Biogen Inc (BIIB) 2010 Q1 法說會逐字稿

Good morning.

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

At this time I would like to welcome everyone to Biogen Idec's first-quarter 2010 earnings 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.

Ms.

Kia Khaleghpour, you may begin your conference.

Thank you, and welcome to Biogen Idec's first-quarter 2010 earnings conference call.

Before we begin I encourage everyone to go to the investor section of BiogenIdec.com to find a press release and related financial tables, including a reconciliation of the non-GAAP financial measures that we'll be discuss today.

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

As usual we will start with a Safe Harbor statement.

Comments made in this conference call include forward-looking statements about our expected future results, the impact of healthcare reform, our operational goals, the market potential of our products, and pipeline advancement.

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

You should carefully review the risks and uncertainties that are described in our earnings release and the risk factors section of our most recent annual and quarterly reports filed with the SEC.

We do not undertake any obligation to publicly update any forward-looking statements.

Today on the call I am joined right Jim Mullen, CEO of Biogen Idec, Dr.

Evan Beckman, Senior Vice President of Immunology R&D; Bob Hamm, Chief Operating Officer; and Paul Clancy, CFO and Executive Vice President of Finance.

We will also be joined for the Q&A portion of the call by Dr.

Rick Munschauer, Vice President of US Neurology and Medical Affairs.

Now I will turn the call over to Jim Mullen.

Thank you.

Good morning, everyone.

Thank you for joining us.

During the first quarter of 2010 we continued to execute on our business strategy and position the Company for growth over the long term.

Total revenue increased 7% on a year-over-year basis to $1.1 billion, driven by 32% year-over-year TYSABRI revenue growth.

Two items negatively impacted first-quarter earnings, a $13 million increase in rebates mandated by the Patient Protection and Affordability (sic) Care Act, and a $14 million write-down on our investment in AVEO Pharmaceuticals.

Taken together, these items reduced EPS by $0.07.

Our non-GAAP diluted EPS for the first quarter of 2010 was $1.08, an increase of 3% on a year-over-year basis.

The Company generated $337 million in cash flow from operations and ended the quarter with a $2.2 billion cash balance.

And as of the end of March 2010, we estimate that we now have more than 50,000 patients on commercial and clinical TYSABRI therapy.

On an operational basis in the first quarter, we launched three new TYSABRI trials, SURPASS, a head-to-head comparative trial to determine the effect of switching from Copaxone to Rebif to TYSABRI -- from Copaxone or Rebif to TYSABRI, and STRATIFY 1 and 2 to test the utility of a JC virus antibody assay for risk stratification.

These studies are the latest in a series of investments we have made to clarify the benefits and risks of TYSABRI.

We completed a share repurchase program announced in October of last year, which returned $1 billion in cash to our shareholders and received Board approval to purchase an additional 1.5 billion of shares.

We continue to make significant strides in the development of our late-stage clinical pipeline.

Last week we updated the medical community on our progress of our neurology pipeline at the annual American Academy of Neurology meeting, where we presented 38 posters on our broad and deep MS pipeline.

For more detail on our pipeline and the information we presented at AAN, I will now have the call over to Dr.

Evan Beckman, our Senior Vice President of Immunology Research and Development.

Thank you Jim.

I'd like to begin with an update of our registrational trials.

We continue to make good progress on advancing and developing our late-stage clinical pipeline and expect data on some of these programs as early as next year.

Preparations are underway to initiate the Phase III trial of daclizumab, the DECIDE trial is a two-year study of daclizumab in RRMS patients with AVONEX as the comparator.

We look forward to updating you with further details of this study.

As previously announced, both BG-12 registrational studies, DEFINE and CONFIRM, have completed patient enrollment, and the trials continue on plan.

We expect data from DEFINE during the first half of 2011 and from CONFIRM during the second half of 2011.

We continue enrolling patients in the advanced study with PEGylated interferon beta-1a and in a Phase III study of GA101 for front-line chronic lymphocytic leukemia in combination with chlorambucil.

Enrollment for a second registrational trial in RITUXAN refractory indolent non-Hodgkin's lymphoma patients planned to start during the second quarter of 2010.

Patient enrollment for BELONG, which is the registrational trial for our long-acting recombinant factor IX candidate in hemophilia B continues to progress well.

Last week we shared important data on our neurology franchise at the American Academy of Neurology annual meeting, where we demonstrated the strength and quality of our neurology pipeline with 38 Company-sponsored platform and poster presentations.

Nearly 4 years after its reintroduction in the US and initial launch in the EU, we continue to demonstrate the powerful efficacy that TYSABRI offers relapsing multiple sclerosis patients.

Key data presentations reinforce the growing body of evidence that TYSABRI is an important therapeutic option for patients and may lead to overall improved quality of life for MS patients, from improvements in physical functions, cognition, and visual function to reduced fatigue.

We take the issue of PML very seriously.

With each case of PML, there is the potential to learn something new about this rare but serious adverse event.

To this point, Dr.

[Rick Riddick] presented data from a retrospective analysis of patients enrolled in the Strata trial, which showed that TYSABRI does not lead to substantial changes in the presence of JC viral DNA in blood or urine samples of MS patients.

During the first quarter we initiated three important trials related to TYSABRI -- STRATIFY 1 and 2, and SURPASS.

As discussed during the platform presentation at AAN, we have developed a blood test that detects antibodies to the JC virus, the virus that causes PML.

