Biogen Inc (BIIB) 2007 Q3 法說會逐字稿

Good morning.

My name is Regina and I will be your conference operator today.

At this time, I would like to welcome everyone to the third-quarter 2007 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 session.

(OPERATOR INSTRUCTIONS) Thank you.

Mr.

Keith Regnante, Director of Investor Relations, you may begin your conference.

Thank you.

Thank you and welcome to Biogen Idec's earnings conference call for the third quarter of 2007.

Before we begin, I would encourage everyone to go to the investor relations section of our website, biogenidec.com, to print out the press release and related financial tables.

You will find these particularly useful when our CFO, Paul Clancy, reviews the financial results and the reconciliation to non-GAAP financial measures discussed today.

We have also posted slides on our website that outline the topics discussed on today's call.

As usual, we will start with the Safe Harbor statement.

Comments made on this conference call include forward-looking statements about the Company's expectations regarding future financial results, including our 2007 financial guidance, our longer-term operational and financial goals, the sales potential of TYSABRI and RITUXAN, and plans for external growth and pipeline advancements.

Such statements are subject to risks and uncertainties which could cause actual results to differ materially from expectations.

In particular, careful consideration should be given to the risks and uncertainties that are described in our earnings release and in Item 1A of the Company's quarterly reports on Form 10-Q and in other periodic and current reports Biogen Idec files with the SEC.

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

Today on the call I'm joined by Jim Mullen, CEO of Biogen Idec; Bob Hamm, Executive Vice President; Cecil Pickett, President of R&D; and Paul Clancy, our CFO and Executive Vice President of Finance.

Now, I will turn the call over to Jim Mullen.

Thank you, Keith.

Good morning, everyone.

We have had an eventful few weeks at Biogen Idec.

We will use this call to take you through the details of our quarter, as well as touch on some of the larger topics.

I will mention just a few highlights before I turn the call over to Bob, Cecil, and Paul.

To start, our business plan is working.

We're making progress on our goals for the year.

Specifically we are driving continued revenue growth, successfully expanding TYSABRI use in both US and internationally, and the pipeline is progressing well.

We closed another business development deal with Cardiokine for the end of Phase II lixivaptan program; the upfront fee was $50 million, which we told you about on the last call, and that was $0.11 for the quarter.

The major disappointment in my view was the AVONEX sales, which were weak in August in both the US and some of our foreign tender markets, but has rebounded nicely in September.

Overall, the year is unfolding as planned and we are on track to meet our full-year 2007 financial guidance, which we raised last quarter.

Further, we remain confident we are well positioned to meet our long-term goals out to 2010, which include delivering on the strong revenue growth; specifically this means 15% top-line growth, driven in part by the 100,000 patients on TYSABRI by year-end 2010.

We also expect to see 40% of the Company's revenue coming from the international business; so that is up from 30%, approximately 30% today.

The next goal is building -- continue to build a robust pipeline and executing on the clinical development.

We are well on our way towards achieving this goal with 15 product candidates in Phase II clinical trials or beyond, and at least 10 data readouts through the end of 2008.

The goal by 2010 is to file at least two additional indications for the CD20 franchise, and have two new products or major indications launched.

You will hear more on the pipeline from Cecil in this call.

Additionally, we're aiming for strong financial performance.

This means leverage the top-line growth and deliver 20% non-GAAP EPS compounded annual growth rate from '07 through 2010.

Now, as I am sure you are aware, we have started a process to explore a possible sale of the Company.

Let may remind you that both management and the Board are confident that the business outlook for Biogen Idec as a stand-alone company will result in attractive value for shareholders.

We believe our strategy is working and has been generating and will generate strong operating and financial performance.

But we do operate in a larger environment with large multinational pharmaceutical companies.

And after several expressions of interest, including by Mr.

Icahn, the Board has authorized management to explore whether a potential sale to a third party might result in superior value to shareholders at this time.

While we cannot provide many details beyond what was in the October 12 press release, we will say that a process like this typically takes a number of months to play out, and we will work to get through this process as quickly as is reasonable.

Finally, it's important to remind everybody that there is no guarantee that an acquisition of the Company will occur at the end of this process.

With that said, we will spend the remainder of our time walking through our Q3 performance as well as providing a bit more detail on our 2010 operating and financial goals.

I will now hand the call over to Bob Hamm.

Thanks, Jim.

Let me start off by reminding everyone of what we have reminded people of in the past, but it bears repeating.

At Biogen Idec we have the number-one prescribed MS therapy today in AVONEX.

Two, we have the product to establish a new level of efficacy, TYSABRI, which has been shown to delay the progression of the disease and reduce relapses by two-thirds.

Finally, we have the best and broadest pipeline of MS compounds for the future.

As Jim has mentioned, our goal to generate revenue growth at a 15% compound annual growth rate and non-GAAP EPS at a 20% compound annual growth rate from 2007 through 2010.

Clearly, the neurology business, which currently has a run rate of over $2 billion in annual revenue, is a key contributor to that goal.

Specifically I would like to comment on three of the key drivers.

First, continued solid performance of AVONEX, the world's leading MS treatment.

In May, AVONEX celebrated its 11th anniversary and remains the world's most-prescribed therapy, with over 135,000 patients worldwide.

It remains the foundation of our global MS business, which had $518 million in revenue this quarter, growing 12% year-over-year.

