Biogen Inc (BIIB) 2002 Q4 法說會逐字稿

Good afternoon.

My name is Sandra (ph) and I will be your conference facilitator.

At this time I would like to welcome everyone to the IDEC Pharmaceuticals fourth quarter and year end conference call.

All lines are on mute to prevent any background noise.

After the speaker remarks there will be a question and answer period.

If you would like to ask a question during this time, please press star then the number one on your telephone keypad.

If you would like to withdraw your question, press star then two on your keypad.

Mr. Rossiter (ph), you may begin your conference.

Thank you Sandra, and welcome to the IDEC fourth quarter and year end 2002 conference call.

With me are Bill Rohn (ph), our Chief Operating Officer and Nadil Hannah (ph) our Chief Scientific Officer, Paul Grant (ph) our Chief Medical Officer and Ed Rodriguez (ph), our Principal Accounting Officer.

This call is being simultaneously webcast.

We have had another great quarter and great year.

Rituxan achieved 318.2 million in fourth quarter sales.

That is nearly a 41% increase from the 226 million sold in the fourth quarter of 2001. (inaudible) logged five and a half million in sales, Bill Rohn will update you on both Rituxan and (inaudible).

Total U.S. net sales of Rituxan for 2002 were 1.08 billion.

It is now a biologic blockbuster. 1.08 billion is up39 percent from 779 million for 2001.

We earned 26 cents per share - diluted basis during fourth quarter and 85 cents per share on a diluted basis for the year 2002.

On a year over year basis, these net earnings represent a 44 percent increase in after tax earnings from 59 cents in 2001 to 85 cents per share in 2002.

As you may have just seen, IDEC and BioGyn (ph) have just announced a collaboration in (inaudible) IDEC will take the development of free programs from (inaudible) pipeline.

BioGyn will have an opt (ph) in right over a four year period.

If they opt in, they will share expenses and profits world wide.

The collaboration leverages our strengths and track record in oncology and - phase one product candidate and two, maturing preclinical oncology programs to our pipeline and Adil will give you some detail to this exciting collaborative program with BioGyn.

Subsequently, Paul will provide an update on key aspects on our development pipeline including Rituxan and Rheumatoid arthritis and 114 in Hodgkins (inaudible).

Finally I will review the financial statements and provide limited guidance for 2003.

But before we get on with this call, let me remind you that in the course of this presentation, in the q-and -a session that follows we may make forward looking statements that involve risks and uncertainties regarding development or regulatory process, product launch and commercialization.

IDECs' financial performance, intellectual property matters and or other subjects remained in IDEC's business.

As future events are not predictable with certainty, we would refer you to the risk factors listed from time to time on our annual report 10K form, our quarterly reports on form 10Q and other SEC filings.

These risk factors may cause actual results to vary materially from projections 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 financial guidance that we may give on this call.

I should also mention that the contents of this call are copyrighted by IDEC Pharmaceuticals and no recording duplication of this call is allowed without permission of IDEC pharmaceuticals.

Let me turn the mic over to Bill Rohn.

Thanks, Bill, and good afternoon, everyone.

As you are aware by now, we had an absolutely stellar year for Rituxan.

In collaboration with our partner Genetech, we elevated this rare brand to the atmosphere of the $1 billion product category.

Rituxan is the number one branded anti-tumor agent in the U.S. market.

U.S. sales for Rituxan amounted to $318.2 million, an increase of 41% versus the same period last year and 18% of above third quarter sales.

For the full year then, Rituxan sales reached 1.08 billion, an increase of 39% over 2001.

There's been some recent speculation on the Street that some type of distribution channel effect may have enhanced the fourth quarter performance.

Our partner, Genetech, who monitors this closely, indicated that wholesaler inventories are well within normal ranges.

Based upon analysis, it is clear that sales reported for Rituxan in the fourth quarter are reflective of actual demand.

Turning to product utilization metrics from our tracking studies, I won't be focusing on the fourth quarter study alone where the variability around point estimates is large.

Instead, I would like to highlight data from all four quarters of 2002 combined versus comparable data from the previous year.

Given the use of standard survey methods across these periods, the trend data is especially interesting to look at and paints a more complete picture of Rituxan growth during 2002.

For example, utilization of Rituxan in front-line stream of Zevalin grew significantly from 35% in 2001 to 63% in 2002.

Clinical results appearing in "the journal of clinical oncology, asco and ash, features the use of Rituxan in this setting was primarily responsible for the growth.

Upfront use of Rituxan in treating aggressive Lymphoma, namely with chop chemotherapy grew from 61% in 2001 to 80% in 2002.

