Biogen Idec Reports Third Quarter 2008 Results

Biogen Idec Reports Third Quarter 2008 Results

38% Revenue Growth

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Biogen Idec Inc. (NASDAQ: BIIB), a global biotechnology leader in the discovery, development, manufacturing, and commercialization of innovative therapies, today reported its third quarter 2008 results.

Third Quarter 2008 Highlights:

• Third quarter 2008 revenues were $1,093 million, an increase of 38% from $789 million in the third quarter of 2007, driven primarily by AVONEX® (interferon beta-1a) sales up 26% to $573 million, TYSABRI® (natalizumab) sales up 172% to $171 million, and RITUXAN® (rituximab) revenues from the unconsolidated joint business arrangement up 27% to $299 million.
• On a reported basis, calculated in accordance with accounting principles generally accepted in the U.S. (GAAP), third quarter 2008 diluted earnings per share (EPS) were $0.70, an increase of 71% from $0.41 in the third quarter of 2007. GAAP net income for the third quarter 2008 was $207 million, an increase of 73% from $119 million in the third quarter of 2007.
• Third quarter 2008 non-GAAP diluted EPS were $0.98, an increase of 69% from $0.58 in the third quarter of 2007. Non-GAAP net income for the third quarter 2008 was $288 million, an increase of 69% from $170 million in the third quarter of 2007. A reconciliation of our GAAP to non-GAAP results is included on Table 3 within this press release.
• Global in-market net sales of TYSABRI® in the third quarter of 2008 were $236 million. Based on our collaboration structure with Elan Corporation, plc., Biogen Idec recognized revenue of $171 million related to TYSABRI in the third quarter of 2008.

"We continue to deliver exceptional financial performance as we grow sales of our three key products and advance our pipeline," said James Mullen, Biogen Idec's Chief Executive Officer. "For the first time in the company's history, Biogen Idec reported quarterly revenues in excess of $1 billion. We increased revenues more than 25% and grew earnings by 30% for the fourth consecutive quarter. Our prospects for growth, both now and in the future, remain strong."

Financial Performance

On a reported basis, calculated in accordance with GAAP, Biogen Idec reported net income of $207 million and diluted EPS of $0.70 in the third quarter of 2008. On a non-GAAP basis, Biogen Idec reported net income of $288 million in the third quarter of 2008. Non-GAAP diluted EPS were $0.98 for the third quarter of 2008.

A reconciliation of our GAAP to non-GAAP results is included on Table 3 within this press release.

As of September 30, 2008 Biogen Idec had cash, cash equivalents and marketable securities of approximately $2 billion. In the third quarter we recorded a charge of $24 million, or $0.06 per share, in "other income, net" related to the impairment and realized losses of certain assets in the company's investment portfolio.

Revenue Performance

Revenues from AVONEX, one of Biogen Idec's therapies for patients with relapsing forms of multiple sclerosis (MS), increased 26% in the third quarter 2008 to $573 million, as compared to the third quarter of 2007. U.S. sales increased 21% to $322 million and international sales increased 33% to $252 million in the third quarter of 2008 as compared to the third quarter 2007.

Revenues for the third quarter of 2008 included $299 million from Biogen Idec's joint business arrangement related to RITUXAN, a treatment for certain B-cell non-Hodgkin's lymphomas (NHL) and rheumatoid arthritis (RA) that Biogen Idec co-promotes in the U.S. with Genentech, Inc. All U.S. sales of RITUXAN are recognized by Genentech, and Biogen Idec records its share of the pretax co-promotion profits. As reported by Genentech, U.S. net sales of RITUXAN were $655 million in the third quarter, as compared to $572 million in the third quarter of 2007.

During the third quarter of 2008, Biogen Idec recognized revenue of $171 million related to TYSABRI comprising:

• $56 million related to product sold through Elan in the U.S. (based on $122 million of in-market sales); and
• $115 million related to product sold by Biogen Idec, internationally.

