Biogen Inc (BIIB) 2004 Q3 法說會逐字稿

At this time, I would like to welcome everyone to the Biogen Idec third-quarter earnings conference call.

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

After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) Please limit yourself to just 1 question.

Thank you.

Now my pleasure to turn the call over to Elizabeth Woo, Senior Director of Investor Relations.

Ms. Woo, you may begin your conference.

Good afternoon, everyone, welcome to Biogen Idec's earnings conference call for the third quarter of 2004.

Let me begin with the Safe Harbor statement.

Comments made on this conference call include forward-looking statements regarding the Company's expectations regarding future financial results, and the approval and launch of Antegren, and the plans for the Company's commercial and 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 Biogen Idec has filed with the Securities and Exchange Commission.

The Company does not undertake any obligation to publicly update any forward-looking statement.

We will be discussing financial information today that includes non-GAAP financial measures.

Please refer to the investor relations section of our website, Biogen Idec.com; and you can print out the press release and accompanying tables for the most directly comparable GAAP financial measures and the reconciliation to non-GAAP financial measures discussed today.

Today on the call I'm joined by Jim Mullen, our CEO;

Peter Kellogg, Chief Financial Officer;

Bill Rohn, Chief Operating Officer;

Burt Adelman, Executive Vice President of Development; and Bill Rastetter, Executive Chairman.

For the Q&A session we will have Bob Hamm, Senior Vice President of the strategic business unit Immunology, available for that portion of the call.

I will now turn the call over to Jim Mullen.

Thank you, Elizabeth.

Good afternoon, everyone.

I appreciate you joining us today.

Next month will mark the 1-year anniversary of the merger between Biogen and Idec.

When the merger was announced Bill Rastetter and I set out 3 key priorities.

The first was a smooth and rapid integration, with a goal really to operate as a single company as quickly as possible.

Bill and I applaud organization achieving this goal.

Many of the activities were completed in record time.

All of our major systems such as manufacturing inventory controls, human resources, and finance were consolidated in a very rapid manner and allowed us to operate on a single platform from almost the beginning.

Secondly, we wanted to leverage the combined capabilities of the 2 organizations.

It was really a question of strategic acceleration which required leveraging our capabilities and assets.

1 example I would like to just note, specifically for Antegren, this included accelerating the buildout of the Nemo (ph) manufacturing facility in Oceanside, California, as well as developing high data (ph) processes to support the anticipated demand for this important product.

Now at the time of the merger, I am not sure we were necessarily thinking that that was on this immediate horizon, but that was certainly one of the big plusses that has emerged in a very short period of time.

Third, more business development deals to support the pipeline.

We've had a very successful year in business development.

In the past year we have signed 3 in-licensing deals with Fumapharm, Vernalis, and most recently Sunesis.

We are collaborating with Sunesis to discover and develop small molecule cancer therapeutics targeting kinases.

Our business development efforts continue to focus on opportunities to leverage and expand the development expertise and commercial infrastructures we have acquired in the areas of neurology, oncology, and dermatology.

I have been pleasantly surprised that the organization has made great strides in each of the areas.

The Company is consolidated now as a unified Company.

We are focused on launching a new breakthrough product.

Before handing to call over to our CFO Peter Kellogg for detailed review of the financial results, let me cite some of the highlights of the quarter.

First on the financial area, Biogen Idec posted $543 million in total revenue this quarter, up 14 percent year-over-year.

This quarter we completed in the 12 million share repurchased program that was authorized by the Board of Directors in February; and the Board has authorized an additional 20 million shares for repurchase.

I think this new share repurchase plan underscores the belief of management and the Board of Directors that our common stock represents an attractive investment for the Company, based on our well-defined strategy and our prospects for future growth.

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

Rituxan co-promotion profits grew 19 percent year-over-year.

Avonex grew 16 percent year-over-year, representing the fourth consecutive quarter of strong double-digit worldwide growth.

As I mentioned earlier, much of the organization's efforts on both coasts are focused on preparing for Antegren.

On the regulatory front, our discussions with the FDA are on track.

All the manufacturing and supply chain sites have been inspected and completed with no major issues identified.

On the financial front, Peter Kellogg and Shane Cooke, the CFO from Elan, will host a joint conference call next week to walk all of you through the accounting for Antegren.

As you know, the economics are 50-50 profits split worldwide for all indications between Elan and Biogen Idec.

This does not change; but the details of how that will be accounted will be walked through by Peter and Shane.

In his comments Bill Rohn will provide a bit more color on our launch preparations for Antegren.

In summary, as we prepare for commercialization we have conducted extensive market research and developed our strategic plans over the summer.

This fall we focused really on execution issues; hiring all the salesforce and all the management; and making sure we're ready to roll when we hear from the FDA.

As I mentioned, as we all mentioned on the last quarter's call, IV access and reimbursement issues will be the gating factors in the first couple of quarters of the launch.

We have been working very hard to understand the landscape and have developed a comprehensive plan to address these challenges.

Next year will be focused on building the foundation for Antegren.

At launch, we will first focus on removing access to reimbursement barriers and position education.

As we exist 2005, I hope the Antegren momentum -- the Antegren franchise will have strong momentum on its way to the number 1 product in MS.

