Biogen Inc (BIIB) 2014 Q4 法說會逐字稿

Good afternoon.

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

At this time, I would like to welcome everyone to the Biogen Idec fourth-quarter and year-end 2014 earnings conference call.

(Operator Instructions)

Carlo Tanzi, Director of Investor Relations, you may begin your conference.

Thank you, and welcome to Biogen Idec's fourth-quarter and full-year 2014 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'll discuss today.

Our GAAP financials are provided in tables 1 and 2. Table 3 includes a reconciliation of our GAAP to non-GAAP financial results.

We believe non-GAAP financial results better represent the ongoing economics of our business and reflect how we manage the business internally.

We have also posted slides on our websites that follow the discussions related to this call.

I would like to point out that we will be making forward-looking statements, which are based on current expectations and beliefs.

These statements are subject to certain risks and uncertainties, and our actual results may differ materially.

I encourage you to consult our SEC filings for additional detail.

On today's call, I'm joined by our Chief Executive Officer, Dr George Scangos; Dr Doug Williams, EVP of Research and Development; Tony Kingsley, EVP of Global Commercial Operations; and our CFO, Paul Clancy.

Now, I'll turn the call over to George.

Thanks, Carlo.

Good afternoon, everyone.

Thank you for joining us today.

I'm sorry we had to move the call at the last minute, but as you can imagine, things were a little chaotic yesterday morning in Boston.

I think we have optimally positioned it between the blizzard and the [flight gate] discussions that will start in a couple of days.

So you guys have something to fill the void.

Look, 2014, I think, was a very successfully year for Biogen Idec.

We brought several new therapies to the market.

We had encouraging data from some of the compounds in our pipeline.

And importantly, we delivered 40% revenue growth and 54% non-GAAP EPS growth, compared to 2013.

In 2014, we launched four new products in two distinct therapeutic areas -- think it's a real accomplishment for a Company of our size.

TECFIDERA is in its second year on the market in the US in 2014.

We successfully launched TECFIDERA in the EU and are continuing to expand its presence across the globe.

TECFIDERA is now the most prescribed MS therapy in Germany and the most prescribed oral therapy in the US, with more than 135,000 people having been treated worldwide.

As you all know from the IMS data, TECFIDERA did experience moderating growth in Q4, which we believe is due to a variety of factors that Tony will discuss in more detail.

However, we believe that TECFIDERA will continue to grow in the US and will grow substantially in international markets, so that we anticipate that 2015 will be another year of meaningful growth for TECFIDERA and for our portfolio of MS products, in general.

PLEGRIDY was approved for the treatment of relaxing MS and launched in both US and the EU in the second half of 2014.

Although we're early in the launch, PLEGRIDY appears to be gaining rapid adoption.

PLEGRIDY is an important part of our strategy to maintain our leadership position in the interferon segment of the MS market.

We also obtained approval and subsequently launched our hemophilia products in the US in 2014 -- ALPROLIX for hemophilia B and ELOCTATE for hemophilia A. ALPROLIX and ELOCTATE represent the first meaningful innovations in the treatment of hemophilia in many years and reflect our mission to help bring new therapies to patients who are under-served.

In our pipeline, we advanced several potential therapeutic options across a broad set of disease areas.

Along with our collaboration partner, AbbVie, we reported positive results from the Phase III trial of ZINBRYTA for relapsing forms of MS and expect to file for marketing authorization in the first half of the year.

We believe ZINBRYTA has the potential to become another important treatment option to serve the diverse needs of MS patients.

Our collaboration partner, Isis, advanced the spinal muscular atrophy program, SMNRx, to Phase III in both infant and childhood forms of the disease.

In December, we announced positive top-line results from a Phase Ib trial of BIIB037 in patients with Alzheimer's disease.

These data are early, but we believe they are compelling, and we are aggressively working to advance this program into Phase III.

And earlier this month, we announced Phase II results for anti-LINGO antibody in acute optic neuritis.

We believe that the data strongly suggests that our anti-LINGO antibody induced remyelination.

And we're now focused on the data from the MS trial, which we expect to have in early 2016.

Throughout 2014, we also continued to build our research and development capabilities by hiring a number of highly accomplished researchers from both academia and industry.

And I believe that we now have truly world-class capabilities across the breadth of R&D.

That has been a goal for a number of years, and it's rewarding too have made such significant progress this year.

In 2014, we increased the number of promising assets in our pipeline through strategic acquisitions and collaborations with a number of partners, including Sangamo, Eisai, and, most recently, Convergence and San Raffaele Hospital.

We also made significant progress in advancing our internally-developed candidates into the clinic, including BIIB061, an oral compound in Phase I development with the objective and enhancing remyelination.

Additionally, Phase I studies are ongoing for several novel formulations of dimethyl fumarate, the active ingredient of TECFIDERA, with the goal of achieving once-a-day dosing and potentially reducing side effects.

We've not yet analyzed the data from these trials, but our hope is to move one or more of these formulations forward towards approval.

Our biosimilar joint venture, Samsung Bioepis, continues to make important progress toward our objective of becoming a leader in the development of biosimilar pharmaceuticals.

The EMEA recently accepted our application for approval of a biosimilar version of etanercept, and we believe that we're making excellent progress on other biosimilar molecules as well.

Through this JV, we intend to develop high-quality biosimilar pharmaceuticals by utilizing our world-class protein engineering and biologics manufacturing capabilities.

It's our belief that biosimilars will become increasingly important in the role of healthcare, and we believe that we're well-positioned to contribute to this evolution.

