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Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)

Barclays Global Healthcare Conference

March 12, 2013 10:45 am ET

Executives

Vikas Sinha - Chief Financial Officer and Executive Vice President

Analysts

Ying Huang - Barclays Capital, Research Division

Ying Huang - Barclays Capital, Research Division

Everyone, thanks for joining us, and also for those who joined us on the webcast. The next company presenting is Alexion Pharmaceuticals. And -- oh, by the way, my name is Ying Huang, I'm the U.S. Biotech Analyst here at Barclays. So it gives me a lot pleasure to introduce my friend Vikas Sinha, who is the EVP and CFO of Alexion Pharmaceuticals. Obviously, Alexion has changed a lot since I first covered them a few years back. Now last year, actually marks the first year, their new product, Soliris, actually crossed $1 billion in global sales. So it's officially a blockbuster product in the therapeutic space.

So with that, let me just turn the podium to Vikas.

Vikas Sinha

Good morning and thanks, Ying, for inviting us to Barclays Conference in this beautiful Miami, and thanks for your kind words. I would be making some forward-looking statements today and would really recommend you to look -- review the risk factors that are outlined in our 10-Ks and 10-Qs.

Just to give a very quick highlight on Alexion, we are focused on innovation and commercialization of life-transforming therapies for patients with severe and life-threatening disorders that are ultra rare. Soliris is our first commercial product, and it is the first and only approved complement inhibitor in the world. Our first indication, PNH, is approved in our market and in 40 countries, and it's growing its core operations in U.S., Europe and Japan. As we move more into these countries, we're going deeper into our penetration.

Our second indication, aHUS, atypical hemolytic uremic syndrome, has been approved in U.S. and EU in 2011. U.S. launch has -- it's more than a year underway now, and launch is, in EU, is being expected throughout 2013.

Now growth in severe and ultra rare disorders beyond PNH and aHUS is 2 tracks. First, we are taking Soliris pipeline into more indications in rare and life-threatening disorders. We have 5 lead programs, STEC-HUS, NMO, myasthenia gravis, kidney transplant rejection and delayed graph function. I'll talk about it in few slides later. Additional indications are also under evaluation in transplant nephrology and hematology area.

Beyond Soliris, we have 4 additional highly innovative therapeutic candidates. Asfotase alfa, which we acquired through the acquisition of Enobia earlier last year. It's for a disease called hypophosphatasia. It is in advanced clinical studies now. cPMP replacement therapy is for molybdenum cofactor deficiency type A. Currently in preclinical, this was also acquired from a company in Germany.

ALXN1102 and 1103 is a unique inhibitors of alternate complement pathway. We acquired this from Taligen Therapeutics. And ALXN1107 is internally built, novel anti-inflammatory antibody, which is currently in Phase I studies, we'll talk more about this as we go forward.

We are profitable and we are growing our company significantly as we move forward, which also provides us significant operating leverage to the company. We have 1,400 employees globally, and we are selling in 50 countries.

Just in terms of financials. From 2011 to 2012, our top line grew by 45% to about $1.1 billion in sales. On the leverage side, we can see that on the profitability, our non-GAAP net income increased by 60% compared to 2011.

When we look at the regional mix, U.S. did 35% of the sales, Europe was 37%, out of the blue was 13% and Asia Pacific, which is mainly Japan, now has around 14% of the total overall pie. What is most important to look at is the U.S., with the launch of aHUS, full year launch, grew by 52% in 2012. And when we compare that with EU, which was only PNH growth, grew by 27%. Asia Pacific grew by 40%, mainly driven by Japan. And out of the blue, which is Latin America, Middle East and Eastern Europe, Russia, grew by 141%. Of course, one of the big growth drivers in 2012.

So reimbursement pieces has been supported by the life-threatening severity of PNH and aHUS. The clinical benefits that Soliris brings to the disease and a very small number of patients are needing this treatment.

Let's talk about PNH and aHUS, the key milestones in 2013 and subsequent years. It's -- in terms of PNH, it's the first indication addressed by Soliris. It's an acquired genetic complement inhibited deficiency affecting blood cells. It's defined by the presence of hemolysis. Patients suffer progressive disease burden and/or vital organ damage in this disease, and approximately 25% of patients die within 5 years of diagnosis.

