Analyst Conference Summary

Biotechnology

conference date: October 29, 2020 @ 5:00 AM Pacific Time
for quarter ending: September 30, 2020 (third quarter 2020, Q3)

Forward-looking statements

Overview: Continued strong revenue growth.

Basic data (GAAP):

Revenue was $1.59 billion, up 10% sequentially from $1.44 billion and up 26% from $1.26 billion in the year-earlier quarter.

Net income was $578 million, down na% sequentially from $na million, and up 24% from $468 million year-earlier.

EPS (diluted earnings per share) was $2.62, up sequentially from negative $4.84 and up 26% from $2.08 year-earlier.

Guidance:

Raised full year 2020 guidance. Revenue $5.90 to $5.95 billion. EPS GAAP $1.78 to $2.13; non-GAAP $11.70 to $12.00.

Conference Highlights:

Ludwig N. Hantson, PhD, CEO, said: "Successfully navigating through this difficult time. . . Third quarter financial results were strong. . . $9 to $10 billion revenue by 2025." Hopes to have 10 indication launches by 2023.

In Q3 2020 received U.S. approval and positive CHMP opinion for Ultomiris 100 mg/mL higher concentration formulation in paroxysmal nocturnal hemoglobinuria (PNH) and aHUS. Established Ultomiris as new standard of care in PNH ahead of set goal, with more than 70% patient conversion from Soliris in 3 U.S., Germany and Japan.

Ultimiris Phase 3 GMG trial is nearing completion of enrollment.

Alexion is shifting Andexxa (acquired with Portola) to a multi-faceted hospital system approach. Andexxa sales are not included in the Q2 results. Q4 guidance was increased in part because of expected increase in Andexxa sales. Gained reimbursement approval in the UK in Q3 for GI related bleeds..

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 $727 million, up 4% sequentially from $702 million and up 14% from $636 million year-earlier. Diluted EPS $3.24, up 4% sequentially from $3.11, and up 16% from $2.79 year-earlier.

Cash and equivalents balance $2.30 billion. Debt $2.45 billion. Cash from operations, $2.16 billion. $434 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 $285 million. SG&A expense was $334 million. Acquisition related costs $63 million. Amortization of purchased intangibles $53 million. Restructuring $14 million. Change in fair value of contingent consideration $23 million. Acquisition related expense $5 million. Gain on asset sale $15 million. Total operating expenses were $903 million, leaving operating income of $685 million. Interest and other expense net was $17 million. Income tax $89 million.

Q&A summary:

Covid Ultomiris Phase 3 update? Growing evidence for complement involvement in Covid responses. Did see a slowdown in enrollment over the summer, has picked back up, now over 30% enrolled.

Q3 pent up demand? Not particularly driven by pent-up demand, did see some possible pull forward to Q3 from Q4 in some countries. Does not expect to see a bolus effect when Covid slows down. In Q3 Germany had a pop in neurology, which could be an example of patients queueing up during a Covid shutdown. Our focus is on increasing virtual sales capabilities.

Third quarter was strong, neurology going strong in Japan. But new patient ads in neuro in the U.S. are slowing down.

Sub-q patent extension opportunity? It has the potential to expand the market, but we do not see it as a massive conversion scenario, since it is once-weekly rather than every 2 months.

Soliris off-label use for Covid? Yes, we do have experience, compassionate use and expanded access in France, and some in Italy. Suggests potential benefit, but is uncontrolled data. We will have scientific data early in 2021.

Stickiness of switches to ultomiris, 30% unswitched, given future competition? There is a long tail of PNH prescribing. It just takes time, especially with doctors with single patients.

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