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Executives

Irving Adler – Executive Director, Corporate Communications

Lenny Bell – CEO

Vikas Sinha – EVP and CFO

David Hallal – EVP and Chief Commercial Officer

Steve Squinto – EVP and Head, Research and Development

Analysts

Eric Schmidt – Cowen & Company

Rachel McMinn – Bank of America Merrill Lynch

Geoff Meacham – JPMorgan

Salveen Richter – Canaccord Genuity

David Friedman – Morgan Stanley

Brian Abraham – Wells Fargo Securities

Ying Huang – Barclays

Matth Roden – UBS

Robyn Karnauskas – Deutsche Bank

Terence Flynn – Goldman Sachs

Alexion Pharmaceuticals, Inc. (ALXN) Q4 2012 Earnings Call February 14, 2013 10:00 AM ET

Operator

Good day, everyone, and welcome to the Alexion Pharmaceuticals Incorporated Fourth and Full Year 2012 Results Conference Call. Today’s call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Irving Adler, Executive Director, Corporate Communications. Go ahead, sir

Irving Adler

Thank you, operator. Good morning and thank you for joining us on today’s call to discuss Alexion’s performance for the fourth quarter and full year 2012 and our outlook for 2013.

Today’s call will be led by Dr. Leonard Bell, our Chief Executive Officer. Lenny will be joined by members of Alexion management – Dr. Steve Squinto, Executive Vice President and Head of R&D; Vikas Sinha, Executive Vice President and Chief Financial Officer; and David Hallal, Executive Vice President and Chief Commercial Officer.

Before we begin, I’d like to note that during the call we will make forward-looking statements, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause our actual results to differ materially from these statements.

A description of these risks can be found in our most recent 10-Q and 10-K reports on file with the SEC. Any forward-looking statements speak only as of today’s date, and we undertake no duty to update any of these statements after this call.

I’d also like to remind you that our reported non-GAAP operating results conform to our U.S. GAAP operating results except for certain adjustments that were described in our press release issued this morning. A reconciliation of our GAAP to non-GAAP results is included in the release.

Thank you. Lenny?

Lenny Bell

Thank you, Irving. In the fourth quarter, we continued the high level of execution that we had achieved throughout 2012 in our mission to develop and deliver therapies that transform the lives of patients whose disorders are severe, life-threatening and also ultra-rare.

During the quarter, we again reached key milestones across our three primary strategic growth initiatives. First, in Q4, our global rollout in PNH proceeded with a steady addition of patients commencing Soliris therapy. In 2013, deeper penetration in existing and new countries positions us to continue to strongly grow our PNH operations.

Second, we are very pleased with aHUS launch in the United States, as we continue to observe a steady addition of new patients during Q4. In 2013, we look forward to serving more patients with aHUS in the United States as well as beginning to serve patients in a growing number of countries in the Western Europe.

Third, during Q4, we continued to advance our lead development programs in severe and ultra-rare disorders with Soliris and four additional highly innovative therapeutics. Steve will highlight the significant 2013 news flow and our pipeline programs, including registration trial commencements, registration dossier submissions and key data publications.

Our accomplishments in 2012 position us for continued strong growth in 2013, as indicated by this morning’s guidance. In addition to our anticipated strong financial performance, we also expect 2013 to be pivotal year across both our commercial operations and development pipeline.

With our operations in place to serve patients in 50 countries, we expect increasing global leverage in 2013, 2014 and future years in PNH and also in aHUS. Beyond our current Soliris indications in PNH and aHUS, we except that development milestones in each of our pipeline programs in 2013 will lead to a series of regulatory approvals starting in 2014 resulting in product launches across this expanded global infrastructure.

Looking more closely at PNH. In Q4, a significant number of new patients again commenced Soliris therapy in our core territories of United States, Western Europe and Japan. This steady addition of new patients reflect the ongoing positive impact of our disease awareness programs and diagnostic initiatives, which continues to result in consistent identification of new patients with PNH.

I would now like to look beyond our core countries at several of the larger countries that are in the earlier stages of our global introduction of Soliris and PNH. In Q4, as expected from our last call, we, again, added PNH patients in Turkey and Brazil at a steady rate. We anticipate steady growth in these countries in 2013, 2014, and future years.

Turning to Russia, as a result of initial deployment of our field teams, Soliris treatment was initiated in a significant number of previously diagnosed PNH patients, who have been awaiting therapy with a onetime positive impact on our Q4 results. We now expect a steady rate of patient identification and treatment initiation in Russia throughout 2013, which should further increase in 2014.

We also expect initial contributions from Korea commencing later in 2013. Likewise, commencing later this year, we anticipate adding new patients with PNH in multiple countries in Latin America, growing further in 2014. As we build on our global platform, we remain acutely aware that on a global basis the majority of patients with PNH have not yet received an accurate diagnosis let alone commence appropriate treatment.

Turning to aHUS, in Q4, we, again, observed a steady increase in the number of patients with aHUS commencing Soliris therapy in the United States. Indeed, looking back at the first full year of our aHUS launch in the United States, I am perhaps most pleased by our ability to adjust our operations to rapidly meet the urgent medical needs of patients with aHUS.

