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 Second Quarter 2017 Financial Results and Strategic Update. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. Thank you. I would now like to turn the conference over to Matt Calistri, Vice President of Investor Relations. You may begin your conference.

Thanks, Dan. Thank you and welcome to Biogen's second quarter 2017 earnings and strategic update 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 a GAAP to non-GAAP financial measures that we'll discuss today. Our GAAP financials are provided in tables one and two. Table three 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. Given that we have a lot to cover today, we'll only be covering the key financial results for the quarter. For further detail, I encourage you to refer to the press release and slides. 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'm joined by our Chief Executive Officer Michel Vounatsos and Dr. Michael Ehlers EVP of Research and Development, who'll also be joined for the Q&A portion of the call by our Chief Medical Officer, Dr. Al Sandrock; Dr. Paul McKenzie, EVP of Pharmaceutical Operations and Technology and Dr. Jean-Paul Kress, EVP, President of International and Head of Global Therapeutic Operations. Now I will turn the call to Michel.

Good morning everyone and thank you for joining us. I am very pleased to discuss our Q2 results and recent events and increase to our 2017 revenue guidance and as promised an update on our strategy for long-term growth. At Biogen we are increasingly focused on execution, maximizing the potential of both our commercial business and our pipeline and building new growth drivers for the future. We had a great first half of the year and we are excited to build on this momentum for the rest of 2017 and beyond. For the second quarter of 2017, Biogen generated record revenues of $3.1 billion. On an apples-to-apples basis excluding hemophilia, revenues grew an impressive 15% from the same period a year ago, our highest quarterly growth in over two years. Revenues grew 6% when we include hemophilia revenues in the prior period. GAAP earnings per share were $4.07, and non-GAAP EPS was $5.04. Earnings this quarter were impacted by the charge related to our recent licensing deal with Bristol-Myers Squibb for their anti-tau asset, now BIIB092. We believe this is a critically important investment as it gives us two new opportunities, one in progressive supranuclear palsy and one in Alzheimer's disease. This is a great example of the growth driving deals we are pursuing. Let me now highlight how we think are the key takeaway for the quarter. First, financial performance. We saw continued growth in our MS franchise this quarter. MS revenues grew 5% year-over-year to $2.3 billion, a record quarter. We continue to add patients globally with a 4% increase versus the prior year and a 1% increase versus last quarter. We are pleased with the progress we are making with the launch of SPINRAZA as we generated $203 million in revenue in the second quarter. We saw…

Thank you, Michel, and good morning, everyone. Let me start by walking you through the significant progress we made this quarter advancing, reshaping and building out our pipeline as we further strengthen our leadership in neuroscience, starting with Alzheimer's disease. Last week, we presented a new post hoc analysis of the Phase 1b PRIME study of aducanumab at the Alzheimer's Association International Conference in London. This analysis looked at changes in cognitive and functional subscores of the clinical dementia rating scale, which is the primary endpoint of our Phase 3 trials. The data showed that aducanumab slowed the decline on both the cognitive and functional assessments compared to placebo, and the results of all subgroups studied were consistent with the overall study population. We also received, recently submitted a protocol amendment for the Phase 3 aducanumab clinical studies ENGAGE and EMERGE that will titrate the high-dose ApoE4 carrier cohort up to 10 milligrams per kilogram. Previously, the cohort was dosed up to six milligrams per kilogram. This change was made based on the results from the titration arm of the placebo controlled portion of the Phase 1b PRIME study that showed patients who were treated with aducanumab using a titration regimen had a lower instance of ARIA at 12 months than those patients treated in the higher fixed-dose cohorts. Based on data from PRIME, higher dose titration of APoE4 carriers may increase the likelihood of demonstrating meaningful clinical efficacy. Importantly, Phase 3 enrollment for aducanumab continues to progress well thanks to operational excellence from our team. Our strategy was to identify exceptional sites that we believe had high potential to enroll patients and to amplify the strength of our data by raising awareness. This plan appears to be working very well. We have sites telling us this is the first…

