Biogen Inc. (BIIB) Q4 2010 Earnings Report, Transcript and Summary

Good morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the [Biogen Idec Inc.] Fourth Quarter and Year-End 2010 Earnings Call. [Operator Instructions] Ms. Khaleghpour, you may begin your conference.

Thank you. And welcome to Biogen Idec's fourth quarter and full year 2010 earnings conference call. Before we begin, I encourage everyone to go to the Investors section of biogenidec.com to find the press release and related financial tables, including a reconciliation of the non-GAAP financial measures that we will discuss today. We have also put the slides on our website that follow the discussions related to today's call. As usual, we'll start with the Safe Harbor statement. Comments made in this conference call include forward-looking statements that are subject to risks and uncertainties. Words such as believe, expects, may, plan, will and similar expressions are intended to identify such statements. Actual results could differ materially from our expectations, and you should carefully review the risks and uncertainties that are described in our earnings slides, earnings release and in the Risk Factors section of our most recent annual and quarterly reports filed with the SEC. We do not undertake any obligations to publicly update any forward-looking statements. Today on the call, I'm joined by Dr. George Scangos, Chief Executive Officer of Biogen Idec; Dr. Doug Williams, Executive Vice President of Research and Development; Dr. Francesco Granata, Executive Vice President of Global Commercial Operations; and Paul Clancy, Executive Vice President of Finance and Chief Financial Officer. We'll also be joined for the Q&A portion of the call by Dr. Al Sandrock, Senior Vice President of Neurology Research and Development. Now I'll turn the call over to George.

Okay thanks, Kia. And thanks to all of you for joining us this morning. Our Q4 2010 was a very good finish to a very good year, and I'd like to begin today's call by taking a moment to recap our 2010 results and accomplishments. So financially, we finished 2010 with an all-around strong performance. AVONEX Q4 revenue grew by 10% on a year-over-year basis, TYSABRI Q4 revenue grew by 12% year-over-year, which drove a solid 8% growth in total Q4 revenues year-over-year. For the full year 2010, total revenues also grew by 8% over 2009, while non-GAAP EPS grew by 25% for the full year. During 2010, we also returned over $2 billion in cash to shareholders and generated over $1.4 billion in free cash flow. Francesco and Paul will provide more financial details later in the call, but suffice it to say that we entered 2011 in a strong financial position with solid momentum. In 2010, we also clarified Biogen Idec's strategic focus. As you know, we terminated our oncology and cardiovascular pipelines in order to focus on neurodegenerative diseases, hematology and selected high value biological drugs. We're now focusing on what we do best and on what patients need the most. We streamlined the company, which will result in annual cost savings of about $300 million. Paul Clancy will go into the financials in more detail later in the call. And we've made two very important hires surrounding our management team, and I'll come back to that in a few minutes. 2010 was also very strong commercially with significantly improved AVONEX unit sales trends, particularly in the U.S., where we delivered what is now three straight quarters of U.S. sales of around 170,000 units. We enrolled more than 14,700 patients in our two U.S. stratified trials, validating what we believe is strong interest among patients and physicians in TYSABRI risk stratification. And we filed applications to our U.S. and EU TYSABRI [ph] to include anti-JC virus antibody status as an additional factor to help stratify the PML risk. It has been a strong year for our commercial organization, and I commend them on their achievements. One recent disappointment has been the negative opinion we received from the CHMP on FAMPYRA. The CHMP was not convinced that 25-foot timed walk was an adequate measure of overall walking ability and had questions about the responder analysis used in the trial. We are of course disappointed by the decision, and we continue to believe strongly that the drug provides a meaningful benefit to many MS patients with walking impairments. We plan to appeal the decision, a process that takes typically six to seven months, and we'll update you on the status of our appeal at an appropriate time. Otherwise, the R&D organization made significant progress in 2010. We initiated two new Phase III programs, one for daclizumab in MS and the other for our prolonged half-life Factor VIII in hemophilia A. We initiated human trials for our inside LINGO antibody, which has the potential to repair to the myelinated lesions in our patients, and we have made some late stage pipeline. In 2011, we anticipate Phase III data for BG-12, our first oral MS compound, Phase II registrational data for daclizumab, a promising MS therapy with unique mechanism of action. In 2010, our Business Development Team delivered three important new deals: First, the restructuring of our anti-CD20 agreement that strengthens our collaboration with Genentech and Roche; an acquisition from Neurimmune of early stage programs that address three key central nervous system targets; and a collaboration with Knopp Biosciences on a promising new potential therapy for ALS, a disease which is very high on that need. Together, these accomplishments position us well for strong performance in 2011. Before I close, let me take a moment here and talk about the two new additions to our senior management team. Steve Holtzman, the Founder, Chairman and former CEO of Infinity Pharmaceuticals and Former Chief Business Officer of Millennium Pharmaceuticals and a track record of doing creative and groundbreaking deals, and Steve will lead our Corporate Development organization; Doug Williams, who was formerly Head of Research in Imunex, when they brought Enbrel forward and was also formerly the Head of R&D and later CEO of ZymoGenetics has a great knowledge for knowing how to turn science into products and doubling our Research and Development organization. Steve and Doug are not only are extraordinarily talented, but are great human beings as well. With the addition of Steve and Doug to Paul, Francesco, Al and the rest of the team here, I believe that we now have the talent and the team that can take Biogen Idec to the next level. In summary then, 2010 was the beginning of a transformative period of Biogen Idec. We performed well and laid the groundwork for a successful 2011 by restructuring the organization, recruiting top talent and putting in place a high-performance culture. I'll now hand the call over to Doug Williams, our new the R&D head, who will give you the thoughts on what makes a great R&D organization, and his approach to advancing our pipeline. Welcome, Doug.