Notably, in the United States, six years after the initial launch our 52% year-on-year US growth rate supports the robust, long-term growth potential for the Soliris franchise. With the initial year of the aHUS launch in the United States now behind us, we believe that over time we will have the opportunity to serve a similar or greater number of aHUS patients compared to PNH across our 50-country platform.

In Europe in aHUS, we are on track to complete the reimbursement processes in most of the larger western European countries through the middle of 2013 with the initial stages of individual country launches in the second half of this year and the first full-year contribution in 2014.

Looking at individual countries, our first focus is on Germany where, as you know, Soliris is not subject to the AMNOG law. As a result, we are currently greatly expanding our German field team to support our aHUS launch and we are on track for the commencement of inpatient hospital reimbursement for Soliris at the end of the first quarter.

In the Netherlands, Soliris has been granted add-on status by the CVZ authority of the Dutch government, facilitating access to hospital reimbursements for Soliris in aHUS. Turning to Italy, the government has approved an early assess program for Soliris in aHUS. In France, we note the government’s strong recognition of the highly positive clinical impact of Soliris and aHUS, as indicated, by the very high ASMR II rating that Soliris has received for aHUS. With ASMR II ratings now in two different severe and life-threatening indications, it is evident that Soliris is a unique life transforming therapy for the very small number of patients living with PNH or aHUS.

Also, and as anticipated, this positive determination by the French government for Soliris in aHUS has now allowed the initiation of reimbursement discussions. We expect these discussions to progress through mid year.

In England, the government’s Agnes panel has recommended that Soliris should be routinely nationally commissioned for aHUS. It is important to point out that as a part of this recommendation Agnes has also specifically and publicly affirmed that Soliris therapy would help save the lives of children and adults with aHUS.

Despite this strong endorsement and the fact that critical ill aHUS patients are in urgent need of Soliris, at this stage the health ministers have decided to refer the Soliris application to NICE for further review. We note that physicians, patients and families and indeed Alexion are now calling on the health ministers to make Soliris available to these critically ill patients, many of whom are children, without further delay.

I’d also like to remind you that in 2009 our PNH funding success was achieved after a 22-month period of discussions with the English Government starting in 2007. And, indeed, since 2007 Alexion’s unwavering objective has been that every patient who can benefit from Soliris should have access to Soliris. Beyond the U.S. and Europe we are pleased to now report that we have recently submitted our SVLA for aHUS in Japan with the education of a launch in that large core country commencing in 2014.

In addition to our current commercial initiatives and our approved indications, we are keenly focused on the need to develop more innovative therapeutics, and during 2013 we look forward to reaching significant milestones across each of our nine lead programs with five highly innovative therapeutics, including Eculizumab.

Importantly, our development programs focus only on those patients with the most severe, devastating, and life-threatening disorders, which also happen to be extremely rare. In each of our nine lead investigational programs, there is no approved or effective therapy.

Likewise, in each program we set our goal as nothing less than a complete transformation of the patient’s lives. Of special note positive data from an investigational study with Eculizumab as a treatment for patients with Neuromyelitis optica or NMO were presented by Mayo Clinic Investigators during Q4.

Following recent meetings with regulators in the United States and also in Europe, we are now accelerating this program and finalizing a clinical protocol of what we expect will now be a single registration trial in NMO and plan to commence this study in the second half of this year.

Turning to our next product candidate, asfotase alfa. In Q4 we completed the process development work for the current manufacturing program. We remain on track for pediatric filing for asfotase alfa and HPP in the U.S. and Europe in 2014. Turning to Japan and following recent discussions with the PMBA we’ve also now initiated enrollment in the clinical trial for asfotase alfa in Japan, which we expect to complete in 2014.

Also during Q4 we were encouraged by the presentation of positive final data from our single arm eculizumab STEC-HUS trial in Germany. Importantly, this data will be significantly Augmented with the addition of substantial control data for (inaudible) study including patients who did not receive eculizumab during the crisis. As we continue to finalize this package, we expect to file an application for regulatory approval in STEC-HUS in the second half of 2013.

Turning to transplant, we’ve now expanded our kidney transplant program to include a third clinical study. In addition to our living donor and deceased donor AHR studies, there is now underway a third clinical study in transplant patients at elevated risk for delayed-graft function or DGF. Data from this investigate initiated DGF trial are expected to be presented toward the end of this year.

As we enter 2013, I am pleased to welcome two new leaders to Alexion’s executive team reporting directly to me. John Moriarty, Senior Vice President and General Counsel; and Frank Wright, Senior Vice President and Head of Alexion Pharma International. Both are seasoned executives, who will play key roles as we grow our multi-product portfolio in an increasing number of countries around the world.

I would also like to thank Tom Dubin for his significant contributions in leadership over the course of 12 years as our Chief Legal Officer, and I thank Patrice Coissac, for his role in helping to build our European organization. We wish each of them well in their future endeavors.

Turning now to our financial performance for the full year of 2012, revenues of $1.134 billion represented a 45% increase, compared to 2011. By maintaining fiscal discipline as we have grown our global operations, we achieved a 60% increase in net income to $425.2 million in 2012.

