Biogen Inc (BIIB) 2004 Q2 法說會逐字稿

Good morning.

My name is Lin and I will be your conference facilitator.

At this time I would like to welcome everyone to Biogen’s IDEC Second Quarter 2004 Earnings conference call.

All lines have being placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question and answer period.

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

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

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

Thank you Lin.

Good morning everyone and welcome Biogen IDEC’s Earnings conference call for the second quarter 2004.

I’ll start with the Safe Harbor Statements.

Comments made in this conference call include forward-looking statements regarding the company’s expectations regarding future financial results, the approval and launch of Antegren and plans for 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 that are described in our earnings release and in the periodic reports filed by Biogen IDEC with the Securities and Exchange Commission.

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

On the call today we will be discussing financial information that includes non-GAAP financial measures.

We will soon have tables on our investor relations section of the website and so later in the call you can go to that section and print out the press release and accompanying tables for the most directly comparable GAAP financial measures and there reconciliation to non-GAAP financial measures today.

On the call I’m joined by Jim Mullen, CEO, Bill Rastetter, Executive Chairman, Peter Kellog, Executive Vice President and CFO, Bill Rohn, Chief Operating Officer and Burt Adelman, Executive Vice President Development.

And now I turn I’ll turn the call over to Jim Mullen.

Thank you Elizabeth.

Good morning everyone, a pleasure to be talking to you.

I’m going to take just about 2 minutes and make a quick summary of the call and then turn the details over to the rest.

The last few months have certainly been an exciting time for the organization as we worked towards commercializing Antegren, that’s a year earlier than we had anticipated coming in the year but never the less, an exciting outcome.

And this the acceleration of Antegren timeline further supports our goal of delivering an average 15% top-line and 20% bottom-line growth through 2007.

Now a few highlight of financials of the financials -- Biogen IDEC posted $539m in total revenues this quarter that up 20% year-over-year and with revenue topping $1b in the first half of 2004, we are obviously well positioned to achieved north $2b in revenue this year.

Now Peter will update you on the business trends for the balance of the year after I finish speaking here.

On the commercial front our blockbuster products Avonex Rituxan continued to post strong growth.

Rituxan grew 19% year-over-year in the US.

Avonex grew more than 20% year over year for the third consecutive quarter.

In the US Avonex has maintained a 45% market share for the first five months of the year and we quite proud of that accomplishment.

A quick status update on the Avonex pre-filled situation, we’ve potentially worked through this and we are well on our way to a permanent solution.

Inventory levels are more efficient to meet demand.

Bill Rohn will expand upon this in his comments.

In late stage development our Phase three programs are making a progress.

For Rituxan we’ve exceeded our goal in enrolling 500 patients in the reflex trial of phrase three in rheumatoid arthritis.

Data from study is anticipated in the first half of 2005.

I’m very excited about future growth opportunity for Rituxan as phrase two efficacy profile in rheumatoid arthritis seem competitive approved biologic and yet may offer the same dosing advantage requiring only two infusions, two weeks apart with lasting effects for 6 to 12 months.

Our BG12 small molecule we utilized since last year is in European Phase Three trials in psoriasis and is anticipate data around year end.

This molecule has potential in various auto-immune diseases and (inaudible) would have Phase two trials in MS scheduled to start in Q4.

Now I’d like to make few comments around Antegren.

Obviously with the timeline of Antegren moved up by more than a year, much of the organization’s efforts are focused on preparing for not for and early 2005 launch.

We and our partner Elan have made significant strides this quarter with Antegren and regulatory arena as well as manufacturing commercial preparation.

On a regulatory front, just to summarize the activity, the FDA has accepted the Antegren DLA for MS and has designated for proprietary review and accelerated approvals, so we filed in May so assuming no clock stoppages, in six months review time which would mean a FDA action on or near year end.

Those potential actions are first an approval letter that’s obviously what we hoped for or secondly a complete response letter even class one where the FDA’s is two months review or class two, where the FDA has six months review.

We’ve also submitted the one you dated, to the EMEA in early June and we will make submissions in Canada, Australia and Switzerland by year end.

On the manufacturing front we’re now making commercial product at a large-scale manufacturing plant in North Carolina.

The FDA will inspect solely for Antegren as part of the initial approval.

In Oceanside California, the plan is expected to finish constructing by year end with validation runs in the second half of 2005 and we expect the plant to be licensed in 2006.

And we also announced that we recently decided to reactivate construction of our Denmark facility and expect that to be licensed some time in 2008.

Our commercial efforts on Antegren are focused on four key issues for a successful launch, reimbursement issue the IV capabilities and capacities by a neurologist adding the sales force capacity and then synchronizing with Elan.

We and our partner Elan have being meeting regularly to formulate the launch client, Sely [ph], Art and I are in frequent communication on a variety of issues.

We are convinced of Antegren’s blockbuster potential never the less we recognize the IV capacity will be gating factors and initial uptake over the first few quarters.

For this reason our commercial efforts are focus on addressing those areas.