Thank you, George. Before I begin, I just wanted to say to those of you listening to the conference call and to my colleagues in the R&D organization that I'm very excited to be joining Biogen Idec. My job is to build on the already solid science that Biogen Idec has and to advance and strengthen our R&D pipeline to deliver meaningful benefits to patients and add value to our shareholders. As you know, I've been part of a large biotech, bringing Enbrel and LEUKINE to market, but I've also been part of an entrepreneurial company. Whether it's large or small, I see common denominators in both, underlying what makes a great organization. As a result, my focus for increasing R&D productivity will center on, first, bringing forward only those programs that offer real differentiated benefits to patients. There's already a strong commitment in the organization to this, but we need to improve upon our past R&D performance by accelerating high-priority internal candidates and assuring that we adequately resource them. We will be more disciplined in evaluating our pipeline programs. Second, we need to improve decision making across the organization. I plan to build on the momentum that George has already begun by evaluating and streamlining program structures so that we can cultivate the entrepreneurial spirit and a sense of urgency in the company. Third, we need to be agnostic about which programs we pursue, whether they're internal or external. We'll become a preferred partner for external emerging biotech companies to further strengthen our pipeline. George, Steve and I can translate our experiences leading small entrepreneurial companies into forging effective new partnerships to sustain our long-term growth and, at the same time, meeting the needs of our partners. We have a keen understanding of what elements in the collaboration will be important for our future partners, having spent many years in that position as the smaller company in collaborations with large pharma and biotech. Ultimately, I want to harness the passion for innovation that we already have here among the many talented scientists and inspire a new sense of focus, clarity and urgency. In the short-term, we'll build on our historical strengths in neurology and immunology and support the late stage hemophilia programs. We'll further strengthen this company by improving decision making, assuring we effectively resource the highest priority in most differentiated programs and retaining our commitment to bringing true benefits to patients. Now I'd like to transition to updates from our late-stage neurology pipeline, which is clearly a priority for me and where we have a number of significant data events this year. We filed in December with the FDA and EMA proposed labeling to include anti-JC virus antibody status as another potential factor to help stratify the risk of PML. We're also working to make an anti-JC virus antibody assay commercially available sometime this year. We expect data readouts from both of our Phase III studies of our oral MS treatment, BG-12, later this year. BG-12 is unique among oral MS therapies because it acts as a [ph] protective agent as well as having immune effects. The active agent in BG-12 is the newest in psoriasis for many years and has an established safety profile. We believe this affords the opportunity to pursue combination therapy that have already initiated a Phase II study to explore this approach to treating MS. We plan to initiate a Phase III trial of dexpramipexole for ALS or Lou Gehrig's disease in the first half of this year. Dex has received orphan drug designation both in the U.S. and EU, as well as fast-track designation in the U.S. Dex has shown positive results in Phase II, and this program is an important part of our strategy to advance therapies for unmet needs in other neurological diseases. And in the second half of this year, we expect to present top line data from SELECT, the first of two registrational trials for daclizumab. This drug targets the pathogenic T cells in MS through a novel mechanism and Phase II studies have shown solid efficacy and promising safety with the convenience of once-monthly subcutaneous dosing. As for our hemophilia programs, we continue to rapidly enroll patients in our registrational studies, with data readouts from both B-LONG and A-LONG expected in 2012. Turning to RITUXAN life cycle management activities, last week, we and our partner Genentech, a member of the Roche group, announced FDA approval for the use of RITUXAN as first-line maintenance therapy in patients with advanced follicular lymphoma who responded to initial treatment with RITUXAN plus chemotherapy. Our [indiscernible] date for RITUXAN and ANCA-associated vasculitis, a rare debilitating disease with no approved therapy, is April 19. While I'll be focusing heavily on maturing these late-stage programs, I'll also be looking into the earlier-staged candidates to evaluate them for their future potential and therapeutic differentiation. So in summary, while I've only been here for three weeks, I feel very privileged to be part of a biotech company with such a tremendous legacy, one that's developed three drugs that have transformed the lives of thousands of patients. Biogen Idec has great science and a team of individuals committed to making the company the leading biotech enterprise in the industry. I've known and admired George and Steve for many years and now have the privilege with interacting with the rest of the management team. This is as solid a team as I've ever seen, and there's an unwavering commitment to take this company to the next level. With that, I'll pass the call over to Dr. Francesco Granata, our Head of Global Commercial Operations.

