Biogen Idec Reports Second Quarter 2008 Results

28% Revenue Growth and 30% Earnings Growth

Tuesday, July 22, 2008 7:15 am EDT

Dateline:

CAMBRIDGE, Mass.

Public Company Information:

NASDAQ:
BIIB
US09062X1037

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 second quarter 2008 results.

Second Quarter 2008 Highlights:

  • Second quarter revenues were $993 million, an increase of 28% from $773 million in the second quarter of 2007, driven primarily by AVONEX® (interferon beta-1a) sales up 14% to $527 million, TYSABRI® (natalizumab) sales up 210% to $147 million, and RITUXAN® (rituximab) revenues from the unconsolidated joint business arrangement up 21% to $279 million.
  • On a reported basis, calculated in accordance with accounting principles generally accepted in the U.S. (GAAP), second quarter 2008 diluted earnings per share (EPS) were $0.70, an increase of 30% from $0.54 in the second quarter of 2007. GAAP net income for the second quarter was $207 million, an increase of 11% from $186 million in the second quarter of 2007.
  • Second quarter 2008 non-GAAP diluted EPS were $0.91, an increase of 30% from $0.70 in the second quarter of 2007. Non-GAAP net income for the second quarter was $269 million, an increase of 12% from $240 million in the second 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® (natalizumab) in the second quarter of 2008 were $200 million. Based on our collaboration structure with Elan, Biogen Idec recognized revenue of $147 million related to TYSABRI in the second quarter of 2008.

"Our prospects for growth remain strong," said James Mullen, Biogen Idec's Chief Executive Officer. "TYSABRI sales nearly tripled compared to the same period last year, our core products continue to grow, our pipeline is overflowing, and our revenues have grown more than 25 percent year-over-year for three consecutive quarters. Given the strong momentum underway, we are raising our full-year guidance and setting an aspirational goal of generating a record $4 billion in revenues this year."

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 second quarter of 2008. On a non-GAAP basis, Biogen Idec reported net income of $269 million in the second quarter of 2008. Non-GAAP diluted EPS were $0.91 for the second quarter of 2008.

As of June 30, 2008 Biogen Idec had cash, cash equivalents, loaned securities and marketable securities of $1.583 billion.

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

Revenue Performance

Revenues from AVONEX, one of Biogen Idecs therapies for patients with relapsing forms of multiple sclerosis (MS), increased 14% in the second quarter to $527 million. U.S. sales increased 13% to $306 million and international sales increased 15% to $221 million.

Revenues for the second quarter of 2008 included $279 million from Biogen Idecs joint business arrangement related to RITUXAN, a treatment for certain B-cell non-Hodgkins 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 $651 million in the second quarter, as compared to $582 million in the second quarter of 2007.

During the second quarter of 2008, Biogen Idec recognized revenue of $147 million related to TYSABRI comprising:

  • $46 million related to product sold through Elan in the U.S. (based on $99 million of in-market sales); and
  • $101 million related to product sold by Biogen Idec Internationally.

As of the end of June 2008, more than 31,800 patients were on commercial and clinical TYSABRI therapy worldwide. According to data available as of the end of June 2008:

  • In the U.S., more than 17,800 patients were on TYSABRI therapy commercially and more than 3,100 physicians have prescribed the therapy;
  • Outside of the U.S., nearly 13,400 patients were on TYSABRI therapy commercially;
  • In global clinical trials, more than 600 patients were on TYSABRI therapy; and
  • There have been no 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 43,300 patients have been treated with TYSABRI; and
  • Of those patients, nearly 13,900 have received at least one year of TYSABRI therapy and approximately 6,600 patients have been on therapy for 18 months or longer.

Revenues from other products were $10 million and $9 million in the second quarter of 2008 and 2007, respectively. Current quarter revenues consist primarily of FUMADERM® (fumaric acid esters).

Table 4 provides individual product revenues.

Royalties were $28 million and $23 million in the second quarter of 2008 and 2007, respectively.