So all in all, it was a very busy and a very good year.

And with that, I'll now pass the call along to Doug.

Thanks, George.

Biogen Idec has a strong and increasingly diverse pipeline.

I'd like to discuss several of our ongoing programs and the progress we're anticipating during the upcoming year.

Our Phase III study of TYSABRI in secondary progressive MS, known as ASCEND, is fully enrolled.

There's no effective therapies available today for this progressive and debilitating form of MS. ASCEND is a two-year, placebo-controlled study in 890 patients that will determine whether or not TYSABRI has an impact on disability progression, as measured by a novel composite endpoint.

The study is being conducted under a special protocol assessment with the FDA, and we expect the data from ASCEND in the second half of 2015.

We're also conducting ACTION, which is a Phase II study evaluating TYSABRI in acute ischemic stroke.

In this study, we're examining if blocking the lymphocytic infiltration, known to occur in the brain following stroke, can reduce the extent of injury.

ACTION is a placebo-controlled study in 160 patients where brain imaging is used to measure the change in infarct volume, compared to baseline.

ACTION is fully enrolled, and we expect data later this year.

We've previously discussed our positive top-line interim Phase Ib results for BIIB037 in Alzheimer's disease.

Additional BIIB037 study data will be presented at the upcoming ADPD meeting in March.

The Phase Ib BIIB037 study remains ongoing, and our current plan is to initiate our Phase III program later this year.

We also recently announced Phase II data from the anti-LINGO RENEW study in acute optic neuritis.

We hope to present full data from RENEW at the upcoming American Academy of Neurology meeting in April.

A second, ongoing Phase II study, evaluating anti-LINGO in MS patients, is fully enrolled, and we anticipate obtaining results in 2016, as previously disclosed.

We continued to develop Neublastin as a novel biologic therapy for neuropathic pain.

Our Phase II study in patients with painful lumbar radiculopathy will evaluate whether or not Neublastin has an impact on pain intensity scores.

The study is now fully enrolled, and results are anticipated in the second half of this year.

Enrollment in our STX-100 Phase IIa study in idiopathic pulmonary fibrosis continues.

The study is currently enrolling the fourth and, potentially, final patient cohort.

Through our collaboration with Eisai, we've obtained co-development and co-commercialization rights to two Alzheimer's disease candidates -- BAN2401, an anti-amyloid beta monoclonal antibody, and E2609, a small molecule BACE inhibitor.

BAN2401 is enrolling patients in Phase II, and Eisai has initiated a Phase II study with E2609 in patients with prodromal AD and mild cognitive impairment due to Alzheimer's disease.

We've also made progress in strengthening our pipeline through business development.

Earlier this month, we announced our agreement to acquire Convergence, a leader in the development of therapeutics for neuropathic pain.

Convergence's lead program, CNV802, is a small molecule inhibitor of the Nav1.7 sodium channel that's being developed for trigeminal neuralgia.

Following completion of the acquisition, we expect to work expeditiously to advance 802 into registrational clinical programs.

This morning, we announced a collaboration with San Raffaele Hospital in Milan, Italy, to develop gene therapy for both hemophilia A and B. Our collaborators at San Raffaele are leaders in the use of lentiviral-based gene therapy approaches.

While this technology remains in early research, we believe gene therapy has the potential to provide lifelong benefits to patients with hemophilia.

We look forward to continuing to drive our R&D progress during the year.

I'll now pass the call to Tony.

Thanks, Doug.

We launched four new products in 2014.

And I'm proud of the execution of the commercial organization.

In 2014, we continued to grow our global MS market share, fueled by the continued roll-out of TECFIDERA worldwide, improving performance from TYSABRI, and continued strength from our interferon business, including the recent launch of PLEGRIDY.

Over the past six months, our data suggests that our portfolio has consistently captured roughly half of all newly diagnosed patients and switch patients in the US.

TECFIDERA continued to demonstrate its strong performance, which we believe is a testament to its attractive product profile, combining strong efficacy, favorable safety and tolerability, and the convenience of oral administration.

We believe TECFIDERA is on track to become the most-prescribed therapy for MS worldwide.

In the US, we saw continued growth through the fourth quarter, with its market share near 20%.

As you may have seen through IMS, we observed moderating new starts for TECFIDERA in the fourth quarter.

We believe several factors have impacted the recent performance of TECFIDERA, including a decline in the overall market switch rate, the US label update in December, and the recent launch of PLEGRIDY, which is capturing some interferon switches that otherwise may have gone to TECFIDERA.

Importantly, we have not noticed a meaningful change in TECFIDERA discontinuation rates.

We are actively engaging physicians to ensure proper education on the label update.

And we believe in the continued growth potential of the product in the US.

Outside of the US, we're continuing to see strong uptake in multiple launch markets, matching or exceeding the pace that we've seen in the US.

In November, we launched TECFIDERA with full reimbursement in the UK.

And as of January, we secured reimbursement in both Italy and Spain.

We continue to expect to achieve full reimbursement across the other major European markets by the end of the year.

We believe that PLEGRIDY may become the interferon of choice, based on its combination of efficacy, a favorable safety profile, and every-two-week dosing, with a convenient subcu auto-injector.

To-date, roughly half of PLEGRIDY prescriptions have come from AVONEX switches.

The other half have come from other therapies and from newly diagnosed patients, which, we believe, is a positive message about the therapy's broad appeal.

The roll-out of PLEGRIDY is expected to continue across Europe in 2015, with launches in most of the major markets anticipated by the end of the year.

