Biogen Inc (BIIB) 2016 Q4 法說會逐字稿

Good morning.

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

At this time, I would like to welcome everyone to the Biogen fourth-quarter and year-end 2016 financial results and business update.

(Operator Instructions)

I would now like to turn the call over to Mr. Matt Calistri, Senior Director of Investor Relations.

Please go ahead.

Thank you, and welcome to Biogen's fourth-quarter and full-year 2016 earnings conference call.

Before we begin, I encourage everyone to go to the Investors section of Biogen.com, to find the press release and related financial tables, including a reconciliation of the GAAP to non-GAAP financial measures that we will 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've also posted slides on our website 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 our 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 the risk factors discussed in our SEC filings for additional detail.

On today's call, I am joined by our Chief Executive Officer, Michel Vounatsos; Dr. Michael Ehlers, EVP of Research and Development; and our CFO, Paul Clancy.

We'll also be joined for the Q&A portion of the call by our Chief Medical Officer, Dr. Al Sandrock.

Now I will turn the call over to Michel.

Good morning everyone and thank you for joining us.

In 2016, Biogen generated revenues of $11.4 billion, a 6% increase over 2015, and on a constant currency basis, an increase of 9%.

GAAP earnings were $16.93 a share, a 10% increase year over year, and our non-GAAP EPS was $20.22, a 19% increase versus full-year 2015.

I am proud that the team was able to deliver such a strong result, and I aim to building on Biogen's impressive track record as we move forward.

2016 was an eventful year for Biogen.

Let me review some of our most important achievements.

We announced the spin-off of our hemophilia business, now called Bioverativ, and aim to complete the transaction next week.

We presented results from the SYNERGY study of opicinumab, a potent (inaudible) therapy for MS.

We presented updated data from the Phase 1b PRIME study of aducanumab for Alzheimer's disease and made significant progress enrolling the Phase 3 trial, exceeding our goal for the year.

Aducanumab also received Fast Track Designation in the US, and was accepted in the PRIME program in the EU.

Our partner, Eisai, initiated and began dosing patients in the Phase 3 program for elenbecestat, or E2609, a BACE inhibitor for Alzheimer's disease, an important complementary mechanism to our [A beta C breeze].

We received additional IP protection for TYSABRI, as we were granted a new patent in the US with coverage to 2027.

And we launched four new products: ZINBRYTA for MS; two biosimilars, BENEPALI and FLIXABI, in European markets; and most recently, SPINRAZA, the first treatment for SMA, which was approved only three months after filing in the US.

2017 is already off to an exciting start.

In the last two weeks, we began dosing the first SPINRAZA patient in the US.

Further, we announced that we have agreed to enter into a settlement and license agreement with Forward Pharma which we believe will help clarify our IP position for TECFIDERA.

Let me now provide you with a brief review of our commercial performance.

Biogen remains the leader in MS, as we have maintained our global market share of approximately 38% in a highly competitive market.

And that number rises to 42% in those markets where we have a direct presence.

Biogen remains the global category leader in the orals, high efficacy, and interferon segments of the MS market.

MS revenues for 2016 grew 3% year over year, or 5% on a constant-currency basis.

While revenue growth has attenuated recently, our portfolio delivered global patient growth of 4% in 2016, driven by patient growth for TECFIDERA of 9% year over year.

In the US, we saw a slight decline in TECFIDERA patients year over year, attributed to competition among the orals, as well as continued moderation in the overall market.

Total TECFIDERA patients outside the US grew by 20% year over year, a major driver of revenue growth.

Outside the US, our efforts are aimed at both new country launches, and a renewed focus on early launch European markets such as France and Germany.

Looking to 2017, we are pleased to have just received approval in Japan, and plan to seek approvals and reimbursement in additional markets throughout the year.

TYSABRI added over 4,000 net new patients globally year over year, and further strengthened its position in the marketplace.

Our research indicates that the safety perception for TYSABRI in the US is gradually improving, as physicians become more comfortable with recertification of their patients.

TYSABRI is also benefiting from a shift away from the platform therapies, including our interferons, to high-efficacy products and the orals.

We are also continuing to advance our leadership position through new product launches in the US.

Our data indicates high brand awareness for ZINBRYTA, and that physicians are generally prescribing it consistent with the label for switch patients.

Outside the US, we are encouraged by the launch in Germany, and we expect to receive reimbursement in all major European markets by the end of 2017.

Across our MS portfolio, we are focused on operational execution, and reinforcing our commitment to MS by pursuing lifecycle management opportunities.

Switching to our biosimilar business, we are very excited with the continued progress, as revenues grew by over 70% quarter over quarter, driven by BENEPALI.

Our biosimilars operation in Europe is already profitable, and we are pleased with the progress of the JV in advancing additional compounds.

The most exciting commercial opportunity for 2017 is clearly the launch of SPINRAZA for spinal muscular atrophy, and we moved quickly to make the product available in the US.