As of the end of September 2008, more than 35,500 patients were on commercial and clinical TYSABRI therapy worldwide. According to data available as of the end of September 2008:

• In the U.S., more than 19,500 patients were on TYSABRI therapy commercially;
• Outside of the U.S., nearly 15,300 patients were on TYSABRI therapy commercially;
• In global clinical trials, more than 700 patients were on TYSABRI therapy; and
• There have been two confirmed cases of progressive multifocal leukoencephalopathy (PML) since re-launch in the US and the first international approval in July 2006.

Cumulatively, in the combined clinical trial and post-marketing settings:

• More than 48,000 patients have been treated with TYSABRI; and
• Of those patients, nearly 18,000 have received at least one year of TYSABRI therapy and approximately 9,500 patients have been on therapy for 18 months or longer.

Revenues from other products were $14 million and $12 million in the third quarter of 2008 and 2007, respectively, consisting primarily of FUMADERM® (fumaric acid esters).

Table 4 provides individual product revenues.

Royalty revenues were $35 million and $24 million in the third quarter of 2008 and 2007, respectively.

Share Repurchase Program

There were no shares repurchased under our share repurchase program for the three months ended September 30, 2008.

Financial Guidance

Following its strong performance, Biogen Idec provided its 2008 financial guidance:

• Total revenue growth above the mid 20% range over 2007.
• Operating margins similar to previous guidance, and total GAAP and non-GAAP R&D and SG&A expenses to be in the range of $2 billion.
• Non-GAAP tax rate expected to be 28%-30%. GAAP Tax rate expected to be 31%-33%. The difference between the GAAP and non-GAAP tax rate is a result of the full year effects of the reconciling items detailed in Table 3 within this press release.
• Non-GAAP diluted EPS above $3.50, representing growth consistent with the Company's stated goal of achieving 20% non-GAAP EPS compounded annual growth through 2010. GAAP diluted EPS above $2.51. Both Non-GAAP and GAAP diluted EPS include the potential for upfront and milestone payments of approximately $40 million which are under consideration for the fourth quarter.
• Capital expenditures of $270 to $290 million.

The reconciling items between the GAAP diluted EPS and non-GAAP diluted EPS for full year 2008 are itemized in Table 3 within this press release.

Recent Highlights

• On October 6, 2008, Biogen Idec and Genentech announced that a global Phase III study of RITUXAN in combination with fludarabine and cyclophosphamide chemotherapy met its primary endpoint of improving progression-free survival (PFS), as assessed by investigators, in patients with previously treated CD20-positive chronic lymphocytic leukemia (CLL) compared to chemotherapy alone. There were no new or unexpected safety signals reported in the study. An independent review of the primary endpoint is being conducted for U.S. regulatory purposes.
• On September 18, 2008, Biogen Idec announced that data was presented from the ASSURANCE (ASSessment of Drug Utilization, EaRly TreAtmeNt, and Clinical OutcomEs) study, showing the long-term benefits of AVONEX® therapy in patients with relapsing multiple sclerosis (MS) for up to 15 years. The ASSURANCE study represents the long-term follow-up of patients who participated in the Multiple Sclerosis Collaborative Research Group (MSCRG), the original Phase III pivotal trial from which AVONEX was approved.
• On September 5, 2008, Biogen Idec and Elan Corporation, plc announced the initiation of the first clinical trial of TYSABRI in oncology. The objectives of this Phase I/II study are to evaluate the safety and potential anti-tumor activity of TYSABRI in patients with relapsed or refractory multiple myeloma. TYSABRI is a recombinant, humanized monoclonal antibody that targets the adhesion molecule VLA4 (also known as alpha-4 integrin) that is expressed on the surface of many types of immune cells. VLA4 is also found on the surface of multiple myeloma cells and may be involved in their survival.
• On August 21, 2008, Biogen Idec announced the initiation of a Phase III clinical trial of intravenous (IV) ADENTRI® (BG9928), an adenosine A1 receptor antagonist, for acute decompensated heart failure (ADHF) patients with renal insufficiency. The trial will evaluate ADENTRI, which is being developed under a licensing agreement with CV Therapeutics (Nasdaq: CVTX), or placebo in addition to standard of care in approximately 900 patients in 21 countries globally, including the United States.