Here, obviously, the jala data was the primary catalyst of adoption.

In relapse disease, Rituxan penetration went from 55% to 72% in low-grade disease and from 44% to 55% in aggressive NHL between 2001 and 2002.

For CLL utilization and treated patients went from 16% to 26% and front line and from 33% to 45% in relapse patients.

Among all NHL and CLL-treated patients then, utilization increased from 44% in 2001 to 61% in 2002.

The portrait of utilization is clearly one of broad across the board gains in all treatment settings.

Rituxan is truly become the linchpin of Lymphoma therapy in the United States.

Before closing my comments on Rituxan, let me point out a few of the significant developments which took place in 2002.

I already mentioned hitting the magic $1 billion mark and the number one ranking among all anti-tumor agents in the U.S., but equally important for the future was the identification of significant Rituxan clinical activity in rheumatoid arthritis a phase ii setting and the subsequent decision by IDEC, Roche and Genetech to undertake a global development and registration program for this indication.

In fact, during the closing days of December, IDEC filed an IMD for a phase III study of Rituxan in patients who have failed or are not adequately responding to anti-inhibitor therapy.

If the FDA agrees with our proposed program, we expect to start enrollment in this trial in the second quarter.

Paul Grant will talk more about the RA program in his remarks.

Once again, ash 2002 proved to be a major showcase for Rituxan clinical data.

Over 200 Rituxan-related abstracts were submitted resulting in dozens of oral presentations and poster presentations.

Significantly, the Haynes worth paper the (inaudible) study supported the concept of maintenance and extended therapy with Rituxan.

Finally, we've been informed by a spokesperson by the eastern cooperative oncology group that preliminary results in the large intergroup NCI trial looking at chop Rituxan induction and Rituxan maintenance in newly-diagnosed aggressive Lymphoma is being targeted for presentation at this year's ash meeting in December.

At this point, we're not certain as to the scope of that presentation, but we are all looking forward to reviewing the emerging results from this important trial.

That's it for Rituxan.

Turning to Zevalin, let me highlight the key developments since our last conference call.

First, net sales for the fourth quarter amounted to 5.5 million.

That represents approximately 325 patients who received the Zevalin therapeutic regimen during the quarter.

Totally, Zevalin sale force 2002 amounted to 13.7 million, which represents about 800 total patients treated.

We typically think of three phases of new technology adoption in our business at the physician level.

Awareness, trial, and adoption.

For example, with Rituxan, we saw about an 18 to 24-month trial period before community-based oncologists understood how they were going to utilize the agent in treatment paradigms.

For Zevalin, awareness is currently high standing at87% on an unaided basis and 98% on aided basis.

But the trial basis for this radio (ph) therapy is still young.

Three barriers that stood in the way of trial.

Reimbursement, logistics and financial implications for referral of treatment and patient selection.

All of these barriers are surmountable and we're addressing each of them.

The key reimbursement effort today is efficiently integrating the new 2003 hot payment scheme, including coding and payment rates into the system.

We are solving this by deploying regional reimbursement specialists who will interface with key hospital accounts, the various Medicare intermediaries and carriers and private payers in order to resolve questions as they arise.

Reimbursement is like priming a pump.

Institutions wait to gain experience with the process for a new, high-value technologies before completely opening the tap.

The trial process for Zevalin also entails referral to a nuclear medicine center for patient treatment.

This has been a barrier just because it lies outside of the standard treatment experience.

We continue to work with community-based oncologists to show them and their nursing staff how routine this referral can become.

Once physicians gain experience with a referral process and see the benefits of radio immunenotherapy on a firsthand basis, we believe referral will be less of an issue.

Of course, the financial implications of referral are also on the mines of oncologists.

Some revenue is lost in the referral process versus retreatment with an in-office therapy.

Ultimately, however, as we have seen with Rituxan, Zevalin will fit into treatment paradigms in combinations that will keep the community-based physician at the center of the treatment decision.

Our phase four trial comparing Rituxan to Zevalin, plus four Rituxan consolidation infusions is a case in point.

All of the Rituxan in the experimental arm, that is the two infusions that are part of the Zevalin regimen and the four chaser consolidation infusions would all be administered in the community-based setting.

This issue will also be worked out as Zevalin finds its way into different treatment regimens.

To date, 20 Zevalin post-marketing trials are underway.

Of these, nine involve regimens that employ Rituxan as consolidation for maintenance therapy.

We planned to open roughly another 20 Zevalin trials this year.

Many of which will incorporate Rituxan, as well.

Finally, we have been working with physicians on the questions they have regarding patient selection.

