Analyst Conference Summary

conference date: July 25, 2013
for quarter ending: June 30, 2013 (second quarter 2013)

Forward-looking statements

Overview: Excellent quarter and raised 2013 guidance.

Basic data (GAAP):

Revenue was $370.1 million, up 9% sequentially from $338.9 million, and up 35% from $274.7 million in the year-earlier quarter.

Net income was $95.9 million, up 17% sequentially from $82.2, and up164% from $36.3 million year-earlier.

EPS (earnings per share) was $0.48, up 17% sequentially from $0.41, and up 167% from $0.18 year-earlier.

Guidance:

Raised guidance for revenue for full 2013 to $1.52 to $1.53 billion. Non-GAAP EPS range $2.97 to $3.02. But R&D expense expectations revised downward to $275 to $285 million, with SG&A resided up to $435 to $445 million. Share-based compensation expense revised up to $76 yo $78 million. Cost of sales is expected to remain about 10% of sales. GAAP tax rate 29% to 31%, but non-GAAP tax rate just 6% to 8%.

Conference Highlights:

The quarter showed strong commercial progress as well as pipeline development.

All revenue was from sales of Soliris (eculizumab), with the increase due to new PNH (paroxysmal nocturnal hemoglobinuria) new patient additions globally and aHUS (atypical hemolytic uremic syndrome) patients in the U.S. and Europe. Anticipates "significant launches in new indications for Soliris and new products over the next several years."

Non-GAAP numbers: net income $147.2 million, up 56% from $94.1 million year-earlier. EPS $0.73 per share, up 55% from $0.47 year-earlier. Excludes (compared to GAAP) $32.1 million of non-cash tax expense, $1.3 million of amortization and acquisition-related costs, and $18.0 million of share-based compensation expense.

In England the government has recently recommended a policy that would be "highly favorable" for access for aHUS patients when implemented in 2014. Continuing reimbursement discussions with France and Spain. All patients became funded in Belgium in July. Believes aHUS opportunity is at least as large as for PNH.

The next major country to get a PNH launch would be Korea, which should be before the end of 2013.

Improvements in the manufacturing and quality systems are being implemented in anticipation of an FDA inspection of the Rhode Island facility in the first half of 2014. EMA (Europe) certified the facilities in Rhode Island and Singapore. A new facility is being established in Ireland.

Cash and equivalents balance $1.12 billion, up about $100 million in the quarter. Long-term debt is $89.0 million.

Soliris for Neuromyelitis Optica (NMO) received orphan drug designation in the U.S. and Europe, which gives 7 and 10 years respectively of extra marketing exclusivity. Alexion is preparing for a single registrational trial in relapsing NMO. It is also preparing for a single registration trial in severe, refractory Myasthenia Gravis (MG). Another set of dosing trials are completed, underway or planned for kidney transplant problems, with top-line preliminary results likely in the fall. The company is also looking at Soliris as a therapy for STEC-HUS.

Asfotase Alfa for hypophosphatasia (HPP) received Breakthrough Therapy designation status from the FDA. A Phase I dosing study of cPMP replacement therapy for Molybdenum Cofactor Deficiency Type A started. A Phase 1 study of ALXN1007 in healthy volunteers was completed. The Phase 1 safety study of ALXN1102/1103 continued.

GAAP cost of sales was $39.4 million. R&D expense was $68.6 million. SG&A expense was $123.2 million. Acquisition expenses was $1.2 million. Amortization was $0.1 million. Total operating expenses were $193.0 million, leaving operating income of $137.7 million. Interest and other expense was $0.4 million. Income tax provision was $41.4 million.

Believes is likely to receive major product approvals between 2014 and 2018 starting with Asfotase Alfa in late 2014. This will include follow-on re-designs of the Soliris molecule.

The anticipated increased revenues from new-country launches in Europe is included in the guidance.

Alexion has a program to identify patients with PNH [WPM: which might mean earlier detection, and which could indicate previous statistics underestimated the potential number of patients.]

Q&A:

Did the EMA inspect the RI facility, cost impacts? The FDA inspected RI in August 2012, resulting in a warning letter in March 2013. The EMA inspected in January 2013 and found the quality improvements to be acceptible, so RI received a compliant letter in May. As to Singapore, we would not see a meaningful financial impact until 2015.

Asfotase Alfa filing in pediatrics, would that restrict the label or reimbursement by age? The Breakthrough Therapy designation is not based on patient age, but on age of onset of disease, before the age of 18.

Soliris for STEC-HUS timing? As we obtain and analyse control data, the challenge has been to ID patients who would most benefit from Soliris.

Are cost increases due to faster-than-expected EU launches? Guidance takes into account European expectations. We are at a key point in Western Europe. During Q2 before the English recommendation we were already seeing some patient starts with access to funding. CTAG has made a recommendation, but that needs to be adopted and ratified.

How do you see your products making you a takeover target for a large pharma? We don't comment on rumors. We are operating from an unprecedented position in our history, with significant future opportunities.

aHUS U.S. progress outside of hospitals? We expanded the team ahead of the launch. We are seeing success in the outpatient setting with patients with longer-term disease.

We believe our Soliris-variant molecules are well-understood, we know the clinical process for them, which gives us confidence they will extend the Soliris franchis over a longer time frame.

aHUS France, timing of reimbursement? We anticipate it completing in late Fall, within the framework of progress in England and Belgium.

Specific attribute of improvement on Soliris? Hope for improved safety, efficacy, and convenience of delivery. Current patents go out to 2020, but pending applications could go out to mid or late 20's. We plan to bring at least two molecules into clinical studies in 2014.

South Korean, potential number of patients? Would view Korea as having a slow but growing number of patients over time, with severe patients initiated first.

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