Based on our strong performance in 2012 in PNH and in aHUS and our robust outlook in both indications for 2013, we today announce that we are guiding to a strong 33% increase in 2013 revenues to the range of $1.490 billion to $1.505 million. As we focus on continuing to improve our operating margins, we are guiding and even stronger at 37% increase in 2013 non-GAAP EPS in the range of $2.82 to $2.92.

Our strong performance in 2012 and our robust outlook for 2013 reflect the transformative clinical benefits we are providing to patients with PNH and aHUS and our diligence and successfully working through the multiple steps necessary to deliver this breakthrough innovation to patients in individual countries around the world.

I would like to note that our performance also reflects the continued success of our ongoing strategies for managing the economic environment in several European countries as we have routinely done country-by-country since Soliris first became available in 2007.

Throughout the global recession and resulting austerity measures over this same six-year period, Alexion has successfully maintained its focus to serve more patients in more countries around the world. We will continue our patient focus as we navigate through these macroeconomic factors.

We believe that our strong and sustained growth will continue to be driven by our expanding global presence and our unique singular commitment to deliver only truly breakthrough that save and transform the lives of those very few patients suffering with devastating disorders.

At this point, I’ll turn the call over to Vikas. Vikas?

Vikas Sinha

Thanks, Lenny. The fourth quarter of 2012 was another period of sustained growth in revenues and profitability for Alexion.

Looking first at revenues, net product sales of Soliris were $320.5 million in Q4, an increase of 41%, compared to the year-ago quarter. I note that our revenue growth in Q4 over Q3 was augmented by an additional $3 million recorded from commencement of therapy by an initial group of previously diagnosed PNH patients in Russia.

For the full year of 2012, we recorded sales of $1.134 billion, an increase of 45%, compared to 2011. Year-on-year revenue growth was robust across all countries in 2012. As we compare regional growth rates in 2012 versus 2011, I would note that revenues in the U.S. increased 52% in 2012, reflecting continued growth in PNH in the first full year of the aHUS launch. Indeed, the observation of this strong growth in our latest – largest market six years after the initial launch supports the robust long-term growth potential for the Soliris franchise.

Revenues in Europe increased 27% on a constant currency basis, more than five years forming our initial EU approval. Likewise, we observed strong growth of 40% in our PNH operations in Asia-Pacific, largely related to Japan.

The growing momentum of our global expansion is further indicated by the 141% year on year growth we experienced across our newer markets. Taken together, the diverse operations that we are building around the world provide us with a foundation for long-term growth in PNH, in aHUS, and future indications.

Turning briefly to taxes. Our non-GAAP tax rate was 5%, which included a one-time state tax adjustment in Q4. As a result of exceeding our revenue target while maintaining strict financial discipline in our growing commercial and clinical activities, we were able to report 2012 non-GAAP EPS of $2.13 per diluted share, an increase of 54% year on year.

With regard to our 2013 financial guidance, I’d like to highlight some key points. First, we are again guiding strong top line year on year revenue growth. Revenues for 2013 are forecasted in a range of $1.490 billion $1.505 billion, an increase of approximately 33% year on year. As in 2012, PNH will be the primary source of revenues in 2013, but with a growing contribution from aHUS, particularly in the latter part of the year as European launches commence.

We expect continued strong gains in revenue in each quarter. I would note, however, that as in previous years Q4 to Q1 revenue growth will occur at a somewhat slower rate due in part to fewer treatment days and low meaningful new country launches in Q1.

Second, as our global operations continue to become more efficient, now supporting growth in two indications, our forecast for 2013 SG&A expense of $425 million to $435 million will be approximately 29% of sales, reduced from 31% in 2012.

Third, our R&D guidance in 2013 is again forecasted at 19% of sales as we pursue the broadest pipeline in our history to support future product approvals and launches. R&D expense in 2013 will include approximately $30 million associated with asfotase alfa production which will be evenly distributed over the first three quarters of the year.

Fourth, we expect to reduce COGS from 11% of sales in 2012 to 10% in 2013. Overall, we expect a 2% to 3% improvement in pre-tax operating margin in 2013 compared to 2012. Also, as we continue to utilize our US and overall, we are guiding a non-GAAP tax rate of approximately 7% to 9% for 2013. And finally, by growing revenues strongly and maintaining our financial discipline, we are guiding 2013 non-GAAP EPS of $2.82 to $2.92, an increase of 37% year-over-year. This forecast is based on 205 million average shares outstanding during the year. We are very pleased with our financial performance in 2012 and our robust outlook for 2013.

At this point, I’ll turn the call over to David, who will provide an update of our global commercial operations. David.

David Hallal

Thanks, Vikas. During 2012, we achieved strong Soliris revenue growth of 45%, reflecting continued growth in PNH globally and our solid aHUS launch in the United States. Notably, in the U.S., six years after the initial launch, our 52% year-on-year U.S. growth rate supports the robust, long-term growth potential for the Soliris franchise.

With our first year of the U.S. aHUS launch now behind us, we believe that over time, we will have the opportunity to serve a similar or greater number of aHUS patients compared to PNH across our 50-country platform. In PNH, during Q4, we continued to observe that our disease and diagnostic initiatives are resulting in consistent identification of new patients with PNH and our core territories of the U.S., Western Europe, and Japan.

