Biogen Inc (BIIB) 2002 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the IDEC Pharmaceuticals First Quarter Financial Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. As a reminder, this conference is being recorded, Thursday, April 18, 2002.

I would now like to turn the conference over to Mr. Bill Rastetter, Chairman and Chief Executive Officer with IDEC Pharmaceuticals. Please go ahead, sir.

Thank you,

. Good afternoon. And welcome to IDEC's First Quarter 2002 Conference Call. With me this afternoon, are Bill Rohn, Phil Schneider, and Connie Matsui.

This call is being simultaneously Webcast.

We've had another good quarter. Rituxan achieved 235 million in first quarter sales. That's up 40 percent from the first of 2001. Bill Rohn will update you on the growth drivers in Rituxan this past quarter, key IDEC abstracts at ASCO in May, and

Zevalin launch.

We earned 17 cents a share on a diluted basis during the first quarter. On a year-over-year basis, these net earnings represent a 42.8 percent increase in after-tax earnings, from 12 cents a share in first quarter '01 to 17 cents a share in first quarter '02.

Phil will review the financial statements with you later on the call. Also, Phil will provide some guidance for you on expense levels and contract R&D revenues that we expect for the remainder of 2002.

But before we get on with today's call, let me remind you that in the course of this presentation and in the Q&A session that follows, we may make forward-looking statements that involve risks and uncertainties regarding development, the regulatory process, product launch and commercialization, IDEC's financial performance, intellectual property matters, and/or other subjects germane to IDEC's business.

As future events are not predictable with certainty, we would refer you to the risk factors that are listed form time to time in our annual report on Form 10K, our quarterly reports on Form 10Q, and other SEC filings. These risk factors may cause actual results to vary materially from projections that we might make today.

These forward-looking statements represent the Company's judgment as of the date of this call. We disclaim, however, any intent or obligation to update these forward-looking statements, including any financial guidance that we may give on this call.

Also, I would mention that the contents of this call are copyrighted by IDEC Pharmaceuticals. No recording or publication of the contents is allowed without the express written permission of IDEC Pharmaceuticals.

Let me turn the call over to Bill Rohn.

Thanks, Bill. And good afternoon. As Bill mentioned earlier, the numbers for Rituxan remain strong through the first quarter. U.S. net sales for Rituxan in the quarter amounted to 235 million, an increase of 67 million or 40 percent versus the same period last year and

quarter sales

.

Use of Rituxan in upfront treatment of aggressive lymphomas continues to be a key

into 2002. Our latest patient record study shows that 75 percent of all newly diagnosed aggressive NHL patients treated in the first quarter received a Rituxan regimen, versus 66 percent during the fourth quarter of last year.

And in the latest study, 90 percent of oncologists now report having used Rituxan in front

or medium to high-grade lymphoma

. Additionally, 97 percent of doctors interviewed will use Rituxan in this setting during the next six months.

Although the GELA study has been the primary driver of Rituxan use in aggressive NHL, it is interesting to note that only a small proportion of U.S. physicians are embracing the GELA-style eight-cycle regimen. For example, in the latest survey, only about 10 percent of patients getting CHOP plus Rituxan for aggressive disease were getting eight cycles of therapy. The remainder of the patients received the U.S. standard of six cycles.

Thus, it's fair to say that U.S. physicians have accepted the principle of Rituxan plus CHOP as established by GELA, but are not embracing eight cycles of CHOP because of concerns about the added toxicity in the extra two cycles.

Importantly, on the European front, our partner Hoffman-LaRoche received the European Medicines Evaluation Agency or EMEA approval for the use of MabThera, as Rituxan is known in Europe, in combination with CHOP chemotherapy for upfront treatment of aggressive NHL. The addition of this indication to the European package insert should positively impact the sales of Rituximab by Roche during 2002.

Beyond intermediate and high-grade disease, all the metrics we recently tracked remain intact. Usage in CLL stands at approximately 16 percent in newly diagnosed patients and 38 percent in relapse patients. It is our expectation that front line use, especially, will grow, based upon the positive data coming out of studies featuring Rituxan in combination with chemotherapy.

An example of one such study is the M.D. Anderson work reported at ASH last December, where Rituxan combined with Fludarabine and Cyclophosphamide, produced a 66 percent CR rate in front-line treatment versus a historical 43 percent CR rate for chemotherapy alone.

The un-CLL retreatment stands at over 80 percent of physicians, maintenance at 27 percent of physicians. And 23 percent of doctors have used Rituxan for ITP. By the way, IDEC and Genentech have taken the decision to conduct label-enabling trials in ITP. We've had favorable discussions with the FDA on the development strategy and will be filing an IND during the second half of the year.

Finally, I would like to underscore that retreatment will continue to be an important business driver, especially as Rituxan moves to the upfront setting. Today, 53 percent of all newly diagnosed NHL and CLL patients receive a Rituxan-containing regimen as their initial therapy.

With over 80 percent of oncologists employing Rituxan retreatment, we would expect many of these patients to receive additional Rituxan therapy upon relapse. Thus, the more patients are treated with Rituxan early, the greater the chance for these patients to receive additional retreatments.

Now, as most of you probably already know, a 4.5 percent price increase was implemented for Rituxan on March 1. Because of Genentech's second wholesaler inventory stabilization program, there was really no impact on quarter one sales. The effect of the price increase will begin showing up in quarter two. Additionally, there's no evidence that wholesalers increase their inventories in anticipation of the price increase.

