Biogen Inc (BIIB) 2010 Q4 法說會逐字稿

Good morning. My name is Michele and I will be your conference operator today. At this time I would like to welcome everyone to the fourth quarter and year-end 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. Khaleghpour, you may begin your conference.

Thank you and welcome to Biogen Idec's fourth quarter and full-year 2010 earnings conference call. Before we begin I encourage everyone to go to the investors section of BiogenIdec.com to find the press release and related financial tables, including a reconciliation of the non-GAAP financial measures that we will discuss today. We have also posted slides on our website that follow the discussions related to today's call.

As usual, we will start with the Safe Harbor statement. Comments made in this conference call include forward-looking statements that are subject to risk and uncertainties. Words such as believe, expect, may, plan, will, and similar expressions are intended to identify such statements. Actual results could differ materially from our expectations and you should carefully review the risk and uncertainties that are described in our earnings slides, earnings release, and in 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 by Dr. George Scangos, Chief Executive Officer of Biogen Idec; Dr. Doug Williams, Executive Vice President of Research and Development; Dr. Francesco Granata, Executive Vice President of Global Commercial Operations; and Paul Clancy, Executive Vice President of Finance and Chief Financial Officer. We will also be joined for the Q&A portion of the call by Dr. Al Sandrock, Senior Vice President of Neurology Research and Development. Now I will turn the call over to George.

Okay, thanks, Kia; and thanks to all of you for joining us this morning. Q4 2010 was a very good finish to a very good year, and I would like to begin today's call by taking a moment to recap our 2010 results and accomplishments.

So financially we finished 2010 with an all-around strong performance. AVONEX Q4 revenue grew by 10% on a year-over-year basis. TYSABRI Q4 revenue grew by 12% year-over-year, which drove a solid 8% growth in total Q4 revenues year-over-year. For the full year 2010, total revenues also grew by 8% over 2009, while non-GAAP EPS grew by 25% for the full year.

During 2010 we also returned over $2 billion in cash to shareholders and generated over $1.4 billion in free cash flow. Francesco and Paul will provide more financial details later in the call, but suffice it to say that we enter 2011 in a strong financial position with solid momentum.

In 2010 we also clarified Biogen Idec's strategic focus. As you know, we terminated our oncology and cardiovascular pipelines in order to focus on neurodegenerative diseases, hematology, and selected high-value biological drugs. We are now focusing on what we do best and on what patients need most.

We streamlined the Company, which will result in annual cost savings of about $300 million. Paul Clancy will go into the financials in more detail later in the call. And we have made two very important hires, rounding out our management team; and I will come back to that in a few minutes.

2010 was also very strong commercially. We significantly improved AVONEX unit sales trends, particularly in the US, where we delivered what is now three straight quarters of US sales of around 170,000 units. We enrolled more than 14,700 patients in our two US STRATIFY trials, validating what we believe is strong interest among patients and physicians in TYSABRI risk stratification. And we filed applications to update US and EU TYSABRI lately to include anti-JC virus antibody status as an additional factor to help stratify PML risk.

It has been a strong year for our commercial organization, and I commend them on their achievements. One recent disappointment has been the negative opinion we receive from the CHMP on FAMPYRA. The CHMP was not convinced that the 25-foot time walk was an adequate measure of overall walking ability and had questions about the responder analysis used in the trial. We are of course disappointed by the decision, and we continue to believe strongly that the drug provides a meaningful benefit to many MS patients with walking impairment. We plan to appeal the decision, a process that takes typically six to seven months; and we will update you on the status of our appeal at an appropriate time.

Otherwise, the R&D organization made significant progress in 2010. We initiated two new Phase 3 programs, one for daclizumab in MS and the other for a prolonged half-life factor VIII in hemophilia A. We initiated human trials for our anti-LINGO antibody, which has the potential to repair demyelinated lesions in MS patients.

And we advanced our late-stage pipeline. In 2011 we anticipate Phase 3 data for BG-12, our first oral MS compound, and Phase 2 registrational data for daclizumab, a promising MS therapy with a unique mechanism of action.

In 2010 our business development team delivered three important new deals. First, the restructuring of our anti-CD20 agreement that strengthens our collaboration with Genentech and Roche; an acquisition from Neurimmune of early-stage programs that address three key central nervous system targets; and a collaboration Knopp Biosciences on a promising new potential therapy for ALS, a disease with a very high unmet need.

Together these accomplishments position us well for a strong performance in 2011.

Before I close let me take a moment here and talk about the two new additions to our senior management team. Steve Holtzman, the founder, chairman, and former CEO of Infinity Pharmaceuticals and former chief business officer at Millennium Pharmaceuticals, has a track record of doing creative and groundbreaking deals. And Steve will lead our Corporate Development organization.

Doug Williams, who was formerly head of research at Immunex when they brought Enbrel forward and was also formerly the head of R&D and later CEO of ZymoGenetics, has a great nose for knowing how to turn science into products. And Doug will lead our Research and Development organization.