Importantly, the majority of PNH patients newly starting on Soliris in Q4 were also newly diagnosed. In 2013, we look to positively influence the entire cycle of care through our PNH disease and diagnostic initiatives throughout the year. Beyond our core territories, we continue to expand our operations in additional large countries. In Turkey and Brazil, we are in the early stages of our disease awareness and diagnostic initiatives, and we expect that we will see a steady rate of new patient identification in Soliris treatment initiation in these countries over time.

In Russia, during Q4, as a result of initial deployment of our field teams, Soliris treatment was initiated in a significant number of previously diagnosed PNH patients, who had been awaiting therapy. We now expect that our ongoing disease and diagnostic initiatives in Russia will result in a more modest yet steady rate of treatment initiation throughout 2013 which should further increase in 2014.

We are also now focusing on Korea as the next major country in our global PNH rollout, commencing later in 2013. In addition, we see a significant opportunity to serve patients with PNH in multiple countries in Latin America, specifically, Argentina, Colombia, and Mexico.

In 2013, our goal is to further optimize care for more patients in more countries, as we know that on a global basis the majority of patients with PNH have not yet received an accurate diagnosis, let alone commenced appropriate treatment.

Turning now to aHUS. We are entering the second year of our launch with a solid foundation in place for a strong global rollout. The combination of the devastating course of aHUS, where more than 50% of patients either die, progress to ESRD or suffer permanent renal damage within one year of diagnosis, together with the demonstrated life-transforming benefits of Soliris treatment, provide a strong underpinning for rapid diagnosis, reimbursement and treatment of aHUS patients around the world.

Looking first at the U.S., we are very pleased with our aHUS launch. In Q4, we again observed a steady increase in the number of patients with aHUS commencing Soliris therapy. Importantly, and as we anticipated at launch, patients with aHUS are gaining rapid access to Soliris treatment through broad reimbursement. We are pleased with the overall dynamics of the launch to-date, and we expect to see an increasing number of new aHUS patients initiating treatment with Soliris in 2013 and beyond.

In Europe, we are on track to complete the reimbursement processes in most of the major western European countries through the middle of 2013, with the initial stages of individual country launches in the second half of the year and the first full-year contribution in 2014.

Looking at individual countries in Europe, with expected in-patient reimbursement in Germany at the end of Q1, we are now expanding our field team to further support our aHUS launch in that country. As Lenny mentioned, in the Netherlands and Italy there have been significant positive developments now leading to reimbursement for patients with aHUS.

In France, as a result of our second ASMR II rating for Soliris as expected, we have now initiated reimbursement discussions and anticipate these discussions to progress through mid-year. In England, recognizing the life-transforming impact of Soliris for patients with aHUS, the Agnes panel recommended that Soliris be routinely nationally commissioned.

It is important to point out that as a part of this recommendation Agnes specially and publicly affirmed that Soliris therapy would help save the lives of children and adults with aHUS. As Lenny mentioned, at this stage the health ministers have decided to refer the Soliris application in NICE for further review. Together with physicians, patients and families, we are now calling on the health ministers to make Soliris available to these critically ill aHUS patients without further delay.

While our European teams are planning for their individual country launches throughout 2013, aligned with our recent aHUS registration filing for aHUS in Japan, our in-country commercial team is now laying the foundation for our aHUS launch in 2014.

Beyond our current Soliris indications in PNH and aHUS, and with our operations currently in place to serve patients in 50 countries, we are building our global commercial operations to prepare for the launches of a series of new indications and new products in 2014 and subsequent years. Our global nephrology team is continuing their efforts to better understand the disease and diagnostic patterns of STEC-HUS in preparation for an expected launch in 2014.

Looking further at our three ongoing kidney transplant programs in DGF as well as the living and deceased donor settings, we are now starting to develop our early commercial plans. We are also building out our global metabolic team to prepare for the company’s second product candidate as we plan for a pediatric filing for asfotase alfa in HPP in 2014.

We continue to identify the needs of the HPP community mindful that diagnoses can be missed and the natural history of the disease may be misunderstood. Also as we prepare to commence our Soliris NMO registration program, we are now beginning to assess the opportunity to serve patients with severe and relapsing NMO. Building on our strong commercial performance in 2012, we look forward to serving more patients with PNH and aHUS in more countries in 2013 and beyond.

Now I’ll turn the call over to Steve, who will review our expanding pipeline initiatives. Steve?

Steve Squinto

Thanks, David. We entered 2013 with the most robust pipeline in the company’s history with five highly innovative therapeutic candidates at various stages of development across nine severe and life-threatening disorders that are also ultra-rare. In addition, we continue to support our global introductions of Soliris in aHUS, and I’m pleased to report the recent submission of a marketing authorization application for eculizumab as a treatment for patients with aHUS in Japan with a decision expected in early 2014.

In our eculizumab development programs in new indications, I would like to turn first to STEC-HUS. In Q4, final data from our single arm eculizumab STEC-HUS trial in Germany were presented at ASN and were consistent with previously presented eight week interim date. The final 28 week data from the full clinical study cohort of 198 patients across 23 sites in Germany showed a rapid and sustained improvement in thrombotic microangiopathy or TMA and reversal of organ damage with eculizumab treatment.