When we look at aHUS, it is a genetic complement inhibitor unlike PNH, which is an acquired genetic deficiency. And in aHUS, it leads to clotting in small blood vessels throughout the body. Progressive and sudden damage happens to the vital organs, resulting in stroke, heart attack and renal failure. More than 50% of the patients die or have kidney failure or require dialysis within 1 year of diagnosis. So we see the sense of urgency in aHUS much higher in terms of a need for treatment. And Soliris is a targeted C5 complement inhibitor addressing both these disorders. All patients responded to Soliris in registration studies. And the studied PNH patients have subsequently been published to achieve normal longevity on long-term studies, while they have been on Soliris, to have achieved a normal life.

Now just to give you our progress in PNH. So we have -- we launched -- we're now penetrating in U.S. and EU. And as we do better diagnostics in these areas, we find more and more patients are coming in. Japan has also been launched and we're going deeper into the market. Turkey and Brazil came in, in 2012, we will be expanding into these markets in 2013. We have Russia, which came right at the end of the year last year, in the Q4, and the growth in Russia is expected this year. Additional countries will be launched in 2013 and beyond. And in U.S., Western Europe and Japan, we're expanding our field teams to support both PNS and aHUS. The U.S. field force expansion was completed last year. We were looking at European increase this year and Japan to follow. We're extending our reach in disease awareness campaigns throughout. Diagnostics initiatives are resulting in consistent identification of new patients with PNH, and continued study additions of new patients treated with Soliris has been seen year-after-year. We're also seeing clinical value proposition resulting in rapid treatment initiation.

On the emerging market side, we also find significant reimbursable populations in Turkey, Brazil and Russia. We have early stages of disease awareness here in diagnostics initiatives, and initial patients have been starting treatment right now. The next growth is also we're looking at Korea and Latin America contributing significantly in 2013 and beyond. In Latin America, we are well-established in Brazil, and we are now looking at Argentina, Colombia and Mexico as our focus area going forward.

Now beyond PNH, we're looking at aHUS where we launched in U.S. in 2011 and moving into '12 with the full year. We're looking at EU coming in, in 2013. And then Japan, Turkey, Brazil, beyond that, Russia following Turkey and Brazil, and additional countries will continue to be added here.

We have built a very strong foundation for global launch for aHUS that it took us almost 5, 6 years to build this for PNH. And now, with the aHUS launch, we are taking the advantage of the infrastructure that we have globally. We have very strong support from the export globally, publications are supporting Soliris as a first line treatment. aHUS diagnostics pathway is being introduced with very positive impact and 1 year after approvals, individual country launches plans are on track.

In terms of U.S., a broad range of patients are being diagnosed and treated with variable history of plasma exchange or plasma infusion, both children and adult are coming into the mix. In terms of the treating physicians, hematologist and nephrologists are the key drivers, but we're also seeing other specialties including internists, pediatricians and family practitioners helping us in terms of finding more patients.

In terms of individual country launches in Europe, Germany, the hospital reimbursements are expected end of Q1. In Italy, early access program has been initiated. In Netherlands, we have received an add-on status advantage facilitating access to hospital reimbursement. In U.K., we have received a very positive recommendation from AGNSS. And we will be now moving into discussions with NICE later this year. France and Spain, reimbursement process is continuing towards mid-2013, and we're looking at individual country launches starting in second half of 2013 as processes conclude. Japan registration filing recently submitted for aHUS. We're expecting launch in 2014.

And expanding Soliris into new severe and ultra-rare disorders, beyond aHUS and PNH, we're focusing on expanding a global franchise, keeping our focus on severe and ultra-rare disorders, diseases which are devastating or life-threatening medical consequences, which -- where we have no therapy or the current therapy is ineffective, we understand the disease mechanism as target for complement blockade, and we can bring potential for transformative impact on patients' lives. We have 5 of those in the works right now. STEC-HUS is the first one we are in a very advanced clinical trials. Neuromyelitis optica, which the Phase II was completed this year and last year, and now we're moving into Phase III. Acute humoral rejection in kidney transplant, this is for both disease and living kidney transplants. And delayed transplant graft function where investigating initiative trial is running right now. And myasthenia gravis, which we will start patient recruitment later this year.