The presence of the antibody to the virus suggests that a patient has been previously exposed to the JC virus.

While the data are still preliminary, this assay may provide a tool for physicians to stratify the risk of PML in their MS patients.

To recap what we know to date, for 13 TYSABRI treated PML patients where we have baseline plasma samples, all 13 of them were antibody positive for one to three years before developing PML.

If antibody status was not a factor for developing PML, we would only have expected six or seven to be positive based on our data that 54% of MS patients have been exposed to the virus previously.

So our hypothesis is that there may be a lower risk for developing PML in TYSABRI treated M.S.

patients who are antibody negative.

To confirm this hypothesis we have initiated two clinical trials.

STRATIFY 1 is designed to determine the percentage of the M.S.

patient population that is positive for JC virus antibodies as well as the false negative rate for the blood test.

We expect to enroll 1,000 patients in this trial.

Inclusion criteria our current TYSABRI patients enrolled in TOUCH or patients who are not currently on TYSABRI but are considering beginning TYSABRI treatment.

For this trial we will be testing for JC virus antibody in the blood and testing for the presence of JC virus DNA in the urine every six months for two years from the time of enrollment.

STRATIFY 2 is designed to evaluate whether the incidence of PML in TYSABRI patients who are negative for the JC virus antibodies is less than the incidence among TYSABRI patients who are positive for antibodies to JC virus.

STRATIFY 2 is expected to enroll a minimum of 8,000 patients and is open to all TOUCH subscribers.

In this trial we will be testing for the JC virus antibody only in the blood and on an annual basis for two years from their time of enrollment.

Our goal is to ultimately provide neurologists and MS patients with tools to stratify risk.

Our thinking here is that within the context of a clinical trial where there is prospective analysis of the data, we have the best opportunity to validate and determine the clinical utility of this assay.

Our hope is that over the long term the JC virus assay may help physicians make better treatment decisions for M.S.

patients.

Moving on to SURPASS, our objective with this study is to provide a new model for making optimal treatment decisions in order to improve the outcomes of patients with M.S.

SURPASS will be the largest prospective study to provide comparator data regarding the management of breakthrough disease in M.S.

Amongst M.S.

specialists there is an evolving standard of care that when a patient on first-line M.S.

therapy presents with either clinical or MRI evidence of disease activity, modification of treatment needs to be considered.

Yet there is no evidence confirming whether switching M.S.

therapies results in improved outcomes.

In the SURPASS trial we are in rolling M.S.

patients initially treated with Rebif or Copaxone for at least six months, who subsequently experience either a clinical attack or two or more new MRI lesions.

Patients will then be randomized to one of three arms.

The first is to continue on the initial therapy.

The second, converting to the other first-line therapy.

Or third, converting to TYSABRI.

SURPASS has a target enrollment of 1,800 patients at 230 sites worldwide.

We expect that it will provide important data on whether early identification of breakthrough disease and subsequent modification of therapy improves patient outcomes.

We expect the study to be completed in 2013.

Our goal with SURPASS and the STRATIFY trials is that combined these studies will provide physicians with powerful tools for informed treatment decisions, such as improved techniques for stratifying the risk of PML in M.S.

patients on TYSABRI.

Now an update on the rest of our pipeline.

During the first quarter we, along with our partner Roche, decided to suspend treatment of patients in the ocrelizumab rheumatoid arthritis program.

This decision followed the recommendation of the independent Ocrelizumab RA and Lupus Data Safety Monitoring Board based on their assessment that the safety risk outweighed the benefits observed in these specific patient populations.

We recently announced that the primary endpoint was met in the Phase III SCRIPT study of ocrelizumab in the TNF-IR RA patients.

The future of the ocrelizumab RA clinical program is currently under review as we and our partner will have to consider these recent results along with the complete safety data set.

The ocrelizumab program in relapsing remitting MS remains ongoing at this time.

However, the MS Data Safety Monitoring Board will be reviewing the safety data from the RA, lupus and MS trials.

We previously announced that the MS study achieved its primary endpoint, and we continue to discuss the next steps for ocrelizumab MS program with our partner, Roche.

Turning to oncology.

As you may recall, during our third-quarter earnings last year, we announced that we have stopped patient recruitment in the lumiliximab LUCID.

We recently reviewed the data for the lumiliximab trials in both relapsed and the frontline CLL and determined that the results do not support continuing the program.

Next, an update on our blood factor programs.

As we announced in January, the global registrational trial for our long-acting recombinant factor IX candidate in hemophilia B continues to enroll patients.

We plan to present results of the Phase I/II factor IX study in July at the World Federation of Hemophilia meeting in Buenos Aires.

Additionally, the Phase I/II study of our long-acting recombinant factor VIII program is progressing well, and we expect a readout from this study later this year.

Recombinant factor IX FC is the first major blood factor innovation since the development of recombinant drugs in the 1990s.

We believe that our long-acting blood factor programs have the potential to significantly improve the lives of people with hemophilia and as a result expand the hemophilia market opportunity.

Recombinant factor IX FC offers the hope of less frequent injections and prolonged protection from bleeding compared to existing therapies.

Our goal in developing the long-acting blood factor candidates is to change the treatment paradigm in hemophilia with more prophylactic usage.

Current short-acting treatments requiring two to three infusions per week for hemophilia B and three to four infusions per week for hemophilia A don't lend themselves to easy prophylactic usage.