Thank you, Mike. Now guidance. We are raising our full year 2017 revenue guidance to a range of $11.5 billion to $11.8 billion. We assume that SPINRAZA continues on a strong trajectory in terms of patients' uptake in the U.S. However, we expect revenue growth will flow as many patients move on from loading dose to maintenance therapy. Outside the U.S. we expect modest SPINRAZA revenues, particularly from Germany and Japan. Our assumptions for MS for the balance of the year remain largely unchanged. We anticipate GAAP and non-GAAP R&D expense between 18% and 19% of sales. This is an increase from prior guidance reflecting the recent in licensing of BIIB092 from BMS. This guidance does not include any impact from potential acquisitions or large-later stage business development transactions. These are hard to predict but obviously remain a priority. GAAP and non-GAAP SG&A expense is expected to be approximately 15% to 16% of revenue. We anticipate GAAP EPS results between $17.05 and $17.65. And non-GAAP EPS to be between $20.80 and $21.40. We believe 2017 is turning out to be a very strong and successful year for Biogen. Now, I would like to turn for a strategic update and discuss how we aim to build on this impressive success going forward. Our mission is clear. We aim to be the leader in neuroscience by developing transformational therapies to address what we believe are becoming the world's most significant unmet medical needs. In order to achieve this mission, we plan to maximize our near-term performance while investing for the future across four core growth areas. One, MS and neuroimmunology. Two, Alzheimer's disease and dementia. Three, Parkinson's disease and related-movement disorders. And four, neuromuscular disease including SMA and ALS. Further, we see opportunities to invest in emerging growth areas such as pain,…

Thanks, Michel. Our strategy is rooted in the fact that the unmet need in neuroscience is massive. With an aging population leading to a significant increase in the number of patients globally that are expected to suffer from nervous system disorders, many of which currently have limited or no treatment options. Biogen has a long history in neurology and has built up substantial core competencies in the area. It is our belief that no other area of medicine holds as much promise with as much need as neuroscience. The opportunity space is vast, and the time is right. With an ongoing revolution in basic neurobiology, human genetics, biomarkers, patient stratification and neuroimaging, an increasing receptivity to new clinical endpoints and regulatory paths, we believe that all signs point to neuroscience as the next oncology. Yet, for most companies, it is either not an area of focus or represents an opportunistic play. Our view is that success in neuroscience requires intense focus and that opportunistic approaches will not maximize value. There is a need for a leader in neuroscience. Our goal is to be that leader. To that end and recognizing that as a therapeutic area in the field of biomedicine, neuroscience is large with many intersecting disciplines. Our strategy is to concentrate on the four core growth areas Michel mentioned: MS and neuroimmunology, Alzheimer's disease and dementias, Parkinson's disease and related-movement disorders, and neuromuscular disease including SMA and ALS. We believe we can accomplish leadership by acting on the following strategic initiatives. First, building a translational machine in neuroscience to increase the probability of success for transitioning from the lab all the way to the market. Second, investing in assets and capabilities in our prioritized growth areas. Third, substantially augmenting our pipeline to emphasize both innovation and risk balance. To…

Thank you, Mike. Turning to capital allocation, as we move forward our new priority for capital deployment is to invest in building our pipeline across our core growth areas and emerging growth areas. We will explore deals of all sizes, and we remain disciplined in our approach. We look to deploy capital to generate returns meaningfully above our cost of capital. We view investment in growth as our top priority, but we also recognize the value of opportunistically returning excess capital to shareholders through share repurchases. Our final strategic priority is to implement a plan for a lean and simple operating model which we believe can unlock resources that can be reallocated to help fund our prioritized investment for growth. We expect that by 2019 up to $400 million annually will be available to redirect towards prioritize R&D and commercial value creation opportunities. Before I conclude, let me discuss our biosimilars business. We are excited about the potential value of both our commercial assets in Europe and our option to increase our investment in our JV, Samsung Bioepis. Biosimilars are an important contributor to our growth while not being at the core of our neuroscience focus. Our plan is to use any positive cash flow from our commercial operation and the JV to reinvest in our core growth strategy. Now let me summarize our strategy to deliver in the short term while investing for medium- and long-term value creation. We are focused and committed to maximizing the resilience of our MS core business. We expect SMA to generate significant growth, accelerated by geographic diversification. We believe our core business is capable of generating significantly increased cash flow to invest for growth. We aim to expand and develop our neuroscience portfolio across our core growth areas and emerging growth areas. We…

Your first question comes from the line of Geoff Meacham, Barclays. Please go ahead.

Good morning, guys. Thanks for the question and all the strategic detail. And I'll keep it just to one question. So you touched on this but, Michel and Michael, I wanted to ask you about the clinical risk here when you look at the biz dev. I think most investors acknowledge the high-impact nature of the pipeline but the risk profile and probability of success in Alzheimer's and stroke in particular I think is the main uncertainty. So when you think about external biz dev, how much of an emphasis is there on clinical risk over things like diversification and impact? And when you look to say the orphan space, do you think more broadly SPINRAZA will provide a template for a bigger franchise in the rare disease space? Thanks a lot.