And then lastly, business development -- just to highlight one deal here that we completed this quarter before I turn this over to Peter, I think the licensing deal we struck with Vernalis small molecule and phrase one for Parkinson’s Disease, exciting program on a pathway that we were quite interested and this program fosters our growing small molecule portfolio I think it underscores our commitment to expanding the neurology of franchise.

The business development efforts continued focus on opportunities leveraging expands development expertise and commercial infrastructures we acquired in the areas neurology, oncology and dermatology.

I would now turn the call over to Peter Kellogg to review our financial results.

Thank you Jim.

This marks the third quarter in which our mergers reported so just as a reminder.

The merger closed November 12th of last year and the results of newly formed Biogen IDEC are consolidated from that date forward.

Similarly to last quarter, we’ve included five tables as attachments to our press release.

The first two are straight GAAP results which we’ll always provide.

Table three and four begin with the GAAP results and then reconcile these reported GAAP’s financial results, with the adjusted non- GAAP P&L for the quarter and year to date.

Finally table five details revenue by product.

As I review the P&L operating performance of Biogen IDEC for Q2, I will focus on table three and I will talk about column three adjusted non-GAAP because we believe it better reflects the recurring economic characteristics of our integrated businesses.

As a reminder adjusted non –GAAP excludes all of the non – operating elements in the GAAP results in column one that are non – recurring or unique to the merger.

Again when we compare year over year growth rates we will compare Q2 2004 results to Q2 2003 Proforma results which reflect what the Biogen and Idec performance would have been like had it been one end of the current operating basis beginning in January 1st 2003.

This will give the best comparison of the combined company each year over year.

After that discussion I’ll circle back and walk you through the reconciliation items that bridged the GAAP results to be adjusted performing non- GAAP performance.

So with that stage setting let me quickly summarize how the quarter looks.

Our top line as Jim pointed out was very strong, yielding an overall 20% revenue growth versus last year , expenses included a $10m fund payment to Bernallin for the in-licensing deal that Jim just mentioned, a $7m milestone to Elan and accelerated spending to a launch preparation work around Antegren.

Our adjusted net income increased 20% versus last year and adjusted EPS was 34 cents per share, pretty much either in line or a little better than expectations.

Now let’s discuss the P&L results line by line following the adjusted non-GAAP results and table tree in more detail.

Total product revenues were $363m, 22% revenue growth over the Proforma results of last year.

Avonex product sales were $347m, up 21% as Jim mentioned.

In the US the Avonex product sales were $227m up 15%, really an excellent quarter.

As our Q2 demand remain steady with Q1, our order product revenues are actually down 6% due to roughly $16m of inventory building in Q1.

Just to remind you what we talked about on last quarter’s call in Q1, we saw roughly $16m of channel inventory building for two reasons, first as you may recall the Avonex liquid end of the year ended Q4 at a lower level than normal about half a week with inventory in the channel, and as we work through Q1 we rebuilt this to a more difficult level.

This contributed $13m to revenue.

Secondly we reintroduced the monopolized version of Avonex in Q1, which required reestablishment of a normal inventory level at our wholesale rate.

This grew roughly $3m in revenue due to restocking, so $13m on Avonex liquid, $3m on the lifelite; so when you exclude these impacts the Q1 sales were in the neighborhood of $224m, which is roughly flagged with Q2.

We’re proud of these results, our sales team continues to deliver solid performance in the US despite very aggressive competitive activity.

At the end of Q2 inventory crossed all wholesale channels with slightly lower than again in Q1 but still well within our normal range.

On the international front, the Avonex product sales were $120m up a very, very strong 33% over prior year.

Our international team continues to win, it posted a very strong second quarter with strengths in Germany, France and Benala, all of those markets were well over 15% growth versus prior year.

In the UK where our growth was up 39% and our distributor business, Latin America and the Middle East were both strong contributors.

Avonex’s Q2 sales growth include a 12 point benefit from foreign exchange, so while our growth in US dollars came in at 33% over prior year , our local currency growth was 21% increase.

Amevive in the US has brought up sales to $12m;

Amevive is a program that is still working to really take off.

It has obviously had a lot of competitive activity in the second quarter.

Behind the scenes we have been working on additional clinical studies to improve the Amevive’s profile and we have also been actively working to enhance the distribution of Amevive to pharmacies and physicians.

On this point I’d like to note that during Q2 we expanded the distribution network to include several major wholesalers in DC, and as a result our Q2 Amevive results included roughly $1-$2m in inventory building.

Not only in the US had product sales of $5m.

Next on the P&L is Rituxan’s collaboration revenue, which is titled revenue from unconsolidated joint business which is $151m, an increase of 28% over prior year.

As we always discuss this number has several elements, first we receive our share of the US Rituxan profit.

US Rituxan sales were $390m in the second quarter and our Q2 profit share from that business was $120m, up 20% versus prior year.

Secondly we received royalty revenue in sales of Rituxan ads outside the US and in Q2, this was $28m, up 103% versus prior year and then thirdly we were reimbursed for selling and development costs incurred related to Rituxan, this was $3m in Q2.

Net finance royalty which was $24m, down a bit from Q1 pretty much as expected, this reflects most notably the decline in royalties received and sharing files of US Inteferon [ph] product.