Also at ASN, key preliminary findings were reported from an exploratory matched control analysis of patients with severe STEC-HUS receiving eculizumab versus other patients who received only best supportive care. The findings show that eculizumab treatment was associated with consistently higher rates of improvement in both renal and neurological function at 8 weeks and 28 weeks when compared with supportive care only.

We are continuing to obtain and analyze additional control data from an epidemiologic study in approximately 400 STEC-HUS patients which we believe will greatly strengthen our regulatory submission and expect to apply for marketing authorization for eculizumab in the treatment of STEC-HUS in the second half of 2013. Also in nephrology, we continue to enroll patients in our company-sponsored, multinational living donor and deceased donor kidney transplant trials in patients at elevated risk of antibody-mediated rejection. We expect to complete enrollment in both of these studies in 2013.

We have also expanded our kidney transplant program to include a third clinical setting, patients at elevated risk for delayed graft function. An investigator-initiated trial is currently enrolling patients to evaluate eculizumab in the prevention of delayed graft function following deceased donor kidney transplantation and is expected to be complete in the second half of this year. We would expect data from this study to be presented later this year and we would then anticipate discussing the data with regulators in order to accelerate the Alexion-sponsored multinational DGF registration program.

Turning now to neurology. We are highly encouraged by the early results and the opportunity in severe and relapsing neuromyelitis optica or NMO. Following the presentation of positive data from an investigator-initiated study during Q4 we have recently met with regulators in both the U.S. and Europe to discuss plans for a study in patients with severe relapsing NMO.

Based on these discussions, we are now accelerating this program and expect to conduct a single multinational registration trial commencing in the second half of 2013. In myasthenia gravis we are now scheduled to meet with regulators in mid 2013 to discuss our plans for a large prospective controlled trial in patients severe MG. We are targeting the second half of 2013 to initiate our company-sponsored MG registration program.

I will now turn to our other lead development programs with highly innovative therapeutic candidates beyond eculizumab and starting with asfotase alfa. We continue to accelerate the development of asfotase alfa as a treatment for a broad spectrum of HPP patients.

In Q4, we completed the process development work for the current asfotase alfa manufacturing programs. In 2013, we expect to complete the natural history study in infants which will supplement the existing open label infant trials in the first half of this year.

In addition, we plan to initiate a six-month placebo-controlled study in juveniles with HPP in the second half of the year. We will be discussing the registration process for pediatric patients with regulatory authorities in mid 2013 with an eye toward a pediatric filing in the U.S. and EU in 2014.

Turning to Japan and following recent discussions with the PMBA, I am pleased to report that we have also now initiated enrollment in our clinical trial for asfotase alfa in Japan which we expect to complete in 2014.

Beyond asfotase alfa, we are also evaluating three additional highly innovative therapeutic candidates as treatment for patients with severe and life-threatening disorders that are also ultra-rare and across a wide range of therapeutic areas.

Looking briefly at these programs, first in our metabolic disease area we are also accelerating the development of our cPMP Replacement Therapy for the treatment of patients with Molybdenum Cofactor Deficiency Type A, a severe, ultra-rare and genetic metabolic disorder that is fatal in newborns.

In the first half of 2013 we expect to meet with regulators and discuss plans for clinical studies and to complete GMP manufacturing runs of cPMP in order to initiate clinical studies near midyear.

Second, enrollment continues in a Phase I study of ALXN1102 and ALXN1103 IV and subcutaneous versions, respectively, of our novel alternative pathway complement inhibitor. We are on track to complete these Phase I studies in the first half of 2013 and to meet with regulators to discuss trial data and the development program later in the year.

And, finally, we have recently completed dosing in our 56-patient, single-dose intravenous Phase I clinical study of ALXN1007, our novel anti-inflammatory antibody. Our next step in this program will be to discuss with regulators the initiation of a multi-dose Phase I study, after which we will explore development in multiple severe life-threatening and ultra-rare conditions.

Alexion’s nine lead R&D programs are on track to reach important milestones this year. We expect the following milestones in 2013 – registration submissions for STEC-HUS in the U.S. and EU; registration trial initiation in both NMO and MG; Japanese clinical development completion in aHUS and also HPP; key data publications or presentations in aHUS, STEC-HUS, kidney transplant and HPP; and trial enrollment completion across several lead programs.

Our R&D team will continue to drive our programs forward with urgency, as we plan to achieve these key milestones this year to help patients and families suffering with severe and life-threatening ultra-rare disorders.

I’ll now turn the call back to Lenny. Lenny?

Lenny Bell

Thanks, Steve. As we build on our accomplishments in 2012, we look forward to 2013 with great excitement, and we will continue to serve even more patients with more disorders in more countries. We thank all of those who make our work possible – our employees, researchers and the physicians around the world and, of course, patients and their families.

Operator, we will now take questions.

Question-and-Answer Session

Operator

We will now turn to the question-and-answer portion of our call. (Operator Instructions) Our first question comes from Eric Schmidt with Cowen & Company.

Eric Schmidt – Cowen & Company

Thanks for taking the question. It sounds like you’ve made some progress since we last spoke on reimbursement in the Netherlands and Italy, in particular – maybe, some other countries as well – but it sounds like you’ve got clearance for aHUS in both of those territories.

And if that’s the case, is there anything that’s really limiting to your launching as soon as possible? And then second question just on NMO. I was hoping that you could, now that you’ve had a successful regulatory discussion, maybe, further outline the enter criteria and design of that trial?

