Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Alexion Pharmaceuticals (NASDAQ:ALXN)

Q3 2013 Earnings Call

October 24, 2013 10:00 am ET

Executives

Irving Adler - Executive Director of Corporate Communications

Leonard Bell - Co-Founder, Chief Executive Officer, Treasurer and Director

Vikas Sinha - Chief Financial Officer and Executive Vice President

David L. Hallal - Chief Commercial Officer and Executive Vice President

Martin MacKay - Global Head of Research & Development and Executive Vice President

Analysts

Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division

Eric Schmidt - Cowen and Company, LLC, Research Division

Rachel L. McMinn - BofA Merrill Lynch, Research Division

Salveen J. Richter - Canaccord Genuity, Research Division

David Friedman - Morgan Stanley, Research Division

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Matthew Roden - UBS Investment Bank, Research Division

Brian Corey Abrahams - Wells Fargo Securities, LLC, Research Division

Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division

Yaron Werber - Citigroup Inc, Research Division

Mohit Bansel

Howard Liang - Leerink Swann LLC, Research Division

Eun K. Yang - Jefferies LLC, Research Division

Bret Holley - Guggenheim Securities, LLC, Research Division

Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division

Operator

Good morning, and welcome, to the Alexion Pharmaceuticals Incorporated Second Quarter 2013 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 of Corporate Communications. Please go ahead, sir.

Irving Adler

Thank you operator. Good morning, and thanks, everyone, for joining us on today's call to discuss Alexion's performance for the third quarter 2013 and our outlook for the remainder of this year. Today's call will be led by Dr. Leonard Bell, our Chief Executive Officer. Lenny will be joined by members of Alexion management; Vikas Sinha, Executive Vice President and Chief Financial Officer; David Hallal, Executive Vice President and Chief Commercial Officer; Martin MacKay, Executive Vice President and Global Head of R&D; Steve Squinto, Executive Vice President and Chief Global Operations Officer; and Saqib Islam, Senior Vice President and Chief Strategy and Portfolio Officer.

Before we begin, I'd like to note that during this 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 filings with the SEC. Any forward-looking statements apply 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 are adjusted from our U.S. GAAP operating results for certain items that we 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?

Leonard Bell

Thank you, Irving. In the third quarter of 2013, Alexion's global organization continues o execute strongly on our mission to develop and deliver life-transforming therapies to patients with severe and life-threatening disorders that are also ultra rare. During the quarter, our Commercial operations teams provided Soliris to an increasing number of patients with PNH and aHUS worldwide. And our R&D team advanced our 10 lead development programs toward our anticipated 6 product approvals, starting in 2014.

Looking first at our commercial operations in PNH in Q3, we again continue to demonstrate a strong uptake of Soliris therapy in our core territories. This reflects the progress we have made in helping physicians to continue to diagnose patients with PNH, either from a significant prevalent population or the national incidence of new cases PNH that have developed each year. We are confident that we have a significant opportunity o serve even more patients with PNH in both our most established markets as well as in new countries. Our continued PNH growth in the U.S., Western Europe and Japan was, again, augmented by our progress in Turkey, Brazil and Russia, together with the growing contribution from Latin America.

Turning to our aHUS launch, we continue to be pleased with a steady addition of new patients in the United States during Q3, and with our initial progress in key European countries. In particular, we're pleased that in mid-September NHS England nationally commissioned Soliris for aHUS, under a broad policy which we expect will form the basis of ongoing access to Soliris through the anticipated NICE decision in 2014. Beyond the United States and Europe, an important milestone was reached when Soliris was approved for aHUS in Japan late in Q3. With initial aHUS patients commencing therapy in Q4, we are pleased that we will enter 2014 with our aHUS operations fully in place in Japan, as we increase our momentum to serve more patients around the world.