While most children with severe hemophilia are already on prophylactic regimens, based on the compelling outcome studies, giving frequent IV infusions to children places a significant burden on parents.

For young children prophylactic dosing also frequently requires placement of a central catheter or port, which introduces risk of serious infection.

For adults with hemophilia, episodic or on-demand treatment is more common, despite the clinical benefits of prophylaxis.

Recombinant factor IX FC has the potential to lower the hurdle for prophylactic treatment of hemophiliac B in both the pediatric and adult populations.

Looking forward, we expect to announce data readouts in seven clinical studies throughout the remainder of this year, as well as data presentations at several medical meetings.

We expect a readout from the TARGET study, which is the Phase II trial of galiximab in combination with RITUXAN in follicular NHL during the fourth quarter of this year at a medical meeting.

We've completed enrollment in two out of three pivotal studies for lixivaptan in hyponatremia.

These multinational studies include the BALANCE trial, a 650-patient study that enrolled patients with heart failure; and the [LIBRA] trial, a study of inpatients with the syndrome of inappropriate antidiuretic hormone hypersecretion, or SIADH.

Topline data readouts for these two studies is expected during the second half of this year.

We continue to make advances on our other pipeline programs with readouts for the Phase II trials of AVONEX in ulcerative colitis and BG-12 in rheumatoid arthritis, both expected during the second half of 2010.

We expect to present data from four of the Phase III studies of ocrelizumab in RA at the American College of Rheumatology annual meeting.

These include data from the STAGE, [FEATURE], FILM and SCRIPT trials.

For the ocrelizumab MS program we previously announced positive topline data from this trial in Q4 2009, and in October of this year we plan to present data at [ECTROS].

Data announcement from the Phase III PRIMA study of RITUXAN as a maintenance therapy for indolent non-Hodgkin's lymphoma is planned in an oral presentation at the upcoming ASCO annual meeting.

Last September we announced that this study met its primary endpoint of progression free survival during a preplanned interim analysis.

We, along with our partner Roche, also plan data presentations at upcoming medical meetings on our anti-CD20 monoclonal antibody designed specifically for use in oncology, GA101.

Specifically, we expect data presentation from the Phase II portion of a Phase I/II study of GA101 in indolent NHL in June at the European Hematology Association meeting in Barcelona.

Also we plan to present data from the Phase II portion of NHL and CLL patients at the American Society of Hematology meeting in December.

Along with advancements on our clinical programs, we continue to make progress on our regulatory efforts.

Recall that earlier in Q1 we received FDA approval for RITUXAN in combination with fludarabine and cyclophosphamide for previously treated and untreated CD20-positive chronic lymphocytic leukemia.

We continue efforts aimed at expanding the RITUXAN label with additional indications.

Last month we submitted supplemental biologics license applications to the FDA and EMA to expand the RITUXAN label in non-Hodgkin's lymphoma to include maintenance treatment for previously untreated patients with advanced follicular lymphomas.

We based our submissions on Phase III PRIMA study data.

The US regulatory filing for RITUXAN in ANCA associated vasculitis also remains on track for the second half of this year

We continue to expand on our regulatory efforts with prolonged release fampridine outside of the US.

We have filed for approval in the EU, Canada, Switzerland, Australia and New Zealand and expect to have more filings.

We are excited for the anticipated ex-US launch of prolonged release fampridine.

Data presentations at AAN highlighted consistent improvements in average walking speed for MS patients last week.

In conclusion, we continue to make progress on our pipeline, and our R&D organization continues to perform well.

We are currently supporting 76 trials with more than 4700 patients across more than 1200 sites worldwide.

Our efforts position us well for future growth, and we look forward to providing you updates on new developments in the quarters ahead.

With that, I'll now pass the call over to Bob Hamm, our Chief Operating Officer.

Thank you Evan.

In the first quarter AVONEX, TYSABRI and RITUXAN generated combined worldwide revenue to Biogen Idec of $1.1 billion, up 7% year-over-year, with continued growth in our core MS business more than offsetting a decline in RITUXAN royalty revenue.

As Jim mentioned, TYSABRI exceeded 50,000 patients.

While TYSABRI continued to add patients during the quarter, patient growth during the first half was modest.

We saw a rebound in March when we added more than 190 patients per week.

Importantly, the moderation in patient growth during the first half of the quarter was a result of a decrease in new patient starts, not an increase in discontinuations.

We've seen this pattern in the past when physicians and patients have taken the time to absorb new information regarding PML risk.

In this case we suspect a label change to reflect increased risk of PML with increased duration of therapy may have been the cause.

Also we've seen a deceleration in patient growth in Germany where there is still a high level of PML discussion.

The safety concern in Germany may have been amplified by "dear doctor" letters sent to physicians during the first quarter.

We also see evidence of a modest increase in drug suspensions.

In order to better understand the impact this is having on TYSABRI use, we regularly ask our patients and physicians about their dosing preferences while at the same time monitoring our TOUCH data on US compliance and discontinuations.

What we have found is that most of the physicians who discuss this option with their patients allow them to make their own decision based on their own unique situation.

Based on our data from the TOUCH program and from physician and patient interactions, we estimate that at the end of March less than 10% of all US TYSABRI patients were in a drug suspension.

We plan to continue to follow this trend closely.

The impact of this can be seen as a modest decline in net revenue per patient, as most physicians in the US do not discontinue their patients from TOUCH during drug suspension.

Since our relaunch in 2006, we have had questions about the impact of research initiatives on TYSABRI's adoption.