I will now turn call over to Peter Kellogg to review the financial results in detail.

Thank you, Jim.

As Jim mentioned, we are just weeks away from celebrating the 1-year anniversary of the merger between Biogen and Idec.

This represents the fourth quarter in which our merger is reported.

So I think you are all getting used to this, but just as a reminder the merger closed November 12 of last year and the results of the newly formed Biogen Idec are consolidated from that date forward.

Similar to last quarter, we have included 5 tables as attachments to our press release.

The first 2 are straight GAAP results, which we will always provide.

Table 3 and table 4 begin with the GAAP results and then reconcile these reported GAAP financial results to an adjusted non-GAAP P&L for the quarter and year-to-date.

Finally, table 5 details revenue by product.

As I review the P&L operating performance of Biogen Idec for Q3, I will focus on table 3; and we will talk about column 3, the adjusted non-GAAP, because we believe it better reflects the recurring economic characteristics of our integrated business.

As a reminder, adjusted non-GAAP excludes all of the non-operating elements of the GAAP results in column 1 that are nonrecurring or unique to the merger.

Again, when we compare year-over-year growth rates, we will compare to Q3 2004 results to Q3 2003 pro forma results which reflect what Biogen and Idec performance would have been like had it been 1 entity on an operating basis beginning January 1, 2003.

This will give the best comparison of the combined companies year-over-year.

After that discussion, I will circle back and walk you through the reconciliation items that bridge the GAAP results for the adjusted pro forma non-GAAP performance.

So let me quickly summarize the results of the quarter.

As Jim said, our top line was very strong, yielding an overall 14 percent revenue growth versus last year.

Expenses did include a $7 million upfront payment to Sunesis, and it included accelerated spending for the launch preparation work around Antegren, as we have been discussing all year.

Our adjusted net income increased 7 percent versus last year; and our adjusted EPS was 37 cents per share, I think a little better than maybe expectations.

Now, let's discuss the P&L results following that adjusted non-GAAP column in table 3 in more detail.

We are going to begin with total product revenues, which were $360 (ph) million; that is 14 percent growth over our pro forma results of last year.

Now Avonex product sales were 346 million, and that is 16 percent growth year-to-year.

This represents the 6th consecutive quarter of strong double-digit worldwide growth for Avonex.

That team has just done a great job all around the world.

In the U.S., Avonex product sales were $224 million, up 10 percent over prior-year.

We ended the quarter with 1 week of inventory in the trade channel, which represents the low of our typical 1 to 2-week range.

So if you factor that into the number, our demand has remained pretty steady quarter-over-quarter.

On the international front, Avonex product sales were $122 million, up a tremendous 29 percent year-over-year.

So our international team continues to win.

They posted the 5th consecutive quarter of over 25 percent year-over-year growth.

The performance was widespread, with excellent results in Germany, France, and the UK.

Avonex's Q3 sales growth internationally included an 8-point benefit or $8 million from foreign exchange.

So while our growth in U.S. dollars came in at 29 percent over last year, our local currency growth was 21 percent year-over-year.

Amevive's product sales were $8 million.

Now this was a softer quarter partly due to a workdown of inventory from last quarter.

As you may recall, on our Q2 call in July we said that there was 1 to $2 million of inventory build during Q2 resulting from the expansion of our distribution network.

Given that this was reversed during Q3, if you stand back and look at the trends, the result is pretty flattish demand quarter-over-quarter.

Zevalin product sales were $5 million.

Our Rituxan collaboration revenues come next, which is titled Revenues from Unconsolidated Joint Business.

That was $160 million, an increase of 19 percent year-over-year.

As you always discuss, this number has several elements.

First, we receive our share of the U.S.

Rituxan profit.

U.S.

Rituxan sales were 393 million in the third quarter, and our Q3 profit share from that business was $119 million, up 8 percent versus prior year.

Secondly we receive royalty revenue on sales of rituximab outside the U.S.; in Q3 this was $33 million up 75 percent versus prior-year.

Third, we are reimbursed for selling and development costs incurred related to Rituxan; and this was $8 million in Q3.

Moving to the next line, royalties were $24 million and corporate partner revenue was $200,000, which leads us to the total revenue line of 543 million, which was 14 percent growth over the same period last year.

Our cost of sales were 61 million.

R&D was 159 million.

I will just note that R&D was about 31 percent of revenue, which is in line with our typical trend.

SG&A was $130 million.

Other income and other expense was $11 million.

And taxes, which were booked at an effective tax rate of 32 percent, was $62 million.

All of which leads to an adjusted EPS of 37 cents per share.

Now because we recognize the importance of earnings computed in accordance with GAAP, and in accordance with Regulation G, this table 3 reconciles our GAAP P&L to the adjusted non-GAAP performance that we just discussed.

This table breaks out the reconciliation by major driver and by P&L line item.

It includes the following types of items. $3 million non-cash expense related to cost of sales going through the P&L at the stepped-up inventory value per purchasing accounting.

Now as you will recall, this step-up occurred when the inventory was brought onto the new Biogen Idec balance sheet on November 12 of last year at fair value.

The adjustments also include $107 million non-cash amortization of acquired intangible assets related to the merger, and during the quarter we revised the intangible value for Amevive due to an impairment analysis.

