Claudine Prowse George A. Scangos - Chief Executive Officer and Director Stuart A. Kingsley - Executive Vice President of Global Commercial Operations Douglas Edward Williams - Executive Vice President of Research & Development Paul J. Clancy - Chief Financial Officer and Executive Vice President of Finance Alfred W. Sandrock - Chief Medical Officer and Group Senior Vice President of Development Sciences

Ravi Mehrotra - Crédit Suisse AG, Research Division Eric Schmidt - Cowen and Company, LLC, Research Division Mark J. Schoenebaum - ISI Group Inc., Research Division Terence C. Flynn - Goldman Sachs Group Inc., Research Division Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division Yaron Werber - Citigroup Inc, Research Division Michael J. Yee - RBC Capital Markets, LLC, Research Division Robyn Karnauskas - Deutsche Bank AG, Research Division Rachel L. McMinn - BofA Merrill Lynch, Research Division Charles Anthony Butler - Barclays Capital, Research Division Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division Matthew Roden - UBS Investment Bank, Research Division

Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biogen Idec Fourth Quarter and Year End 2013 Earnings Conference Call. [Operator Instructions] Claudine Prowse, Vice President, Investor Relations, you may begin your conference.

Thank you, Tiffany, and welcome to Biogen Idec's Fourth Quarter 2013 Earnings Conference Call. Before we begin, I encourage everyone to go to the Investors section of biogenidec.com to find the press release and related financial tables, including a reconciliation of the non-GAAP financial measures that we'll discuss today. Our GAAP financials are provided in Tables 1 and 2. Table 3 includes a reconciliation of our GAAP to non-GAAP financial results, which we believe better represents the ongoing economics of our business and reflects how we manage the business internally. We have also posted slides on our website that follow the discussions related to this call. I would like to point out we will be making forward-looking statements, which are based on our current expectations. These statements are subject to certain risks and uncertainties, and actual results may differ materially from our expectations. I encourage everyone to consult our SEC filings for additional detail. On today's call, I'm joined by our Chief Executive Officer, Dr. George Scangos; Tony Kingsley, EVP of Global Commercial Operations; Dr. Doug Williams, EVP of Research and Development; and our CFO, Paul Clancy. We'll also be joined for the Q&A portion of the call with our Chief Medical Officer, Dr. Al Sandrock. I'll now turn the call over to George.

Okay. Thanks, Claudine. Good morning, everybody, and thanks for joining us today. 2013 was a very good year for Biogen Idec and for the patients we serve. We continue to grow our base businesses, our current MS and anti-CD20 franchises, we successfully launched TECFIDERA, our most recent MS therapy, we announced marketing applications for 3 potential new products, PLEGRIDY for MS and ALPROLIX and ELOCTATE for hemophilia and finally, we advanced a promising pipeline of potential new medicines. And the solid operational progress was coupled with strong financial results. Revenue for 2013 was $6.9 billion, an increase of 26% from 2012, and non-GAAP earnings were $8.96 per share, an increase of 37% from 2012. With TECFIDERA, we strengthened our positions in the MS market, and we believe that we now have leading therapies in the oral high-efficacy and injectable segments of the market. We believe that having this suite of therapies positions us well to address the diverse needs of MS patients. The launch of TECFIDERA in the U.S. was a milestone event for us. We believe that TECFIDERA's broad and rapid uptake is a testament to its clinical profile, as well as excellent execution by our organization. We're very pleased that the launch of TECFIDERA now ranks among the best in the biopharmaceutical industry. AVONEX and TYSABRI continue to provide a solid business foundation. AVONEX remains a multibillion drug 17 years after launch, and physicians, as well as patients, continue to look to AVONEX as a first-line MS therapy of choice. We believe that TYSABRI is a powerful MS treatment and remains a therapy of choice for patients needing high efficacy. During the year, we completed an important transaction by acquiring complete ownership of TYSABRI, which strengthened our leadership in MS. This asset acquisition represents a prudent use of…