We appreciate the anticipated demand for SPINRAZA in a business area with such a high unmet medical need, but also realize it may take some time for the treatment centers to manage the complexities in administration, set up, scheduling of patients, as well as for insurers to develop coverage policies.

We are working with clinicians, payers, and patient advocacy groups to try to expedite access to treatment, given some likely capacity constraints in the system, as well as the need to secure reimbursement.

Our goal is that no patient will forgo treatment because of financial limitation or insurance status, and we are pleased with the progress made so far.

These coverage decisions are made on a case-by-case basis with each payer.

While we have seen some early challenges, such as the recent decision from Anthem, we have seen some early successes, as well.

We continue to expect a gradual uptick throughout the year, as we work step by step over these launch dynamics.

Beyond the US, we aim to make SPINRAZA available to patients around the world as soon as possible.

We have already filed in the EU, Japan,, and Canada, as we seek broad global patient population that we believe will benefit from this therapy.

We hope for immediate approval from the EU.

I am now turning it over to Mike for an update on our efforts in R&D, the true engine of value creation for Biogen.

Thank you, Michel, and on behalf of employees and stakeholders around the globe, let me congratulate and welcome you to your new role, and share the excitement and enthusiasm for the vision, energy, rigor, and commitment you are already bringing to the helm of this great Company.

And good morning to everyone on the call.

2016 was a productive year for Biogen, as we made important progress advancing our understanding of several key diseases and assets, received approvals for a broad range of therapies, and continue to shape our pipeline toward areas of high unmet medical need.

Let's begin with SPINRAZA.

With FDA approval, SPINRAZA became the first and only treatment approved in the US for spinal muscular atrophy, or SMA.

We plan on submitting additional data this year to the FDA, including the final analyses from ENDEAR and CHERISH, the Phase 3 study evaluating SPINRAZA in later-onset SMA, with the goal of updating the label.

Earlier this month, we also presented new data from the final analysis of ENDEAR at the British Pediatric Neurology Association Conference in the UK.

SPINRAZA met the pre-specified primary endpoint in the final analysis, demonstrating a statistically significant reduction of 47% in the risk of death or permanent ventilation.

In this analysis, 68% of untreated infants died or required permanent ventilation, compared to 39% of infants treated with SPINRAZA.

Commonly reported adverse effects were generally consistent with those expected in the general population of infants with SMA.

We plan to present further efficacy and safety results from ENDEAR, in addition to CHERISH, later this year.

Specifically, we are submitting both ENDEAR and CHERISH to AAN for presentation in April.

In addition to being the first medicine for the treatment of SMA, SPINRAZA represents the first intrathecal antisense oligonucleotide approved for any indication.

The success and favorable benefit risk profile of SPINRAZA highlights the potential for this previously untapped therapeutic modality in severe nervous system diseases more broadly.

Working together with our collaboration partner Ionis, we intend to leverage our leadership position to advance new therapeutics.

Moving on to our efforts in MS repair and regeneration, we are planning to initiate a Phase 2b study for opicinumab, or anti-LINGO, in the fourth quarter.

We're also advancing BIIB061, a novel oral remyelinating agent with a different mechanism than opicinumab.

We're applying learnings from the opicinumab trials to inform next steps for this asset, and look forward to updating you in the coming months.

Across our MS franchise, we remain committed to fully understanding and maximizing the medical value and impact of our products, as we continue to generate new clinical data and prioritize lifecycle management opportunities.

Although not within MS, we believe the pursuit of natalizumab, or TYSABRI, for acute ischemic stroke, is an example of how we aim to derive additional value.

With over 1.7 million cases each year, stroke remains one of the leading causes of death and neurologic disability worldwide, with limited treatment options.

We believe natalizumab may be able to address the post-ischemic inflammation that leads to neurotoxicity.

We previously reported that in our Phase 2 study ACTION, natalizumab, when administered up to nine hours after stroke onset, failed to meet its primary endpoint of MRI infarct volume, but did show benefit on key prespecified secondary clinical outcomes, including the Modified Rankin Scale and Barthel Index.

We expect a follow-on Phase 2b dose-ranging study, ACTION 2, to be fully enrolled in 2017, and hope to share the results shortly thereafter.

This study is assessing the clinical impact of natalizumab on functional independence and cognition, when initially dosed within up to 24 hours of stroke onset, which should be a major advancement over the current standard of care, such as tissue plasminogen activator, or TPA, which has a limited time window.

Now turning to Alzheimer's disease.

During the quarter, a number of exciting developments occurred for our lead assets.

We presented new data from the Phase 1b PRIME study of aducanumab, our investigational treatment for early Alzheimer's disease at the CTAD meeting in San Diego.

We believe the totality of the data presented at CTAD, including additional data from our competitors, continue to support the A beta hypothesis, as well as the design of our Phase 3 trials.