Combined market share of AVONEX and TYSABRI is approximately 40% in the US and is expected to grow.

Second, achieving the milestone of 100,000 patients on TYSABRI by year-end 2010.

TYSABRI has now been on the market in the US for almost 15 months and is available in many European and other countries.

Another significant milestone has recently been achieved with over 17,000 patients on therapy worldwide in the commercial and clinical settings, and over 2,100 physicians prescribing in the US alone, including 94 of the top 100 based on IMA volume.

Momentum continues to build, with more and more patients starting therapy, and more and more physicians prescribing every day.

We are confident that TYSABRI will achieve the goal of 100,000 patients on the therapy by year-end 2010.

Finally, continued geographic diversification of its revenue base, with more than 40% of revenue from international business by 2010.

Our neurology business already derives a significant portion of revenues from outside the US, with international revenues representing over 40% of the total.

We will continue to rapidly expand our global footprint and drive results beyond 2010.

We are currently the leader in MS, and we will extend our leadership position into 2010 and beyond with our robust pipeline that has four products in Phase II or beyond, those being BG-12, RITUXAN 2H7, oral VLA-4, and daclizumab.

Turning to TYSABRI and summarizing the results, TYSABRI continues to build momentum.

As many of you are aware we had a significant presence at ECTRIMS this year, where we announced that as of the end of September there are over 17,000 patients on therapy globally, including 10,500 in the US, 5,500 in EU, and around 1,000 in clinical trials.

As anticipated, summer was slower in Europe.

We will continue to accelerate uptake as the number of prescribing physicians and the number of countries with reimbursement increases throughout the remainder of 2007.

We now have the over 2,000 patients on therapy for longer than one year and no new reports of confirmed case of PML as of mid September.

The AFFIRM study showed that 64.3% of TYSABRI-treated patients were disease-free or without relapses and disability progression; and 36.7% had no relapses, disability progression, or MRI activity.

Additionally, results from the PLEX study suggest that plasma exchange may be and effective means of accelerating the removal of TYSABRI from the blood serum.

We are also moving forward with clinical trials to support the TYSABRI marketing effort.

In order to definitively show the efficacy of TYSABRI compared to marketed competitors, we're planning head-to-head switching trials.

Additionally, we're concerned that patients may be experiencing delays before moving to the most effective therapy.

We are designing trials to potentially address this.

We plan to initiate these head-to-head switching trials in early 2008.

It is clear that neurologists and patients are increasingly choosing TYSABRI given its significant impact on clinically meaningful and relevant endpoints, including relapses and disability progression.

Turning to the US and the source of patients in the US, four out of five patients prescribed TYSABRI are new to the Biogen Idec franchise.

One-third of TYSABRI patients are returning quitters and naive patients, which is expanding the market.

As we have reported in previous earnings calls, glatiramer acetate, with its 365 injections per year, continues to be the single largest source of TYSABRI patients year to date.

Internationally, about 5,500 patients were on therapy in Europe as of the end of September.

Germany, France, Italy, and Greece continue to provide the majority of new patients being dosed with TYSABRI.

As of the end of August, we estimate TYSABRI to have achieved a 4.4% MS market share in Germany, 7% in Sweden, 6.4% in Denmark, 6% in Ireland, 6% in Greece, and in a couple of months 2% in France.

It is expected that the momentum in international markets will continue to accelerate throughout the year, driven by France, which launched in early June.

It is the second-largest MS market in Europe and is currently our number-to market in terms of TYSABRI-treated patients.

In the UK, the National Institute for Health and Clinical Excellence has recommended the use of TYSABRI to treat people with highly active relapsing-remitting MS, in recognition of its superior cost and efficacy benefits.

Reimbursement has been approved on a national level, although widespread reimbursement availability will likely start in Q4.

TYSABRI is the first treatment for MS to be recommended for use by NICE.

Since the last earnings call, TYSABRI has received approval in New Zealand and reimbursement in the UK and Belgium.

Czech Republic and Slovenia are expected to launch in Q4 '07 with reimbursement expected in early '08.

The international rollout is expected to continue throughout 2007 and into 2008 with 23 countries expected to have launched by the end of this year.

Key launch countries in 2008 should include several of our distributor markets in Latin America and the Middle East as well as Australia.

On slide 16, we show the TYSABRI end-user sales.

We're making solid progress in both the US and international, as you can see from the ramp of in-market or end-user sales in MS.

Turning to Crohn's.

As we announced last week Biogen Idec and our partner on TYSABRI Crohn's, Elan, have been informed by the FDA that the agency requires additional time to review information regarding the proposed TYSABRI risk management for Crohn's disease.

Under this revised timeline, the companies anticipate action from FDA on or before January 13, 2008.

Approximately 1 million people worldwide have Crohn's disease, a chronic and progressive inflammatory disease of the gastrointestinal tract which commonly affects both men and women.

Currently, there is no medical or surgical cure for Crohn's disease.

Many patients fail to respond to current therapies, including biologic therapies such as the TNF-alphas.

Due to this failure of current therapies in CD, therapies such as TYSABRI that have novel biological targets are required.

In addition, we continue to work on other indications for TYSABRI including exploring potential applications in oncology.

Moving over to AVONEX, AVONEX remains the most-prescribed therapy worldwide and the number-one therapy in the US for more than 10 years.