In Q3, we continue to experience the positive impact of our selective country sale team expansion on our individual country performance. Enabling us to more rapidly identify both PNH and aHUS patients. Looking forward, we are increasingly confident in our ability to continue to strongly grow the number of patients we serve with both of these severe and life-threatening disorders. Additionally, the ongoing strength of the global aHUS launch, continues to reaffirm our view that our opportunity to serve these patients is at least as large as our opportunity to serve patients with PNH, and perhaps larger. For example, in the United States, there are now more patients receiving Soliris for aHUS than there were patients receiving Soliris at a similar time following PNH approval.

Turning to R&D. Q3 was another noteworthy quarter across the breadth of our development pipeline. I would like to note 5 items in particular. First, in July, regulators in both the United States and Europe granted orphan drug status to Soliris for NMO. Second, in September, researchers presented positive preliminary data from the eculizumab deceased-donor AMR kidney transplant study. Third, researchers presented strongly positive asfotase alfa data in a broader population of infants and young children with HPP. These data are consistent with earlier results as we continue to drive toward our worldwide regulatory filings in pediatric onset HPP in 2014. Fourth, we have recently had positive discussions with the FDA regarding our program in DGF. And as a consequence, we are now planning a single multinational registration study, which we anticipate commencing in 2014. And finally, this morning we announced that our cPMP replacement therapy has been designated as a breakthrough therapy by the FDA as a potential treatment for patients with MoCD Type A.

During Q3, we also continued to make steady progress in the global expansion of our manufacturing and supply chain operations. We continue to implement improvements in our Rhode Island manufacturing and quality operations, and look forward to the FDA reinspection of this facility in the first half of 2014.

I'm pleased also to note that, following the EU approval in Q2, the FDA has now also approved the Singapore contract facility as a new and additional source for the manufacture of Soliris. And finally, we continue the rapid rollout of our technical and quality operations in Dublin, Ireland, an important element in the expansion of our global supply platform.

As we have discussed previously, and based only on what we currently have in the pipeline at this point, we anticipate a series of 6 potential major product approvals between 2014 and 2018, starting with our second product asfotase alfa in late 2014, and then followed by Soliris in the deceased- and living-donor kidney transplant settings; Soliris in delayed graft function; Soliris in one or more neurology indications; our third product, cPMP, for infants with MoCD Type A; and we expect to launch one or more of our next-generation follow-on products to Soliris within the same 2014 to 2018 period.

As we advance towards these 6 potential product approvals, we expect more than 10 key development milestones in 2014 alone. As Martin will describe further, these include, with regard to asfotase alfa, our U.S., EU and Japan filings for marketing approval.

In AMR, the completion of enrollment and dosing in both our ongoing living-donor AMR study and our newly expanded deceased-donor study, as well as the availability of additional clinical data. For each of DGF, NMO and MG, significant advances in enrollment of the single registration study in each of these indications.

For cPMP, acceleration of our program with completion of the retrospective data collection study, completion of enrollment in the natural history study and initiation of the synthetic cPMP bridging study in patients with MoCD Type A.

For ALXN1007, the initiation of 2 different Phase II proof-of-concept clinical studies in patients with severe and ultra-rare disorders.

And finally, turning to our next generation Soliris candidates, we expect to initiate clinical studies with our first 2 molecules in 2014.

Turning briefly to our financial performance. Our Q3 results reflected 36% growth in revenues and 39% growth in non-GAAP net income year-on-year. This continued strong performance has enabled us to increase our 2013 guidance for both revenues and net income for the third time this year.

At this point I'll turn the call over to Vikas for a closer look at our third quarter financial performance and our expectations for the remainder of 2013. Vikas?

Vikas Sinha

Thanks, Lenny. As we reported in this morning's press release, Q3 2013 was another period of strong financial performance for the company. We, again, achieved steady growth in revenues and profits from our PNH and aHUS operations, as well as robust cash flow.

I would like to highlight a few points regarding our Q3 results, and then point to some key considerations regarding the final quarter of 2013.

Soliris sales in Q3 were $400.4 million, a 36% increase compared to Q3 2012. Our PNH operations continued to grow strongly in all our territories. In aHUS, we are gratified by the steady uptake of Soliris in the U.S. and by our continued reimbursement progress in Western Europe during Q3.