Steve and Doug not only are extraordinarily talented but are great human beings as well. With the addition of Steve and Doug to Paul, Francesco, Al, and the rest of the team here, I believe that we now have the talent and the team to take Biogen Idec to the next level.

In summary then, 2010 was the beginning of a transformative period of Biogen Idec. We performed well and laid the groundwork for a successful 2011 by restructuring the organization, recruiting top talent, and putting in place a high-performance culture.

I will now hand the call over to Doug Williams, our new R&D head, who will give you his thoughts on what makes a great R&D organization and his approach to advancing our pipeline. Welcome, Doug.

Thank you, George. Before I begin I just wanted to say to those of you listening to the conference call and to my colleagues in the R&D organization that I am very excited to be joining Biogen Idec. My job is to build on the already solid science that Biogen Idec has and to advance and strengthen our R&D pipeline to deliver meaningful benefits to patients and add value to our shareholders.

As you know, I have been part of a large biotech, bringing Enbrel and Leukine to market. But I have also been part of an entrepreneurial company. Whether it is large or small, I see common denominators in both, underlying what makes a great organization. As a result, my focus for increasing R&D productivity will center on, first, bringing forward only those programs that offer real, differentiated benefits to patients.

There is already a strong commitment in the organization to this, but we need to improve upon our past R&D performance by accelerating high-priority internal candidates and assuring that we adequately resource them. We will be more disciplined in evaluating our pipeline programs.

Second, we need to improve decision making across the organization. I plan to build on the momentum that George has already begun by evaluating and streamlining program structures so that we can cultivate the entrepreneurial spirit and a sense of urgency in the Company.

Third, we need to be agnostic about which programs we pursue, whether they are internal or external. We will become a preferred partner for external emerging biotech companies to further strengthen our pipeline.

George, Steve, and I can translate our experiences leading small entrepreneurial companies into forging effective new partnerships to sustain our long-term growth and at the same time meeting the needs of our partners. We have a keen understanding of what elements in a collaboration will be important for our future partners, having spent many years in that position as the small company in collaborations with large pharma and biotech.

Ultimately I want to harness the passion for innovation that we already have here among the many talented scientists and inspire a new sense of focus, clarity, and urgency. In the short term, we will build on our historical strengths in neurology and immunology and support the late-stage hemophilia programs. We will further strengthen this Company by improving decision-making, assuring we effectively resource the highest priority and most differentiated programs and retaining our commitment to bringing true benefits to patients.

Now I would like to transition to updates from our late-stage neurology pipeline, which is clearly a priority for me and where we have a number of significant data events this year. We filed in December with the FDA and EMA proposed labeling to include anti-JC virus antibody status as another potential factor to help stratify the risk of PML. We're also working to make an anti-JC virus antibody assay commercially available sometime this year.

We expect data readouts from both of our Phase 3 studies of our oral MS treatment, BG-12, later this year. BG-12 is unique among oral MS therapies because it acts as a cytoprotective agent as well as having immune effects. The active agent in BG-12 has been used in psoriasis for many years and has an established safety profile. We believe this affords the opportunity to pursue combination therapy and have already initiated a Phase 2 study to explore this approach to treating MS.

We plan to initiate a Phase 3 trial of dexpramipexole for ALS, or Lou Gehrig's disease, in the first half of this year. Dex has received Orphan Drug Designation both in the US and EU, as well as fast track designation in the US. Dex has shown positive results in Phase 2, and this program is an important part of our strategy to advance therapies for unmet needs in other neurological diseases.

In the second half of this year we expect to present top-line data from SELECT, the first of two registrational trials for daclizumab. This drug targets the pathogenic T-cells in MS through a novel mechanism; and Phase 2 studies have shown solid efficacy and promising safety, with the convenience of once-monthly subcutaneous dosing.

As for our hemophilia programs, we continue to rapidly enroll patients in our registrational studies, with data readouts from both B-LONG and A-LONG expected in 2012.

Turning to RITUXAN lifecycle management activities, last week we and our partner Genentech, a member of the Roche Group, announced FDA approval for the use of RITUXAN as first-line maintenance therapy in patients with advanced follicular lymphoma who responded to initial treatment with RITUXAN plus chemotherapy. Our PDUFA date for RITUXAN and ANCA-associated vasculitis, a rare debilitating disease with no approved therapy, is April 19.

While I'll be focusing heavily on maturing these late-stage programs, I will also be looking into the earlier stage candidates to evaluate them for their future potential and therapeutic differentiation. So in summary, while I have only been here for three weeks, I feel very privileged to be part of a biotech company with such a tremendous legacy, one that has developed three drugs that have transformed the lives of thousands of patients.

Biogen Idec has great science and a team of individuals committed to making the Company the leading biotech enterprise in the industry. I have known and admired George and Steve for many years and now have the privilege of interacting with the rest of the management team. This is as solid a team as I have ever seen, and there is an unwavering commitment to take this Company to the next level.

With that I will pass the call over to Dr. Francesco Granata, our head of Global Commercial Operations. Francesco?