Finally the other charges related to severance, restructuring, and integration charges that impacted Q3.

Just to reiterate a point that Jim made, I would like to mention the status of our share repurchase plan.

During the third quarter, we repurchased just over 6 million shares, completing the 12 million share repurchase program that was authorized by the Board of Directors back in February.

Based on this activity, the Board has just authorized another 20 million shares for repurchase.

Another point I would like to cover just quickly is the tax repatriation act.

Now many of you have been asking about the implications of the new tax bill to Biogen Idec; and by the new tax bill I am referring to the American Jobs Creation Actions Act of 2004.

As you know, one of the key provisions of the bill relates to the repatriation of foreign earnings permanently invested outside the U.S.

We are currently exploring the benefits of a 1-time cash repatriation provided under the bill, but we have no decisions at this point.

Another important provision of the bill relates to the deduction for domestic manufacturing.

In principal, this should provide a favorable impact on future cash taxes and on our effective tax rate.

Again, we are currently working through the implications of both of these provisions for Biogen Idec.

Now let me just finally turn to financial guidance.

Although we do not have all of the answers yet regarding Antegren for the balance of this year, we are comfortable with a full-year estimate in the $1.42 to $1.49 range.

It is a relatively wide range, but it is just hard to be more specific than that until we hear from the FDA.

On a longer-term basis I do want to reiterate we are on track to achieve our long-term goal of delivering an average 15 percent top line and 20 percent bottom-line growth through 2007.

Since Antegren timing and outlook is so crucial to our near-term actions and planning, we will provide 2005 guidance sometime after the launch of Antegren.

However, we do expect that 2005 will be the launch year; and as such, we will be making substantial investments ahead of the revenue curve.

Accordingly, we don't expect to achieve the full 20 percent in adjusted EPS in this type of a launch year.

With this in mind, as Jim mentioned, the most important metric for next year will be the Antegren trajectory as we exit the year.

We have indicated that Shane Cooke, Elan's CFO, and I will host a joint conference call to explain how the collaboration accounting for Antegren will work, as Jim mentioned.

This call will be on Wednesday, November 3, at 8 AM.

So we look forward to discussing this with you at that time.

In conclusion, this is a very exciting time for the organization as we prepare for the launch of Antegren.

We are financially and operationally strong, and we are very ready to execute on this great opportunity.

Now I'd like to turn the call over to Bill Rohn, who will give you an update on the commercial front.

Bill.

Thank you, 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 Rituxan.

U.S. net sales in the third quarter were 393 million, an 11 percent increase versus Q3 of 2003, and a 1 percent increases versus Q2 of 2004.

The price of Rituxan was increased in the U.S. by 4 percent effective September 9 of this year.

Rituxan's overall adoption rate in the combined NHL and CLL markets was 72 percent in the third quarter, versus 70 percent in the second quarter, and 66 percent in Q3 2003.

This increase in utilization for Rituxan occurred as a result of increased adoption in front-line indolent NHL, front-line CLL, and indolent maintenance.

As you know, neither our nor Genentech's salesforce promotes Rituxan in front-line indolent NHL, aggressive NHL, CLL, or maintenance.

Even so, Rituxan continues as a significant therapy in these settings and achieved adoption gains in Q3 2004 in each of these areas, driven mainly by presentations at scientific meetings, and articles in peer reviewed journals.

In Q3 2004, hematologists and oncologists used Rituxan maintenance in approximately 10 percent of non-relapse patients previously treated for NHL and CLL.

More than 60 percent of hem-ocs have tried Rituxan maintenance during the past year, which is up from 46 percent in Q3 2003.

We continue to see increasing hematologist-oncologist interest in and usage of Rituxan in indolent maintenance.

So far we have seen limited impact on physician prescribing of Rituxan due to changes in Medicare reimbursement, which were effective January 1 of this year.

I'm pleased to report that the Centers for Medicare and Medicaid Services, CMS, recently published a carrier correction, which stipulates an increase in the 2004 Medicare physician office reimbursement rate for Rituxan from 81 percent of AWP up to 83 percent of AWP.

This correction is retroactive to April 1 of 2004.

Overall, we believe Medicare changes have had limited impact on Rituxan prescribing to date.

However, we continue to monitor the Medicare situation closely.

As we have noted in the past, we continue our homework on Zevalin and Amevive.

Amevive is a small product today, but with its unique profile we believe the drug will have an important role in the physician's armamentarium.

We continue to enhance the profile of Amevive through additional combination and extended dosing clinical studies.

We are working to supplement our label in the U.S. in several areas that would result in improved convenience for patients and physicians.

We do see some evidence that the competitive noise is expanding the market for biologic therapies.

But the market growth has been slower than expected.

We do, however, continue to believe the market for biologics in psoriasis is substantial.

With Zevalin we are accepted to radioimmunotherapy into the mainstream of lymphoma therapies by continuing to support the product with ongoing postmarketing trials.

We anticipate seeing important new information in relapsed aggressive disease at ASH later this year.

Let me now turn to our neurology franchise.

As Peter mentioned, this is the 4th consecutive quarter where Avonex has grown more than 15 percent year-over-year.