This is a key part of the trial period for any new agent.

The patient who is an ideal candidate for single agent Rituxan is probably not a patient who will readily be referred for Zevalin treatment.

Rather, it is a patient for whom an agent will be selected with a very high chance of inducing a remission.

That is an agent with a high overall response rate.

This is a patient that classically might have been treated with aggressive combination chemotherapy regimens.

But we believe that many patients that would have gone on to chemotherapy may go on to Zevalin instead.

Our clinical experience suggests that physicians trial in these patients will be successful.

Of course, Rituxan chemo combination patients may end up on the Rituxan-Zevalin regimens as these become better understood through experimental protocols.

Many of the trials are now beginning to enroll patients as I have noted.

As a final note on Zevalin, let me update you on the number of treatment sites which are unable to administer the radio label portion of the regularmen of Zevalin.

Today, over 700 administration sites are capable of delivering Zevalin, up to 560 at the end of the quarter with 700 administration sites, each sales representative has at least ten locations within their territory to direct patients with Zevalin therapy.

Going forward, we expect a number of administration sites to increase only gradually, probably peaking at 800 to 900.

Well, that covers the latest developments for both Zevalin and Rituxan.

Let me turn the meeting over to Nadil Hannah.

Thank you, Bill.

I'm pleased to share with you information about the recent announced alliance with bargain which spoke with us on two oncologies from their pipeline.

The programs aid at potential markets include an (inaudible) Beta delivery system, a product currently in limb Lymphoma and also for patients with liver metabolisms.

Second, LTBR, lympho toxin interceptor which is spread through multiple tumors for Colin, breast and lung(inaudible) carcinomas and it is used to hit toxicology in tumors.

Third, an enscripter which is used on multiple tumors such as Colin, pancreas, and breast.

This interceptor is effective in models.

I think we will assume the responsibility for Zevalin programs of over the initial four years of the partnership.

Subsequently, Bogen (ph) has a right for equal sharing of Zevalin coast and product by product basis.

Strategically, the alliance provides IDEC access to three programs that are complimentary to our internal programs.

Strengthening our product portfolio and oncology to include the following.

Two approved products, Rituxan and Zevalin.

Two products in phase two clinical trials (inaudible) Two phase one-two products, Interferon Beta gene delivery and atoqin 60, which is also called 214, and products with potential of being in the clinic in the next 12 to 18 months, and iduqan 59 and several targets and studies including the receptor.

That actually covers all of our portfolio onion college today, and I will let Paul Grant, my colleague, discuss the clinical program that we have on board.

Thank you, Nadil, and good afternoon.

In the preliminary session of the oncology rheumatology meeting in October of last year, data from the phase 2-a Rituxan study of rheumatoid arthritis was presented.

The results indicates that Rituxan alone or in combination of methotrexate could target a new approach in d-cells with patients with rheumatoid arthritis.

Together with our partners, Genetech and Roche, we are developing a program which includes a phase three study in patients who have an inadequate response to ITT and therapy phase 2-b, ranging study in patients who failed previous chemotherapy.

We are very excited at being able to evaluate the Rituxan and with it a new therapeutic approach for RA patients.

Our plan is to initiate this program in the second quarter of this year (inaudible) last December, Dr. Tutman presented information from the phase two study of IDEC 114 in patients with relapsed or refractory (inaudible) Hodgkins Lymphoma.

At a previous meeting, we presented pre-clinical data presenting this antibody -- and two zemograph models.

The purpose of this study is to demonstrate the safety and co-netics of 114 in this patient population.

The treatment consisted of an intravenous infusion of IDEC 114 given once a week for four weeks.

Patients being treated in a dose escalating design with the initial cohort receiving 125 milligrams per meters squared and subsequent cohorts receiving 250, 375, and 500 milligrams per meters squared.

We have data available on the first 22 patients treated and no dose limiting toxicities or serious adverse events have been observed.

The most commonly reported adverse events are fatigue and nausea occurring in 26% and 10% of the patients respectively.

So far, we only have a short follow-up with these patients.

In fact, the meeting duration of only two months, but reductions in tumor burdens have been seen, have been observed at all doses.

Importantly, in the 375 milligrams per meters square cohort, we have documented the complete response in three patients after 16 so far for an objective response rate or 19%.

Of interest, these complete responses occurred several months after the treatment caught, and so of course, we are eager to see how the data evolves over time for the more recently treated patients.

Our pre-clinical studies have also demonstrated a mock therapeutic effect of combining IDEC 114 with Rituxan.

And we have already commenced rolling patients into a combination study to examine this approach.

