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Biogen IDEC Inc (NASDAQ:BIIB)

Morgan Stanley 2013 Healthcare Conference

September 9, 2013 3:15 PM ET

Executives

Tony Kingsley - EVP, Global Commercial Operations

Paul J. Clancy - EVP and CFO

Analysts

David Friedman - Morgan Stanley

David Friedman - Morgan Stanley

All right. Thanks everyone for joining us. Dave Friedman, biotech analyst and joined with team from Biogen Idec up here in the far side, Paul Clancy, Chief Financial Officer; the near side her, Tony Kingsley, Executive Vice President of Global Commercial Operations; and would love for this to be interactive. So please feel free to at any point raise your hand, and we will get a mike to you and make sure we get your questions answered.

So maybe if we can just start, you guys have a lot going on as usual. So if you can give just a couple of minutes from a high level about Biogen, what you guys are about, and then we will jump into some of the questions.

Tony Kingsley

Okay, I will go first and then Paul, you can end it. Look, a lot of focus in our Q2 earnings call and this year has been on the launch of TECFIDERA, which I am sure we will speak about today and that we are very pleased with. That's part of a broader (inaudible) strategy for the company, which is not just our commercial strategy. We have three terrific assets in the market today, and think we have an unparalleled position. But it's a deep scientific commitment, that's now spanned a couple of decades, and we think will continue to be an area of great investment. So we feel good about the commercial performance of the business these days and the prospects, and yes, we have some other launches coming up in 2014, or long acting factors, Factor IX and Factor VIII (inaudible) which we expect to launch both of those, roughly in that sequence in the first half of 2014.

Then we also add PLEGRIDY which is a pegylated interferon to add to our MS portfolio. So we have some launches ahead of us in 2014, and then we have some important data read outs. We have daclizumab in 2014 and then actually a series of Phase 1, Phase 2 readouts that are pretty important, that we can talk about some more.

I think I started with the commercial piece, but if you look at the trajectory, the journey that the company has been on over the last couple of years. I think George Scangos, our CEO has recommitted the company to great science, which has really been the hallmark of what's made the difference for Biogen over the time, and well, we have been focused on moving the late-stage pipeline to market, and doing that successfully, we think the company has made a lot of progress in re-building their early stage pipeline specifically in the areas of, where we think our scientific strengths are, neurology, immunology, and hematology. So let me pause there, and Paul if you want to add anything.

David Friedman - Morgan Stanley

Great, and so maybe if we can just first start, you guys had some news out this morning about expanded collaboration with Isis, if you can just touch on that, it's probably, I think, a reasonable example of building out your both early and mid-stage pipeline?

Paul J. Clancy

Yeah. I'd be glad to. We announced this morning a research collaboration that extends -- this is actually our fourth collaboration with Isis, around antisense, and this is very much a research collaboration around target validation. So, it extends the first three collaborations right into really a bunch of different targets that aren’t named yet, all in neurology. So, I think it really secures our position in antisense in neurological diseases, so we are very excited about it.

We have had a good collaboration with Isis so far, feel good about the science, feel good about the scientists, and feel very good about the collaboration working so far.

David Friedman - Morgan Stanley

Great. So may be if we can jump into MS, given that that's really the biggest part of your business. So, you guys have a number of MS assets that you offer now commercially. Maybe, if you can just run through your roster of MS drugs and maybe one or two sort of key characteristics that you guys identify with those drugs or the market identifies with those drugs?

Tony Kingsley

So, let me start with AVONEX, which is the legacy AVONEX interferon product. It's an injectable product, it's taken once a week. The injectables portion of the MS market, we think is going to compress over time. We think within that market, we can gain share with AVONEX, because the efficacy perceptions and differences across the injectable products are really increasingly sort of compressed. We think it hence becomes a much bigger differentiator. We have had a lot of success with AVONEX and gained share in the last couple of years, really for two reasons. The first is the AVONEX pen, which is an auto injector, which again improves patient experience and therefore improves convenience, and also frankly sales force focus on execution.

So we think, PLEGRIDY, which is a different molecule, but is a pegylated interferon, which has a longer half life, so the injections can be less frequent, also plays to that convenience message. So, we have committed to continue to gain share within the injectables portion of the market with that, and we think that makes sense.