Our strong sales performance Q3 was combined with ongoing control of both SG&A and R&D expenses, resulting in a 39% increase in non-GAAP net income, to $168 million, compared to Q3 2012 or $0.83 per share in the second quarter.

Looking at our balance sheet. Cash, cash equivalents at quarter-end grew by $184 million to $1.3 billion. This reflects continued strong positive cash flow from our business during the quarter.

Our Q3 GAAP results also reflected expenses totaling $20.7 million associated with two matters: a license payment under new drug discovery collaboration, as well as the settlement and dismissal of the Novartis IP litigation. These amounts are excluded from our non-GAAP results.

Turning to our guidance. We are now raising our 2013 revenue guidance to the higher and narrower range of $1,535,000,000 to $1,540,000,000. This improved revenue performance, coupled with continued discipline in our operating and manufacturing expenses, is enabling us to meaningfully improve our 2013 non-GAAP EPS guidance to the higher and narrower range of $3.02 to $3.04.

I also note, that we are narrowing our R&D guidance to the range of $2.80 million to $2.85 million. SG&A is also being narrowed to the range of $440 million to $445 million.

Other items of our 2013 guidance are being reiterated. We expect that R&D expenses will increase in the fourth quarter as we continue to advance our lead development programs. As in the past, we expect that SG&A in Q4 will reflect the impact of major medical conferences and our expanded healthcare provider programs.

We are pleased with our progress in the third quarter of the year and our plans for the future. At this point, I'll turn the call over to David. David?

David L. Hallal

Thanks Vikas. In the third quarter of 2013, global revenues from our Soliris operations increased by a robust 36% compared to the same period last year. We continue to grow our PNH operations by achieving deeper penetration in the nearly 50 countries in which we serve patients. And in aHUS, we served an increasing number of patients in the U.S. and Western Europe. In addition, we received our aHUS approval in Japan in mid-September, and we are now beginning to serve initial patients with aHUS there.

During Q3, we observed the steady and continuing impact of our PNH disease awareness and diagnostic initiatives in our core territories, with the significant addition of new patients with PNH starting treatment with Soliris. In Q3, as in prior quarters, the majority of patients newly starting on Soliris were also newly diagnosed with PNH. We are gratified that our ongoing educational efforts are leading to higher rates of accurate diagnoses of PNH. We are confident that we have a significant opportunity to serve even more patients with PNH, in both our most established markets, as well as in new countries. Beyond our core territories, we continue to expand our PNH operations in additional major countries during Q3. We observed a steady rate of new patient identification and Soliris treatment initiation in Turkey, Brazil and Russia. We expect consistent growth in these countries over time, and we're increasingly confident that the aggregate of these 3 markets provides us with an opportunity to serve patients that is similar in size to the U.S. market.

Initial patients are now starting receive Soliris in South Korea, the next major country in our global PNH rollout. In addition, in Latin America, an increasing number of PNH patients are starting on Soliris, notably in Argentina and Colombia.

I would note that the aHUS launch continues to benefit our PNH operations. Sales team expansions on a country-by-country basis enable us to more rapidly identify PNH and aHUS patients. Looking forward, we are increasingly confident in our ability to continue to strongly grow the number of patients we serve with these severe and life-threatening disorders.

Turning now to aHUS. In Q3, our efforts again resulted in a steady increase in the number of new patients, in the U.S., commencing Soliris therapy, with the majority of patients starting on Soliris often presenting urgently with the life-threatening thrombotic microangiopathy or TMA.

I am also pleased to report significant progress with the reimbursement processes in key European countries during the quarter. Starting with England, during Q3, NHS England nationally commissioned Soliris for the treatment of children and adults with aHUS. We expect that this new and very brought aHUS policy will form the basis of ongoing access to Soliris. The NICE decision is anticipated in 2014.

In Spain, near the end of the quarter, we obtained an agreement with the federal government regarding the use of Soliris for patients with aHUS. This now enables us to begin the reimbursement processes in individual provinces.