Thank you, Doug. And good morning everyone. As George mentioned at the start of the call, our commercial performance ended the year on a high note. I'm pleased to say that in 2010, we achieved our main goal, which was to stabilize our global MS patient share by abating the decline in our share in the U.S. and growing TYSABRI share globally. This contributed to our 10% global sales growth, driven by strong performances from both AVONEX and TYSABRI. Let me take a moment to discuss each franchise in more detail, and I'm going to focus on market share and unit sales. Later in the call, Paul Clancy will provide more information on revenue, including the impact on foreign exchange and pricing. Starting with AVONEX, our performance in the U.S. has improved tremendously. We have had three consecutive quarters now for sale around the 170,000 unit mark after four years of unit sales declines. This is thanks to our strong commercial leadership team, the overall organization, and thanks to the plan we have implemented. Our 2011 goal now is to put our U.S. AVONEX franchise back on an ABCRE market share growth trajectory. Outside the U.S., after a period of decline, we achieved some AVONEX market share growth in Q4. Keep in mind that in a multi-billion market, even small changes in market share can translate into significant revenue growth, thus, our focus on share. AVONEX unit demand grew by a solid 6% and the overall market continued to expand. AVONEX is now licensed in more than 85 countries and continues to gain share in many of them. In Japan for example, AVONEX market share crossed the 30% threshold in 2010. AVONEX full year revenue growth in the Asia Pacific region was 46%. In 2010, AVONEX was newly approved in South Korea, Hong Kong, Bosnia and Herzegovina, Lebanon and Panama. Moving on to TYSABRI performance, 2010 worldwide market TYSABRI revenue exceeded the $1.2 billion, an increase of 16% versus 2009. We ended the year with 56,600 patients, an increase of 8,200 patients or 72% over 2009, and we continue to gain market share. Worldwide, net patient additions averaged 133 per week, down from 162 during the third quarter. This drop in patient addition is something we are watching but nothing that we are overly concerned about. In fact, new TYSABRI patient inflows in the U.S. have been stable, a reflection of the confidence that physicians and patients have in the value of TYSABRI and the affirmation of the effectiveness of our commercial communication strategy. There's no doubt what's called [ph] in the U.S. discontinuation, which could be the result of a number of factors including time on TYSABRI, treatment interruptions, JCV antibodies, [ph] and new competition. The important point however, is that TYSABRI continues to grow in the U.S. In fact, during 2010, we added 3,100 commercial U.S. TYSABRI patients. This is very good, very strong growth. In addition, there are now more than 14,000 patients who have been recruited on the STRATIFY-2 trial in the U.S., which suggests the tremendous amount of interest in risk stratification, potentially unlocking TYSABRI growth over the midterm. TYSABRI patients outside the U.S. grew by 21% and unit grew by 23%. During 2010, TYSABRI were approved in Russia, Argentina, Columbia, Guatemala, Honduras, Bosnia and Herzegovina, Morocco and Panama raising the total number of countries where TYSABRI is approved to more than 30. In December, TYSABRI goes to India. Much has been made lately about competition from [ph]. We expect the overall market to grow as a result of a new entry and that we expect [ph] to gain market share and meet the needs of the segment of the marketplace. However, to date, as I just described, both AVONEX and TYSABRI have performed very well. We believe that the benefits of these products, coupled with our commercial strategy and their associated communication plans, we continue to make them compelling options for MS patients. Our strong 2010 performance, did not happen by chance. It was the result of a new way of working, combined with exquisite execution. In line with joint vision for Biogen Idec, we strengthened our global commercial infrastructure, while eliminating unnecessary layers of management and clearing the way for a strong partnership between our strong global and our strong local operations. We enhanced our capabilities in market access, global marketing and other core commercial functions. We hired a preeminent neurologist to run the medical affairs team, increased the size of that team and invested in generating new scientific data for our products. In addition, we have increased the size of our sales force, and we strengthened our leadership team by attracting some of the best talent in the industry. Another big accomplishment for us in 2010 was the restructuring of our RITUXAN sales and marketing operations, which allowed us to focus on our joint strategic role in the collaboration, while eliminating most of the [ph] operational responsibilities. This translated into improved market performance and profitability that will continue into 2011. These priorities are critical, not only to Biogen Idec's 2011 success, but also to building a strong commercial foundation to accommodate future product launches. Overall then, we have much to be excited about how we are heading into 2011. We entered the year with positive momentum in both AVONEX and TYSABRI franchises. We have identified opportunities to advance both franchises through better execution, global expansion and, in the case of TYSABRI, risk stratification. And now we have the talent and the resources in place to translate these platforms [ph]. With that, I will now turn the call over to Paul Clancy, our Chief Financial Officer. Paul?