Although we saw a slight dip in the current quarter leading to a drop in the AVONEX US revenue of 0.7% year-over-year, market share in the US has remained extremely stable for the past 12 months.

We're beginning to see the impact of TYSABRI on the ABCR market in the US, which is now flat to declining on a year-over-year basis.

Internationally, AVONEX revenue grew at 7% in Q3 '07 year-over-year.

With its long-term efficacy profile, including many years of experience in the physician and patient communities, and its number-one position, AVONEX remains the product to start with.

Of course, for those who need more efficacy, TYSABRI is the appropriate choice.

With the number-one prescribed MS therapy today in AVONEX, a product that has established a new level of efficacy in TYSABRI, and the best and broadest pipeline of MS compounds for the future, we are the leaders in MS.

We continue to recognize MS patients need more options, since they will have this disease for decades and it is unlikely only one drug will be appropriate over the course of their disease.

From diagnosis to disease resolution, we're amassing the highest quality portfolio of compounds to address the unmet needs of people with MS to 2010 and beyond.

I will now hand the call over to Dr.

Cecil Pickett, our President of R&D.

Thank you, Bob.

This quarter marks my one-year anniversary with Biogen Idec, and I continue to be impressed by the caliber of our R&D team.

I also feel good about the strength, continued progression, and balance of our pipeline, which includes both line extensions and novel molecules addressing potentially large markets.

Today, I would like to report on our recent accomplishments and upcoming data readouts.

First I will provide an update on some of our R&D accomplishments for the quarter.

Then, from among the 15 programs we have in late-stage development, I will summarize two near-term data readouts.

Specifically, I will focus on the daclizumab Phase II CHOICE data that was recently presented at the ECTRIMS meeting, and the LT-beta-R-Fc Phase IIa data which will be presented at the American College of Rheumatology meeting in November.

Finally, I will close by reminding you of the several upcoming data readouts which we're expecting by the end of 2008.

Starting with our R&D accomplishments for the quarter, we at Biogen Idec continue to make strong progress on enriching and advancing our pipeline.

We continue to advance and develop our clinical pipeline.

We continue to accrue patients in our registration stage programs of lumiliximab in CLL, galiximab in NHL, and BG-12 in relapsing-remitting MS.

We also achieved first-patient-in milestones for several programs, including a BIIB14 Phase IIa trial in Parkinson's; volociximab or M200 Phase II ovarian cancer trial; and LT-beta-R-Fc Phase IIb program.

In addition, we filed IND applications for our Neublastin and Factor IX programs.

We believe we have a solid pipeline that is progressing well, with a good balance of both risk and potential return represented.

We also published a paper on our LINGO program in an animal model of multiple sclerosis which is highlighted on the cover of the October issue of Nature Medicine.

We showed that anti-LINGO-1 antibody can promote spinal cord remyelination and axon integrity.

While still early in development, we believe our LINGO program has the potential for broad application and significant benefit to patients with MS and other neurodegenerative disorders.

We also continued to successfully execute our external growth strategy.

In early July, we announced an agreement with Cardiokine to jointly develop lixivaptan, an oral vasopressin receptor antagonist expected to enter Phase III clinical trials this year for the potential treatment of hyponatremia in patients with congestive heart failure.

Now let me move on to two very important near-term data readouts, starting with daclizumab, which we codeveloped with our partner, PDL BioPharma, for relapsing-remitting MS.

As you may have seen, the Phase II data from the CHOICE trial of daclizumab in relapsing-remitting MS was recently presented at a platform session at ECTRIMS.

This randomized, placebo-controlled trial looked at daclizumab added on standard Interferon-beta therapy in 230 patients.

We examined two doses of daclizumab, and the higher 2 milligram per kilogram dose every other week reduced new or enlarging gadolinium-enhancing lesions between weeks 8 and 24 by 72% compared to interferon alone, with a P value of 0.004, thus meeting the primary endpoint.

While not powered to show significance for the secondary endpoint of reduction in relapse rate, both doses showed a trend towards a 34% reduction in annualized relapse rate.

Keep in mind these efficacy results were on top of background interferon therapy.

The safety we saw also supported moving forward into the Phase IIb e clinical studies.

We have said we expect to initiate the second Phase II SELECT trial looking at daclizumab as monotherapy by year-end 2007.

Moving to LT-beta-R-Fc, as we have indicated, we accelerated the clinical development of LT-beta-R-Fc in rheumatoid arthritis and are actively enrolling patients in a robust Phase IIb program.

We plan to enroll a total of 500 patients across two trials, generating randomized efficacy data in both DMARD inadequate responders and TNF inadequate responders.

The primary endpoint in both trials is ACR 50 at three months.

We also expect to identify the correct dose, potentially a once-a-month subcutaneous injection.

We will present the Phase IIa data that encouraged us to accelerate into Phase IIb development at the American College of Rheumatology Meeting in a poster presentation on November 9.

The abstract is available online at the ACR website.

We examined standard components of the ACR scoring system, such as tender and swollen joint count, at one month and explored multiple doses.

The abstract indicates 48 patients with moderate to severe RA and inadequate response to DMARD continued methyltrexate and received subcutaneous LTBR-Fc at one of six doses or placebo once weekly for 4 weeks, followed by 8 weeks of observation.

The interim results showed that at day 35, swollen joint count was reduced by a median 61% from baseline in LT-beta-R-Fc patients, versus 0% in placebo patients with similar patterns in tender joint count and other ACR core set measures.