In Germany, in Q3, we continue to see an increasing number of aHUS patients diagnosed and treated by hospital-based nephrologists and hematologists.

In France, we continue to advance reimbursement discussions with the government and we will progress these discussions through the remainder of the year.

In Italy, during Q3, the government continued to provide Solaris through an early access program, as we advance through the reimbursement process to cover all patients with aHUS.

In Belgium, as previously discussed, funding for aHUS commenced in July. In Europe, with our significant progress year-to-date, we look forward to completing the reimbursement processes and transitioning to broader access policies in 2014.

Elsewhere, in our EMEA region, we continue to serve initial aHUS patients in Turkey in Q3. Beyond the U.S. and Europe, we were pleased that Soliris was also approved for aHUS in Japan late in Q3. As in the U.S., we have expanded our sales team in Japan to launch aHUS to hematologists and nephrologists, while the team continues to support our PNH initiatives in our smaller territories. Initial aHUS patients in Japan will begin therapy in Q4 as we obtain the necessary listings on hospital formularies.

The ongoing strength of the global aHUS launch continues to reaffirm our view that our opportunity to serve these patients is at least as large as our opportunity to serve patients with PNH and perhaps larger. For example, as one key measure, looking at the U.S. today, now 2 years post approval for aHUS, there are more patients receiving Soliris for aHUS than there were patients receiving Soliris 2 years following the PNH approval. Our view is that the incidence of aHUS is likely higher than the incidence of PNH.

While we are pleased with these aHUS results to date, we believe greater opportunities exist to work with physicians. In particular, our experience shows that high physician conviction in the diagnosis of aHUS, combined with the clear understanding of the chronic life-threatening nature of the disease and the necessity of sustained compliment blockade, maximizes optimal long-term patient outcomes and minimizes patient risk from life-threatening complications of TMA.

To support the aHUS community, we are developing enhanced disease awareness programs, further underscored by the very positive 3-year chronic Soliris treatment data being presented at ASN. As a result, we expect that physicians will increasingly appreciate the genetic and lifelong nature of aHUS and the optimal outcomes achieved with chronic Soliris treatment.

We look forward to serving more patients with PNH and aHUS in more countries in the remainder of 2013 and with a strong start to 2014. Beyond our current commercial operations, we anticipate a series of 6 potential major product approvals between 2014 and 2018, starting with our second product asfotase alfa in late 2014.

At this point, I'll turn the call over to Martin for a look at our development programs. Martin?

Martin MacKay

Thanks, David. I am pleased to provide an update on key milestones in our 10 lead development programs as well as a wider view of how we are continuing to build the momentum of our global R&D organization to support an expanding yet highly-focused portfolio of clinical initiatives across multiple therapeutic areas.

To begin, I would like to discuss the progress of our development programs with eculizumab, starting with antibody-mediated rejection or AMR in kidney transplant.

I am pleased to report that during the quarter, we presented positive preliminary data at the European Society for Organ Transplantation meeting from our eculizumab multinational deceased-donor AMR trial. These data indicate that eculizumab may be an effective prophylaxis against acute AMR in highly-sensitized deceased-donor kidney recipients. In this study, the composite primary endpoint was a 9-week occurrence of post-transplantation treatment failure, which occurred in 10.6% of the 47 patients reported, including a 6.4% rate of AMR compared to an expected 30% rate of AMR in this highly-sensitized population of kidney transplant recipients.

Given the increasingly strong physician demand for eculizumab in the deceased-donor AMR setting, the positive preliminary data and the anticipated regulatory value of strengthening the data set with greater patient numbers, we have decided to now expand the study by enrolling more patients. Looking ahead into 2014, we anticipate the completion of enrollment and dosing in both our ongoing living-donor AMR study and our newly expanded deceased-donor study, and the availability of additional primary endpoint data from the deceased-donor study. We will also explore the potential to provide initial primary endpoint data from the living-donor study during 2014, prior to the anticipated 12 month follow-up data.