Share Repurchase Program

Biogen Idec repurchased 4,971,804 shares in the second quarter of 2008 under the 20 million share repurchase program authorized by Biogen Idec's Board of Directors in October 2006.

Financial Guidance

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

  • Total revenue growth in the mid 20% range over 2007 as TYSABRI market penetration and favorable foreign exchange continue.
  • 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 at or above $3.50, representing growth consistent with the Companys stated goal of achieving 20% non-GAAP EPS compounded annual growth through 2010. GAAP diluted EPS at or above $2.51. Both Non-GAAP and GAAP diluted EPS estimates exclude the impact of any future acquisitions or transactions.
  • 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 May 29, 2008, Biogen Idec named Hans Peter Hasler Chief Operating Officer (COO) of the company. Mr. Hasler, age 52, has served as Executive Vice President, Global Neurology and Head of International. In his new role, Mr. Hasler will oversee all commercial operations as well as the company's business development function.
  • On June 19, 2008, the Board of Directors announced that Biogen Idec stockholders elected all of its four nominees - Cecil B. Pickett, Ph.D., the Honorable Lynn Schenk, Phillip A. Sharp, Ph.D., and Stelios Papadopoulos, Ph.D. - to the Biogen Idec Board of Directors. Based on the final tabulation, announced on July 9, 2008, Dr. Sharp received 98 percent of the votes cast and each of the Board's three other nominees received nearly 75 percent of the votes cast.

Conference Call and Webcast

The Company's earnings conference call for the second quarter will be broadcast via the internet at 8:30 a.m. ET on July 22, 2008, and will be accessible through the investor relations section of Biogen Idec's homepage, http://www.biogenidec.com. 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 August 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.

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 ability to protect our intellectual property rights and the cost of doing so, product liability claims, our significant investments in marketable securities, 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.
June 30, 2008
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
         
Three Months Ended Six Months Ended
June 30, June 30,
  2008     2007     2008     2007  
REVENUES
 
Product $ 684,486 $ 518,625 $ 1,349,556 $ 1,003,013
 
Unconsolidated joint business 278,822 230,590 526,045 437,754
 
Royalties 28,115 22,648 52,096 45,635
 
Corporate partner   2,021     1,313     7,933     2,684  
 
Total revenues   993,444     773,176     1,935,630     1,489,086  
 
COST AND EXPENSES
 
Cost of sales 92,401 84,063 193,335 166,013
 
Research and development 252,259 218,149 510,491 409,598
 
Selling, general and administrative 245,689 203,668 461,518 391,729
 
Amortization of acquired intangible assets 72,869 60,961 147,650 120,881
 
Collaboration profit (loss) sharing 33,429 (105 ) 54,835 (5,672 )
 
In-process research and development   -     -     25,000     18,405  
 
Total cost and expenses   696,647     566,736     1,392,829     1,100,954  
 
Income from operations 296,797 206,440 542,801 388,132
 
Other income (expense), net   (5,463 )   31,586     (5,093 )   53,288  
 
INCOME BEFORE INCOME TAXES 291,334 238,026 537,708 441,420
 
Income taxes   84,706     51,886     167,983     123,779  
 
NET INCOME $ 206,628   $ 186,140   $ 369,725   $ 317,641  
 
 
 
BASIC EARNINGS PER SHARE $ 0.71   $ 0.55   $ 1.26   $ 0.93  
 
DILUTED EARNINGS PER SHARE $ 0.70   $ 0.54   $ 1.24   $ 0.92  
 
 
WEIGHTED-AVERAGE SHARES USED IN CALCULATING:
BASIC EARNINGS PER SHARE   290,356     340,315     293,268     340,312  
 
DILUTED EARNINGS PER SHARE   293,476     343,389     296,554     343,713  
TABLE 2
Biogen Idec Inc.
June 30, 2008
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
   
 