Conference Call and Webcast

The Company's earnings conference call for the third quarter will be broadcast via the internet at 8:30 a.m. ET on October 21, 2008, and will be accessible through the investor relations section of Biogen Idec's homepage, http://www.biogenidec.com [1]. Supplemental information in the form of a slide presentation will also be accessible at the same location on the internet at the time of the earnings conference call and will be available on our web site subsequently through November 22, 2008.

About Biogen Idec

Biogen Idec creates new standards of care in therapeutic areas with high unmet medical needs. Founded in 1978, Biogen Idec is a global leader in the discovery, development, manufacturing, and commercialization of innovative therapies. Patients in more than 90 countries benefit from Biogen Idec's significant products that address diseases such as lymphoma, multiple sclerosis, and rheumatoid arthritis. For product labeling, press releases and additional information about the company, please visit www.biogenidec.com [2].

Safe Harbor

This press release contains forward-looking statements, which appear under the heading "Financial Guidance" above and in the comments from James Mullen, our CEO. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from that which we expect, including our continued dependence on our two principal products, AVONEX and RITUXAN, the uncertainty of success in commercializing other products including TYSABRI, the occurrence of adverse safety events with our products, the failure to execute our growth strategy successfully or to compete effectively in our markets, our dependence on collaborations over which we may not always have full control, possible adverse impact of government regulation and changes in the availability of reimbursement for our products, problems with our manufacturing processes and our reliance on third parties, our ability to attract and retain qualified personnel, the risks of doing business internationally, fluctuations in our operating results, our significant investments in marketable securities, the impact of the global credit crisis, our ability to protect our intellectual property rights and the cost of doing so, product liability claims, fluctuations in our effective tax rate, our substantial indebtedness, environmental risks, the actions of activist shareholders and the other risks and uncertainties that are described in Item 1.A. Risk Factors in our annual report on Form 10-K and our quarterly reports on Form 10-Q and in other reports we file with the SEC. These forward-looking statements speak only as of the date of this press release, and we do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

TABLE 1

Biogen Idec Inc.

September 30, 2008

Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

 
 
 
 
 
 
 
 
 
 

 
 
 
Three Months Ended
 
Nine Months Ended

 
 
 
September 30,
 
September 30,

 
 
 
 
2008
 
 
 
2007
 
 
2008
 
 
 
2007

REVENUES
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 

Product
 
$
758,260
 
 
$
529,581
 
$
2,107,816
 
 
$
1,532,594

 
 
 
 
 
 
 
 
 
 

Unconsolidated joint business
 
 
298,979
 
 
 
234,637
 
 
825,024
 
 
 
672,391

 
 
 
 
 
 
 
 
 
 

Royalties
 
 
35,162
 
 
 
23,537
 
 
87,258
 
 
 
69,172

 
 
 
 
 
 
 
 
 
 

Corporate partner
 
 
563
 
 
 
1,476
 
 
8,496
 
 
 
4,160

 
 
 
 
 
 
 
 
 
 

Total revenues
 
 
1,092,964
 
 
 
789,231
 
 
3,028,594
 
 
 
2,278,317

 
 
 
 
 
 
 
 
 
 

COST AND EXPENSES
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 

Cost of sales
 
 
107,493
 
 
 
81,613
 
 
300,828
 
 
 
247,626

 
 
 
 
 
 
 
 
 
 

Research and development
 
 
268,800
 
 
 
286,274
 
 
779,291
 
 
 
695,872

 
 
 
 
 
 
 
 
 
 