Our U.S. share of the MS market remains in the mid 40 percent range, despite 2.5 years of intensified competition from a new entry.

As a note, we implemented a 6 percent price increase on October 1; and despite this increase, however, Avonex remains the lowest priced beta interferon.

A quick update on the prefilled syringe situation.

We are continuing to work with the regulatory authorities to review the recent validation data and agree upon the regulatory requirements for commercialization of the improved fill finished (ph) process and to fully implement the changes that will resolve the issues that arose earlier this year.

To date, we have met all commercial requirements for product and continue to carry sufficient supplies to meet commercial demand.

Let me close my remarks with a few comments to update you on our commercial preparation for launching Antegren.

The acceleration of Antegren has impacted virtually every function in the organization.

We spent the summer conducting marketing research and finalizing our strategic plans.

The fall has been concentrating on execution of these plans.

As I outlined on last quarter's call, our efforts have been focused on the key areas of IV access, reimbursement, and salesforce optimization.

Our goal is to provide unfettered access to patients for infusions.

Given all the data that exists in the public domain we have mapped out all possibilities in every area of the country on a territory-by-territory basis in an effort to help inform the healthcare professionals about the location and logistics of infusion access.

Thousands of sites have been identified and mapped and will be mobilized to help the MS patients and healthcare professionals seeking Antegren treatment.

On the reimbursement front, as with any novel drug, the system in the U.S. will take a while to become grounded in the efficacy and the advantages of a new therapeutic agent.

We have a plan to accelerate the introduction and understanding needed by all those who are stakeholders in the reimbursement system.

With regard to the salesforce, we will be expanding our salesforce capacity and will choose a structure that optimizes Antegren's potential.

Working with Elan, more than 200 people have been hired and are in the process of being trained to support Antegren.

All field management is in place, and less than 10 percent of the positions remain open to be filled.

For obvious competitive reasons, I cannot share more specific details about our commercial plans at this time.

Our market research data shows that a large subset of people with MS are anxious to consider a new therapy, and a great many others who have previously stopped treatment would now seek treatment based upon availability of a new therapy.

We're convinced of Antegren's blockbuster potential.

Nevertheless, we recognize that IV capacity and reimbursement will be gating factors to the initial uptake over the first couple of quarters.

We feel the trajectory established coming out of the end of next year will be much more indicative of Antegren's potential.

Overall, we are very excited about the opportunity that Antegren represents.

With the introduction of Antegren we believe the potential MS market over the next few years will grow to approximately 6 billion, up from about 4 billion today.

Antegren should expand the market and become the number 1 therapy for MS.

With that, I will now turn the call over to Burt Adelman.

Thank you, Bill.

Good afternoon, everybody.

I'm just going to very quickly take you through a few additional top-line data points on Antegren and Rituxan.

As you are aware, we are still with our colleagues at Elan running a Crohn's disease program with Antegren.

In late September we and Elan submitted a file to the EMEA for approval of Crohn's disease based on the ENACT-1, which was an induction study, and the ENACT-2, which was a maintenance study; both of which were Phase III trials.

But in the U.S., we do need the results of another induction trial before we will be submitting to the FDA; and that trial is ongoing, and we expect to see the results in the first half of '05.

In MS, I think Jim has already given you a pretty comprehensive summary of the regulatory activities, but we do anticipate FDA action on our 1-year filing in late November.

We are working closely with the FDA to ensure a timely completion of these efforts.

Similarly, we are working closely with the EMA on our application there and actual will come sometime in '05.

For Rituxan in the oncology setting, we are enrolling patients in an ECOG study.

It is a large randomized study that will evaluate 365 previously untreated patients with indolent non-Hodgkin's lymphoma.

It is a study to evaluate Rituxan as a maintenance therapy.

It is just getting started and will be ongoing for a while.

There is also a Phase III study in relapsed CLL that continues to enroll patients in Europe and is now open to enrollment in the United States.

In rheumatoid arthritis, there are concerted efforts with our partners Genentech and Roche to move the development of Rituxan forward in RA.

There are 2 trials ongoing.

In Q3 we exceeded our goal of enrolling 500 patients in the REFLEX trial, which is a Phase III trial of Rituxan in tumor necrosis factor treatment failures.

Data from this study is anticipated in the first half of '05.

The Phase II2b DANCER trial, a relatively complicated 9-armed trial that enrolled approximately 440 DMARD failure patients, is intended to inform us how to optimize the use of Rituxan with or without corticosteroids and a fixed dose of methotrexate; and the results from that trial will be available in the near future.

Now, very importantly, as a reminder to all of you, we're hosting an analyst day in Boston on November 30.

We will be using that as an opportunity to take you in detail through what I think is a very exciting and broad pipeline of products in oncology, neurobiology, and autoimmunity.

We hope that all of you will be able to attend that meeting.

It will be a great opportunity to discuss the entire pipeline and talk about how we are dealing with the increasing complexity of drug development.

With that, I will hand the microphone over to Bill Rastetter.

Thank you very much.

I would like to summarize and close, and then turn this over to Elizabeth for Q&A.

With our merger of equals just a year ago, Biogen and Idec Pharmaceuticals became Biogen Idec.

Today we have revenues in the first 3 quarters of 2004 of US$1.6 billion.