Thank you, Doug, and good morning, everyone. As George mentioned at the start of the call, our commercial performance ended the year on a high note. I am pleased to say that in 2010 we achieved our main goal, which was to stabilize our global MS patient share by abating the decline in AVONEX's share in the US and growing TYSABRI's share globally.

This contributed to our 10% product sales growth, driven by strong performances from both AVONEX and TYSABRI. Let me take a moment to discuss each franchise in more detail; and I am going to focus on market share and unit sales. Later in the call Paul Clancy will provide more information on revenue, including the impact on foreign exchange and pricing.

Starting with AVONEX, our performance in the US has improved tremendously. We have had three consecutive quarters now of sales around the 170,000 unit mark, after four years of unit sales declines. This is thanks to our strong commercial leadership team and overall organization, and thanks to the plan we have implemented.

Our 2011 goal now is to put our US AVONEX franchise back on an [oi-adiciary] market share growth trajectory.

Outside the US, after a period of decline we have achieved some AVONEX market share growth in Q4. Keep in mind that in a multibillion-dollar market, even small changes in market share can translate into significant revenue growth. Thus our focus on share.

AVONEX unit demand grew by a solid 6%, and the overall market continued to expand. AVONEX is now licensed in more than 85 countries and continues to gain share in many of them. In Japan, for example, AVONEX market share crossed the 30% threshold in 2010.

AVONEX full-year revenue growth in the Asia-Pacific region was 46%. In 2010, AVONEX was newly approved in South Korea, Hong Kong, Bosnia-Herzegovina, Lebanon and Panama.

Moving on to TYSABRI performance, 2010 worldwide in market TYSABRI revenue exceeded $1.2 billion, an increase of 16% versus 2009. We ended the year with 56,600 patients, an increase of 8,200 patients or 17% over 2009; and we continue to gain market share. Worldwide, net patient additions last quarter averaged 133 per week, down from 162 during the third quarter. This drop in patient addition is something we are watching, but nothing that we are overly concerned about.

In fact, new TYSABRI patient inflows in the US have been stable, a reflection of the confidence that physicians and patients have in the value of TYSABRI and an affirmation of the effectiveness of our commercial communication strategy. The slowdown was caused by an uptick in the US discontinuation, which would be the result of a number of factors including time on TYSABRI, treatment interruptions, JCV antibody status, and new competition.

An important point, however, is that TYSABRI continues to grow in the US. In fact, during 2010 we added 3,100 commercial US TYSABRI patients. This is very good, very strong growth.

In addition, there are now more than 14,000 patients who have been approved on the STRATIFY 2 trial in the US, which suggests a tremendous amount of interest in risk stratification, potentially unlocking TYSABRI growth over the midterm.

TYSABRI patients outside the US grew by 21% and units grew by 23%. During 2010, TYSABRI was approved in Russia, Argentina, Colombia, Guatemala, Honduras, Bosnia-Herzegovina, Morocco, and Panama, raising the total number of countries where TYSABRI is approved to more than 30. In December, TYSABRI launched in India.

Much has been made lately about competition from orals. We expect the overall market to grow as a result of a new entry, and we expect orals to gain market share and meet the needs of a segment of the marketplace.

However, to date as I just described, both AVONEX and TYSABRI have performed very well. We believe that the benefits of these products, coupled with our commercial strategy and the associated communication plans, will continue to make them compelling options for MS patients.

Our strong 2010 performance did not happen by chance. It was the result of a new way of working, combined with exquisite execution. In line with George's vision for Biogen Idec, we strengthened our global commercial infrastructure while eliminating unnecessary layers of management and clearing the way for a strong partnership between our strong global and our strong local operations.

We enhanced our capabilities in market access, global marketing, and other core commercial functions. We hired preeminent neurologist to run the medical affairs team, increased the size of that team, and invested in generating new scientific data for our products.

In addition, we have increased the size of our sales force, and we strengthened our leadership team by attracting some of the best talent in the industry. Another big accomplishment for us in 2010 was the restructuring of our RITUXAN sales and marketing operations, which allowed us to focus on our joint strategic role in the collaboration, while eliminating most of the overall operational responsibilities. This translated into improved market performance and profitability that will continue into 2011.

These priorities are critical not only to Biogen Idec's 2011 success but also to building a strong commercial foundation to accommodate future product launches. Overall then, we have much to be excited about how we are heading into 2011.

We entered the year with positive momentum in both AVONEX and TYSABRI franchises. We have identified opportunities to advance both franchises through better execution, global expansion, and in the case of TYSABRI risk stratification. And now we have the talent and the resources in place to translate these factors (technical difficulty) .

With that, I will now turn the call over to Paul Clancy, our Chief Financial Officer.

Thanks, Francesco. I'll start with our GAAP financials, which are provided in Tables 1 and 2 of the earnings release. Table 3 includes a reconciliation of the GAAP to non-GAAP results.

