Biogen Inc.
Q3 2009 Earnings Call Transcript

Published: 20 Oct 2009

[Operator:]

Good morning ladies and gentlemen my name is Nicollet and I will be your conference operator today. At this time I would like to welcome everyone to the Biogen Idec Inc. Q3 2009 Earnings Conference Call. (Operator Instructions). I would now like to turn the call over to Eric Hoffman. Please go ahead sir.

[Eric Hoffman:]

Thank you and welcome to Biogen Idec’s Third Quarter 2009 Earnings Conference Call. Before we begin, I’d encourage everyone to go to Investor Relations section of biogen.com to find the press release and related financial tables including a reconciliation of the non-GAAP financial measures that we’ll discussed today. We have also posted slides on our website that outline the topics discussed on today’s call. As usual, we’ll start with the Safe Harbor statement. Comments made in this conference call include forward-looking statements about our expected future results including our 2009 financial guidance, our longer-term operational and financial goals; the sales potential of TYSABRI and other products; the potential markets for our products, pipeline advancements, and regulatory actions. These statements are subject to risks and uncertainties which could cause actual results to differ materially from expectations. You should carefully review the risks and uncertainties that are described in our earnings release, and in the risk factors section of our most recent annual and quarterly reports filed with the SEC. We do not undertake any obligation to publicly update any forward-looking statements. Today on the call I’m joined by Jim Mullen, CEO of Biogen Idec; Dr. Al Sandrock, Senior Vice President and Head of our Neurology R&D organization; Bob Hamm our Chief Operating Officer; and Paul Clancy, CFO and Executive Vice President of Finance. With that, I’ll turn the call over to Jim Mullen.

[Jim Mullen:]

Thanks Eric, good morning everyone. I am pleased to be able to report another solid quarter continuing on our Q2 performance. Not only was our financial performance strong, but we also made progress on our pipeline. Total revenue grew to more than $1 billion in non-GAAP EPS for the third quarter 2009, it was up 14% over last year to $1.12. Importantly, we remain on track to achieve our full year operating plans. AVONEX revenues were $580 million supported by the long-term safety and efficacy profile. In the US AVONEX continued to see market share decline and we are working towards improvements here as our CEO Bob Hamm will detail in his comments, and we think this performance can be turned around. In addition AVONEX performance was impacted by growth in our Access Program that provides free drugs to patients who cannot afford the therapy. As we have discussed before this correlates closely with unemployment trends. Internationally AVONEX has picked up market share and continues to grow in volume. This is important because the international MS market is both larger and growing more rapidly than the US market. We were pleased to have our method of use patent issued in the US covering AVONEX through 2026 and Bob will discuss the implications. TYSABRI patient growth continued through the summer nearly 3,000 net new patients were added in Q3 for a total of approximately 46,200 patients currently on therapy or a 30% growth year-over-year. We achieved TYSABRI global end market net sales in the quarter of more than $282 million up 19% year-over-year resulting from the continued success of our marketing and sales efforts focused on TYSABRI’s compelling efficacy. We booked $207 million of this net of hedge on our P&L. Internationally we saw some expected seasonality over the summer as net new patients added dipped in August and then recovered in September. We continue to look for and evaluate methods and approaches to further identifying risk factors for PML which Al Sandrock the lead to our Neurology R&D organization will speak to later. Revenue from the RITUXAN unconsolidated joint business was $284 million on net US sales of $670. Bob Hamm will also take you through an update on our commercial franchise. Our pipeline progressed nicely during the quarter. Strategically our pipeline is focused on first in class or best in class specialty products in diseases with high-unmet need and global applications. I will provide a couple of examples of recent positive developments and upcoming milestones. Yesterday we and our partner Biovitrum announced the positive read out on our Phase I/II study of our long acting Factor IX for hemophilia B and planned to advance the program into registrational trial in 2010. Last week our partner Acorda had successful FDA Advisory Committee on Fampridine-SR in MS and we plan to file with the MEA in early 2010. We completed enrollment in the third quarter for CONFIRM the second of the two Phase III trials of our oral BG-12 in MS and we are especially pleased with this accomplishment given the size and complexity of the BG-12 Phase III program. Final read outs are expected by year-end that will include a Phase II study of Ocrelizumab for MS. Al Sandrock will give you updates on a number of pipeline programs including these and others. We are reiterating our 2009 non-GAAP earnings per share to be above $3.85 and we continue to expect cash flow from operations to exceed earnings. Our CFO Paul Clancy will give you additional financial details. Also, this morning we are announcing a share repurchase related to our approximately $3 billion cash balance our board has authorized a share repurchase of up to $1 billion in order to return excess cash to shareholders. We expect to implement this buy back over the coming months to reduce the share count over time. This program does not impact our ability to execute against strategic external growth opportunities, but represents the strength we see in the ability of our core products to generate significant cash flow for the Company. Paul will discuss this in more detail during his comments. In conclusion, the third quarter was a successful one and we are reiterating full year 2009 guidance. Our main focus was maintaining TYSABRI patient growth and we accomplished that goal. We have strong franchises, cash flow on the balance sheet, and ended the quarter with approximately $3 billion in cash and marketable securities and we continue to focus on products pipeline performance as drivers of long-term shareholder value creation. I will now hand the call to Dr. Al Sandrock, SVP Neurology R&D.