Now, on Monday past, the ASCO abstracts became available to Society members via the ASCO Web site. We are aware of 23 Rituxan abstracts that were accepted for the meeting, which will take place in Orlando on May 17 through the 21. While ASCO's confidentiality policy prohibits me from discussing the details of any abstracts prior to the meeting, there are

among the 23 which continue to extend and enhance the clinical utility profile of Rituxan.

Well, if you're attending the meeting, some of the posters or presentations you should look for include, first of all, a study from Dr.

group at Long Island Jewish Medical Center, in which a group of heavily pretreated high-risk CLL patients received a combination regimen of Rituxan plus cyclophosphamide and dexamethasone.

Also you should look for a study from Dr.

group at Sarah Cannon Cancer Center in Nashville involving 86 newly diagnosed follicular NHL patients who received a four-infusion schedule of Rituxan, followed immediately by a short course CHOP or CVP - and short course here is three cycles -

plus Rituxan was added to either CHOP or CVP for the three cycles. This trial tests an interesting strategy of combining Rituxan with chemotherapy in newly diagnosed low-grade disease, but with a short course of chemo designed to reduce the toxicities of the classical six-cycle chemo regimen.

And finally, I think you'll find the study by Dr.

group at Stanford in lymphocyte-predominant Hodgkin's disease, or LPHD, quite interesting. Here, unlike classic Hodgkin's disease, the malignant cells of LPHD do express CV20. Dr.

and colleagues treated 21 patients using a standard Rituxan-times-four regimen.

Now while LPHD does not represent a large market opportunity, these patients tend not to respond to the conventional Hodgkin's disease regimen. So alternative therapies like Rituxan are indeed needed.

Well, that's it for Rituxan. With regard to Zevalin, I will briefly update a few topics we discussed on our March 26 product launch conference call. First, as anticipated, we are finding that awareness of radioimmunotherapy and Zevalin is high in the oncology community.

Thus, when our reps visit oncologists and hematologists, they're able to focus on communicating the specific benefits of the Zevalin therapeutic regimen identifying a

and also on

patients for product trial. Conversely, we're not being detracted by having to explain the virtues of biologic-based therapy or even the merits of radioimmunotherapy.

Additionally, now that we are in the active sales mode, we are verifying that the major adoption hurdles being encountered are precisely the ones we anticipated prior to launch - that is, logistics and reimbursement.

Helping the oncologists and nuclear medicine specialists work out new networks of referral and communication has been a major focus for the sales team over the past three weeks. We will continue this effort for the next few months to ensure the new logistics patterns are fully in place and operational.

On the reimbursement front, coverage from private pay sector is proceeding relatively smoothly. We are actively encouraging and assisting in pre-authorized reimbursement approval on all private pay patients. And success rates in the early going are in the high 90 percent range.

Reimbursement for Medicare patients is, as anticipated, delayed. Many sites are somewhat reluctant to treat Medicare recipients, knowing that reimbursement through the APC code system will not be available until July 1.

On the radiopharmacy front, I'm pleased to report that we have now executed distribution agreements with about 60 percent of the freestanding independent and chain pharmacies. So today, we have virtually

coverage of the potential treatment sites in the U.S.

New treatment sites continue to be enabled to administer the radio-labeled portion of the Zevalin regimen. We don't have an exact count on the number of fully-licensed and calibrated sites today, as we've seen a trend toward self-enablement on the part of hospitals and freestanding imaging centers.

That is, many nuclear medicine departments are moving forward on their own or with the help of their local radiopharmacy supplier, without IDEC assistance, to become operative as an administration site. And

has been an especially active partner in this regard.

We've asked our sales representatives to track - keep track of the activated sites in each of their territories. But I must admit the numbers are more of an estimate at this point and less of a census than when IDEC was the sole source of assistance. Having said that, we currently estimate that approximately 320 administration sites are capable of delivering the Zevalin therapeutic regimen at this time.

Let me close my Zevalin remarks with a few comments about ASCO and some of the publications we expect to see in the coming months. In total, we will have six posters at ASCO, all on Zevalin. Specific presentations will include the following topics: number one, Zevalin therapy for transformed lymphoma;

number two, successful

therapy after Zevalin; number three, successful chemotherapy following Zevalin; number four, prognostic factors correlated with response to Zevalin; number five, Zevalin therapy experience in aggressive NHL; and number six, response to Zevalin by follicular subtype.

I should point out that these posters do not represent results from new studies. And in effect, we have teased out additional analyses from our existing safety and efficacy databases that more fully define the utility of Zevalin for clinicians.

On the publication front, our Phase 3 registration trial comparing the Zevalin therapeutic regimen to Rituxan has been accepted for publication in the Journal of Clinical Oncology and will appear in the May 15 issue. The study of Zevalin and Rituxan refractory patients has also been accepted for publication in JCL. But the exact publication date has not yet been provided.

Finally, the manuscript featuring reduced-dose Zevalin for patients who are mildly thrombocytopenic has been accepted for publication in Blood and will appear in the June 15 issue.

That covers the latest developments for both Zevalin and Rituxan. Now let me turn the meeting over to Phil Schneider for a review of the numbers.

Phil?

Thanks, Bill, and good afternoon, everyone. As you can see from the press release, we've had another good quarter. Net income for the first quarter 2002 was 29.7 million or 17 cents per share on a diluted basis using a tax rate of 35 percent. This compares to income of 20.8 million or 12 cents per share on a diluted basis for the first quarter of 2001 at a tax rate of 37 percent. Our results this quarter represent a 43 percent increase in after-tax earnings over the first quarter of 2001.