The second is TYSABRI, unparalleled in the market today in terms of its efficacy. If you talk to physicians, they will tell you that certainly the clinical data speaks to that. We think the market moves to higher efficacy over time, because patients need it, and physicians believe patients need it.

TYSABRI, we think is a leader in the high-efficacy segment, because first of all we have been on the market for a while and people have lot of experience. We have made a big investment over the last several years at risk stratification to help stratify the risk of patients for developing the very rare, but serious side effects of PML, so we think high efficacy grows, we think TYSABRI despite the fact that there are new entrants tend to perform very well.

Third of course is TECFIDERA. It's intuitive that orals will become a bigger portion of the market. The orals opportunity really hasn't been unlocked yet, I think prior to TECFIDERA, because the market has needed not just a safe oral with good efficacy, but something that's straightforward for physicians and patients to use with relatively low burden, because that's what you're competing against with some of the platform therapies.

So we think as oral's grows, we think TECFIDERA should be the leading oral. So, look across those, the exact pace of the market evolution and how fast each of those segments grows or shrinks is an imperfect science, but we feel exceptionally well hedged with leading products in each of those categories.

David Friedman - Morgan Stanley

So maybe just digging in a little bit, if we just start on the injectable side between AVONEX and Peg-AVONEX, what is in your sort of experience now pushing people from one to the other as new patients are starting, are they tending to start on one versus the other and maybe just start there?

Tony Kingsley

So look, within injectables, TYSABRI's strategy has been to capture new patient starts -- sorry AVONEX's strategy has been to capture new patient starts. AVONEX, relative to the other products has tended to be a less switched-to product, but more a product that people start with, and that's where we are focused, and again, convenience, I don't mean in the trivial sense, I mean in the sense that it leads to better compliance -- patient compliance which leads to better clinical outcomes is very important to physicians. If you talk to physicians, and they talk about what therapy they are considering for patients, two things are important; they think patients should get treated because it's important to treat the disease early; and second, they want to put patients on things they think they will comply with, and that's a lot of the conversation.

So, I think AVONEX's success has been in competing for a disproportionate share within that category of new starts, part because of the AVONEX patent, which has improved the kind of needle-phobia, which was a historic issue with that.

PLEGRIDY fits with that same theory, right? Less frequent as a subcu injection, not intramuscular, which has been a disadvantage for AVONEX. Once every two weeks or once every four weeks is a material advantage (inaudible), so we think it will compete for new starts, but it becomes -- if you start to think about that profile, it becomes an attractive alternative to other injectables people might switch to, and it's even an attractive profile relative to orals for some patients.

David Friedman - Morgan Stanley

So, given that AVONEX is a new -- sort of new patient type drug, how long are people tending to stay on that, and with the entrance of TECFIDERA, have you seen people leaving AVONEX to switch to TECFIDERA?

Tony Kingsley

No. So, big distribution in terms of the amount of time patients spend on different products. The most frequent reason that people switch obviously is efficacy breakthrough. There are certainly patients who have been on AVONEX and well controlled for 15 years. There are some people that go on any of the injectables that may drop off in six months, because of reasonably large distribution.

We have seen AVONEX patients switch to TECFIDERA as expected. We talked about in the second quarter about 25% of TECFIDERA's prescriptions to date, to the second quarter were for new starts, newly diagnosed stations, that's a very positive message about the profile of the product. About 75%, not surprisingly were switches. The switches have been roughly in line with market share. So, we expect that we would lose some AVONEX to TECFIDERA. We expected we would lose some TYSABRI to TECFIDERA. We think over time, we can outperform with both of those products on a relative basis, but in the first sort of three or four months, I don't think that was surprising to us than the [around] (ph) market share.

David Friedman - Morgan Stanley

Got it. Then in terms of TECFIDERA, what are you seeing now, and as the drug has started to ramp up, is there -- I guess some switches from your drugs? Are you seeing switches from other companies' drugs? Is it mostly new patients, and how do you expect that to change in the next two to four quarters and then beyond?

Tony Kingsley

So look, we are very pleased with the start that TECFIDERA got off to. I will refer to the second quarter data that we disclosed and probably not get any more sort of intraquarter, but I think the two most interesting metrics that we did share about TECFIDERA were about a quarter of the patients were new starts. Often when a new product comes into the market, physicians may think about switches first as opposed to new starts. – It sends a pretty strong message about the belief in the product, both the efficacy and the safety profile.

