Biogen Inc (BIIB) 2003 Q1 法說會逐字稿

Good morning, my name is Judy, and I will be your conference facilitator.

At this time, I would like to welcome everyone to the Biogen, Inc. 2003 first quarter earnings release conference call.

All lines have been placed on mute to prevent background noise.

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

If you would like to ask a question during that time, simply press star, then the number 1 on your telephone keypad.

If you would like to withdraw your question, press star and the number 2 on your telephone keypad.

Thank you, Ms. Woo, you may begin your conference.

Thank you, Judy.

Welcome to Biogen's first quarter 2003 conference call.

Let me introduce the participants in the order in which they will speak;

Peter Kellogg, CFO and Executive Vice President of Finance, our second speaker will be Doug Abel, Vice President of the Dermatology Business Unit, then Jim Mullen our Chairman and CEO, we will then go to the Q&A.

To introduce myself, I am Elizabeth Woo, Senior Director of Investor Relations.

We will have joining us for the Q&A, Burt Adelman, M.D., our Executive Vice President for R&D.

I do want to let everyone know that there is a slide that Doug will walk through in his discussion on the AMEVIVE® in office explaining the reimbursement process that you may want to take the time to download by going to www.biogen.com where our press release is available as well as the slide that will accompany that discussion.

I will now begin with the safe harbor.

Comments made in this conference call may contain forward-looking statements regarding expected future financial results and expectations related to the development of the company's pipeline products.

Such statements are based on management's current expectations and are subject to risks and uncertainties which could cause actual results to differ materially.

In particular, careful consideration should be given to the risks and uncertainties described in the reports Biogen has filed with the Securities and Exchange Commission including the outlook sections of MD&A and the company's most recently filed forms 10-K and 10-Q.

The company does not undertake any obligation to publicly update any forward-looking statements.

Now, I'll hand it over to Peter to run through the financials.

Thank you, Elizabeth.

As you are aware we preannounced on April 2nd that our Q! results would be stronger based on two factors; one, the robust AVONEX® revenue that we are enjoying and two, operating efficiencies in both R&D and SG&A.

Consequently, our Q1 reported EPS was 42 cents per share and excluding non-recurring items, Q1operating EPS was 50 cents per share, towards the high end of our guidance range .

The non-recurring charges that are included in the reported results are; one, a legal settlement of $13 million related to the [Renchler] IP dispute and, two, a $3 million write-down on or holdings in [EOS], due to the sale of that business to [PDL].

These two charges create the decline in reported earnings versus prior year.

Now let's walk through the P&L for Q1.

AVONEX® product revenue was $274 million, that is a 3% increase over prior year, and as you may recall, the U.S. wholesalers built some inventory in Q1of last year, so adjusting for this, roughly $8-10 million distortion last year, our Q1 2003 sales represent an effective 7% year-over-over growth.

We also had a 7% increase over prior quarter.

The AVONEX® business is solid with stong results in both the U.S. and the international side, this is a record quarter of revenue for AVONEX®.

The AMEVIVE® product sales were $4 million, now, I'll come back and discuss the AVONEX® and AMEVIVE® businesses separately after walking through the P&L.

In Q1, our royalties were $41 million, that is an 85% increase versus prior year .

As I indicated in the guidance we provided in January, we are making conservative assumptions on royalties from Schering-Plough's Alpha Interferon sales until we see how the new Roche competitive launch impacts the trends.

Additionally, on a full year basis, we incorporated the expiration of international royalty rights, those products from Spain and France, as noted in our 10-K.

Accordingly, our full year guidance anticipates this royalty level declining a bit in the second half of the year.

Contract revenue was $1million, this is the first time this P&L line item has appeared for Biogen and it is based on our IDEC collaboration.

As we announced in February, IDEC will be paying for the R&D work for this collaboration over the next few years.

When it is decided that Biogen should perform some of the work, they will reimburse us 100% and we will book this reimbursement as contract revenue.

Contract revenue is pretty hard to anticipate, so we won't provide any projections on this line for 2003, but you can be assured that any amount booked here will be offset by R&D expense.

Cost of sales were $46 million, this drives a gross margin of 86% which is right in line with our guidance range of 85-86% for the year.

R&D was $85 million or 27% of revenues.

Biogen's R&D line does experience lumpiness from quarter to quarter.

We'll see some of this variation to continue in the balance of 2003, based on the timing of milestone payments and some variations in program activities.

However, our Q1 performance is aided by improvement in R&D operating productivity.

Based on this Q1 result, Biogen R&D is going to enjoy a full year benefit while remaining 100% on track in our programs.

We spent about $368 million in R&D last year and we expect to spend over $390 million this year.

As a result, we expect to end up in the low end of the 30-32% of revenue range for the full year, and again this is happening while all of our clinical trials are moving forward, in line with our original plans.

SG&A was $95 million or 30% of revenue, this is a sequential 10% increase over prior quarter and is largely driven by our AMEVIVE® launch.

We now have close to 100 people in the field and we initiated a full compliment of promotional activities this quarter focused primarily on position.