The primary differences between our GAAP and non-GAAP results for the quarter were $75 million related to restructuring; $53 million related to the amortization of acquired intangibles; and $28 million of tax impact on these items. For the year, the differences are outlined in the earnings presentation.

Our GAAP diluted earnings per share was $0.99 in Q4 and $3.94 for full-year 2010. Now I will move on to the non-GAAP P&L, which we believe better represents the ongoing economics of the business and reflects how we manage the business internally.

Our non-GAAP diluted earnings per share was $1.42 for Q4 and $5.15 for full-year 2010, which was -- as noted -- a strong finish to the year. Total revenue for the fourth quarter grew 8% to $1.2 billion and also grew 8% for full year to $4.7 billion.

Going through our product revenues, I will focus on adding financial detail to Francesco's comments, starting with AVONEX. Q4 AVONEX worldwide product revenue was strong, growing 10% to $654 million. AVONEX worldwide reached $2.5 billion in revenue for 2010.

In the US, where AVONEX grew to $1.5 billion, inventory in the channel ended at just over 2.25 weeks, up slightly from last quarter. Internationally, AVONEX product revenue was $270 million, an 11% increase over Q4 2009, and full year grew 12% to $1.27 billion.

The international AVONEX business modestly benefited from some tender market sales in the Middle East and Russia in Q4. International AVONEX revenue also includes a $4 million hedging gain in Q4 and $35 million in hedge gains for the full year 2010.

Moving to TYSABRI, worldwide collaboration sales were $333 million in the fourth quarter, growing to $1.2 billion for the year. For Biogen Idec, we recorded TYSABRI product sales of $242 million in the fourth quarter, a 12% increase over prior year. We recorded TYSABRI worldwide revenue for full-year 2010 of $900 million, a 16% increase.

In the US, Q4 TYSABRI product revenue to Biogen Idec grew 15% to $70 million, and grew 9% for the full year to $253 million. Q4 international TYSABRI product revenue was $172 million, a 12% increase over prior year, which included a $1 million gain from hedging. International TYSABRI revenue for full-year 2010 totaled $647 million, a 19% year-over-year increase which included an $11 million gain from hedging.

Now moving on to the RITUXAN collaboration revenues. Our revenues are broken down into three components.

First, our share of the US RITUXAN profits. US RITUXAN sales were $691 million in the fourth quarter, up 5% versus prior year. Q4 revenue was unfavorably impacted by some destocking, as inventory in the channel declined. Our profit share from that business was $215 million, up 12%.

For the full year, US RITUXAN sales were $2.8 billion, up 4%. And our profit share from that business was $848 million, up 10%.

Second, we received revenue on sales of rituximab outside the US. And in Q4 this was $34 million, down 26% as royalties from individual countries have expired. Revenues on sales of rituximab outside the US for the full year was $171 million.

Last, in the fourth quarter we were reimbursed $9 million for selling and development costs incurred related to RITUXAN. For the full year, we were reimbursed $58 million.

Moving to royalties, royalties were $45 million for the fourth quarter and $137 million for the year. In the fourth quarters, our royalties increase sequentially as a result of Angiomax moving through a sales-based royalty tier.

Now turning to the expense lines on the non-GAAP P&L. Q4 cost of goods sold were $100 million or 8% of revenues. Q4 R&D expense was $289 million or 24% of revenues. R&D expense for the full year totaled $1.2 billion, approximately 26% of full-year revenue.

In the fourth quarter, R&D expense benefited from the termination of the lixivaptan program, which was offset by a $10 million true-up payment to Roche related to the collaboration amendment. Absent these two changes we incurred no meaningful R&D milestones in the quarter.

Q4 SG&A expense was $273 million, a 15% year-over-year increase as we increased sales and marketing activities in support of AVONEX and TYSABRI and increased medical affairs activity.

Continuing down the P&L, our collaboration profit-sharing line totaled $68 million in expense for the quarter. Other income and expense was a loss of $5 million in Q4 as yields on our marketable securities have declined.

Our Q4 non-GAAP tax rate was approximately 22%, which was driven lower due to the R&D tax credit legislation late in the year. For full-year 2010 our non-GAAP tax rate was approximately 25%, which included the R&D tax credit and favorable discrete items in prior quarters.

Let me also call attention to the non-controlling interest line on the P&L. In Q4, we incurred a $25 million pretax charge related to the previously announced termination of our involvement in the lixivaptan program.

In the fourth quarter our weighted average shares were 243 million. Over the course of 2010, we retired 40.3 million shares related to the two previously communicated share repurchase authorizations. The ability to return cash to shareholders has been a testament to the robust cash flow generation of the Company.

We ended the year with approximately $2 billion in cash and marketable securities. Of note, approximately 47% of our cash and marketable securities is domiciled outside the US.

This brings us to our non-GAAP diluted earnings per share which were $1.42 in Q4 and $5.15 for full-year, representing a 25% increase over full-year 2009.