Now, I would like to hand it back to Bill.

Thanks, Paul.

For the financial review this afternoon, I will start by presenting a summary of the quarter and then finish with limited guidance for 2003.

Also, as a reminder, beginning with the financial results for the first quarter 2003, we will no longer issue quarterly flash financial releases reporting U.S. net sales of products and an estimate of earnings per share.

As we have done in the past, quarterly and annual financial results, including reports of U.S. net sales of our products will be released approximately one to two weeks following the report of Rituxan sales by Genetech.

Now on to our financial summary.

Net income for the fourth quarter 2002 was 44.6 million, or 26 cents per share on a diluted basis.

This compares to income of 28.7 million or 16 cents per share on a diluted basis for the 2001.

Our results this quarter represent a 55% increase in after-tax earnings over the fourth quarter 2001.

Net income this quarter of 44.6 million also showed a 16% increase over third quarter 2002, net income of 38.4 million.

Revenues for 2002 were 123.7 million compared to 81.7 million for the same period 2001 and 103.7 million in the third quarter 2002.

The 51% increase from the fourth quarter of 2001 was driven by an increase of 40.3 million in unconsolidated drug business revenues and 5.5 million of sales from Zevalin.

Revenue from unconsolidated joint business for the fourth quarter of 2002 was 53% higher than the same period in 2001 with 116.6 million in revenue versus 76.3 million for the fourth quarter of 2001.

The increase of drug business revenue resulted from higher U.S.

Rituxan sales and higher royalties from sales of Rituxan outside the U.S.

The joint business revenue consisted of IDEC's share of the pre-tax co-promotion profits, reimbursements from Gentech, Rituxan and Zevalin sales force and royalty income from Hoffman, la Roche and sales outside of the United States.

Co-promotion profits were driven off of the 318.2 million in U.S. net sales of Rituxan to third pears recorded by Gentech in the U.S. during the fourth quarter of 2002.

IDEC's profits split for the fourth quarter with Gentech before any reimbursements amounted to 30.9% of net U.S.

Rituxan sales versus 30.8 for the same period in 2001.

IDEC recognizes royalty revenues from foreign sales with a one-quarter lag royalty revenue for the rest of the world for sales of Rituxan recognized by IDEC in the fourth quarter of 2002 was from third quarter 2002 sales and amounted to 13.5 million compared to 5 million recorded in the fourth quarter of 2001 and 11.8 million in third quarter 2002.

Moving on to operating expenses, total operating expenses for the quarter amounted to 55.8 million versus 41.5 million for the fourth quarter of 2001, and 49.4 million for the third quarter 2002.

Cost of sales on the p slr/l is from Zevalin and includes cost of goods sold royalties and manufacturing variances for Zevalin.

Cost of sales as a percent of Zevalin sales was favorable versus our ongoing expectations because of material being sold was made prior to FDA approval and was expensed rather than capitalized as inventory.

R&D expenses increased by 3.7 million from the fourth quarter of 2001.

The increase was mostly driven off of increased expenses related to one-time be in licensing of technology rights related to our products, increases in personnel to support research and process sciences, facilities expenses, and these increased expenses were partially offset by the capitalization and manufacturing costs for production of commercial inventory of Zevalin.

Our manufacturing campaigns for Zevalin observed almost 12 months production time this year, that is 2002 in our current plan.

During fourth quarter, approximately 8.9 million of Zevalin related operating costs of our manufacturing facility and outside contractors was capitalized to inventory for.

For 2002, our Zevalin manufacturing campaign absorbed approximately 32.6 million of Zevalin-related operating costs.

This number includes both internal and external contract manufacturing costs.

As we have built adequate bulk inventory levels of Zevalin, we do not manufacturing bulk Zevalin inventory in 2003.

Correspondingly, our plant facility cost will be recorded as R&D expenses in 2003.

I will give you some guidance on the magnitude of this in a few minutes.

SG&A amounted to 29.4 million, a 10.3 million increase from the fourth quarter of 2001, and compared to total SG&A of 23.8 for the third quarter of 2002.

The increase over fourth quarter 2001 was mostly due to our investment in the Zevalin launch, specifically (ph) expansion of our sales force, establishment of a medical function and obligations under our agreement with mds Canada, Inc., regarding astium 90 minimal commitments and also legal expenses, general infrastructure additions were in the increase over fourth quarter of 2001.

We saw net interest income for the fourth quarter decrease by 1.1 million from 2001, due to substantially lower interest rates and interest expense from our April 2002 convertible debt offering offset by interest income from the larger cash position.