Thanks, George. In 2013, we grew our global MS market share, executed our franchise strategy across our 3 core MS products. In the fourth quarter, TECFIDERA's U.S. launch continued to enjoy broad adoption and rapid uptake. According to our data, through December, over 6,000 physicians, representing approximately 85% of total MS prescription volume, have prescribed TECFIDERA. Additionally, our data show that over 30% of new TECFIDERA patients in Q4 were not on prior therapies, an increase from prior quarters. We believe both these figures reflect physician and patient confidence in TECFIDERA's clinical profile and real world experience. We've also continued to improve patient access to TECFIDERA. As of January, almost all insurance plans in the U.S. provide coverage for TECFIDERA, with approximately 75% of patients having access without requiring a step edit. Nine months into launch, we believe TECFIDERA is in a very good position, but we understand that sustained effort is required to extend this initial success in the U.S. In the EU, we received a positive opinion on new active substance designation from the CHMP in November. TECFIDERA was then referred to the European Commission, which grants marketing authorization for medicines in the European Union. If approved, it's our intent to quickly launch in Germany, followed by staggered launches in other EU countries over the next 6 to 18 months, coincident with obtaining product reimbursement. Outside of Europe, reimbursement of TECFIDERA in Australia was approved in December. And we expect public reimbursement approval in Canada in the first half of this year. AVONEX performed well in 2013, gaining share globally within the injectable segment. In the U.S., where TECFIDERA caused a significant contraction in the injectable segment of the market, AVONEX continue to hold up well. The injectable segment of the market represented approximately $11 billion of global…

Thanks, Tony. I'll begin by highlighting the major events from 2013, and then discuss multiple clinical trial readouts anticipated in the upcoming year. Let's start with TECFIDERA. During 2013, significant new data were generated that deepened our understanding of this important therapy. We have further elucidated TECFIDERA's mechanism of action and demonstrated that the biological effects of DMF, compared to other fumarate molecules, are distinctly different. Also, data generated from the ongoing endorsed clinical study continued to support the long-term efficacy and safety of TECFIDERA. During the year, TYSABRI was submitted for marketing approval in Japan, and we're anticipating a decision in the first half of 2014. Beyond relapsing forms of MS, we continue to evaluate TYSABRI's potential efficacy in other indications. Enrollment was completed in the Phase III ASCEND study in patients with secondary-progressive MS, and data remain on track for 2015. We also initiated a Phase II proof-of-concept study in acute ischemic stroke. The study will utilize an imaging endpoint to assess infarct size, and determine if TYSABRI, given immediately post-stroke, can lessen lymphocyte-mediated tissue damage to the brain. For the PLEGRIDY program. During the year, we obtained positive Phase III data from year 1 of the 2-year advanced study in relapsing-remitting MS patients. Patients in the study were dosed with PLEGRIDY, administered either once every 2 weeks or once every 4 weeks. PLEGRIDY has been filed for approval with the FDA and EMA, and remains on track for anticipated FDA approval decision in mid-2014, and an EMA decision in the second half of 2014 as well. During the year, we generated new clinical data, which further supports the potential of ELOCTATE and ALPROLIX as effective hemophilia therapies, with reduced dosing frequency, and which we believe will lead to better outcomes for patients. Both ELOCTATE and ALPROLIX were…

Thanks, Doug. Our GAAP diluted earnings per share were $1.92 in the fourth quarter, and $7.81 for the full year. The differences between our GAAP and non-GAAP financial results are outlined in the earnings presentation. Our non-GAAP diluted earnings per share in the fourth quarter were $2.34 and $8.96 for the full year. Total revenue for Q4 grew 39% to approximately $2 billion, and grew 26% for the full year to $6.9 billion. Fourth quarter AVONEX worldwide revenue was $751 million. For the full year, worldwide AVONEX revenue grew 3%, and surpassed $3 billion. In the U.S., Q4 AVONEX revenue increased 2%, to $475 million. For the full year, U.S. AVONEX revenue increased 6%, to $1.9 billion. Outside the U.S., Q4 AVONEX revenue was $277 million, a decrease of 3% compared to the prior year. And for the full year, international AVONEX revenue decreased 1%, to $1.1 billion. Foreign exchange weakened AVONEX international revenue for the full year by approximately $9 million, compared to a $25 million gain in the prior year. TYSABRI worldwide revenue, net of hedging, was $427 million in Q4. These results were comprised of $251 million in the U.S. and $176 million internationally. For the full year, worldwide TYSABRI revenue to Biogen Idec was $1.5 billion, net of hedging. We recorded U.S. revenue of $814 million and $712 million internationally. The final approval of the settlement with AIFA is still pending. As a result, fourth quarter TYSABRI revenue was unfavorably impacted by $14 million of deferred revenue and $54 million for the full year. Global Q4 TECFIDERA revenue was $398 million in Q4 and $876 million for the full year. U.S. TECFIDERA revenue includes incremental inventory build of approximately $42 million in Q4. Turning to our anti-CD20 franchise, which now includes GAZYVA. U.S. profit share was…