Thanks, Francesco. I'll start with our GAAP financials which are provided in Tables 1 and 2 of the earnings release. Table 3 includes a reconciliation of the GAAP to non-GAAP results. The primary differences between our GAAP and non-GAAP results for the quarter were $75 million related to restructuring, $53 million related to the amortization of acquired intangibles and $28 million of tax impact on these items. For the year, the differences are outlined in the earnings presentation. Our GAAP diluted earnings per share was $0.99 in Q4 and $3.94 for full year 2010. Now I'll move on to the non-GAAP P&L, which we believe better represents the ongoing economics of the business and reflects how we manage the business internally. Our non-GAAP diluted earnings per share was $1.42 for Q4 and $5.15 for full year 2010, which was, as noted, a strong finish to the year. Total revenue for the fourth quarter grew 8% to $1.2 billion and also grew 8% for full year to $4.7 billion. Going through our product revenues, I'll focus on adding financial detail to Francesco's comments, starting with AVONEX. Q4 AVONEX worldwide product revenue was strong, growing 10% to $654 million. AVONEX worldwide reached $2.5 billion in revenue for 2010. In the U.S. where AVONEX grew to $1.5 billion, inventory in the channel ended at just over two and a quarter weeks, up slightly from last quarter. Internationally, AVONEX product revenue was $270 million, an 11% increase over Q4 2009, and full year grew 12% to $1,027,000,000. The international AVONEX business modestly benefited from some tender market sales in Middle East and Russia in Q4. International AVONEX revenue also includes a $4 million hedging gain in Q4 and $35 million in hedged gains for the full year 2010. Moving to TYSABRI. Worldwide collaboration sales were $333 million in the fourth quarter, growing to $1.2 billion for the year. For Biogen Idec, we recorded TYSABRI product sales of $242 million in the fourth quarter, a 12% increase over prior year. And we recorded TYSABRI worldwide revenue for full year 2010 of $900 million, a 16% increase. In the U.S., Q4 TYSABRI product revenue to Biogen Idec grew 15% to $70 million and grew 9% for the full year to $253 million. Q4 international TYSABRI product revenue was $172 million, a 12% increase over prior year, which included a $1 million gain from hedging. International TYSABRI revenue for full year 2010 totaled $647 million, a 19% year-over-year increase, which included an $11 million gain from hedging. Now moving on to the RITUXAN collaboration revenues. Our revenues are broken down to three components. First our share of the U.S. RITUXAN profits. U.S. RITUXAN sales were $691 million in the fourth quarter, up 5% versus prior year. Q4 revenue was unfavorably impacted by some destocking as inventory in the channel declined. Our profit share from that business was $215 million, up 12%. For the full year, U.S. RITUXAN sales were $2.8 billion, up 4% and our profit share from that business was $848 million, up 10%. Second, we received revenue on sales of RITUXAN outside the U.S., and in Q4 this was $34 million, down 26% as royalties from individual countries have expired. Revenues on sales of RITUXAN outside of the U.S. for the full year was $171 million. And last, in the fourth quarter, we are reimbursed $9 million for selling and development costs incurred related to RITUXAN. For the full year, we were reimbursed $58 million. Moving to royalties. Royalties were $45 million for the fourth quarter and $137 million for the year. In the fourth quarters, our royalties increased sequentially as a result of indiamax [ph] moving through a sales-based royalty tier. Now turning to the expense lines on the non-GAAP P&L. Q4 cost of goods sold were $100 million or 8% of revenues. Q4 R&D expense was $289 million or 24% of revenues. R&D expense for the full year totaled $1.2 billion, approximately 26% of full year revenue. In the fourth quarter, R&D expense benefited from the termination of the lixivaptan program, which was offset by a $10 million true up payment to Roche related to the collaboration amendment. Absent these two changes, we incurred no meaningful R&D milestones in the quarter. Q4 SG&A expense was $273 million, a 15% year-over-year increase as we increased sales and marketing activities in support of AVONEX and TYSABRI and increased medical affairs activity. Continuing down the P&L, our collaboration profit sharing line totaled $68 million in expense for the quarter. Other income and expense was a loss of $5 million in Q4, as yields on our marketable securities have declined. Our Q4 non-GAAP tax rate was approximately 22%, which was driven lower due to the R&D tax credit legislation late in the year. For full year 2010, our non-GAAP tax rate was approximately 25%, which included the R&D tax credit in favorable discrete items in prior quarters. Let me also call attention to the non-controlling interest line on the P&L. In Q4, we incurred a $25 million pretax charge related to the previously announced termination of our involvement in the lixivaptan program. In the fourth quarter, our weighted average shares were $243 million. Over the course of 2010, we retired over 40.3 million shares related to the two previously communicated share repurchase authorizations. The ability to return cash to shareholders has been a testament to the robust cash flow generation of the company. We ended the year with approximately $2 billion in cash and marketable securities. Of note, approximately 47% of our cash and marketable securities is domiciled outside the U.S. This brings us to our non-GAAP diluted earnings per share which were $1.42 in Q4 and $5.15 for full year, representing a 25% increase over the full year 2009. So 2010 was a year of strong financial performance. Commercial organization executed hard to achieve high-single-digit revenue growth above our original expectations. We appropriately leveraged the P&L with non-GAAP EPS growing by 25%, and our cash flow was exceptional. Now I'd like to outline our 2011 financial guidance, which will exclude any significant business development activities. Revenue in 2011 is expected to be between flat and low-single-digit growth. Our estimate includes the impact of some notable items that are projected to reduce our revenue base. First, the RITUXAN business will be impacted by the continuing expiry of ex-U.S. royalties and a reduction in sales and marketing expense reimbursement. We expect the RITUXAN rest-of-world revenue to total approximately $80 million to $100 million for 2011. Second, we don't expect to benefit from the hedge gains we've experienced in 2010. Third, the impact of healthcare reform increases from approximately $15 million in 2010 to approximately $95 million in 2011 across all products. Nevertheless, we expect these headwinds to be offset by continued TYSABRI revenue growth. We expect some upward pressure on cost of goods sold as we won't benefit from some of the one-time upsides in 2010. R&D expense is expected to be approximately 22% to 24% of revenue. SG&A expense is expected to be approximately 20% to 21% of revenue, reflecting the savings from the change in RITUXAN sales and marketing structure, offset by some commercial investments to compete in the new landscape. Our outlook is designed to capture the economic upside from the November restructuring, aiming to achieve a yearly run rate savings of $300 million by the second half of 2011. As a result, we expect the combination of R&D plus SG&A expenditures to decline by high-single-digit percent. Our effective tax rate, both GAAP and non-GAAP is expected to be between 26% and 28% of profit before tax. Non-GAAP diluted earnings per share is expected to be above $5.70 and GAAP diluted EPS is expected to be above $4.82. We expect CapEx in the range of $200 million and $220 million. Overall, the financial plan is designed to allow resources to move forward our late-stage pipeline, defend the commercial business and drive double-digit non-GAAP earnings per share growth. Now I'll hand the call over to George for his closing comments.