Lenny Bell

David?

David Hallal

Yes. So, Eric, regarding the Netherlands, with the add-on status that Lenny and I mentioned, it does put the process in place for funding for aHUS. Much like we might see in Germany or the U.S., the team there in the Netherlands would build the case with the physicians on a case-by-case basis for patients at the hospital level to receive their funding. And that is actually ongoing, as we speak.

In Italy, it is an early access program under a law, L. 648, in Italy, which is providing now patients – the initial patients with access to treatment. And we are still in ongoing discussions with Italy for a broader-based, longer-term funding solution.

Lenny Bell

Steve?

Steve Squinto

Eric, yeah, in relation to the NMO question, obviously, as we said this morning on the call, we now have had very productive discussions with both the FDA as well as European regulators as well. And we feel pretty good now that we will move forward with a single registration trial. Obviously, the discussions with regulators continue and are ongoing in terms of trial design. So I think as we initiate that trial we will provide much more detail on the specific design elements of the trial.

Eric Schmidt – Cowen & Company

Thanks.

Operator

Our next question comes from Rachel McMinn with Bank of America/Merrill Lynch.

Rachel McMinn – Bank of America Merrill Lynch

Yeah, thanks very much. I wanted to just clarify, following up on Eric’s question on the guidance itself. Does it actually include revenues from some of these countries with pending, you know, pending reimbursement? Because I know in the calls that are past you tend to probably weigh those down pretty substantially at the beginning of the year.

And then just a follow-up to a question I’ve asked previously on asfotase alfa. I think you’ve mentioned before that you wanted to get additional regulatory feedback. And I was wondering what the result of that feedback is if you have it? Thanks.

Vikas Sinha

So, Rachel, this is Vikas here. I will take the first question and then Lenny can address the second one. When we are looking at the financial forecasting, we try to take the risk and opportunities in account. And as we proceed through the year, we update our effectiveness, how we have managed or mitigated these risks.

And the guidance that we showed this morning takes into account our current assessment of these opportunities and risks. And continued robust growth, right? So we’ll give you more update as we progress during the year how we have done the risk and opportunity management around these countries. Obviously, the second question, Lenny if you want.

Lenny Bell

I could take that. Regarding – Rachel, regarding the asfotase alfa program, so I think as we said this morning we’re rounding out in completing the infant part of the program I’m conducting this natural history study will launch into a juvenile trial probably midyear, it’s a placebo-controlled trial.

And that will also be expected to meet with regulators about mid year to discuss kind of where we’re with the program. But we’ve had some good communication as well with the Pediatric Development Committee in Europe. So I think we are feeling good that we’ve got a pretty strong program.

Rachel McMinn – Bank of America Merrill Lynch

Thank you.

Operator

Our next question comes from Geoff Meacham with JPMorgan.

Geoff Meacham – JPMorgan

Hi, good morning, guys. Thanks for taking the question. So, Vikas, when you look at the growth rate that you talked about in Europe last year, I don’t know, if you can be specific but I wanted to know, you know, how much you think was volume versus an FX or price headwind and maybe this begs the bigger question, is do you think the acceleration here in Europe could be potentially as high as the U.S. or even other regions driven by aHUS? Thanks.

Vikas Sinha

Geoff, let me take the first question because it gets confusing when we talk about constant currency. So if I just give you the exact numbers, it might be helpful. Sales in Europe in 2012 were $418 million approximately which included a negative impact of around 14.5 million year-on-year due to the effects. So when we look at the constant currency just of 27% and non-constant currency that’s actual numbers it’s more towards very similar to what we did ‘10 or ‘11 on 22.7%. Regarding aHUS let me pass it on to David.

David Hallal

I would just say, Geoff, that as I mentioned in the call, obviously, I think the first full year of the U.S. launch in 2012 and seeing the growth rate in the U.S. accelerate to 52%, you know, as we look at 2013 we’d be very encouraged in Europe. But I just wanted to remind you that we would expect most of these launches to really happen in the second half of the year, Q3, Q4. And as I tried to indicate, we would see the first full year contribution from layering on the aHUS business in Europe in 2014, whereas in the U.S. we really were fully adding patients throughout the year in 2012.

Geoff Meacham – JPMorgan

That’s it. Thanks.

Lenny Bell

Yeah.

Operator

Our next question comes from Salveen Richter with Canaccord Genuity.

Salveen Richter – Canaccord Genuity

Thanks for taking my questions. I’m curious, as you look at your U.S. growth rates, so it looks like 52% growth last year versus 28% the year before. Can we assume that basically the majority or bulk of all this growth came from aHUS versus PNH?

And then just a follow-up question on FX. I’m just trying to get a sense of what you’re including in guidance for 2013 versus your 2012 FX assumptions.

Lenny Bell

Two questions. One is on the growth rates in U.S. and the second one is FX. Let me take the FX first. We have taken 2012 and 2013 FX rates to be very similar. The – if I go back and look at ‘11, ‘12, ‘13, ‘11 was – euro was very strong, approximately 1.4 to a dollar. Coming to ‘12, it was more towards 1.3 and we are expecting the same level in 2013. Regarding the growth rate, I’d like Dave to address it.

