Analyst Conference Summary

Biotechnology

conference date: July 30, 2020 @ 5:00 AM Pacific Time
for quarter ending: June 30, 2020 (second quarter 2020, Q2)

Forward-looking statements

Overview: Continued strong revenue growth.

Basic data (GAAP):

Revenue was $1.44 billion, flat sequentially from $1.44 billion and up % from $ billion in the year-earlier quarter.

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

EPS (diluted earnings per share) was negative $4.84, down sequentially from $2.50 and down % from $ year-earlier.

Guidance:

Positive update: 2020 revenue $5.55 to $5.60 billion. GAAP EPS $0.96 to $1.30. Non-GAAP EPS $10.65 to $10.95. This now includes effects from the Portola acquisition.

Conference Highlights:

Ludwig N. Hantson, PhD, CEO, said: "As a result of execution and delivery against our objectives, we have entered a new phase of company growth and diversification, which enables us to adjust our capital allocation priorities and return value to shareholders through an expanded stock buyback program. I am incredibly proud of what we have accomplished so far and am confident that we are well positioned to build on this momentum in the second half of the year."

GAAP Q2 2020 numbers includes impairment charges of $2.05 billion, primarily relating the Company's revised strategic view of Kanuma.

The rare disease community has been impacted by the pandemic. But we performed well in Q2.

Alexion is shifting Andexxa (acquired with Portola) to a multi-faceted hospital system approach. Andexxa sales are not included in the Q2 results.

Committed to a minimum of $500 to $550 million share repurchases in 2021. Then will increase to one-third of free cash flow from 2022 to 2023.

Ultmiris now has over 70% conversion in the U.S., which impacts Soliris sales. Continues to work to expand the label. Ultimiris has been priced lower than Soliris to encourage conversion.

Non-GAAP numbers: net income was $702 million, down 4% sequentially from $728 million and up 16% from $605 million year-earlier. Diluted EPS $3.11, down 4% sequentially from $3.22, and up 18% from $2.64 year-earlier.

Cash and equivalents balance $2.85 billion. Debt $2.31 billion. Cash from operations, 6 month, $1.34 billion. $361 million was used to repurchase shares.

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. Received EU approval for Ultomiris in atypical hemolytic uremic syndrome (aHUS)in Q2 2020 and announced positive Phase 3 data for weekly subcutaneous Ultomiris formulation. In June 2020, Alexion announced that the Phase 3 study of weekly subcutaneous SC Ultomiris demonstrated PK-based non-inferiority versus intravenous Ultomiris. Pending collection of 12-month data, Alexion plans to file for approval in the U.S. and EU for the SC formulation and device combination in PNH and aHUS in the third quarter of 2021.

Alexion plans to initiate a Phase 2/3 study of Soliris in children and adolescents with NMOSD (Neuromyelitis Optica Spectrum Disorder) in the second half of 2020. A Phase 3 study of Soliris in children and adolescents with gMG (Generalized Myasthenia Gravis) is underway. Alexion plans to initiate a Phase 3 study of Soliris in GBS (Guillain-Barre syndrome) in Japan in 2021, pending regulatory feedback.

Alexion is collaborating with Caelum Biosciences to develop CAEL-101, targeting amyloid deposits in patients with light chain (AL) amyloidosis. A pivotal Phase 2/3 program is underway of CAEL-101 as an add-on to current standard-of-care therapy. Dosing is complete in the Phase 2 dose selection portion of the program; the Phase 3 portion of the program is planned to begin in the third quarter of 2020, pending dose selection.

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.

ALXN1830 trial halted in Q2 due to pandemic, hopes to resume. Preliminary PK/PD modeling suggests weekly SC infusions of 1500mg may have the potential to provide >70% IgG lowering

In July 2020, Alexion announced the completion of its acquisition of Portola. The acquisition added Andexxa to the company's commercial portfolio. Andexxa has conditional approval in the U.S. and EU (Ondexxya in the EU) for the reversal of anticoagulation in patients experiencing life-threatening or uncontrolled bleeding who are treated with rivaroxaban or apixaban. A Phase 4 study is underway for Andexxa compared to standard of care in patients presenting with acute intracranial hemorrhage while taking an oral Factor Xa inhibitor.

Several other early stage clinical programs are underway.

See also Alexion pipeline.

GAAP cost of sales was $145 million. R&D expense was $221 million. SG&A expense was $301 million. Amortization of purchased intangibles $74 million. Change in fair value of contingent consideration $16 million. Acquisition related expense $5 million. Impairment $2.05 billion. Total operating expenses were $2.81 billion, leaving operating income of negative $1.37 billion. Interest and other income net was $18 million. Income tax benefit was $284 million.

Q&A summary:

Return of capital v. dividend? We have strength. Buy backs give flexibility as to cash used and business development. We are not at the stage of maturity where we should commit to a dividend.

Soliris v. Ultomiris pediatric new studies? These are due to regulatory requirements for that population.

Sales guidance, implied 2H less than 1H? Covid ads uncertainty. Y/y topline growth is still good. New patient adds are expected to slow. We are uncertain of compliance rates going forward. Payer mix may be an issue for the unemployed. We try to set guidance we can meet or exceed.

2040? We had good data in PNH, we will do a Phase 3 trial of 2040 as add-on therapy for Soliris.

In the U.S. our sales force is not back in the field, we are calling and using digital methods.

Operating expense guidance increase? In Q1 we talked about expense controls and uncertainty. We thought there would be study delays, but now we expect a number of studies to start or restart. Plus the Portola op ex.

Revenue after Ultomiris conversions complete? We are not guiding to 2021, but factors are the compliance rate and hopefully pandemic will wane. Ult conversions will continue well into 2021.

Ultomiris competition? New entrants may expand market volume in GMG. Soliris for more severe cases, for SCRN is more for first line. Given it is a chronic disease, we believe therapy should be continuous, and the addressable market expanding considerably.

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