We will provide an update at the poster session, which I encourage you to attend.

Now I will touch on data readouts in 2008.

We are expecting to see data from at least 10 clinical trials by the end of 2008.

These include readouts in additional indications for RITUXAN such as DMARD inadequate responders in RA, primary progressive MS, lupus, and CLL.

We will also see readouts from novel programs such as the heat-shock protein 90 inhibitor and volociximab in solid tumors, the Phase IIb data on LT-beta-R-Fc in RA, CDP323 in relapsing-remitting MLS, long-acting Factor IX in hemophilia B, and BIIB14 for Parkinson's disease.

In closing, as I outlined during our R&D day last spring, 2007 is very much a year of execution while 2008 is poised to be a year of results.

I hope you come away with some of the same excitement we have for the pipeline.

With that, I will hand the call over to Paul Clancy, our CFO.

Thank you, Cecil.

As usual, I would like to use this call to review our quarterly financial performance.

The GAAP financials are provided in Tables 1 and 2 of the earnings release.

Table 3 is a reconciliation of the GAAP to non-GAAP financial results.

So let's begin with our GAAP to non-GAAP reconciliation.

In accordance with Regulation G we have provided Table 3, which breaks out the reconciling items by major driver.

The main items excluded from the operating non-GAAP P&L in Q3 were, first, we adjusted $96 million in purchase accounting charges for the amortization of intangibles in in-process R&D expense.

These include charges related to the Biogen Idec merger as well as the Conforma, Syntonix, Fumapharm, and Cardiokine transactions.

Second, we adjusted $38 million for the consolidation of Cardiokine and the gain on the sale of certain long-lived assets.

Third, we adjusted $9 million in pre-tax employee stock options expenses.

$6 million of this adjustment is in SG&A while the remaining $3 million is in R&D.

Fourth, we had $17 million of tax impact of the items I just mentioned.

Now, I will move on to the non-GAAP P&L operating performance.

We believe it is important to share this non-GAAP P&L with shareholders because it better represents the ongoing economics of our business.

It reflects how we manage the business internally, and it forms the basis of our management incentive programs.

In Q3, while we delivered $0.41 diluted EPS on the GAAP P&L, after the adjustments shown on Table 3, our non-GAAP diluted EPS was $0.58.

Now let's move through the third quarter non-GAAP P&L results in a bit more detail.

Q3 total revenue was $789 million, which represents 12% growth over the same period last year.

Revenue for the first nine months of the year totaled approximately $2.28 billion, representing a 15% growth over the same period last year.

Key drivers of this year-over-year increase include the continued growth of the international AVONEX business, the reintroduction and increasing penetration of the TYSABRI business, and the continued growth of the RITUXAN franchise.

For the third quarter, Biogen Idec's MS franchise grew by 12% since last year.

With the launch of TYSABRI we continue to grow the MS market, as new patients and former quitters join the market.

Going through our product revenues, I will begin with AVONEX, the number-one worldwide MS product.

You may recall Q3 last year was a very strong quarter for the worldwide AVONEX business.

Thus, I think it is useful to mention both a quarterly and year-to-date growth rate when discussing AVONEX's performance.

Q3 AVONEX worldwide product revenue was $455 million, which represents a 2% increase over the same period last year.

Revenue for the first nine months of the year totaled approximately $1.37 billion, which represents an 8% increase over the same period last year.

Q3 US AVONEX product revenue was $266 million, representing a 1% decrease over the same period last year.

Revenue for the first nine months for US AVONEX totaled $806 million, representing a 6% increase over the same period last year.

Q3 international AVONEX product revenue was $189 million, representing an increase of 7% on a year-on-year basis.

Revenue for the first nine months for AVONEX international totaled $559 million, representing a 10% increase over the same period last year.

The quarterly increase for AVONEX international was driven by favorable foreign exchange rates.

Direct and JV markets continue to perform well, as revenue increased in these markets by over 9%, of which approximately one-third was due to volume and two-thirds due to foreign exchange rates.

Now moving to TYSABRI performance.

Q3 TYSABRI worldwide product sales for Biogen Idec were $63 million.

As Bob highlighted, TYSABRI continues to make strong progress.

TYSABRI end-patient revenue totaled $93 million.

In the US, end-user or in-market TYSABRI sales totaled $59 million, which represents a 25% quarter-over-quarter increase.

Biogen Idec booked $28 million of this amount.

Internationally, end-user or in-market TYSABRI sales totaled $35 million, which is a 38% increase from the prior quarter.

Additionally, you will note that our collaboration profit-sharing line has become positive this quarter.

This line represents Biogen Idec's payment of 50% of profits outside the US to Elan and the reimbursement of third-party royalties incurred by Elan outside the US.

We expect this number to continue to grow in the coming quarters, reflecting the growing profitability of our international TYSABRI business.

Moving now to other product revenue.

Q3 ZEVALIN product sales were $4 million.

We signed an agreement with Cell Therapeutics, who will acquire ZEVALIN.

In August, Cell Therapeutics announced that it would pay Biogen Idec $10 million in upfront cash, up to an additional $20 million in future milestone payments, and ongoing royalties on sales.

The $10 million upfront payment will be recognized in our operating results over the term of our supply agreement.

We anticipate the sale will close in the fourth quarter of 2007.