So 2010 was a year of strong financial performance. Commercial organization executed hard to achieve high single-digit revenue growth above our original expectations. We appropriately leveraged the P&L, with non-GAAP EPS growing by 25%; and our cash flow was exceptional.

Now I would like to outline our 2011 financial guidance, which will exclude any significant business development activities. Revenue in 2011 is expected to be between flat and low single-digit growth. Our estimate includes the impact of some notable items that are projected to reduce our revenue base.

First, the RITUXAN business will be impacted by the continuing expiry of ex-US royalties and a reduction in sales and marketing expense reimbursement. We expect RITUXAN rest-of-world revenue to total approximately $80 million to $100 million for 2011.

Second, we don't expect to benefit from the hedge gains we have experienced in 2010. Third, the impact of healthcare reform increases from approximately $50 million in 2010 to approximately $95 million in 2011 across all products. Nevertheless we expect these headwinds to be offset by continued TYSABRI revenue growth.

We expect some upward pressure on cost of goods sold as we won't benefit from some of the one-time upsides in 2010. R&D expense is expected to be approximately 22% to 24% of revenue. SG&A expense is expected to be approximately 20% to 21% of revenue, reflecting the savings from the change in RITUXAN sales and marketing structure, offset by some commercial investments to compete in the new landscape.

Our outlook is designed to capture the economic upside from the November restructuring, aiming to achieve a yearly run rate savings of $300 million by the second half of 2011. As a result, we expect the combination of R&D plus SG&A expenditures to decline by high single-digit percent.

Our effective tax rate, both GAAP and non-GAAP, is expected to be between 26% and 28% of profit before tax. Non-GAAP diluted earnings per share is expected to be above $5.70; and GAAP diluted EPS expected to be above $4.82.

We expect CapEx in the range of $200 million to $220 million. Overall the financial plan is designed to allow resources to move forward our late-stage pipeline, defend the commercial business, and drive double-digit non-GAAP earnings per share growth.

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

Okay. Thanks, Paul. Look, so we had a good 2010 and we intend to build upon that now as we move through 2011.

We have five key goals for 2011. First, we plan to maximize our financial performance without compromising the long-term health of the business. Our 2011 goal is to deliver double-digit earnings growth, realizing the economic benefits of the restructuring we did last fall.

Second, we plan to grow our share of the MS market. Our 2011 goal is to grow AVONEX share in the ABCRE market and to continue to grow TYSABRI's share overall.

Third, we plan to aggressively pursue the serological assay and TYSABRI risk stratification effort. Our 2011 goal is to provide these important insights to the neurology community subsequent to a label update.

Fourth, we plan to aggressively advance the late-stage pipeline. Our 2011 goals include filing an NDA for BG-12; completing enrollment in the PEG interferon Phase 3 trial; completing and communicating the final results of the SELECT daclizumab Phase 2 registrational trial; continuing to advance the Phase 3 daclizumab DECIDE trial; initiating the dexpramipexole Phase 3 trial; and completing enrollment in our factor VIII and our factor IX pivotal trials.

In addition, we'll aggressively explore external opportunities to enhance our portfolio. And we now have in place a team that can do that thoughtfully and effectively.

Fifth and finally, our plan calls for continuing to drive true cultural change at Biogen Idec, building on a new sense of urgency and nimbleness at the Company.

So before I close I want to thank all of Biogen Idec's employees for their contributions, without which we couldn't achieve our goals, and for the positive and productive attitudes with which they have embraced our new vision. We have got quite a bit to be excited about and are looking forward to 2011 and beyond.

So with that we will close our remarks and open up the call for questions. Kia?

Thank you, George. Operator, we're ready to open up the call for Q&A. We ask that you please limit yourself to one question and then reenter the queue for follow-up questions. Please state your name and your company affiliation. Operator, we're ready for the first question.

Eric Schmidt, Cowen and Company.

Congratulations on the nice end to a good year. Paul, I am wondering if you are expecting to get royalties on Benlysta in 2011, if that is part of your guidance, and what royalty rate you might be entitled to.

That is a royalty that we are entitled to. It is a small single-digit. It is kind of embedded in there; it isn't a significant mover of the determination of our revenue outlook for next year. But we are still nevertheless cheering for a great performance for Benlysta over the long term.

Mark Schoenebaum, ISI Group.

Hey, guys. Good to hear Steve's voice on the line.

It is Doug.

Oh, Doug? Sorry, I thought Steve was on. Sorry. Quick questions.

One, Paul, what are you expecting for AVONEX volume growth in 2011? What is embedded into the guidance?

Two, what is the budget for BD now that you have named the team head? Can you give us any kind of framework to think about that? Does that $300 million in annualized cost savings exclude that? Thanks.

Let me take that and then I will ask George to give a broader perspective on business development. Look, in AVONEX our objective -- I kind of point you to that -- is to begin to move, take this, what we have done in terms of abated the share loss in the ABCR market and actually move it towards share gains. It is kind of unclear whether or not that segment will actually grow or not; but that is our objective, it is to actually try to begin share gains across the world in the ABCRE segment of the market place.