Revenues for the first quarter of 2002 were 79.7 million compared to 56.5 million for the same period in 2001. The 41 percent increase from the first quarter of last year was driven by an increase of 29.6 million in co-promotion revenues from higher Rituxan sales and the achievement of the higher tier of profit split with Genentech earlier in the first quarter.

Contract revenues and license fees for the first quarter 2002 amounted to 1.5 million, which was 6.4 million less than the first quarter of 2001. The decrease in license fees was primarily due to a $5 million milestone received last year from Schering AG for the accepted filing of Zevalin in Europe.

Now, remember for IDEC, license fees, milestones and contract R&D payments remain an important part of our business. And the timing of these revenues may and do vary from quarter to quarter.

Now, revenue from unconsolidated joint business for the first quarter of 2002 was 61 percent higher than the same period in 2001, with 78.2 million in revenue versus 48.6 million

quarter of 2001.

The joint business revenue consisted of IDEC's share of the pretax co-promotion profits, reimbursements from Genentech for Rituxan-related sales force, and the development expenses and royalty income from Hoffman-LaRoche on sales of MabThera outside the United States.

Co-promotion profits were driven off of the 235 million in U.S. net sales of our third party -

recorded by Genentech in the U.S. during the first quarter of 2002. Now, IDEC's profit split from the first quarter with Genentech before any reimbursements amounted to 27.9 percent of net U.S. Rituxan sales versus 26 percent for the same period in 2001 and 30.8 percent last quarter.

During the first quarter 2002, IDEC stepped up to the higher profit share level in our collaboration with Genentech. You'll recall that our profit collaboration share resets the lower tier every January 1, until we achieve a fixed profit level during the calendar year. This is why our profit as a share of

than last quarter was

.

IDEC recognizes royalty revenues from foreign sales with a one-quarter lag versus end user sales. Royalty revenues from Zenyaku for Japan and Hoffman-LaRoche for the rest of the world, for sales of Rituxan or MabThera recognized by IDEC in the first quarter of 2002,

was from fourth quarter 2001 sales and amounted to $9 million, compared to 2.6 million recorded in the first quarter of 2001 and 5 million last quarter. Royalties included the initiation of sales in Japan. And I'll speak a little bit more about this later on.

Moving into operating expenses, total operating expenses for the quarter amounted to 38.1 million versus 33.2 million for the first quarter of 2001 and 41.5 million for the fourth quarter of 2001.

R&D expenses decreased by 2.3 million from the first quarter of 2001, due to our manufacturing plant being utilized to make manufacturing inventory for Zevalin,

offset by increased development and clinical trial costs of our other product candidates and higher facility expenses. Our manufacturing campaigns for Zevalin will absorb three to six months of production time per year in our plan.

SG&A amounted to 18.8 million, a 7.1 million increase from the first quarter of 2001 and compared to total SG&A of 19.1 million

quarter of 2001. The increase over the first quarter of last year was mostly due to our investment in the Zevalin launch, specifically sales force expansion and the establishment of a medical fairs function, and Zevalin premarketing efforts, legal and patent fees and general infrastructure additions.

We saw net income for the first quarter decrease dramatically by 9.7 million or 59 percent from 2001, due to lower interest rates off larger cash portfolio. Our tax-reporting rate for 2002 is currently estimated to be 35 percent.

Concerning shares, weighted average shares used to calculate EPS on a fully-diluted basis for the fourth quarter of 2000 - I'm sorry, for the first quarter of 2002 amounted to 182.4 million. The 15.3 million increase over the first quarter of 2001 was primarily the result of the accounting treatment requiring inclusion of 13.9 million shares from our convertible debenture, which we issued in February of 1999.

Growth model EPS - we anticipate from this point forward that the shares from our convertible debenture will now be - yield the tax-affected interest expense from the debenture, which is approximately 1.2 million per quarter.

IDEC ended the quarter with 876 million in cash and securities available for sale, an increase of 9.8 million from the end of 2001. The increase in cash was primarily from operations and exercise in employee stock options, offset by 20 million of investments in our capital projects and other capital equipment.

Now I'd like to provide some guidance for 2002. As - consistent with last quarter, we continue to believe that contract R&D revenues should be around 15 million. Concerning royalty income, this quarter we saw a large quarter-to-quarter increase in royalties from Rituxan or MabThera sold by Roche and Zenyaku. It increased 5 million to 9 million.

A large component of the increase was related to initiation of sales in Japan. But we caution trending this, as we're unsure that the short-term Japanese trend will continue or if there was stocking. We just haven't seen any information out there of that. So we can't really tell whether that was a one-time stocking or if it's going to continue. So I just give you a little caution there.

For R&D expense, we continue to estimate that annual expense for 2002 should be in the range of 100 to 120 million. Selling, general and administrative expenses will be in the range of 85 to 92 million. And the tax rate for 2002 is still anticipated to be 35 percent.

So this concludes my comments. At this point, let me turn the meeting back over to Bill Rastetter.

Thanks, Phil. Each quarter, there are a number of questions that we hear from you over and over again. So we thought that we might add a Frequently Asked Question section to our conference calls. In that spirit, we will answer three FAQ's before opening the floor to your other questions.

So Frequently Asked Question Number 1 - do you believe the results from the NCI ECOG study with CHOP/Rituxan in aggressive NHL's, possibly to be reported at ASH this year, will replicate the data from the European GELA study?