As a result of higher than expected fourth quarter 2002 Rituxan sales and lower than anticipated R&D tax credits, we have adjusted our tax reporting rate for the full year of 2002 to 36%.

Our guidance had been 35%.

Our weighted average shares used to calculate EPS on a fully diluted basis for fourth quarter 2002 amounted to 178.2 million shares.

The 4 million share decrease from the fourth quarter of 2001 was primarily the result of excluding out of the money employee stock option from the calculation of weighted average shares.

We entered the quarter of 1.4 billion in cash and available for sale and 581 million from the end of 2001.

The increase in cash from the end of last year was primarily from the sale in zero coupon senior convertible debt securities for gross proceeds of 714 million and cash from operation.

The increase of cash was offset by 135 million used for stock re-purchase of time of our convertible financing and 166 million of cash used for investment in our facilities projects and capital equipment.

Now, we would like to provide some limited guidance for 2003.

Circling the philosophy on guidance continues to change in the -- and post Sarbanes oxly era.

Companies such as Coca-Cola and "Washington Post" decided to stop giving guidance altogether.

This is probably not appropriate in our business where the course of investments and other cash flows may not always be so predictable.

We will continue to give limited guidance and we will focus on events that change the assumptions underlying our business.

For example, today I will share with you assumptions about 2003 anticipated head count growth in manufacturing plant utilization.

During 2002, we hired nearly 6300 full-time employees growing to nearly 1,000 strong.

You may assume in 2003 that we will focus on organizational effectiveness, training and simulation into the IDEC team of new employees, excuse me, as compared to adding significantly to further head count growth.

The team is roughly the right size for our stage of development and we have been fortunate to recruit hundreds of talented and motivated employees.

As I mentioned above, our Toriman manufacturing plant was used during 2002 almost exclusively (ph) for Zevalin manufacture.

As a consequence, the expenses were largely capitalized into Zevalin inventory.

We do not anticipate manufacturing Zevalin into 2003, so our -- facility will be charged to R&D as it is used to support products and development.

We anticipate this expense will be in the range of $20 million plus or minus 20% depending on actual plant utilization.

This will take us back into the range of manufacturing R&D expense that we reported in 2001 and that you would expect were (inaudible) to the size of -- as many of you know, we will transition from -- in the next several years to a campus in oceanside, California, 25 miles north of the current facility.

Some engineering quality and engineering staff have already transferred to oceanside.

The first facility in ocean side known as (inaudible) is mechanically complete and will come on stream in 2003.

We anticipate in 2003 that we will spend 25 million for this activity, some of these costs will be incurred for full validation and will be capitalized.

The first product to go into niko will be Zevalin with the objective of painting in 2004, FDA licensure for the facility for commercial supply profit.

As we did with IDEC, Genetech and Roche came up to a plan for Rituxan for Rheumatoid arthritis.

We will conduct a study for inadequate responders.

Most of the study will occur next year, in 2004.

In 2003, we will be involved in setting up clinical sites, negotiating clinical trial agreements, getting the protocol to IRBS and recruiting 20% of the patients for the study.

You should assume that all expenses for this study will be charged it our R&D line and then we will be reimbursed by the Rituxan collaboration on our top line.

Genetech and IDEC expect to share the cost of development with Roche.

The Genetech and Roche will be charged a portion of the venture as other costs since we occurred since FDA approval in 1997.

On SG&A for 2003, you consume that infrastructure, sales, marketing, advertising promotion, medical affairs, reimbursement, continuing medical education programs are largely in place and will continue at roughly the pace we saw in fourth quarter 2002.

The tax reporting rate for 2003 is anticipated to be around 38%.

Looking ahead to capital expenditures for 2003 and beyond, we continue to estimate capital expenditures to be around 325 million for 2003 and to total around 170 million in 2004.

We assume that these projects will be financed with cash from our existing balance sheet.

With that, we've concluded our prepared comments and we would like to open the floor for questions.

Sandra, can you help us with that, please?

At this time, I would like to remind everyone if would you like to ask a question, please press star and then the number one on your telephone keypad.

We'll pause for just one moment to compile the Q&A roster.

Your first question comes from John Sunnier (ph).

Thanks for taking my question.

Bill, I was wondering if you could walk us back through the R&D guidance.

Give us a little bit more color on what to expect.

It looks like you're going to have at least two items folding into under that line item that were not a part of the attitude, is that correct?

I'm sorry, John.

Run that by me again?

Two items that are what?

That are being folded into the R&D line that were not a part of R&D expense in 2002.

Is that correct?

You talked about the expense associated with the phase three trial in RA.