David Hallal

Yeah. Thanks, Salveen. Yeah. I think what you see and you’re referring to last year’s growth rate, you would see a consistent growth coming in the U.S. prior to the aHUS launch. And you can see that. And then, as you now look at the U.S. number with aHUS layered onto that certainly that incremental growth over that consistent steady growth of PNH is certainly attributable to us adding on the aHUS indication in business.

Salveen Richter – Canaccord Genuity

Thanks. Very helpful.

Operator

Our next question comes from David Friedman with Morgan Stanley.

David Friedman – Morgan Stanley

Hi. Thanks for taking the question. I just wanted to clarify just a couple things. The first is for HPP, can you just clarify on – to the degree your filing strategy? Will it be infants first or infants and juveniles together and how the current, soon-to-start trial fits in with that? And then, the second question is just around timing of any more data for HPP and if we’re still going to see Phase III transplant data this year.

Lenny Bell

Okay. So I think there are three questions in there. Let’s start with the first. So the filing in which we – which we announced this morning would be 2014, would include both infants as well as juveniles. That is our expectations. And again, we haven’t met with regulators. That’s expected mid-year.

We have a little bit of a feel for it, though, because we have had meetings with the pediatric development committee regarding the need for afib in the program and I think that would be consistent with what we’re hearing from that group as well. So, yes, that we would expect to have some HPP data coming out, either publications or presentations this year as we discuss as well earlier on the call.

And then, your third question I think was data in transplant. So I think there we’re seeing very, very good progress with our deceased donor program. And I think that one may be able to be completed with some data possibly coming out towards year-end. I think enrollment will hopefully complete in the living donor, but look for data in that trial probably more in 2014.

David Friedman – Morgan Stanley

And the data – sorry, just to clarify. The data year end, if it makes it for deceased, is that going to be something in a press release or at a medical meeting?

Lenny Bell

I would hope that it would be at a medical conference.

David Friedman – Morgan Stanley

Okay. Thank you.

Operator

Our next question comes from Brian Abraham with Wells Fargo Securities.

Brian Abraham – Wells Fargo Securities

Hi. Thanks very much for taking my question. A question for David, I was wondering, if you could talk about the diagnostic campaign for aHUS. Just wondering, how much better to you think physicians have become at appropriately identifying aHUS and distinguishing it from other things like TTP and STEC-HUS? Where do you feel, you need to dedicate the most resources towards this effort, is it region dependent or type subscriber depend? Thanks.

David Hallal

Yeah. It’s a great question. So, as I think I alluded to last quarter, we have recently launched our diagnostic pathway for aHUS. And you’re right on, Brian. It’s really focused on helping physicians and many of these patients present in a very urgent state with active thrombotic microangiopathy and the question is that aHUS or is it TTP or, STEC-HUS. And that diagnostic pathway provides a very clear guidance on ruling out severe ADAMTS13 deficiency of below 5%, which would be consistent with the diagnosis of TTP, and also making sure that the patient is not Shiga-toxin positive.

And we have seen really great success because physicians obviously in this state of urgency for patients want to make a very rapid diagnosis. So, where are we focusing our time? First of all, as you might imagine how patients present, and many of them in a hospital, our call points have expanded significantly. Yes, we are focused on hematologists and nephrologists, but we are also looking at a variety of different sites where those patients might present in the institutions, which is very important for us.

And then secondly, how would one order the Shiga-toxin and – not unlike our PNH experience, ordering the Shiga-toxin and ADAMTS13 test, and which labs would you send them to, and are those labs performing very good work and providing an accurate diagnosis very quickly in these cases?

And so our efforts are both with the physicians themselves to educate them on the pathway, but also the diagnostic labs, both national diagnostic labs, as well as local regional labs, so that those tests can be performed very, very quickly. And what we’ve seen so far is nice success. But given the rarity of the disease, much more work needs to be done with physicians and also the labs.

Brian Abraham – Wells Fargo Securities

Thanks, very much.

Operator

Our next question comes from Ying Huang with Barclays.

Ying Huang – Barclays

Thanks for taking my questions. I have a couple. Number one, with eventual approval hopefully in new indications including aHUS and then later maybe NMO and also (inaudible), do you guys expect more pricing pressure from Paris, especially Europe at all? What we are seeing with the U.K. is actually a isolated case.

And then, number two, do you think you are making more progress in terms of penetrating the enough hospital aHUS patients in the U.S.? Thanks.

Lenny Bell

Yeah. So, thanks very much for your thoughtful questions. So, I – what I would make a comment is that, as we said earlier this hour, if it is still only an hour that we have really over the last six years since we launched Soliris and PNH in 2007, we have always seen that there are significant challenges and opportunities in each of the now 50 countries in which we deliver Soliris to patients.

And I think, frankly, you know, over that time period there has been significant macroeconomic upheaval with a broad and deep global recession and austerity measures, you know, around the world and certainly including the United States. And despite that by staying focused, it takes us often several years with individual countries. Certainly the commonwealth countries are the most common. That would be the case. England and Australia last time with PNH was, you know, two-plus years and we see very similar now. We don’t really detect a different style, frankly, that we saw before. And it’s been difficult this entire time. We don’t detect that it’s becoming more so.