So before I give the floor to Mike, this is Michel. So we want to have a strategy that is a bit more hedged. There are different combination of factors in the different vertical that you heard in neuroscience that were communicated by Mike, including clinical development risks, time line, P&L risk, capital allocation, regulatory or payer. But now coming back precisely to your question, Mike will give you more details.

Yes. Geoff, I think this is a great question and the nature of it highlights exactly what we're trying to do. We are looking very closely at clinical risk. We're looking to diversify that a bit. We think that SPINRAZA does provide an excellent template of what we can do in rare and orphan disease. When we look at this as development, we're going to look at very closely at this area in rare and orphan. We also want to make some of this risk a little bit less codependent which is areas that may not – where the risk isn't the same across different clinical populations so we're looking at that. And then I mentioned a little bit about trying to pursue patient-centered franchises which is kind of addressing things across patient areas where we've got known expertise. Whether that's symptomatics and Alzheimer's disease, whether it's muscle enhancement and SMA, those are the kind of things we're going to look to diversify and mitigate clinical risk in the portfolio.

And your next question comes from the line of Eric Schmidt with Cowen & Company. Please go ahead. Eric Schmidt - Cowen & Co. LLC: Congrats on a great start to the year. I was hoping, Michel, could just talk a little bit more about capital allocation. It sounds like the shift from share repurchases to one of biz dev priorities is emphasizing maybe more growth over value. Can you talk about why you perhaps no longer view your stock as a good investment? Or also whether the dividend or any discussion of a dividend is off the table for the foreseeable future? Thank you.

Thanks for the good question, Eric. So as alluded, the third strategic priority is to develop and expand our neuroscience portfolio. We believe that this is a future growth engines for the company. But you know, we will obviously do that with the objective to maximize shareholder returns. We will absolutely deploy this capital where the internal rate of return will exceed our weighted average cost of capital and we will look all the time at R&D, commercial acquisitions as well as returning capital to shareholders, okay? So we don't exclude returning capital to shareholders. We will evaluate that while we see the opportunities.

Your next question comes from the line of Umer Raffat with Evercore ISI. Please go ahead.

Hi, guys. Thanks for taking my question. Michel, so on the call today you mentioned a possible potential inflection point in the early 2020s. And you also talked about resilience in the MS base business and the growth in SPINRAZA. So my question is this, do you think you can grow top-line through that possible inflection early 2020s even if you excluded the contribution from biosimilars?

So you know, the facts and the way we did outline the strategy fully speaks for itself in terms of ability for Biogen to implement well on the opportunities we have to continue to drive MS and to accelerate the efforts in SMA. And we believe there are significant opportunities as explained. And if we continue implementing well, MS is a growing market. There are half of the patients being treated than actual prevalence in the U.S. So we decided not to give long-term forward guidance on these measures that you ask, but we are confident in our ability to continue to implement well and deliver on the expected performance. And, yes, it is true that at the same time there is an articulation whereby we have the readouts of very important studies. But we'll not wait for that. As we said all along, we will continue to develop and expand our portfolio, and therefore there will be some capital allocation prioritization efforts, including potentially some BD. So this is what we are working towards.

Your next question comes from the line of Geoff Porges with Leerink Partners. Please go ahead.

Thanks very much. Mike, a lot of people have been asking about the interim look on the aducanumab trials. You amended the protocol, as you described, for the APoE4 carriers. Could you talk about the advisability and likelihood of an interim look? And whether that's something that would be disclosed to you or to us at the time? Thanks.

Yes, Geoff. Thanks for the question and interest. We just don't comment about interim analysis, so I really have no more to say on that one.

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

Hi. Good morning. Thanks for taking my question, and congrats on the quarter. Michel, you mentioned that the global MS patients increased 4% versus last year. So do you think that's a long-term market trend? And also what do you think OCREVUS would do? Because if I do my math, it seems that the drop in TYSABRI revenue in the U.S. this quarter is way less than what we saw from the increase in the OCREVUS launch. So does that mean actually OCREVUS would at least in the near term expand the MS market? I was wondering if you can talk about that. Thank you.