No, in fact, we'd be surprised if it did. The induction regimens are entirely different. The GELA study uses eight Rituxans and eight CHOPs. And the NCI study uses half the amount of Rituxan - four Rituxans and only six CHOPs. So it'd be very surprising if the results were the same.

But, of course, the NCI induction regimen is not the way docs are using CHOP Rituxan in the U.S. anyhow. The most common use is six Rituxans and six CHOPS. The real importance of the NCI study is the contribution of the maintenance Rituxan. And we won't know about this, we'd guess, until the end of 2004, perhaps at ASH. We'd imagine that a comparison of NCI ECOG and GELA will simply prove the old adage - more is better. That is, more Rituxan is better.

Frequently Asked Question Number 2 - what is the status of the Corixa litigation?

As we mentioned on one of our earlier calls, we do not intend to give regular updates on litigation. The only development has been that the Federal judge in San Diego has ruled that our declaratory judgment action case, which we filed last September, will be heard here in San Diego and that Corixa's lawsuit, which Corixa filed in Delaware, has been transferred to San Diego and will be consolidated with our case. Discovery has not yet commenced. But we expect it to start soon.

Frequently Asked Question Number 3 - what are IDEC's plans for financing your manufacturing facilities and your new headquarters?

We're currently in the design stages for a new large-scale manufacturing facility in Oceanside, California, and a new headquarters and R&D facility in San Diego. The new manufacturing facility will give us about 20-fold the capacity that we currently have. The new headquarters and R&D facility will allow us to continue to grow in a campus setting, rather than scattering facilities throughout North County San Diego.

Also, we will complete this year the construction of a new clinical manufacturing facility in Oceanside that will double our existing manufacturing capacity for clinical trial materials and limited commercial supply. We expect to finance at least a portion of the design and construction costs for these facilities from our strong existing cash balances.

Over the next three years, we anticipate investing about 500 million in facilities. So we will continue working with our Board and external advisors in evaluating financing alternatives as various opportunities arise, including the sale of equity or debt securities, bank financing, and off-balance sheet lease arrangements, such as synthetic leasing.

Synthetic leases have fallen somewhat out of favor in the post-Enron era. We will continue to monitor the status of these as financing vehicles as new standards for accounting and financial reporting are proposed and adopted.

The most likely outcome is that we will use a combination of financing methods over time to build facilities for our future expansion needs. We will keep you posted as firm decisions are made.

We'd now like to open the floor to your other questions.

, please give us some help.

Thank you, sir. Ladies and gentlemen, if you would like to register for a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. If you're on a speakerphone, please lift your handset before entering your request.

One moment please for the first question.

with Salomon Smith Barney - pleas go ahead.

Thank you for taking my question. Your comments about the ECOG study - I was wondering what that implied about the pursuit of a regulatory filing perhaps this year, which I know that Genentech has talked about. And as I understand, the FDA has requested seeing the data from this particular study. What implications, given your comments about the potential results, did that have for that filing?

, we will continue the discussion with the FDA primarily through Genentech on that. And there is no certainty with respect to timing or strategy there. I think that, since none of us have seen the results of the induction piece, we would evaluate that before making any final decisions.

But again, I don't want anybody to be surprised if the spread between the control arm and the treatment arm are different. We have not seen the data. But with half the amount of Rituxan and three-quarters the amount of CHOP, I would expect the results would be different.

OK, and then if you could also give us an update on the pipeline in terms of the various products. I know that many of them are in Phase 2 studies. Any update on when we see some results. And as way of association, clearly you gave a range for R&D expenditures. Can you also give us some color in terms of the bottom and the high end of that range as to what the implications are related to the pipeline then?

I think there are a number of things that will influence the - that range. And it certainly will be influenced by the rate of hiring, our ability to actually bring qualified people in. We're trying to hire a good number of people. Many will be expensed against the R&D line. So

and all our clinical trials expenses will vary based on accrual rates and so forth and the initiation of various studies.

Obviously, there are certain points where you pause and talk to the FDA. And the timing of that is somewhat uncertain. So I think it - this early in the year, we're going to have to stick to that range.

Having said all that, I don't think there's a year in the last 15 when we've spent actually our entire R&D budget.

One tends to build these budgets with expectations that you're going to spend every penny. But we never end up doing it. So the best I can do is give you a range at this time.

With respect to these studies - the studies that are ongoing are currently blinded. They'll be unblinded towards the middle of the year, towards fall of this year.

And we will certainly be submitting abstracts to a variety of places. I imagine that Roche, for example, may submit the Rituxan data to ACR and so forth. We would probably put psoriasis data at the derm meetings, which I recall, are early in the year.

But I think you will probably get a feeling for where we're headed before you actually see the data. That is, we'd tell you on a call that we're going to do X, Y, or Z, based on what we've seen. And so you have to be a bit patient to see the data, because, of course, we never do data by conference call. We always do it in a peer review setting.

And I'm just not prepared here today to give you all of the meetings to which we're going to submit abstracts. I'm sure those project teams have those plans. I just don't have them with me here.

OK, thank you very much for taking my questions.

Sure,

.

Our next question will come from

with Morgan Stanley.

Please go ahead.

Thank you. Could you walk through - so far, I guess it's been 2.5 weeks or something - how many radiopharmacies and nuclear medicine centers have actually taken commercial shipments or administered the products or any kind of feel you have for that so far?