The second was, we had 3,500 physicians, right? And that's within a several month period. That's a really incredible level of breadth and breadth of adoption in the market over a very short timeframe, so we find that very encouraging.

Again, on the market share, we think that TECFIDERA should take from all the existing products. We do think as the injectables compress, that AVONEX has a more compelling value proposition, and we expect it to outperform over the medium term with AVONEX within that category, and we think TYSABRI's growth potential is really based on its high efficacy profile, and frankly somewhat disconnected from the other products in the market.

David Friedman - Morgan Stanley

And how has the -- your efforts around risk stratification and the ability to test risk in advance of starting TYSABRI, how has that impacting the drug in the short term, and how do you view it impacting sort of the tail of the drug?

Tony Kingsley

So, short term, look it has increased physician's confidence in moving patients to TYSABRI earlier, because they get risk stratified. About the U.S., about 80% of the starts of TYSABRI are JCV antibody negative, about 20% are positive. That speaks to the fact that there are patients who need efficacy regardless of risk status, that's important for them. So, we have seen an increased use of TYSABRI among physicians who are already using it, a little bit of increase in breadth as physicians get to know that.

Risk stratification is a -- I think it's really a technology roadmap. That's something that we have invested in over time. We tend to think of it in a simple terms of black and white, positive-negative, and I think that's a straightforward way to think about it in the short term. But I think as we can dig into invest in the science and arm physicians with tools, perhaps to stratify risk even further, it gives them a better management tool.

I do think that we believe that it positions TYSABRI again with great efficacy. It positions it with physicians having much more comfort relative to some of the other higher efficacy agents that are going to come into the market, that have their own sets of complexity.

David Friedman - Morgan Stanley

Then, in terms of TECFIDERA and actually the other drugs outside of the U.S., is there any update you can give on TECFIDERA in Europe?

Tony Kingsley

No update really. So just kind of go back to what we talked about on the second quarter. It's hard to handicap both the timing and the outcome, but we are hoping still nevertheless within the next probably less than handful of months that we try to get to some resolution. We obviously hope it's a positive. Our intent is to launch with both strong patents position, which we have today, we believe, as well as clarity on regulatory data protection. So a little bit situation that we are going to be working through in the near term now.

David Friedman - Morgan Stanley

And what are the range of outcomes there really? I mean, is there a scenario where you never are present in Europe? Is it, you are present in Europe with sort of suboptimal protection? I mean, what is the true sort of realistic range of outcomes that could happen there?

Tony Kingsley

Yeah. I mean, David, tough for me to comment on that. But I think appropriate is the way you are thinking about it. It is -- lots of times in this business, we think about binary outcomes, and lots of times they really actually secure this route. So we are going to work through it and make the right judgment as we move forward. Certainly, our intent, what we are working on is try to get clarity and get a positive outcome.

David Friedman - Morgan Stanley

And, we haven't seen a generic COPAXONE yet, but there is a lot of discussion around it, and some people I think believe it will happen, sooner rather than later. How have you guys started to think about the ability to compete with generics in the MS space?

Tony Kingsley

Look, the most important issue with generic COPAXONE is you're competing with a different mechanism of action, that not all physicians think is the best mechanism of action, right? So generic COPAXONE should come to pass as first and foremost, going to be an issue for COPAXONE itself. The obvious question is, will payors take advantage of that and try to step -- add people through COPAXONE, that's a push in this market, given the lack of physician consent and the treatment algorithm. Some payors may try to do that, but that's going to be a real challenge for them.

David Friedman - Morgan Stanley

And have you guys found TECFIDERA taking share at all from COPAXONE?

Tony Kingsley

Yeah again, largely plus-minus proportional to the market share.

David Friedman - Morgan Stanley

Got it.

Paul J. Clancy

We would expect that it won't.

David Friedman - Morgan Stanley

Then just in terms of -- as we talk about sort of the competitive landscape. I mean, price and price growth has been a big part of the growth of the MS market overall. Are you finding that formulary controls and negotiating has gotten tougher? Is it the same, and what do you expect going forward and what sort of new tricks are you picking up to deal with it? -- I will leave at new tricks to Paul.