Most recently there has been interest in our work on the JCV antibody assay.

Long-term we believe that it is important for neurologists and MS patients to have more information, clarifying TYSABRI's benefit and risk for individual doctor-patient benefit risk discussions.

So while our net patient growth may moderate to absorb this new information over the short term, we've disciplined ourselves to keep perspective on what is best for the long-term adoption of the product.

Now an update on AVONEX.

The franchise generated $593 million in global revenue during the first quarter of 2010, an increase of 7% year-over-year.

AVONEX Q1 sales benefited partially from a 5.5 price increase in the US on 26 February.

Our new US commercial team is now largely in place and showing renewed energy and focus.

The leadership team has assessed our US AVONEX commercial strategy and identified three areas we can address in order to arrest the decline of our AVONEX US market share.

The first is sales force effectiveness.

We need to re-emphasize clinical selling and focus calling programs on key customers.

We are examining multiple options to increase our interactions with physicians.

The second is tactical marketing execution.

AVONEX has compelling long-term efficacy data, but that message has been lost over the past few years.

Our CHAMPIONS 10-year data brought that message back into focus, and it's starting to resonate with physicians.

Now we need to build on that as we continue to amass evidence of AVONEX's term efficacy.

The third area we need to better leverage is our patient services.

Biogen Idec has been a pioneer in this area, and we need to reestablish the primacy of this as a competitive advantage.

We have an extremely talented organization in Research Triangle Park, North Carolina that has been doing some great work with therapy support.

We know that patient participation in this program increases product compliance.

Over the next few months we will be launching programs to increase patient participation in therapy support.

Outside the US our salesforce has been highly effective, and our marketing message has been clear and in step with the local market.

We have a strong international leadership team and more than a dozen years of experience selling directly to markets outside the US.

Structurally one thing that has facilitated our effectiveness overseas has been our affiliate model.

We have a local presence in each of our direct markets with an experienced sales force and programs tailored to local patients and physicians.

In my opinion these are the factors that make AVONEX the number-one MS therapy outside the US and inform our updated strategy within the US.

Next an update on RITUXAN.

RITUXAN Q1 revenues to Biogen Idec were $255 million, down 9% year-over-year.

This decline was driven by the continued expiration of royalties on revenues outside the US.

Our US RITUXAN profit share was up 12% on a year-over-year basis and 4% on a quarter-over-quarter basis, driven by increased demand in the hematology and oncology settings and some restocking in the channel.

Finally, a quick update on prolonged release fampridine, marketed as Ampyra in the US by Acorda Therapeutics.

Our plan for launching outside the US continues on schedule.

During the first quarter we assembled an international prolonged release fampridine advisory board of neurologists from 14 to countries.

This advisory board provides scientific input into the potential for a long-release fampridine launch and subsequent product lifecycle management.

The advisory board held their first meeting in January.

In parallel our supply chain team continues preparation to enable appropriate compassionate use programs and named patient supplies.

We look forward to upcoming discussions with the regulators now that our launch is potentially less than a year away.

With that I will now turn the call over to Mr.

Paul Clancy, our Chief Financial Officer.

I'll review our 2010 first quarter financial performance.

Our GAAP financials are provided in tables 1 and 2 of the earnings release, table 3 includes the reconciliation of GAAP to non-GAAP results.

The primary differences between our GAAP and non-GAAP results for the quarter were $49 million related to the amortization of acquired intangibles, $40 million for the contingent consolidation payment associated with the Syntonix acquisition, $12 million for employee stock option expense, and $5 million for severance and restructuring, all of these offset by a $27 million tax impact on these items.

Our GAAP diluted EPS was $0.80 in Q1 2010.

Now I'll move on to the non-GAAP PML operating performance of Biogen Idec, which we believe better reflects the ongoing economics of the business and reflects how we manage the business internally and set operational goals.

Our Q1 non-GAAP diluted EPS was $1.08.

The quarter was negatively impacted by two items.

First, we incurred a $14 million charge resulting from the impairment of our strategic investment in a AVEO Pharmaceuticals following their initial public offering in March.

Second, we were impacted by US healthcare reform, specifically revenues were reduced by $13 million due to the recently approved Patient Protection and Affordable Care Act.

In the quarter we specifically incurred additional discounts from three changes.

First, the change in the minimum Medicaid rebate from 15.1% to 23.1%, which took effect retroactive to January 1.

Second, the extension of Medicaid rebates to managed care organizations that dispense drugs to Medicaid beneficiaries, which took effect on March 23, as the law was enacted.

And third, the expansion of 340B Public Health Services Drug Pricing Program, which provides outpatient drugs at reduced rates to include certain hospitals, clinics and healthcare centers.

This was affective retroactive to January 1.

These additional discounts impacted each of our products as noted on a slide in the earnings presentation.

The AVEO impairment combined with the impacts of healthcare reform unfavorably impacted EPS by $0.07.

Now let's move through the first-quarter results in a bit more detail, starting with revenue.

Total revenue for the first quarter of 2010 was $1.1 billion, a 7% growth over the first quarter of 2009.

Q1 product revenue grew double-digit to $824 million, a 12% growth over Q1 2009.

I'll start now going through our product revenues with AVONEX.

Q1 AVONEX worldwide product revenue was $593 million, a 7% increase over Q1 2009.

US AVONEX product revenue in the first quarter was $350 million, a 3% increase versus prior year.