Okay, thanks, Paul. We had a good 2010 and we intend to build upon that now as we move through 2011. We have five key goals for 2011. First, we plan to maximize our financial performance without compromising the long-term health of the business. Our 2011 goal is to deliver double-digit earnings growth, realizing the economic benefits of the restructuring we did last fall. Second, we plan to grow our share of the MS market. Our 2011 goal is to grow AVONEX share in the ABCRE market and to continue to grow TYSABRI share overall. Third, we plan to aggressively pursue the serological assay and TYSABRI risk ratification efforts. Our 2011 goal is to provide these important insights to the neurology community subsequent to a label update. Fourth, we plan to aggressively advance the late-stage pipeline. Our 2011 goals include filing an NDA for BG-12, completing the enrollments in the Peginterferon Phase III trial, completing and communicating the final results of the select daclizumab Phase II registrational trial, continuing to advance the Phase III daclizumab design trial, initiating [ph] Phase III trial and completing enrollment in our Factor VIII and Factor IX physical trial. In addition, we’ll aggressively explore external opportunities to enhance our portfolio, and we now have in place a team that can do that thoughtfully and effectively. Fifth and finally, our plan calls for continuing to drive true cultural change at Biogen Idec, building on a new sense of urgency and nimbleness at the company. So before I close, I want to thank all of Biogen Idec's employees for their contributions, without which we couldn't achieve our goals and for the positive and productive attitude with which they've embraced our new vision. We've had quite a bit to be excited about and are looking forward for 2011 and beyond. So with that, we'll close our remarks and open up the call for questions.

Operator, we're ready to open up the call for Q&A [Operator Instructions] Operator, we're ready for the first question.

The first question comes from Eric Schmidt from Cowen and Company.

Paul, I'm wondering if you're expecting to get royalties for BeneFIX in 2011 if that's part of your guidance and what royalty rate might be entitled to?

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

Your next question comes from Mark Schoenebaum from ISI Group.

One, Paul, what are you expecting for AVONEX volume growth in 2011? What's embedded into the guidance? And two, what's the budget for BD now that you've named the team head? And can you give us any kind of framework to think about that? And does that $300 million in annualized cost-savings exclude that?