In our delayed graft function, or DGF program, we have now met with the FDA to discuss plans for a company-sponsored multinational study with eculizumab, and we expect to meet with the EMEA next month. Based on these discussions to date, we are now planning a single multinational DGF registration study, which we anticipate commencing in 2014.

Turning, now, to our neurology program, in neuromyelitis optica or NMO, we are on track to conduct a single registration trial with eculizumab in relapsing NMO. Based on new clinical information that recently became available, we have further strengthened the study designing to include a broader population of patients that continue to have relapses despite best available therapy. This will lead to more rapid enrollment of the study, which we now expect to commence in the first quarter of 2014.

In refractory myasthenia gravis or MG, we have also finalized the protocol for a single registration trial in, and plan to commence a study by the end of this year. Further, with regard to the lifecycle management of Soliris, well through the 2020s, we expect to advance 2 or more next-generation molecules into the clinic during 2014.

Finally, with regard to STEC-HUS, we have met with key investigators in Germany to discuss the longer-term clinical outcomes, from patients treated with best supportive care during the 2011 E. coli crisis as a potential control population. In light of the broad consensus that the most severely ill patients during the German crisis preferentially received Soliris as opposed to supportive care only, we recognize the increasing difficulty of identifying a suitable control population. Nonetheless, we and the investigators continue to analyze additional data, which we expect to continue through the end of the year.

I will now turn to our lead development programs with our second highly individual product candidate asfotase alfa. We were very pleased this quarter to announce new and strongly positive data in infant and young children with hypophosphatasia or HPP. Interim results were presented from an ongoing multinational phase II open-label study that enrolled 15 infants and children with HPP, representing a range of HPP characteristics. This study met its primary endpoint. Infants and young children with HPP treated with asfotase alfa had significant improvement in skeletal mineralization from baseline, as assessed radiographically, after 24 weeks of treatment. This response was observed as early as 12 weeks and improvement continued at 48 weeks. At 48 weeks, 100% of evaluable patients were clinically significant responders. 93% of the patients survived the first 48 weeks of treatment, with 80% of patients having improved respiratory status or requiring no respiratory support at the final analysis. Following the publication of positive infant data in the New England Journal of Medicine last year, we are excited about the current results, as they provide us with data in a broader patient population of infants and children.

We also continue to collect additional data as we work towards completing our registration program. We are pleased the our initial analysis, of infant natural history study, is strongly supportive of our anticipated filing. Following regulatory discussions, we have also determined that we will not now need to conduct a pre-approval placebo-controlled study in juveniles, and will instead conduct a natural history study in juveniles with HPP.

We expect to file for marketing authorization for pediatric onset HPP in the U.S. and Europe in 2014, and we also expect to file for approval in Japan in 2014.

Beyond asfotase alfa, we're evaluating additional highly innovative therapeutic candidates as treatment for patients with severe and life-threatening disorders that are also ultra-rare.

In our metabolic disease area, we continue to accelerate development of our cPMP Replacement Therapy, which has just received breakthrough designation for the treatment of patients with Molybdenum Cofactor Deficiency Type A, an ultra-rare genetic metabolic disorder that causes catastrophic neurologic damage in newborns.

We are moving this program to forward on 3 levels. First, we're continuing with a retrospective data collection from the small number of individual newborns with MoCD, who have been being treated with the earlier from of cPMP. Second, I am pleased to report that now we have initiated a natural history study in MoCD patients. And third, having completed doing with our synthetic cPMP, and a study of healthy volunteers, we expect to initiate a synthetic cPMP bridging study in 2014.

With regard to ALXN1007, our novel anti-inflammatory antibody, I am now pleased to report that the PK/PD, and safety results from the single-dose study, allowed us to progress to a multi-dose Phase I clinical study in healthy volunteers. In addition, I am also pleased to announce that we have recently met with regulators to discuss the initiation of a Phase II proof-of-concept study in patients, which we expect to commence in early 2014. As we discussed, we are exploring parallel development of ALXN1007 in additional severe life-threatening and ultra-rare conditions. And finally, enrollment continues in a Phase I study of ALXN1102, ALXN1103 our novel alternative pathway complement inhibitor.