Selling, general and administrative
 
 
232,824
 
 
 
190,644
 
 
694,342
 
 
 
582,373

 
 
 
 
 
 
 
 
 
 

Amortization of acquired intangible assets
 
 
94,464
 
 
 
65,689
 
 
242,114
 
 
 
186,570

 
 
 
 
 
 
 
 
 
 

Collaboration profit (loss) sharing
 
 
43,533
 
 
 
5,842
 
 
98,368
 
 
 
170

 
 
 
 
 
 
 
 
 
 

In-process research and development
 
 
-
 
 
 
29,959
 
 
25,000
 
 
 
48,364

 
 
 
 
 
 
 
 
 
 

Total cost and expenses
 
 
747,114
 
 
 
660,021
 
 
2,139,943
 
 
 
1,760,975

 
 
 
 
 
 
 
 
 
 

Income from operations
 
 
345,850
 
 
 
129,210
 
 
888,651
 
 
 
517,342

 
 
 
 
 
 
 
 
 
 

Other income (expense), net
 
 
(24,725
)
 
 
44,904
 
 
(29,818
)
 
 
98,192

 
 
 
 
 
 
 
 
 
 

INCOME BEFORE INCOME TAXES
 
 
321,125
 
 
 
174,114
 
 
858,833
 
 
 
615,534

 
 
 
 
 
 
 
 
 
 

Income taxes
 
 
114,337
 
 
 
54,733
 
 
282,320
 
 
 
178,512

 
 
 
 
 
 
 
 
 
 

NET INCOME
 
$
206,788
 
 
$
119,381
 
$
576,513
 
 
$
437,022

 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 

BASIC EARNINGS PER SHARE
 
$
0.71
 
 
$
0.41
 
$
1.97
 
 
$
1.35

 
 
 
 
 
 
 
 
 
 

DILUTED EARNINGS PER SHARE
 
$
0.70
 
 
$
0.41
 
$
1.95
 
 
$
1.34

 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 

WEIGHTED-AVERAGE SHARES USED IN CALCULATING:
 
 
 
 
 
 
 
 

 
BASIC EARNINGS PER SHARE
 
 
291,408
 
 
 
288,958
 
 
292,613
 
 
 
323,006

 
 
 
 
 
 
 
 
 
 

 
DILUTED EARNINGS PER SHARE
 
 
293,921
 
 
 
293,396
 
 
295,515
 
 
 
326,743

TABLE 2

Biogen Idec Inc.

September 30, 2008

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 
 
 
 
 

 
 
 
 
 

 
 

September 30,
2008

 

December 31,
2007

ASSETS
 
 
 
 

 
 
 
 
 

Cash, cash equivalents and marketable securities
 
$
1,227,828
 
$
979,070

 
 
 
 
 

Cash collateral received for loaned securities
 
 
178,129
 
 
208,209

 
 
 
 
 

Accounts receivable, net
 
 
484,636
 
 
392,646

 
 
 
 
 

Loaned securities
 
 
158,971
 
 
204,433

 
 
 
 
 

Inventory
 
 
249,858
 
 
233,987

 
 
 
 
 

Other current assets
 
 
339,658
 
 
350,062

 
 
 
 
 

Total current assets
 
 
2,639,080
 
 
2,368,407

 
 
 
 
 

Marketable securities
 
 
717,182
 
 
932,271

 
 
 
 
 

Property, plant and equipment, net
 
 
1,579,938
 
 
1,497,383

 
 
 
 
 

Intangible assets, net
 
 
2,250,766
 
 
2,492,354

 
 
 
 
 

Goodwill
 
 
1,137,547
 
 
1,137,372

 
 
 
 
 

Investments and other assets
 
 
210,695
 
 
201,028

 
 
 
 
 

TOTAL ASSETS
 
$
8,535,208
 
$
8,628,815

 
 
 
 
 

 
 
 
 
 

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 

 
 
 
 
 