Okay. Thanks, Paul. So in 2013, the company has strong financial results, coupled with excellent operational progress, which position us well for the future. And as I think about 2014, we appear to be at an inflection point, going from 2 major marketed products in 2012 to 3 in 2013, and now to potentially up to 6. This type of growth will be a challenge for most organizations, and we're no different. It's essential that we successfully complete the registration processes and effectively launch each of our products, while we continue to focus on the needs of tomorrow. So with many accomplishments behind us, and with patients as a focal point of our work, we'll continue to focus on execution. As leaders in MS, we're committed to identify and develop medicines for the great unmet needs that still remain. Today's treatments help slow the progression rate, but for approximately 1/4 of patients, secondary-progressive MS remains an issue, with no approved medicines on the market. We're committed to advance TYSABRI and SPMS to potentially offer a new option for this important group of patients. We're also developing anti-LINGO, with a hope to halt or reverse MS damage. If anti-LINGO does work, it will represent the first therapy to actually repair CNS pathology, which potentially opens up a new way of understanding how to deal with diseases of the brain. The potential approval and upcoming launches of ALPROLIX and ELOCTATE for hemophilia patients will mark an important new chapter for Biogen Idec. ALPROLIX and ELOCTATE represent true innovation for patients and a significant long-term opportunity for the company. Hemophilia is an area where there's been minimal innovation for many years. This gives us an opportunity to change the prophylactic treatment paradigm from short-acting to long-lasting therapies. We believe that this may lead to a lower burden of disease, improve compliance and better outcomes. Finally, we need to ensure that we continue to drive innovation by bringing the best science to the company. Our R&D strategy concentrates on neurology, immunology, non-malignant hematology in adjacent diseases, where patients have poor therapeutic options today. We prioritize indications in which we have a good understanding of disease etiology, and make prudent decisions in advancing compounds in the clinic. We also need to continue to seek business development opportunities that will strengthen our research capacities and complement our novel pipeline. In closing, as always, I'd like to thank our employees for their continued hard work and dedication. I'm very proud of the many accomplishments that we achieved together last year. As an organization, we've advanced the business to make a meaningful difference in patients' lives. So thanks to all of you for joining us this morning, and we'll now open up the call for questions.

[Operator Instructions] Your first question comes from the line of Ravi Mehrotra with Crédit Suisse. Ravi Mehrotra - Crédit Suisse AG, Research Division: First part, probably for George. You've recently talked more about business development, and obviously, [indiscernible] and the provisioning -- the 2 remaining goals provision for 2014. Can you give us more color on the type and characteristics of the deals you envisage? And part 2, probably for Tony. Interested in your view on 3x a week Copaxone and potentially generic Copaxone rights [ph] in this year impact on the MS market?

Ravi, good catch actually. For the past 2 years, we've done a number of business development transactions, but we had no earmarked business development budget. And we were able to fund those out of the R&D budget or other ways we have managed to find the money to do that. This year, we've earmarked $200 million for business development activities. And I think that reflects our belief that these are very important to the future of our company. We've improved the science in the company. I think we've improved the throughput of our internal R&D group, but that won't supply all of the compounds that we need to go forward. So part of that $200 million will go to bolster our pipeline, and we're looking primarily for Phase I, Phase II compounds, maybe late preclinical. Part of it will go to increase our technology platform. I mean last year, we did deals with Adimab, and one of the deals we did with Isis really were to give us a better platform to increase the quality and the speed of our internal R&D, and we'll continue to do some deals in that nature as well. So I think we'll look for both pipeline additions in the 3 areas that I mentioned, as well as technologies that increase the efficiency of our own R&D.