US AVONEX inventory in the channel ended at about 2.25 weeks in the first quarter.

In Q1 units sold in the US declined approximately 9% as compared to Q1 2009.

This was offset, as Bob noted, by price increases.

Unemployment continued to impact our US AVONEX trends as free goods once again increased.

Q1 international AVONEX product sales were $243 million, a 13% increase over Q1 2009.

In Q1 2010 units sold outside the US increased approximately 4% as compared to prior year.

Q1 TYSABRI worldwide product sales were $219 million for Biogen Idec, a 32% increase over Q1 2009.

As Bob mentioned, TYSABRI patient growth moderated in the quarter, likely the lagged effect of label discussions with both FDA and EMEA.

Nevertheless we are encouraged by the trajectory we saw in the last month of Q1.

Specifically we estimate our net patient adds in the month of March picked back up to average approximately 190 per week.

In the US end-user TYSABRI sales totaled $135 million for the first quarter, a 17% increase over Q1 2009.

Biogen Idec booked $60 million of revenue of this amount.

Q1 international TYSABRI product revenue was $158 million, a 42% increase over Q1 2009.

Q1 Fumaderm revenue was $13 million.

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

We recorded $255 million in revenue for the quarter, representing a decrease of 9% on a year-over-year basis.

Our RITUXAN revenues are broken down into three components.

First our share of the net US RITUXAN profits.

Net US RITUXAN sales were $687 million in the first quarter of 2010, up 7% versus prior year, benefiting from demand and channel restocking.

Our Q1 2010 profit share from that business was $200 million, up 12% versus prior year.

Second, we receive revenue on sales of rituximab outside the US.

In Q1 this was $38 million, down 54% versus prior year, as royalties from individual countries have expired.

Third, in the first quarter we were reimbursed $16 million for selling and developing costs incurred related to RITUXAN.

Royalties were $26 million for the first quarter of 2010, an 8% increase year-over-year.

Now turning to the expense lines in the non-GAAP P&L, which includes the adjustments that I described earlier.

Q1 COGS were $97 million or 9% of revenues, benefiting from fewer inventory write-offs.

Q1 R&D expense was $[303] million or 27% of revenues.

This represents a 9% increase over the prior quarter and a 10% increase over the prior year, due primarily to an additional $19 million in expense we assumed as a result of a restructured collaboration agreement with Swedish Orphan Biovitrum for our blood factor programs.

In essence we are now bearing the full development and manufacturing expenses for the factor IX and factor VIII programs in exchange for more favorable downstream economics in streamlined roles.

Additionally at our large-scale facility [NRTP] we redeployed manufacturing activity to clinical programs away from commercial production, which reduced the amount of expenses normally capitalized to the balance sheet.

This added an additional $13 million of R&D expense during the quarter.

These two impacts were somewhat offset by favorability from recent program decisions.

I'd also note that during the second quarter of this year we anticipate that we may make a $30 million milestone payment to Facet Biotech, our partner in daclizumab, due upon initiation of the Phase III DECIDE trial.

Q1 SG&A expense was $234 million or 21% of revenues.

As mentioned during our last call, our SG&A expense as a percentage of revenues may average as much as 22% in total for 2010 as we prepare to defend our MS franchise against potential new competitors.

Continuing down the P&L, our collaboration profit-sharing line totaled $64 million expense for the quarter, representing our payment of profits outside the US to Elan in the reimbursement of third-party royalties incurred by Elan outside the US.

Other income and expense for the quarter was a loss of $8 million driven by the $14 million charge from the impairment of our investment in AVEO Pharmaceuticals as previously mentioned.

Our cash and marketable securities position ended the quarter at $2.2 billion, down from year-end mostly due to purchase of treasury stock.

Our Q1 non-GAAP tax rate was approximately 25%.

The Q1 tax includes a $6 million one-time benefit related to restructuring of an international entity.

This brings us to our Q1 non-GAAP diluted earnings per share, which were $1.08.

Now let me share the progress we've made with respect to our share repurchase program.

During the first quarter of 2010 we repurchased and retired 10.5 million shares at a total cost of $578 million.

As a result, we completed the billion-dollar share repurchase program announced during the fourth quarter of 2009.

In total since the October authorization, we've purchased 25.3 million shares for a total cost of $1.3 billion, including approximately 6 million shares earmarked for share stabilization.

Biogen Idec's average diluted shares outstanding were approximately 273 million for the first quarter.

Last week the Board approved an additional $1.5 billion share repurchase program with the objective of returning excess cash to shareholders.

The authorization is open-ended, and our intention is to execute the program in the open market at more likely a more deliberate pace.

Our decision to repurchase more shares is influenced by a number of factors including the continued improvement in the credit markets, our outlook in the cash flow generation of the enterprise, and the potential for our product initiatives and pipeline maturation.

We continue to have the flexibility and capacity to pursue meaningful strategic investments.

Turning to the full-year outlook, we are leaving our financial guidance unchanged from previous communication.

We estimate healthcare legislation will reduce our revenue by approximately $70 million to $90 million for the year, or about 2%.

These reductions are due to the increase in Medicaid rebates, the expansion of hospitals eligible for 340B pricing, and the extension of Medicaid rebates to managed care organizations.

Nevertheless the longer-term impact on our business can be less unfavorable as expansion of patients who are currently uninsured and prescription drug coverage for patients in Medicare Part D doughnut hole takes effect in future years.

