnings per share in Q2 to be 46 cents per share. Now moving past Q2, I want to give you some sense of how we are looking at 2001 in total. Based on the revised product revenue trends and royalty outlook, we expect Avonex's revenues to be over $900 million for this year, and combined with royalty revenue guidance that we gave, we expect total revenues to be approaching a billion dollars. Now, as we look forward, however, there are some factors that are still undetermined, and we have to take those into account. First, we are eagerly awaiting the results of the Amevive phase III data. Now, this result will give us some important insight into the commercial potential of this product, and together with a view of the competitive landscape that's emerging both with products in the market, as well other products that are in the pipeline right now, this will give us a much better view of the level of commercial ramp-up that we should support in the second half. Secondly, we are now in the middle of designing some of the Antegren phase III trials for MS, and based on the phase II results, we may have some home run opportunities here. So we will be assessing that 14 in our Q2 trial designs that are ongoing, and that might drive some additional activity in the second half, we'll see. But clearly, if you look at our R&D pipeline, we've had a great quarter, both in Q4 and in Q1, and many of the trials that we've been planning have started ahead of plan,

and development is doing very, very well. That's putting a little pressure on the P&L. Right, clearly we're having a great year, and we're looking forward to these great results. Now, just on another note, we are also aware of the FDA's proposal for a warning on all interferons, and since we'll be discussing this with the FDA during Q2, it's too soon to comment on this proposal or any possible impact that it might have. So, as we evaluate the 2001 outlook, we are comfortable with the consensus range that's emerged, but really internally, we remain targeted to achieve the low 190s as indicated in our March press release. Now, there may be some additional one-timers that could happen, and that will come up because we are matching deals that are outside the company with our strategic pipeline development objectives, and we've not included any impact from external transactions in Biogen's guidance for 2001. And obviously, our 15 guidance does not include anything that might happen from potential acquisition standpoint. [Reflections] in the market [caps] out there, evaluations are much more compelling. We are very interested in this area. Now moving past 2001, a number of people asked to have some guidance on 2002, and certainly on the top-line, we see no reason to see any change in the Avonex strength. We'll continue to aggressively support this brand, and we think we will continue to have very strong clinical data, and we'll have a very attractive brand that would take the MS community. The royalty payments on Intron A and PEG-Intron A will resume in 2002. So, we anticipate that royalty revenues would be higher as compared to what we're giving as guidance right now for 2001. But beyond the Avonex business and the royalties, there are many moving parts, so it's really too early to give 2002 EPS guidance at this time. We need to see the phase III Amevive results. We need to evaluate or strengthen the pipeline so [_______________] we really need to see some important strategic cards turnover before we give more specific guidance. Now, we will though see a lot in Q2. So we will be discussing this in more detail after the Q2 in

the Q2 earnings conference call. So with that, 16 I'd like to wrap up and say I'm very proud of this quarter. I think the business did very well, and I'd like to turn it over to Burt Adelman who will be discussing the pipeline. Burt?

Thank you Peter. [_______________] R&D guys, it's hard to hear the CFO brag about our accomplishments. Good morning everybody. During the next few minutes, I'm going to provide you with a pipeline review and update you on key events from the last quarter. I'll do this by byproduct, and begin with Avonex. As you have already heard, our most critical efforts with Avonex have been to continue to disseminate the important results of the successful CHAMPS and impact studies. As you probably recall, CHAMPS demonstrated that early treatment with Avonex will delay the onset of clinically definite multiple sclerosis in high-risk patients. The impact study demonstrated the safety and efficacy of Avonex in treating patients with secondary progressive multiple sclerosis. We're also widely discussing the results of our large dose comparison study in relapsing, remitting MS. Results of this study confirmed that for patients with relapsing, 17 remitting multiple sclerosis, the 30 microgram weekly dose of Avonex is the best treatment regimen. I believe that there will be as many as seven presentations of data from key Avonex studies during the upcoming America Academy of Neurology meeting, and I'm sure that many of you will attend that meeting and hear these presentations. As you might imagine, we are discussing many of these results with the FDA and European regulatory agencies and hope to expand our label to encompass these clinical findings in the near future. During this quarter, we completed the analysis of the Avonex study in interstitial pulmonary fibrosis. This is a large multidose phase II trial. Unfortunately, the results did not demonstrate a useful therapeutic effect of Avonex in this indication, but we continue to look for additional important indications in which to expand Avonex use. In addition, we continue to pursue the development of a liquid formulation of Avonex in a prefilled