So 3x a week cop in the plan expected. Look, I think 2 things happen. The first is, it will create competitiveness noise in the marketplace, which we are prepared to deal with. The second thing is, it's going to put something like 85,000 patients in play for switch. We think we have good alternatives for those patients, so we're going to have a strong presence in offices competing for that. Generic cop, also in the plan, also expected. First-order impact we think will be on branded Copaxone itself. Second-order impact is it will add to the toolkit that the payers have to put some pressure on the credit category. We have said that there's more pressure on gross than net. That's a little bit -- that has been a piece of that story that we've been telling in the guidance we've been giving on that.

Your next question comes from the line of Eric Schmidt with Cowen & Company.

Sort of another big picture R&D question, maybe for George. The guidance is calling for 25% or so year-on-year growth in that line. I think when you joined the company a few years ago, you suggested you were going to bring down R&D to maybe 20% of sales long term. I think the question is, what convinces you you're going to get a good return on the incremental R&D spend? Obviously, you can afford it, but just a good investment or not? And are you still targeting more like a 20% of revenue long-term target?

Yes, well, somewhere in that range is the honest answer to that question. We don't target a particular percentage of revenues to R&D. Look, I think most important thing for me, Eric, in our R&D budget is that we don't waste money. That we don't spend money on projects that are just dragging on and haven't met their goals, that are not well thought through, and they're not critically executed and are not competitive. And so when I first came and when Doug came, we eliminated a lot of projects that we thought met those criteria. And so we are going forward now with a pipeline where we believe meets the criteria that we have there, well thought-out, there's good basis for taking them forward. It doesn't mean they're all going to work, of course, but they're all good bets. And so that's the way we think about R&D. As we -- our revenues are -- we anticipate that they will grow. And the percentage we spend on R&D next year may not be the same as we spend the year after as our revenues continue to grow, R&D may not increase at the same rate. So it may come down over time, but we believe we have to make some investments now and -- to generate the pipeline and the value that will continue to give us growth a few years out. And we are very cognizant of not wasting that money. I think we are very critical of how we spend that money.

Your next question comes from the line of Mark Schoenebaum with ISI Group.

I know Doug is there. I don't know if Al is there. But I wanted to maybe ask my question on anti-LINGO, if I may. I just think this is an area people are pretty focused on from a stock perspective. And maybe just take a couple of minutes and just walk us through the -- what you know from the preclinical data? And then in humans, do you know that this drug crosses the blood-brain barrier in sufficient quality -- in sufficient quantities that exert the effect that you need. And related to that, the trial that you're doing, I think, if I'm reading controls correctly, an optic neuritis has just one dose? So can you help us understand how we can have confidence that you know that you've already nailed those? And then when you all see the data later this year, should we -- do you think that there's a requirement for statistical significance? Or is this trial just way too small to hold it up to that kind of a standard and how would you move forward? So that's a lot of questions, but basically just walk us through the anti-LINGO proposition, what we know -- what we should be expecting from the trial, and specifically blood-brain barrier and brain concentrations in those?

Mark, this is Doug. You have both Al and me here on the call. So we'll tag team the answer. Let me address the one that you just came back to; which is, does the drug actually cross the blood-brain barrier? And the answer to that is, yes. We know that from the Phase I study, both the SAD and MAD study, we actually looked at CSF levels of the antibody in patients who received the anti-LINGO antibody. And what we found was detectable levels of the antibody that roughly matched the levels that we knew were efficacious in the mouse models of remyelination. That was a key observation in those studies. We wanted to make sure that across the dose range we were testing in both single-dose and multiple-dose format, that we could, in fact, get to a level of drug in the CSF that was consistent with efficacious doses in the animal models. So we can check that box off. Your question about optic neuritis and why did we only choose one dose, we choice the highest dose. Remember that we're viewing this is as a proof of biology study. So we wanted to run a placebo-controlled study looking at the highest dose of drug versus placebo, and really simply asking the question of whether or not we could facilitate remyelination and thereby measure that quantitatively with the endpoints in the study. And I'll let Al talk to you a little about some of the sort of basic biology observations that had driven our enthusiasm for the program from the beginning.