FUMADERM revenue was $7 million.

As we mentioned in our last earnings call, we took over distribution of FUMADERM in early May and at that point we began shipping inventory and recognizing revenue.

Q3 is the first quarter that we recognized three full months of revenue.

Now moving on to the RITUXAN collaboration revenues, which is referred to as revenue from unconsolidated joint business.

We recorded $235 million in revenue, representing an increase a 15% on a year-over-year basis.

As we always discuss, this number has several elements.

First, we receive our share of the US RITUXAN profits.

As reported by our partner Genentech, US RITUXAN sales were $572 million in the third quarter; and our Q3 profit share from that business was $156 million -- up 13% versus prior year.

Second, we receive royalty revenue on sales of rituximab outside the US; and in Q3 this was $63 million, up 22% versus prior year.

Third, we were reimbursed $15 million for selling and development costs incurred related to RITUXAN.

Finishing our revenue performance, third-quarter royalties were $24 million.

Now turning to the expense lines on the non-GAAP P&L.

Q3 cost of goods sold were $82 million; this represents 10% of revenue.

Q3 R&D were $282 million; this represents 36% of revenues.

I should note that this R&D spend includes $50 million upfront payment to Cardiokine for the recent transaction relating to the late-stage lixivaptan program.

This $50 million payment equates to $0.11 diluted earnings per share.

Adjusting for this upfront payment, R&D as a percent of revenue would be approximately 29%.

I do think it is useful to reiterate that our pipeline continues to grow and advance.

We currently have 15 programs in Phase II or beyond, and we expect at least 10 data readouts in the next 14 to 15 months.

Q3 SG&A were $185 million.

This represents 23% of revenues and an 11% year-over-year increase.

You'll notice that there was a slight decline in SG&A as a percentage of revenue in Q3 when compared to last quarter.

As we mentioned during the last earnings call, we're in the midst of a major TYSABRI marketing effort in the US, as well as a country-by-country rollout in Europe.

These launch activities have required us to significantly increase our SG&A investments over the last quarters.

However, as revenue has continued to grow, we're benefiting from increased leverage from these investments.

Q3 other income and expense was $7 million.

The most significant change to our OIE line since last quarter is the impact of our $3 billion share repurchase.

Specifically, this line has been impacted by the loss of interest income on $1.5 billion in cash in the interest expense on $1.5 billion in debt.

I should also note that the OIE line includes a gain of $11 million from the sale of certain equity investments.

Moving to our Q3 tax rate.

The non-GAAP Q3 tax rate was 29.6%, which is consistent with the guidance we issued during our previous call where we mentioned that we expect the balance of year effective non-GAAP tax rate to be in the 28% to 30% range.

Our year-to-date non-GAAP tax rate is 27.1%.

This rate is lower than our Q3 tax rate, driven by a couple of factors.

First, the IRS completed its audit for fiscal years 2003 and 2004, leading us to record an immediate $15 million reduction in tax liabilities in the second quarter.

Second, we continue to benefit from an increasing ratio of international income, including the impact of our recent capital restructuring.

After adjusting for the impact of the IRS audit, our year-to-date non-GAAP tax rate is 28.4%.

This brings us to our Q3 non-GAAP diluted EPS of $0.58.

So in conclusion, our top-line revenue growth was 12% on a year-over-year basis.

We continue to increase the worldwide penetration of TYSABRI.

And we continue to progress our pipeline both internally as well as through our external growth strategy, as evidenced by the recent Cardiokine transaction.

I would like to close by reiterating our 2007 non-GAAP P&L financial guidance.

As we mentioned on our last call, we expect annual revenue growth in the 16% to 18% range and a bottom-line EPS growth rate in the 16% to 20% range.

We expect a 2007 non-GAAP diluted EPS in the range of $2.60 to $2.70.

On a GAAP basis, this translates to 2007 diluted EPS in the range of $1.84 to $1.94, excluding any future acquisitions or other transactions.

We are excited about the continued growth prospects for Biogen Idec, driven by the continued success of our commercial products.

In advancing the pipeline we believe that we will continue to generate strong top-line and bottom-line growth.

Now I will hand the call over to Jim for his closing comments.

Thank you, Paul.

In summary, the year is unfolding as planned and we are well on track to hitting our 2007 financial guidance which I will remind you we revised upward earlier this summer.

The underlying business remains strong.

We have made good progress with both TYSABRI and the pipeline.

I think that really is the key takeaway.

The top line remains strong, and we are making good progress on TYSABRI, and the pipeline progress has been excellent.

So underlying this, we do remain focused on bringing meaningful therapies to patients in need and, at the same time, delivering value to our shareholders.

Just before I hand the call back to Keith for questions and answers, let me touch one last time on the process we have begun to explore a potential sale of the Company.

I know this is an uncertain time for employees and investors alike and that there is a great thirst for any related information.

However, I am sure you can understand this is a sensitive issue on a number of fronts.

I have gone as far as I am able on this topic at this point.

It would be inappropriate for any of us to discuss additional details.

I think we'd make better use of our limited time in questions and answers with questions about the quarter than in parsing the language of our October 12 press release.

So with that, Keith, let's open it up to Q&A.

Thank you, Jim.

Operator, we are now ready to open up the call to Q&A.

We do ask the participants on the call to please limit themselves to one question and then please reenter the queue to ask follow-up questions.