Yes, let me take that, and then I'll ask George to kind of give a broader perspective on business development. Look, in AVONEX our objective, I kind of point you to that, is to begin to move -- take this -- what we've done in terms of abated the share loss in the ABCR market and actually move it towards share gains. It's kind of unclear whether or not that segment will actually grow or not, but that is our objective is to actually try to begin share gains across the world in the ABCRE kind of segment of the marketplace. I don't think our expectations are meaningful unit gains when you combine what's going on in the United States, with natural kind of unit growth that continues outside the United States. The $300 million target savings is pure savings. I think our thinking on that is that as we brought in new people, Doug, Steve as well, in the business development front, we look to be agnostic as we've talked about in terms of pursuing internal or external opportunities, and we'll make trade-offs along the way.

The $300 million savings as well as the EPS target that Paul said earlier, both having in them a certain amount of money for business development transactions. Certainly, I'm not going into what that is as many partners might be listening to the call here. But there' are certain amount of money in there and we, as Paul said, I think all of us are agnostics. We need the best pipeline we can get. We have several interesting compounds in the pipeline already, we need to strengthen it further. We will do that both by evaluating internal and external opportunities. And basically, we view R&D and business development as one big budget and that's the amount of money we have in order to build and move forward our pipeline and we'll try and use it often.

Your next question comes from Rachel McMinn from Bank of America.

Two more R&D-oriented questions, but wondering if you can say on STRATIFY 2 -- you’ve talked about how many patients are in this study. Can you give us a sense of how many PML events have been recorded in this study so far? And/or when you expect to actually have data from the study? And then secondarily, on BG-12, you talked about using this in combination, but obviously, the initial study is versus placebo. I'm just trying to gauge like, what do you think -- obviously, more than just having a statistically significant result, but what would be a good result that would get you excited about commercializing it as monotherapy?

Rachel, this is Paul. Let me just answer the first part of that and I'll turn it over to Doug and Al on the other specific. Just on the STRATIFY 2, I mean, there's certainly interest, as we understand, as we all have interest in trying to understand what patients are doing as they get their STRATIFY 2 information. That's an open label, physicians and patients in essence get their zero positive or zero negative status. We are not kind of looking at that to try to preserve the integrity of that trial for the time being. So when the information is ready to be communicated broadly to the medical community, we'll do that. But I think we’re trying to make this study very, very important for the long-term health of TYSABRI. I'll turn it over to Doug and Al.

I think as far as the magnitude of the response that we would like to see in the combination studies, it's sure hard, we'll be thinking about sort of the magnitude that's important. But I think what's key here is that we've got different mechanisms of action that we're combining. We've got an agent that has neuroprotective effects and some modest immunomodulatory activity. We'll be looking at that in combination with the interferons as well as Copaxone and obviously, we'll be looking at improved performance in terms of EDSS and the usual parameters that we measure in MS studies.

Your next question comes from Robyn Karnauskas from Deutsche Bank.

It was just -- in thinking about [ph] the market growth for AVONEX and TYSABRI, I was wondering if you could comment on what kind of assumptions do you think -- you have around pricing. Is it a big price increase? How long will that be able to continue? Because you said repeatedly that you don't think there's a lot of pricing power left in the market? And the second question is really about volume growth, just to elaborate a little bit more, how much volume growth are you really assuming in your guidance?

This is Paul, Robyn. For planning purposes and going forward, we don't assume pricing. So specifically on the guidance, what's embedded is simply what has already been taken in the marketplace. What we see in the marketplace, with respect to overall market growth, is low-single-digit in the United States for the market and kind of higher single-digit outside the United States. I think one thing to point to, that's interesting is that we have seen with the new entrants that it has the potential to expand the market. So we don't, per se, have that built into our forecast, but that's a heartening kind of early indicator in a dynamic in the marketplace.

Next question comes from Yaron Werber.

One is just a follow-up on pricing. I mean, if you actually calculate the price of TYSABRI, regardless of the price increases, the actual price increase that you're able to book is much smaller than the actual price increase. So can you help us understand exactly what's going on there? Is there big rebates or big gross to net adjustments? And the price of AVONEX, you've actually noted, was down 2% versus Q4 '09, again despite price increases. So just trying to understand that dynamic. And then secondly, it sounds like your guidance assumes pretty much a flat share count in 2011. So are you not expecting any share buyback or is that upside?

Yes, this is Paul. I'll start with the back-end of your questions. The guidance assumes essentially where we ended the year with respect to shares. So on an ongoing basis, we have essentially assumed share stabilization. The use of cash and the robust cash flow generation the company puts us in this very enviable position. We'll continue to really review strategic opportunities for the company. We have a new team here in place that is very adept and very experienced at that in really try to build and enrich the pipeline. If we have excess cash flow, we'll look towards returning that the shareholders and the most appropriate way. But I think the way you framed it as the potential of upside is probably the decent way to think about it. We just don't want to get the SKUs too far ahead of our nose on that one. With respect to pricing, the dynamic that you're maybe seeing is kind of an FX or the hedge gains that will cut down on a year-to-year basis. So when you strip that apart, I do think on the AVONEX business, we're seeing pull through. And then on the TYSABRI business, I think it's accurate, it's a little bit less of realization of the price changes.