For AMEVIVE®, our Q1 focus will be discussed by Doug Able, after me.

In addition, we continue to invest in AVONEX® with new types of marketing programs for patients and physicians.

Overall, Q1 SG&A spending was higher as a percentage of revenues than we expect for the full year.

Again, full year guidance for SG&A has been in the 28-30% of revenue range, yet, just like R&D, we now expect SG&A to fall at the low end of this range.

Other income and other expense was negative $6 million and as I mentioned before, this includes two nonoperating items: First, a $13 million charge for the settlement payments to resolve a legal dispute we had with [Renchler] over intellectual property rights.

This agreement concludes any legal assertion by [Renchler].

It provides for a small royalty payment on EU AVONEX® sales going forward, but I'd like to point out that this future royalty payment is completely offset by other royalty obligations that are dropping off in 2003, so, our guidance and our future P&L, will be essentially unaffected on a trend basis.

Secondly, we reported a $3 million write-down related to and equity investment in [EOS] which we indicated in our 10K.

During Q1, [EOS] merged with [PDL], and this transaction converted our $5 million holding in [EOS] into $2 million in [PDL] stock.

The $3 million write-down was taken on completion of the merger.

Taxes for the quarter were $25 million, that is a 28% effective tax rate versus [PDC] and reported EPS was 42 cents, as I said, and operating EPS was 50 cents.

Now, let's talk about the business performance in the U.S. and international.

Starting with U.S.

AVONEX® product sales, they were $189 million, that is a 4% decrease over prior year, but again, adjusting for the U.S. inventory fluctuation last year, this represents a small increase versus prior year and it represents a 3% increase over Q4.

Our commercial organization has done a great job and as we look forward, we think the AVONEX® business will also benefit from the introduction of a liquid pre-filled syringe formulation in the second half of this year.

On the international side, AVONEX® product sales were $85 million, that is a 24% revenue growth over the same period last year and an 18% increase over fourth quarter.

AVONEX®'s year over year revenue growth in local currencies, was 11%, in fact, our local currency performance represents a 9% increase over Q4, so, all told, this is truly a great quarter for our international team.

Now, the strength in the euro is consistent with our expectations and we planned for that, but the strength in our base business provided the up side and it was primarily derived from Latin America, Germany and the U.K. and it is volume-based.

Specifically, the Latin American economy is beginning to recover and our 2002 efforts in Brazil are now paying off.

The strength in Germany was driven by our long-term efficacy program and results stemming from the expansion of our sales force last year and the U.K. market is finally opening up.

In addition, our neutralizing antibody message is really taking hold.

In the markets where we introduced this framework first, the performance is strong, the Nordics, the U,K, Ireland and Austria.

Looking ahead in supporting our more bullish balance of 2003 outlook, our international performance will be further enhanced by the introduction of our pre-filled syringe beginning this summer.

The launch will be on a country by country basis and we expect the majority of this transition to be complete by year end.

Now let us turn to AMEVIVE®.

AMEVIVE® product sales for the first quarter were $4 million.

Now this $4 million reflects shipments to our two distributors.

In Q1, we focused on driving reimbursement and initial dosing patterns.

We are currently booking revenue for AMEVIVE® with a 10% reserve for all shipments to medical benefit channels.

This accounts for possible credits during the initial launch period related to our insuring the doctors that patients who received insurance revocation will be reimbursed.

We are insuring doctors for up to 10% of their business and our distribution partners are insuring any level above 10%.

Doug Abel will discuss the launch efforts and status in his walk through.

Let's turn to 2003 full year P&L guidance and start with the revenue line.

Now that we've seen our Q1 results and the trends that they imply, I'd like to recap the specific line items that have improved since our preannouncement a few weeks ago.

Specifically, as I mentioned on the international AVONEX® sales line, we are looking a lot better.

We are raising our outlook to 12-16% growth versus our prior guidance of 8-12%.

Accordingly, world wide AVONEX® is now expected to grow in the mid-single digit range.

Based on this change, our total revenue growth is expected to be in the mid-teens range.

Now, on R&D and SG&A, we provided a range as a percentage of revenue for the full year, for R&D it was 30-32% and for SG&A, it was 28% to 30%.

We now, as I mentioned earlier, expect to be at the low end of this range for both R&D and SG&A.

Our operating EPS, as we mentioned in the preannouncement, is improved and expect it now to fall in the $1.72-$1.85 range.

We've included an updated full year guidance table as part of the press release for reference.

Now, as we map out the quarters for 2003, we anticipate solid earnings growth each quarter versus prior year, however, since we are in the launch mode for AMEVIVE®, we have significant milestone payments planned for [ICOS] and [ILAN] in different quarters to anticipate the timing of some competitive activity in our royalty line.

We do expect some lumpiness from quarter to quarter.

We expect Q2 EPS to fall within the 38-44 cent range, including a $5.5 million milestone to [ICOS].

Now, different scenarios for the AMEVIVE® ramp up and different scenarios for the Interferon-A business at Schering-Plough, drive the breadth of this range.

Clearly as you'll hear from Doug, the AMEVIVE® business is off to a great start but is just now beginning the critical dosing ramp up period.