Tony Kingsley

So, negotiations are definitely getting tougher. Payors are focused on the class in part because of prices have gone up, but in part there are a number of new entrants and new agents coming into the class. We still think there is -- in the U.S., we still think there is some headroom for the class, but gross (inaudible) are getting stretched, and there is nothing that the payors are doing. It's becoming more challenging. The payors have not come up with new tools that you haven't heard of before, but they are applying exactly the things, so the battle is getting tougher, and I think we are going to be under more pressure.

Look, outside the U.S., pricing is a completely different story as you know. In Europe, we have much stronger buyers. In Europe, on average, prices tend to go down over time, although that's a series of 28 independent events with different sequences, and we have seen some more price erosion in Europe, and have built that into the forecast over time.

David Friedman - Morgan Stanley

Then, I guess, just the last question in MS. TYSABRI, you are looking at in secondary progressive MS, maybe if you can just describe why you have gone forward in that indication, timing of data, and then potential opportunity size compared to the relapsing remitting that you are in now?

Paul J. Clancy

Yeah. Let me kind of take it from the last part of your question backwards. We have always thought that it's about 25% or 30% of the patient population moves to secondary progressive. So, that's a meaningful, meaningful opportunity. Right now, there really is -- it's a truly unmet need. There really isn't any therapies indicated for disease modification in secondary progressive. Undoubtedly, there is probably some use of agents, potentially including TYSABRI in that setting, but we think it's a pretty wide open area, and a very important area for Biogen Idec to plan, right. If you think about it, we have a value chain from bench to bedside that is all around multiple sclerosis to be able to extend that into secondary progressive multiple sclerosis just makes total sense and really kind of positions us for the future.

And we have got the belief that, the size of that market will grow over time, just a simple kind of cohort analysis of the aging of -- patients mature into secondary progressive likely at a different rate than call it 10 or 15 or 20 years ago, just because there are disease modifying therapies. So with that said, it's a meaningful opportunity for us. The data readout is scheduled for -- we have had the last patient in, and so the data readout is scheduled for mid-2015. So we are really looking forward to that readout.

And I think that a couple of aspects of the trial design that are important to know is, it's a different endpoint than the traditional relapsing remitting endpoints around primary endpoint there being around annualized relapse rate. The endpoint is more of a composite score, which I think favors kind of -- at least leans a little bit of confidence, and secondary progressive by definition is not a disease that's characterized by relapses. So, I think that's part of why, there hasn't been a lot of positive trials. It's a tough disease, it's a different disease from a scientific point of view, but we think that TYSABRI has the potential here, and there's certainly some technical barrier there and it's not for sure, but we think it can be, it's a potential big opportunity there.

David Friedman - Morgan Stanley

Any questions on MS before we move? So maybe -- The mike will be coming in a second.

Unidentified Analyst

Hi, thank you. In the MS space, you clearly have AVONEX, you have TYSABRI, you have TECFIDERA, it sounds like you are going to be coming out with PLEGRIDY. A two part question, when one of your representatives walks into a neurologist's office, how are they going to be differentiating those products? I understand you have one force for each of those products, will you be adding a fourth force? And then in the managed care space, from what I understand the Academy of Managed Care Pharmacy has some guidelines around the use of platform agents versus new agents, and they recommend interferon and (inaudible) first, then the other agents after that. Just wondering how PLEGRIDY will fit into that scheme of things?

Tony Kingsley

Good question. We think the ability to position these products in the doctor's (inaudible) is actually reasonably straightforward. We position TECFIDERA as the best product to start a new patient on, and as the best alternative to switch believe they need higher efficacy, and would like to get advanced oral. That's the message.

TYSABRI is positioned around its superior efficacy for the patients who really need high efficacy early, and we talked a lot about risk stratification. AVONEX is a great alternative for new starts for patients, and for physicians who adopt new technology like TECFIDERA maybe more has an AVONEX as a (inaudible). So we feel very comfortable. We are able to position all three of the products, and have been able to get access with physicians on that front.

In terms of guidelines; [TBDA], there are some different guidelines that have been developed, that payors are referencing or trying to put in place. I think that's going to be a multiyear issue working out with payors, what goes first and what goes second and what goes third. Really, the physician community is going to have come together in a much more -- I think compelling way, to be able to shape guidelines that can actually impact. I would say in that world, I would rather have a portfolio of products, that meets a variety of needs, because I think we have an opportunity to play a bigger role in how that set of guidelines gets developed.

