Biogen Idec Reports First Quarter 2006 Results
Biogen Idec Inc. (NASDAQ: BIIB), a global biotechnology leader with leading products and capabilities in oncology, neurology and immunology, today reported its first quarter 2006 results.
First Quarter 2006 Highlights
— Total revenues for the first quarter were $611 million vs.
prior year $588 million, an increase of 4%, driven primarily
by RITUXAN(R) (rituximab) revenues from the unconsolidated
joint business arrangement up 14% to $183 million and
AVONEX(R) (Interferon beta-1a) worldwide sales up 5% to $393
million.
— On a reported basis, calculated in accordance with U.S.
generally accepted accounting principles (GAAP), first quarter
diluted earnings per share (EPS) were $0.36, an increase of
200% over the same period last year; excluding merger-related
accounting impacts and employee stock option expense, non-GAAP
EPS were $0.55, an increase of 83% over the same period last
year.
— With the adoption of Statement of Financial Accounting
Standards (FAS) 123R as of January 1, 2006, Biogen Idec is
reporting employee stock option expense in its GAAP results
for the first time. Total stock option expense on a pre-tax
basis in R&D and SG&A for the first quarter 2006 was $13
million, or $0.03 per share. This impact has been excluded
from non-GAAP performance metrics.
James Mullen, Biogen Idec’s Chief Executive Officer, commented, “During the quarter we took several key steps to secure the continued growth of our core business, specifically achieving major milestones with two products, TYSABRI and RITUXAN. We are pleased with the unanimous vote by the U.S. Food and Drug Administration’s Advisory Committee supporting the reintroduction of TYSABRI and expect to have this important therapeutic option available to multiple sclerosis patients later this year. The approval and launch of RITUXAN in rheumatoid arthritis has allowed us to expand our business focus and enter a therapeutic area with significant unmet medical need.”
Financial Performance
On a reported basis, calculated in accordance with GAAP, Biogen Idec reported net income of $123 million (or EPS of $0.36) in the first quarter of 2006 (Q1 2005: net income of $43 million, or EPS of $0.12).
The 2006 first quarter results include an after-tax credit of $4 million ($0.01 per share after-tax) attributable to the cumulative effect of a change in accounting principle associated with the adoption of FAS 123R on January 1, 2006. The cumulative effect adjustment reflects the impact of estimating forfeitures of equity awards at the date of grant instead of the prior accounting practice of recognizing forfeitures as incurred.
The difference between non-GAAP net income and EPS and GAAP net income and EPS in the first quarter are itemized in Table 3 and are primarily due to:
— pre-tax charges of $75 million, consisting of amortization of
intangibles ($70.7 million), inventory step-up ($4.0 million),
and severance ($0.7 million).
— pre-tax employee stock option expense of $13 million.
On a non-GAAP basis, Biogen Idec reported net income of $189 million in the first quarter of 2006 (Q1 2005 non-GAAP: $106 million). Non-GAAP EPS were $0.55 for the first quarter of 2006 (Q1 2005 non-GAAP: $0.30).
Revenue Performance for the 3 Months ended March 31, 2006: — Revenues from AVONEX increased 5% to $393 million (Q1 2005: $374 million). — U.S. sales were $232 million (Q1 2005: $233 million) — International sales increased 15% to $161 million. (Q1 2005: $141 million) — Revenues from Biogen Idec’s joint business arrangement with Genentech, Inc. related to RITUXAN were up 14% to $183 million (Q1 2005: $160 million). All U.S. sales of RITUXAN are recognized by Genentech and Biogen Idec records its share of the pretax co-promotion profits on a quarterly basis. — U.S. net sales of RITUXAN increased 8% to $477 million in the first quarter of 2006 (Q1 2005: $440 million), as reported by Genentech. — Revenues from other products were $13 million (Q1 2005: $24 million). Details are provided in Table 4. — Royalties were $21 million (Q1 2005: $27 million).