As we have always indicated, the heavy ramp up will occur in the second half of 2003.

Now I'll hand off to Doug Abel, who will provide an update on the AMEVIVE® launch.

Doug?

Thanks, Peter and good morning, everyone.

This is truly an exciting time for us as we work through an approach the end of our eleventh week of launch.

I'm going to run through the current status as we look at them, here are the headlines.

First of all, reimbursement is, in fact, coming.

As we indicated in both our recent press releases, over 90% of the patients who have completed the insurance verification process, do have coverage for AMEVIVE®.

Next, physician interest, again, as we've indicated in our press releases, almost 800 physicians have initiated patients into this process.

As we sit here at week 11, this is well over twice our expectations for physicians willing to sign up this early in the launch for the in-office injectable process.

Our patient results and patient numbers remain on track.

As with any new biologic and especially with any in-office injectables, the reimbursement cycle takes time.

It's early, but looks right now as though we are running 8-12 week for the initial wave of patients to truly begin the dosing period.

This broad physician interest and the willingness of physicians to pursue AMEVIVE® therapy really lays the foundation of our growth as we work through the balance of 2003 and look forward.

So, what's been our point and what have we been working to date?

Really, quarter 1 was an opportunity for us to introduce Biogen and AMEVIVE® to the physicians, primarily on a one-on-one basis within their offices.

As part of that discussion we also need to introduce dermatologists really for the first time to the in-office injectable process, as well as to the efforts and programs we can provide to support their adoption of an in-office injectable product.

Now, as we move into Q2, we are going to continue to focus on broadening the number of physicians who are bringing patients into AMEVIVE® therapy, but also begin to aggressively focus on cycle time improvements and targeting a dramatic reduction in the 8 to 12 weeks it currently takes for patients to initiate therapy.

Our goal is to get as many patients through the system as rapidly as possible.

In addition to that, we'd like to broaden the front end of the funnel through the patient marketing activities.

In a minute I'll touch on our patient database and where we are going there.

This Q1 introduction and Q2 focuses on the reduction of cycle time and introduction of patient marketing lays the framework for the second half of the year ramp that Peter discussed.

So, how are we doing?

In the prelaunch period, we talked a number of times about three key areas of introduction, patient awareness and interest, the physician preparation and understanding of new therapeutic approaches to the treatment of psoriasis and understanding and preparing to address logistical barriers.

Again, we are sitting eleven weeks into launch and those are the metrics I'll speak to going forward.

So, first of all, on the patient awareness side, our database now stands at over115,000 patients with chronic psoriasis, over 50% of whom have moderate to severe chronic plaque psoriasis and are clearly targets for AMEVIVE® therapy .

In addition, our websites continue to grow in activity, we now have had over 100,000 visits to psoriasissupport.com and amevive.com.

How about the physician side?

We have talked a number of times about truly focusing on a target audience of 3,000 dermatologists.

Now, as I indicated, we are already at the point where almost 800 of those physicians have started the process of initiating patients on AMEVIVE® therapy.

That's a metric we are really excited about, as I said, that is more than two times our expectations for this point in the launch.

Our marketing efforts that bring physicians forward, are broad-based.

They include the traditional physician office calls, as well as quite a few things going on behind the scenes; teleconferences discussing the products, seminars, nurse education programs, as well as ongoing support for CME programs, that discuss psoriasis in general, and all of the new therapies coming forward.

At the recent American Academy of Dermatology meeting, we had over 700 physicians visit our booth and in the vast majority of these cases, we had true in-depth conversations and the vast majority, again, are within our target 3,000 physicians.

As we look across the programs I've discussed, the physician office calls, the teleconferences, the seminars, as well as recently launched patient programming, attendance is at or above expectations for all these programs.

I'd now like to turn to the in-office injectable reimbursement process and a couple of up front thoughts as we begin to discuss how this flows.

First of all, the service model was built to support the introduction of a brand new in-office injectable and brand new biologic therapy to psoriasis and dermatology was constructed, by our conclusion, after many years of work and much discussion and marketing research with physician and payers.

We start with a product profile, AMEVIVE® clearly physician administered product and an in-office injectable product that requires monitoring, that yields to setting a treatment at a physician's office.

You put those together, the product profile and setting in a physician's office and where the vast majority of patients should be expected to be reimbursed under the medical benefit part of their coverage.

Now, in most cases, this is also what requires distribution of the product directly to the physician's office.

We continue to expect that well over three-fourths of the patients will be covered under this medical benefit and as a result, the service model was designed to support physicians who are pursuing in-office injectables for the first time.

The goal in the cycle time is built around providing the physician with full up front understanding of each individual's patient coverage before treatment is initiated.

This process is consistent with the process required for all other in-office injectables, as well as many of the newly-launched in-office biologics.

So, step one; the patient and physician decide to pursue AMEVIVE® therapy.

Once that decision is made in the physician's office, there is a simple one page form that takes less than 10 or 15 minutes to complete, that initiates the process of this up front understanding of the patient's insurance benefits.