Yes. This is what I anticipate. Your competitor is your best friend, mostly when you get 24% royalties in the largest market. So we have seen in the U.S. a contraction in 2016 of the market. And we assume that the market will resume back to low-single-digit growth in the U.S. and high-single-digit growth in Europe geographies. So I anticipate that with the PPMS label and all the patients from the sidelines, there is logically an opportunity to see the market regain some momentum. And concerning TYSABRI, you know it's 10 years of post-marketing experience with a very well documented beneficiaries proposition for the providers and for the patients that had the time to experience the efficacy of this product. I was in USC last week, and I was reminded by all the physicians on the perceived unsurpassed efficacy on this product. So it speaks for itself, and I believe that TYSABRI will continue to do well, but we have seen some erosion and so be it for high titer JCV that will switch to OCREVUS. But let's keep in mind that when they switch from TYSABRI to OCREVUS, it's not an easy switch. What I hear and as anticipated is that some of the patients see a rebound in the disease symptomatology, and they do communicate that to the providers. So this is clearly an element that we see. So I hope I did answer with a few measures – the dynamic, your question.

Your next question comes from the line of Ronny Gal with Bernstein. Please go ahead. Aharon Gal - Sanford C. Bernstein & Co. LLC: Good morning, and thanks for taking my question. I would like to turn to SPINRAZA for a second. Now that you kind of know a little bit more about the market dynamics in the United States, patients with spinal fusion and so forth, can you give us a feel for the applicable market size for SPINRAZA as you see it today? And as long we're following that, you've not really mentioned time lines for bringing your own gene therapy to the marketplace. Can you describe that time line? And how you would compete with potential gene therapy between the current state and when you have your own program coming to market?

Yes. So I will take the first part, and then I will let Mike on the gene therapy comment. So, when I travel in the different geographies and I get to meet scientific leaders and I talk to advocacy groups, it appears that the epidemiology and the prevalence might be slightly higher than what we anticipated. This is what I hear from different geographies. So we are very pleased with the launch progress, and we see infrastructure and patient access improving. The patients pools and demand is certainly a very good support to this momentum, and importantly, we are making some good progress with the late onset. And keep in mind that the later onset represents 80% of the prevalence. So we are now with regulatory approval beyond the U.S. unlocking new patient pools broadly, and the testimony from the patient is critical. And this is a community that basically communicates extremely well. Patients and family are very well informed, motivated and they demand treatment. So what we've said in the call is that we believe that SPINRAZA will become one of our most important commercial assets.

So, Ronny, I'll try to answer the question about gene therapy. So, first, we're very excited about our Penn collaboration. Obviously we stay closely aware of clinical results as they're being presented in the field by AveXis, an example. We think we're making good progress. We believe that we will be able to get to the clinic next year. We see a path forward. We're making a considerable investment in our development capabilities, our regulatory strategy, all the analytics and manufacturing technologies that go around this, and we're quite committed to solutions including gene therapy solutions for all SMA patients.

So just an additional comment, but I would like to give the floor first to Paul McKenzie, our Head of Manufacturing, will say a few words.

Right. Thanks for the question. Great to hear your voice. Looking forward to the challenges of gene therapy. As we know, across the industry many companies are wrestling, like us, with gene therapy, its scalability, it's analytical challenges and our regulatory path forward. We've been investing specifically in growing our development engine in collaboration with our early partners like Penn where we're co-locating resources between the two companies, learning from each other actively. We believe that we can build a development engine that will drive success across our portfolio of gene therapy entities. And as we've announced at the end of last year, we went into a strategic agreement with Brammer Bio for manufacturing capabilities so we could co-develop and leverage a manufacturing platform across our entire portfolio. So we're excited about our possibilities in gene therapy.

Thank you, Paul. Al Sandrock would like to make a comment.

Hi, Ronny. On the question about prevalence, the most common type of SMA based on incidence is Type 1, and we know we affect survival in Type 1 patients. So the prevalence has to go up overall for SMA, if that's true.

Your next question comes from the line of Robyn Karnauskas with Citigroup. Please go ahead.

Hi, guys. Thanks for taking my question, and congrats on a great quarter. So, just a follow-up, Al, with that comment. So the point about the percentage of people who can't get treated, is that a new data point? Did you know that a certain percentage of patients could not get the intrathecal injection? And did you say it's about only 40% that might be eligible? So is the number, the original number as a prevalence that you put out there, would that go down because a lot of those patients can't be treated? And just a quick question on the EAP patients. Are those patients that would be paying patients going forward, or have they gotten their drug already? Would they be getting drug in the future? Thanks.

Yes. The plan on EAP is to eventually – it was meant to bridge between getting the results, the positive results, and getting approval and reimbursement in those countries. So it's meant to be that bridge, and eventually we anticipate the EAP patients will be on the drug in the commercial setting. And in terms of people who can't get the drug, the types of people who can't get the drug were people who had spinal surgery, for example, spinal fusions, are having trouble medically to get the drug. And a lot of those are Type 2 patients, childhood onset patients. And so we're working through how to – we're working with orthopedic and neurosurgeons on trying to figure out how to get drug to those patients who deserve to be treated because they're childhood onset, and we have data that shows that childhood onset SMA responds well to SPINRAZA. And in terms of others who can't get it, I think you might be referring to those who get reimbursed. And we're working through that. We don't have a lot of data in adult onset patients so consequently, there are some questions from payers. But we're going to be addressing those questions. And remember, we have a broad label in the U.S. Many of those patients are getting treated, and we'll see if we can see efficacy in those patients as they get treated per the U.S. label.