syringe and of the inhaled formulation. Both of which, we think will represent important improvements in patient convenience. Next, I will discuss Antegren. As you recall, Antegren is a humanized monoclonal antibody that binds to 18 the VLA-4 integrin complex and prevents lymphocyte migration into inflamed tissue. The Antegren program is a partnership between Biogen and Elan Pharma. As Peter has already mentioned in January, we announced very strong data from a large phase II study of Antegren in multiple sclerosis and from a phase II of Antegren in Crohn's disease. The Crohn's disease data will be presented at the Digestive Disease Week Conference coming up in May. That will be very exciting, and I think we will be well received by the GI community. The MS data will probably be presented at a major neurology meeting in the fall. Unfortunately, the data were not available in time for submission to the spring AAN meeting. We are very excited about these results and firmly believe that Antegren will be an important new therapeutic in multiple sclerosis, Crohn's disease, and other significant immuno-inflammatory diseases. In fact, we are strongly pursuing additional indications beyond MS and Crohn's disease for Antegren. We are currently meeting with regulatory agencies in the United States and Europe to present our phase III plans, and intend to begin phase III studies in both indications later this year. Now, let's move to Amevive, our immunomodulatory fusion 19 protein currently in development for psoriasis. I am pleased to tell you that the phase III psoriasis trials are now completed. The last patient finished follow-up in March. Database [__________] and analysis are on going as we

speak. Just to remind you, this was a large phase III program. It enrolled approximately 1000 patients at over 100 sites worldwide. So there has been tremendous experience in the clinical community to date with the use of Amevive in treating patients with psoriasis. Results from these trials will be available by mid year, and it remains our intention to file in Europe and the United States during the second half of the year. This will keep us on track for commercial launch during the second half of 2002. The psoriasis market is very large and in need of safe and effective therapy with a long duration of action. Amevive's phase II and retreatment data continue to demonstrate that it should answer this need. Finally, let me remind you that psoriasis is only our first indication for Amevive. We believe its efficacy and safety profile warrants development into other important indications, and in fact we will be starting a phase II study in rheumatoid arthritis later this 20 year. Now, moving to some of our earlier staged clinical programs, as Peter has already eluded, during this past quarter, we brought two new products into the clinic. The first was a soluble lymphotoxin beta-receptor. This is an immunomodulatory fusion protein, similar to Amevive, that binds to lymphotoxin beta on immune cells and blocks T cell activation. It particularly focuses the dendritic or professional antigen-presenting pathway. Preclinical studies have demonstrated that interruption of this pathway can reverse clinical manifestations of immune disease in various animal models, and therefore, we believe that this product may be effective in many immune mediated disorders such as rheumatoid arthritis and lupus. The second product brought into the

clinic was our new Adentri molecule. As many of you are aware this is the pathway that we have been pursuing for sometime. The Adentri program is focused on highly selective small molecule antagonists of the adenosine A1 receptor. Blockade of this receptor in the kidney improves renal function and may have an important therapeutic effect in patients with congestive heart failure, our primary clinical indication. Many of you saw the results of our proof of 21 concept phase II program presented last month at the American College of Cardiology meeting. That study confirmed that A1 receptor blockades will increase renal output and preserve kidney function in heart failure patients receiving intensive diuretic therapy. Our new molecule, which has the same pharmacodynamic profile as the earlier molecule is easily formulated for intravenous and oral use, and in fact, our program currently in the clinic is with an oral formulation of this product. We will subsequently be putting the intravenous formulation into the clinic later this year. Finally, on the clinical front, our interferon-beta gene therapy program for malignant glioma remains on target to enter the clinic during the second half of this year, having already received approval from the [rack] at the NIH, and we will be submitting the IND shortly. We also continue to make progress transitioning programs from research into preclinical developments. We have recently moved two programs up to preclinical development. The first is a humanized monoclonal antibody directed against the LT-beta receptor. This antibody has antitumor activity in various animal models and 22 will be tested on a number of human malignancies, including breast cancer and colon cancer. The second program to be moved to preclinical

development is a humanized anti-VLA-1 monoclonal antibody that in animal models has demonstrated important anti-fibrotic activity and therefore might be clinically useful in disorders such as chronic obstructive pulmonary disease, chronic renal failure, and hepatic cirrhosis. We hope to provide you with much more information about these products in the near future. Now this concludes my comments, and I will give the mike back to Elizabeth.