That form starts step 2; insurance verification for the individual patient's plan.

As part of that process, the prior authorization of treatment will be required and understanding of the documentation required to successfully achieve that prior authorization has also been provided.

Our experience to date for those patients who go through the system is that a majority do require prior offs, again, not at all unexpected for the first biologic launched in this audience and for this indication and also as it is the first indication for AMEVIVE®.

As we discussed in step 1 and step 2, we currently have over 2,500 patients initiated by 800 physicians.

As part of step 2, the payor confirms the benefit and coverage available for AMEVIVE®.

Again, for those patients who have gone through the process to date, the patients do have coverage in over 90% of the cases.

Several hundred unique payers have now been touched and, again, this kind of balance of coverage does hold true across payers as well.

Once the physician and patient have a clear understanding of the reimbursement environment for that individual patient, the physician initiates an order for AMEVIVE®.

Again, this order is not initiated until both the patient and physician have a clear understanding of their insurance coverage.

The system is set up to provide virtually, just in time delivery to the physician's office.

The result of this is that very limited inventory is required to be carried by the physician making it simple and easy for that practice to move forward and without the financial burden of inventory in place in the practice.

Now this entire process now as I discussed for a brand new biologic in-office injectable this early in its life cycle can take up to 8-12 weeks and that's the environment we stand in today.

Let's remember, this is the first time the payor is encountering the brand new product, the first time the physicians are pursuing an in-office injectable in their practice and as physicians gain comfort and reassurance from payers and as payers begin to establish formal policy, we do expect the process to naturally get shorter.

Our focus and effort going forward will be to do everything we can to increase that natural acceleration.

So, once the product has been ordered, the billing process begins.

When the drug is delivered to the physician's office, the distributor also sends an invoice.

Again, this is established just in time and during the launch period the distributor is providing initial120-day terms to the physicians.

The goal is to provide the physicians with adequate time to receive reimbursement for treatment of a patient prior to it being necessary to reimburse the distributor.

Finally, as Peter alluded to, in the rare case where, after an initial preapproved claim is denied, the physician is in a position to pursue a credit for that claim.

The other half of the reimbursement piece we just in these four steps, is the patient financial obligation, co-pays and co-insurance.

As you know this is highly variable.

Every payer can have a different structure and every employer can contract with different coverage with each payor.

First of all that's why it's so important that prior to therapy we work with the physician to explore the true benefit for each patient.

For those patients we've seen to date with private insurance that is covered under a medical benefit, the majority, in fact, have average weekly co-pays that are running $20 or less.

The remainder have co-insurance with an average currently of about 20% of the total cost.

For those patients in a co-insurance environment, the vast majority of plans also have an average annual out of pocket maximum.

That means that when the patient adds up all co-pays as well as deductibles, the total amount they are required to deliver out of their own pocket is capped.

The average we have seen to date is about $2,400 per year.

Once that out of pocket is hit, 100% of the remaining medical coverage for all aspects of their care is covered by the plan.

One of the other a aspects we've received a number of questions about is the usage of IM compared to IV and as expected we continue to see the vast majority of physicians pursuing IM therapy for their patients.

So, as we look to the full year, let's think about the process buckets we discussed again.

We have solid early data about buckets 1 and 2 at this point, and as I said, almost 800 physicians delivering 2,500 patients after only eleven weeks of launch.

Bucket number 3, which is patients receiving dose is where we're at, the true inflection point.

Again, it's really exciting to be here as we see more and more patients every week beginning to access AMEVIVE® therapy.

Again, eleven weeks, over 2,500 patients in the front.

If you think about that over eleven weeks, it averages right now about 1,200 patients coming in the front door per month right now and growing.

If you take that number and add very modest growth to the pace of new patient introductions, at the end of the year we should exit will over 13-17,000 patients per year.

The first question is that a reasonable assessment?

We believe that, one, we have the foundation in place with the breadth of physicians pursuing therapy already far above our expectations, and, two, we are just turning on the patient marketing engine and touching the 115,000 patients in the database, so we certainly feel that is an achievable goal.

The second half of our focus, obviously, is accelerating the process.

Again, we believe this is reachable based on a natural acceleration we've seen in other products, in-office bio-injectables that is have been launched, and that we can continue to accelerate our efforts to enhance it.

So, as we look at the market overall, our view remains unchanged.

Like many other markets, we're at a very neat inflection point with new therapies coming into play, you have see this in both RA and MS.

But just looking at the statistics, there are 500,000 patients former and current systemic and light users, light patients, we have always anticipated multiple product entries.

Even as we look at the external surveys that many of you have conducted, AMEVIVE® is showing as a very strong player in this market frequently in the number 2 position.

In conclusion as we look at both the market and AMEVIVE® performance to date, we recognize it is still quite early in the launch, less than three months in the marketplace and that we are introducing a new therapy and a new treatment paradigm to the physician audience.

Reimbursement is, in fact, coming along, for patients who got through the system, over 90% have coverage.

We are truly excited by the physician breadth and interest with almost 800 physicians initiating patients.

Our focus remains on accelerating the cycle time as people move through the reimbursement process.