Also, please state your name and your company affiliation.

Operator, we will now take the first question.

(OPERATOR INSTRUCTIONS) Geoff Meacham of JPMorgan.

Hi, guys.

A quick question for you on your most recent patient numbers for TYSABRI.

It looks like the new starts in the US have picked up.

Can you give us a sense for -- have you seen an increase in the number of patients on TYSABRI in existing TOUCH centers?

Or have you also seen an increase in the number of TOUCH centers and sort of new docs prescribing TYSABRI?

This is Bob Hamm.

Yes; in fact, both.

Yes to both questions.

We continue to see a weekly increase in new prescribers coming on.

I would also add that since July we have seen about a 25% increase sustained in new TOUCH starts coming in.

The fact remains that getting the physician started, getting them used to the program, allows them to get comfortable with it.

The more they use the product, they more they use the product is kind of what we are saying.

And we would expect that evolution to continue.

Just a quick follow-up if I can on that same patient number from Europe.

It looks like in your last data cut the European new starts look a little bit weak in August.

Have you guys seen -- that is not a surprise, I guess, given the vacation season.

Have you guys seen a pickup in September in some of the new geographies that you are launching?

This is Bob.

I think as you know, the European numbers in several countries are very sketchy.

You have to extrapolate from wholesaler data and whatnot, so it is not that reliable.

Yes, after the summer ends, with increasing countries that we said and increasing physician prescriber base, we would expect the growth to continue.

All right.

Thanks.

Mark Schoenebaum of Bear Stearns.

Hi, Jim.

I don't know if you want to answer this question, but I just got to ask.

Can you maybe talk to us a little bit about why you guys made the decision to go public with the announcement, rather than keep that private?

And if you won't answer that, I have a quarter question.

This is in either-or, is it, Mark?

Well, I can address the first one.

I think, there was a couple of issues.

One, I don't think it is really even possible to run a process very quietly behind the scenes and also explore broadly all the parties that could be interested.

So that was a very pragmatic view.

Secondly, I felt we had a need to be able to talk as directly as possible to both the shareholders as well as the employees about what was going on.

Then lastly, this allows us, I think, to keep this process as short as humanly possible.

Because as you can appreciate, going through a period like this creates a lot of uncertainty in the Company among employees.

It is just unsettling.

It is not different here than anywhere else, and I would like to get that past us as quickly as possible.

May I ask my quarterly question?

Okay.

Okay, is very simple, actually, maybe for Bob.

Can you just go over -- can you give us share for AVONEX in the US and the year-over-year comparison in the same for international?

If you don't mind.

Patient share.

And I really appreciate you answering both questions.

Sure, Mark.

The issue in Europe, as I said, is difficult to assess.

The fact is AVONEX has been the number-one product for many years.

As I reported, the ABCR segment is declining year-over-year, but the AVONEX share remains very stable with its leadership position throughout the world.

And US?

Same, yes.

Joel Sendek of Lazard Capital Markets.

Thanks.

I have a question on the revenue guidance.

If you look at the numbers, your revenue growth is up 15% year to date and only 12% in the third quarter.

So I am wondering what you are seeing in the fourth quarter to reiterate the 16 to 18% growth.

Because as I do the math, it looks like you are predicting pretty strong revenues in the fourth quarter.

Yes, Joel, so I would say we are expecting a bit of acceleration versus what we have today, right now.

Included in that is a pickup of the TYSABRI which is -- we are seeing on a sequential quarter basis.

I would say that is probably the biggest driver for the fourth-quarter expectation.

Thank you.

Jim Birchenough of Lehman Brothers.

Just wanted to touch on your guidance, long-term guidance.

It seems central to that is AVONEX maintaining patient share.

I'm just wondering, could you comment on some of the challenges to that?

Including the impact you have described on the ABCR drugs, the sequential decline, and potential competitors.

We are seeing a fair amount of data from compounds like Campath and FTY720.

So what gives you the confidence in the long-term sustainability of AVONEX trends?

This is Jim.

Let me take a crack at that.

So, I think what I have said to people as we have been out to all the investors that we have been at over the last six weeks is -- our expectation in the US is that it, on an absolute basis, is sort of flat to a little bit down.

Outside the US, it will be modestly increasing.

In part that is driven because we are taking on some new markets here and incorporating sales that we didn't have before by going direct in some of these markets.

So you look at Brazil, Argentina, Japan, etc.

So you get some growth out of new geographies, even though the, if you will, the more mature geographies are going to be relatively flat or even possibly modestly declining.

But with the TYSABRI we are also bringing in a pretty big chunk of new patients back into the market.

So a third of these patients are patients that have fallen through the different therapies.

So I think that is the offset that we see as you sort of balance all this out.

You know, the more mature geographies will be challenged, and a lot of the growth is going to go to TYSABRI.

But we still have some new geographies that are relatively unpenetrated that will show up as new sales for us.

Just a follow-up, how do you see the competitive landscape playing out, when you look at some of the emerging therapies?

Also, if you could just touch on consideration for potential generic entrants, what the timing of that might be.

Well, we have assumed that FTY720 would come to the market.

We have assumed that Campath will come to the market.

Just as a purely practical matter that is at the tail end of this sort of time frame of '07 to '10.

So those might get into the marketplace in the last -- in the 2010.

So the impact in the near term is relatively modest to very little.