The next question comes from Jeff Meacham from JPMorgan. Geoffrey Meacham - JP Morgan Chase & Co: Question for you on new starts in the JC virus assay. I'm curious if you guys anticipate more or less a warehouse effect of TYSABRI candidates from the assay [ph] or do you think you could have -- the other question is how frequently do you think that you can test on a yearly basis? What would be the recommendation and then the net effect of that on discontinuations?

So far, what we have seen taking place in the market is that the patients to whom TYSABRI's prescribed have remained pretty stable and the conversion of prescription into [ph] on treatment remained pretty stable in quarter four. What we have seen is a slight increase in the discontinuation, and in particular, we have seen that from the past quarters, some changes in there. There are more, now, alternative dosing than drug [ph]. We don't see for the moment a warehousing effect as you mentioned. We think that through the plan of communicating our risk stratification, we shared an outline what is the profile of the risk benefit of TYSABRI in the virus-negative patients and what should be the idea of the public used in the virus-positive patients, for which we still think there is room for TYSABRI to be used, as by the way testified by the confidence of physicians in continuing prescribing TYSABRI.

Jeff, in terms of the frequency of repeat testing, we believe that annually is reasonable, but we'll see what the regulatory authorities, whether or not they agree.

The next question comes from Thomas Wei from Jefferies. Thomas Wei - Jefferies & Company, Inc.: I'm a little bit confused about the growth dynamic characterization that you gave for TYSABRI. So just based on the utilization numbers during the fourth quarter, you can calculate the gross patient as, those were 3,300 then discontinuations were only 1,600 for the net new patient numbers of 1,700. So relative to the third quarter, if we look at things sequentially, that actually means that the fourth quarter softness wasn't really driven by an increase in discontinuations. That looks relatively steady over the last few quarters. It was really driven by softness in new starts. Is that the right way towards the data on a sequential basis? And can you just share with us how these trends might differ geographically?

Well, basically the drop in new patients is mainly driven by discontinuation. And again, we didn't see in the U.S. any softening of the touch form, and we didn't see any significant decrease in the transformation of touch forms into prescriptions. So we think that the largest part of the drop in net patients is driven by discontinuation. Again, that discontinuation were mainly either patients going into drug holidays or alternative dosing. We have seen in quarter four a slight change on these two segments and increase in alternate dosing and is likely to a proportional degree in drug holidays. Does that answer your question?

The other thing I'd add is, we always talk about and kick around these numbers that there is such precision. We feel very comfortable that the data in the United States both on touch forms, which are in kind of an analogue to prescriptions as well as discontinuations, are pretty robust. In that when we articulate the U.S. information, it's based off of the risk management program, and it's pretty good. Outside the United States, when we provide total worldwide information, it's actually the triangulation of information, including shipments and units and country-by-country data. And that would extend also to the patient utilization numbers that you referred to at the beginning of your math, I think that kind of 77,000 number. So I think we just want to be guarded by taking those and then driving it down to very, very specific trends. These are kind of broad, particularly outside the United States, broad kind of unit trends and patient trend numbers.

Your next question comes from Matt Roden from UBS.

It's on TYSABRI risk stratification really how to best communicate that information down the line. So should we be expecting now the STRATIFY 2 a PML rate in [ph] negative patients. And if so, what sort of differential rate do you think would be required to convince regulators and the MS community to drive up broader uptake?

Yes, we would like to eventually get to an incidence figure in the antibody positive population as well as the antibody negative population. And in terms of what the regulators will require, I'd rather not comment on that because we are right in the middle of sort of our regulatory process. We have had conversations with them and we have filed. So we are making progress but, obviously, but probably best not to comment.

And remember that the population is not just positive and negative. There are two other risk factors already on the label, duration and prior [ph]. So we'd like to be able to let patients and physicians know what their relative risk is depending on what set of risk factors they have and currently three that are on the label, JC virus, antibody status and hopefully additional risk factors in the future. And so -- but we can't really comment on the specific to that as we go throughout the regulatory process. That's certainly the goal.

Your next question comes from Josh Schimmer from Leerink.

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

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

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

No, same thing. Sorry, we can't add too much more color.

Your next question comes from Jason Kantor [RBC Capital Markets].

Also a question on TYSABRI. With the proposed label change, the commercial JC virus test and STRATIFY results, how are you seeing that all come out over time and what sort of assumptions do you have in terms of what kind of uptick those things might cause in your guidance? And then in a related question, what percentage of the people that are already on TYSABRI have been tested to date for JC virus?