In between the patient interest, physician interest, and the ongoing clinical development, we feel we have the foundation in place to continue to build for the future.

So those are the headlines as we sit here, 11 weeks, and now I'll turn it over to Jim for his comments.

Thank you, Doug.

Thank you for joining us this morning.

I'll try to be brief in my sum up so we can get to the questions and answers.

Just a couple of highlights I would like to emphasize, first starting with the MS franchise.

Certainly we are pleased with the AVONEX® business in the U.S. where the unit volume has been pretty stable and the rest of the world is growing nicely.

When we talked a year ago, there was a lot of uncertainty about the direction of the business.

The trends are clear now and history shows us once the trends are established, they are very hard to change and that applies to this market, any of these chronic care markets.

I think we are confident now and more bullish about the outlooks for the business for the remainder of 2003.

We also strengthened world wide AVONEX® franchise through a few milestones we achieved in the first quarter.

One, is we did receive FDA approval for patients determined to be at high risk for the development multiple sclerosis, so AVONEX® is now the first and only MS treatment approved for this indication in both the U.S. and the EU.

We did receive CCMP approval in the E.U. for the pre-filled syringe and expect to receive approval in the U.S. later this year and will begin shipping that into the marketplace.

Finally, and I think this is an important highlight, we did achieve record world wide AVONEX® sales, particularly driven by the strong growth in Europe.

ANTEGREN®, which represents the next novel therapeutic treatment for MS, is in pretrials for MS and Crohn's.

Many of you saw the "New England Journal of Medicine" article which published the phase 2 results for MS and Crohn's that was published in January.

The Crohn's phase 3 induction results will be announced this summer.

Very close, in fact, to having the phase 3 results.

We currently have over 3,000 patients in the three phase 3 trials ongoing, two in MS, one in Crohn's.

Many have been in the trials for well over a year and we are feeling pretty comfortable about the trajectory about this program.

We continue to get asked questions about how will ANTEGREN® impact the overall MS earnings at Biogen so I'm going to summarize it from a 100,000 feet quickly for you again.

No matter what scenario you consider, if the ANTEGREN® results are comparable to current products, better than current products, as a mono-therapy or combination-therapy, Biogen will make more on the bottom line.

The better results, the stronger the ANTEGREN® results, the larger the addressable market and that's really the key part of the math.

And I say that before you add in contributions to Biogen from ANTEGREN® in other indications like Crohn's and other autoimmune diseases.

Turning to AMEVIVE®, Doug gave you a pretty thorough overview, it is eleven weeks in the launch.

We've been talking for some time about the two phased launch, first, educating the physician, working through the reimbursement logistics and secondly driving patient demand and we are just about to start that phase of the launch.

We feel like we're on track for the goal for the year.

Doug said we're tracking -- we should have 13-17,000 patients initiated which means starting this reimbursement process and depending on how successful we are at shortening that time frame, I think we're on track.

I want to remind everybody that the sales on AMEVIVE® are going to be back end loaded.

When you look at an 8-12 week lag from initiation to dosing, it means in the second quarter, the pull-through of patients are patients initiated in March and April.

Second objective with AMEVIVE® is really continue building the profile of AMEVIVE®.

You've seen a little bit of data out at the some of the conferences in combination with AMEVIVE® which drives higher efficacy with other drugs to really get faster onset of action.

There's a lot of additional trials ongoing there that I believe will continue to illuminate the profile of AMEVIVE®.

AMEVIVE® in Europe, clearly the withdrawal of our application at the MEA was a major disappointment, as we announced during that call, we will have to supply additional clinical data and potentially include an active comparative trial.

We are working through these plans with the regulators and in talking with a number of the member states in DEU and I don't think we're going to be more specific about that until we have really finalized our plans and we will get more specific, I expect, at our Q2 earnings call.

And lastly in the psoriasis area, the LFA-1 antagonist, the oral compound that we have in partnership with [ICOS], data will be available this summer and so will have an interesting look at just where we are with that program.

On the business development front, I do want to go back and highlight this new collaboration with IDEC Pharmaceuticals.

You probably remember we are collaborating across three different oncology programs that were developed here at Biogen, a beta interferon gene for glaucoma, a beta- receptor and a program we call Crypto.

We are excited about this partnership.

IDEC is a leader in oncology products and this helps us move these therapies forward rapidly and access an already existing commercial infrastructure.

I think it's a great demonstration in validation of the productivity of the Biogen discovery engine over the past few years and we look forward to developing more of these collaborations as well as licensing opportunities.

Growth and profitability goals for 2003 and 2005.

This year represents a year of top and bottom line growth acceleration for Biogen.

We'll begin to reap the benefits of having multiple products on the market as well as expanding our after tax margins and certainly the first quarter demonstrates that we are pretty well on the program there.

And as we look forward, the driver of business are simple.

AVONEX® so far stronger than expected and believe that will hold up.

AMEVIVE®, the leading indicators on the launch show that's right on track and performing well and ANTEGREN® will have the results on Crohn's this year and results on MS shortly after that and so, we look forward to that product.