Next line is corporate partner revenue which is very small $.1m and that adds up to total revenue that Jim mentioned of $539m and that’s 20% total revenue growth versus last year.

Our cost of sales were $58m, up 11% of revenue and we did incur $8m in inventory write offs in the quarter of roughly $5m Zevalin and the rest for Ameviv.

Our R&D line was $159m, that’s 31% of revenue.

This increase included a $7m milestone payment to Elan related to filing with Antegren and the $10m payment that I mentioned earlier to Vernalis.

We’ve also incurred costs related to the Rituxan RA Phase Three trials that Jim mentioned earlier.

Since development is going to be a key part of our growth strategy going forward, we will include all in license products that are Phase One or earlier as operating items on our P&L as we have done this quarter for Vernalis.

SG&A was $138m, that’s 26% of revenue.

Again this growth was primarily driven by activities prepared for Antegren’s launch such as hiring marketing, a marketing team for Antegren, we need extensive market research in a bid to develop our launch concept.

Other income and other expense was $6m in Q2.

Now this is a decline versus last quarter when it was $12m and was largely due to losses being realized on securities -- as a result of securities to activate our share repurchase program and so the losses were about $4m.

This actually accelerated our unrealized loss balance and so we don’t expect to see this impact in future quarters.

Taxes were $57m or 32% tax rate, effective tax rate versus DVT and our adjusted EPS was 34 cents per share.

Now because we recognize the importance of earnings computed in accordance with GAAP and in accordance with regulation G, this table tree reconciled our GAAP P&L to the adjusted non-GAAP performance that we just discussed.

The same will break down the reconciliation by major driver and by P&L line items and includes the following types of items. $93m of non-cash expenses related to the cost of sales going to the P&L as a stepped up inventory value per purchase accounting.

As you recall this step up occurred when inventory was brought on to the new Biogen IDEC, balance sheet on November 12th as fair value.

This relates primarily to Avonex [ph] and secondarily to Amevive.

As a side note during Q2, we have worked our way to all of the stepped up inventory related to Avonex and you may recall that this charge was $194m in Q1 with a run out of the stepped up Avonex bases was already apparent.

The adjustments also include $79m of non-cash amortization of acquired intangible assets mainly Avonex and (inaudible).

And finally the other charges relate to severance restructuring and integration charges that impacted Q2, a little over $1m and this will diminish as we go through the balance of the year.

We will continue to provide such reconciliation tables in all of our quarterly earnings releases for the balance of this year.

Now I’d like to touch for a moment during, on share repurchase during Q2.

We did activate our share repurchase program and just under 6 million shares were repurchased.

As a reminder our current program has authorized 12 million shares to be repurchased.

And now on the financial guidance for 2004, I’d just point out that there’s really no update from last quarter.

We’re comfortable that the average of the full year estimates out there is reasonable and that the range, while it is quite wide at $1.34-$1.53, it certainly allows for more than enough, for any volatility that might occur.

If you notice the Wall Street mean estimates were very accurate for Q2 both by line items and for the adjusted EPS so while the quarters are going to be lumpy as we go through this year, it seems that the progressions for Biogen IDEC during 2004, is quite well understood on average.

As an important note, we are revising our full year guidance for capital expenditures.

We now expect those to be in the $400-$450m range versus our prior guidance of $325-$400m.

This is driven by our announced Denmark project re-start and the acceleration of our new nemo [ph] project both of which Jim just chatted about.

Now let’s look past 2004.

I think the key question that most of you had is how will the Antegren collaboration with the Elan be accounted for?

If we are able to present Antegren one year dated estimates, we plan to also organize a separate conference call roughly around that time frame.

We’ll walk you through the accounting of Antegren.

Our plan is to have Shane Cook, the Elan’s CFO join me so that we can roll out this accounting logic as a team and address questions from the perspective of company all in one call.

We’ll update you as soon as this plan is finalized.

So just in conclusion, this is a very exciting time for our organization and as Jim highlighted, and I’m very pleased that while we’re preparing for Antegren, I’m also able to report strong performance of our underlying businesses.

Our top line growth is 20% and our adjusted net income growth is 22%, speak for themselves.

No let’s turn over to Bill Rohn who will give you an update on commercial results.

Bill?

Thanks Peter.

Since Peter has already covered the sales performance for the various products let me focus my remarks on some of the operational highlights starting first with Avonex.

As has already mentioned, this is the third consecutive quarter that Avonex has grown more than 20% year over year.

The testament, the enduring benefits of the product of course, as well as to the successful efforts of our sales force.

Importantly, our US share of the MS market remains in the mid 40% range despite 2 years of intense (inaudible) competition from the new entry.

For the first 5 months of the year, Avonex’s market share has been stable at roughly 45%.

In addition we’ve made significant progress in addressing the manufacturing issues for the presold syringe.

By way of a reminder, in March, we alerted you to the fact that we had experienced some losses of liquid presold syringe, falling outside of our release classifications which if exacerbated, could potentially compromise our ability to meet ongoing demand.

We also noted that the technical challenge was not related to the bulk product but to the syringe fill and finish process.