So, this is Michel. The uptake so far was strong, and we just want to send a word of caution here because, yes, effectively 80% or 60% of the Type 2 population basically had or has spinal surgery and eventually, just let's put ourselves in the shoes of Type 2 patients, either patients who had the fusion surgery and is aware now of the ability of a product like SPINRAZA and how motivated and also frustrated. And therefore, together with the medical community, they try to find solutions. Let me give you an example of one center close to where we stand here, the Boston Children's Hospitals. They have an strategy plan in place. They have an internal team that is well assigned to SMA. They have processes in place to manage through all the logistics. They are battling with the payers in order to secure access and reimbursement. And they are working now on the solutions so that they can appropriately dose the more complicated patients. It starts with the right leadership, the right commitment, and providers here are our allies in order to find solutions for those patients. But, again, we just want to say, we won't be able to penetrate as strong as one would wish in this population because of this challenge.

Your next question comes from the line of Matthew Harrison with Morgan Stanley. Please go ahead. Matthew K. Harrison - Morgan Stanley & Co. LLC: Great. Good morning. Thanks for taking the questions. So, Michel, you clearly outlined a lot of flexibility in what you could do from both the pipeline and the revenue side, and I think you struck a tone of confidence here on the business, but you also decided not to give any kind of long-term metrics. Can you just comment on why you didn't give any long-term metrics at this point? And if there is a time, or what needs to change for you to feel comfortable to give some long-term metrics? Thanks.

So, listen. I think that the process that together with the executive team, we worked on during the past six months has been a very rich and fascinating journey to try to define what will be the next step for Biogen. I am in charge since six months, and I think that already what we communicate here is pretty solid, and should give you an indication on how we see Biogen evolve. And we decided that for the time being this is good. Obviously, we have our plans, we have our commitments and we're going to execute on those. But here you have a clear view on the strategy, meaning what we consciously decide to do and not to do and this is what we communicated today.

Your next question comes from the line of Alethia Young with Credit Suisse. Please go ahead. Alethia Young - Credit Suisse Securities (USA) LLC: Hey, guys. Thanks for taking my question. Congrats on starting off the biotech tape with a good quarter. I guess just going to SMA again, kind of in the point of the center for people who were early adopters, do you see people going back to use the drug? And also like what's been the general feedback as far as educating and getting people comfortable with intrathecal injections? Thanks.

So what we see is a learning curve. Remember, those centers did not perform in intrathecally – intrathecal injections and mostly injections and very often for infants. And what we see is capability being built around this pool of patients pressed by the patients, tremendously pressed by the patients and the advocacy group. And what we see is a learning curve and when they dedicate personnel infrastructure, we expect depth to increase over time in those key centers. Remember at the outset, what we always said with a lot of caution since day one, and we continue to be very cautious about the ramp up is that there are approximately 30 key SMA centers and 150 neuromuscular centers. And you see that where we stand today, we have 145 centers dosing the product. We've made substantial progress, and now it's a matter of having those centers performing more and more so that the patients can benefit.

Pediatric neurologists generally – I mean they're comfortable putting a needle in the intrathecal space, but usually to withdraw fluid for diagnostic purposes. So I think early on many centers were asking anesthesiologists and interventional radiologists who are more used (01:11:23) but I suspect that as time goes on, as Michel was saying, with the learning curve, that people will start to get comfortable injecting because usually the hard part is to find the intrathecal space (01:11:35) drawing versus adding fluid, there's not that much of a technical difference.

Thank you, Al.

Your next question comes from the line of Terence Flynn with Goldman Sachs. Please go ahead. Terence Flynn - Goldman Sachs & Co. LLC: Hi. Thanks for taking the question. Michel, when you referred to a leaner and simpler operating model, I'm just wondering if that just assumes a redirection of some SG&A spend to R&D or does that also contemplate any potential SG&A cuts that could impact your margins positively? Thanks.