The phase three trial in RA will be entirely reimbursed by the joint venture, so it will appear in the R&D line, but it will also appear in the top line.

Okay.

The biogen collaboration will be charged to the R&D line.

Those expansions should be fairly typical for early-stage programs.

You don't really start heavy spend in R&D until you get to phase two or to phase three.

And, you know, big manufacturing campaigns to make materials for later-stage trials and so forth.

So you will also recognize that last year, we had fairly sizable trial commitments to IDEC 151 and 131.

We have opted to go forward with Rituxan in RA so we will not continue RA expenses for 151, and while we are optimistic about getting our hold with 131, we are currently not proceeding there and would proceed at a modest pace at such time that we reinitiate that program if the FDA lets us go ahead.

Thank you.

Sure.

Your next question comes from Mike Tate (ph).

Thank you for taking my call.

My question --congratulations, by the way, on a very good year.

I wanted to ask Paul Grant if we could just get a little more color on the protocol for the RA trials and in particular, the -- that are being used in the study presented at ACR specifically, things like cyclofosamide or steroids, have those been reduced?

Just a couple of comments.

The goal of the Roth study was to look at the contribution of in the separate clinical arms by the EMTotraxate with the Rituxan.

From what we have seen, it's not our intention to move forward with the EMTotrexate.

All of the study have come from steroid administrations and that is, in fact, being carried forward into the phase three study for those patients who don't get adequate responds to CNS therapy.

Can you comment about whether the doses would be comparable to those seen in the UK study?

The -- will be comparable.

Comparable, thank you very much.

But not to the UK study.

Comparable to the studies in the Roche 2-a study.

However, as I pointed out, phase three study where we are conducts, you know, it's clearly a more rapid targeting a patient population, medical need population.

Those populations haven't responded to NDF therapies.

Concurrently, we are running phase two's development program which will examine both those ranging with Rituxan and looking really at what the contribution of those steroid makes for the therapeutic effect.

Mike, we will manage here the inadequate TNF responders, phase three, and Genetech will manage the phase 2-b, looking at steroid and Rituxan bills.

Great, thank you.

Your next question comes from Derrick Winger.

Yes.

I have just financial questions.

Fourth quarter, depreciation and amortization, capital expenditures, long-term debt and the interest expense.

Let me give the phone to Ed Rodriguez.

Hi, Derrick.

If you look on our press release in the noncurrent liabilities, that's primarily the long-term debt, that 893, and that's our line, and that increased from last year because of the offering that we did in April of this year, of 2002.

Right.

And our depreciation was approximately around 10 million for this year, and then as Bill had mentioned earlier in his conference call comments, the capital expenditures for '02 was approximately 166 million.

No.

I wanted the fourth quarter figures for depreciation and amortization, capital expenditures and interest expense, including the accretive, obviously.

Derrick, we can call you back with those fourth quarter numbers.

Okay.

Do you have the number?

No.

If you can give that you to us?

203-708-5870.

Great.

Thank you.

Your next question comes from Peter Ginsburg (ph).

Yes.

Good afternoon.

A couple of questions.

First, I think it was Bill Rohn who made the comment on the (inaudible) study and you weren't certain of the scope of what might be presented.

Would it be possible that the maintenance would be ready yet at that time?

I had something that said that the maintenance wouldn't be ready until the second half of '04 or probably early '05?

Once again, Peter, not really sure of the scope of the study.

Obviously, some of the patients that were treated very early in the trial went on to a maintenance regimen or observation a couple of years ago so there are some patients that there is some decent follow-up on.

But whether there's a sufficient number of those patients for the group to actually do a meaningful analysis on them is hard to say at this point.

We don't have access to the data.

It's pretty much an arm's length relationship, so like you, we will await with great interest to see the scope and the detail of the presentation.

Okay, thanks.

Switching to IDEC 152, you got a presentation coming up on March 8th regarding some phase two data there.

I was wondering if you delineated what your plans going forward would be once the data is presented?

Well, we would certainly make that known to all investors simultaneously through some appropriate disclosure, Peter.

I think the it would be inappropriate to front run that presentation.

Okay.

Okay.

Thanks.

Your next question comes from Joe Fenic (ph).

Thanks.

Two questions.

First, financial one.

On Zevalin, the gross margin perspective, is it safe to assume that you'll have that same similar (ph) gross margin that you had in the balance of 2003?

Yes, we can expect that same gross margin that we saw in the 2002 year, absent any manufacturing variances that we might incur while filling any product.