Also in Alzheimer's disease, as Michel mentioned, our partner Eisai recently initiated and began dosing in the Phase 3 program for elenbecestat, or E2609, an oral BACE inhibitor, which aims to prevent the production of beta-amyloid.

Eisai has also recently completed enrollment in the Phase 2 ADAPTIVE design trial for BAN2401, a humanized beta-amyloid antibody, which exhibits a strong binding preference for protofibrils.

Data from that trial are expected in the next 12 to 18 months.

We're working to advance BIIB074, a novel investigational state-dependent subtype selective sodium channel blocker, for neuropathic pain.

We completed enrollment in a small exploratory Phase 2a study in erythromelalgia, and anticipate data in the coming months.

We continue to enroll a Phase 2B trial for lumbosacral radiculopathy, and are planning to initiate two Phase 3 studies in trigeminal neuralgia this year.

Start-up activities will initially be focused outside the US.

BG00011, or STX-100 for idiopathic pulmonary fibrosis, is enrolling its final cohort in a Phase 2a study, and we expect to present the data after the trial completes in the second half of the year.

We are also making important progress across our early-stage pipeline as we continue to shape our R&D engine for the future.

With that said, although we're pleased with our pipeline, there is always room for improvement.

We're building out our R&D leadership team, and remain laser focused on delivering meaningful new molecules to and through the clinic.

Working closely with Michel, we're making important progress to refresh and augment our pipeline.

We are looking to add assets across our pipeline and are working aggressively to optimize, prioritize, and reshape our R&D activities, focusing resources to rapidly advance assets based on compelling science and medical impact that present the greatest opportunity.

Expect to hear more from us in the coming months.

With that, I will now pass the call to Paul.

Thanks, Mike.

Our GAAP diluted earnings per share were $2.99 in the fourth quarter, and $16.93 for the full year.

GAAP earnings per share were negatively impacted by $1.55, related to the settlement and license agreement with Forward Pharma.

Our non-GAAP diluted earnings per share were $5.04 in the fourth quarter, and $20.22 for the full year.

Total revenue for Q4 grew 1% year over year, to approximately $2.9 billion, and grew 6% for the full year, to $11.4 billion.

Global fourth-quarter TECFIDERA revenues were $1 billion.

This included revenues of $800 million in the US, an increase of 2% versus Q4 last year, and $202 million outside the US, a decrease of 3% versus Q4 of last year.

As a reminder, in Q3, we believe TECFIDERA US revenue benefited by approximately $40 million to $50 million due to inventory build in the channel, which impacts the sequential quarter comparison.

On a sequential basis, we believe inventory levels remained relatively constant.

For the full year, worldwide TECFIDERA revenues were $4 billion, an increase of 9% versus prior year.

This included $3.2 billion in the US and $799 million in sales outside the US.

Interferon revenues, including both AVONEX and PLEGRIDY, were $688 million during the fourth quarter, a decrease of 7% versus Q4 last year.

This included $488 million in the US, and $200 million in sales outside the US.

For the full year, worldwide interferon revenues were $2.8 billion, consisting of $2 billion in the US and $815 million in sales outside the US.

TYSABRI worldwide revenues were $474 million this quarter, a decrease of 1% versus Q4 last year.

This included $289 million in the US, and $185 million outside the US.

In the US, Q4 TYSABRI revenue was unfavorably impacted by an increase in discounts and allowances, specific to this quarter.

For the full year, worldwide TYSABRI revenues were $2 billion, a 4% increase versus the prior year.

We recorded US revenues of $1.2 billion, and $781 million internationally.

Foreign exchange and hedge impact weakened full-year revenue by approximately $66 million for TECFIDERA, $79 million for interferons, and $62 million for TYSABRI versus prior year.

As a reminder, with respect to ZINBRYTA, in the United States, we don't book in market revenue, we book a profit share, and in Q4, we experienced a contra revenue to the total revenue line.

Our hemophilia products continued to perform well this quarter.

ELOCTATE revenues for the quarter were $149 million, an increase of 47% versus Q4 last year.

This includes $126 million in the US, and $23 million outside the US.

For the full year, worldwide ELOCTATE revenues were $513 million.

We recorded US revenue of $445 million, and $68 million internationally.

ALPROLIX revenues in Q4 were $93 million, an increase of 31% versus Q4 last year, including $74 million in the US, and $20 million outside the US.

For the full year, worldwide ALPROLIX revenues were $334 million.

We recorded US revenue of $268 million, and $66 million internationally.

Our biosimilar business generated $53 million in revenues this quarter, and full-year biosimilar revenues were $101 million.

Turning to our anti-CD20 revenues, we recorded $318 million for Q4 and $1.3 billion for the full year.

Total other revenues were $51 million in Q4 and $316 million for the full year.

Now turning to the expense lines on the P&L.

Q4 GAAP cost of goods sold was $378 million.