TYSABRI continues to perform well, as the therapy enjoyed its third consecutive quarter of positive net new patient ads, even as the oral therapies have continued to gain share.

We believe that this performance is due to the high level of efficacy that TYSABRI provides to patients.

Turning to our hemophilia products, we continue to believe that reduced infusion frequency is the largest unmet need for the hemophilia community and that ALPROLIX and ELOCTATE meaningfully address this burden.

We are encouraged by the strong uptake of ALPROLIX in the US.

We believe its value proposition to patients has been relatively straightforward, as the majority of patients starting on ALPROLIX have been choosing the once-weekly prophylaxis dosing schedule.

ALPROLIX ended the year with its market share in the low teens, with over 60% of hemophilia treatment centers prescribing the product.

The US launch of ELOCTATE has been proceeding to plan, ending the year with share in the mid-single digits, with over 60% of hemophilia treatment centers prescribing after two quarters on the market.

As we expected, the hemophilia A market has been more competitive than hemophilia B. Acquiring additional patients will require sustained educational and promotional efforts, but we believe we have the ability to execute on this strategy.

I will now pass the call to Paul.

Thanks, Tony.

Our GAAP diluted earnings per chair were $3.74 in the fourth quarter and $12.37 for the full year.

Non-GAAP diluted earnings per share in the fourth quarter were $4.09 and $13.83 for the full year.

Total revenue for the fourth quarter grew 34%, to approximately $2.6 billion, and grew 40% for the full year, to $9.7 billion.

Global fourth-quarter TECFIDERA revenue was $916 million.

We recorded revenues of $743 million in US and $173 million outside the US.

TECFIDERA US sales included 14 shipping weeks in the fourth quarter.

This added approximately $50 million to US sales.

Foreign exchange, offset by hedging, weakened TECFIDERA revenue by approximately $7 million for the quarter versus prior quarter.

Our estimate is that we ended the quarter with approximately 2 1/2 weeks of inventory in the US wholesale channel, a similar level to last quarter.

For the full-year, worldwide TECFIDERA revenues were $2.9 billion, consisting of $2.4 billion in the US and $483 million in sales outside the US.

Interferon revenues, including both AVONEX and PLEGRIDY, were $777 million during the fourth quarter, which includes $528 million in the US and $249 million in sales outside the US.

For the full-year, worldwide interferon revenue grew 2% to $3.1 billion, consisting of $2 billion in the US and $1.1 billion in sales outside the US.

AVONEX US sales included 14 shipping weeks in the fourth quarter, which added approximately $35 million to US sales.

Foreign exchange, offset by hedging, weakened Q4 interferon revenue by approximately $9 million versus prior quarter.

TYSABRI worldwide revenue was $484 million in the fourth quarter.

These results were comprised of $266 million in the US and $218 million internationally.

TYSABRI US sales included 13 shipping weeks in the fourth quarter versus 14 in Q3.

Foreign exchange, offset by hedging, weakened TYSABRI revenue by approximately $9 million for Q4 versus Q3.

For the full year, worldwide TYSABRI revenue was approximately $2 billion, of which, US revenue was $1 billion and $934 million internationally.

Moving to hemophilia -- ALPROLIX revenue in Q4 was $40 million and $76 million since being launched in May.

And ELOCTATE revenue in Q4 was $37 million and $58 million since being launched in July.

Turning to our anti-CD20 unconsolidated joint business, which includes RITUXAN and GAZYVA US profit share as well as the profit share on royalties on sales of rituximab outside the US.

We recorded $305 million for Q4 and $1.2 billion for the full year.

Royalties were $31 million for Q4 compared to $67 million in the prior quarter.

Our royalty revenues from Angiomax ended on December 15 with the patent expiration.

For the full year, royalty revenues were $177 million.

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

Q4 non-GAAP cost of goods sold were $297 million, or 11% of revenue.

For the full year, non-GAAP COGS were $1.2 billion, or 12% of revenues.

Q4 non-GAAP R&D expense was $499 million, or 19% of revenue, which includes approximately $50 million in milestones and other payments related primarily to our JV with Samsung Bioepis and our recent collaboration with Google X Life Sciences.

For the full year, non-GAAP R&D expense was $1.9 billion, or 19% of revenue, an increase of 31% over 2013.

Q4 non-GAAP SG&A expense was $573 million, or 22% of revenue.

In the full year, non-GAAP SG&A expense was $2.2 billion, or 23% of revenue, an increase of 30% over 2013.

Our Q4 non-GAAP tax rate was approximately 24% for the fourth quarter, as we benefited from the reinstated R&D tax credit.

Our full-year tax rate was approximately 25%.

During the quarter, we made a $200 million CVR payment to the former shareholders of (inaudible).

And in Q4, as part of our ongoing share stabilization plan, we repurchased 1.7 million shares for a total of approximately $527 million.

Our weighted-average diluted shares at end of the year were $237 million, and we ended the year with approximately $3.3 billion in cash and marketable securities, split approximately 50/50 between the US and ex-US.

This brings us to our non-GAAP diluted per-share, which again, were $4.09 for the fourth quarter and $13.83 for full year, representing a 54% year-over-year increase.

Let me turn to our full-year 2015 guidance.

In 2015, we plan to provide annual guidance in one update per year during our second quarter earnings.

This modest change is intended to synchronize with our internal planning processes and ensure a continued focus on the long-term.

Now, starting with revenues.

We expect revenue growth between 14% and 16%.

Before I provide color on the products, I'd like to highlight three factors.

First, our plan assumes exchange rates at the recent spot rate.

