Analyst Conference Summary

Biotechnology

conference date: October 26, 2017 @ 7:00 AM Pacific Time
for quarter ending: September 30, 2017 (third quarter 2017, Q3)

Forward-looking statements

Overview: Revenue down sequentially. Lowered GAAP EPS guidance, but slightly raised revenue and non-GAAP EPS guidance. Announced a restructuring.

Basic data (GAAP):

Revenue was $859 million, down 6% sequentially from $912 million and up 8% from $799 million in the year-earlier quarter.

Net income was $78 million, down 53% sequentially from $165 million, and down 17% from $94 million year-earlier.

EPS (diluted earnings per share) was $0.35, down 52% sequentially from $0.73 and down 17% from $0.42 year-earlier.

Guidance:

For full year 2017 raised revenue guidance very slightly to revenue of $3,475 to $3,525 million. Lowered GAAP EPS guidance to $2.00 to $2.35, but raised Non-GAAP EPS to $5.50 to $5.65.

Conference Highlights:

Ludwig N. Hantson, Ph.D., CEO, said: ""Alexion delivered strong commercial, R&D, and financial performance in the third quarter of 2017. We received regulatory approvals for the third indication for Soliris in the U.S. and European Union, strengthened our patent portfolio with three new U.S. patents for Soliris that extend protection into 2027, reached new funding agreements in key European countries for Strensiq and Kanuma, and advanced the ALXN1210 clinical development programs. We also announced a restructuring that aligns the global organization with our strategy and we expect to deliver significant savings. We enter the fourth quarter of 2017 in a position of strength and are confident in our strategic plan to build long-term sustainable value for shareholders."

Looking at expanding from ultra-rare diseases to rare diseases.

Revenue growth was slow because of timing of orders; some paying patients enrolling in trials; and pricing 1% headwind.

Soliris for gMG (Myasthenia Gravis) was approved in the US this week, and recently in the EU. Little or no revenue from this is expected in Q4. Total 60,000 to 80,000 potential patients in the U.S.

Geographic expansion continues to be a key growth drivers. Strensiq funding agreement was reached with NICE and NHS in England.

R&D therapeutic areas of focus will be hematology, nephrology, and neurology. Alexion has evaluated over 90 complement mediated disorders. Several programs outside the strategic focus have been or will be discontinued, including the Moderna partnership.

Soliris (eculizumab) for PNH and aHUS sales were $756 million, down 7% sequentially from $814 million and up 4% y/y from $728 million year-earlier.

Strensiq (Asfotase Alfa) for HPP (pediatric-onset hypophosphatasia) generated $87 million in revenue in the quarter, up 5% sequentially from $83 million and up 43% from $61 million year-earlier.

Kanuma (sebelipase alfa) for LAL-D (lysosomal acid lipase deficiency) generated $16 million, up 7% sequentially from $15 million and up 78% from $9 million year-earlier.

Non-GAAP numbers: net income was $328 million, down 8% sequentially from $355 million and up 17% from $281 million year-earlier. Diluted EPS $1.44, down 8% sequentially from $1.56, and up 17% from $1.23 year-earlier. Excludes $57 million in share-based compensation, $80 million in amortization of purchased intangibles, related tax adjustments, and other costs.

Cash and equivalents balance $1.53 billion, up sequentially from $1.44 billion. 35% of cash is in the U.S. Debt $2.76 billion. $580 million free cash flow.

Alexion continues to develop therapies with Soliris. Soliris for AMR (Antibody-Mediated Rejection) enrollment is complete for both living donors and deceased donors. Preliminary data will be reported at the American Transplant Congress.

NMOSD (Neuromyelitis Optica) continues dosing in a registrational trial with complete enrollment expected in 2017. Data is expected in 2018.

Alexion is also developing other treatments for ultra-rare diseases. ALXN 1101 for MoCD (Molybdenum Cofactor Deficiency) Type A Phase 3 registrational study is enrolling patients.

ALXN1007 for inflammatory diseases continued a Phase 2 study for graft-versus-host disease involving the GI tract (GI-GVHD), and now has orphan drug status.

Next generation Soliris therapy ALXN 1210 continued a Phase 3 registrational trial in aHUS with dosing every 8 weeks and should complete enrollment in 2018. The PNH study enrollment completed in July. The Expects an approval in the first half of 2019. A Phase 3 subcutaneous study is also planned.

cPMP Replacement Therapy (ALXN 1101) continued a pivotal study for Molybdenum Cofactor Deficiency Type A (MoCD). The primary endpoint is patient survival and able to sit upright independently for at least 30 seconds at 12 months.

Samalizumab (ALXN6000), an antibody to checkpoint protein CD200, is one arm in a multi-arm trial for acute myeloid leukemia (AML) conducted by the Leukemia and Lymphoma Society. Alexion also started a Phase 1 study for advanced solid tumors.

There are now 10 programs in the clinical stage, All programs target devastating and rare diseases.

See also Alexion pipeline.

GAAP cost of sales was $157 million. R&D expense was $195 million. Sales, General & Administrative expense was $271 million. Amortization of purchased intangibles $80 million. Restructuring expense $72 million. Change in fair value of contingent consideration expense of $4 million. Total operating expenses were $622 million, leaving operating income of $80 million. Interest and other expense was $22 million. Income tax benefit was $20 million.

Q&A:

gMG launch in Europe? Focus is in Germany and U.S. Japan could be approved this year and launched in 2018. German field team is deployed, but no feedback on uptake. Because there were no trials there, there are no thought leaders, so uptake likely to be slow.

Latin America sales? It is the soft spot for performance. Some countries that had been growth countries won't be in the future. But overall global volume trends remain.

Business development timing? Our efforts are not tied to progression on 1210. We believe we need to rebuild the pipeline. We have a strategy to move to rare from ultra-rare, but in the same disease set. We are building capability to do this over a long period of time. We are not to the point of executing transactions.

Pricing for gMG? A number of factors are involved. Focus is on the 5% to 10% of population that responds best, 3,000 to 8,000 patients. Should be an initial cohort waiting for treatment. But getting them treatment will take some time. We want price based on value, and that varies by country. We will not undermine our very strong Soliris pricing strategy.

Market research for MG? Finding clinicians, neurology is new for us, but our U.S. team understands the space well. High potential physicians are neuro-muscular specialists. There are already a few hundred centers where MG is already treated.

Patents? New soliris patents go until 2027. It may be a year before we find out about EU patents.

Strensiq pricing strategy? Growth has been affected by pricing adjustments in the U.S. We are working with payers to align for higher-dose patients. Our main focus is on geographic expansion. The mix between pediatric and adults is different than anticipated, so we needed to make adjustments.

OpenIcon Analyst Conference Summaries Main Page

Search

More Analyst Conference Pages: