Analyst Conference Summary

Biotechnology

conference date: January 29, 2015 @ 7:00 AM Pacific Time
for quarter ending: December 31, 2014 (fourth quarter 2014, Q4)

Forward-looking statements

Overview: Revenue continues to ramp rapidly.

Basic data (GAAP):

Revenue was $599.5 million, up 8% sequentially from $555.1 million and up 36% from $441.9 million in the year-earlier quarter.

Net income was $153.3 million, down 14% sequentially from $177.7 million, and up from negative $19.0 million year-earlier.

EPS (diluted earnings per share) was $0.76, down 14% sequentially from $0.88 and down from negative $0.10 year-earlier.

Guidance:

For the full year 2015 revenue is expected between $2.55 and $2.6 billion. Non-GAAP EPS is expected between $5.60 and $5.80. This includes a projected negative foreign exchange impact of $135 million. It includes as small original contribution from Asfotase Alfa. This includes a $135 negative revenue impact from FX less hedging (but of course depends on actual FX rates during the year). Effective tax rate 7% to 9%.

Q1 revenue expected between $585 to 590 million due to FX headwinds.

Conference Highlights:

Soliris (eculizumab) sales were $599.5 million, up 8% sequentially from $551.1 million and up 36% from Q4 2013. Believes most PNH patients globally have not yet been identified. Also aHUS patient additions continue, including the launch in Japan. In the U.S. there are now more aHUS patients than PNH.

Believes effective tax rates will be better than prior guidance due to more tax credits remaining.

Completing the planned leadership transition, including promotion of David Hallal to CEO, effective April 1.

Asfotase Alfa for HPP (pediatric-onset hypophosphatasia) launches should occur in 2015. The HPP sales team has already begun education efforts. Regulatory submissions are complete in the U.S., Europe and Japan.

Non-GAAP numbers: net income was $266.0 million, up 3% sequentially from $258.3 million and up 50% from $177.7 million year-earlier. Diluted EPS $1.30, up 2% sequentially from $1.27, and up 49% from $0.87 year-earlier. Excludes $33.8 million in share-based compensation, $10.0 million acquisition related costs, an $8 million milestone expense, $8 million in impairments of intangible assets, $15.4 million for restructuring, and $37.3 million in non-cash taxes.

Cash and equivalents balance $1.96 billion, up sequentially from $1.78 billion. Long term debt $10 million. Cash flow from operations was ? $ million was used to repurchase shares in the quarter.

Alexion continues to develop therapies with Soliris for AMR (Antibody-Mediated Rejection) with enrollment complete for both living donors and deceased donors. DGF (Delayed Graft Function) trial is enrolling. NMO (Neuromyelitis Optica) continues dosing in a registrational trial. The registrational study for refractory MG (Myasthenia Gravis) is enrolling.

Alexion is also developing other treatments for ultra-rare diseases. ALXN 1101 for MoCD (Molybdenum Cofactor Deficiency) Type A natural history study and synthetic cPMP bridging study are ongoing.

ALXN 1007 for inflammatory diseases continued a Phase 2 study in patients with APS (antiphospholipid syndrome). Also graft-versus-host disease involving the GI tract (GI-GVHD), which should have interim data this year.

Next generation Soliris therapies ALXN1210 and ALXN5500 have commenced Phase I trials.

There are now 17 programs in the pre-clinical stage. Seven Moderna mRNA programs are part of that.

See also Alexion pipeline.

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

GAAP cost of sales was $49.4 million. R&D expense was $129.1 million. Sales, General & Administrative expense was $183.8 million. Acquisition related expense $10.0 million. Total operating expenses were $346.3 million, leaving operating income of $203.7 million. Interest and other income was $1.6 million. Income tax provision was $52.0 million.

204 million shares outstanding at end of year.

Q&A:

Any EU pricing pressure in the guidance? What we have incorporated is a bit of erosion due to price in Italy and the U. K, about 2%.

Asfotase manufacturing capacity? We are well on track to provide for anticipated demand with a first half launch in the U.S. and Germany. There are some HPP patients who are still in studies to allow them to remain on therapy. It is difficult to pinpoint the patient numbers since young patients die so quickly. It will take some time.

Other indications for Asfotase? You are absolutely right. We are looking at other indications, and others have published papers, but at this stage we need more rigorous preclinical study.

Asia Pacific growth rate? Headwinds from FX were from Australia and Japan.

Tax rates? In the short term it is the tax credits. In the long term it is lower because we did a careful nation-by-nation tax analysis. Long term may be 14% to 16%.

Severe adult HPP trial? We are still working on the trial design.

Use of cash balance? We will accumulate more in 2015. Our priority would be to expand our portfolio of therapies. Other than that we would buy back stock to offset dilution.

Next generation Soliris? Could you take more than one forward? Sub-Q formulation IP? We want to bring more than one forward. We want to provide options for patients. We intend to have 2 or more enter into the commercial arena. We have a deeper portfolio beyond the two that are starting trials. No comment on Sub-Q.

Asfotase in utero? Intriguing. Also in utero diagnostics. The earlier the treatment, the better. But the challenges are great.

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