Relative to the generic competition, in Europe there is another competitor that will probably come to market that is the BioPartner's product.

But that is not truly a biogeneric that will have been a full development program.

Others may come; but there are still some patents out there.

It really is product-by-product dependent on whether some of these remaining patents will block new entrants.

So the closer they are to an identical to Interferon beta-1a, I think the more difficulty they're going to have getting to the marketplace.

Thanks for taking the question.

Eric Schmidt of Cowen and Company.

Good morning.

A question about the TYSABRI guidance for 100,000 patients on drug by the end of 2010.

I'm just wondering what kind of assumption or expectation for the incidence of PML underlies that guidance.

Well, expectation for the PML is what we have in the label.

The market research would indicate that most of the physicians, they believe that that is either the actual incidence or, given the current safety experience in the commercial setting, that perhaps it is a bit lower than that.

So our expectation is that we will see some instance of PML similar to the label.

Just to add a couple more things, you know, I think one of the things that makes the difference when people sort of sit back and think about it is -- our expectation is that something over 50%, maybe approaching 60% of the TYSABRI sales will ultimately be ex-US markets; and of course, the balance in the US market.

We are expecting some modest contribution to that 100,000 from Crohn's.

Thanks, Jim.

Bill Tanner of Leerink Swann.

Thanks are taking the question.

A question maybe for you, Bob, or a couple of them.

You did mention doing some head-to-head studies, TYSABRI with some of the other drugs.

You also, I think I heard you say that there has been a delay in switching patients.

So I am curious, a couple things.

One is the delay.

Is that just the absence of data, or is that some negative detailing?

Secondly, then, on the head-to-head, would you contemplate just needing relapse reduction, or going at least a couple years and looking at changes in disability?

Thanks.

Okay, Bill.

On the head-to-head trial basis I think it is important to look out to the future and where the market will be, and how payers will make decisions in the future.

Therefore, robust head-to-head trials, we haven't seen many of these.

But it would make a big difference in the way certain groups look at this situation.

In terms of switching patients, just get back to the fact that four out of the five patients who are coming to TYSABRI are new to Biogen Idec.

That means they are either switching or coming from the quitter-naive pool that Jim mentioned.

Therefore, it is a matter of going after some physicians who may want to see more clinical evidence in certain quarters.

But already we are seeing that four out of five patients are coming from the other products and the other categories.

Okay, thanks.

May-Kin Ho of Goldman Sachs.

Can you refresh our memory?

What kind of manufacturing capacity do you have at this point and what would that be by 2010?

Then lastly, just a quick question on the quarter.

Can you break out for us the interest income versus interest expense?

Interest income versus --?

Okay, I will turn that one to Paul in a second.

Manufacturing capacity, I assume you are talking about for TYSABRI.

No, for the Company.

For the Company?

Yes, we have licensed in North Carolina 90,000 liters of large-scale capacity in two purification suites.

In addition there are three trains at the 2,000-liter capacity that run independently of that.

In Cambridge -- so both of these products are licensed multiproduct facilities.

In Cambridge, we have five trains that we can run.

We run them in combinations of clinical as well as commercial material.

The Danish facility is another 90,000 liters of large-scale capacity that will come online approximately this time next year, and then go through the licensure process.

That would be online for commercial product somewhere in 2009.

Can you put it in context for us?

What is this in context of the worldwide capacity?

Worldwide capacity of what?

What is the denominator I am trying to work with here?

You mean biologics?

Yes, biological mammalian.

I don't know.

I would think this probably puts us about number three in the world, around -- if you look at Wyeth's capacity and Genentech's, I think we may be the next one behind that.

It could be BI is a little bit around that, but we are certainly in the top five.

Okay, thank you.

Steve Harr of Morgan Stanley.

(inaudible) a little more granularity on the AVONEX franchise.

If you take out currency and price increases, could you just give us your year-over-year volume trends in the US and Europe?

Then follow that up with just -- should we expect going forward that with your 100,000 patient goal that you would see 20% of those patients leaving AVONEX?

So we would have potentially 20,000 patients in declining volume over the next several years.

Yes, I would say just to address the last question -- there was some interference there, but as I understood it -- what we would expect to see is the ABCRs obviously being affected, as we have seen in the first year and a half of TYSABRI activity.

But that AVONEX's share would remain stable within that group; and therefore we would see it relatively flat going forward with the growth in the overall market and whatnot.

Did you want to go back to May-Kin Ho's question on the interest?

May-Kin, this is Paul.

I will go back to -- you had a question on the interest income and interest expense.

Those numbers were roughly -- interest income being right around $15 million, interest expense being right around $20 million.

As I had mentioned, in the OIE line we did have a gain on an equity investment of $11 million.

Could you follow up and answer the volume question as well there?

Steve, I would say, for the given quarter our unit trends both in US and EU are pretty close to flat.

I would kind of reiterate one of the points I had made, that we were comparing against a pretty strong quarter in Q3 '06.

Mike King of Rodman & Renshaw.

Thank you for taking my question.

Can you hear me?

I just wanted to see if you could -- maybe Bob could comment about sort of -- where do you think you need to get in the TYSABRI relaunch where neurologists feel comfortable, to get that inflection, that hockey stick that everybody seems to be talking about but nobody seems to be able to put their finger on?

Well, I am going to let Bob address part of that, but let me take the first, which is -- our 100,000 projection does not assume some big inflection.