Financial Guidance
Biogen Idec continues to expect that its 2006 non-GAAP earnings per share will be in the range of $1.95 – $2.10.
Guidance for full year 2006 reported earnings per share (GAAP-based financial measure) is not currently known, as the Company cannot predict with any certainty the nature or the amount of non-operating or unusual charges for subsequent quarters. The Company does anticipate that certain charges related to purchase accounting will be included in the GAAP financials, such as amortization of intangibles of approximately $250 – 330 million, primarily related to the AVONEX intangibles. Separately, the impact of stock options being expensed due to FAS 123R in 2006 is now estimated to be in the range of $0.08 – $0.12. The Company additionally anticipates that it may have to take other charges in subsequent quarters and that such charges, if material, would cause reported earnings per share to further differ from non-GAAP earnings per share.
The Company anticipates that 2006 capital expenditures will be in the range of $190 – $275 million.
Recent Highlights
— On February 28, 2006, Biogen Idec and Genentech announced that
the FDA had approved, following Priority Review, the
therapeutic antibody RITUXAN in combination with methotrexate
(MTX) to reduce signs and symptoms in adult patients with
moderately-to-severely active rheumatoid arthritis (RA) who
have had an inadequate response to one or more tumor necrosis
factor (TNF) antagonist therapies.
— On March 8, 2006, Biogen Idec and Elan Corporation, plc
announced that the Peripheral and Central Nervous System Drugs
Advisory Committee of the FDA voted unanimously to recommend
reintroduction of TYSABRI(R) (natalizumab) as a treatment for
relapsing forms of MS. The Committee’s recommendation is
advisory to the FDA, and the agency is not bound by this
recommendation. The FDA has designated TYSABRI for Priority
Review, a status for products that are considered to be
significant therapeutic advancements over existing therapies
that address an unmet medical need. Biogen Idec and Elan will
continue to work closely with the FDA in the weeks ahead with
the goal of making TYSABRI available. Discussions with FDA
will include, among other things, finalizing the details of
the TYSABRI risk management plan. The companies anticipate
action by the FDA by June 28, 2006.
— On March 29, 2006, Biogen Idec and Elan announced that the
first patients in the TYSABRI monotherapy safety extension
study program in MS have been enrolled and dosed. Patients who
previously participated in the Phase III MS trials and
subsequent safety evaluation are eligible to be screened for
entry in this open label multi-center study. Sites throughout
Europe, the United States, Canada, Australia, New Zealand and
Israel are expected to enroll patients. This safety extension
study is being conducted under an FDA Investigational New Drug
(IND) application in the U.S. and similar investigational
approvals internationally.
— On March 30, 2006, Biogen Idec and Genentech announced that
the companies submitted a supplemental Biologics License
Application (sBLA) to the FDA for the use of RITUXAN as
first-line treatment of previously-untreated patients with
low-grade or follicular, CD20-positive, B-cell non-Hodgkin’s
lymphoma in combination with CVP (cyclophosphamide,
vincristine and prednisone) or CHOP chemotherapy or following
CVP chemotherapy in those patients who achieved a response of
stable disease or better.
— As part of the restructuring plan announced in September 2005,
Biogen Idec completed the sale of the worldwide rights for
AMEVIVE(R) (alefacept) to Astellas Pharma US, Inc. in April
2006. AMEVIVE is a biologic anti-inflammatory compound used in
the treatment of moderate-to-severe plaque psoriasis.
Use of Non-GAAP Financial Measures
The non-GAAP financial measures presented in this press release are utilized by Biogen Idec management to gain an understanding of the comparative financial performance of the Company. Management believes that the non-GAAP financial measures are useful because they exclude those non-operational activities or transactions that are not necessarily relevant to understanding the trends of the Company or the prospects of future performance such as charges related to amortization of intangibles, inventory step-up values, and employee stock option expense. Management uses these measures to establish operational goals and believes that non-GAAP measures may assist investors in analyzing the underlying trends in the Company’s business over time. The presentation of this information is not meant to be considered in isolation or as a substitute for GAAP financial measures.