Well,

, this is Bill Rohn. I'd prefer not to get into some specifics with regard to patient throughput at this point in time. I think that, suffice it to say, there's a tremendous amount of enthusiasm in the oncology community for this product - as I mentioned before, high awareness, a lot of patients identified.

The point of focus has been on getting enablement, if you will, of the networks to move the patient through the treatment regimen in an efficient fashion. And I think that - well, like any new product launch that's creating a new paradigm of treatment, there are some glitches. And it takes a little while. But we're very encouraged by the high level of interest that is being exhibited by the marketplace.

I constantly get comments from our sales reps about physicians that they haven't been able to see for a couple of years, because they're so-called No-See physicians. And they're actually getting phone calls from those physicians asking the representatives to stop by their office and go over the details of Zevalin features and benefits.

And is there - other than just obviously the visibility with all the presentations, is there anything at ASCO that you think will be a critical driver?

Well, no, I think the focus at ASCO is certainly going to be - continued to be the broad feature benefit and story for Zevalin.

I think it's sort of the official coming-out party for the drug in the commercial setting. We expect there to be an awful lot of attendance at our commercial exhibit to get the full details of the product's utilizations, and of course, at the posters and oral presentations that are scheduled.

We saw a tremendous increase at ASH last year in terms of - in terrific interest in radioimmunotherapy in Zevalin. I think the

community woke up to the fact that this product was about to be placed on their doorstep. And they got busy in a hurry trying to find out more about it. And we'll just continue that process at ASCO.

And I guess just lastly, if there's anything you can say about margins, now that you're producing for - commercially for Zevalin - and if you can maybe just refresh my memory as to how you can get leverage over the - kind of the different pieces and how that might come into play on what the profitability is.

Phil, do you want to make any comments about that?

Yeah, I guess we can talk about that. We're anticipating that Zevalin should have fairly decent pharmaceutical margins. We should probably be seeing initially 80-plus percent margin. That's mostly comprised of two things - royalties - third party royalties we have to pay, and manufacturing costs related to the product. But we'll probably be seeing more of that in upcoming quarters.

And what portion of that do you have control - on the 20 percent cost of goods, what portion of that do you have control over, versus any of that coming kind of fixed from third parties? I mean, is there potential to leverage that to 85 or something as you ramp up? Or...

As I said, most of it's - it's broken up between royalties and our costs. And I wouldn't expect there to be any change in that, at least in the near term.

OK, thank you.

Our next question will come from

with Lazard. Please go ahead with your question.

:Thank you. I have a question about the initial usage of Zevalin. And do you expect the initial usage to be across the different indications that the Rituxan is used or more in line with the initial labeling of Zevalin?

, this is Bill Rohn again. The early indication that we're seeing is that the utilization is pretty smack right on label. This is similar to the experience that we witnessed for

. If I look at the preapproval reimbursement activities, virtually 100 percent of those are within the current label claim. And, of course, having Rituxan refractory as part of the label claim, I think, is - provides a primary stimulus for the vast majority of these patients.

But we don't anticipate any meaningful off-label use until I think that most of the physicians treat a handful of patients. And then as we provide data from subsequent clinical trials and as physicians get much more comfortable with the activity and the side effect profile of the product, they'd probably spread their wings a little bit at that point in time.

The other issue is that, of course, reimbursement is so new and fresh. Most of the physicians are reluctant to challenge the reimbursement system at this early stage with patients who are outside of label claims.

OK, and switching to Rituxan real quickly - previously you've given us estimates on the numbers of patients that have been treated with Rituxan. You've used the range of 50 to 55,000. Have you any better data on this or an update there?

There's really -

, this is Bill Rastetter - no rocket science involved there. It comes from taking the assumption that the average patient last year got six infusions - taking the U.S. net sales and just calculating the number of patients that would have been treated at six infusions based on the Rituxan pricing.

OK, so no change. OK, thank you.

Our next question will come from

with S.G. Cowen. Please go ahead.

Yes, have you seen any changes in the average number of Rituxan infusions per patient, as perhaps doctors adopt maintenance therapy more aggressively?

You know, maintenance therapy represents, we'd guess, less than 5 percent of overall utilization. It is a major growth driver going forward, as things like the

study and other maintenance studies get completed and discussed.

If you look quarter-to-quarter over the last year, I think we are reaching about six infusions as an

for Rituxan infusions. Now, if you go to maintenance eventually as a standard of care and are treating twice a year, then I think you'd get another step up, not per course, but per year, right. So as maintenance kicks in, I think you'll see another leg up on that. But it's pretty much stabilized at about six.

I don't remember Bill Rohn having said anything about ASCO abstracts looking at longer-term maintenance follow-up. But is there any expected maybe at ASH then?

In ASCO, there is nothing with regard to maintenance. I would guess at ASH, we might see some updated data from the

trial. Typically, I think he reported last December.

And usually they like to have some space of time between reporting to allow data to mature a bit. So I would say it's probably a good guess that you might see some more

data at ASH in December.

OK, and then lastly, I know you're not in the business of giving out projections on any of your products. But if I have estimated, say, 15 units of Zevalin sales for 2002, I was hoping you could help me out with the curve there. Would you expect it to be more of a - perhaps four units sold in Q2, five sold in Q3, and six sold in Q4, or more like a two, five, eight units in the next three subsequent quarters and a more rapid adoption later on in the year?

You're referring to Zevalin, of course.

Yes, sorry.