Thank you for the question. Listen, the world and technology are evolving very fast and the question is pharma companies evolving at the same pace or faster pace, and how is Biogen in that space? Where do we stand versus pharma benchmarks and beyond pharma benchmarks? And, yes, we have done a lot of cost measure in the past, but when you peel the onion and look at the reality of the key processes, the ability for cost moves to the key geographies and patients, the key processes on manufacturing, R&D, using channels and benefiting from technology or procurement, there are plenty of opportunities to be leaner and more simple and to be the biotech that we stand for. The one that everybody wants to copy. This is why looking at the opportunity here across all divisions and functions we stated this opportunity of $400 million run rate as per 2019 that we are going in order to be logical with our strategy that we are going to reinvest in value creation opportunities that will benefit the shareholders. But I would like Paul to say a few words as head of manufacturing, how he sees the lean and simple.

Great, thanks, Michel. Thanks, Terence for the question. Now, to Michel's point, we really believe that if we can take – stand back, we have a great track record of developing and delivering high-quality products to the market. But when we look at our fundamental processes there's always opportunity to improve. There's areas like end-to-end planning in terms of how much time we take from start, raw material to patient. How can we improve our overall cycle times? How can we reduce variability to be successful? Reliability is a key focus of our manufacturing teams. How can we ensure that we're reliable day in and day out and really manage to make reliability a key strategic deliverable moving forward. We believe in resource allocation and the use of resources to drive higher use of technology, whether it's algorithmic planning for inventory, or whether it's process control. And the last one I want to highlight is really our zest to deliver industry platforms for all of our technology areas. Just want to highlight our next-generation manufacturing platform that creates an ecosystem from our interface to R&D out to our day-to-day distribution. But next-generation manufacturing we hope and we believe we can deliver consistently titers in monoclonal antibody space, be it above 10 grams per liter, which we will be the first in the industry we believe to deliver that level of titer.

Thank you, Paul. So basically it's all about fitness for the organization, and how can we enhance the level of speed and decision-making, proximity, agility. In the P&L, you can expect to see neutral impact on the contribution in bottom-line, but a potential shift from SG&A to R&D. And last but not least, I would like to say that based on this fitness, we want to stimulate growth momentum, but the cost discipline at Biogen actually will enhance, because we want to be very, very rigorous on how the money is being spent. It's not about focusing the efforts on head count reduction. It's all about fitness and processes.

Your next question comes from the line of Michael Yee with Jefferies. Please go ahead.

Hey. Thanks. Good morning. A question for Al and Michael. You talked about the timing for gene therapy next year for SMA. Can you talk a little bit more about some of your confidence in terms of differentiating? Is that going right into the Type 2 patients? Is the improved capsage (01:16:20)? Does it improved manufacturing, given the COGS for these types of patients? Maybe talk a little bit about the challenges and where you see differentiation capabilities? Thanks.

Michael, this is Mike. I'll kind of start. Look, at one level we haven't really disclosed our overall strategy in this area. So I can't go into some of this. But, as I mentioned Paul elaborated on, we have put a considerable investment into our development capabilities, our analytical and manufacturing capabilities. And we do see this across the gene therapy space as being a critical point of differentiation. I mentioned that we're committed to solutions for all SMA patients, and I think that's also going to be an important component of potential differentiation in our development strategy. And I would also highlight that because SPINRAZA has become the standard of care and is approved quite broadly in SMA, we need to think very carefully about how different therapies will be used in combination and in sequence across different SMA populations. So that in a nutshell is sort of highlighting the broad categories of things where we think that we can differentiate.

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

Hey. Good morning, guys, and thanks for taking my questions. So, when you talk about building through business development, I'm just curious how much financial flexibility or buying power you believe you have with your current balance sheet, assuming you're taking – you're not doing as much in terms of share buybacks and stuff and focusing on BD? Thanks.

So, we have an EBITDA that is in approximation of $6 billion, if you take 2016. And we anticipate that the maximum yield would likely be in the approximation of $10 billion to $12 billion, which is two times the EBITDA on a net debt basis. This is where we stand basically. But again, the driver will be value for the shareholders, and we'll be very disciplined in the way we spend our money, the shareholders' money actually.

Your next question comes from the line of Jim Birchenough with Wells Fargo. Please go ahead.

Hey, guys. Thanks for the detail on the call. Congrats on the results. Just on SPINRAZA, trying to get a better sense of the trajectory coming out of the second quarter. And there's some moving parts here. So I'm wondering if you can help us on what's the distribution right now between Type 1, 2 and 3 in patients treated. And when you think about the prevalence that's out there, when you eliminate the 60% who have spinal fusions, how many Type 2 patients are left to treat? Thanks.

Thanks for the question. This is Michel. So basically the current status is approximately two-third of the patients treated in the U.S. geography represents Type 2 and Type 3 populations. And this is also the highest prevalent population today, okay? As Al said, over time the early onset will grow based on expected improved survival. So 60% we did not anticipate that a few months ago. So it shows that those patients are highly motivated and now we face the challenge of the more complicated patients for which the entire system is trying to overcome to secure that they can also improve on their disability. So it's actually very difficult for me where I stand to state what will be the expected penetration of the late onset patients at this stage. Basically, the next few months will be very rich because they will inform us on the ability for the system to overcome those challenges. The Biogen team is, as you can tell, fully committed and engaged. They have done a spectacular work. They have not a sense of the strategy. They have the sense of the purpose and this is stronger than anything I have seen so far in my professional life. So to answer clearly your question, a few months and we'll be a bit more educated. Thank you.

Your next question comes from Salim Syed with Mizuho Securities. Please go ahead.

Hey. Congrats, guys, and thanks for all the color. Michel, I had a question on biosimilar since you've brought it up a couple times. It seems like you guys are excited about the business. So what are the pushes and pulls that are going into you actually exercising the option because I believe that expires next year if I'm not mistaken?

I think exercising the option makes sense. This is my position, okay. And this will give us a lot of optionality on what we do with this stake in a successful JV. As you can see, there is the launch of infliximab in the U.S. being announced today. So there are lot of good prospects for this JV that is engaged in also building a strong pipeline. And we're looking at that very closely so that we can see how we can eventually enrich our commercial footprint. We are very pleased with the success of this team, very focused, very nimble without basically losing the focus on MS as a priority and adding tremendous momentum to the top line but also profitable since Q3 last year. So these are all positives and I will just cap it by saying that from a value proposition vis-à-vis the public payers in Europe, this is a tremendous add when we engage with payers because we come with new product launches and innovation and at the same time with significant savings opportunity mostly when you consider then the relevant market for the anti-TNF is approximately €9 billion in Europe. So we currently intend to opt in for the JV option and as you know, the option expires in 2018. But we don't lose our focus strategically and I will bring you back to what we said earlier in the call, the vision is to be the leader in neuroscience.

Your next question comes from the line of Andrew Peters with Deutsche Bank. Please go ahead.

Hey, guys. Thanks for taking my questions and let me add my congrats as well. Just wanted to understand the $400 million comment a bit more. It seems like you're shifting SG&A to R&D and specifically to external opportunities. So just wanted to get your sense on how you think about taking on additional clinical risk when it could be less likely that any external programs that you may pursue likely haven't done the same degree of translational work that you outlined earlier on the call. So how do you think about kind of your biomarker-type driven approach to risk as it relates to external opportunities? Thanks.

Thank you for a great question. So where do we stand? We did initiate the lean and simple a few months back when I took up the job. We are still looking at the opportunities. We have a long list of opportunities so this is to be more fit than what we are today. And we will need now, together with the executive team to prioritize what we do first. And as I communicated earlier, we believe we aspire to have a $400 million run rate in 2018. Well, we are mid-2017 so we still have some time in order to put that in place. Not much. We are starting implementing this year, but I don't have granularity today on the respective impact on each line of the P&L, but certainly we will see key geographies commercially and R&D benefit in order to add to the momentum in the short midterm and the long term, and Mike will add some comments.

Yeah. Andrew, so just to address the question on clinical risk and biomarkers that you raised. Look, this is why our primary focus is on things with an early clinical development, the early clinical space. Not exclusively, but that's really the primary, so we're focusing on that. And look, I think that in the areas where we work, we often see opportunities where others might not. We often can develop capabilities and development that others don't have in that space. And that's why we think we do just have asymmetric ability, the more we are in the early clinical space. Of course we're going to look beyond that, though, which there might be later programs, there might be earlier programs. A key element of this reinvestment though for that is the time element, so we're very conscious of the fact that to get to the growth that we're looking in the portfolio where our core skill set is in early clinical development means we need to be acting now to really be able to identify those opportunities and bring them in. I'll turn it to Al for some comments.