Second, as a reminder, we expect a year-over-year decrease in royalty revenue of approximately $130 million as the royalties on Angiomax sales have expired.

Third, our plan assumes our one year of free pricing in Germany for TECFIDERA will end this March and move to a lower price.

Now, let me characterize how we're thinking about each of our products.

Our plan assumes TECFIDERA will represent the largest contributor to our overall revenue growth.

In Europe, our plan assumes TECFIDERA will have full reimbursement in the majority of the EU market.

For TYSABRI, we believe the therapy will continue on a positive patient growth trajectory.

We continue to be in discussions with AIFA to resolve the outstanding period, yet a settlement is not included in our 2015 guidance.

We believe we're well-positioned with PLEGRIDY within the interferons.

And, combined with AVONEX, our plan assumes we'll continue to gain share within this declining segment.

For our MS therapies, our plan assumes a constant number of shipping weeks of 13 for each of the four quarters in 2015.

We believe ALPROLIX and ELOCTATE will to grow at a strong pace as we continue to focus on expanding the depth and breadth of the therapies.

Our 2015 plan assumes revenues are related to RITUXAN and GAZYVA will grow modestly.

R&D expense is expected to be between 19% and 20% of sales, which includes approximately $250 million earmarked for business development activity, a similar level of spend when compared to 2014.

SG&A expense is expected to be approximately 20% to 21% of revenue.

As we're now through the commercial ramp of both TECFIDERA and hemophilia therapies, we anticipate over a 200 basis point improvement in SG&A year-over-year.

We anticipate non-GAAP EPS results between $16.60 and $17 and GAAP EPS to be between $15.45 and $15.85.

From a cash perspective, we expect to pay over $1 billion in CVR payments to Fumapharm, related to the sales of TECFIDERA.

We anticipate capital expenditures of approximately $400 million to $450 million, an increase over 2014, as we invest in our manufacturing capabilities and IT infrastructure.

I will turn the call over to George for his closing comments.

Okay.

Thank you, Paul.

Look, in closing, we had a very productive year.

We gained regulatory data protection for TECFIDERA in the EU and subsequently launched in Europe.

We launched PLEGRIDY in the US and Europe and ELOCTATE and ALPROLIX in the US as well as some other countries.

We had a good year commercially and financially.

And we received positive results on some of the important compounds in our pipeline.

We started out 2015 with the agreement to acquire Convergence and the collaboration with San Raffaele hospital.

And we expect to complete additional business development transactions during the year.

We also expect to see pipeline readouts for several compounds.

In addition to the presentations of the data for BIIB037 and the anti-LINGO antibody expected in March and April and the completion of the TYSABRI SPMS trial, we expect to see mid-stage data for Neublastin in neuropathic pain and TYSABRI in stroke.

So this will be another busy year with meaningful milestones.

We have aggressive goals in all aspect of business, and we'll continue to do our best to achieve them.

So in closing, and as always, I'd like to thank our employees, who are dedicated to making a positive impact on patients' lives, and the patients and physicians who are involved in our clinical development programs.

The achievements we made together could not have been realized without their passion and commitment.

Thank you, all, for joining us this afternoon.

Operator, we'll now open up the call for questions.

(Operator Instructions)

Your first question comes from the line of Eric Schmidt with Cowen.

Your line is open.

Thanks for taking my question.

Congrats on a great 2014.

Maybe for Paul, on the ex-US TECFIDERA trajectory.

It sounds like the drug is now number one in Germany, and that you're quite optimistic for a lot of growth ex-US in 2015, yet I think the numbers came in a little bit below consensus.

You flagged the $7 million FX hit, but was there anything else on TECFIDERA that created, maybe, a little bit of a weaker ex-US sales number?

No.

Nothing meaningful, ex-US.

We're actually very happy with how things are moving along ex-US, as you had noted.

Our challenge to our organization is that every country that we get reimbursement in, we do better than the prior.

And we actually were able to do better, in terms of launch curve at time equal to zero, in Germany than the United States.

And we hope to do it as we go to every other country.

That's, obviously, an aspiration, more than anything else.

Nothing too meaningful, in terms of the trends, to point out.

Your next question comes from the line of Geoffrey Porges with Bernstein.

Your line is open.

Thanks very much, and congratulations on the results.

I appreciate the detailed guidance.

I just want to ask about BIIB037 -- still getting questions about that.

And you provided some useful color for the start of the year.

Could you talk a little bit about, specifically, where you're going with the dose?

And thinking about the Phase III trials and discussions that you're having, when you might have those discussions with the FDA, and when might we have a position to talk about what the trials look like -- the scope and all that sort of thing.

Hi, Jeff, this is Doug.

Thank you for the question.

There's not a lot of additional color that I can provide to you, vis-a-vis the final study design going into Phase III.

As you can imagine, we're in the process of having discussions with regulators.

In fact, we've been having them for some time, as we've been seeing the data emerge from the study.

I think it's safe to say that our intent, going forward, will be to try to design a study that most faithfully reproduces the type of patient that we treated in the Phase Ib study, as well as looking at similar endpoints.

As you know, from a cognition perspective, we achieved statistical significance on the CDR sum of boxes, which is our registrational endpoint, the BACE inhibitor for AstraZeneca and Lilly is actually using that as a Phase III endpoint in prodromal in mild patients.

I think you can anticipate a Phase III program that will have similar patients entering the study, screened in a similar fashion up-front.

And the final study design we will talk about at the time we start enrolling patients.

That's our usual practice.

I don't see any reason to break profile for this particular molecule.