Working with our vendor and fill finish partner, we have implemented a series of corrective actions which appear to have addressed the underlying issue associated with the product.

Validation of this new fill finish process has been completed and reports are being assembled for the various regulatory agencies.

We continue to update the FDA and EMEA on our progress and plan to meet with the FDA in the coming weeks, review the recent validation data and agree upon the regulatory requirements for commercialization of the improved fill finish process.

I’d like to emphasize and underscore that to date we have met all commercial requirements for products and continue to carry sufficient supplies to meet the commercial demand going forward.

Turning to Antegren as Jim discussed, the acceleration of Antegren has impacted virtually every function that’s in the organization.

Currently the commercial organization is in a very active planning mode to make sure we are ready for an early product launch.

Over the last several months we’ve had about a hundred people working on Antegren full time.

Summer’s the time for planning and we while the fall will be the time for execution.

Now for obvious competitive reasons we don’t want to bar hands as to the specific plans therefore I won’t be able to share many of the details with you today.

What I can tell you is that we are focusing our commercial efforts in the following key areas.

Reimbursement, IV capabilities and capacity by neurologists and optimizing sales for a structure.

In the reimbursement arena we have embarked on a program to educate payers on Antegren’s mechanism of action and we will educate them, on the data of course, when it becomes available.

With regard to IV capacity we have a number of databases which have been assembled which inform us of the current status of infusion capabilities today.

We will be mapping these over the next few months and we will implement local solutions for local conditions.

With regard to the sales force we will be expanding our sales force capacity and we’ll choose the structure that optimizes Antegren’s potential.

We will also use our own infusion specialty sales force to enable the option for patients to be treated in the hospital out-patient setting.

We are convinced of Antegren’s blockbuster potential, never the less we recognize that IV capacity and reimbursement will be gating factors for the initial uptake over the first few quarters for this reason our commercial efforts are really focused on addressing these areas.

Overall we are very excited about the opportunity that Antegren represents, we believe the potential MS market over the next few years will grow to roughly $6b up from $3.6b today and we believe Antegren will not only expand the market, but also capture a large share of the market.

Amevive and Zevalin are works in progress.

Amevive is a small product today but with this unique profile, this drug will have an important place in the positions (inaudible).

We continue to work at enhancing Amevive’s profile through additional combination and extended dosing clinical studies.

While we see evidence of the competitive noise is extending the market for Biologic Therapies, market growth has been a bit slower than expected, still we continue to believe that markets for Biologics and psoriasis is substantial and it is important to note that Amevive is the only approved biologic for Psoriasis that is reimbursed by Medicare.

For Zevalin we are attempting to move radio immuno-therapy into the main stream of lymphoma therapies by continuing to support the product with ongoing post marketing trials.

We have noted growing interests in some of the data presented at Asco [ph] and anticipate seeing important new information especially in relapsed aggressive disease at Ash [ph] later this year.

Let me conclude my remarks with two comments on Rituxan.

US net sales in Q2 of 2004 were $390m, a 19% increase versus the same period last year and an 8% increase versus Q1.

Rituxan’s overall adoption rate in the combined NHL and CLL markets were 70% in Q2 up from 68% in Q1.

As expected most of Rituxan’s growth in Q2 was in the induction use specifically in front line indolent NHL and frontline CLL.

As you know neither our, nor Genetech sales force promotes Rituxan in Frontline indolent NHL or for that matter in aggressive NHL, CLL or maintenance.

Even so Rituxan continues as a significant therapy in these settings, and achieved adoption gains in Q2 2004 in each of these areas.

This is of course a data driven market, at Asco, there were over 50 new abstract posters and oral presentations featuring Rituxan in a variety of clinical settings.

Of note data presented from Ecog1496 demonstrated increased progression free survival in indolent NHL patients created with a Rituxan maintenance regimen versus observation.

Also at Asco the mid trial (inaudible) international trial a study of chop- like chemotherapy plus or minus Rituxan in younger patients, those patients under 60 age, with aggressive NHL demonstrated that the addition of Rituxan to chemo benefits time to treatment failure.

Roche our partner outside the US recently announced positive opinions of the European Union’s committee for human medicinal products for the front line use of Rituxan in combination with CVP chemotherapy for the treatment of indolent NHL.

In the US we and our partner Genentech will not file a supplemental PLA for the frontline use of Rituxan in indolent NHL in the first half of 2004 as originally planned since the FDA had requested additional data.

Once we complete our discussions with the FDA we will update you with a new timeline for this filing.

In aggressive NHL we and Genentech now anticipate filing with the FDA in 2005 based on data from Ecog 4494 and the (inaudible) study.

We believe this flow is important new clinical information will continue to fuel the use of Rituxan for the next several quarters.

Finally on the reimbursement front we believe Medicare legislation has had limited impact on Rituxan’s prescribing to date, however this is an area that is in tremendous flux and so we will continue to monitor the Medicare situation very closely.

With those comments I will now turn the call over to Bill Resstetter, Bill?

Thanks Bill, our mission at Biogen IDEC is to create new standards of care in Oncology and in oncology Antegren represents the next opportunity t fulfill that mission.