And biosimilar legislation, including the 12-year data exclusivity on biologic therapies can be quite positive.

The balance of year market impacts of both potential new competition and data provided in the context of our JCV antibody assay trial is equivocal.

We will monitor closely the TYSABRI trends over the next few months as patients and physicians adjust to new information.

Regardless, we believe that our initiatives to provide more clinical data on the benefit/risk equation can poise TYSABRI for strong growth over the long term.

In conclusion, our core business delivered a solid quarter.

Total product sales grew by 12%.

We are marking progress on our late-stage pipeline, and we continue to generate strong free cash flow.

We face new headwinds this quarter, yet we will continue to keep our focus on the long term.

From that perspective we are in an enviable position.

Our pipeline features six products in registrational trials, we have several intriguing TYSABRI initiatives underway, and we generate sound cash flow, allowing us to return capital to shareholders.

I'll now hand the call over to Jim for his closing comments.

Thank you, Paul.

In summary, the first quarter introduced some topline pressure that we are aggressively working to counter, but we continued to deliver bottom-line growth and strong cash flow.

We are focusing on advancing our enviable late-stage pipeline with six programs in registrational trials.

Overall we've made progress on a number of strategic initiatives intended to position the Company for long-term growth.

With that, Kia, we will now open up the call for Q&A.

Thanks, Jim.

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

(Operator Instructions).

Operator, we're ready for the first question.

Yaron Werber, Citi.

It's actually Karim De Felipe calling in for Yaron.

I have a question on AVONEX.

Regarding the sequential decline in sales, even despite the price increase, I was wondering if you could give us more color on what the volume trends were for the quarter.

This is Paul.

Thanks, Karim.

In the United States, we saw a year-over-year decline of about 9%, outside the United States an increase of mid-single digits.

I think the trend in the United States does owe partly to continued pressure from unemployment.

And we witnessed, actually, our free drug program increasing for AVONEX in the quarter versus over the last couple of quarters.

Got it.

Could you also give me the FX impact for AVONEX?

The FX impacts all told for the total business was about a positive 3% on a year-over-year basis.

So -- and that is net of hedging and net across all of the products.

Got it.

Thank you very much.

Eric Schmidt, Cowen and Company.

Just wondering about the share repurchase plan.

It's quite substantial.

What should we read into that, if anything, regarding strategic alternatives, kind of broader use of cash, etc.?

And then, Paul, if you could provide the share count at the end of Q1, that would be very helpful.

Yes, so the average -- I'll start with the backend question, Eric.

The average shares outstanding on a diluted basis was approximately 273 million.

We're probably about 4 million or 5 million shares underneath that as of March 31, 2010.

I wouldn't read too much into it with respect to the strategic agenda.

We continue to work earnestly at alternatives for the strategic agenda.

I would just point you to the comments I made that we still have adequate financing capacity.

I think our confidence in the credit markets, whether that's right or wrong, is certainly much better than it was a year ago.

So you still want to judge us in terms of our capability with respect to financing capacity as well.

And I really just point you to the fact that it does underscore a strong free cash flow generation for the enterprise.

Thank you.

Joel Sendek, Lazard Capital Markets.

I had a question about the TYSABRI drug suspensions.

I'm just a little confused here, because clearly what you said about the new patient adds in March shows a trend upward.

But yet, if I compare what you said about drug suspensions now versus last quarter, it looks like they are up.

I think my notes from last quarter said there was about 5% patients on drug suspensions, and now it's about 10%.

So can you help us reconcile that, please?

Sure.

This is Bob Hamm.

What we saw beginning in the fourth quarter with the duration story unfolding was a slight increase in the suspension story.

I don't believe we said 5%.

We were looking at single digits at the time, high single digits.

And we look at that closely.

The issue is, we only have data for the US, which is now only half the patients.

So what we are seeing is what we can glean from the US data only.

So that's about all we can say on it at this point.

The other thing, Joel, I would just add is that many of those patients that Bob referred to as in drug suspension can stay in our patient database in the United States.

So the reconciliation between the two is really more made up in the average price per patient.

All right.

Thanks.

Rachel McMinn, Bank of America.

I guess two questions.

One, can you comment at all on the CEO search, and, Jim, what you're going to do if nobody is hired before June?

And then the second question is just on the TYSABRI fourth-quarter patient numbers.

They look a little bit different than what you had stated last quarter.

I'm wondering what the difference is there.

Why don't we take those in reverse order?

Paul, do you want to try that, and then I'll just --

Yes.

Rachel -- no, thanks for the question.

I appreciate it.

We will as a matter of course always try to update the best estimate even when we look backwards in the patient database.

In the United States, that rarely results in any change.

What you would note, though, is that in our international patient database, we made a change to correct for our best estimate.

And that is just simply a function of the fact that internationally the patient -- are just that, is estimates that are a little bit triangulated with the most important piece of data, is the shipments going out.

I would note as it relates to that, that those changes that we made which brought down the patient numbers in international at the year-end 2009 were largely owing to Germany, which Bob had pointed out, which we actually see as probably the one market outside the United States that is relatively flat.

If you take the trends outside of Germany, a number of the major countries are doing quite well in continuing to add patients.

Rachel, with respect to the CEO search, so just to take people back, there is a Board search committee composed of four of the Board members.

They have been active in the search, interviewing candidates.

I think they are -- they're certainly very cognizant of the June date and working towards that.

If there is not somebody in place by June, that will be another conversation with the Board, but there is not a specific plan for that.