With respect to the choice of dose, as you know, the study is still underway.

We still have a couple of cohorts that remain blinded.

And until we see that data, we won't be able to finalize the exact dosing regimen.

Except, I'll reiterate what Al said at JPMorgan, which is, we believe we have a dosing window that we can work with, from both a safety perspective but more importantly from what looks like a treatment effect perspective as well.

So a lot more information at the ADPD meeting about the results that we've been able to look at.

But the study design issues are very much in process right now.

And we'll let you know what those studies are going to look at the time we enroll the first patient.

Your next question comes from Mark Schoenebaum with Evercore ISI.

Your line is open.

Hey.

Thanks very much.

Just a follow-up on the Alzheimer's question, if I may.

Why did you guys choose not to use ADAS-cog as a cognitive endpoint?

And then, the two cognitive endpoints that you did look at -- mini-mental and, I believe, sum of the boxes?

Doug, there's been this debate on Wall Street, regarding Lilly, as to clinical significance versus statistical significance.

I'd love to get your view of what would constitute a clinically significant benefit in the mini-mental and the sum of the boxes.

Thanks a lot.

Okay.

We chose not to use a ADAS-cog because, I think, it's now the view of the field that that's probably a better tool to use for patients who are further down the disease spectrum.

That CDR is, I think, now becoming much more accepted as a preferred primary endpoint for studies that focus on patients with prodromal and mild disease.

That seems to be the pattern that's emerging, if you look at what the primary endpoints for studies in those cohorts of patients actually are using, with the Lilly study being just an example of that.

The issue of what constitutes clinical significance is one that, obviously, is something that we'll be discussing with regulators.

Our view, based on our decision to go right from Phase Ib to Phase III, is that we believe we've seen a treatment effect that is significant enough, and our advisors believe this to be the case, to meet the criteria in most people's minds for clinical significance and not just statistical significance.

Your next question comes from the line of Terence Flynn with Goldman Sachs.

Your line is open.

Hi.

Thanks for taking the question.

Maybe a two-part one for me.

In terms of your guidance on the interferon franchise, Paul, just wondering -- you mentioned you expect to take share in a declining market, which we've heard similar commentary from you guys in the past.

But do you actually think that can be a growth franchise for you this year?

Then the second part of that is just the implications of the entry of daclizumab and longer-term ocrelizumab and the impact on your injectable franchise.

Thank you.

Yes.

I think we'll probably end up tag-teaming that -- this one, a little bit, Terence.

I think it being growth is probably a little bit of a stretch.

I think the reason we've been a little bit cautious on phrasing it up that way is this obvious interplay of how fast orals move along, which affects interferons.

Which -- so if orals don't move along as fast, I think the interferon franchise will hang in there.

It's not unheard of.

It's just, I think, it's early days right now.

But conceptually, we do believe there's something special about PLEGRIDY in that a once-every-two-week subcu is so much more favorable than any of the other interferons and potentially Copaxone as well.

So we'll have to see whether or not that turns into the combination of AVONEX and PLEGRIDY growing.

But we're hoping, at a minimum, it hangs in there.

Terence, it's Tony.

And let me hit that first.

Look, we think dac is a very good compound.

And it certainly has a place in the market.

I'm not sure I would think of it -- look, we don't have the label yet.

So there are some things that we don't know.

I wouldn't necessarily think of it as an injectable, in the sense of the platform therapies as we think of them today, in that it has -- appears to have a different efficacy profile.

So it may play in some broader segments than the existing platform therapies do.

In terms of ocrelizumab, again, we'll have to wait and see.

There is -- we hear interest in the market, as I'm sure you do, from physicians that it looks like it could be an interesting -- very much in the high-efficacy segment.

But we'll have to wait and see how that product plays out, and where it fits versus TYSABRI and some of the other alternatives.

Your next question comes from the line of Ravi Mehrotra with Credit Suisse.

Your line is open.

Hey.

Thanks for taking my question.

I apologize up front.

I'm really going to ask you to do our job at one level.

On TECFIDERA, looking at long-term consensus numbers -- I know these numbers are noisy -- it looks like the average 2020 estimate's around $9 billion, implying a global market share of around 40%.

Interested in your view on whether you think the Street may have got ahead of itself, here?

Or if you think that TECFIDERA is likely to get to those levels of market share?

Gosh, Ravi, we don't give long-term guidance out there.

And so I think we're going to stay at that as it is and let people come to their same conclusions.

We think this is still a very meaningful growth with TECFIDERA that's embedded in the guidance for this year.

But I wouldn't want to comment on a bunch of models over a long period of time.

Your next question comes from the line of Cory Kasimov with JPMorgan.

Your line is open.

Hey.

Good afternoon.

Thanks for taking my question.

In your prepared remarks, you alluded to the ongoing Phase I studies for several novel forms of MMF.

And I'm just wondering if there's anything you can say about how these molecules differ from TECFIDERA and when you may be in a position to provide some data on them?

Thanks.

Let me be clear.

We're not testing formulations of MMF.

We're testing formulations of DMF, which is the active ingredient of TECFIDERA.

And DMF is DMF, but the formulations are different.

And look, the intent is to get to a once-a-day formulation, potentially reduce the GI side effects.

So we have several formulations in Phase I now.

We have others behind those.

And we're hopeful to be able to bring forward one them to the market.

Your next question comes from the line of Yaron Werber with Citi.

Your line is open.

Great.

Thanks for taking my questions.

I have a question for Tony, if you don't mind -- two of them.