As you’ve heard today Antegren’s accelerated timeline has galvanized all parts of the organization in preparation for launch by early ’05.

We have also stated our goal for 50% of our pipeline to be generated from in licensed opportunities by 2010, the (inaudible) deal is another step towards achieving that goal and we continue to evaluate a number of interesting early stage opportunities.

With three products in phase three development Antegren in MS and in Chrones disease, BV12 for psoriasis in Europe and Rituxan for rheumatoid arthritis we have a robust pipeline that reaffirms our commitment to our corporate goal of averaging 15% of revenue growth and 20% EPS growth through 2007.

Finally please mark your calendars so that we can review our overall business with the investment community we will host an analyst day on November 30th in Boston.

Now I would like to turn the call to the Elizabeth for Q&A.

Operator we are ready to begin the Q&A session if you could clear the q to take questions and we would ask that participants announce their name and firm and please do try to limit yourself to one or two questions so that we can take questions from as many colleagues as possible.

Operator with that we are ready to take the first question.

At this time I would like to remind everyone if you would like to ask a question please press star then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.

The first question comes from Steven Harr with Morgan Stanley.

Good morning, just on the R&D line Peter should we subtract out that $21m or I should say that $17m in payments and use that as our run rate going forward or what would be the proper number there?

OK well, you know (inaudible) because actually we do have obviously a very big and expanding pipeline -- we have even licensed Vernalis so while yes it is true that we had a milestone and we had an upfront fee, I also think our R&D line will continue to grow as we build our pipeline, since that is really our fundamental strategy.

So I caution you pull it out an assume a much lower run rate forever, I do think that over the next couple of years as the R&D continue to expand, you know we have a lot of phase 4 activities.

Generally what we have always advised is that as the revenue grows we anticipate internally having our R&D play out in the range of 30 to 32% of sales, and if you use that as a guiding light, that’s probably a good metric.

That’s the way, pretty much we think about it as well internally.

Okay?

Great, thanks.

Okay.

Thank you.

Your next question comes from Ian Somaia with Thomas Wiesel Partners.

Thanks for taking my question.

Regarding the spectrums will data be limited I think on Antegren to the mono-therapy study or should we also expect to see the combination data there?

And then I just have one follow up.

Yeah, hi this is Burt Adelman.

So, - - we’re still discussing the overall strategy for releasing the data.

Part of that strategy includes actually getting approval from the regulatory agencies to present the data as the trial turf as everyone knows is still ongoing for a two-year conclusion and under review.

So, you know, I hate to be noncommittal on that, but I think first and foremost we’re trying to figure out if we’re going to get permission from the regulatory agencies to present the spectrums and then we’ll more specifically decide how to handle the data.

Okay.

The - - when would you -- I guess, when do you plan to have the discussions with the FDA, without at least getting the approval to present?

Well now that the application has been formally accepted for a review, we can anticipate having that kind of conversation with them.

Okay and the - - just the one follow-up I had was related to manufacturing.

Once the Denmark facility is up and running in ’08, what will be the total manufacturing capacity?

Of Bio-medics?

I’ll give that to Jim.

This is Jim Mullen.

It’s not an easy question to answer in absolute because we have several moving parts and moving parts are the productivity of the process, how many products will be running in the facility, what exactly will be the cycle time of the process as it gets burned in with, you know, experience and the learning curve and so - - those are the basic moving parts.

What we had said previously is that the North Carolina plant with the current process and the productivity we have, we believe it’s sufficient to support around 70,000 patients and then you can - - the capacity at Ocean Side is similar and the capacity in Denmark is similar again.

We do anticipate that we’re going to have to step into significantly increasing the productivity of the process, but I think it’s premature to exactly pin that down.

And it also becomes a complicated regulatory strategy you know, depending on how significant the manufacturing changes are that result in increased productivity and how those roll through different markets.

So, it’s a relatively complicated answer to I think what was a pretty simple question, but those are the variables.

Thanks.

Your next question comes from Craig Parker with Lehman Brothers.

Good morning.

A question for Bill Rohne on reimbursement and some of the market research you’ve done there.

Do you have an estimate of the percent of patients who are being treated by a Neurologist who may not be a preferred provider in their health plan, and would thus make them subject to come kind of a co-pay?

Craig, I don’t have that statistic handy.

The folks are doing some pretty deep dives into the local and regional pair of practices, but unfortunately I just don’t have a summary number that I can pull off the top of my head at this point in time and answer your question.

But it’s a good question so, we will go back and see if we can come up with an answer for you.

Okay, thanks Bill.

Your next question comes from Joel Sendek [ph] with Lazard.

Thanks.

I also have a question on reimbursement on Rituxan and just wonder if you can comment at all on what EMS reported yesterday with regard to the reimbursement rates for personally compound, looks like with Rituxan there was bit of increase.

Jim.

The publication yesterday was, I think an attempt to try to provide some visibility to oncologists and there’s a lot of pressure by Asvil to get an early publication of some of the ASP numbers so that Asvil members can try to calculate what might likely be their reimbursement rate revenue flow for coming year 2005 and beyond.