I don't think our expectations are meaningful unit gains when you combine what is going on in the United States with natural unit growth that continues outside the United States.

The $300 million target savings is pure savings. I think our thinking on that is that as we have brought in new people -- Doug, Steve as well on the business development front -- we look to be agnostic as we have talked about in terms of pursuing internal or external opportunities; and we will make trade-offs along the way. George?

Yes, look, the $300 million savings as well as the EPS target that Paul said earlier, both have in them a certain amount of money for business development transactions. Certainly not going to go into what that is. Many partners might be listening to the call here.

But there is a certain amount of money in there; and we, as Paul said, I think all of us are agnostic. We need the best pipeline we can get.

We have several interesting compounds in the pipeline already. We need to strengthen it further. We will do that both by evaluating internal and external opportunities.

Basically we view R&D and business development as one big budget, and that is the amount of money we have in order to build and move forward our pipeline. And we will try and use it optimally.

Rachel McMinn, Bank of America.

Two more R&D-oriented questions. I am wondering if you can say on STRATIFY 2 -- you have talked about how many patients are in this study. Can you give us a sense of how many PML events have been recorded in the study so far? And/or when you expect to actually have data from the study?

Then secondarily on BG-12 you have talked about using this in combination. But obviously the initial study is versus placebo. I am just trying to gauge what you think -- obviously more than just having a statistically significant result, but what would be a good result that what get you excited about commercializing it as monotherapy? Thanks.

Rachel, this is Paul. Let me just answer the first part of that and I will turn it over to Doug and Al on the other specifics. Just on the STRATIFY 2, I mean there is certainly interest -- as we understand, as we all have interest, in trying to understand what patients are doing as they get their STRATIFY 2 information. That is an open label. Physicians and patients in essence get their sero-positive or sero-negative status.

We are not looking at that to try to preserve the integrity of that trial for the time being. So when the information is ready to be communicated broadly to the medical community, we will do that. But I think we are trying to make this study very, very important for the long-term health of TYSABRI. Turn it over to Doug and Al.

Yes, I think as far as the magnitude of the response that we would like to see in the combination studies, it is sort of hard. We will be about the magnitude; that is important. But I think what is key here is that we have got different mechanisms of action that we are combining.

We have got an agent that has neuroprotective effects and some modest immunomodulatory activities. We will be looking at that in combination with the interferons as well as Copaxone. I think obviously we would be looking at improved performance in terms of EDSS and the usual parameters that we measure in MS studies.

Robyn Karnauskas, Deutsche Bank.

I was just -- in thinking about the market growth for AVONEX and TYSABRI I was wondering if you could comment on what kind of assumptions you think you have around pricing. You took a big price increase. How long will that be able to continue? Because you said repeatedly that you don't think there is a lot of pricing power left in the market.

And the second question is really about volume growth, just to elaborate a little bit more. What is -- how much volume growth are you really assuming in your guidance?

Yes, this is Paul. Robyn, for planning purposes and going forward we don't assume pricing. So specifically on the guidance, what is embedded is simply what has already been taken in the marketplace.

What we see in the marketplace with respect to overall market growth is low single digit in the United States for the market, and higher single digit outside the United dates.

I think one thing to point to, I think, that is interesting is that we have seen with the new entrant that it has the potential to expand the market. So we don't per se have that built into our forecast, but that is a heartening early indicator in a dynamic in the marketplace.

Yaron Werber.

I have two quick questions. One is just a follow-up on pricing. If you actually calculate the price of TYSABRI, regardless of the price increases, the actual price increase that you are able to book is much smaller than the actual price increase. So can you help us understand exactly what is going on there? Is there big rebates or big gross to net adjustments?

The price of AVONEX you have actually noted was down 2% versus Q4 '09, again despite price increases. So just trying to understand that dynamic.

Then secondly, it sounds like your guidance assumes pretty much a flat share count in 2011. So are you not expecting any share buybacks, or is that upside? Thank you.

Yes, this is Paul. I will start with the back end of your questions. The guidance assumes essentially where we ended the year with respect to shares. So on an ongoing basis we essentially assume share stabilization.

The use of cash and the robust cash flow generation of the Company puts us in this very enviable position. We will continue to really review strategic opportunities for the Company. We have a new team here in place that is very adept and very experienced at that and really trying to build and enrich the pipeline.

If we have excess cash flow, we will towards returning that to shareholders in the most appropriate way. But I think the way you framed it as the potential of upside is probably a decent way to think about it. We just don't want to get the skis too far ahead of our nose on that one.

With respect to pricing, the dynamic that you may be seeing is kind of an FX or the hedge gains that got done on a year-to-year basis. So when you strip that apart, I do think on the AVONEX business we are seeing pullthrough. Then on the TYSABRI business, I think that it is accurate; it is a little bit less of a realization of the price changes.

Geoff Meacham, JPMorgan.