One is, we've been doing a lot of work on biosimilars, and we're trying to figure out your view of what happens to the ABCR class when Copaxone goes generic?

So what would happen, let's say, to the interferon class?

Then secondly, you mentioned there's three different reasons TECFIDERA was weaker -- it was weaker or slowing down, in terms of new patient adds.

And it was a decline in switching, US label change, and the PLEGRIDY launch?

Of the three, which one was the most important?

Thank you.

Okay.

Good two-part question, Yaron.

(multiple speakers)

You're moving to the back of the queue next time, Yaron.

(laughter)

Look, Copaxone -- I think we've been consistent on that.

We think, in the US private payer market, the impact of a generic Copaxone is largely on branded Copaxone.

It's difficult for payers to see -- or certainly, to convince physicians -- that there is therapeutic substitutability between glatiramer acetate and the interferons.

So I think that's where we are on that, and that's pretty consistent with what we said in the past.

On TECFIDERA -- look.

Actually, hard to piece apart.

Probably, the -- as Paul said, we expect the product to grow.

But we would see some moderation in growth next year.

I think we would have said that in any case for the first reason, which is the switch rate in the market in the US has come down over the last three or four quarters.

We've talked about that, I think, again, pretty consistently.

When TECFIDERA launched in the US -- and we're seeing this repeat outside the US -- it doubled or tripled the switch rate for a period of time.

And that's been working its way down over time.

Yes.

Yaron, one other thing I'd add to it -- we've always said in the past that, over time, we think IMS -- the data that you all see -- is pretty accurate.

It's actually been accurate on a short-term basis as well.

So I think you can look at the trends of the IMS scripts in the Q3 and Q4, and you can interpret things.

PLEGRIDY launched, effectively, the first week of November.

And you can discern a little bit.

I think, at the end of the day, you look at it and you say, a lot of these things all happen at the same time.

Your next question comes from the line of Geoff Meacham with Barclays.

Your line is open.

Afternoon, guys.

Thanks for taking the question.

I just had one on LINGO.

I know you guys, obviously, just got the data this month, but when you look beyond AAN, will there be much more data internally or before you publicly release the MS data?

I guess, I'm just trying to get a feel for what you'll ultimately be looking for in Phase III effects size wise and what you can, in fact, address this year with regulators before you start a formal pivotal in MS. Thanks.

Yes.

Hi, Jeff.

This is Doug.

I think there's not a lot of additional data from the acute optic neuritis study that we're going to see.

I think you'll see the majority of the data -- as much as we can cram into one 15-minute platform presentation, or at least, I hope it's a platform presentation -- at AAN.

It's likely that there will be some additional data cuts that will trickle out at subsequent medical meetings, but I think you'll get a clear sense of what we've seen in that data with acute optic neuritis at AAN.

The MS study, as we talked about in a previous earnings call, that study is ongoing.

It is fully enrolled now.

Our intent is to actually have a small group of us internally see some of that data at the 12-month time point, later this year, which we will use as a basis to begin to have some of those discussions with regulators.

I think that what we're able to see in that data will teach us a lot about which of the various endpoints we're measuring in that study, actually, show the best correlation with remyelination.

As you know, this is the first of its kind study, where we are assessing the impact of remyelination on patients with MS. And so we're looking at a variety of endpoints -- everything from EDSS to cognition to certain ambulatory parameters.

We have a number of imaging endpoints built into the study.

From that analysis, we hope to be able to tease out what the most sensitive clinical measures of remyelination are, so that we can go to regulators and start discussing what a Phase III endpoint might actually look like.

So as we said in the previous call, there will be a smaller group of those that will see that data, and that will allow us to determine how to have a conversation with regulators.

We plan to keep the study blinded through to the full 18-month time point, which means that full data disclosure won't come until sometime in 2016 for the full data set.

That's what you can anticipate playing out over the course of the next 12 to 18 months.

Your next question comes from the line of Brian Abrahams with Wells Fargo.

Your line is open.

Thanks for taking my question.

A question for Tony.

You mentioned one of the causes for the TECFIDERA slowdown recently has been the label change.

But interestingly, you're not seeing any increase in discontinuations, which, I guess, you'd presumably get with more aggressive lymphocyte monitoring.

So I'm curious -- what are you seeing, in terms of physician reactions to the PML case that might be slowing uptake, and what sorts of educational initiatives do you think will be needed to help physicians work around this?

Thanks.

Good question.

I think the educational initiatives are underway, which is, we have our sales forces out, talking to a broad set of physicians.

Our medical team is providing support where there are requests.

So I think we are executing on this, educating people to the label and what the label says and answering those questions.

You know, part of the impact, when you have something like this, is the time it takes to get.

You can get to a small set of physicians quickly, and you tend to get to the KOLs quickly is the time to get to broader community base.

So we think we have the right education in place.

We have to keep executing it, making sure that things continue to happen.

Look -- the lack of any meaningful change that we see -- or we believe we're seeing -- in the discon rate is encouraging, because it doesn't suggest there's such a change in the profile that people are anxious to pull patients out, but on the contrary.

Look -- I think that, naturally, in a case like this, as people are processing the new label, you'll see softness in the switch rate for a period of time.

And that is, probably, what accounts for it.

Your next question comes from the line of Matthew Harrison with Morgan Stanley.

Your line is open.

Great.

Thanks for taking the question.

Just on BIIB037 -- first, can you clarify -- earlier you only mentioned CDR sum of the boxes as a statistically significant cognition endpoint.

Was it just that?

Or was that MMSE?

And then, should we expect to see -- or what should we expect to see -- in the abstract?