So in terms of the preclinical experiment, there were 2 types, the in vitro experiments and the animal experiments. And let me just briefly say that in vitro, what we did was we added anti-LINGO or we decreased LINGO expression by other methods and we can get oligodendrocyte precursor cells to differentiate much better when you have less LINGO present. And when you throw in neurons into the same cultures, you do co-cultures, we actually see myelin formation, and many of our colleagues externally have been doing that -- that type of experiment for years, had never seen myelin quite as well formed in vitro before blocking LINGO. In the animal experiment, there were sort of 2 types there. One is the knockout experiments and the overexpression experiment. And if you knockout LINGO from a mouse, you see early myelination in the spinal cord, which is functional so that it improves nerve conduction in the spinal cord when -- in the LINGO knockout animals where you have early myelination. In the other animal studies, what we did was induced demyelination by several methods. One, by using a detergent, focally, injected focally or by feeding the animals cuprizone, or by inducing EAE, so an autoimmune attack against myelin. And each of these 3 animal models of demyelination, we saw rapid reconstitution of myelin, and we know it was remyelination because when we did electro microscopy, we saw very thin, but the kinds of myelin that we expect to see in remyelination, so it's thinner than normal. And also, we had improvement in function in the EAE animal, so that they move better. So -- and I think as Doug pointed out, we were very careful in each of those experiment to understand the concentration of anti-LINGO that was necessary to produce these in vivo effects. And so we took that information into the human studies. Moreover, what we did was we used larger animals were we could test out some of the novel imaging methods, such as magnetization transfer ratio and diffusion sensor imaging to verify that we could actually look at remyelination using these imaging methods. And we're applying those same methods that we used in the animal models in the humans. So it's all novel. We're in new territory here. And as George pointed out, not everything is going to work, but we're very excited.

I think you had one other question about the possibility of seeing a real treatment effect in the relapsing-remitting study. That's ongoing, the second of our Phase II studies. And that's a very robust study in the sense that it's 4 different doses of anti-LINGO versus placebo. We're looking at a broad array of potential endpoints, some of which we hope would represent the primary endpoint for a Phase III study. But candidly, as Al said, this is new territory. So we're learning which of these endpoints is going to actually be the most sensitive measure of a remyelinating event, and then carrying that forward into the design of the Phase III study. So it's very innovative, very broad clinical program, but it is also a very proper, straightforward Phase IIb dose-ranging study that's very robustly designed to look at a variety of potential treatment effects.

Your next question comes from the line of Terence Flynn with Goldman Sachs.

Actually, just wanted to follow up on the one on anti-LINGO. So, Al, you mentioned the larger studies or studies in larger animals to look at imaging. Was just wondering if that employed systemic delivery or local delivery of anti-LINGO. And if you looked at the concentration in those animals, was wondering how that compared to the mouse models you mentioned given you used local delivery there.

Well, we actually did both local and systemic. And in many of the later experiments, it was almost all systemic, so. And they were nonhuman primate models where we injected lysolecithin, but what was local was the lysolecithin injection, which was done directly into the corpus callosum which is a heavily myelinated fiber track. But we gave the anti-LINGO systemically and looked by MTR.

Your next question comes from the line of Geoff Porges with Bernstein. Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division: Maybe I'll continue on the same vein, Doug and Al. Could you give us the same explanation of your confidence in the SPMS study for TYSABRI, certainly a big incremental market, but conventional wisdom has been more of a gradual degenerative process rather than inflammatory one. So what's the basis biologically for committing to that? And secondly, related to that, do you have any other short-term goal in SPMS in the rest of your portfolio? Are there any of these other early drugs that you might contemplate in that disease?