And I think the principal guidance that we've been giving in terms of ramp rate is that - one must take into account - this is a first-in-class therapeutic alternative. So it is new, in spite of the fact that the awareness is high. Nobody's used it, by and large, before - really before the end of March. And so we've got to work through the logistics.

I think the other issue that's going to affect ramp rate is obviously the Medicare reimbursement. So I think it's - we'll have to wait and see what the first quarter looks like. I'm not sure the first quarter necessarily becomes a projection factor just because of the Medicare reimbursement issue.

To refresh your memory, about 45 percent of NHL patients have Medicare as their primary source of health insurance. And that is a bit of a governor on use rate in the early going. It gets removed in the third quarter. And we would anticipate that there would be obviously an acceleration in usage after that point in time.

So we wouldn't expect any stocking in Q2 that might smooth out that curve.

This product will not be subject to stocking. Again, just to refresh your memory, we're not selling this to wholesalers. We're selling this to the radiopharmacies - freestanding radiopharmacies. And they're pretty much ordering it on a per-patient basis.

So most of the inventory is, frankly, always going to be in the IDEC warehouse, until a patient shows up or gets scheduled. And then it'll be sent two kits on a per-patient basis.

The other factor to keep in mind here is - this is a distribution channel that's not monitored by IMS. So going forward, unfortunately, those of you that use IMS - some method to gauge sales progress intra-quarter are not - aren't going to have that - unfortunately

will be used with Zevalin.

Yeah, Bill, I guess I'd reiterate - just that we don't know - it's much to order - we don't know what the quarter is going to look like for Zevalin, because this is a brand new class of product just being rolled out. And all the folks who might be using Zevalin in third or fourth quarter are just learning how to use it and are learning the referral patterns and how to schedule and so forth.

So that and Medicare, I think, may in fact make second and third quarter quite different. But it is way too early for us to

guess what second quarter's going to look like.

Thanks a lot.

Our next question will come from

with Bank of America Securities. Please go ahead.

Hi, first question is on Rituxan - could you give us a sense as to what the percent of total sales that's related to front-line aggressive NHL?

, it's pretty hard to ascribe a sales number there, because the data sources that we generate to try to peel apart this issue penetration into each of the histologic subtypes is basically not a projection sample. It's - you do a random sample. So trying to use that as a tool to allocate sales revenue per

subtype - or histologic - is pretty tough.

The - I think if you look, however, back at the last several quarters and look at the ramp rate and the fact that it did pick up pretty dramatically once the impact of the GELA data kicked in to HIMS physician behavior, you get some idea of the total impact of that.

I mean, last year, we grew the brand well over 80 percent. And a significant amount of that growth was coming principally from use in front-line aggressive. So - but I really don't have a specific number that I can ascribe to that particular usage sector.

Well, in your surveys, though, were you able to get a sense as to what percent of a patient's - of a doctor's patients are those types of - are these patients aggressive lymphoma patients that they're treating obviously.

Well, I think it probably matches, unless, again, this is not a stratified sample to be able to project from. But if we just look at the raw data, it is unimaginable - somewhat the prevalence pool of patients

where we see the aggressive NHL patients accounting for close to half of the patients in the prevalence pool.

I guess one way to back,

, if you want to approach it a little bit differently - there are about 30,000 newly diagnosed aggressive patients in the U.S. each year. And if each quarter, a quarter of those are initiated, or 7500, and if we have 3/4, let's call it roughly 5000 at an average of 15,000 of Rituxan. That would be 75 million of the quarter. And that is about as close as the metrics would allow us to get. And it's based on that 75 percent penetration of front-line treatment. Is that helpful?

Yeah, you said 30,000 newly diagnosed...

Aggressive lymphoma patients a year

.

Oh, aggressive lymphoma, OK. That's right. OK, can you just talk quickly about the toxicity associated...

times the 75 percent penetration of front-line use. And so call that 5000 times 15,000, or call it 16,000, with the Rituxan, that's about 80 million of the total reported last quarter.

Wow.

I think that's about as close as I could come to guesstimating it. Is that helpful?

Yeah, that's very helpful, actually. Can you now talk about - you talked about how the doctors here are not using eight infusions. They're using six of CHOP cycles. How much more toxicity are they seeing with eight versus six?

Well, it's primarily cardiac toxicity, right, and I think it's attributable to the CHOP, not to the Rituxan.

Oh, of course.

It's well known from the Adriamycin. And it has just become standard in the U.S. to use six cycles rather than eight because of that.

OK. On the financial side now, I'm having trouble getting to 17 cents. When I do the division of 29,673 divided by 182,418, it's 16 cents. I was just wondering if I'm missing something.

Yeah, I think,

, you have to add back the interest expense from the bond.

Oh, OK.

I think you're adding - you add the shares in the denominator. But you have to- again, this is - denominator. But you have to add the interest expense back into the net income from those bonds. We have to treat them as if they're converted or as if they're a bond, so either way. And this is just more dilutive to

were all converted.

I got you. OK, I understand. Now the R&D - you haven't changed your guidance obviously. But should we be thinking about the R&D spending as a smooth curve? Or should we see a big jump in the second quarter from the first quarter? How should we think about that?

Yeah, I think there's two things affecting that. One is, as I mentioned, our facility was used mostly in the first quarter to make Zevalin inventory. So you've got that plant that, when it's making Zevalin, it goes to inventory. And when it's not, it goes to R&D, because it's making clinical supplies. So that's something that potentially can - will pop into R&D. But I think you'll see an increase next quarter. And then it'll take another bump in the third quarter.