Will there be any significant data there, or is it mostly a placeholder?

Thanks.

With respect to the statistical significance, we did achieve that with both the CDR sum of boxes and with the MMSE.

I believe we did clarify that at the JPMorgan meetings in January.

With respect to what is in the abstract -- I haven't actually seen it myself, so I can't answer the question.

I think there won't be enough to satisfy you in the abstract, anyways.

I think the real answer to the question is going to come out of the presentation itself, because there will be a lot more information there than there will be in the abstract.

Your next question comes from the line of Ying Huang with Bank of America Merrill Lynch.

Your line is open.

Thanks for taking my question as well.

Maybe a housekeeping question for Paul.

You mentioned that IMS data in the short-term was pretty accurate.

But it seems you guys did a better job in selling the drug in the US with TECFIDERA.

So I was wondering, can you quantify where it was short?

And then, can you quantify, also, the exact inventory level?

I know it's 2.5 weeks from Q3 to Q4.

And then, just curious -- your view, also, on the outcome is on prodrug program.

It seems like you guys don't feel very strong about the MMF prodrug.

Thanks.

Thanks, Ying.

Yes.

I'm not sure what question is on the clarification for MS. I think you were referring to something outside the US, and we really don't have a clear picture outside the United States.

So MS -- what I was referring to is within the United States.

And just on a -- more of a week-to-week basis, we see it as pretty accurate, vis-a-vis our data that we have from SPPs going to patients.

And I think, with respect to the MMF prodrug situation, I think there are certainly two programs that are in the clinic at the moment, that we're aware of, that are moving along -- still very early.

I think George pointed out the distinction between DMF and MMF, and we think that's an important distinction because it's quite clear, from a number of studies that we have carried out, that the biologic response, at least every clinical settings, to MMF is distinct from DMF.

And so it remains to be proven that the ability to replicate the safety and efficacy profile that we see with TECFIDERA -- which is DMF -- can in fact be replicated with these MMF pro-drugs.

I think that's what the hurdle is for those programs, moving forward.

And it's still far too early, I think, to assess how successful those are going to be.

Your next question comes from the line of Michael Yee with RBC Capital Markets.

Your line is open.

Thanks.

Follow-up question on BIIB037.

There's been recent Phase III readouts -- most recently, with Lilly.

We have all seen a 34% improvement in cognition there -- ADAS-cog, but also MMSE.

Can you help us frame that data with why you're so jazzed up with your data?

But I guess, also, when we see your presentation, how much information will we get?

I know there's more information then -- more follow-up beyond just the interim.

So help us understand what we'll see there.

Thanks.

I think, with respect to our data -- which is what I'll focus the answer to the question on -- I think what you'll see, I think, is the actual numbers behind the statements that we've made.

There's a clear dose- and time-dependent reduction in beta-amyloid levels that we've seen in these patients.

There is a dose-dependent and statistically significant impact on cognition, as measured by two parameters -- both CDR sum of boxes as well as the MMSE endpoint.

What you'll also see, I believe, is data to support the notion that we put forward that we believe we have a safety window to work with, vis-a-vis the area that we have seen with our molecule that's also been seen with some of the other anti-beta-amyloid antibodies.

I think that the data we have seen, the data we've talked about -- at least, in verbal form -- is compelling enough and consistent enough for us to want to move the program as rapidly as we can from Phase Ib into Phase III.

I think that you'll, hopefully, get a clear sense of the treatment effect that we have seen and the consistency of the results across the various parameters we measure.

It was enough to convince us to make the leap from Ib right into Phase III.

Your next question comes from the line of Robyn Karnauskas with Deutsche Bank.

Your line is open.

Hi, guys.

Thanks for taking my question.

I guess I'll ask a hemophilia question, since one really hasn't come up.

You've talked a little bit about it being competitive in the factor VIII space.

Help us think about what you're doing to, maybe, increase switching.

And should we just expect even and steady growth of that product?

Or could there be an acceleration in the back half of the year after, maybe, you change some of the marketing or anything like that?

Thanks.

Good.

Robyn, it's Tony.

So if I look back to before we launched both the products, I think we both said we couldn't predict the launch curve that well, but we'd go with even and steady.

My idea is ALPROLIX got off to a faster start because it's a very straightforward proposition for physicians.

For patients, you have a pretty prophy-friendly group of patients in the factor IX market, and there was zero competitive response.

We've said that we think the ELOCTATE in factor VIII is going to plan, as we'd expect it to, which is, you have to capture some early adopters.

You have to have those patients have good experience, so they can -- it's a big word of mouth market -- they can activate other people.

So we're continuing to execute on patient education.

But a lot of it is calling on the hemophilia treatment centers, explaining the label, explaining the data, talking to both the nurses and physicians.

I think it's pretty consistent with the way we've talked about it, historically.

It takes a lot of good, hard execution.

But we like the product profile.

And we think, over time, you build that virtuous cycle of patients have good experience, physicians have good experience, and you get increased adoption over time.

So I think we're on a steady march to continue to try to convert that market.

We think we have a good product and good ability to do that.

Your question comes from the line of Matthew Roden with UBS.

Your line is open.

Great.

Thanks very much for taking the question.

I hope you are all dug out from all the snow.

Doug, you mentioned, in Alzheimer's, staying faithful to the patient population as you move forward.

So that prompted me to wonder whether or not the stat sig improvement in cognition you saw was in the prodromal patients or the early AD patients or both?

And also, whether or not the stats sig was on an intent-to-treat basis?

Thank you.