I think the increase that was calculated there was and -- I just looked at the table briefly, was about 3% and I think that what that is, is a reflection of a change between reimbursement at 81% of AWP this year, to ASP plus percent next year.

And of course we know the ASP calculations and the formula for that are still in plus and hoping to adjust it by CMS, though I’m not so sure that publication of those numbers created a lot of clarity for Oncologists to pay -- actually it creates some confusion, but be that as it may, I think we’ll be able to refine a better idea of exactly what will happen to revenue flow for oncologists in 2005 as we get the final CMS calculations for ASP and we also get comfortable that CMS isn’t going to move back up or around a little bit.

Thank you.

Your next question comes from Jennifer Chow with Deutsche Bank.

Morning.

Jim or Bill could you just discuss more specifically how commercial responsibility for Antegren are going to be divided up with Elan?

Whether or not the full balance of Biogen Idec’s current sales force for MS is going to be also detailing Antegren?

And maybe if you could just give us a percent of how you expect the MS sales force to grow by launch time.

Thanks.

Okay, I’ll grant that one Jennifer.

The commercial responsibilities are pretty straightforward.

On MS, Biogen will lead the way on a worldwide basis.

So, it will be the sales force that we currently have in the field as well as the significant expansion and I would think of that roughly in terms of doubling.

I’m not going to get into more detail on exactly how we’re going to put those people out in the field - - it is a large part of what Bill Rohne referred to before.

There is a lot of counter-marketing going on, even though no one has ever seen data.So I’m - - you know, we’re quite aware of that dynamic.

So we will have a significantly large sales force out there working the product.

In addition to that is that Elan has had a good hospital sales force.

They’re actually going to be contributing quite a number of folks particularly at the launch year on both reimbursement issues as well as the infusion center.

So they’ll have some folks that we’re going to be well coordinated with ours.

On an operational level, all of that is directed by the people that are currently running MS business.

So, Jim, in terms of the doubling you expect that to happen by launch time?

Yeah, yeah.

We think it will be at launch time or you know, within, you know measure in a couple or a few weeks after that.

Okay thanks.

Okay.

Your next question comes from Anthony Fossil with White Diamond Research.

Hi, good morning.

I had a question concerning the issue of neutralizing antibodies, which seems to be gaining traction at least at the previous year’s meeting in Milan and with the WHO.

How much of an impact is this having on - - MS treaters sort of turning away from the high dose inteferons like Redif [ph] and Beta-seron?

And are they returning to Avonex or you know, continuing their Avonex prescriptions?

This is Bert.

I’ll take a crack at that and then Bill Rohne may have some additional comments.

I would just fundamentally say that at least those of us in the clinical sort of research end of the business believe that the reason why the product has remained so strong in the market place is importantly due to the argument regarding the very significant difference in risk for neutralizing antibodies across the products, you know, where Avonex is very significantly at an advantage.

The physicians choosing to treat patients with MS have to make a decision for therapy for disease for life and they’ve got to choose therapy that a patient’s likely to have the best opportunity to benefit from for the longest period of time and I think that particular concern is where the neutralizing antibody issue resonates most significantly.

With respect to, you know, the percent of current decision making that’s driven by that, I don’t particularly know, but we – when we talk to physicians and we talked to clinical investigators, we hear this concern right back to us, both about Avonex and more broadly about biologic therapy, I think that it is very important and will remain a very significant aspect of the Avonex product profile.

Just one follow-up question concerning the eventual or future – this algorithm which may involve combination therapy use Antegren plus Inteferon (ph), the data going forward will be most copious one would imagine in Antegren plus Avonex.

Question do you think that eventually people will develop a sense of a class effect of mixing and matching the Antegren with other Interferon (ph) alternatives or do you think that the MS treaters sort more (inaudible) to just be data driven and just go Elan with most – I guess, support of rational for using Antegren with an Interferon?

Well I think that – that’s a very good question.

I don’t -- I can’t give you a specific answer in part because obviously we haven’t revealed all of the relevant data, but I do believe that, you know, the purpose of our program is to establish the best therapeutic strategy for a patient in light of all therapies that are available and therefore, you know Antegren will be an important therapy for all patients with MS and obviously for patients currently on therapy, who are not experiencing adequate clinical response.

With respect to, you know, the unique nature of combination therapy, you know, I would only say that among the Interferons, a once a week therapy added to once a month therapy would be a lot more appealing to a patient I would think than, you know, once a month therapy plus, you know, a multiple or everyday kind of therapy – so you know, we can have more kosher conversation when the relevant data are public but, you know, we will continue in our clinical development efforts, be addressing the specific issue of combination therapy, you know, be it for, you know, the broad spectrum of patients or potentially unique subsets of patients, that we can say are particularly likely to benefit either initially or in add on fashion from combination therapy.

Okay, and one final question here.

I understand that Elan is trying driving the regulatory filing agenda with regard to Antegren and the Crones Disease, but that being said, could you give us a little bit of the sense of what the sort of tentative timeline is there in terms of where we are now and where – to get to sort of the final marketing approval provided everything goes as planned.