Non-GAAP cost of goods sold was $363 million, both 13% of revenue.

Full-year GAAP COGS were $1.5 billion, or 13% of revenue.

And full-year non-GAAP COGS were $1.4 billion, or 12% of revenue.

Q4 GAAP R&D expense was $534 million, or 19% of revenue.

Q4 non-GAAP R&D was $531 million, or 18% of revenue.

Both GAAP and non-GAAP R&D expense included a $50 million payment milestone to Eisai in Q4, following the dosing of the first patient in, in the Phase 3 program for the BACE inhibitor.

Full-year GAAP and non-GAAP R&D expense was $2 billion, both 17% of revenue.

Q4 GAAP SG&A was $496 million.

Q4 non-GAAP SG&A was $484 million, both 17% of revenue.

Both full-year GAAP and non-GAAP SG&A were $1.9 billion, or 17% of revenue.

Throughout the year, we continued to execute on a number of measures to curb operating expense growth, while continuing to invest in R&D in key commercial priorities.

We believe the benefits materialized in both the fourth-quarter and full-year results.

We booked a GAAP-only charge in Q4 of $455 million related to our recent settlement and license agreement with Forward Pharma.

Upon effectiveness of this agreement, we have agreed to pay Forward Pharma $1.25 billion, plus potential royalties.

The charge in Q4 represents the portion of the payment attributable to the sales of TECFIDERA during the period April 2014 through December 31, 2016.

GAAP other net expense, which includes interest was $48 million in Q4, and $217 million for the full year.

Non-GAAP other net expense was $52 million in Q4, and $222 million for the full year.

In Q4, our GAAP tax rate was approximately 23%, and our non-GAAP tax rate was approximately 24%.

For the full year, both GAAP and non-GAAP tax rates were approximately 25%.

Our weighted-average diluted share count was approximately 217 million for Q4 and 219 million for the full year, which brings us to our diluted earnings per share.

For Q4, we booked $2.99 on a GAAP basis, and $5.04 on a non-GAAP basis.

For the full year, GAAP EPS was $16.93, and non-GAAP EPS was $20.22, representing a strong 10% and 19% growth year over year, respectively.

During the quarter, we repurchased 2.2 million shares of the Company's common stock, for a total value of $651 million.

We ended the quarter with approximately $7.7 billion in cash and marketable securities, with approximately 30% of this in the US.

In 2017, we expect to continue repurchasing shares as part of our previously announced $5 billion share repurchase program.

Let me turn to our full-year 2017 guidance.

Guidance this year has a few more moving pieces, due to the spin-off of Bioverativ.

I will focus on Biogen's 2017 guidance, but also provide additional context on Bioverativ, and what we call WholeCo, the combined companies.

I'd refer you to the slides for today's call for reference.

There are a couple of items of note before I go into the substance of the Biogen guidance.

First, there will be a stub period for the full month of January, where hemophilia will be part of Biogen, not Bioverativ.

Second, our GAAP guidance includes the minimum expense we expect to record in 2017, upon the effectiveness of our settlement and license agreement with Forward Pharma.

The actual charges for this recorded will depend on the outcome of the patent office proceedings in the US and EU.

Third, our guidance does not include any impact from potential corporate tax reform in the US, repatriation, or changes to the Affordable Care Act.

And our plan is based on recent rates for foreign exchange.

Now let's get into the Biogen guidance, starting with revenues.

We expect revenues of approximately $11.1 billion to $11.4 billion.

This includes one month of hemophilia revenues, which equates to approximately $75 million.

This represents 5% to 7% growth on a pro-forma basis, when you adjust for hemophilia revenues for both 2016 and January of this year.

Starting with MS, our plan assumes Ocrevus is approved this year, and launches in the US and Germany in the first half of 2017.

We anticipate relatively stable demand for both TECFIDERA and TYSABRI in 2017 on a global basis.

This is comprised of ex-US patient growth, offsetting modest patient declines in the US.

We believe the number of patients using AVONEX and PLEGRIDY combined will continue to decline as the market continues to shift away from the platforms.

We anticipate continued strong growth from our biosimilar business, predominantly driven by BENEPALI.

Moving to SPINRAZA, we are very excited about bringing this therapy to patients with such high unmet need.

We are assuming the vast majority of the SPINRAZA revenue this year will be in the US.

We are cognizant that there are near-term capacity constraints in the system, and the need for patients to secure reimbursement, so we expect the revenue uptake to be gradual in 2017.

Nevertheless, clearly the kinetics of the launch are the biggest ambiguity in our outlook.

Now moving to expenses.

We expect upward pressure on cost of goods sold as a percentage of sales in 2017, largely due to the increase in royalties related to the sales of SPINRAZA, and our biosimilars revenue becoming a larger portion of the business.

We anticipate R&D expense between 16% and 17% of sales.