David Friedman - Morgan Stanley

So could we just move on, taking hemophilia in the last couple of minutes? I mean, you guys have two products that you have been developing there. It is a market that has available products already. So what got you excited about the two drugs you've developed, and what is your approach to coming into the market with competition already there?

Tony Kingsley

Yeah, I will start with -- the biggest unmet need in the market is to introduce infusion frequency, sort of long acting (inaudible). I mean, you talk to any physician, certainly patients, it is clearly the number one in the market. This has been a relatively low switch market for a period of time, because there hasn't been a lot of innovation to switch to. We think this is -- what it attracts is, innovation that will make a material difference for patients that give them better outcomes, against the kind of the number one unmet need in the market. We think we can get in there and compete with that. That's what's attractive to us.

Look, getting into the market as a new player, this is a -- it's a small market, the commercial footprint is not that big, but relationships matter a lot, trust in company matters a lot. It's a more patient driven market. So we have hired the right people, we think we can do that, and invest frankly a lot in building the company's presence and reputation of the market, because patients care a lot about company's long term commitment to the market, particularly given some of the efforts in the past.

So we feel like we can put in place the commercial research to exploit that fundamental product advantage, against what we think is a big unmet need in the marketplace. We are very excited about it.

David Friedman - Morgan Stanley

Can you just discuss your -- what the relationship is with Sobi?

Paul J. Clancy

Yeah, I'd be glad to. It essentially is a 50-50 collaboration. Although we restructured the collaboration in late 2009, such that Biogen Idec took the lead, until Sobi hops in. We took the lead from an operational standpoint, from a manufacturing standpoint, from a clinical trial standpoint. So right now, we do a lion's share of the work. We have commercial rights in certain territories, Sobi has commercial rights in other territories. Specifically, Sobi has commercial rights in Europe in some adjacent territories including Russia and some countries in the Middle East, and Turkey. Many of those countries, particularly in Europe will be about 1.5 to two years delayed, because of the European regulator's requirement for pediatric study. Those studies actually for Factor VIII and Factor IX are expected to read out in 2014. So that's an important data readout as well next year.

Then, from an economic standpoint, there is cross royalty arrangements that are fully disclosed in our SEC filings, but that are quite favorable to Biogen Idec for a number of years in the early days of the U.S. launch.

David Friedman - Morgan Stanley

Got it. And in terms of the drug, I mean, you mentioned sort of increasing the time interval between infusions, some other people have speculated as to whether the goal could also be to just change the way the disease is dealt with, and try to hit different [cross] levels. So may be if you could just talk about how relevant and important that aspect of the market is to develop for you guys, versus stressing the dosing interval as sort of your lead (inaudible)?

Tony Kingsley

So certainly, better patient outcomes is obviously the ultimate goal here. I think there are a series of opportunities for the long acting products in the press here. Perhaps the most straightforward is taking existing prophy patients -- patient with prophylaxis regimens and giving them the value proposition of less frequent dosing, sort of same [production]. I think that's more straightforward.

The second is increasing the level of prophylaxis. Prophylaxis in the moderate of (inaudible) segment is about half of the patients today. I think the benefits of prophylaxis are well understood by physicians, and frankly a lot by patients. One of the biggest barriers of prophylaxis frankly has been the frequency of injections. A longer acting agent may open that opportunity a little bit more, and we had a weekly ARM, as you know in the trial, that had very attractive outcomes relative to demand.

I do think there is a third opportunity we believe, which is -- there may be some subset of patients who don't take full advantage of the dosing frequency change, but manage their drop levels differently. That's also a potential opportunity. But I would think about them, maybe in that order.

David Friedman - Morgan Stanley

Then, how do you think about pricing in this market and the competitiveness of it?

Tony Kingsley

Look, the question is, do we think we can get coverage from payors at reasonable price points? We do. We think that clinical data is good. I have often said, payors don't pay for convenience purely. They will look at the whole package at where the clinical (inaudible) is, and we feel very positive on that front. There are some mechanical issues we have to work through, which is how do you actually price on a unit basis, given that you would be looking to compare things on a course of therapy. We think those are solvable problems that we can work through over the course. But we think that it's a strong value proposition, and we should be able to command fair pricing for that.

David Friedman - Morgan Stanley

Any last questions before we wrap up? No. All right. I think that's our time. So thanks everyone for joining us.

Tony Kingsley

Thanks David.

Question-and-Answer Session

[No Formal Q&A for this Event].

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