So a smooth run of R&D then.

Yeah, I guess so.

OK, and then - you guys have almost $1 billion in cash. And I know Phil - it's probably burning a hole in your pocket. I was wondering what you guys are thinking about doing with it.

, I think a strong balance sheet is good. As I mentioned earlier, we have 500 million in facilities financing that we will be doing. I don't think we'll take - I'm sure we won't do all of that off the balance sheet. We'd like to keep the balance sheet strong. We'd like to be able to move opportunistically with particular emphasis on attractive products.

We're always asked about M&A. And I always give the same answer. I'm much more interested in attractive products than the much, much more difficult gymnastics and acrobatics of actually doing mergers and acquisitions and integrations of different geographies and cultures and what not.

So you know, one of the Frequently Asked Questions we talked about answering, which actually I completely forgot about - there was a rumor on the street a couple weeks ago we were buying

. And let me dispel that. We are not going to buy

. And so we're not going to use the cash on the balance sheet for that.

OK. Thanks, guys, appreciate it.

Yeah.

Our next question will come from

with Adams Harkness & Hill. Please go ahead.

Hi, if I remember correctly for ITP, you used three Rituxan doses of the 375 per meter square. What do you - what is being used by Roche for the rheumatoid arthritis indication?

There are, I think, three active arms there. And if I'm not mistaken, they're using actually a schedule that's not related to oncology infusions. I think they're using more like about a gram of drug. I think it's two infusions of 500 milligrams about a week apart.

OK. And...

By the way - that, by the way, would not necessarily be the dose and schedule we would take forward, if we decide to expand off of this work and do clinical trials in the U.S. The most likely next step, if this data in fact shows that there is utility to Rituxan in managing these patients, would be to do a - probably a Phase 2 trial that would look at optimizing that dose and schedule.

So don't necessarily use that as a projection as to what the likely infusion schedule would be or drug consumption would be for the rheumatoid arthritis market.

The doses that have been used in those studies have been published in a couple of abstracts. And if you give me a call a bit later, with some help from folks in the clinical group, I'll get those for you.

OK, thanks. And so when - you'll have that data later this year. So it's in the whole pool of all the data that you're going to have. And you're going to then tell us which programs might go forward.

Yeah, and for example, I don't think we'd take 151 and Rituxan forward rheumatoid arthritis. We certainly couldn't manage both of those.

We will probably not take our

and our

71 together in parallel in psoriasis. So I'd pick one of those. And so we want to move with the stronger candidate in each case.

The nice thing about each of these products is they can go into multiple indications - those that we have looked at and some that we have not looked at. And we want to take our strongest product candidate and move it forward in several important indications. But we probably would not be redundant by indication in Phase 3.

And are we working on any sub-cu formulations of any of these products? We are, aren't we?

Yes, absolutely.

OK.

And the feasibility of sub-cu will depend on solubility and dose and frequency of dosing. And so if you have to give a fair amount of material, it is possible then - just as an example, rather than giving an I.V. infusion once every two weeks for four or eight infusions or what have you, that you might go to more frequent sub-cu dosing.

All of that's going to have to be worked out, once the solubility formulated for sub-cu is understood for each product and the effective dose is understood for each product. But yes, by all means, we're looking at that.

OK. And the - what are the capital expenses going to be for this year? Do you know, Phil?

Let's see. Over the next - I think as we mentioned earlier, over the next three years, it'll be around 500 million. And I'd say this year, we'll probably be - I'm guessing it'll probably be around 100 million this year.

OK. And I have one other question, if I can remember - oh, the eight-times dosing - has the adoption been slow there? Has Genentech not been marketing it aggressively? Do you have any idea of how much penetration you're getting into the low-grade lymphoma?

Well, eight-times regimen is really only an operative regimen frankly, when Rituxan's being used as a single agent. And I have to tell you that today, 70 percent of the time the drug is given, it's given in combination with chemotherapy.

And it's really the chemotherapy that ends up dictating the regimen, because typically each cycle in chemo is accompanied by one infusion of Rituxan. So when you look at times-eight and its impact, it ends up having an impact in a relatively small fraction of patients that are getting Rituxan as a single agent.

But there - by the way, there is - in the ASCO abstracts, there's a study out of Japan that is a times-eight study that will add to the database on - as Bill mentioned before, establishing that, frankly, more is better.

OK, great, thank you.

Our next question will come from

with CS First Boston. Please go ahead.

Hi, and congratulations on not buying

first. And second, in

international royalties, if my memory serves me first, the royalty rate is about 11 percent or so. And actually, we're seeing - if we're trying to analyze the Genentech reported sales or the shipments to Roche, there's actually a pretty good correlation in terms of your royalties and what they're shipping.

We also get the international sales number out of Roche. And again, if I haven't messed up on the currency translation, I believe that in the first quarter, it was about 90 million. So I was wondering if you have any comments about - what is Roche seeing in Europe in terms of sales after the approval of the GELA regimen?

, this is Bill Rohn. I think the 90 million calculation may be a little bit high. I have not seen those numbers, however. And with regard to feedback with that GELA-style regimen, now that it's been approved, we haven't - not had a meeting with our colleague. And one is coming up in May. We will have a global product and project team meeting. And we'll have a much better read on it at that point in time.