We’re very, very pleased, frankly. You know, I know that you are focused on England. It is, in our experience, an unprecedented concession by a government to publicly and specifically affirm that Soliris saves the lives of children, adults prior to an agreement with that government. It really is – it is absolutely remarkable. We understand, though, that the ministers have decided not to follow both the Agnes process as well as the Agnes recommendations.

And, you know, I think that a variety of parties in England are obviously concerned and certainly first and foremost, we have top of our concern, the patients who suffered for years with PNH. Unfortunately, with aHUS, obviously, they probably can’t afford to suffer that long. So I would anticipate that the common wisdom would be that if a government says that a treatment will save the lives of children and adults, I suspect that they’ll eventually act on that.

Lenny Bell

And I’ll just cover the second question about – I think it was related to the aHUS patients outside of the hospital. So, obviously, we have been characterizing the aHUS opportunity to serve patients. You know, they are the more urgent patients who’re showing up in the hospital with active TMA. And then there are some of the prevalent patients that maybe have had a history of TMA, maybe already have in-stage renal disease, maybe awaiting a transplant. Those patients tend to be more ambulatory for us at initial presentation. And we clearly with medical evidence suggesting that even patients who have had the disease for a longer period of time have extra renal complications from TMA, can benefit from long-term treatment. And we are, obviously, seeing some success in helping those patients gain access also.

Ying Huang – Barclays

Thanks very much.

Operator

(Operator Instructions) Our next question comes from Matt Roden with UBS.

Matth Roden – UBS

Great. Thanks for taking the question. I have one on 1102 and 1103. You mentioned you will be taking that to the regulators this year. Is that is a getting factor for you to progress into patients? And what are the patients we should be thinking about? Just trying to understand where this may fit in, whether we should think about this as a next gen subcu alternative to Soliris or whether or not this is something that would open up a completely different line of opportunity.

Lenny Bell

Yes, I think it’s a great question. Keep in mind this is a very unique inhibitor. The mechanism of action of this particular therapeutic candidate is very different from Soliris. So the objective of this Phase I study is really just to simply look at the safety. Try to get a better feel for how we can dose the drug with the pharmacodynamic and pharmacokinetics properties are of the molecule.

Ensure that we can demonstrate that we can look at mechanism of action and it is what we think it is. It is somewhat dating than to have that next discussion with the regulators about this early clinical data to then justify a program that will be a multi-dose program in a severe disease population.

Matth Roden – UBS

But just to clarify. We should think about this as sort of a new line of opportunity as opposed to something that could ultimately replace Soliris?

Lenny Bell

I think you can look at all of the above. I think that there are – depending upon what we see from the data and particularly focusing on what we learn regarding the mechanism of action, certainly I think we will have opportunities to go into new disease areas. But there may still be an opportunity also to look at it as a life cycle program.

Matth Roden – UBS

Okay. Great. Thank you so much.

Lenny Bell

You are welcome.

Operator

We will take our next question from Robyn Karnauskas with Deutsche Bank.

Robyn Karnauskas – Deutsche Bank

Hi, guys. Thanks for taking my question. Vikas just quick one for you. Can you just talk a little bit about how sustainable I think the cogs and the margin improvements are? And if you look at R&D spend instead of ramping up a little bit on R&D spend. How do we think about that going forward given you are going to be starting a lot more programs next year? Thanks.

Vikas Sinha

Yeah, Robyn, thanks for that question. So let’s take one by one. Cost of goods sold, I think 10%, we think it’s a sustainable thing. We are at this point not adding the HPP into the guidance. Because one of the things that’s going to happen this year in 2013 is that 30 million of the HPP production is going to be expensed into R&D. And that’s the reason why the R&D cost is higher and getting into a 19% level.

But over the long run I meant ‘13, ‘14 onwards we will be looking at getting closer to 17% to 18%. We have also on the SG&A side demonstrated a continuous reduction in the percentage of sales. This year we closed – 2012 we closed at around 31%. And with the guidance we are expecting to bring it down to 29% of sales. So that, I think we will need to continue to build also on the SG&A side and the global infrastructure for interest launch. But over time I think somewhere around 27%, 28% ranges is where we will land up with SG&A.

Robyn Karnauskas – Deutsche Bank

Great. Thank you.

Operator

We have time for one more question. Our last question comes from Terence Flynn with Goldman Sachs.

Terence Flynn – Goldman Sachs

Hi. Thanks for taking my question. I was just wondering in terms of how much data you will have from the asfotase alfa program when you actually meet with regulators and in mid-2013. And then anything you can tell us about the Japanese trial design you are running for asfotase alfa? Thanks.

Lenny Bell

Yes. So the data we will have of course will have the data from the additional infant study that was conduct by Anobia and that went into an extension phase. So we will have almost three years of data in the infant population. Also, almost three years of data from the juvenile population, again, that was initially started by Anobia its now into the extension phase on that trial as well.

We will have some data from a second infant trial that was done called the 1010 trial that was put in place after the initial infant trial was started. So we will actually have quite a bit of data for what we’re calling our pediatric indication, and that’s the data that we will take into our discussions with regulators mid-year to talk about the registration strategy.

Operator

That was our last question and this concludes today’s conference call. Thank you for your participation. You may now disconnect.

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