Well we finished our commentary in 30 minutes, which was our goal, and now we are going to open it up for Q&A for about 15 to 20 minutes. So, moderator please gives us the first question.

Thank you. Ladies and gentlemen, to ask a question, press the 1 key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key, and if you are using a speaker phone, please lift the handset before you ask your question. One moment please. Our first question comes from 23 Matthew Geller of CIBC World Markets.

Hi, I have a couple of questions about Amevive. In terms of the intramuscular trials, have there been any phase II results with intramuscular delivery? Can you talk a little bit about how it might differ intramuscularly from the IV formulation, and also in terms of the T cell levels after administration in terms of either the [_______________] depletion, can you talk a little bit about memory T cell. There was some controversy at the American Academy of Dermatology, and whether you have discussed it with the FDA, and whether that might have any effect on usage or labeling or whatever?

Sure. Good morning Matt. This is Burt. Regarding the general data set we have on intramuscular use of Amevive, we have no reason to believe that the pharmacodynamic or pharmacokinetic profile of the absorbed product will be any different than when given intravenously. Obviously, the bioavailability of an intramuscular injection is going to differ to some degree from an intravenous injection, and we conducted a number of studies in humans prior to 24 the beginning of phase III so that we could estimate the therapeutic dose to go forward with. Now, with respect to the effect on T cells, as we have said many, many times, we are very excited with the pharmacodynamic effects of Amevive. We believe that it is a focused immunomodulatory agent, that its activity is directed against a unique subset of activated T cells that actually cause psoriasis, and since psoriasis is a T cell mediated disease, if you don't alter T cell function, you won't induce significant clinical improvement. Now, regarding the comments that you made about discussions with the FDA or controversy, there have been none here at Biogen. We have had no safety issues. We've, as I said, completed an extensive phase III program. We presented data at the dermatology meeting that you referred to, indicating that a significant number of patients have received multiple courses of Amevive with no safety issues, but with preservation of clinical efficacy. So, we go forward believing that really, the only issues between us and registration at this point in time are the technical challenges of pulling all the data together and making the submission. 25

Are there any papers or presentations we can read to understand about the specificity of the T cells that Amevive affects?

I am sure that we can call together the abstracts and other presentations that we have already made and send them off to you.

Matt, this is Elizabeth, there are some papers on the specificity on the CD45 RO, and I can give that to you if you contact me later.

That would be great. Thank you Elizabeth.

Our next question comes from Michael Wood of Lehman Brothers.

Good morning. Two questions. First of all, can you tell us what the royalty rate on Angiomax is going to be, and second of all, I think Serono stated on their recent call that they continued to see improvements in market share. I am just curious about, to hear what kind of differences in methodology, they are using to measure market 26 share in Europe versus Biogen's methods?

Michael, this is Elizabeth. On the Angiomax royalty rate, we don't give out specifics, obviously, but in the beginning, you know, in the mid single digit, and then at a later point, when the sales ramp up, it does get to be quite significant in the healthy double digit range.

Hi. This is Peter Kellogg. I'll take the market share question. Yeah, basically, in Europe, there are just different sources of market share data, but in general, the trends that we have been seeing is that we've been stable and now recently been picking up a bit. Serono also does their own calculations. There is no single source of the data, and they are stating their market shares have been going up. There are 3 players in the market. The third player obviously is Betaseron. So, by all estimates, they have been losing market share. So, that probably is how you are getting the [triangulation of effect].

Thank you.

Is that all? Yeah. 27

Our next question comes from Douglas Lind of Morgan Stanley.

Thank you. Just back on the T cell situation with Amevive. Elizabeth, you mentioned the RO positive cells. Burt, I mean, are you pretty confident today that Amevive is very specific for those RO positive cells, and basically the decrement that we see in the white cells, in the T cells is specifically due to the RO positive cells or are you getting some nonspecific activity in any way against the other potentially important T cell populations?

I think that we probably, for the third time in a major meeting, showed the extensive data set from T cell subset analysis, indicating that the CD8 and CD45 RO-positive cells, which are the active memory cells, indeed decline and then return to baseline after Amevive therapy, whereas the CD45 RA cells, which are the naïve memory cells, don't budge. So, I think we continue, from the laboratory perspective, to be satisfied that this therapy is quite focused in its pharmacodynamic effect. But as I have said many times, what's ultimately most important is what is the clinical safety record. Are patients 28 having serious infections? Are they suffering evidence of immunodeficiency? And the answer to that remains, absolutely not.