Yes.

With respect to the study itself, again, I keep pointing you in the direction of the presentation.

I don't want to discuss any additional information about the study itself, beyond what we've talked about so far.

And again, with respect to the design of Phase III, we'll be trying to faithfully replicate the population of patients that we treated in the Phase Ib study in the Phase III.

So it will be a prodromal and mild population of patients.

I think you can anticipate that we will do a similar type of entry screening to what we did in Phase Ib, to confirm the patients actually have the target for the drug as a prerequisite to enrolling them into the study.

And beyond that, I'll just stay silent until we present the actual data set in March.

Your next question comes from the line of Thomas Wei with Jefferies.

Your line is open.

Thanks.

Just a follow-up on BIIB037.

From whatever work you've done, or when you look at the overall literature, do you believe that the beta-amyloid thesis could lead to improvements in cognition?

Or are we really just looking for slowing or stabilization of cognitive decline?

It's a really good question.

I think we don't actually know the answer to that question.

It's testable.

If, in fact, you have an agent that both removes amyloid and does, in fact, show improvements in cognition -- at least, the rate of decline -- versus the control population.

And my bias and my guess is that what we're looking at is something akin to disease modification with DMTs in MS, which is, hopefully, a major slowing in the decline of these patients over time.

Whether, in fact, we can treat them and reverse some of the damage that's been done I think is an unknown at this point.

But obviously, the long-term follow-up studies would be designed to try to answer those sorts of questions, over a longer duration of treatment than what we're likely to do in the Phase III programs.

I think the hope is there.

But at the moment, I think it's a hope.

Yes.

Thomas, this is George.

It's a question that we also think is very important.

Look, we have one-year data on patients, and it's a long-term disease.

We just don't have enough data, yet, to answer that question.

I think when you see the data that we present in March, we can have a more, let's say, intelligent discussion about that topic.

But it's hard to say anything meaningful in the absence of the data.

Your next question comes the line of Josh Schimmer with Piper Jaffray.

Your line is open.

Thanks for taking the question.

I'm going to ask a gene therapy question.

Is the hemophilia program going to be the first experience with in vivo use of lentivirus?

And what gives you confidence in the both safety and efficacy of this approach?

Thank you.

The question is for -- with respect to the gene therapy?

Josh, can you repeat the question?

You were breaking up there.

Yes.

You were breaking up, there.

I was wondering -- is this the first experience with in vivo in using lentivirus for the purpose of gene therapy?

And what gives you the confidence that the in vivo approach will be both safe and efficacious?

Yes.

Josh, this is Doug.

I think the deal we announced today is, in fact, using lentiviral in a systemic delivery mode.

It's still a very early program but one we that have looked at, and one for which we're excited to be working with the Luigi Naldini, who is one of the leaders in this area.

It is an early program.

He's got intriguing data, at the moment, using a vector system that they have designed.

There's still a number of technical hurdles to overcome with this, but it does direct expression into the liver.

One of the advantages with lentiviral vectors is that, number one, you obviate some of the issues that you have with AAV vectors, which involve pre-existing immunity to the vector system itself.

And it's also a very long-term expression that you're capable of getting with that vector system.

Luigi is one of the pioneers in this area.

We think that if we can make this a successful approach, that it really is a transformational approach from a gene therapy perspective, given how broadly you could treat patients with both factor eight and factor nine deficiency.

Still pre-clinical, but I think very much a transformational type of therapy, if we can bring it forward and make it work.

Operator, we'll take one more question.

Your last question comes from the line of Joseph Schwartz with Leerink Partners.

Your line is open.

Thanks very much for fitting me in.

You've been using some innovative patient screening methodologies in the Phase Ib for 037, such as automating PET amyloid quantification and focusing on certain regions of the brain.

I was wondering if you could talk a little bit about these tools, in terms of how they could influence who will be eligible for receiving the drug if it comes to market?

And are you planning to develop a companion diagnostic to be commercialized alongside 037?

At the moment, what we're using is an agent that is, in fact, already licensed and available in the market.

It's AV-45 as a screening tool for patients coming into the study.

We thought that was an important way of screening patients up front to confirm that.

In particular, patients with mild cognitive impairment, there are many reasons why that could happen -- amyloid beta deposition being just one of them.

So confirming that the patients actually have the target for our drug up front, we believed, was an important way of enriching the population of potential responders.

And as we carried out the study, I think that was confirmed because our screen failure rate was probably on the order of 30% to 40%, meaning that even though these patients had cognitive impairment, they didn't actually have beta-amyloid deposition at a level that was detectable with the screening reagent.

So they were eliminated from the study.

They could, arguably, never have responded to our drug anyways.

So we needed to actually get them out of the study up front.

How this plays out, with respect to the eventual labeling of the drug -- my guess is that it will be common standard practice to actually screen patients with early stages of Alzheimer's with either AV-45, which is available, or something akin to that.

And akin to that, I mean, there are CSF levels of a-beta that can be looked at as well.

Some way of screening patients upfront to confirm that their disease, their cognitive impairment, is caused by beta-amyloid deposition, I think, will become part of the treatment paradigm.

So whether it's a bioassay based on CSF, or whether it's an imaging approach like we've used, I do believe that will be an essential part of the treatment paradigm, going forward, to confirm that these drugs are being used in the right patients.

Okay.

With that, I think we'll bring the call to an end.

Thank you, all, for your flexibility and being with us this afternoon.

And thanks for all of your interest.

And we can all get back to work.

Go Pats.

This concludes today's conference call.

You may now disconnect.