All right.

Thanks very much.

Geoff Meacham, JPMorgan.

Thanks for taking the question.

A question for you on the PML rate.

We are above [one in 1000] inpatients on drugs for over a year, and just curious what the strategy is when the overall postmarketing rate exceeds this.

And is there an active dialogue with FDA or EMEA ahead of this?

This is Rick Munschauer, Geoff.

We have been monitoring the overall incidence, both by duration of therapy and by [effect], quite carefully.

These are very small numbers.

We really at this point don't think that there has been a variability there that is outside the expected variability on a month-by-month basis, given the relative rarity of the events.

And certainly we are in constant communication with the FDA about this.

This information is widely available and discussed.

Okay.

And just a follow-up to an earlier question on the JC virus assay -- do you guys feel post-AAN that you have more validation work to do on the assay, or is it now a matter of just accumulating data on as many patients as possible?

We are very encouraged in our preliminary studies that 13 out of 13 patients for which we had samples stored away who went on to develop PML were indeed positive by that assay.

That has led us to the STRATIFY 1 and STRATIFY 2 trials, which will formally test that hypothesis over time.

A total of about 9000 patients will be entered into that trial.

And we do feel that trial will give us the bottom-line information about the value of this assay in stratifying the risk for PML.

Okay, thanks.

Jim Birchenough, Barclays Capital.

This is Nick calling in for Jim.

With respect to the STRATIFY 1 and 2 trials, I can't remember if on the call, did you say that patients and physicians would receive the data in a real-time fashion back in STRATIFY 1?

And I guess we heard at AAN that that was not going to happen now.

And then on the STRATIFY 2, I think I've heard you just say around 9000 patients, but I've also heard you say 28,000 patients, or all of the patients who are receiving TYSABRI.

With response to your first question, yes.

The protocol as it's written now does share the information with the doctor, and the doctor can share it with the patient when you are enrolled in the STRATIFY 1 or STRATIFY 2 trials.

We have been in active discussion with the FDA about this, and at this point the information is still that the information will be shared going forward with that.

And in terms of the study size, STRATIFY 1 is 1000 patients.

That is designed to determine the false negative rate of our assay.

STRATIFY 2 we project will be about 8000 patients.

We'll see in terms of that trial as it progresses whether we are obtaining the appropriate amount of information to achieve our overall endpoint, and that is establish the validity of this assay in stratifying risk.

So what will you send back to the physician?

It will just be a yes, no?

Will it have a level, and then the physicians and the patients scratch their heads and say, well, what do we do now?

Will you provide any guidance?

You can't provide any guidance as to what they should do.

Good question.

The report back to the physician will be either positive or negative, and it is a yes/no kind of response.

There is an intermediate zone where we do a confirmatory so the physician will know, yes, an intermediate test was done, and this was positive or negative in those patients that were borderline.

There is obviously no guidance from the Company, and this is a protocol.

What a particular physician does with this information will be done in concert with his discussion with the patient.

And that intermediate test, is that a more sensitive ELISA than your own?

It's a more sensitive ELISA to make sure that we capture all those patients who are within a certain threshold of being positive.

Okay.

Thank you.

Josh Schimmer, Leerink Swann.

Thanks very much for taking the question.

What terms are you seeing and expecting in ex-US reimbursement rates for your core MS franchise?

And do you see new country opportunities in emerging markets as providing sufficient overseas growth to offset reimbursement and pricing challenges ahead in Europe?

Thanks for your question.

This is Bob Hamm.

The recent announcement in Germany obviously could be viewed as spilling over into other countries in Europe.

We don't see that at this point.

There's always a pressure to discussions from various countries based on the mix of activities in the MS space.

But right now, other than the German announcement, we don't see a major impact there coming this year.

And the growth, again, it varies from country to country so much.

But we certainly see growth based on our ability to expand our reach into countries that we currently are moderately engaged in or accruing patients in.

So we see that as a real opportunity going forward.

And then as you calculate and track the PML risk with TYSABRI, how do you account for patients who are on drug holiday?

Do you just treat them as though they are all on drug, or do you adjust your calculations to reflect that some have paused therapy?

This is Rick again.

We count the total number of infusions.

That's our current metric for doing that.

Good question.

A lot of debate over that one, but that's our current metric.

Okay.

Thanks very much.

(Operator Instructions).

Gene Mack, Soleil Securities.

Thanks for taking the question.

Maybe I'm just a little bit confused when you talk about drug suspensions versus drug discontinuations for TYSABRI.

I think I caught both those turns of phrase in the earlier discussion.

And I'm just wondering, how does the definition differ between the two?

In the United States, where all TYSABRI-treated patients are entered into the TOUCH program, the physician has the opportunity to re-begin therapy at any time.

So in a way, it's a bit difficult for us to determine the difference between a drug suspension and a drug discontinuation.

However, those kinds of statistics can only be had when we look at the TOUCH program going forward.

We have incomplete data on that.

Ian Somaiya, Piper Jaffray.

Just a question on the AVONEX patents.

Just any update you can provide on whether you've had any meaningful discussions and when we could see potential agreements signed as they relate to that intellectual property.

Ian, this is Paul.

Nothing to report, actually, at this point in time.

And we will try to keep you informed along the way as soon as we do have something to report.

Bret Holley, Oppenheimer.

I was wondering, what is a realistic timeline for completion of STRATIFY 2?