We do anticipate, however, this is going to represent a significant upside and Roche sales activity in their territories, because in Europe, unlike the U.S., the usage tends to parallel the package insert. And by adding this to the package insert, it really opens up a whole new significant market that they weren't able to effectively tap prior to the approval, except in those patients that paid for their own therapy in Europe.

So is - do they need to get pricing approval for that regimen separately or it's already under the MabThera pricing approval in Europe?

It's already under the MabThera pricing approval in Europe.

So would you give us guidance about the royalty number you would be expecting this year or confirm the royalty rate assumption?

No, we've never mentioned a royalty rate. I don't know where your royalty assumption comes from. I can neither confirm nor deny it.

OK.

There's numbers,

, but I don't know where you got the number from.

OK. And in terms of what are your expectations for royalty revenues this year?

We just don't give projections of any sort of revenues. That's - has to come from your models. We, too, are only analysts when it comes to the future. So...

OK, and last question about the - our use of Rituxan in rheumatoid arthritis - when is the next data point? Do you have - do you know when is the next time we could see some data coming out of the trial that Roche is conducting?

You know, I think, we at the Company, to Roche completing their analyses, would see something in the second half of this year. Now, whether they plan to submit an abstract to ACR and whether ACR would accept it, I think things that I couldn't speculate on. But I think it would make sense that it might be there. I think you would probably again hear some intention from Genentech and IDEC about what our next step is based on the results before you'd actually see the results.

OK.

By answer

so if it doesn't make it in ACR, last year at ASH, there was an abstract on its use in RA. So they might actually - although the venue is maybe not what's directly appropriate, might also reveal the data at that point, if the data is not mature enough to hit the abstract deadline for ACR.

And what...

And again, if we go forward with Genentech and Roche, the next step would be a dose ranging Phase 2, because the randomized study that is being conducted in Europe looks at various combinations, but not at different doses. And we would undoubtedly have to do dose ranging before proceeding with Phase 3.

How many patients are in the current trial?

One hundred sixty.

OK. Thanks a lot.

Thanks,

.

Our next question will come from

with Goldman Sachs. Please go ahead.

Hi, most of my questions have been answered. So I just have a question on ITP and then a question on Medicare. In the case of ITP, obviously there's a high unmet need. Can you just talk a little bit about the strategy in terms of the trials that you're going to be doing?

And secondly, on Medicare, once you get the code approved, can you walk us through how long it would take for actually a patient to get through this process? Other patients that are kind of waiting already - once you get the code, you can then put them into the system.

Yeah,

, on the ITP - and I'll turn the Medicare question over to Bill. On ITP, I think it'd be inappropriate to jump the gun here and comment before we get final agreement on all clinical trial matters with the FDA. Certainly, when the first patient is treated, we would issue some detail on that.

I will say that we don't anticipate that it would be significantly different from the various studies that have been published in ITP that look at regimens that are fairly similar to the oncologic regimen, anticipating that a reduction in normal B cells in these patients will lead to recovery of platelet counts, as has been seen.

With regards to the Medicare reimbursement situation, on July 1, or when we get that APC code, which should, by virtue of the regulation, be given on July 1, those patients would be then eligible for treatment and reimbursement at that point in time. So we would expect them to enter the system shortly after that point.

The interesting thing that's happening now is that when a Medicare-eligible patient is identified as a possible candidate for Zevalin therapy, in some cases, almost - and this certainly isn't universal - but anecdotally, in some cases what's happening is the physician is going back and treating the patient once and again to sort of put them in a holding pattern until July 1 - so interesting phenomena.

But what they're trying to do - they know they won't necessarily get the depth and duration of response from another round of Rituxan. But they feel that they can at least put the patient at least in some sort of situation where they won't need aggressive additional therapy in the meantime and then would schedule them for a Zevalin therapeutic regimen shortly after July.

That's great, thank you.

Our next question will come from

at Deutsche Bank. Please go ahead.

Thank you. I had a question on the ECOG study for Rituxan in aggressive lymphoma. Is there any literature out there published of a trial with - in a controlled setting where six cycles of CHOP was compared to eight? And what do those results look like?

Well, I've never seen that, no. I think it is mainly from community experience in monitoring adverse events, in particular cardiac toxicity, that has led most U.S. physicians to the six-cycle regimen. But no, I don't know of any comparative study.

The comparative studies that have been done with aggressive front-line therapy have been with different combinations, not with different doses. Generally, dose and dose attenuation is based on physician experience and is often individualized to the patient. And so, times-six, times-eight are just rules of thumb. There will be patients who will not get the full six in the U.S. and won't get the full eight in Europe.

OK, and in terms of - can you just remind me the rationale that the FDA set forth when they had asked for the data from the ECOG trial, given the fact that the regimen there appears to be very different from what is being used as standard of care in those patients right now.

Well, I can't speak for the FDA. I, in fact, was not at the meeting. Nobody in this room was at the meeting. But my presumption is that it's simply the old rule of thumb that you need for these types of things - a couple of large well-controlled studies. And ECOG would represent only one. I don't think it's anything more than that.

OK, and then the Rituxan for RA trial - is there an active control arm with Methotrexate alone?

Yes.

Thank you.

All right. I guess we have time for one more question. We've gone a bit over the hour. But we'd be happy to take one more.

, can you help me with one more question?

Ladies and gentlemen, if you do have a question, please press the 1 followed by the 4 at this time. I am showing no addition questions, sir. Please continue with your closing remarks.

Well, thank you all for joining us. We appreciate the support and the interest. And we will be here if you have any other questions. From San Diego, we're signing off. Take care.