Well I believe that – so you are correct, Elan is driving the regulatory strategy for Crones as part of collaboration, as they are leading the clinical effort in development in Crones.

I believe that by the end of the year we’ll be submitting the European component of the Crones approval package, but as we’ve said many times, in the United States, and additional induction study will be necessary to support the approval process and our partners at Elan are aggressively pursuing the execution of that trial, when that trial is done, the results are analyzed, we will then have a better sense of the submission and approval package in the U.S.

Your next question comes from Megan Ho with Goldman Sachs.

Hi, talking about the optimum sales structure for the launch of Antegren.

Recently – I guess one of your competitors, and Pfizer, talked about expanding their sales effort (technical difficulties) (inaudible) Antegren -- does that affect your thinking in terms of what the optimum structure and what are some of the scenarios that you’re thinking about?

Megan this is Jim, I’ll try to deal with that.

Well, you know, in the end with the neurologists, need are - what we can supply neurologists is information, and training or if you will education on the clinical trial.

And I think the reality is when Antegren gets approved that the major chatter is going to be around its innovation and the data, and the data will be relatively new.

So I actually anticipate that the other products are going to have some difficulty getting any real share of mind, they may well get share of office space in the waiting room, but they’re not going to get share of mind because, you know, frankly these other products have been out there for six to seven years, it’s not, you know, a huge new boluses data coming out on those, and some of the excitement is going to be around Antegren.

In terms of you know, expanding the sales force , you know, if we thought that that were our primary driver for e.g. the Avonex business, we would have expanded the sales force well beyond of what w currently have, nevertheless the sides that we have been obviously extremely competitive.

I believe one of those competitors, their response is “well, let me see if I can put more pressure.” It’s always been our contention that this is not a detailing, highly sensitive to detailing market, it is highly sensitive to information and innovation, I believe that’s going to play out again.

So, you know, I know there’s great efforts to counter detail against Antegren, but, you know, the data will speak for itself when it comes to light.

And on the reimbursement and auto-education, I guess having a rapid review is a double edged sword as you said, between the time that you might get approval versus launch, you would have very little time to really prepare the proper reimbursement codes, etc.

So how long do you think it might take to get these codes?

Well, it’s going to take a while to work through their system and what we are, you know, what we are doing now is we’re down at the practice level, because this is an issue down at practice level, its different for every pair, every practice and every patient, so we’re – it’s going to require hand-holding, customized approach to working people through you know, the additional reimbursement issues, connecting infusion capacity with practices, some of them already having it, some of them to have a referral, their referral needs to be within the payment system, so there’s a lot of detail logistics if you will, down at the reimbursement level.

As a practical matter, you know, we’re trying to get this thing a little closer to major medical which is where it typically starts on these lunches into pharmacy formulary kind of a product as rapidly as we can.

The one thing I would say is that I think this market is pretty well established.

Biologics are well understood and the Antegren profile as you can see from the phase 2 data, I think is certainly compelling enough that it will get attention.

Thank you.

Your next question from Jeffrey Porsche with Stanford Bernstein.

Hi, thanks for taking the questions and congratulations on a good quarter.

Couple of quick questions.

If you could just tell us what the percentage would be and what the growth trend in Avonex in units or in patients was both in the U.S, outside the U.S. that would be helpful.

Secondly, you’ve given information in the past about the additional patients in the MS population who you believe are not on treatment right now, who could potentially become available in different other agents specifically Antegren comes to market.

If you could you give us an update on what your market research is telling you about that?

And then finally just a little bit of information on the other indications you mentioned Crones, but I’m curious to see where you are in RA.

Also with Colitis, you’ve talked in the past about other indications as well.

Thanks.

Okay let me take the first -- I think three questions there so let me take the first one if a can, then I’ll pass I guess to Jim or Bert for the second one.

On the – in terms of the US and then internationally you asked basically what’s the unit growth of business looking like.

Well so a couple of building blocks that obviously I highlighted internationally that there were about 12 points growth in foreign exchange in the international portion of business.

On the US, the other impact which is probably most notable is the volume in the US is pretty much flat versus prior year at this point.

It’s up -- it bounced around a little bit, but we did have a lot of benefit from pricing that we taken over last year.

So roughly 15 points of growth and a good portion of that is from the pricing and the volume is pretty steady.

On the international front you know basically most of it is all volume related because very strong business performance when you track the foreign exchange benefit that we are getting.

So I think that was the total of the first question.

The second question was other indications for Antegren?

The second question related to the patient population --.

Oh patient population and what we said we think that is some where in the range of 100,000 patients that have been on the drop to the different therapies and are currently not on any one of the four therapies in the market.

You know we think that is a market that is accessible to Antegren and it will take a little bit of work, because we got to get patients back into the neurologists and back into that system.

But, you know, we think that that based on conversations with neurologist that they already know who those -- many of these patients are.

And so I think we should see some of that.

And Jim is that in 100,000 in the US or --?

No I think we said that it’s 100,000 that’s between US and Europe.

Okay thanks.