We have annualized 2004 R&D expenditures in excess of 650 million.

We have approximately 2,600 R&D employees including 1,100 in pharmaceutical operations and technology -- those are the manufacturing folks and quality folks and supporting staff -- and approximately 425 in discovery research.

Worldwide, we have 4,100-plus employees.

We have world-class manufacturing sites operating in RTP, coming online with completion of construction and validation in Oceanside, California.

We're in the early stages of construction of another plant in Denmark.

We have direct sales in North America and 19 international markets.

We have active distributor operations in 40-plus global markets.

We have of course 2 biologic blockbusters in Avonex and Rituxan in addition to Amevive and Zevalin.

We have a robust product pipeline that we look forward to reviewing with you at the analyst day of 10 products in clinical development, focusing on unmet medical needs in the areas of oncology, neurology, dermatology, and rheumatology.

3 of these product candidates are in Phase III clinical trials;

Rituxan in Phase III in rheumatoid arthritis and in chronic lymphocytic leukemia in collaboration with Genentech and Roche;

Antegren in MS and Crohn's disease in collaboration with Elan; and BG-12, an oral medication for psoriasis, in a Phase III study in Germany in collaboration with our partner Fumapharm.

I would like to thank you for your support.

It is good to have you with us on this journey.

Let me turn it back to Elizabeth for Q&A.

Thank you, Bill.

We're about to open the call up for Q&A.

The call will end around 6 PM, and we do ask out of consideration of colleagues that you ask 1 question and then with subsequent questions re-enter the queue.

Operator, we will take our first question.

(OPERATOR INSTRUCTIONS) Ian Somaiya, Thomas Weisel Partners.

Thanks for taking my question.

Just curious about the net decline in SG&A spend this quarter, especially as we look forward to a major product launch.

Is this generally a timing issue?

Or are you truly done preparing for the launch of Antegren?

Let me take first cut at that.

Really I think it is probably more a temporary lull.

I think that we did, however, -- I will just highlight that in Q2 we really did step up our spending significantly.

I think we announced at that time that we were going to really begin preparation work.

I think in parallel we have been careful in our spending on both Amevive and Zevalin in keeping that in line with the revenue results that we're getting.

But I do think as we go into the fourth quarter and into next year you'll see a healthy amount of sales and marketing investment as we really power up.

I think very importantly, and Bob Hamm is here to answer any more specific questions, but I will tell you that we are planning to be very aggressive when we launch Antegren; and we're going to do a great -- we hope to do a great job really capitalizing what that drug can do.

So more to come.

Jason Kantor, WR Hambrecht.

That was also my first question, but the next question here, you say that your goal is for 20 percent EPS growth and you're expecting to come in a little bit below that.

Do you have any targeted lower end to what you would be willing to go below your 20 percent EPS growth goal?

I will take a crack at that again.

I don't think exactly, no.

We understand it's a launch year.

Believe me if I really knew exactly how much Antegren we were going to sell next year, maybe I could get closer to that.

But it's got to be a very wide range when you are dealing with this important of a launch.

But I think what we are really doing is viewing next year as the year to really develop the market and build the platform or foundation for real expansion worldwide; not just in the U.S. but in Europe and worldwide.

So I don't think that next year is necessarily the year we are hitting exactly an EPS number that we are overly concerned about.

Obviously we're careful and we are working with a balanced portfolio of many different programs.

There's many ways to win in our Company today, which is great.

But I do think that we would highlight that it's a launch year.

So we are going to be spending aggressively and we won't quite have the revenue to match to that right away.

I think as we come out of the year, though, we are going to be hopefully really showing some great momentum, so we have absolutely no concerns about hitting the 20 percent compounded growth rate through 2007.

I think we have iterated that often.

I think as we have done all of our thinking and planning around this, we have very good confidence around that.

Adam Walsh, Jefferies.

You talked about IV access and reimbursement and potential gating factors for the Antegren launch.

In speaking with neurologists ahead of the Antegren launch, some of them suggested to us that data on EDSS and long-term safety data might be needed to really galvanize clinical opinion behind the drug.

Is this consistent with your own premarket launch research here?

Do you think that you will have adequate long-term safety data at launch to satisfy the majority of prescribing physicians?

This is Jim Mullen, and I may ask for some assistance here from Burt or Bob here.

But we think that the 1-year data, which is going to be the relapse rate, is a sufficient basis for approval.

Certainly the FDA believes that.

And I believe as you saw the Phase II trial results, and those compelling results in the Phase II, that we believe that that is sufficient.

Now as a practical matter, the long-term safety data -- you only get long-term safety data with long-term use.

So every product coming to market really faces that.

Antegren has had probably more clinical use coming to this market than any other product that I have seen launched recently into these kind of markets.

So we have had something like over 3,000 patient years of use.

In terms of the 2-year data, the 2-year data really isn't going to be that far behind the 1-year data.

We don't know what is going to say yet.

But as we all -- I think as everybody knows, but I will remind everybody, the primary endpoint for the 2-year data is the EDSS.

So I think everybody waits to see what that looks like.

We certainly hope that that is going to be consistent with what we saw for the relapse data.

But I believe that that is data sufficiently exciting that it is not going to be a large barrier to use, and that there are many physicians that are more than ready and have many patients that don't really have any other options, they failed the options.