June 30,
2008

December 31,
2007

ASSETS
 
Cash, cash equivalents and marketable securities $ 701,008 $ 979,070
 
Cash collateral received for loaned securities 146,956 208,209
 
Accounts receivable, net 482,797 392,646
 
Loaned securities 191,244 204,433
 
Inventory 255,028 233,987
 
Other current assets   383,995   350,062
 
Total current assets   2,161,028   2,368,407
 
Marketable securities 691,044 932,271
 
Property, plant and equipment, net 1,629,398 1,497,383
 
Intangible assets, net 2,347,561 2,492,354
 
Goodwill 1,139,597 1,137,372
 
Investments and other assets   204,198   201,028
 
TOTAL ASSETS $ 8,172,826 $ 8,628,815
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Collateral payable on loaned securities $ 146,956 $ 208,209
 
Current portion of notes payable 11,544 1,511,135
 
Other current liabilities 726,941 469,831
 
Long-term deferred tax liability 501,452 521,525
 
Notes payable 1,038,086 51,843
 
Other long-term liabilities 224,916 331,977
 
Shareholders' equity   5,522,931   5,534,295
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,172,826 $ 8,628,815
TABLE 3
Biogen Idec Inc.
June 30, 2008
Condensed Consolidated Statements of Income - Non-GAAP
(in millions, except per share amounts)
(unaudited)
       
Three Months Ended Six Months Ended
June 30, June 30,
EARNINGS PER SHARE   2008     2007     2008     2007  
 
GAAP earnings per share - Diluted $ 0.70 $ 0.54 $ 1.24 $ 0.92
Adjustment to net income (as detailed below)   0.21     0.16     0.51     0.37  
Non-GAAP earnings per share - Diluted $ 0.91   $ 0.70   $ 1.75   $ 1.29  
 
 
An itemized reconciliation between net income on a GAAP basis and net income on a non-GAAP basis is as follows:
 
GAAP net income $ 206.6 $ 186.1 $ 369.7 $ 317.6
Adjustments:
COGS: Stock Option Expense - 0.1 - 0.1
R&D: Restructuring - 0.4 - 0.4
R&D: Stock option expense 1.4 2.9 4.1 5.9
R&D: FIN 46 consolidation of Cardiokine 1.5 - 2.3 -
SG&A: Restructuring - 0.5 - 0.6
SG&A: Stock option expense 3.8 5.3 6.9 11.4
Amortization of acquired intangible assets 72.8 61.0 147.6 120.9

In-process research and development related to the contingent consideration payment in 2008 associated with Conforma acquisition and the acquisition of Syntonix in 2007

- - 25.0 18.4
Other income (expense), net: FIN 46 consolidation of Cardiokine (1.5 ) - (2.3 ) -
Income taxes: Income tax effect of reconciling items   (16.1 )   (16.0 )   (34.5 )   (32.6 )
Non-GAAP net income $ 268.5   $ 240.3   $ 518.8   $ 442.7  
 
 
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:
 
Diluted
  Shares   EPS
Projected GAAP net income $ 740.0 295.0 $ 2.51
Adjustments:
R&D: Stock option expense 8.5
SG&A: Stock option expense 17.0
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 Companys 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 the 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 ongoing 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.
June 30, 2008
Product Revenues
(in thousands)
(unaudited)
     
Three Months Ended
June 30,
  2008   2007
PRODUCT REVENUES
 
Avonex® $ 527,152 $ 461,618
 
Tysabri® 147,173 47,539
 
Amevive® 113 2
 
Zevalin® 59 4,290
 
Fumaderm® 9,989 5,176
   
Total product revenues $ 684,486 $ 518,625
 
 
Six Months Ended
June 30,
  2008   2007
PRODUCT REVENUES
 
Avonex® $ 1,063,261 $ 910,427
 
Tysabri® 261,836 77,299
 
Amevive® 252 218
 
Zevalin® 2,504 9,893
 
Fumaderm® 21,703 5,176
   
Total product revenues $ 1,349,556 $ 1,003,013

Contact:

Biogen Idec
Media Contact:
Naomi Aoki, 617-914-6524
Director, Public Affairs
or
Investment Community Contact:
Eric Hoffman, 617-679-3916
Director, Investor Relations