We anticipate additional expense driven by advancing our Alzheimer's programs, notably aducanumab, and the BACE inhibitor, as well as a desire to build our pipeline to business development.

Guidance does not include any impact from potential acquisitions, or large late-stage business development transactions, as both are hard to predict.

SG&A expense is expected to be approximately 15% to 16% of revenues, a decrease from 2016, driven by the reduction in headcount related to the hemophilia spin, and continued diligent focus on improving inefficiencies.

We are reallocating resources to maintain our leadership position in MS, and we have resourced SPINRAZA for an excellent launch.

From a tax perspective, we anticipate our tax rate for 2017 to be largely comparable to 2016.

For Biogen, we anticipate GAAP EPS results of $18 to $18.80, and non-GAAP earnings per share to be between $20.45 and $21.25.

Our shareholders will also benefit from the earnings of Bioverativ.

As a reminder, eligible shareholders will receive one share of Bioverativ common stock for every two shares of Biogen common stock.

On an apples-to-apples basis, we aim to grow earnings per share for Biogen in the double digits based -- on a pro forma basis.

I will now turn the call over to Michel for his closing remarks.

Thank you, Paul.

The following is my take on how Biogen is opening the page for 2017.

We have a stable leadership position in MS, with the remaining lifecycle management opportunities, for which I will come back to you at a later stage.

Our biosimilar business is growing strongly.

We are now the standard of care for SMA, and we believe intrathecal delivery opens up potential related treatment modalities.

I am very encouraged by the progress in our Phase 2 and 3 programs such as [remediation], acute ischemic stroke, neuropathic pain, idiopathic pulmonary fibrosis, and last but not least, our Alzheimer's disease program.

All of these are breaking new ground in important areas of medicines, and aiming to address significant unmet medical needs.

We have reinforced our IP position for TECFIDERA and TYSABRI.

We continue to be disciplined on expense management, and we aspire to continue delivering double-digit earnings growth.

With that said, good is not good enough, and we aim to do more.

In 2017, we will be focusing on flawless (inaudible) execution, while laying the groundwork for Biogen's long-term sustainability and success, including our renewed [participation] on business development activities.

2017 will be a big year and I could not be more excited to be taking over as CEO during such a critical time, as we continue to build our Company and drive leadership in neurology and neural regeneration.

You can expect to hear more from me over the next six months, as I work with the leadership team to reevaluate our strategy for long-term shareholder value creation, including efficient R&D investment, and high-return business development activities.

In closing, I'd like to thank our employees around the world, who are dedicated to make a positive impact on patients' lives, and all of the physicians, caregivers and participants in our clinical development programs.

The past and future achievements could not be realized without their passion and commitment.

With that, we open the call for questions.

(Operator Instructions)

Mark Schoenebaum, Evercore ISI.

First, thanks to Biogen for all your support, you are just fantastic to my team and to me, especially Paul, Al and Matt.

Second of all, I know you've been asked this before, but I just think it's so important and I love to hear you say it in front of the broadest audience possible, and that is just comment on the solanezumab results, and what implications they may or may not have for aducanumab?

And then I'd like to know if Michel is a Patriots fan?

Because if he is, we're downgrading the stock.

Al will take the sole, but just on behalf of everybody here at Biogen, it's great to hear your voice, great for you to be back, and well wishes.

Thanks.

Al, good to hear your voice.

I agree with Paul.

It is great to hear your voice again.

So on Sole, there's a few key differences between the Sole trials and aducanumab.

First of all, the patient population they studied was mild, those are mild patients.

We are starting the prodromal and the early mild.

We continue to believe, and I think most of the community believes that the earlier the better, particularly for A beta lowering therapies.

The second is the outcome measure.

They use ADASCog and they actually looked at CDR in sum of boxes as the secondary endpoint I believe.

And we believe CDR is a very good endpoint for early-stage Alzheimer's, and that's what we're using in our Phase 3 trial.

I believe the Lilly results showed a positive P value less than 0.05 on the CDR sum of boxes even in the mild population.

So I thought that was encouraging.

And finally, the difference in the antibodies.

Sole binds to soluble monomeric forms of A beta, which means it binds to a lot of antigen in the circulation.

The antibody probably therefore have a hard time getting to the brain.

They actually couldn't show a lowering of amyloid plaque to a significant degree in the brain.

Our antibody in contrast doesn't bind to the soluble monomeric form, it binds to the soluble ligamers, binds also to the insoluble fibrillar forms.

As a result, the antibody does get into the brain and we have a substantial robust reduction in amyloid plaque in the brain at one year which we published.

So I think for all those reasons, I am not sure you could read too much into the Sole result and infer anything on what we're going to see with aducanumab.

Concerning your second question, I will not enter into the debate on what real football is, but I am a fan of all the teams around here, including the Celtics and the Patriots.

Ronny Gal, Bernstein.

I got three quick ones.