So SPMS, there's 2 sort of largely 2 prevailing theories. One is that, it's purely a neurodegenerative process, whether it's a primary process or whether it's secondary to demyelination people argue about that. The other theory, though, is that there's ongoing inflammation, but it's a different type of inflammation. It's inflammation that is sort of behind blood-brain barrier that there are these germinal -- ectopic germinal centers that form the lymphoid follicles that form in the sub-meningeal space. These have been associated with cortical areas of cortical demyelination. And so -- whereas the inflammation that's due to peripheral white blood cells entering the brain may be less, there is this lymphoid follicle idea. Now the thing about TYSABRI is that it disrupts the formation of these lymphoid follicles, and we think that, not only from the animal experiments, but in humans, we see a decrease in the chemokine signature that's been associated with the lymphoid follicles. And so that's why from a biological point of view, we think that TYSABRI, SPMS has a decent chance. Now the other reason why we're optimistic cautiously is that we're using a more sensitive endpoint in the clinic to get as a composite measure of disability progression. And we've gotten agreement with FDA under SPA and also we've gotten good agreement with European regulators on the use of this model endpoint. So for both of those reasons, we're cautiously optimistic about TYSABRI, SPMS.

And Jeff, this is Doug. As far as other shots on goal, as you described it, obviously, the anti-LINGO program is also geared towards the possibility of working in secondary progressive, but primary progressive as well. There's a possibility for that drug across the spectrum of MS subtypes. There's also some discussion about the possibility of taking TECFIDERA in that direction. You could, again, based on what Al described about the possibility of there being an immune component, that is involved in some patients with SPMS. Obviously, there's a mechanism that makes sense there with TECFIDERA in terms of down-modulating immune responses. But also the possibility of improving neuronal protection with the antioxidant effects of that molecule. So that's a sensible thing for us to consider. Stay tuned for more information on that as we consider that one. And then from the standpoint of where are we focusing our basic science resources and our neurology discovery program, it's primary and secondary progressive disease. I mean, that's really the focus for new target discovery and validation, really to try to understand the pathways that are involved better. That's where the real opportunity and need is from our perspective over the long term, and we're really focusing the basic science, resources in our neurology discovery group in that direction.

Your next question comes from the line of Yaron Werber with Citi.

So I'm going to move to commercial a little bit in TECFIDERA, and it's sort of a two-part question. One, for Paul, inventory was -- that sounds like it's $134 million for the year, it's about 5 weeks. I mean, historically, for products that are launching kind of 4 to 5 weeks is typical as they grow. So I'm trying to get a sense, is that -- should we even think of it as kind of sort of real inventory? Or is that going to be just a normal churn that you're going to see in the growth product and it's going to get slowly, over time, to 2 weeks kind of range? And then secondly, just on the commercial, the new patients and the returning quitters are 30%. I'm trying -- I don't know if you could split it better, kind of what's new versus returning? And do you -- that's been kind of consistent. Do you think that -- it sounds like you're thinking it's going down, and then why is that?

Yes. Let me start with the inventory question, Yaron. Great question. The 5 weeks represent the combined inventory in wholesalers, as well as the SPPs, specialty pharmacies. So given the way we launched in the United States, we actually have that visibility all the way through. When we talk about just -- and then just to note, when we talk about AVONEX, the visibility we have really is just wholesalers. And the combination of -- when we talk about AVONEX, we try to -- in the United States, we try to look at around 2 weeks, which is what we also look at in wholesalers specifically, which is what we look at for TECFIDERA, and then SPPs make up the balance of that to get to 5. And I think that -- we think in the United States that, that represents, so the cumulative amount right now represents about what we will have for our run rate. As we move to 2014, it really will depend on kind of the sales trajectory of tech in the U.S., whether or not there's a little bit more upward pressure, but I think it's really just more indicative of the launch year.

Yes, Yaron, it's Tony. On the 30% new to therapy, frankly, difficult to break that down to measure what the mix of genuinely naïve versus potentially returning quitters. There are constantly some returning quitters into the market and some people that go out of the market, so it is a portion that's difficult to break down. I think what we've said launched data prior quarters that we thought that number was around 25%. So it's actually up a little bit in the recent quarter. Not clear that, that should go down. We think it's an encouraging statement. It's an encouraging statement about the market acceptance of the product, that it's becoming a -- it's capturing a meaningful share of new patient starts that speaks to the confidence the market has in the product profile.

Your next question comes from the line of Michael Yee with RBC Capital Markets.