On the question about risk in neurology investment. I think the strategy that was outlined by Michel and Mike makes a lot of sense and it leverages not only our capabilities in terms of understanding of disease, but also platforms like the intrathecal ASO. So just as an example, we just take the movement disorder bucket, there are a lot of rare and orphan diseases. For example, the spinal cerebellar ataxias that are amenable we think to intrathecal ASO. They are genetically well-defined and the pathway could be very similar to the SPINRAZA pathway. In the neuromuscular disorders, there's a ton of diseases that are rare and orphan diseases. Again, and many of those are due to spinal cord pathology which we know now is amenable to intrathecal ASO. So I think within those key strategic core areas that Mike talked about, there's a lot of opportunity and even for large diseases such as ALS or Parkinson's, you can divide them into genetically well-defined subsets and take the very same approach. And I think using the ASO technology, we know that the antisense gets to large parts of the central nervous system, not just the spinal cord. We have data from nonhuman primates and from other places where we know that the ASOs can get all the way up into the brain into the cerebral cortex, so that opens up a whole array of opportunities. So yes, there's risk in neurology and I think it's important to think about that risk and to manage it, but I think there's also great opportunity, particularly when leveraging something like intrathecal ASOs.

Thank you, Al. Mike.

Yeah, I'll just pick up on that a little bit more, Andrew, because I think you've sparked a lot of interest in commentary there. One thing that I've been very impressed by being here at Biogen is the fact, if you look at Biogen's historical probability of success from FIH to proof of concept in this space, it's roughly four times higher than that of industry benchmarks. So we have a demonstrated ability to actually change the probability of success equation in that space. And Al cited beautiful examples on this. We've seen this before. It was the PRIME study with aducanumab actually imaging patients and stratifying accordingly. It's in the design capabilities, the smart type of design to have titration as part of the PRIME study to be able to inform how we conduct our Phase 3 trials and then responding and executing appropriately. Endpoint development, whether it was in the SPINRAZA program, it made a lot of difference. Or even as we've been envisioning the plans for the opicinumab program. These are the development of novel endpoints that are based on the fact that we have got differentiated expertise in the area.

Thank you, Mike. Before we take the last question, I would like to refer to a press release issued yesterday. We have announced Alisha Alaimo that will be joining Biogen at some point of time soon. And we are very excited about this new hire, superb talent with great leadership. We did not yet finalize a date – the starting date, but we are working on that. And here in the room we have Jean-Paul Kress, who is leading the international market and I would like just to extend a welcome. Maybe, do you want to say a few words, Jean-Paul?

Yes. Thanks, Michel, and good morning, everyone. First, I'd like to say how much I'm excited to join Biogen. I come from another company very much involved in MS as well. But I have to say that I've always been very impressed by Biogen's great rack record and leadership in MS and neurosciences. So it's a great pleasure and a great privilege to join the company at this time of renewed ambition. Obviously too early for me to comment and we're still in early days and started like five weeks ago, currently assessing the business, getting a hand on our global commercial organization with a strong focus on strengthening our execution capabilities and reinforcing our MS leadership and launching SPINRAZA globally. So, very much looking forward to interacting with you in the future and provide you with an update on our commercial project.

Thank you, Jean-Paul. We are relying on execution. So we have a last question.

Our final question comes from Brian Skorney with Robert Baird. Please go ahead. Brian P. Skorney - Robert W. Baird & Co., Inc.: Hey. Good morning, guys, and thanks for squeezing me in. I guess I was just wondering if you could give us some more details on the value-based contracts that you mentioned in MS, particularly, how much of the market these contracts currently represent and some idea of how the value winds up determining the price that you're getting revenue off of? Thanks.

Yeah. Thanks for the question. We're extremely pleased that the team was able to foster value-based contract. I said earlier and I was challenged actually by saying but tell me how and it was not easy. The U.S. team has done a spectacular work. We spent time brainstorming on how we could bring the value of an entire portfolio to the customers and to the patient benefit and be in a position to shift the position that where the industry is perceived as being part of a transaction on a cost per product versus satisfaction, versus outcome, versus value, versus being part of the solution. And the team has worked very hard and I did believe into that. I did put that in the scorecard of the organization because I believe that this is what the society deserves and this goes beyond financial measures. It's a matter of providing the value that what we stand for since the outset of the discovery and the clinical development and translating that into the way we operate. So we were able to foster four of them and two types, one that basically gives the company responsibility for some of the discontinuation but the provider and the customer opens immediately to another dynamic in terms of engaging with a partner. And the other one on – the other one is on – I forgot, can you remind me the word?

The regional payers and so we've got payer and also Medicaid system.

Yeah. One is on discontinuation and one is on relapse of MS. So I apologize, so relapse of MS and therefore for the entire portfolio at the end of the period we see the relapse of MS and then there is basically a higher discounts being provided in case. So these are regional customers. These are pilots. It's for us to try to learn and to measure the impact, bring real world evidence and measure how we move forward from there. It's not a financial objective at the outset, it is just changing the paradigm and being the leader and being more responsible. This is what the industry deserves.

Thank you.

Thank you to everyone for attending today. This will conclude today's conference call, and you may now disconnect.