First one, AbbVie just moved their Tau program into phase 2, we've been talking a lot about the strength and weaknesses of the amyloid-beta process.

I'm wondering if you can review for us how you think about the anti-tau as a target.

What has been proven about that target, and what has not?

And what is generally your feeling about that overall field as a secondary field in the Alzheimer's field?

Second, quarterly seasonality.

We've seen in the first quarter with the multiple sclerosis drugs, should we think about your revenue for 2017, should we think about first quarter as being a lot weaker and going over time?

And then last but not least, I'm not sure I am even willing to say that, but as you are accelerating for aducanumab, can you just discuss with us the stopping criteria both for futility and early stop conditions for this trial?

This is Mike Ehlers, I will start with the Tau question.

So we're very interested in Tau because as you may know, one of the hallmarks of Tau pathology is that the pathology in the brain is more related to clinical status and progression.

That's been one of the reasons why there's been such an interest in Tau.

There's also potential notion that this might be a mechanism that can intervene a little bit later than A beta and that those have been some reasons for a lot of the excitement.

Other parts of this that get us interested is the data around the potential spreading of Tau extracellularly, that leads to progression of the pathology, and I think that's led some additional credence to the notion that a monoclonal body might be able to intersect the core disease process.

There are some open questions about the relative Tau species and the best epitopes, and a lot of that will have to play out clinically.

There's tremendous advance, and we're certainly active in this, in imaging agents for Tau pathology, and we think that if that comes to fruition, that has the chance to be as important to the field as amyloid imaging.

I would say that in our portfolio, we have both a Tau monoclonal antibody, and we are also progressing soon to get to the clinic, an anti-sense oligonucleotide for Tau in our collaboration with Ionis that I referred to the line of the potential for intrathecal anti-sense oligonucleotides.

So we think there's great potential.

A lot of that will play out in the clinic, and we are truly excited about Tau as a target.

Ronny, this is Paul.

I will try to address the seasonality question.

I think you are basically right, that in multiple sclerosis, in our expectations, we expect some normal seasonality headwinds in the United States.

We generally anticipate seeing gross to net as a percentage move up, just in Q1.

That's pretty normal.

The US patients are oftentimes moving around, with respect to changes in insurance, and sometimes there's a little bit of a unit slippage on that.

And the TECFIDERA inventory levels in the US that I had pointed out that got high in Q3 and stayed in Q3, could experience a little bit of a drawdown.

That doesn't change anything, with respect to the fundamentals going through the rest of the year, over the long term.

You give the toughest question.

This is Al, Ronny, and I'm afraid we don't want to comment on interim analyses or futility analyses or any of those things.

So sorry.

Eric Schmidt, Cowen and Company.

Thanks for the question.

With the SPINRAZA revenue of $5 million in the first week on the market, is that a real end-user number?

And when Michel says expecting immediate EU approval, are we thinking next week?

Thank you.

Michel and I can tag team.

This is Paul.

The $5 million in Q4 was all channel build.

So as everybody knows, approved a couple days before Christmas, 12/23.

Our team worked real hard the week between Christmas and New Year's.

Inclusive of that was just some small channel fill that wasn't related to anything, with respect to patients.

And concerning the EU approval, it's probably my accent, it's mid-year that we expect to have SPINRAZA approval.

Thank you.

(Operator Instructions)

Geoff Meacham, Barclays.

Thanks to Paul for all the detailed guidance, and I will say up front, go Falcons.

Next question.

Exactly.

We'll talk after the call and put some money on it, Jeff.

Let's talk later on that, Paul.

All right.

For Mike or Al, just again the focus on Alzheimer's, for aducanumab, for enrollment, it looks like you are more than one third of the way enrolled.

Is there anything that's change relative to some of the initial challenges that you faced, and does that make you feel better when you think about the patient identification down the road?

And then just a real quick one, have you had to make any changes when you look at the protocol for ENGAGE or EMERGE to account for the seizure that you saw from the PRIME study?

Thanks.

Geoff, this is Al.

We have not made any changes in the protocol to account for the seizure.

Look, enrollment, as Michel said, we exceeded our stretch, actually, goal for 2016.

Things are improving, I think in terms of two fronts.

There was a lot of, since we require positive PET scan, it's hard to get PET scans lined up for people in certain countries.

And with time, we've been able to sort out a lot of the issues related to getting PET ligands to the centers where they have the PET scans and getting patients scanned, and I think that is improving, and hopefully that will help with enrollment.

And then the other thing is that, our publication last year really continued to build excitement around our molecule, because we showed all of the data we had from the pre-clinical studies and much of the data from the PRIME study.

So that plus the CTAD results, so I think both of those things, I think, are encouraging, although we still have, as you pointed out, a ways to go.

Terence Flynn, Goldman Sachs.

Just was wondering on 2017 guidance, recognize you don't typically give product guidance, but just wondering at a high level if you can give us your thoughts on the MS franchise, volume, price, the impact of the TECFIDERA label update, and Ocrevus as well?