In terms of the overall profitability while we did drive R&D up in 2002, that strategy is really proving out, pulling through products and expanding indications we have and we're going to see that coming down over the next few years.

SG&A will peak this year and we will get the leverage on sales as the AMEVIVE® pulls through, and therefore I expect the after tax margins to expand in the 22-25% range in this time period.

One last comment I would make, is it certainly appears the analyst consensus for Biogen's average earnings growth through 2005 is about 13%.

We think that the business is going to perform significantly better than that, more like the 20% earnings growth range and I think that is achievable with the AVONEX® business, AMEVIVE® and the introduction of ANTEGREN® in 2005.

So with that, I'll turn it back to Elizabeth to get the Q&A kicked off.

Yes, just as a reminder, the operator is going to open the queue with Q&A.

We please ask that you ask one question and then get back in queue for subsequent questions.

We are going to take questions until 9:30.

The call will end promptly at that time to let people get to the market.

Thank you.

Operator?

At this time I would like to remind every one if you would like to ask a question, please press star 1 on your telephone keypad.

If you have pressed star 1 at any time prior to this, you will need to depress star 1 again, the previous queue has been cleared.

Also, per management's request, please limit yourself to one question, thank you.

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

Your first question comes from Matt Gellar from CIBC.

Thank you very much.

Can you talk about the ANTEGREN® timetable, what studies will you need for filings for Crohn's disease and also for multiple sclerosis, is there going to be an interim look this year, beginning of next year and what do you think you'll need, how many studies and any other details when we might see data for ANTEGREN®?

Good morning, Matt, this is Burt Adelman.

Regarding the Crohn's study, we have a substantial, well-controlled phase 2 study that will be part of the application.

The phase 3 program is composed of two linked studies, the first is a study that requires patients with active disease and requires a therapeutic outcome of 70 points or greater reduction than CDAI.

Patients who achieve that role into the second part of the study which is a remission induction and maintenance study looking for a reduction of CDAI below 150.

It's our belief, conversations with regulatory authorities, that a successful outcome of the first part of that program along with the results from the phase 2 trial and the comprehensive safety data set coming from the entire experience, will support a application for approval in Crohn's hopefully by the end of this year or perhaps early in '04.

And then we'll follow up with the results from the remission induction and maintenance study.

Regarding MS, as I think everyone knows, again, there's a very large and substantial phase 2 study demonstrating efficacy with respect to MRI and relapsed rate at six months and form an important part of the application.

There are two ongoing studies, both of which are fully accrued; one is a placebo-controlled study in relapsing remitting patients, the other is an add-on steady evaluating the value of ANTEGREN® added to AVONEX® for patients who have some evidence of continued disease after approximately a year of interferon therapy.

We have had conversations with the FDA about the possibility of an early limited approval based upon an interim analysis of the placebo-controlled trial and, you know, we'll just have to see how that goes in continued conversations with the agency.

Conceivably, if things went quite well, we might have an MS application early in '04.

Your next question comes from Dennis Harp of Deutsche Banc.

Congratulations on a good quarter.

On AVONEX®, can you provide us with a little more detail on the growth that came out of Europe and was any of that attributable to price increase, was that market share gain, was that patient growth, and in the U.S. where did your market share stand at the end of the quarter compared to where it was at the end of the fourth quarter 2002?

Good morning, Dennis, this is Peter.

Let me take the two parts of your question and I will take the international part first.

There were really no price increases on the international front.

It wasn't pricing per se, we had good foreign exchange benefits, even without that, the year over year growth was 11% and was pretty broad-based.

I think as I characterized it, the three places it did very well, obviously, were Latin America, Germany and the U.K..

The U.K seems to be recovering a bit, Germany, we've been working hard on that market for some time and are really starting to see some nice benefits, it is a very competitive market which was a factor coming in.

We stabilized our market share and it has kind of grown in the market and has done very well in the first quarter.

And then finally, the U.K has obviously been a challenge for some time with estimations and so forth, over the last six months or so, all the companies started to expand that market and we are having success with that.

The other thing I would say is some of the other markets have done very well compared to the prior year as well.

The Nordics, U.K., Ireland, and Austria, the other ones I mentioned on the call, they did very nicely and these are the ones where we had our neutralizing antibody efficacy programs out there the longest and so it is very heartening to see this program taking root and doing well.

And then I'd say, beyond that in general, a nice broad-based performance throughout the year.

We have had a completion of our conversion of our distributor and essentially in Europe a number of the markets we have distributed there and up and running and we have a couple markets in transition on that in Eastern Europe.

In general broad-based performance and good first quarter.

Now on the U.S., we had about a little over 50% market share all told, kind of all channels at the end of Q4 and I would say, right now we are just a little bit below 50%, you know, obviously these numbers are a little difficult to measure.

We get unit numbers back from all suppliers but they come back about six weeks after month end, so we don't have them yet.

In general, we think maybe there will be a slight change.

Our market share performance versus what we expect for this year is very much on track and doing quite well and I think that helps us a lot for the first quarter.

Your next question comes from Craig Parker of Lehman brothers.