[Al Sandrock:]

Thank you, Jim. Today I will be providing a number of updates on our pipeline with an emphasis on neurology, my area of responsibility. I will begin with our MS portfolio. As we have said in the past our goal with MS is simple, but powerful, slow, stop and eventually reverse the disease. With AVONEX we have made major progress on slowing the disease. Based on a growing body of unprecedented efficacy data we believe TYSABRI goes a long way towards stopping disease activity in relapsing MS patients. Let me start with a brief remark on the benefit TYSABRI brings to patients with relapsing MS. Every day we hear from physicians and patients about how TYSABRI has made a significant, positive, impact in their lives. They are corroborating the benefits that we have observed in our clinical studies on a wide array of measures of efficacy and quality of life. This drug was approved because it offers hope for many patients with this devastating disease. I would also like to provide you with the recent updates on TYSABRI safety. As I mentioned before, TYSABRI is among the most intensely monitored drugs on the market today. We share and discuss these data with regulators around the world on an ongoing basis and work with them to keep healthcare providers up to date. Biogen Idec and our partner Elan currently believe, as the recent FDA update indicated, that the risk of developing PML increases with the number of TYSABRI infusions received. We continue to believe that the overall rate of developing PML with TYSABRI remains consistent with the rate implied on the label. We have proposed, and are currently discussing with the regulatory authorities, a potential label change to reflect this increased risk of PML with increased duration of TYSABRI exposure. Stepping back, it is important to remember that PML remains a rare adverse event. Outcomes have been better than previously expected and we believe the overall benefit risk profile remains favorable. Real world patient and physician experience continue to establish TYSABRI as a compelling option for the treatment of MS bringing hope to many patients and transforming the care of MS patients. Additionally, we continue to allocate significant time and resources to identifying PML risk factors and in developing ways to stratify, mitigate, and manage the risks. We are working on this internally and we are also working to set up a consortium of other interested collaborators. The premise of our work is that PML in TYSABRI treated patients’ results from a convergence of factors including the presence of JC virus, immune compromise, viral mutations, duration of treatment, and perhaps other factors such as risk [oleal] MFO. With respect to the presence of virus recent published data in larger cohorts using more refined serological techniques indicates that seroprevalence is in fact less frequent in the textbook dogma of 80% or 90%. We have analytically validated a serological method with the goal of one day offering a commercially available assay that may inform about the relative risk of developing PML. Now onto to some neurology pipeline updates. The neurology pipeline achieved some important milestones during the third quarter of 2009

[Bob Hamm:]