Collateral payable on loaned securities
 
$
178,129
 
$
208,209

 
 
 
 
 

Current portion of notes payable
 
 
10,215
 
 
1,511,135

 
 
 
 
 

Other current liabilities
 
 
797,528
 
 
469,831

 
 
 
 
 

Long-term deferred tax liability
 
 
440,164
 
 
521,525

 
 
 
 
 

Notes payable
 
 
1,042,427
 
 
51,843

 
 
 
 
 

Other long-term liabilities
 
 
298,267
 
 
331,977

 
 
 
 
 

Shareholders' equity
 
 
5,768,478
 
 
5,534,295

 
 
 
 
 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 
$
8,535,208
 
$
8,628,815

TABLE 3

Biogen Idec Inc.

September 30, 2008

Condensed Consolidated Statements of Income - Non-GAAP

(in millions, except per share amounts)

(unaudited)

 
 
 
 
 
 
 
 
 
 

 
 
 
Three Months Ended
 
Nine Months Ended

 
 
 
September 30,
 
September 30,

EARNINGS PER SHARE
 
 
2008
 
 
 
2007
 
 
 
2008
 
 
 
2007
 

 
 
 
 
 
 
 
 
 
 

 
GAAP earnings per share - Diluted
 
$
0.70
 
 
$
0.41
 
 
$
1.95
 
 
$
1.34
 

 
Adjustments to net income (as detailed below)
 
 
0.28
 
 
 
0.17
 
 
 
0.78
 
 
 
0.54
 

 
Non-GAAP earnings per share - Diluted
 
$
0.98
 
 
$
0.58
 
 
$
2.73
 
 
$
1.88
 

 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 

An itemized reconciliation between net income on a GAAP basis and net income on a non-GAAP basis is as follows:

 
 
 
 
 
 
 
 
 
 

GAAP net income
 
$
206.8
 
 
$
119.4
 
 
$
576.5
 
 
$
437.0
 

 
Adjustments:
 
 
 
 
 
 
 
 

 
COGS: Stock Option Expense
 
 
-
 
 
 
-
 
 
 
-
 
 
 
0.1
 

 
R&D: Restructuring
 
 
0.1
 
 
 
0.8
 
 
 
0.1
 
 
 
1.2
 

 
R&D: Stock option expense
 
 
2.4
 
 
 
3.5
 
 
 
6.5
 
 
 
9.4
 

 
R&D: FIN 46 consolidation of Cardiokine
 
 
1.7
 
 
 
-
 
 
 
4.0
 
 
 
-
 

 
SG&A: Restructuring
 
 
2.9
 
 
 
-
 
 
 
2.9
 
 
 
0.6
 

 
SG&A: Stock option expense
 
 
5.3
 
 
 
5.9
 
 
 
12.2
 
 
 
17.3
 

 
Amortization of acquired intangible assets
 
 
94.5
 
 
 
65.7
 
 
 
242.1
 
 
 
186.6
 

 

In-process research and development related to the contingent consideration payment in 2008 associated

 with Conforma acquisition and the 2007 acquisition of Syntonix and consolidation of Cardiokine

 
 
-
 
 
 
30.0
 
 
 
25.0
 
 
 
48.4
 

 
Other income (expense), net: FIN 46 consolidation of Cardiokine and gain on sale of long-lived assets
 
 
(1.7
)
 
 
(38.0
)
 
 
(4.0
)
 
 
(38.0
)

 
Income taxes: Income tax effect of reconciling items
 
 
(24.1
)
 
 
(16.9
)
 
 
(58.6
)
 
 
(49.5
)

Non-GAAP net income
 
$
287.9
 
 
$
170.4
 
 
$
806.7
 
 
$
613.1
 

2008 Full Year Guidance GAAP to non-GAAP adjustments

An itemized reconciliation between projected EPS on a GAAP basis and on a non-GAAP basis is as follows:

 
 
 
 
 
 
 
 