Thanks.

I think Michel and I will try to tag team this a bit.

We don't give product guidance, Terence.

What you didn't ask, and what we think is the biggest ambiguity, as I pointed out in the prepared remarks is SPINRAZA, obviously.

I think the MS business is a stable business, that will certainly, we certainly have thinking around as Ocrevus as coming in, we will take some share and probably hopefully expand the market, particularly with around PPMS.

The ambiguity there obviously is what the label looks like at the end of March.

Michel, any other additional comments?

Yes.

So on MS, it is all about implementation and execution.

And what we can see is that when we do that well, and we can always do better, then we are able to start improving.

For example, in Germany with the launch of ZINBRYTA, this is now four months, and we can see the share growth after two years to being stable.

In France, improved implementation for TEC, all-time high during the last results, during the period audited results.

But it's not the case everywhere.

In the US, we have been a bit penalized as a market leader with the contraction of the market in 2016.

We believe this will normalize with the launch of Ocre, the way Paul said.

This will expand the market, and the market will return to a low single-digit growth, and the market data will also benefit for that.

From that.

So it's a defined situation based on the very respectable competitor that will be launched this year, and with very good data in clinical trials, that has to be confirmed with the label, we'll see, but also in real world.

But in the meantime, we have 250,000 patients on TEC, the safety perception and efficacy perception on our product is well characterized, and we have many cards to play and play well, and we are launching in Japan.

And last but not least, I hope I don't forget that we have tiered royalties in the US from 13.5% to 24%.

So it will be an exciting year, and again, I want to reassess that we remain truly committed in MS with the current portfolio, and the current launches and lifecycle management opportunities.

Michael Yee, RBC Capital Markets.

Appreciate all the guidance clarity as well.

I wanted to ask a little more on SPINRAZA.

You made some comments about managed care, and things like that, and some headwinds with the launch to get ramped.

But I wanted to just ask, how many sites are available, how are you ramping this?

How fast do you think that could get by the end of the year?

And are people trying to write for type II patients and how is managed care handling all of that?

Thanks so much.

Michael, it is, we don't have many more calls to be able to say it's early days.

But it's still pretty early days.

As we have pointed out it's 40 or 50 sites, that is a big percentage of the business in the United States, and then it broadens out from there.

We are doing meaningful medical education across the United States.

We have a go-to-market, if you will, that includes going and providing care to the families, and understanding, but I would say we are early days in trying to get through these capacity constraints, and early days with respect to reimbursement and all the insurer coverage.

I know it's a very important thing, and we will try to do is, in Reg FD settings update people along the way, as we move through launch.

So what we can say is that it's a state-by-state opportunity, and this week, we had the approval from a very large Medicaid coverage, but I will not say more on this stage is this one, because you saw also the Anthem decision.

So we believe that over time, logic will prevail in terms of having the patient access therapy that is proven to save lives.

And the demand from the patient side is there, and is strong.

This I can tell you.

Concerning the early access program that we have opened in the US, we had 62 patients in 15 sites, and ex-US, we have 146 patients in 13 countries.

So all those factors are coming into play, and so far we are satisfied with the progress that we are making.

Matthew Harrison, Morgan Stanley.

I am going to ask one and I'm not sure if you will answer, but I will ask anyway.

I think one of the major questions people still have after the TECFIDERA settlement is a scenario where you win the interference but lose the IPR, and I think a lot of people are wondering what that outcome could look like, vis-a-vis the settlement with Forward, if there is any extended protection in that scenario.

And why you might structure the settlement with Forward to allow that as a potential outcome?

So any confidence you can give us that downside scenario can't happen?

Okay, Matt, this is Paul.

We're going to have a hard time really engaging on this, obviously.

But let me just, I can't really get into any specifics, because it does get into legal strategy and all that stuff.

The way to think about the announcement that we made a couple weeks ago on Forward Pharma, I think it's probably two-fold.

One is which obviously you are getting at, but one is the economics, which we laid out.

And that was all about trying to reduce uncertainty, and what we thought was a very prudent deployment and a good structuring of the economics.

The second was the structure, and keeping the interference going and so on and so forth.

And that was designed to ensure that or attempt to ensure certainly, and that's what we believe, that we have the strongest patents over the long term across the various scenarios, both in the US and in the EU.

So there's lots of different scenarios.

People have written about it, but that's probably about as far as I can.

Thanks for the question.

Josh Schimmer, Piper Jaffray.

I just want to come back to SPINRAZA.

I guess I'm a little confused by some of the comments that you are obviously excited, and well-resourced, you even expect upwards COGS pressure from the SPINRAZA royalty, but also projecting slowing gradual due to access reimbursement.

Given the evidence that suggests time as a function in this, I'm surprised there be any tolerance for delayed uptake, either for logistics or reimbursement in this population.