Thanks Al. During the third quarter our global revenue was $1.1 billion, up 3% year-over-year. Third quarter RITUXAN US net sales were up 2% year-over-year to $670 million. RITUXAN revenues on our P&L were $284 million, down 5% year-over-year with 6% growth in our Q3 US profit share offset by a 28% decline in international RITUXAN revenues as our x-US royalties continue to expire. Our product revenues of $802 million grew 6% year-over-year with nearly flat AVONEX sales buoyed by a 21% year-over-year growth in the TYSABRI business. TYSABRI added approximately 1,000 net new patients per month during the third quarter and posted its second quarter in a row at a blockbuster run rate with Q3 in market sales at $282 million. Turning to the RITUXAN CD20 franchise, a highly penetrated lymphoma market coupled with the general downward economic crusher meant slower revenue growth overall for RITUXAN in Q3. Units declined by 1% year-over-year. Price growth of 5% year-over-year was balanced by a 27% increase in discounts and allowances yielding an overall 2% year-over-year revenue growth. Operating profit outpaced revenue growth however, at 4% year-over-year, due in part to discipline in spending and improved margins during the quarter. Front line adoption and maintenance use of RITUXAN remains steady for labeled oncology indications, those being diffuse large B cell and indolent follicular NHL. Biogen Idec and Genentech submitted two separate sBLA’s in May this year for the CLL8 study in previously untreated CLL and for the REACH study in previously treated CLL. Both sBLA’s were accepted and granted priority review status by the FDA with a PDUFA date in November of ’09. CLL launch planning activities are on track. As Al mentioned Biogen Idec and our partner Genentech will discuss the PRIMA results with regulatory authorities worldwide for the possible update of the product label. Moving to the globally neurology business, AVONEX $580 million in global revenue for Q3 is up 1% year-over-year with a run rate of over $2 billion and approximately $139,000 patients on therapy worldwide, AVONEX is a foundation of our market leading franchise in neurology. US AVONEX revenue is up 8% versus prior year with price increases taken earlier in the year mitigating the underlying decline in unit volume of 8%. In the US we did see an increase in the number of patients in our Access Program as Paul will detail. During the same period in international markets AVONEX revenue is down 8% with a 1% increase in unit volume offset by 9% decrease in net price largely due to foreign exchange. We believe the US market can perform better and have taken steps to improve that trajectory including our expansion earlier this year of the AVONEX field force and a change in leadership of the US business. We are confident that this is possible since we are holding our share of the ABCR market and are international markets and we see no reason why we can’t bring the same performance and results to the US. Approximately half of the US prescribers are now aware of the 10-year CHAMPIONS data which demonstrated sustained benefit over ten years of treating patients with AVONEX from their first MS attack. This is compelling data. Of physicians who have been exposed to it 1/3 have indicated they would increase their use of AVONEX in CIS patients and ¼ said they would also increase their use of AVONEX in relapse and remitting patients. AVONEX pioneered early treatment of MS and now with the CHAMPIONS 10-year follow-up data we demonstrated compelling, long-term benefit in patients treated after their first attack. The message is simple

[Paul Clancy:]

Thanks Bob. Our results for the third quarter were in line with our full year operating plan. We are pleased with this performance, especially in the context of a number of challenges this quarter, including normal seasonality, a stronger dollar year-over-year, and reduced RITUXAN rest of world royalties. The GAAP financials I provided in Tables 1 and 2 of the earnings release; Table 3 is a reconciliation of GAAP to non-GAAP financial results. Our Q3 GAAP diluted EPS was $0.95. Our Q3 non-GAAP diluted EPS was $1.12 an increase of 14% on a year-over-year basis. The primary differences between our GAAP and non-GAAP results for the quarter were $51 million related to the amortization of intangible assets, $8 million for employee stock option expense, and an offsetting $13 million impact related to those items. Our amortization of the AVONEX intangible asset was lower this quarter due to an increase in the expected lifetime revenue of AVONEX following the issuance of the 7-75 patents in the third quarter. Now I will move onto the non-GAAP P&L operating performance of Biogen Idec which we believe better represents the economics of our business and reflects how we manage the business internally and set operational goals. Q3 total revenue was $1,121,000,000.00 representing a 3% growth over the same period last year. Year-over-year growth was somewhat muted by foreign exchange which had a negative impact of approximately 4%. Going through our product revenue I will begin with AVONEX. Q3 AVONEX worldwide product revenue was $580 million up 1% versus the same period last year. Q3 US AVONEX product revenue was $348 million representing an 8% increase versus last year. AVONEX units in the US declined approximately 8% which was offset by price increases. In the US we did experience a continued increase in the number of patients supported by free drugs which we refer to as our Access Program. The impact from supporting Access patients accounted for approximately a 2% to 3% unit decline. We ended Q3 in the US with approximately 2.2 weeks of inventory in the channel, down from 2.3 weeks in Q2. Q3 international AVONEX product revenue was $232 million representing a decrease of 8% on a year-over-year basis. Remember Q3 2008 was a strong quarter due to the German wholesaler buy-ins which impacted the comparison this year resulting in a small year-over-year unit increase. The unfavorable FX impacted the year-on-year comparison by approximately $25 million on AVONEX international sales. Never the less, AVONEX gained share outside of the US in both a quarter-over-quarter basis and year-over-year basis. Q3 TYSABRI worldwide Biogen Idec product sales were $207 million; a 21% increase versus Q3 2008 and 10% increase sequential quarter. End market sales were $282 million. More than three years after the relaunch TYSABRI continues to deliver double-digit growth on both a quarter-over-quarter and year-on-year basis. US end user TYSABRI sales totaled $131 billion; we booked $59 million of this amount. International TYSABRI sales totaled $148 million and this number is net of a $4 million currency hedge loss. Gross international TYSABRI sales totaled $151 million. The total unfavorable impact of foreign exchange on AVONEX and TYSABRI versus Q3 2009 totaled approximately $37 million. Now moving on to the RITUXAN collaboration revenues referred to as revenue from unconsolidated joint business