A question for you on new starts in the JC virus assay. So I am curious if you guys anticipate more or less a warehouse effect of TYSABRI candidates from the assay for approval. Or do you think that you could have -- the other question here is how frequently do you think that you could test on a yearly basis? What would be the recommendation and then the net effect of that on discontinuations? Thanks.

So far what we have seen taking place in the marketplace, in the market, is that the patients to whom TYSABRI is prescribed have remained pretty stable. And the conversion of prescription into actual patients on treatment remained pretty stable in quarter 4. What we have seen is a slight increase in the discontinuation; and in particular we have seen from the past quarter some changes in drug -- more now alternative dosing than drug holidays.

We don't see for the moment a warehousing effect as you mentioned. We think that through the plan of communicating our risk stratification we shall outline what is the profile of the risk-benefit of TYSABRI in the virus-negative patients, and what should be the yield or the appropriate use in virus-positive patients, for which we still think that there is room for TYSABRI to be used -- as by the way, testified by the confidence of physicians in continuing prescribing TYSABRI.

Geoff, in terms on the frequency of repeat testing, we believe that annually is reasonable. But we will see what the regulatory authorities -- whether or not they agree.

Thomas Wei, Jefferies.

I'm a little bit confused about the growth dynamic characterization that you gave for TYSABRI. So just based on the utilization numbers during the fourth quarter, you can calculate the gross patient adds. Those were 3,300. Then discontinuations were only 1,600 for the net new patient number of 1,700. So relative to the third quarter if we look at things sequentially, that actually means that the fourth-quarter softness wasn't really driven by an increase in discontinuations. That looks relatively steady over the last few quarters.

It was really driven by softness in new starts. Is that the right way to look at the data on a sequential basis? Can you just share with us how those trends might differ geographically?

Well, basically the drop in new patients is mainly driven by discontinuation. Again, we didn't see in the US any softening of the TOUCH form, and we didn't see any significant decrease in the transformation of TOUCH forms into prescriptions. So we think that is the largest part of the drop in net patients is driven by discontinuation.

Again, the discontinuations were mainly either patients going into drug holidays or alternative dosing. We have seen in quarter 4 a slight change on these two segments, an increase in alternative dosing and a slight decrease, proportional decrease in drug holidays. So does it answer your question?

Thomas, let me -- the other thing I would add is we always talk about and we kick around these numbers, that there is such precision. We feel very comfortable that the data in the United States -- both on TOUCH forms, which are kind of an analog to prescriptions as well as discontinuations -- are pretty robust. And that when we articulate the US information it is based off of the risk management program and it is pretty good.

Outside the United States, when we provide total worldwide information that is actually a triangulation of information including shipments and units and country-by-country data. And that would extend also to the patient utilization numbers that you referred to at the beginning of your math, I think, the 77,000 number.

So I think we just want to be guarded by taking those and then driving it down to very, very specific trends. These are kind of broad, particularly outside the United States, broad kind of unit trends and patient trend numbers.

Matt Roden, UBS.

Thanks a lot for taking the question; it is on TYSABRI risk stratification, really, how to best communicate that information down the line. So should we be expecting out of STRATIFY 2 a PML rate in sero-negative patients? And if so, what sort of differential rate do you think would be required to convince regulators and the MS community to drive a broader uptake?

Yes, we would like to eventually get to an incidence figure in the antibody-positive population as well as the antibody-negative population. In terms of what the regulators will require, I would rather not comment on that because we are right in the middle of our regulatory process.

We have had conversations with them and we have filed, so we are making progress. But probably best not to comment.

Yes; and remember that the population is not just positives and negatives. There are two other risk factors already on the label, duration and prior immunosuppressant use. So we would like to be able to let patients and physicians know what their relative risk is, depending on what set of risk factors they have, the currently two that are on the label, JC virus antibody status and hopefully additional risk factors in the future, all right?

But we can't really comment on the specifics of that as we go through the regulatory process. That is certainly the goal.

Josh Schimmer, Leerink Swann.

Paul, just wanted to circle back on the price increase question. What are the specific factor or factors that ultimately cap your ability to take additional price increases going forward?

Oh, gosh, Josh. I mean I actually have no thought to add to it. So we don't plan for it in terms of anything for the next year's guidance as well as going forward; we kind of plan at a very low level.

Can I ask, had you planned in 2010 for price increases?

No, same thing.

Okay. Thanks very much.

Yes, sorry I can't add too much more color.

That's okay. Thank you.

Jason Kantor.

Also a question on TYSABRI. With the proposed label change, the commercial JC virus test, and STRATIFY results, how are you seeing that all come out over time? What sort of assumptions do you have in terms of what kind of uptick those things might cause in your guidance?

Then a related question, what percentage of the people that are already on TYSABRI have been tested to date for JC virus?

Well, over time, to get back to the last question, we would like to be able to provide information to patients and physicians about the relative risk, which we anticipate will be obviously lower in the JC-negative population than in the JC-positive population, so that patients can make the appropriate decisions together with their physicians.