Hi, a quick question for Doug.

Doug, I think it took you probably twice as long to describe reimbursement as your average sales call.

Can you explain why, first of all, any details you have from your sales calls what the average time is per dermatologists, what marketing messages you're emphasizing and what your assumption is about conversion of the applications of patients awaiting reimbursement?

In other words, are you assuming 100% actually ending up on AMEVIVE® rather than getting a different prescription?

Thanks, Craig, for the question.

As far as the amount of time in the office, having been around dermatology for 6-8 years, I can tell you we are getting a remarkable amount of time especially within the first couple of calls.

It's not unusual for us to have an hour long presence or more in the physician's office.

And in addition to that, a lot of the discussion that we walk through is actually carried on between the physician office staff and one of our representatives as compared to an in-depth dive with the physician once they've gotten their clinical arms around the benefit.

As far as messages we are delivering at this point, we are focusing, as we discussed earlier in our launch teleconference, on a couple of key areas.

One is an action of AMEVIVE® which is truly a different approach to treating the disease and then a discussion of efficacy and duration where we do have some real neat opportunities for the patients.

That opportunity in patients who respond go months before they need to come back in for another treatment cycle is really resonating quite strongly in the office.

Obviously we discussed safety of the products as well and make sure we are giving the physician a full balance of the discussion.

The final point is to discuss what it takes for a patient to get on therapy and make sure the physician understands that they enter in the in-office injectable marketplace, what it's all about and working to avoid downstream surprises by helping everybody understand up front what the situation is.

We'd be far more concerned if a physician found out about reimbursement after the fact and prior to initiating therapy of what the burden was and that really came out all the research we've done some of the comments I've heard from a number of analysts I've spoken to about physician comments to them, only reinforces how important it was that we build a model approach to this business.

Kind of the back half of your question, no, we certainly don't expect 100% of people coming in the front door to come out the back door.

Yes, that's my goal but we don't look at that.

Eleven weeks in, where 90% patients do in fact have coverage, we feel a large number of these patients will, in fact, go on therapy.

We track as many as we can to understand if we are losing them right now to [Enbrow], we certainly see them as a strong player in this marketplace and having a significant role here.

So, looking forward, no, we don't see 100%.

It's early to know how that will move out and also early in our launch process where we are seeing, if you will, the slowest patients move through, these first patients going through are going to be the ones who take the longest time.

I'm comfortable with the dropout we are seeing early, but again, not going to say we are not clearly focusing on accelerating that time frame and that that's not important, as we go to the end of the year to achieve our goals.

Your next question comes from Milken Ho from Goldman Sachs.

Jim, I wanted to ask about your statement from '03 to '05 your forecast of average EPS growth of about 20%, and kind of contrast it to what you discussed in November at the analyst meeting in 2001 At that time, obviously we did not expect to have [INAUDIBLE], so one could assume your projections for AVONEX® now are lower than that time and also at that time we thought we would have European launch of AMEVIVE® and we do not have that.

If you look at the overall P&L, where would the compensation be to keep the 20% growth rate you projected?

The 20% growth rate we are talking about growth rate at the bottom line and what we're seeing is a mid-teens kind of expansion at the top line and we're going to get leverage through R&D, SG&A and tax a little bit as you drop through the rest of the P&L and margin expansion from the 20% range into the 23-25.

If you do the compounding of those two things, you will indeed arrive at EPS growth rates in the range of 20%.

Peter, I don't know if you want to add anything to that.

Going back to '01, a lot of different things have changed, the royalty line is very strong at this point and had great success certainly collaborating with IDEC has kept a number of other programs going forward which will kick back into the pipeline when we opt in at 50%.

All those factors combined have really helped us, number one, to maintain a pretty good top line performance and, number two, good operating leverage in the business which is what Jim referred to.

Your next question comes from Jennifer Chow of RBC Capital Markets.

Congratulations on a solid quarter.

Doug, with respect to the insurance verification step, where are the most significant bottlenecks and can these be ironed out in the near term and Peter, can you just clarify on the exhibit that was provided, where your four step process is revenue booked by Biogen.

Thanks, Jennifer.

As we look at the insurance process, right now there's two pieces where time in the process, if you will, is consumed.

The first is in the initial step where AMEVIVE® is presented to the payer for the first time and questions and questions about as well what type of psoriasis patient should access, not just AMEVIVE®, but any of the new therapies coming for the treatment of moderate to severe chronic plaque psoriasis.

At this point, especially at that level of the payor organization, there is an educational process that goes on and that's a process that clearly we expect to accelerate as you begin to cycle more and more patients through more and more payers, those questions are not asked a second or third or fourth time and also that individual providing that coverage of understanding, also gets supported by a formal written policy as the payer now that we're in the market establishes that policy.

On the other piece that is taking some time is, prior authorization.

I want to be clear that for any new product, prior authorization, not unexpected, we've talked about it a number of times and part of step two, insurance verification, when the payer pushes back and asked for prior again, we are seeing the same things for other treatments in the market today, even other treatments being used for psoriasis that we compete with.

So, we are not alone in needing some level of prior authorizations.