A question maybe for Al or Doug on SMNrx. I know there's some data coming soon. We've seen previous childhood data, but there's also infantile data coming. Just wanted to understand what you can actually glean from infant data? And whether you're looking at anything else besides mortality in the short study, gene copies, maybe measurements of SMN protein. Is there anything you can glean out of that, that can help give us some confidence, obviously, rather than going into Phase III a little bit blind?

Yes. I mean, in the infantile study, we're looking at things like weight gain. Are the kids -- are the babies gaining weight on a trajectory. Normally, they start to lose weight because they get muscle atrophy. But the main thing is to look at survival and ventilator dependence. Those are the 2 key events that we're looking at.

Your next question comes from the line of Robyn Karnauskas with Deutsche Bank.

Just a quick one, again, on LINGO. So you've talked before about optic neuritis disease as new lesions and relapse-remitting, we have new and old lesions. So just curious in the relapse-remitting MS study, will you able to see if LINGO by imaging has an impact on new and old lesions and how are you doing that? And how does this effect -- ultimately if these trials are successful, does it matter? How does this affect the market opportunity?

Well, yes, we can look at old and new lesions in the relapsing-remitting study. We anticipate that the patients who come into that study will have lesions that have been there potentially for years. And they recognize that it's T2-hyperintense lesions. And so we often talk about burden of disease, and we look at T2-hyperintense lesions. So we can look at those lesions that are no longer enhancing. They're so old that there's no inflammation or blood-brain barrier breakdown, and yet we can see -- look into those lesions and see whether they change their imaging characteristics that would be consistent with remyelination. I think if that were to occur, if old lesions start to remyelinate, then you can treat people who are in the late stages of SPMS even when they have no new lesions forming, and that's what happens in SPMS, is that the number of new lesions that form start to get very, very infrequent, nevertheless they continue to progress in terms of disability. So it would indicate that you could go pretty broadly all the way from the very earliest events in MS to the late stages of secondary-progressive MS, and as Doug pointed out, potentially even primary progressive MS.

Your next question comes from the line of Rachel McMinn with Bank of America Merrill Lynch.

Yes, I was hoping you could talk about discontinuation rates on U.S. TECFIDERA. Paul, I didn't quite catch what you said was assumed in your guidance for 2014? And then apologies, but another LINGO question. You guys had said last -- 2 weeks ago that you felt that if there was positive proof of principal data for optic neuritis that, that could help you accelerate your MS Phase III plans. And I was just trying to understand the gap between when you have data in second half of 2014 in optic neuritis and when you get your MS data in the back half of 2015, what kind of things would you be doing that would accelerate plan?

Rachel, it's Tony. On discontinuation rates, look, we don't think it's settled out yet because we're still in a pretty dynamic portion of the trajectory. But we said it appears that TECFIDERA is headed what is sort of a normal discontinuation rate for therapy to the market. No evidence that suggests it's going to be dramatically better, no evidence that suggests it's going to be dramatically worse. For existing products, including the orals, we think those numbers tend to run in the low 20% -- low-20% range.

And Rachel, that's consistent with what's essentially embedded in the guidance.

And Rachel, this is Doug. With respect to a positive readout from the optic neuritis study and the impact that could have on the time line for the relapsing-remitting study, essentially, there's a lot of study start-up activities, there's a lot of planning activities that go on with respect to designing the protocol. A lot of that can get front-loaded, and we would likely spend some additional money at risk based on a positive outcome from the optic neuritis study, anticipating a positive outcome in the relapsing-remitting study. So yes, it's hard to give you specifics on exactly what those steps would be, but there's a lot of legwork that goes into planning for a study, which we could move up and likely would if we had a robust readout in the optic neuritis study.

Your next question comes from the line of Tony Butler with Barclays Capital.

Again, apologies, but back to LINGO very briefly. When you think about remyelination, how do you come to grips with the notion that remyelination is actually occurring contiguously? And you're going to say, "Well we do get functionality in some of the non-primate models." But the part B of the question is, that may be true, but aren't these animals still youthful and growing, and therefore, the translation into an adult MS patient or young adult MS patient might actually be substantially different than a young and growing animal? I'm just curious how you -- if there's more data behind that.