While a lot of people are talking about an inflection, and one can imagine that occurring, that is not what the assumption is as we build to 100,000.

So you can get to the 100,000 number with continued modest acceleration.

So increasing breadth and depth along the same lines that we have seen in the US; and similarly increasing breadth and depth outside the US, as well as the additional impact of new markets as those come online.

You sort of roll up all that information and you will get to the 100,000.

Relative to the inflection point, if you will, to the extent that that prescribing behavior is limited by fear of PML, the outstanding question is -- does the risk of PML accumulate with exposure to TYSABRI?

I think the people that are worrying about that are looking kind of to the two-year point, where you have a sufficient number of patients that have been on continuously for two years, to come to some kind of statistical conclusion of whether the experience is going to be the same as the label, better than the label, worse than the label.

That takes you out, about this time next year you will have a few thousand patients that have been well over two years.

Bob, do you have any --?

No, I wouldn't add much to that, other than that we know there are 450,000 patients, more or less, being treated worldwide today.

So if you look at the numbers and the growth in the market, again we would not expect to see a hockey stick.

It is just the evolution of the increasing countries, increasing prescribers, week over week, month over month, year over year.

Okay.

Just a quick follow-up.

Do most centers that can do infusions have a capability to do plasmapheresis as well?

Or would that have to be referred out?

I think all the major centers certainly would.

Beyond that, I think we would have to do more looking at that situation.

Okay, thanks very much.

Michael Aberman of Credit Suisse.

A question on the RITUXAN change of control.

While the documents are public, somewhat confusing.

I just want to clarify.

If Genentech exercises the option to select and to buy back, even if they lose that, does the other party get to buy back the CD20?

Or is it automatic -- the second and third generation.

Or does it automatically switch to a royalty rate?

And any idea as to clarity as to how much lower that royalty rate is than the profit share?

So, the answer is, the change of control, Genentech has the ability to name a price for all the marketed CD20 products.

At this point in time that only includes RITUXAN.

The counterparty decides whether they are a buyer or a seller.

The unmarketed products revert to a royalty.

And the rates on that are undisclosed and unfortunately subject to confidentiality between Genentech and ourselves.

Okay.

Taking the pattern here without Elizabeth on, can I follow up with a quick question on TYSABRI?

There was some data on rebound.

I know it was a small data set.

Have you seen any patients come off TYSABRI?

Will we see further data in terms of what happens to the MRIs and disability when patients are discontinued from TYSABRI?

Hi, this is Bob, again.

From our clinical experience, we have not seen that; and in our current practice in the commercial organization and tracking the patients, we have not seen that to date.

I guess, there has been some anecdotal information.

But the plural of anecdote, a wise person said, is not data.

So we will have to wait and see.

But there is no evidence to date that we have seen.

Will you be collecting that data in TOUCH and presenting it at all at any point?

Well, we collect all sorts of data, as you know, in TOUCH.

What is relevant to the patient and physician community we will certainly share in a transparent fashion, if we have any such information.

Okay, thanks, guys.

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

Ian Somaiya of Thomas Weisel Partners.

Thanks for taking my question.

Just a question on seasonality as it relates to TYSABRI and AVONEX, and whether it played any roles in third-quarter numbers.

And is there anything unique to the European reimbursement process which would lead to an increase in new patient starts in the fourth quarter?

I will take about one, Ian.

Seasonality, it is just the fact that you see it in the summer; there's just fewer new starts.

That has always been typical.

It probably is more evident as the market growth overall slows down.

You can see that more clearly through the data at least for you guys.

You also see some softness in the starts once you get in and around the Christmas season.

That is not a popular time for people to start new therapies.

Sorry, Ian, what was the second part of your question?

On the European side?

The European reimbursement system, the only thing that is special there is that you're doing a country by country rollout, and each one of these European markets has a different reimbursement system.

You're typically negotiating with the government regulators, and you need to establish a reimbursement rate really before you can practically sell.

That is why these markets roll out over a period of 18 months, because they all have a different kind of process.

So for example, we really haven't seen the contribution in any significant degree of France, which is one of our major markets.

Spain, which is a relatively new entrant.

So you will start to see some of these bigger markets start to contribute patients here in the fourth quarter, in the tail end of the third quarter, that were not present in the first half of the year.

So it is not more complicated than bringing on new countries one at a time.

All right.

I guess my question related to more of what pharmaceutical companies claim, which is in the fourth quarter they see a surge in sales coming out of Europe.

So I guess you are not expecting that in the fourth quarter.

We have not -- that has not been a typical experience for us in the kind of markets we have been in.

Okay, thank you.

Maged Shenouda of UBS.

Hi, thanks for taking my question.

Can you outline your discussions with Carl Icahn since you announced that you were putting the Company up for sale?

No.

Okay.

Just one follow-up then on the quarter.

How should we think about the R&D run rate?

Is this quarter's spend a reasonable run rate?

I will give that to Paul.

Yes, I would say that it is very unusual with respect to the upfront for Cardiokine, so that was a big lump.

If you take that out, we had run R&D at 29% of sales.

I would say that that will come down as our sales numbers come a bit.

So there will be -- I think the run rate on a raw dollar basis is probably reflective, if you take the Cardiokine upfront payment out.

Okay, thank you.

Great.

Well, that was our last question.

We thank you for your participation in today's call.

You may now disconnect.