Well, over time, to get back to the last question, we would like to be able to provide information to patients and physicians about the relative risk, which we anticipate will be obviously lower in the JC-negative population than in the JC-positive population. So that patients can make the appropriate decisions together with their physicians. So we wouldn't -- as the risk-benefit of TYSABRI obviously will be different for people who have different risks, and so they can make the appropriate decision. We imagine over time, and potentially increase in the negative population. We want to make sure we get that on the label, and we do this in the way that's obviously consistent with all of the guidance and regulations. So far, there are 13,700 patients who have been tested on STRATIFY 2 so that's the total, there's another 1,000 on STRATIFY 1. And so that's the total number of TYSABRI patients or patients who know their JC virus factor.

Your next question comes from Sapna Srivastava from Goldman Sachs.

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

Outside the United States, the growth of volumes of AVONEX was 6%. And for TYSABRI, the volume growth on outside the United States was around 17%. Outside the United States, it was 23% in volume growth. So continue to have a stronger -- both product continue to show a very promising and interesting growth in terms of volumes. As far as price is concerned, as usual, there is much more price pressure in Europe than in the United States. We think we have got the large proportion of the possible price pressure on both products in 2010, which could translate into a softer 2011 price erosion outside the United States. We have, on the other hand, strengthened our global market access capability in order to make sure that to appropriate very good position [ph] will be able to further limit the price [ph] United States.

Your next question comes from Geoff Borges from Bernstein.

Just a couple questions for Doug. Doug, just a couple of dosing questions. Looking at PEGylated interferon, you obviously had the chance to look at the data. What do you think you're likely to be able to get away with in terms of dosing or Peginterferon beta? And similarly for Factor VIII, I see you announced that you started the Phase III trial there. Could you talk about the dosing schedule you're going ahead with? And then lastly, just related to your views of the portfolio, I know it's early days, but you've been successful in the past at attracting, acquiring interest in R&D assets before, and I think that's not gone unnoticed. Anything that you think will be a candidate for externally partnering in terms of generating revenue and bringing your partners to the table rather than actually making the investments from Biogen Idec's side.

Let me see if I can get these in order for you. From the Peginterferon perspective, I think we're going to be able to see that data fairly soon. So I'll wait until we see the data before I predict what the answer is going to be to that question. But certainly, I think it's an important part of our strategy that's building on the AVONEX franchise to come up with a more convenient dosing schedule than what we currently have when we're enthusiastic about having that data. As far as the Factor VIII situation is concerned, I think the information that we have available to us at this point would suggest that the dosing frequency should be about half of what we see with the existing Factor VIIIs out there. So reducing the dosing by half, I think is what our anticipated dosing frequency is going to be in that study. And then the third question is attracting talent?

Your next question comes from Joel Sendek from Lazard Capital Markets.

I have a question about FAMPYRA. I was wondering if you could potentially share any of your strategy for the appeal, for example, is there any additional data you could submit? Or how can you reference the commercial success in the U.S. in support of the appeal? And then if you could give us more information on exactly what will happen along with the six to seven months and what we'll we hear and when?

Let me try crack at it and then maybe George can finish up. I think that the key thing to remember is that there's two positive Phase III trials and so the data are quite robust. And as a clinician, ambulation is very important in multiple sclerosis. And so, I think, those are the things that we need to point out. The other thing is that there's a patient reported outcome, a validated outcome called MSWS-12, which confirmed the fact that this increase of 25% from baseline in walking speed in the responders is clinically meaningful. And so these are the things that I think we need to point out and make sure that the CHMP fully understands the data.

And just to give you a sense of how the time line plays and how we get to six to seven months is, essentially, we have to get a new rapporteur and co-rapporteur named. We have 60 days to actually submit essentially our response to the initial action of the regulatory agency. They then have 60 days to decide whether they're going to uphold the original rejection or essentially take our position on this, and then there's an additional 67-day period whereby the central body has an opportunity to vote on this and give a final recommendation. So that's how we get to the all in six-to-seven-month time line.

Your final question comes from John Sonnier from William Blair. John Sonnier - William Blair & Company L.L.C.: George, I appreciate the goal to be agnostic in your business development pursuits. I guess with Doug on board, why wouldn't you alter your strategic direction a bit more towards a broad focus in immunology than you would have done otherwise?

Doug has obviously, I think, demonstrated over the years his ability to be very discerning among targets and developing drugs that have an impact on the immunological system but that will be part of our focus as we go forward, it has been, and that will continue to be part of our focus. I think Doug, as you probably know, I mean together with Al and other people have broad, I think, scientific insight that spans not only immunology, but also neurology and the other areas we're interested in. So certainly we'll continue to focus on immunological things and the anti-inflammatory aspects. But not only that, obviously, we have to be focused on neurology as well, so we'll see. We're happy to have Doug here as a very seasoned, a very successful R&D head, and who will not only take our internal projects forward, but I think help us in a very thoughtful analyses of opportunities we see on the outside.

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