Maybe you can discuss whether awareness and urgency to treat this disease is really where it should be, and if not, why not?

Thanks.

I think that, Josh, what you laid out is what we'd agree, is this is the ambiguity of the uptake.

We're only weeks in.

The awareness of SPINRAZA, I think, is absolutely there.

Tight-knit community.

Extremely tight-knit set of physicians, as well.

As people know, when we talked about and provided top line data on the second interim readout, we alluded to, that there was a chance we would get approval in the fourth quarter or early 2017.

That actually, even though we conveyed that, that actually was not the general belief in the physician community.

I think people were thinking more like spring, so we went to work trying to get that ready.

But there's still a little bit of work around capacity constraints.

And then, what you point out is obviously, the other big countervailing force, right?

This is tremendous unmet need to a set of patients that have a dire outcome.

And I think we talked about that in type I, but I would say that type II is similar for any family that is burdened with this disease.

In regard to uptake, to our figure, that we should envision realistically, and this is what Paul said and I would like to again say that this is absolutely the way we see it beginning.

And again, the demand is there, and patients through the doctors, through the providers, or directly through the call centers are getting engaged.

So these are very positive signs obviously.

Ian Somaiya, Bank of Montreal.

So I was really hoping to just get your thoughts on other Alzheimer's approaches.

Specifically, the A beta approach that Probiodrug is taking and just any interest there.

And separately, the recent advancement of the gene therapy product targeting Tau.

Just your thoughts and your inclination in terms of maybe duplicating those efforts?

Let me start, and Mike I'm sure will have other things to add.

The Probiodrug approach is to go after plaque essentially, the pyroglutamated is thought to be the nidus for the plaque, and it's a way to get after the plaque.

I think in that sense, it's not that different from the aducanumab approach, which is to go after the plaque.

I think it's an interesting approach.

But as I said, I think it overlaps significantly with our approach.

And the other approaches to AD, in addition to Tau, one of the things we are very interested in is neuro inflammation.

There are genetics that point to neuro inflammatory pathways.

Biogen has a strong history in inflammation, and in neuro, and we have some real expertise internally.

And so we're going after some targets that are related to neuro inflammation.

And then, I think we like the idea of combining things, ultimately.

I think ultimately we are going to see AB treatment being a combination of approaches, and all with different mechanisms of action.

So that's how we're looking at things.

Mike?

I guess the only thing I would say specifically on this is, as Al mentioned, the pyroglutamate A beta antibody is largely a similar core hypothesis, going after plaque beta-amyloid.

There may be some differences in specific epitopes that would have to play out.

It's also less clear how that intervention causes biomarker changes, typical of other A beta antibodies.

Have to play out.

I think the things with gene therapy as a general approach was the other question you asked about.

We are very interested in gene therapy, AB as a modality in general.

I think there's a lot of excitement around that.

We have very active programs, and our collaboration with U Penn, there's still a lot of things have to be worked out in terms of the technology, the safety profile, the manufacturing and bio processes.

My own feeling is this will initially be most beneficial in more severe genetic diseases, rather than genetically heterogeneous common diseases.

That is the way that we're thinking about it.

But we like AB as a general approach.

Robyn Karnauskas, Citigroup.

I appreciate the comments you made on the MS market so far, but I had one more.

If you look at IMS, it appears that TECFIDERA is declining and Aubagio is growing.

So maybe can you help us understand what you are seeing on this trend, and what you might be doing to control the trend, and if there's any pricing pressure or anything like that on the orals from this, on TECFIDERA in the US and the EU?

Thanks.

I will not comment on the third party data.

That's got a methodology, change.

So I have noticed what you have noticed.

What is important is that we continue on the demand generation to perform and that the team is able to generate in order demand as expected.

From the data we have, we see a very slight erosion of TEC around the 19.2, 19.1, slight erosion, which we can certainly say the inroad of Aubagio from the whole base.

This we can see.

And we have to do a better job of that.

We're going to take one more question.

Alethia Young, Credit Suisse.

I was curious if you could provide maybe some potential color around when you think about some of the prevalences and some of the other markets for SMA like Japan, Canada or Australia, which can be on the horizon in the next 12 to 24 months?

Thanks.

Well, I know of no regional differences in the incidence of SMA or the prevalence.

We actually have filed for approval in Australia, Canada, and Japan, as well as Europe, and so yes, we would love to ultimately, I think every child with SMA deserves treatment, and so that would be our goal.

So we want to provide the product for the patient in need all around the globe.

And then Asia-Pac, there are plenty of opportunities, I'll be with Al and all the members of the team flying at the end of the week to Japan to meet authorities to discuss also SMA.

So we are committed.

We are meeting with authorities, and we are working on that.

Thank you all.

Thank you for attending our call.

And talk to you very soon.

Thank you, everyone.

This will conclude today's conference call.

You may now disconnect.