Yes. So there is some spontaneous remyelination if you will going on in MS patients. It's just incomplete. And some of the data suggests that there are groups of patient that do it better than others. Certainly, younger people do seem to remyelinate better than others, but there may be inherent differences among people in terms of their ability to remyelinate. And so we would like to boost what we think is a natural phenomenon that's not very complete, and it's certainly not in all patients. And then in terms of the growing animals. I mean, we do -- it's true and mice, they are growing, but in a non-human primates, they were older animals. And so we think that the data are still suggestive that we could have efficacy in the adult MS patients we're treating.

Your next question comes from the line of Geoff Meacham with JPMorgan. Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division: Had a few for Tony. So when we think about the rollout of TECFIDERA in Germany, are there any subtleties in the MS market versus the U.S. in terms of the distribution of naïve patients or quitters? And then when you -- many of the initial TECFIDERA patients in the U.S. were on TYSABRI for quite a while, so just curious what you see today from TYSABRI switches to TECFIDERA.

Yes. So good question. Not dramatic differences I don't think in German market. Among European markets, like the U.S., it does tend to have a pretty broad sort of more community based set of positions as opposed to being just center-based. We'll put promotional effort against it that makes sense for that kind of market. So hard to articulate the big differences from sort of market and patient characteristic standpoint. In terms of TYSABRI switches, we did see, as we said, a bolus of switches at around the launch of TECFIDERA in the months following that. And then the majority of those were going to TECFIDERA. The discontinuation rate on TYSABRI in the U.S. has moderated since that time. We are still seeing a meaningful portion of those go to TECFIDERA. So we're keeping them within the franchise, which is, obviously, net positive.

Your next question comes from the line of Matt Roden with UBS.

I actually wanted to ask about STX-100. I was wondering if you could talk about the endpoints you're looking at the Phase II trial. What you need to see in that trial as a basis for a go or no-go decision? And then finally, the clinical regulatory pass if it is a go. Can you move straight in to Phase III here or is that too aggressive of an assumption? And then related strategically, does this drug fit into your portfolio? And if it's successful, is this a new vertical or is there some other plan for the product?

Okay. I'll try to get all of those, if I can. This is Doug. So with respect to the endpoint of the Phase IIa study data that will readout this year, it is really a biomarker driven study, and it's based off of some nonhuman primate work that was done with a molecule to allow us to look directly at the TGF-beta signaling pathway. Remember that that's how this drug works. It basically blocks an activator of the TGF-beta pathway that's specifically up-regulated in tissues undergoing fibrosis like the lung in IPF patients. So we're administering increasing doses of the antibody, 8 weekly doses. And then we'll be harvesting bronchoalveolar lavage cells directly from the lung from these patients, and assessing the TGF-beta signaling pathway, looking at the immediate downstream signaling event when TGF-beta binds to its receptor. That's the [indiscernible] endpoint. That's a very quantitative way of looking at that signaling pathway. There's also a collection of genes that are up-regulated, again, downstream of TGF-beta binding to its receptor, and we validated those endpoints in the primate preclinical studies. And so what we're looking for in this study is -- and in addition to the TGF-beta signaling pathway, in a dose-dependent fashion, taking cells directly from patients with IPF, directly from the tissue of interest. We think that, that will give us really good insights into the appropriate dose to take forward into the next clinical study, which we haven't yet defined whether that will be a Phase III study or whether that would be a Phase II, III type study. Again, we're still working through that. But with respect to -- right to Phase III, it's really going to be a function of how robust that data is. As far as strategic, we have identified fibrosis as one of the areas of expansion for the organization. It's sort of a logical extension beyond the chronic inflammation space that we're already in with some of our programs. And fibrosis is the consequence of long-standing inflammation in many different diseases. So we see it as a natural adjacency to the immunology portfolio. And it's a specialty market, which fits very well with the type of drug candidates that we're going to be developing in the various markets that we're in. So we see it as really a perfect fit with the expansion plans for the organization in terms of our R&D portfolio and eventually our sales programs.

I now turn the conference back over to our presenters.

Okay. Thanks, everybody. We'll get back to work on the pipeline, that's clearly where the interest is. Thanks for your attendance this morning. Appreciate it. Bye.

This concludes today's conference call. You may now disconnect.