Again, this is a process that is accelerated by two ways: One is by the guidance the physician can get up front about what is needed, two is by the office systematizing it a bit, having an existing letter of medical neccesity that has been successful with a payer or two, and then able to use for new payers and new patients.

But also of the payer's side, the first couple prior authorizations are also going to be the most in-depth review and both the prior off process and the payer review are really accelerated as the payer establishes formal coverage policies.

So again, we expect that bucket to accelerate as the physicians continue to do prior offs for AMEVIVE® as well as other therapies and that the payer revisits the process.

Finally we are working both those buckets on the top end of these plans.

We have an in place national accounts organization that calls on the payers.

We've expanded that team to touch more payers over the last 6-12 months and we are trying to drive policy both from the bottom up as well as top down indicating both sides of the organization.

And, as I look at those buckets, I think both of them are certainly accelerated.

Peter, I don't know if you wanted to add.

Well, on the second part of your question, you don't actually see when we book revenue of this chart, this is focused on the doctor's experience in the in-office injectable process.

We book revenue when we ship product from our facilities to our two distributors.

In principle, because the distributors carry a modest level of inventory, those shipments are driven in step three when doctors order the product and have it shipped to their office and in turn, the wholesalers or distributors will turn around and order from us.

We book revenue when we ship to the distributor.

The other caveat, I would say, in the medical benefit channels, we are booking during the launch period, we are only booking 90% of the revenue and holding it at 10% deferred revenue reserved until we get through the launch period, okay?

Your next question comes from Mirov Chobov of UBS.

In terms of AMEVIVE®, how many patients who actually started reimbursement procedures rather than finished it, have actually gone on the drug?

So your question is, that just to repeat the question.

Well, you talked about 90% of the patients that finish reimbursement procedures have been approved and my question is, obviously we don't know what the dropout rate was, so my question was how many patient has started reimbursement procedures went on to receive the drug.

Okay.

Again as we indicated with that kind of 8-1 week cycle at the front end of this process, it's really early to tell that and just at the inflection point of kicking it off.

Second of all, what we have is data from our distribution partners on the number of units they are shipping out on a weekly basis and we try to roughly correlate that to patient numbers.

We haven't talked about that level of debt at this point, but I can tell you that that number is growing rapidly at this point, that we're seeing that conversion rate and to really get to the core of the question, with this kind of 8-12 week cycle time, it's really early for us to get to a point to figure out exactly what the full pull through is going to be.

But as we touch base with patients through that process, we are comfortable with how many of them are advancing a step each day.

Just so we are clear, we launched out in February so we begin getting these decisions and referrals from doctors early in February.

Now of course, there are always some patients that come through very quickly because their reimbursement is very clear, so on and so forth and those have been dosed.

But as we come through April we are getting into the 9-10 week period where we are now coming through the back end of that process and getting dosing.

Each week the numbers are picking up and as Doug said, we are really right now at that inflection point, in Q1 we started the referral curve and Q2 we are getting into the dosing curve.

We are just getting into that now, and as Doug said, we are getting into that real exciting period.

Operator, I think we have time for one or two more questions.

Okay, your next question comes from Elise Mooring from Smith Barney.

Thank you for taking my question.

Just as a follow-up on that, in regards to AMOVIVE®, since you're expecting AMEVIVE® sales to be back end loaded, how many patients are you assuming will actually get on to treatment during the course of this year?

And just as a follow-up, on AVONEX®, I understand what your guidance is on international has gone up, but if I were to annualize your current quarter, the first quarter number of 85 million on the international side, that in itself does generate 17% growth on an annualized basis year-over-over for the entire year relative to '02, so, seems to imply you're not expecting growth quarter by quarter in AVONEX® sales internationally, unless I'm doing my math wrong.

Let me reverse the answer to the sequence here a little bit.

So, I think at this point we've had a very good first quarter and have taken up our guidance at this point.

Obviously a competitive environment out there so we are watching that market evolve.

We've done well and excited.

I think you are right, it's a bit conservative in terms of steady performance because of the balance of the year and taken our guidance and we will see how we do as we go through the second quarter and so forth.

But I think in general, the health of the business is very strong, the only mitigating factor probably is we do have [Copaxin] launching into a couple of markets as they expand through Europe, and, you know, we've seen that in already in Germany.

We are now doing well in Germany.

Some time in Q2, we would probably guess, they will be coming into France and so that is probably the only mitigating factor you're seeing in the business.

And, Doug, the number of dosing?

Patients receiving dosing we think it's going to be north of 10,000 and really depends on what the initiation to dose time on average is as we go up to the end of the year.

You know the metrics are still in the early days, we're just starting the patient push and so, what we're seeing for flow of patients is really demand that was sitting there at a relatively small number of physicians.

We are projecting forward demand or initiations that looks not unlike what we have seen for the last couple of days, we are talking about the13-17,000 initiations by the end of the year of which we would expect north of10,000 to be dosing.

That was our last question.

Thanks for joining us on the call and we look forward to seeing you on the call in three months.

Thank you.

Thanks for joining us today for the conference call.

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