[Jim Mullen:]

Thanks, Paul and I will be brief because we have a lot of information this quarter and we should get to Q&A. In summary business performance and pipeline progress for the quarter was very good. We believe that the strong fundamentals of the business across all products and geographies will continue to deliver robust results and create significant value for our shareholders. With that, Eric, let’s open this up for Q&A.

[Operator:]

(Operator Instructions) Your first question comes from Eric Schmidt with Cowen And Company.

[Eric Schmidt:]

My question is on the opportunistic infections that Al mentioned regarding Ocrelizumab. I am just looking for a little bit more information. What type of infections did you see, have you observed these in the past with RITUXAN and why isn’t the ongoing MS trial impacted?

[Al Sandrock:]

That is a lot of questions. We are not commenting on the types of opportunistic infections. I can say that we saw a lot of these predominantly in Asia and the reason for the imbalance right now is unknown. In terms of the Ocrelizumab our MS trial, while it is a different indication, you know the unmet need is different and that trial is actually over in terms of the efficacy read out portion, and in fact we plan to be looking at some data later this year.

[Operator:]

Your next question comes from Joel Sendek with Lazard Capital Markets

[Joel Sendek:]

I have a question about Fampridine-SR. It looks to me that you are targeting a little bit earlier filing time than you previously stated and I am wondering what is left on the critical path to that filing, and if you could tell us at all about what kind of meetings you have had with the European regulators about the one point that the Company had.

[Al Sandrock:]

I think the main issue that we had to grapple with was the requirement for a pediatric plan which we have had some verbal interactions with the MEA, and we have a verbal agreement on a plan forward. That was the main issue that we dealt with, and yes we are planning to file in early 2010.

[Operator:]

Your next question comes from May-Kin Ho with Goldman Sachs.

[May-Kin Ho:]

You mentioned that you have been talking with the FDA about changing the label on TYSABRI in terms of the higher risk of PML when you have long duration of therapy. Will you be specifying how long patients should be treated and what kind of changes are you thinking about?

[Al Sandrock:]

We are not specifying how long they should be treated, in fact there is not going to be any mention of terminating treatment. The overall risks are still within the rate implied in the label currently. The main reason that we are implementing this label change is predominantly so that our labels worldwide are roughly harmonized in terms of what it says about duration. In some locales our label stated that the link with duration was unknown and clearly that is not compatible with our current thinking, so that was the main reason for asking for a label change. In terms of the overall risk benefit we believe it remains favorable and nothing major has changes. In fact we think that the risk is basically the same as that implied in the label currently.

[May-Kin Ho:]

Will you have to spell out what the risks are at different time periods?

[Al Sandrock:]

We are still in discussions with the regulators at this point.

[Operator:]

Your next question comes from Geoff Meecham with J.P. Morgan.

[Geoff Meecham:]

I have a follow up question to the last question. With respect to the label change for TYSABRI how often will you guys update the label and then what do you think would be the FDA or the MEA consequences should one of the longer duration groups exceed the 1/1000 rate?