And Burt, you can say that in the two phase III trials that have already been completed, to be reported midyear because they would have been halted early, would they not, if there were problems?

Certainly, as everybody is aware, Biogen puts safety of our patients in clinical trials above anything else, and were there to be significant safety concerns in this or any program, obviously we would have done what was appropriate. But, you know, there have been no halts, no stops, no problems with these studies at all.

Right. Thank you.

Our next question comes from Eric Hecht of Merrill Lynch.

Hi gentlemen. I was wondering if you could tell me what the 17 million of royalty is comprised of.

Okay. We don't, this 29 is Peter again. We don't usually break that out. I guess the question is, I mean, we have quite a few royalty streams, so it's not just Schering-Plough that we get royalties from. So, we have them on, about 5 or 6 different companies that pay royalties, and none of those have been effective moving from Q4 2000 to 2001. So.

I'm just curious what's happened to the hepatitis B vaccine, for example, and are you still getting royalties on that?

Yeah. Absolutely, those kinds of things are what we are talking about. Exactly. So those continue to go forward just as always.

Okay, and can you address pricing of Avonex in Europe?

In terms of has there been a pricing action or anything like that?

Right.

No, there has been no pricing action in Europe, whatsoever.

Well, as you know, Eric, in Europe, you really don't have the opportunity 30 to raise prices, given the government [_______________] systems, and if you price it once, then basically they ask for reductions, year in and year out.

Yeah, that's what I was wondering, more than on the opposite end, if there were reductions.

If they happen on a semi-frequent basis, maybe every other year, but that's part of the estimate.

Right, so basically what you are seeing as you go from volume to revenue in Europe, Eric, is primarily, some foreign exchange movement as you go year to year, you know, and then also you get some [necks] between distributors and direct channels and things like that, but basically, no, nothing's changed on the pricing front. Okay?

Our next question comes from Eric Schmidt of SG Cowen.

Good morning. Congratulations.

Thank-you. 31

Could you, just on follow up to Eric's question, quantify the currency impact on the quarter and then also provide a little more detail for me on this proposal with the FDA for warning on all interferons. What the sort of forward-looking milestones are there?

Okay. Yeah. Let me take the first one which is the foreign exchange impact. It is clear as we go from Q4 to Q1, you know, what we do is we do have forward contracts in foreign exchange, and so, as we give guidance and as we lay out our outlook for each year, we've already taken that into account. We tend to do those out a fairly good distance, so we can give good guidance and not be subject to foreign exchange movements. In the first quarter, we had some foreign exchange benefits. [From my head], we are not [_______________] that exactly, but it wasn't overwhelming. Obviously, versus prior year though, you do get an impact that the [euro] has moved over the last year. But we tend not to try and get into that wave as clearly, we're running the business, kind of, as we go forward with any year giving guidance into accounts as we set up our plan. On the second point, Burt?

Yeah, I'll answer that. 32 So the agency has asked for a class change in [safety] labeling, for all type 1 interferons, so these are alpha and beta interferons. The data that they are working off, to the best of our understanding, really comes from the alpha interferons, not the beta interferon, and I would tell you that we are close to our patients, we've treated a lot of patients, and we have no evidence to believe that the safety profile of Avonex has changed in any way since the package insert essentially the key issues that are in the original package insert, and we have diligently maintained surveillance and updated the package inserts when we felt that it was important. Alpha interferon is used at different dosing ranges, and it's used to treat patients with different diseases and multiple sclerosis. So it's conceivable that the safety profile will differentiate from that of the beta interferons. We are currently discussing this issue with the FDA. We don't have a final resolution, so there's really not much more that I can say at this time.

Next question.

Our next 33 question comes from May-Kin Ho of Goldman Sachs.

Hi, I have 2 questions. The first one is can you update us on Avonex in Japan, and the second is the Amevive file. You said it would be in the second half of this year and therefore launched in the second half of next year. What is the assumption for FDA review time?

Good morning May-Kin. I'll answer those. So, our assumption for FDA review time at this point is one year.

Even in light of the recent delays of FDA?