And those are the patients that are going to go on this product first probably.

Burt or Bob, do you want to (multiple speakers)?

I would just agree and reiterate the comments that Jim made.

This drug has seen many many many patients.

So at the time of approval there will be a large and deep safety data base with patients having been on drug for an extended period of time.

So I don't think that there will be a problem explaining to patients and physicians what the safety profile of this drug looks like.

Importantly, it will be very different than the existing therapies in that obviously it is not associated with flu-like symptoms.

It is not associated with important injection reactions.

And has a different sort of convenience profile than even once-a-week dosing in that the drug is given once a month in a physician's office.

Obviously, EDSS data are important; and we are expectant, just as everyone else, for those results.

However, patients are significantly affected by the symptoms associated with relapses or exacerbations and the very important effect that Antegren has in these patients on relapses and relapse rates will in itself be recognized as a very compelling and important reason to prescribe the drug.

Geoff Porges, Sanford Bernstein.

I'm wondering if you could just give us an update on your view of the MS (technical difficulty) down the line volume trend that you (technical difficulty) and also the volume trend for Avonex, net of pricing and currency effects in the U.S. and outside?

I'm going to try to summarize that question because we had a lot of trouble hearing that question.

But it sounds like the question is, can we comment on the underlying trends in the rest of world markets?

Is that what you --?

I will speak a little louder.

The volume trend net of pricing and currency effects in the U.S. and ex-U.S. for the market and for Avonex.

Sure.

We will deconvolute currency and volume for you.

Peter, do you know that?

First of all, turning to it; just 1 second; you are going to hear some paper shuffle as I open that part up. 1 second;

I apologize.

Basically, in the international markets, our business grew 29 percent in revenue.

There was 8-point benefit from foreign exchange.

It is always hard to interpret the international markets beyond that a little bit, just because we have country mix and different dynamics between our direct market and our distributor market.

So I am always cautious to comment on volume versus pricing and country mix and so forth.

But overall we think the international MS market is growing in the low double digits and the U.S. market is growing in the mid to upper single digit range.

So I think we are doing quite well in the U.S.; holding share; maybe getting (inaudible) a little bit; but really doing a great job holding our position as the market leader.

Internationally, our numbers tell us -- we are always cautious to talk about marketshare -- but our numbers tell us that we have actually picked up share in recent quarters.

So we are feeling very good about that and I think the team has done a great job internationally.

So hopefully that -- I had a little trouble hearing you too as well -- but hopefully that was the question you were headed toward.

May-Kin Ho, Goldman Sachs.

Can I ask a question about Rituxan supply?

Because last quarter or the recent call at Genentech has indicated that they had some problems in manufacturing; but now the problem is fixed.

However inventory is very low.

Can you comment on what the supply situation is in terms of inventory there?

I will try that one, but we really cannot comment because we don't have a lot of visibility at that level of detail.

Bill Rohn, do you have any other intelligence on that?

The latest input that I received from our partners at Genentech was that the inventory situation is well in hand.

That we have recovered and are in a position to supply demand on a global basis.

So I don't anticipate a shortage there.

Eric Schmidt, SG Cowen.

I was just wondering if you made the decision, should you get approval of Antegren in the U.S. sometime in the next couple months, whether you would launch before the end of the year, during the holiday season, or wait till next year?

I'll take a crack at that.

We're certainly going to make the drug available to people.

Given the unusual circumstance where the full 2-year trial continues to run, and therefore the 1-year data has never really been out there, I think there is very significant challenge to get the data out there, get everybody to explain it, get it absorbed into the marketplace correctly.

So we're certainly going to start on that we make it (ph) available.

In terms of how hard we go on the push, if you will, I think we will have to gauge a little bit where we are in season.

Bob, do you want to make any comment to that?

No.

Our goal is to be ready as soon as possible, and based on the environment we're going into, we will (inaudible).

We know there is some pent-up demand there.

It is hard to say how much that is.

But there is certainly physicians that have patients that are anxiously awaiting a new option.

So we are not going to withhold that.

We are just going to try to get the product out there as quickly as we can.

Craig Parker, Lehman Brothers.

If payors put in place prior authorization requirements for Antegren, which I suspect they will try and do -- I guess this is a question for Bill Rohn.

Bill, how do you think those might be manifest?

For example would they say a patient might have to have some median duration of Avonex use before they're eligible for Antegren?

Craig, I think you're kind of referring to potentially some sort of treatment guidelines.

I don't anticipate that to be the case coming out of the chute.

There is always on the launch of a new drug what I call the reimbursement dance, the avoidance dance, where the payors have to integrate the new information about the product.

And it's not a matter of not reimbursing; it is a matter of how quickly they turnaround those earlier claims.

We will go through that same process.

The prior authorization I think is a part of that whole process.

We should be able to work through that very, very effectively with our reimbursement support, our call center activities.

We're going to have the approval of the clinical data to support that.

I don't anticipate that that would be a major hurdle or roadblock at the outset.

Somewhere down the line we may eventually see an attempt by managed care organizations to look at treatment guidelines, but I don't anticipate that at the outset.

Elise Wang, Smith Barney.

