Analyst Conference Summary


Alexion Pharmaceuticals

conference date: April 24, 2014 @ 7:00 AM Pacific Time
for quarter ending: March 31, 2014 (first quarter 2014, Q1)

Forward-looking statements

Overview: Revenues continue to ramp rapidly, net income strong.

Basic data (GAAP):

Revenue was $566.6 million, up 28% sequentially from $441.9 million and up 67% from $338.9 million in the year-earlier quarter.

Net income was $159.4 million, way up sequentially from negative $19.0 million, and up 95% from $82.2 million year-earlier.

EPS (diluted earnings per share) was $0.79, up sequentially from negative $0.10 and up 93% from $0.41 year-earlier.


Revised 2014 guidance up: non-GAAP EPS $4.75 to $4.85 due to lower projected cost of goods sold, SG&A expense, and tax rate. Revenue projection still $2.15 to $2.17 billion.

Conference Highlights:

Soliris sales were $567 million, up 28% sequentially from $441.9 million and up 67% from Q1 2013, reflecting steady additions of PNH (paroxysmal nocturnal hemoglobinuria) and aHUS (atypical hemolytic uremic syndrome) patients. This also included $87.7 million reimbursement for 2013 shipments from France. Growth was 41% y/y excluding the French payment. Believes aHUS number of patients should be at least as high as the number of PNH patients. Japan will launch for aHUS in 2014. Europe did well in the quarter, with NICE in the U. K. giving the thumbs-up.

Alexion believes that most global cases of PNH have not yet been diagnosed. Most new starts in the quarter were newly-diagnosed patients.

Announced today that based on discussion with the FDA Alexion is commencing a rolling BLA submission for its next product, Asfotase Alfa, with completion expected this fall for HPP (pediatric-onset hypophosphatasia). HPP launches should occur in 2015. Also commenced registration trials for Eculizumab (Soliris) for NMO (Neuromyelitis Optica) and MG (Myasthenia Gravis). Alexion is already preparing for the Asfotase Alfa launch.

Non-GAAP numbers: net income was $312.6 million, up 76% sequentially from $177.7 million and up 138% from $131.3 million year-earlier. EPS $1.53, up 76% sequentially from $0.87, and up 135% from $0.65 year-earlier. Excludes $23.8 million in share-based compensation, $3.5 million impairment of early-stage assets, $24 million in non-cash taxes, and $102 million in upfront milestone payments.

Cash and equivalents balance $1.55 billion, up sequentially from $1.52 billion.

Alexion continues to develop therapies with Soliris for AMR (Antibody-Mediated Rejection) with enrollment complete for living donors and continuing for deceased donors; DGF (Delayed Graft Function) trial is scheduled for mid-2014, NMO (Neuromyelitis Optica) initiated dosing in a registrational trial; and screening for the registrational study for MG (Myasthenia Gravis).

Alexion is also developing two other treatments for ultra-rare diseases: ALXN 1101 for MoCD (Molybdenum Cofactor Deficiency) Type A; and ALXN 1007 for inflammatory diseases. See also Alexion pipeline.

Two next-generation Soliris derivatives should start trials in 2014.

Between 2014 and 2018 Alexion could have as many as 7 product approvals.

After the quarter ended Alexion announced it is establishing messenger RNA (mRNA) research capabilities through an exclusive research agreement with Moderna Therapeutics.

GAAP cost of sales was $32.9 million. R&D expense was $191.5 million. Sales, General & Administrative expense was $129.3 million. Impairment of intangible assets $3.5 million. Total operating expenses were $324.2 million, leaving operating income of $209.5 million. Interest and other income was $2.4 million. Income tax provision was $52.6 million.

Expenses were down from estimates due to a variety of operational efficiencies.

After 2014, with the exhaustion of tax credits, the tax rate will gradually rise through 2016.


If we pull our $88 million, Soliris sequential growth $37 million? Two factors impacted sequential growth, a reduction in rebate in some European countries and the patients already under treatment in France. Without those growth would have been near $21 million. That is the sequential growth we expect Q1 to Q2.

HPP level of disease awareness? We see awareness as being similarly low, and across more than 2 specialties. With HPP there is often not an accurate diagnosis, so our awareness plans and targeting of the right physicians will be important.

Asfotase Alpha other indications? Key is focus on childhood onset, but later we could expand to other areas.

Rhode Island facility inspection? We are pleased with the remediation and improvements we have made. We have informed the FDA we are ready for an inspection, but it has not yet been scheduled.

Entry criteria refinement in Phase III NMO and MG studies? Extensive discussions with investigators and regulators. Endpoints better tuned to the population intended for treatment. It is potentially a little broader population, but the same severity.

Rolling submission? We have a path to get to the best label to serve patients for HPP. We have expanded our juvenile natural history study. We expect the expanded study to complete in the fall. The rolling review helps to shorter the overall review period. The FDA is interested in moving the Asfotase alpha study forward as rapidly as possible. We anticipate launching in early 2015, followed by Europe and Japan.

CPMP bridging study? We started with synthetic CPMP but will switch to natural. A naive study would happen next year. We are still planning for the best way forward.

PNH vs. aHUS in the quarter? We don't break them out. The number of active patients in the U.S. seems likely to exceed PNH eventually, but the timing is hard to predict because PNH is still growing and remains a robust opportunity.

aHUS in Japan? Q1 was the second quarter of launch. We are working on disease awareness and diagnostics. PNH had a larger prevalent pool in Japan than aHUS.

Turkey, Russia and Brazil, the PNH population is being supported by their governments; total patients should be more than the U.S. Identification of new patients is ongoing, just as in the U.S. and Europe.

Any plans to address dry AMD? We are working on a number of indications in the molecular pathway, but the focus is on devastating diseases.

For adults, they may fall under the aHUS label if juvenile onset can be documented.

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Disclaimer: My analyst call summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2014 William P. Meyers