 
 

 
 
 
Shares
 
Diluted EPS

 
Projected GAAP net income
 
$
740.0
 
 
295.0
 
 
 
$
2.51

 
Adjustments:
 
 
 
 
 
 
 
 

 
Stock option expense
 
 
25.5
 
 
 
 
 
 
 

 
In-process research and development
 
 
25.0
 
 
 
 
 
 
 

 
Amortization of acquired intangible assets
 
 
317.5
 
 
 
 
 
 
 

 
Income taxes: Income tax effect of reconciling items
 
 
(76.5
)
 
 
 
 
 
 

 
Projected Non-GAAP net income
 
$
1,031.5
 
 
295.0
 
 
 
$
3.50

Use of Non-GAAP Financial Measures

Our "non-GAAP net income" and "non-GAAP diluted EPS" financial measures exclude the following items from GAAP net income and diluted EPS:

1. Purchase accounting and merger-related adjustments.

We exclude certain purchase accounting impacts, such as those related to our 2003 merger with Biogen, Inc., the acquisitions of Fumapharm AG, Conforma Therapeutics and Syntonix Pharmaceuticals, and the consolidation of Cardiokine and Neurimmune. These include charges for in-process research and development and the incremental charges related to the amortization of the acquired intangible assets. Excluding these charges provides management and investors with a supplemental measure of performance in which the Company's acquired intellectual property is treated in a comparable manner to its internally developed intellectual property.

2. Stock option expense recorded in accordance with SFAS 123R.

We believe that excluding the impact of expensing stock options better reflects the recurring economic characteristics of our business. We also exclude stock option expense from our non-GAAP R&D expenses and SG&A expenses, but include P&L impact of restricted stock awards and cash incentives in our non-GAAP results.

3. Unusual or non-recurring items.

We evaluate these on an individual basis, and consider both the quantitative and qualitative aspects of the item, including (i) its size and nature, (ii) whether or not it relates to our ongoing business operations, and (iii) whether or not we expect it to occur as part of our normal business on a regular basis.

We believe it is important to share these non-GAAP financial measures with shareholders as they better represent the ongiong economics of the business, reflect how we manage the business internally and set operational goals, and form the basis of our management incentive programs. Non-GAAP net income and diluted EPS should not be viewed in isolation or as a substitute for reported, or GAAP, net income and diluted EPS.

TABLE 4

Biogen Idec Inc.

September 30, 2008

Product Revenues

(in thousands)

(unaudited)

 
 
 
 
 
 

 
 
 
Three Months Ended

 
 
 
September 30,

 
 
 
 
2008
 
 
2007

PRODUCT REVENUES
 
 
 
 

 
 
 
 
 
 

 
Avonex®
 
$
573,493
 
$
454,890

 
 
 
 
 
 

 
Tysabri®
 
 
171,169
 
 
62,903

 
 
 
 
 
 

 
Amevive®
 
 
27
 
 
87

 
 
 
 
 
 

 
Zevalin®
 
 
2,483
 
 
4,349

 
 
 
 
 
 

 
Fumaderm®
 
 
11,088
 
 
7,352

 
 
 
 
 
 

Total product revenues
 
$
758,260
 
$
529,581

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
Nine Months Ended

 
 
 
September 30,

 
 
 
 
2008
 
 
2007

PRODUCT REVENUES
 
 
 
 

 
 
 
 
 
 

 
Avonex®
 
$
1,636,754
 
$
1,365,317

 
 
 
 
 
 

 
Tysabri®
 
 
433,005
 
 
140,202

 
 
 
 
 
 

 
Amevive®
 
 
279
 
 
305

 
 
 
 
 
 

 
Zevalin®
 
 
4,987
 
 
14,242

 
 
 
 
 
 

 
Fumaderm®
 
 
32,791
 
 
12,528

 
 
 
 
 
 

Total product revenues
 
$
2,107,816
 
$
1,532,594