So going into the milestones for each one of them. For STEC-HUS, we have to obtain and analyze additional control data. We target second half of 2013 for filing. For NMO, completing regulatory discussions and then commencing a single registration trial in second half of 2013. For kidney transplant, we're completing our multinational Phase II disease donor kidney transplant trial and completing enrollment in multinational Phase II living donor kidney transplant trial this year, and accelerating the DGF program, which is currently in investigative initial trial. In myasthenia gravis, we're targeting second half for the trial initiation.

Now growing into other disorders, where ultra-rare programs with highly innovative candidates, we want to focus on what we know well and do well, apply bench to bedside skills development in PNH and aHUS to additional severe ultra-rare disease settings. We want to seek to only develop therapies with transformative impact on patient's lives. And leverage development and commercial skills with both internal and external opportunities. Keeping this in mind, we have 4 areas we are focused on: first is the asfotase alfa, which we acquired from the acquisition of Enobia; cPMP was acquired from a German company; and ALXN1102 and ALXN1103, came in from Taligen; and ALXN1107 anti-inflammatory antibody, which is home-built.

Now talking about each one of them. HPP is a severe ultra-rare and life threatening genetic metabolic disorder. It is characterized by deficient tissue nonspecific form of alkaline phosphatase. If you look at the x-rays on the side, a normal 9-month old, the bone structure on an HPP patient, you can see so much fluid in the HPP patient. It leads into progressive vital organ damages, including destruction, deformity of bone, profound muscle weakness, seizures, impaired renal function and respiratory failure. 50% of newborn patient die within 1 year. Asfotase alfa is a highly innovative approach directly addressing cause of the disease. This targets the alkaline phosphatase to replace the missing tissue nonspecific form in deficient tissue, reverses metabolic consequences of HPP and potential life transforming therapy.

So we're optimizing currently the first-generation manufacturing process, which is completed, advanced pediatric programs towards a filing in 2014, we're completing the infant natural history studies and we're initiating juvenile, double-blinded, placebo controlled HPP study. Complete current adult study to design follow-on trial, and then accelerate asfotase alfa registration program in Japan. Continue current enrollment and ongoing registration study in Japan towards 2014 completion.

In terms of cPMP, commencing the clinical studies near midyear. And in terms of ALXN1102 and ALXN1103, we discussed the trial and development programs with regulators. In terms of 1107, complete the single-dose Phase I clinical study, then initiate the multi-dose Phase I clinical study and then explore development across multiple severe and rare conditions.

In terms of top line objectives for 2013, the key development milestone: Registration submission 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 in HPP; key data publication presentations in aHUS, STEC-HUS, kidney transplant and HPP; trial enrollment completion across several lead programs.

In terms of commercial and financial objectives for 2013: Continue to aggressively grow global Soliris revenue from PNH into seventh year; continue to expand into additional larger countries for PNH; aggressively broaden Soliris launch of aHUS in U.S.; initiate country-based launches in Western Europe; and maintain strong financial discipline as we expand R&D and commercial operations.

Our guidance for 2013: Revenues to increase by 23% to $1.49 billion to $1.505 billion; non-GAAP EPS increase by 27% over 2012 to $2.82 per share to $2.92 per share; R&D, $285 million to $295 million, approximately 19% of sales; SG&A, $425 million to $435 million, approximately 29% of sales, this has been reduced from 31% in 2012; GAAP tax rate will be reduced from 33% in 2012, now to 29% to 31%; and non-GAAP tax rate to be expected around 7% to 9%.

As we build our organization, we will continue to focus on keeping our financial discipline as we expand our global presence and our pipeline in ultra-rare disorders.

Thank you very much. And Ying, I think the Q&A is in the breakout room.

Ying Huang - Barclays Capital, Research Division

Yes, the breakout will be at Point Vienna 2, it's on this level. Thank you, Vikas.

Vikas Sinha

Thanks a lot.

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