Analyst Conference Summary

Biotechnology

conference date: May 6, 2020 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2020 (first quarter 2020, Q1)

Forward-looking statements

Overview: Continued strong revenue growth.

Basic data (GAAP):

Revenue was $1.44 billion, up 4% sequentially from $1.38 billion and up 27% from $1.14 billion in the year-earlier quarter.

Net income was $558 million, down 37% sequentially from $889 million, and down 5% from $588 million year-earlier.

EPS (diluted earnings per share) was $2.50, down 38% sequentially from $4.02 and down 4% from $2.61 year-earlier.

Guidance:

Updated 2020 guidance, decreasing revenue but increasing non-GAAP margins. Revenue $5.23 to $5.533 billion. Non-GAAP operating margin 55% to 56%. GAAP EPS $8.14 to $8.47. Non-GAAP EPS $10.45 to $10.75.

Conference Highlights:

Ludwig N. Hantson, PhD, CEO, said: "We had a strong first quarter across our global commercial business, driven by substantial growth in the number of patients we are treating with our medicines. We also made significant progress diversifying our portfolio through business development, with the close of the Achillion acquisition and the announcement that we have entered into an agreement to acquire Portola. As COVID-19 continues to reach across the globe, we are adapting our ways of working to ensure we maintain our ability to continue serving patients."

Taking the usual pandemic steps, including seeing if soliris will help. Expects starts to slow somewhat. Is promoting home infusions.

On January 28, 2020 Alexion announced it had completed acquisition of Achillion.

In October 2019, the FDA approved Ultomiris for the treatment of aHUS to inhibit complement-mediated thrombotic microangiopathy (TMA) for adults and children one month and older. Applications for approval in the EU and Japan are under review. A Phase 3 study in children and adolescents with aHUS is underway.

Alexion plans to initiate a Soliris Phase 2/3 study in children and adolescents with NMOSD in mid-2020. A Phase 3 study of Soliris in children and adolescents with gMG is underway. In Q4 2019 Alexion received approval in Japan for Soliris (eculizumab) for neuromyelitis optica spectrum disorder (NMOSD).

Alexion is collaborating with Caelum Biosciences to develop CAEL-101 for light chain (AL) amyloidosis. A pivotal Phase 2/3 study investigating CAEL-101 as an add-on to current standard-of-care therapy is planned to begin in the first half of 2020. In October 2019, the European Commission granted orphan drug designation to CAEL-101 for the treatment of AL amyloidosis.

In September 2019, Alexion announced an agreement with Eidos for an exclusive license to develop and commercialize AG10 in Japan. AG10 is a small molecule designed to treat the root cause of transthyretin amyloidosis (ATTR), destabilized and misfolded transthyretin (TTR) protein, by binding and stabilizing TTR in the blood. Eidos is currently evaluating AG10 in a Phase 3 study in the U.S. and Europe for ATTR cardiomyopathy (ATTR-CM) and plans to begin a Phase 3 study in ATTR polyneuropathy (ATTR-PN). Alexion plans to expand the AG10 program into Japan in 2020, pending regulatory feedback.

In October 2019, Alexion announced an agreement with Stealth BioTherapeutics for an option to co-develop and commercialize elamipretide for mitochondrial diseases. Currently being evaluated in a Phase 3 study in people with primary mitochondrial myopathy (PMM) - a genetic mitochondrial disease - elamipretide is a novel, potential first-in-class therapy that targets mitochondrial dysfunction. Alexion will have the opportunity to exercise the option following the delivery of results from the Phase 3 PMM study, which are expected in the first quarter of 2020. If exercised, the option also provides for co-development and commercialization of elamipretide in Barth syndrome, Leber's hereditary optic neuropathy (LHON) and geographic atrophy associated with dry age-related macular degeneration (GA).

Non-GAAP numbers: net income was $728 million, up 19% sequentially from $611 million and up 33% from $546 million year-earlier. Diluted EPS $3.22, up 19% sequentially from $2.71, and up 35% from $2.39 year-earlier.

Cash and equivalents balance $ billion, up sequentially from $2.75 billion. Debt $2.38 billion. $ free cash flow.

Ultomiris had an IND accepted for COVID-19 in April 2020. In PNH a Phase 3 study for children is underway. In aHUS a Phase 3 children's study is also underway, and the EU gave a positive opinion. The 100 mg/mL dose has a PDUFA date of October 11, 2020. Enrollment completed in the subcutaneous Phase 3 trial, with data expected in June 2020. In Amyotrophic Lateral Sclerosis (ALS)a Phase 3 study got underway in March 2020. Alexion plans to initiate a Phase 3 study of Ultomiris in CM-TMA in 2H 2020, pending regulatory feedback. But no longer pursuing PPMS as an indication.

Alexion is collaborating with Dicerna Pharmaceuticals to jointly discover and develop subcutaneously delivered GalXCTM RNA interference (RNAi) candidates, currently in pre-clinical development, for the treatment of complement-mediated diseases. In December 2019, Alexion exercised its option for exclusive rights to two additional targets, expanding the collaboration to now encompass four targets within the complement pathway.

Alexion is collaborating with Caelum Biosciences to develop CAEL-101 for light chain (AL) amyloidosis. A pivotal Phase 2/3 program will try CAEL-101 with standard-of-care therapy. The Phase 2 dose selection portion of the program began in March 2020.

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

ALXN1840 (formerly WTX101) for Wilson disease Phase 3 enrollment is complete. There are about 10,000 potential patients in both the U.S. and in Europe.

ALXN1810 is in Phase 1. It is ALXN1210 delivered subcutaneously.

Several otehr early stage clinical programs are underway.

See also Alexion pipeline.

GAAP cost of sales was $112 million. R&D expense was $201 million. SG&A expense was $320 million. Amortization of purchased intangibles $74 million. Change in fair value of contingent consideration $6 million. Restructuring gain $1 million. Total operating expenses were $749 million, leaving operating income of $696 million. Interest and other expense net was $32 million. Income tax was $106 million.

Q&A summary:

Color on new revenue guidance? In Q1 we saw little impact due to strong demand momentum. We stopped in person sales in early March, shifting to virtual. We are seeing new patient case volume affected. Time to therapy initiation is also affected. Compliance varies by disease. Ultimiris is an advantage because it is longer between infusions.

Any uptick in demand for charitable care? We have no visibility on that. We do expect some shift to Medicaid. We are saving some on sales expense.

Ultomiris conversion is a pricing headwind for us.

SCRN trial restart timeline, gating? We are committed to ten launches by 2023. SCRN started a healthy volunteer study that had to be paused. For hemolytic anemia we are transitioning to subcutaneous, causing the delay to 2021.

Talked more about COVID-19 dynamic effects that could happen.

Any pull forward of orders? We have seen some amount of inventory pull through in Q1.

Portola? We think we can play a role for better access. We have better penetration of institutional settings. We also have some good new data to support sales.

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