[Al Sandrock:]

It is difficult to speculate on those things. I mean the frequency of updating the label will be determined by the change in information that we see as more knowledge is gathered.

[Operator:]

Your next question comes from Geoffrey Porges with Sanford Bernstein.

[Geoffrey Porges:]

Back up to TYSABRI for a second, you did give us some incremental information about Galiximab and lumiliximab; I am wondering if you could give us a sense of how much that could potentially reduce your R&D spend in the future if those programs are not continued. How much of the 27% you are spending now would come out and could we see sort of incremental savings to R&D next year?

[Paul Clancy:]

I would say we are right in the middle of it, so not totally prepared. It is 2-0 right now, kind of two out of six or seven of our large pivotal trials, so it does have an impact as we kind of roll into next year. We do want to make sure you are mindful of the fact that this thing isn’t necessarily turned off automatically. We will kind of look at the path forward, but I think as we spin into next year and the next earnings call we will be able to give you a lot better visibility as it relates to that impact.

[Operator:]

Your next question comes from Mark Schoenebaum with Deutsche Bank Securities.

[Mark Schoenebaum:]

Paul, you guys do have 2007 through 2010 longer-term guidance out there from a top line and bottom line perspective. Are you still comfortable with that and can you actually give the market shares for AVONEX in the US and Europe?

[Paul Clancy:]

I wouldn’t use this call to kind of address anything on or off of that. What I would remind you is that those were a set of goals in totality. They actually had product goals, pipeline goals and financial goals. As we have been around on investor conferences I think we have tried to be clear that some of those goals were on track; some of those goals were far exceeding, particularly on the pipeline front, and some of those goals were kind of falling short of the TYSABRI patient goals obviously. In the totality, in the spirit of those goals that we set up, we still are certainly going after those for the 2007 to 2010 time period.

[Operator:]

Your next question comes from Josh Schimmer with Leerink Swann.

[Josh Schimmer:]

I was curious about the commentary regarding a commercially available assay for relative risk of PML in TYSABRI. Were you referring to the JC virus assay or is there any interest in returning to the Cylex Assay to better quantify the immune system function? The last update I think you were less enthusiastic for that assay but I am wondering if you now have more hope.

[Al Sandrock:]

Actually I was referring to the anti-JCV assay.

[Josh Schimmer:]

Is there any interest in returning to the Cylex or other immune quantification type assays to screen patients, has that changed or evolved?

[Bob Hamm:]

We are very interested in assessing immune function. We will continue to look at whatever data come out from Cylex. We are also working on assays related to CD8 response to VC-1.

[Operator:]

Your next question comes from Yaron Werber with Citi.

[Yaron Werber:]

On BG-12 which is actually a pretty interesting drug just given some of the issues on safety from the oral drugs out there, are you going to release the 52-week data from the find and from CONFIRM or are we going to have to wait until the 104-week data?

[Bob Hamm:]

Both of these trials are full two-year trials and our goal is to complete these trials before looking at or announcing data.

[Operator:]

Your next question comes from Jason Zhang with BMO Capital Market.

[Jason Zhang:]

You made a comment about assessing your manufacturing capacity. Does that mean you will have excess capacity? If that is a yes is that excess capacity the result of an increase of skill or is it actually a result of lower revenue projection?

[Jim Mullen:]

It is actually a combination of a number of factors. The first and the biggest impact is simply the high side process for TYSABRI that got approved which is almost 4x as productive as the previous commercial process. While that approval was earlier in the year, we are into that process now. I think the other factors are just you drop things like LT beta out of the pipelines, and maybe some of the other protein products there is probably a little less pressure near-term on commercial capacity. Having said all of that, I think people always have to be mindful of backup capacity, so that we have dual sourcing for key programs. That was one of the primary reasons for cross licensing both the Cambridge and RTP facilities as well as having a second large-scale facility. However, having said all of that, I think we believe we have a certainly sufficient capacity and probably too much capacity over the next couple of years at large scale.

[Operator:]

Your next question comes from Jim Birchenough with Barclays Capital.

[Jim Birchenough:]

I was wondering if you could provide an update on the methacycline treatment study in terms of when you would expect data from that study at this point and related to that there is a one log imbalance at baseline it seems between treatment and control and if you get the 40 patients enrolled and you still have that imbalance what do you do at that point?

[Al Sandrock:]

Well we would adjust for that imbalance cyclically and we expect to see data toward the end of next year.

[Operator:]

Your next question comes from Christopher Raymond with Robert W. Baird & Co., Inc.

[Christopher Raymond:]

I have a general question on AVONEX. Jim you alluded to a loss of US market share, can you maybe talk about what the drivers of that might be? Is that increased competitive activity or maybe some change of effort on your part? Without giving anything away can you talk about what specifically you are going to do to change that dynamic?

[Jim Mullen:]

Well, I mean certainly it is increased competitiveness, but a lot of it comes back to old-fashioned marketing and messages and discipline around that. What we are looking to do and what Bob is looking to do is improve and tighten up our marketing message and deliver it in a consistent fashion much as we have done in the international markets, which has proven to be a good strategy. The other thing is you can start to look more regionally or almost more specifically center-by-center to think about how you tailor some of these messages more to the individual centers, the individual regions, which sometimes has slightly different dynamics.

[Eric Hoffman:]

To follow up on the AVONEX market share in the US and x-US, in the US AVONEX’s market share of the ABCR market is in the range of 30%, just a tick above; x-US AVONEX’s market share in the ABCR market is around 27%.

[Operator:]

Your next question comes from Steven Harr with Morgan Stanley

[Steven Harr:]

I wanted to get an understanding, previously you guys have said that you did not believe that TYSABRI PML risk was related to time on the drug and then clearly something changed. You gave us exposure numbers, is there something new on number of PML cases you can offer us, or is there something you can offer us as an explanation as to why you saw more patients exposed to the drug during the quarter than on therapy? It must have been 1,300 patients that dropped off during the course of the quarter.

[Bob Hamm:]

You know we are not giving out actual patient numbers, but I can tell you as time goes on the numbers of patients treated for the longer duration is increased and our 95% competence intervals on the incident rate narrows and as that happens we get more clarity about the risk. That was the reason why we had decided to update the label with this increase in the risk with the length of exposure.

[Operator:]

Your next question comes from Eun Yang with Jefferies & Co.

[Eun Yang:]

We heard recently from your [inaudible] that there were a few more cases of PML and so the number of cases around that are around 17. With that said there seems to be an indication between the duration of TYSABRI treatment and PML cases and some doc’s tended to focus on the longer duration therapy, so when you look at the patients who have been on the treatment for 24-months or longer PML rate runs around 1 in 800 which is higher than what is in the label currently. So, my question to you is what do you think would be the critical threshold of a PML rate that where physicians or regulatory agencies would become more cautious on TYSABRI?

[Bob Hamm:]

I don’t want to speculate what makes regulators want to do things, but I can assure you that our current thinking is that the risk of PML even in that third year beyond 24-months is within the currently implied risk in the label.

[Operator:]

Your next question comes from Michael Aberman of Credit Suisse.

[Michael Aberman:]

I have a follow up question to that in some regards. In Europe you saw a slow down in sales and you are accounting primarily the seasonality; however we know that a number of new PML cases came from there and you are instituting changes in Germany to try to rectify, I guess, a situation where there is perhaps less control. I am wondering if you can just expand on what you have seen in the marketplace in terms of Europeans perception about risk and explain in more detail what you are doing in Germany to counter that.

[Bob Hamm:]

Well actually at this time, as I said, seasonality we think accounted for July, August, and September actually bounced back quite nicely including levels in Germany we hadn’t seen for three months or so. So, I think the German authorities and the KOLs there that are working with us have taken a very responsible approach and just making sure that appropriate use of TYSABRI is monitored and followed up with, but there is no sign that they don’t think anything other than this is a risk-benefit matter and that the benefit certainly outweighs the risk.

[Operator:]

Your next question comes from Maged Shenouda with UBS.

[Maged Shenouda:]

Can you just elaborate a little bit on patient churn with TYSABRI or even compliance? Are you seeing any changes since the FDA’s recent commentary on PML risk?

[Bob Hamm:]

No, we aren’t seeing that. We did see that about a year or so ago with the first cases, but thus far we are really not seeing any reaction to other information discussions ongoing.

[Operator:]

Your next question comes from Rachel McMahon with Banc of America Securities.