And is there any interim analysis of STRATIFY 2 focused on JCV prevalence that could augment the data from STRATIFY 1?

STRATIFY 2 is intended to go out for two years.

It will depend a little bit upon enrollment.

And at this point, the power calculations are done, and we generally don't share that kind of information.

However, we do really feel that the study is powered to achieved its desired results at about 8000 patients for two years.

Chris Raymond, Robert Baird & Company.

Just wanted to circle back on I think Eric's stock buyback question.

Paul, you mentioned that you will look to identify this and take advantage of excess cash.

Can you maybe give a range of where you feel like the optimum net cash level would be, and at what threshold you have excess cash?

Good question.

It's something we debate for years.

And I hate to -- optimal capital structure you really can't look at in a vacuum, because it's so tied to the business development and corporate development plans that you have underway.

We have -- I did want to just kind of emphasize that we certainly love this business.

We think there's great returns in this business.

And we continue to look for business development and corporate development opportunities.

But what we are influenced by is that can come -- over the last number of years, you've seen that come in business developing opportunities with a relatively modest use of capital in terms of adding value and bringing in-licensing collaborations and business development opportunities into the pipeline.

We will look at larger uses, as every company in our space does.

We'll also kind of tie that up vis-a-vis the credit markets and the financing capacity that is available to us, which I think at this point in time we'd call it as more favorable than a year ago.

So I think it's still a balanced approach, but should there be excess capital in the business, which we've largely concluded very recently, we will look to return it to shareholders in the most efficient manner.

Thank you.

Jason Zhang, BMO Capital Markets.

I have a question with regard to the 190 per week new patient adds.

So that's based on March average.

Do you -- can you provide more -- is that higher at the end of March than it was beginning of March, or is it too early to have a real number for that?

Well, gosh, I actually don't have it in my head discerned on the four-week basis within March.

I don't think it's materially different week to week to week in March.

And even if it was, I don't know if that's incredibly telling.

I think the broader trend that we've seen in the business is that subsequent to the label discussions -- and there is a lag effect here, right, because patients and physicians decide, and then it takes four to five or six weeks to put them on therapy and get their first infusion.

So subsequent to those discussions that were happening in the fourth quarter, we did see a modest slowdown in the net patient adds on a gross basis as well.

We've seen that largely pick up, and that kind of trends back into the four to five weeks since the label discussions were largely finished.

So I think it's -- I'd just kind of keep it at the full month of March basis.

And because for the quarter it's about 120, I'm just wondering, so this new patient add really is not -- isn't going down or going up gradually.

They really kind of drop or rise pretty significantly.

Can you explain that, why it's such -- why one month could be so different than the month before or the month after?

Yes, no I think it's owing -- what we think is it's owing to physicians digesting new information, and most meaningful new information was the label discussions in the back end of the year.

We're largely past that.

And we feel a little bit heartened by the trajectory that we are seeing in March.

Okay, thanks.

Jim Birchenough, Barclays Capital.

Thanks for the follow-up.

It's Nick again for Jim.

I'm interested in your thoughts on primary infection for JCV while patients are taking TYSABRI.

And my thoughts really -- my concerns are driven by the preclinical SV40 data, which are worrying.

As you know, SV40 has 67% homology to JCV, so perhaps not a perfect model.

I think you quoted a 2% per annum primary conversion rate to JCV positivity.

As you know -- I'm wondering on your level of confidence of this, because the published data comparing JCV ELISA to, say, a more elegant T-cell assay suggests that ELISA underestimates the true exposure, previous exposure to the JCV virus -- JC virus.

So how confident are you in that 2% primary conversion number?

Nick, this is Jim.

We decided to jump ball on that question.

And we appointed a lead qualified person to answer.

That became me.

And I'll let Rick or Evan add into it, but the data we have on the primary infection is not only the data that we've seen from our own collection of samples over a couple-year period of time, but what else is out there in the literature.

And it appears to be in the range of 1% per year.

Maybe I'll let -- I'll let Evan and Rick maybe add onto that a little bit of color.

I think -- this is Evan.

Obviously, the assays and other things that you use are really important in determining all of this.

When we first started looking at the PML several years ago, there were numbers all over the place about the incidence of latent or prior exposure to JC virus.

We think that we've gotten better assays, and we believe that our data and the program that we have going forward will give better answers to that question.

At the moment, the 1% to 2% we think is pretty reasonable.

I don't think that -- you described maybe more sensitive techniques or other things.

I just don't think that that number is going to be wildly off to a point where it's really going to matter.

Whether it's 1.2% or 2.3%, I think we are in the range.

And the program we have going forward will help better define that.

Obviously, we think that's something important, and as we put this program together going forward to help stratify risk for patients and physicians, obviously the new conversion rate that happens, whatever that is, is going to be an element of the pieces of information they need to use and monitor to make good decisions.

So we have an interest in trying to get that right over time.

So can I just ask, so for the other 30 or so cases of PML, do you have any baseline data that you can go back to ask -- try and ask that question if primary conversion connotes a higher risk for developing PML?

The data that we've given you, those 13 cases, represent to date the patient base that we have with the right data to be able to go back and ask those questions.

If we had more, we would be sharing more.

We would like to get the numbers up as well.

So as new cases come up, sometimes there's that opportunity, but that is probably where most of those cases are going to come from, new numbers are going to come from.

Okay.

Thank you.

I believe that was our last question.

Thank you for your participation in today's call.

You may now disconnect.