Thanks, and then on Rituxan, can you give us any sense for the average number of doses for the patients treated with Rituxan and whether any potential use of maintenance has changed that use of Rituxan in the maintenance setting has changed that at all?

Joel, Bill Rohn.

At this point in time, the average infusions per (ph) -- regimen remain at 6.

We haven't seen any meaningful change for that for a period of time, and let's remember that 70% of the time that Rituxan is given, it's given in combination with the chemotherapy regimen, which are typically six cycles, so it's such a large part of the data base that it pulls everything to six.

Even the patients that are treated with four infusions or those that are treated with eight infusions aren't significant enough to move that number so I don't anticipate that we'll see much of a change until, as you point out, maintenance therapy kicks in.

I think the quarterly tracking study showed that percent of physicians who were acclaiming to be experimenting with maintenance now at about 39% that was up from, I think, 35% or 34%, so it's a little bit more of an increase.

The studies that were presented at Ash, the (inaudible) study, the Haynesworth study are beginning to get broader exposure, and I think it's those things that will enhance the utilization of maintenance therapy and of course, could we see some data out of the ecog trial and the aggressive Lymphoma setting, the curative setting, that may have an impact, as well.

I don't see anything to suggest that there will be a meaningful move off the six infusions per patient.

Interesting thing to note in regard to your question is maintenance at least, according to Haynesworth is given a four-infusion regimen.

So if a maintenance course is counted as a separate course which would be in the tracking study, it might actually bring the number of infusions of course of therapy down but the number of infusions per year per patient up, so I think we're going to have to be careful.

Yeah, that's actually -- that's part of my question, which is you have a patient that ultimately has eight (inaudible) and will have two different regiments.

Is that fours or eights?

Unidentified We're taking a real hard look at our tracking study methodology, and working on ways that we can mix (ph) up (ph) these (ph) new (ph) dynamics (ph) and shifts of patients.

As it is currently figured, we might end up dealing (ph) with that problem, but the market research came from both Genetech and IDEC are working hard at figuring out how they need to craft the market report to make sure we accurately capture those shifting trends.

Quickly if I could on the biogen deal, was there any material, stocks or cash, that changed hands?

Might we announce any more --expect any more announcements from them?

The deal, I think, a fantastic deal because all the moneys go into research and development.

There are no upfront fees or licensing fees or milestones.

It's a real collaboration.

We're very excited about it.

I will say our business development guys are looking all the time for interesting opportunities.

We think we've got fantastic R&D infrastructure and manufacturing here, so I wouldn't rule out end licensing.

We have people that look for in-licensing opportunities full time as a profession.

By all means, you should expect that there would be stuff over time.

I can't give you a feeling for time line on that, but, sure.

Thank you.

Your next question comes from Rob Dolvov (ph).

This is Mara (ph).

In terms of the deal with biogen, would you talk about if you're paying all the expenses and if successful -- can come in?

What are the conditions that are involved in that profession?

Also, you mentioned one-time licensing in the fourth quarter.

How much of it and how much of it came, what was the baseline growth on R&D and SG&A?

Yeah, Mara, the details of the biogen deal, the details of the biogen deal that have been disclosed are all that we're going to disclose.

It's a four-year at this time, certainly.

It's a four-year opt-in, and we will fund these programs in such time that biogen may choose to opt in and we will split further developments and profits going forward.

With respect to the one-time license, it was about a million and a half.

It was not a very large licensing.

Okay, and then really broad general question.

Next year, do you expect that expenses will grow at the faster or slower rate than revenues?

Mara, we have never given guidance on EPS or revenues and we will stick with that policy.

I tried to give you some building blocks here to build your expense side.

We, too, are analysts when it comes to projecting revenues.

We do our best, obviously, through marketing and sales efforts to optimize those, but I can't give you any guidance on revenues.

I was just wondering is it corporate policy how do you adjust spend and revenues?

We invest in R&D with the view toward building shareholder value, and the nature of research and development is that there are different demands for investments at different times.

As witness, for example, our investment in Zevalin inventory that got capitalized last year as compared to 2001 investment in the R&D line and manufacturing for clinical trials, so you know, this as you well know, is not a business as many have, say, Coca-Cola, bottling Coca-Cola where cash flows are fairly consistent and predictable.

Our investments vary from year to year, and I tried to give you the building blocks that we can see at this time so you can build your expense models.

Okay.

Thank you.

Your next question comes from Paul Tawney (ph).

Thank you.

You mention add that the R&D charges for the Rituxan RA will be reimbursed by the joint venture.

Did I also hear that charges will go against the joint venture profits?

That's correct.

That's correct.

So I guess the profits will be cut by your share of the RA development expenses?