So we would -- the risk-benefit of TYSABRI obviously will be different for people who have different risks; and so they can make the appropriate decision. We imagine over time potentially an increase in the negative population. We want to make sure we get that on the label and that we do this in a way that is obviously consistent with all of the guidelines and regulations.

So far, there are 13,700 patients who have been tested on STRATIFY 2. So that is the total. There is another 1,000 on STRATIFY 1. So that is a total number of TYSABRI patients or of patients who know their JC-virus status.

Sapna Srivastava, Goldman Sachs.

There have been many questions asked on volume and pricing, and I am not sure if I still fully get it. Could you just help me understand just ex-US what are you seeing in terms of AVONEX and TYSABRI volumes? And how should we think of the pricing relative to the US and this X volume growth that you are forecasting?

Outside the United States, growth of volumes of AVONEX was 6%; and for TYSABRI the volume growth outside the United States was around 17% -- around 17%. No, excuse me, outside the United States, it was 23% in volume growth. So continue to have a strong -- both products continue to show a very promising and interesting growth in terms of volumes.

As far as price is concerned, as usual there is much more price pressure in Europe than in the United States. We think we have got a large proportion of the possible price pressure on both products in 2010, which could translate into a softer 2011 price erosion outside the United States.

We have on the other hand strength in our global market access capability in order to ensure that through appropriate value proposition and discussion with the payors we will be able to further limit the price erosion outside the US [system].

Geoff Porges, Bernstein.

Just a couple of questions for Doug. Welcome to the seat on the call. Doug, just a couple of dosing questions.

Looking at PEGylated interferon, you have obviously had a chance to look at the data. What do you think you are likely to be able to get away with in terms of dosing for PEG interferon beta?

And similarly, for factor VIII, I see you announced that you started a Phase 3 trial there. Could you talk about the dosing schedule you are going ahead with?

Lastly, just related to your views of the portfolio, I know it is early days; but you have been successful in the past at attracting, acquiring interest in R&D assets before, and I think that has not gone unnoticed.

Anything that you think would be a candidate for externally partnering in terms of generating revenue and bringing a partner to the table, rather than actually making the investment on the Biogen Idec side? Thanks.

Let me see if I can get these in order for you. From the PEG interferon perspective, I think we are going to be able to see that data fairly. So I'll wait until we see the data before I predict what the answer is going to be to that question. But certainly I think it is an important part of our strategy of building on the AVONEX franchise to come up with a more convenient dosing schedule than what we currently have. And we are enthusiastic about having that data.

As far as the factor VIII situation is concerned, I think the information that we have available to us at this point would suggest that the dosing frequency should be about half of what we see with the existing factor VIIIs out there. So reducing the dosing by half I think is what our anticipated dosing frequency is going to be in that study.

Then the third question is attracting talent?

Joel Sendek, Lazard Capital Markets.

I had a question about FAMPYRA. So I was wondering if you could potentially share any of your strategy for the appeal. For example, is there any additional data you could submit or how can you reference the commercial success in the US in support of the appeal?

Then if you can give us more information on exactly what will happen along the six to seven months, and what will we hear, and when? Thanks.

Let me take a crack at it, and then maybe George can finish up. You know, I think the key thing to remember is that there's two positive Phase 3 trials. So the data are quite robust, and as a clinician ambulation is very important in multiple sclerosis. So I think those are the things that we need to point out.

The other thing is that there is a patient reported outcome, a validated outcome, called MSWS-12, which confirmed the fact that the increase of 25% from baseline in walking speed in the responders is clinically meaningful.

So these are the things that I think we need to point out and make sure that the CHMP fully understands the data.

And just to give you a sense of how the timeline plays out and how we get to six to seven months, essentially we have to get a rapporteur and co-rapporteur named. We have 60 days to actually submit essentially our response to the initial action of the regulatory agency. They then have 60 days to decide whether they are going to uphold the original rejection or essentially take our position on this.

And then there is an additional 67-day period whereby the central body has an opportunity to vote on this and give a final recommendation. So that is how we get to the all-in six- to seven-month timeline.

We have time for one last question.

John Sonnier, William Blair.

Thanks for squeezing me in. George, I appreciate the goal to be agnostic in your business development pursuits. But I guess with Doug onboard, why wouldn't you alter your strategic direction a bit more towards a broad focus in immunology than you would have done otherwise? Thanks.

Yes, that's a good question, John. Look, Doug has obviously I think demonstrated over the years his ability to be very discerning among targets in developing drugs that have an impact on the immunological system, and that will be part of our focus as we go forward. It has been and that will continue to be part of our focus.

I think Doug, together with Al and other people, have a broad scientific insight that spans not only immunology but also neurology and the other area we are interested in.

So certainly we will continue to focus on immunological things and the anti-inflammatory aspects. But not only that. Obviously we have a big focus on neurology as well.

So mostly we're happy to have Doug here as a very seasoned, very successful R&D head who will not only take our internal projects forward but I think help us in a very thoughtful analysis of opportunities we see on the outside.

That was our last question. Thank you for your participation in today's call. You may now disconnect.