[Rachel McMahon:]

On TYSABRI can you talk about what proportion of patients in your database are implementing drug holidays, how long a holiday might be, and when you calculate your patients, if a patient misses two doses are you still considering them to be on drug?

[Al Sandrock:]

From the data we have we are seeing very, very isolated cases of that. We are really not seeing anything more than physician practices that have been in place probably for a year, so no there has not been any real change in that regard.

[Operator:]

Your next question comes from Geoffrey Porges with Sanford Bernstein.

[Geoffrey Porges:]

I have some follow up R&D questions; one is on BG-12. Do you have any ideas when you might be in a position to start a combination study or will you have to get the full two-year data from the ongoing Phase III? Then on the Factor IX, during a pivotal trial is there any sense of whether you might initiate a pivotal trial for comparable Factor VIII program?

[Al Sandrock:]

Let me take that last question first. The Factor VIII IND has been submitted in Q3 as we had planned and we are waiting for feedback on that, so we are very excited about that program as well and we hope to initiate Phase I trials with that soon after we hear the FDA feedback. In terms of BG-12 we are very interested in combination therapy. We do not feel we need to complete the Stage III program before we start work on combination therapy and our plan is to initiate combination work as early as early next year.

[Operator:]

Your next question comes from Geoff Meecham from J.P. Morgan.

[Geoff Meecham:]

I have a bigger picture question for Jim, with Al’s updates to the pipeline today and the developments with [Identry] you guys have a little bit less late stage pipeline assets and I am wondering what this share repurchase says about your willingness to do deals to backflow the pipeline?

[Jim Mullen:]

I think as Paul tried to explain, what I thought was relatively clearly, we did go through the process of looking across the M&A landscape, our cash flows and what the financing markets are and we think there has been a market change in the financing market than access to capital. So, our willingness to do deals is certainly not, I wouldn’t take any signal from the share buyback of our willingness to do deals. I think we are being pragmatic about what is out there in fact and we are going to continue to be very active on the PD front with an emphasis to things that are late stage programs.

[Operator:]

Your next question comes from Jim Birchenough from Barclays Capital.

[Jim Birchenough:]

I just want to tie up a lose end, a number of 17 confirmed PML cases was put forward. Is that the number that you are familiar with and when will we get a formal update from the Company on PML cases next?

[Jim Mullen:]

I think as we have said previously we aren’t going to be giving everybody the count by count to the extent we do update that, that will be in the context of medical meetings. What we will discuss are things like we discussed today, things that are meaningful to either what is going on in the marketplace or the label. I think that is probably a more appropriate way to really discuss the risk/benefit of the compound going forward.

[Operator:]

Your last question comes from Yaron Werber with Citi.

[Yaron Werber:]

Paul, I have one quick question on amortization and one on the guidance. On the amortization of acquired intangible assets it was a big drop off this quarter and you did mention that, is that sustainable going forwards and into the out years? Secondly just on the share buyback, can you give us a sense as to is this something you want to get done over the next few months, or is this something that is now going to get done over the long term? Because if you look at your guidance for Q4 I am surprised you are not raising it further, because you have already done $293 and you are easily on track to do more than $4.00 this year, so I am just trying to understand what is going on here.

[Paul Clancy:]

The amortization which affects the GAAP P&L, not the non-GAAP P&L, every year we will, as per kind of our accounting policy, revisit the economic useful life of that asset. That asset was put on the books when the Biogen and Idec merger came together. With the issuance of the 775 patents the lifetime revenue of AVONEX is projected to be a bit more durable than it was in the past year. We do anticipate that the run rate that you saw in Q3 will be the run rate for that amortization plus or minus in Q4 and spinning into 2010. Then, as per our policy we will continue to look at that useful life on an annual basis, call it a year from now. With respect to the share buyback timing, in my comments I kind of said that it was open ended, so we expect to do it in a very thoughtful, diligent way, trying to capitalize on low points in the stock price within the guidelines from a 10B 18 perspective. It won’t have a meaningful impact even if we are very aggressive in the fourth quarter, it just won’t have a meaningful impact because of the way the share counts are counted for 2010.

[Eric Hoffman:]

Thank you very much for your participation in today’s call.

[Operator:]

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation. (Operator Instructions)