Yeah.

If profits without doing the study were -- then profits before they are divided split between the parties would be x minus the cost of the trial.

It's exactly the same methodology we've used for all development expenses since product launch.

There have been a number of phase four commitments to the FDA, for example that have been funded in that same fashion and reimbursement and expensed to the party doing and reimbursed by the party doing it through metric cash flows.

Great.

Thank you.

Your next question comes from Eric Smith (ph).

Good afternoon.

I was just wondering if would you disclose the minimum payment that you made to mds for the isotope and I guess I'm looking for one more piece to the puzzle photograph 2003 as to whether that payment is still in existence or might go up or down in manage (inaudible).

Yeah.

We don't view the payment as material at this time.

At such time as it rises to materiality, we put it in a q or a k.

And I think that's all that we would say about that at this time.

Bill, I apologize, but I missed the guidance for '03 taxes.

38%.

Thank you.

Actual reporting rate of 38%.

Thanks.

Your next question comes from Adam Walsh (ph).

Good afternoon.

Thank you for taking my question.

In your preliminary release reported that fourth quarter Zevalin sales were negatively impacted by a one-week supply interruption at nbs nordium.

I'm wondering, is it safe to assume that the shutdown affected one week of Zevalin sales, or could there have been a greater impact?

As a follow-up, since the plan in semiannual maintenance shut down by mds, is this something that will reemerge as an issue in the second and fourth quarter of this year?

Adam, Bill Rohn, the answer, I guess to both of your questions is yes.

This is, as with all manufacturing facilities, whether they be for radio isotopes or drug products, there are annual preventative maintenance episodes in which the facility is refurbished and this is required by FDA regulation.

And there will be two at the nordion facility, one in December, and I think one in Newman, if I'm not mistaken, and they are about a week, so.

The one in June, however, probably wouldn't see much affect because there would be a delay of those patients for approximately a week, whereas, the one in December that shutdown occurs right around Christmastime, and so the delay in patients wouldn't appear until now, calendar year 2003, so it wouldn't be a washout in the same calendar year, which is why we mentioned that.

That's helpful.

Thank you.

Your next question comes from Elyss Wang (ph).

Hi.

I apologize, but I got a little bit late on to the call here.

Could you clarify again what your guidance was on specifically on SG&A?

Do you indicate that the level going forward would be equating to the amount generally you had spent in the fourth quarter that you just reported?

And then on the R&D side, I guess, if I recall, Bill, at times said that R&D typically would be about 25% of revenues going forward.

Is that a good approximation, or am I missing something you might have said earlier?

Yeah, on the SG&A, Elyss, I said infrastructure is largely in place.

You shouldn't see the character of the magnitude of that spending change very much.

We are -- we are in full gear here in terms of supporting Zevalin.

On 25% of revenues, I think for profitable biotech companies that is a good target to shoot for.

I think that if you average three or four years for IDEC, it will always be right there.

I can't say that I even have done the calculation for our budget for '03.

We're doing what's necessary to build shareholder value, and I can't give the guidance on what that number s I frankly, have not calculated it precisely for this year.

It's my sense that that's about the right number for a company in our stage of development.

If you look at several years and average revenues in R&D, it would be about that.

It's to -- I'm not trying to differentiate 25 from 23 or 27.

I'm trying to differentiate a big target around 25 versus a big target, say, at 40 to 45, which may not be a sustainable model.

That is, don't read too much into that comment.

Are you still there Elyss?

Yes, I am.

And then just one other question, the cost of goods, I'm sorry, I thought you made some commentary in response to questions that perhaps somewhere in the mid-teens is the appropriate level?

No, I don't think we said that.

I think we said a couple of thing on this call.

One was that some of the Zevalin, which is currently being held in inventory for sale had actually been expensed appropriately under GAAP because it was manufactured and released prior to FDA approval and so without an FDA approval, GAAP would indicate that you could not or should not capitalize as inventory.

Zevalin that is manufactured post-approval would appropriately as it was in 2002 would be capitalized into inventory and appear on the balance sheet and be written down and go through cost of sales as revenues were generated by saleable of those materials.

Okay?

And Ed also said that he anticipates that the cost ever goods sold would be about the same in 2003.

Okay.

Thank you for that clarification.

Your next question comes from Angelino (inaudible).

That question has been withdrawn.

At this time, there are no further questions.

Well, thank you very much.

I look forward to doing this again in about three months.

Give us a call in the interim if we can help in any other way.

Thank you much.

Signing off here.

This concludes IDEC's fourth quarter fiscal year-end conference call.

You may now disconnect.