And the last question about additional indications as we’ve already told you there are ongoing clinical trials activities obviously in crones and our partners at Elan (ph) have started up a program in rheumatoid arthritis a phase 2, a large phase 2 trial of rheumatoid arthritis.

And you know, clearly we believe that the mechanism of action of Antegren is relevant broadly in autoimmune disease and likely in diseases where our immune cell activity are also relevant, but may not be conventionally viewed as auto immune disease.

In addition we’ve had some interesting presentations to us on potential of Antegren in certain oncologic indications.

So you know we are looking broadly at additional development plans.

But we’d have to admit to you that right now between ourselves and Elan I mean we are working full force to get the current MS approval and the crones approval submitted and prosecuted, and are trying not to distract our efforts too broadly.

So we want to get through the approval in MS, the approval in Crones, the initial launch activities, which require you know significant support across the organization from the clinical, regulatory, commercial teams.

And then we will re-activate our efforts to look for a new important indication.

Your next question comes from Eric Hand (ph) with Merrill Lynch.

Thanks, can you give us the mechanism of action for Antegren which is basically to sequester white blood cells in the periphery – I would imagine that you get an increase of peripheral white blood cell count and obviously that could lead to the potential for a rebound.

I was wondering what type of regulatory requirements there might be as a result of that kind of profile and what kind of data do you have in hand on that for us?

Right so a good question and indeed actually a useful marker of Antegren effect is a slow rise in the number of circulation lymphocytes, which we think is a result of just released from sites that see cuestration (ph) because you would see this in a normal individual just as much as you would in the individual who had an autoimmune disease.

We also – we’re curious about the possibility of rebounds and in the large phase 2 trial that was published last year in the New England Journal before we actually completed analysis of those data we followed the patient --- treated patient population off drug for an extended period of time looking both at relapse rate and MRI activity.

And I’m glad to say that we saw absolutely no evidence of accelerated to these activity in those patient.

Obviously if you have MS, if you are on no therapy you will over an extended period of time have evidence of disease activity.

That’s natural history of the disease.

But there is no evidence that Antegren is associated with accelerated disease activation or relapse as we’ve seen with other potential -- other targeted therapies to lymphocyte trafficking and you know we have a huge safety data base and these issues have not come up in conversations you know with any regulatory authority.

Great thanks.

I think operator we’ll take possibly our last question.

Your next question comes from Elise Wang with Smith Barney.

Thanks for taking my question, just want a follow up on some of your plans again on the sales force front.

If I recall you had mentioned before that you were actually planning to have two separate sales force, one for Avonex and one of Antegren.

Can you talk a little bit more about that and what some of the rational is for that and also whether or not you believe at this point based on the conversations you’ve had with the FDA as to whether or not a panel is likely and how that plays into the release of data?

Elise this is Jim and I’ll try to handle the sales force and it will be a pretty unsatisfactory answer because I don’t think we are prepared say more than we have already said for competitive reason.

And so we’re going to roughly double the sales force and exactly how we’re going to send those out to guys out in the field with what instructions will be a surprise for the competition when we arrive.

In terms of the conversations with the FDA and advisory panel I mean at this point I’ll ask Burt Adelman but I don’t really think we had any guidance one way or the other on that subject.

Clearly it does affect the timing of when the data could come out and when we look at the calendar that’s one of the reasons why we’re so careful to have conversations with the agencies on this subject – they will act around where we are on the approval time line and you know where an advisor to the might fall if there is going to be one in the time line can all be a very short period of time so Bert maybe you want to answer that --

Hi Elise – You know I just say one thing about the sales force issue too since it’s come up.

One thing we can tell you is that we will continue to field the best sales force in the neurology space without a doubt.

That’s why we’ve been so successful and that’s why we’ll continue to be.

With respect to an advisory committee meeting you know all I can saw is we have heard nothing.

Obviously in this accelerated time line if there is an advisory committee meeting it would be early in the fall.

And obviously it would change the entire calendar of that release of clinical data, because it is a public hearing and the data will be available in that setting.

Okay that’s great, I’d like to have a follow up Bert -- can you talk about this B2006 compound that you just in-licensed?

I know Rhonepursue it in depression, but can you talk a bit about the data you’ve seen with Parkinson disease.

Well you know first of all the target – the A2A target is well established in Parkinson’s, it actually a competitive area here.

We had a small molecule discovery program in this area a number of years ago, dropped it because we were behind.

But we’re excited to have the opportunity to get back in, in this accelerated setting, you know in partnership with Vernalis.

We are happy as a – you know we’re try to continue to build our franchise in neurology so it’s very exciting to us to have an opportunity to bring a product forward in Parkinson’s Disease, to expand our portfolio here.

The product is in-patients, it has a very acceptable pharmacology profile in terms of dosing.

And with respect to efficacy (ph) in humans you know I can’t comment at the moment, we’ll talk more about this at the November 30th meeting.

But you know we are very excited to now have leap-frogged much of the competition and to be you know in the clinic with an exciting new anti-Parkinson drug.

And with that, that was our last question, I want to thank you for joining us on the call today and we will host you again in another three months.

Thank you.

This concludes today’s conference call you may now disconnect.

Thank you.

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