Conference Call and Webcast
The Company’s earnings conference call for the first quarter will be broadcast via the Internet at 8:30 a.m. ET on April 26, 2006, and will be accessible through the investor relations section of Biogen Idec’s homepage, http://www.biogenidec.com.
About Biogen Idec
Biogen Idec (NASDAQ: BIIB) creates new standards of care in oncology, neurology and immunology. As a global leader in the development, manufacturing, and commercialization of novel therapies, Biogen Idec transforms scientific discoveries into advances in human healthcare. For product labeling, press releases and additional information about the company, please visit http://www.biogenidec.com.
Safe Harbor
This press release contains forward-looking statements regarding expected future financial results, including non-GAAP EPS and capital expenditures, the potential reintroduction of TYSABRI in MS, and the potential for RITUXAN in RA.
These statements are based on the Company’s current beliefs and expectations. A number of risks and uncertainties could cause actual results to differ materially. For example, financial results and external growth opportunities may be affected by a number of factors, including any unexpected slowing of growth of the markets for AVONEX and RITUXAN, any change in market acceptance of AVONEX and RITUXAN in key markets worldwide, the impact of reimbursement and pricing decisions related to the Company’s products, the impact of competitive products on the Company’s products, any material decreases in royalties which the Company receives, the impact of litigation, increases in costs related to, or an inability for us to enter into in-licensing deals, collaborations or acquisitions on acceptable terms, increases in costs related to research and development of new products as well as increases in costs related to development of existing products in new indications, and any material issues, delays or failures related to the manufacturing or supply of the Company’s products.
Our long-term growth will depend on the successful development and commercialization of new products as well as the development and commercialization of existing products in new indications. Drug development involves a high degree of risk. For example, the plans for our development programs could be negatively affected if unexpected concerns arise from additional data or analysis, if regulatory authorities require additional information or further studies, or if we were to encounter other unexpected hurdles.
The potential for TYSABRI in MS is subject to a number of risks and uncertainties. There is no assurance, for example, that we will be able to gain sufficient information to fully understand the risks associated with the product. There is also no assurance that the Company and Elan will be able to resume marketing and sales of TYSABRI.
For more detailed information on the risks and uncertainties associated with these forward looking statements and the Company’s other activities, see the periodic reports filed by the Company with the Securities and Exchange Commission. The Company does 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. First Quarter 2006 Condensed Consolidated Statements Of Income (in thousands, except per share amounts) Three Months Ended March 31, 2006 2005 ——— ——— REVENUES Product $406,519 $397,584 Unconsolidated joint business 183,380 160,453 Royalties 20,561 26,749 Corporate partner 715 3,016 ——— ——— Total revenues 611,175 587,802 ——— ——— COST AND EXPENSES Cost of goods sold and royalty revenues 67,494 99,609 Research and development 145,892 172,477 Selling, general and administrative 154,391 158,472 Amortization of acquired intangible assets 70,707 75,677 Impairment and loss on sale of long lived assets (298) 6,293 ——— ——— Total cost and expenses 438,186 512,528 ——— ——— Income from operations 172,989 75,274 Other income, net 18,665 (8,926) ——— ——— INCOME BEFORE TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 191,654 66,348 Income taxes 72,464 22,890 ——— ——— INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 119,190 43,458 Cumulative effect of accounting change, net of income tax 3,779 – ——— ——— NET INCOME $122,969 $43,458 ========= ========= BASIC EARNINGS PER SHARE Income before cumulative effect of accounting change $0.35 $0.13 Cumulative effect of accounting change, net of income tax 0.01 – ——— ——— BASIC EARNINGS PER SHARE $0.36 $0.13 ========= ========= DILUTED EARNINGS PER SHARE Income before cumulative effect of accounting change $0.34 $0.12 Cumulative effect of accounting change, net of income tax 0.01 – ——— ——— DILUTED EARNINGS PER SHARE $0.36 $0.12 ========= ========= SHARES USED IN CALCULATING: BASIC EARNINGS PER SHARE 339,653 335,279 ========= ========= DILUTED EARNINGS PER SHARE 345,815 352,173 ========= ========= Numbers may not foot due to rounding. TABLE 2 Biogen Idec Inc. First Quarter 2006 Condensed Consolidated Balance Sheets (in thousands) Mar. 31, Dec. 31, 2006 2005 ———– ———– Assets Cash, cash equivalents and securities available-for-sale $849,355 $850,753 Accounts receivable, net 276,441 265,742 Inventory 191,022 182,815 Other current assets 278,863 318,771 ———– ———– Total current assets 1,595,681 1,618,081 ———– ———– Long-term securities available-for-sale 1,407,541 1,204,378 Property and equipment, net 1,191,968 1,174,396 Intangible assets, net 2,904,838 2,975,601 Goodwill 1,130,430 1,130,430 Other 293,768 264,061 ———– ———– Total assets $8,524,226 $8,366,947 =========== =========== Liabilities and shareholders’ equity Current liabilities $520,797 $583,036 Long-term deferred tax liability 736,255 762,282 Non-current liabilities 124,332 115,753 Shareholders’ equity 7,142,842 6,905,876 ———– ———– Total liabilities and shareholders’ equity $8,524,226 $8,366,947 =========== =========== Numbers may not foot due to rounding. TABLE 3 Biogen Idec Inc. First Quarter 2006 Condensed Consolidated Statements Of Income – Non-GAAP (in millions, except per share amounts) Three Months Ended March 31, 2006 2005 ——- ——- Earnings per share GAAP Earnings per share – Diluted $0.36 $0.12 Adjustment to Net Income (as detailed below) 0.19 0.18 ——- ——- Non-GAAP Earnings per share – Diluted $0.55 $0.30 ======= ======= AN ITEMIZED RECONCILIATION BETWEEN NET INCOME ON A GAAP BASIS AND NET INCOME ON A NON-GAAP BASIS IS AS FOLLOWS: GAAP Net Income $123.0 $43.5 COGS: Fair value step up of inventory acquired from former Biogen, Inc 4.0 9.3 R&D: Stock option expense 4.8 – SG&A: Severance and restructuring 0.7 0.5 SG&A: Stock option expense 8.3 – Purchase accounting: Amortization of acquired intangible assets related to the merger with former Biogen, Inc. 70.7 75.7 Impairment and loss on sale of long lived assets (0.3) – Income taxes: Income tax effect of reconciling items (18.4) (23.1) Cumulative effect of accounting change from adoption of FAS123R, net of income tax (3.8) – ——- ——- Non-GAAP Net Income $188.9 $105.8 ======= ======= Numbers may not foot due to rounding. The non-GAAP financial measures presented in this table are utilized by Biogen Idec management to gain an understanding of the comparative financial performance of the Company. Management believes that the non-GAAP financial measures are useful because they exclude those non-operational activities or transactions that are not necessarily relevant to understanding the trends of the Company or the prospects of future performance. Management uses these measures to establish operational goals and believes that non-GAAP measures may assist investors in analyzing the underlying trends in the Company’s business over time. The presentation of this information is not meant to be considered in isolation or as a substitute for GAAP financial measures. TABLE 4 Biogen Idec Inc. First Quarter 2006 Product Revenues (in thousands) Three Months Ended March 31, 2006 2005 ——— ——— PRODUCT REVENUES Avonex(R) $393,427 $373,586 Amevive(R) 8,278 12,016 Tysabri(R) (196) 5,946 Zevalin(R) 5,010 6,036 ——— ——— Total Product Revenues $406,519 $397,584 ========= ========= Numbers may not foot due to rounding.