I just wanted to know if you could perhaps comment on what we were hearing about comments made about the Antegren studies, relative to previous studies that had been done with MS medications in the past.

About differences related to diagnostic criteria to diagnose MS initially.

And also definitions of what relapses are, in terms of how it has changed and perhaps loosened up to some extent.

I was wondering if you could perhaps just make some comments about that in terms of the current Antegren studies and how that might affect a comparative look between that and some of the current drugs.

Without going into long details, we have used every and all standard definitions that are currently or historically accepted to make the diagnosis of MS and/or relapses.

So I don't think there will be any problem on the part of physicians or third0party payors understanding the nature of the populations that were treated or how the outcomes were measure.

Obviously, we have done all of this in close consultation with key opinion leaders in the U.S. and Europe, and with regulatory parties.

Eric Ende, Merrill Lynch.

I think I heard you say that you were hiring 200 people in the sales division.

Is that correct?

Specifically we don't want to give information on our total sales number.

We have over 200 people we're hiring and training right now to work the Antegren launch from all angles, which includes customer service, reimbursement, and a number of other specialties.

In addition to the sales organization.

In addition to the sale organization.

So it is a big effort underway, but we're trying to avoid giving out lots of details.

Mike King, Banc of America Securities.

Most of my questions have been answered.

I am just wondering if perhaps Bill Rohn would like to comment about the recent label change with respect to Rituxan's HBV reactivation; and if that has changed -- created any kind of inflection point in Rituxan use.

Or what you might be doing to head that off in the first place?

That notice went out to healthcare professionals I think within the last couple of weeks, and so it's a little too early to tell.

We don't anticipate a downturn or a reluctance to use the product.

Reactivation of viral infections has been reported in the literature in the past.

They have been individual case reports.

And as a result of over the last 8 years accumulation of a small handful of these, in consultation with the FDA we decided it was just prudent to include it as part of the official package insert.

At this stage, haven't seen any reluctance to prescribe or use the drug.

We just think it is a more full and complete disclosure of the risks and benefits associated with using the drug.

Mark Schoenebaum, Bear Stearns.

I have 2 questions, but you only have to answer one;

I figure that one of them you probably won't answer.

The first one is --

Do we get to choose which one that is?

I know you will cut me off so I want to get --.

The Red Sox will win.

Actually I'm a big Cardinal fan, so that hurt.

They are going to win, because productivity in Boston is just going down by the day.

It can't go to 7 games.

First of all, and this is the one I suspect you won't answer, but I have got to ask it.

Burt, have entered into formal labeling discussions yet on Antegren?

And if you won't answer that, can you tell us whether or not you will at any point provide specific Antegren top-line sales guidance?

Thanks.

I will ask answer the first question, which is we have not -- the regulatory process is moving along on time.

There have not been any significant interruptions in the review process and discussions with the FDA.

Obviously when the label is released, we will all see it.

Let me quickly -- on top-line sales guidance for Antegren, we have been cautious about providing product-by-product sales guidance as our portfolio seems to grow.

Obviously Antegren is something where a lot of people are interested, so we are sensitive to that.

That said, it is a new product, new mechanism of action, being launched into a very, very sizable market.

So I just think I am very cautious about hanging too much seriousness to a sales forecast until we really get in the market and see the things start to behave.

And all the questions that people have been asking about the importance of the 2-year data or reimbursement or IV, all those things.

We need to see a little bit of behavior around that before we could start really putting out guidance on that.

I actually think we want to be careful about that.

I hope that everybody will be very interested in the results and from that will conclude that this is as serious a product as we do.

But I think exactly how it rolls out, I really encourage you not to get caught up in the first quarter, second quarter, maybe even the first full year.

I think what's really going to be important, and this is the way we're looking at it, is that we're doing the right job commercially in the first-year and that we're exiting the first year with the right trajectory on that product.

If we get that done, I think (inaudible) exciting future.

I think at this point that is probably the most we should probably throw out there.

We will talk as we go through it and see what we all learn.

Joel Sendek, Lazard.

I had a question about the share repurchase program.

Over what time frame are you going to execute it in?

And how many in the money vested options are outstanding right now?

2 questions.

Over the time frame, we will be -- let me just be careful on this.

The last 12 million share repurchase plan actually had a 2-year time frame to it.

However, we did activate it.

We did execute against it more rapidly than that.

The second approval which was just recently done for 20 million shares also had a 2-year time frame for it.

But to be determined really what time frame we will execute it over.

In terms of the number of shares outstanding that are actually in the money right now, I don't have that at my fingertips.

You can see in table 3 the actual calculation of the if-effective dilutive securities, which includes not only stock options but also converts and restricted stock as well.

So that is probably a good guide for you in terms of how it goes into the diluted EPS calculation.

I would tell you that the large majority of that obviously is stock options.

But anyway nonetheless I don't want to throw out a number right now, because I don't have that at my fingertips.

Alex Hittle, A.G. Edwards.

We continue to run across people who voice concerns that the FDA may require a panel meeting for Antegren.

I was wondering if you have any updates or comments that you would like to offer in that regard.

I would simply say that there is less and less time available.

They have to announce a panel meeting with a reasonable amount of time before it actually happens, and they remain on their review schedule.

Michelle Park (ph), CSFB.