You know, they are required to operate under the [______________] guidelines, and we'll certainly expect that they will, and we will do everything to ensure that they receive an easy to review application. Regarding Avonex in Japan, as I'm sure many of you are aware, Biogen has a partnership with Genzyme to develop Avonex for multiple sclerosis in Japan, and that program is ongoing. We are recruiting patients into a clinical study, and probably towards the second half of this year, we will be able to better assess what the ultimate 34 time line will be for registration and commercial roll-out.

Our next question comes from Peter Ginsberg of Piper Jaffray.

Yes. Good morning. Just looking at the IMS prescription data in terms of US market share, it looks like we are running at a pretty flattish pace. Now, I know that you have significant sales through other distributors. Have those sales been rising over time as a percentage of overall sales?

No. Hi Peter, it's Peter Kellogg.

Hi.

No. Not really. I think, so you are looking at the weekly data in March. Is that what you are picking up on or?

Through the first quarter.

The overall first quarter. No, we've seen at least certainly for Avonex a very strong performance in January and 35 February both on weekly and also on monthly recaps, so we are pretty solid on that. Yeah, we do have another channel of distribution that has not being growing in any way disproportionately with the core business at all. I think the March data, if you are looking at the weekly sales data, we are still looking that at little bit. Sometimes there are some moving [_______________] don't actually materialize in the monthly just because of a sample error or data sources, but in general, no. We have not picked up any real issues on the IMS data in US sales trends. We are obviously very pleased with what we have gotten for Avonex, so we think that we've build a lot of momentum both in the volume and shares standpoint.

And the numbers look great. Thanks a lot.

Yeah. Thank-you. Is this the last question?

I think we are going to take one or two more questions.

Okay, our next question comes from Elise Wang of Salomon 36 Smith Barney.

Thank-you, good morning. I was wondering you did talk about obviously you are doing the phase III studies, at least one of them with Amevive with some intramuscular formulation. Could you tell us a little more details about what it is the differential in dose elative to the IV formulation, and also give us more details in terms what you have seen in terms of retreatment patterns.

Hi, good morning Elise. So, I will answer the second part of the question first. We have presented data at the recent dermatology meetings indicating that patient's who receive retreatment appear to have a response similar or as good as they have initially, that the safety profile, the duration of effect, all of the important outcomes remained stable during multiple courses of therapy, so the data today suggests that Amevive is a useful therapeutic for long-term maintenance of psoriasis patient. So you know, we have not shown a lot of data, and from our earlier phase II studies with IM, but we did do a series of studies to demonstrate safety and efficacy and to get a sense of the bioavailability. The phase III IM study has 37 examined two doses versus placebo, so when we have those results, we will be able to actually tell you quite specifically the relationship between the IM dose and the IV dose.

Thank-you, Elise. That was our last question. So I am going to pass it to Jim Mullen for his closing comments.

Good morning everybody. I am calling in from Japan, as Elizabeth said, at the beginning of this. I have been over here as we continue to work on our strategy to build a commercial presence here in Japan. I think you heard what was a pretty good review of the quarter. I am very pleased with the commercial performance in the quarter. We have had strong sales both domestically and internationally. We've also met or surpassed all of our development milestones, the phase III trials on Amevive are complete. We successfully completed the phase II trials on Antegren. We have moved two new products, Adentri and LT beta into the clinic slightly ahead of schedule. We have advanced two more programs in the preclinical study in preparation for clinical trials early next year. Again those are ahead of schedule. 38 [_______________] manufacturing plant, construction is on schedule finish in this quarter and validation [_______________] facility are already on the way. We have had a very active but probably somewhat silent on the publicity front quarter in licensing and acquisition discussions. The only real blemish on the quarter of course has been the royalty situation which, as Peter said, will improve over the remainder of the year, and hopefully, it will certainly be resolved on the Schering-Plough front in July 2002 with the new contract, and hopefully we will get more specific resolution with Schering-Plough sometime during the course of this year. The quarter ahead certainly is going to be a very important quarter for us. We turn over a lot of cards. The analysis of the phase III studies on Amevive, initiation of the Antegren studies, but all of the base business, the momentum on the development side and the commercial side look very strong. I would invite all of the analysts and investors that can, to

attend a September 25th meeting in Boston where we will review all of the R&D pipeline in quite some depth. Again thank you very much for attending the call. 39

Thank-you very much.

Ladies and gentleman, thank you again for participating in today's conference. This does conclude the program. You may now disconnect. Good day.