With respect to Antegren, could you provide some current metrics on IV access for neurologists who treat MS?

And then perhaps give us a sense of the Company's goals or expectations by launch as well as by year-end '05?

As Bill Rohn stated, our goal and our mission is unfettered access for people with MS for infusions.

There's a couple of things we are well aware of.

One is we had up to 100 sites in the Antegren trial in the U.S.; and that the vast majority of the big centers of the U.S. have a long history of infusion capability based on IV steroids etc.

What we have done is go ahead and painstakingly map out all of the places where infusions occur in the U.S. to make sure that access and openness to options for patients and physicians is foremost in our mind.

It is painstaking.

It is a lot of work.

But in today's world with the database at our disposal, we have been able to accomplish that.

And we're going to work that issue accordingly across the thousands of options in the U.S. today.

So it is capacity, but it is also accessibility for the people with MS.

Chris Raymond, Robert Baird & Co.

It has been our impression that the SENTINEL trial should be wrapping up at the end of January.

Is that still the time line we should be thinking about?

I wonder if you could maybe comment on sort of what would happen in that trial in the event of an approval in November?

The SENTINEL trial is the combo trial.

Data from both of these trails are forming the basis of the review, the interim data review that the FDA is currently conducting.

So we anticipate that data from both of these trials will be present in the label, will be used to support the safety and efficacy claims that are in the label.

The trial itself will be complete and reported out sometime late in the first half of '05.

One addition.

Both of those trials continue and they go to completion, for the full 2 years as we have always stated.

So irrespective of the approval date, the full 2 years will be completed on both the AFFIRM and the SENTINEL.

Stephen Harr, Morgan Stanley.

Just to follow-up a little bit on what you brought out there.

I was wondering if you could give us some more details around how all the information from the ongoing studies will be disseminated?

Either a publication strategy or if it strictly going to be with the label.

And also what type of conversations you have been able to have to date with reimbursers to prepare them about these data?

I will take the first part and I will give Bob the next part.

We will use all of the traditional channels for dissemination of these data, which include scientific meetings, investigator meetings, publication in obviously the most prestigious journals, and obviously when the package insert is released.

So I cannot give you a timetable on all of that, but we will certainly use all of those channels.

Now regarding the second part of your question, I will give it to Bob.

We have been, with Elan, have been having a series of advisory panel meetings across the country, bringing together reimbursement folks, payors and decision-makers, to expose them to the Phase II data and get them familiar with the world to come.

That activity will obviously increase geometrically as the data becomes known.

Jason Kantor, WR Hambrecht.

Great, incredible.

You sound like the Red Socks, huh?

It's unbelievable.

The 200 people that you have hired this quarter, is that a cost that is being split with Elan?

And is that reflected in this quarter's SG&A, which I think was arguably impressively low?

Let me answer the first question, it is yes.

That is all expense as we go-forward and as we hire the people and so forth.

And part 2 of that is yes, we are in collaboration mode right now with Elan.

I think that probably the only caution I would just say, as you talk about it being low or not low, is I think as you launch you are going to be spending more money on marketing activities, and you are going to have more conferences, and all the things that Burt and Bob talked about in terms of communication is really where you continue to have conferences, conference calls, panels, and so on.

That is obviously not really happening -- as Bob said we're having some of those.

But as Bob stated very well, we'll be geometrically expanding as we are able to actually have Phase III data to talk about.

So I just caution you.

But it was a little low in the third quarter, and I think that is fine.

We prefer to think of that as prudent management of the business.

In fact we have invested very aggressively and heavily behind the Antegren launch.

What you don't see is all the other moving parts in the other pieces of the business.

I think we have just been realistic about our spending levels in some of the other parts of the business.

So we have not taken our foot off the accelerator at all around spending in preparation for the Antegren launch.

Since we seem to have lapped the deck, operator, we will take one last question.

Geoff Porges, Sanford Bernstein,

Great, I will try and speak a little louder this time.

Jim, you have talked in the past about the manufacturing yields from RTP being about 70,000 patients per year before you implement any process improvements.

I was just wondering whether you have made any headway on those process improvements, and where you look like you are heading in terms of the patient capacity of the initial launch facility?

Your notes are correct on that.

I think what we said in the past is with current configuration productivity and the way we're operating the facility in North Carolina, it is about 70,000 patient years of capacity there.

You'll see a similar -- because the sites are same size in Oceanside and Denmark, the current calculations would be the same.

In fact I have been quite pleased with the headway we have made on process improvements.

I think it is premature to predict exactly where that is.

But it is not foremost in our concerns these days.

I would go back to something I said really in my opening statements.

One of the maybe unanticipated or quicker than we anticipated benefits from this merger is we put together some great technology with a great operating base.

We are going to see the benefits from that in this process I think fairly shortly.

I feel like we are -- I think we have got this situation well under control.

It certainly has our attention, but we are making good progress.

Thank you everyone for joining us today on our call.

We will see many of you perhaps on our accounting call next week. (multiple speakers) And at the analyst meeting at the end of November.

Thank you.

Thank you, ma'am.

Thank you, ladies and gentlemen, for your participation in today's conference call.

This does conclude today's Biogen Idec conference call.

You may now disconnect.