As we improved the effectiveness of our R&D organization to accelerate our in-house lead programs, we remain keenly focused on targeting our disciplined financial investment to programs with the potential to provide dramatic breakthrough medical value to patients with devastating and ultra-rare disorders.

In addition, our broader capabilities in translational medicine, clinical operations, medical sciences and regulatory affairs, position us to further expand our research and development pipeline by accessing a range of promising new technologies and assets. We will do this through disciplined research collaborations, licensing and acquisitions. Where, as with our in-house programs, our focus remains on therapeutic candidates with life-transforming potential.

In summary, we look forward to achieving more than 10 key development milestones in 2014, including our U.S., EU and Japan filings for marketing approval for asfotase alfa. In AMR, the completion of enrollment, and dosing in both our ongoing living-donor AMR study and our newly expanded deceased-donor study, as well as data presentations. For DGS, NMO and MG, significant advances enrollment of our single registration studies.

For cPMP, the acceleration of our development program, with completion of the retrospective data collection study, completion of enrollment in the natural history study and initiation of the bridging study in patients with MoCD Type A.

For ALXN1007, the initiation of 2 Phase II proof-of-concept clinical studies. And for our next-generation Soliris candidates, initiation of the first clinical study with 2 candidates. I look forward to updating you on these programs on future calls. I will now turn the call back to Lenny. Lenny?.

Leonard Bell

Thanks, Martin. In the third quarter of 2013, we accomplished a significant number of important clinical and commercial milestones while continuing to build our global organization to serve more patients worldwide in 2014 and future years.

As always, we thank everyone who makes our work possible, including employees, researchers, physicians, shareholders and, especially, patients and their families. Working together we can expect to reach many additional milestones in the years ahead. Operator, we'll now take questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we will take our first question from Geoff Meacham with JPMorgan.

Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division

I guess I'll just ask one, but I wanted to talk about the -- you guys have talked about the aHUS opportunity in Japan. Are there any subtleties in practice or in patient identification that you can point to when you compare to the U.S. or Europe? I just want to get a sense for the ramp potential.

David L. Hallal

Yes. Just thinking back to the aHUS launch, Q4 2011, as we described with aHUS, different from PNH, there isn't necessarily as a large prevalent pool of patients, given the high levels of mortality and patients that progress to ESRD with aHUS. And so, just as we saw in the U.S., we would expect that there'll be a combination of patients from a smaller prevalent pool, not necessarily a lot of pent-up demand, but that our team would be in place to begin to help initial patients who are newly presenting with TMA. So we would expect that same type of pattern, as we've expanded our sales team in Japan, that we saw in the U.S.

Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division

There is no -- just related to that, there's no registry or patient identification that was done ahead of time?

David L. Hallal

From an Alexion perspective, like in the U.S., what we try to do for our expanded sales team is provide them some information on where the nephrologists and hematologists are, that are more likely to have had experience with TMA and see those types of patients.

Irving Adler

And, you know, Geoff also had plenty, [ph] But we'd certainly would expect that, as David described, the vast majority of patients commencing Soliris treatment are patients who are presenting with rapidly progressive TMA. So in essence, long-term identification, quarters or years in advance, unfortunately, wouldn't serve those patients best.

Operator

And our next question comes from Eric Schmidt with Cowen Investments.

Eric Schmidt - Cowen and Company, LLC, Research Division

Probably another question for David on aHUS. It sounds like you think you can do a little bit better with persistency of dosing. Could you tell us what percent of patients you think might be getting the drug in a more acute versus chronic setting? And then, maybe you could provide a little bit of insight into any pricing concessions that you're being required to take in Europe to get approved reimbursement?

Leonard Bell

Yes. So first, on the compliance side, as I have noted in past calls, we have observed that compliance in aHUS is generally good, but less than what we have historically seen with the very high levels for PNH. We have observed, and I did allude to this in the call, that when there is very strong physician conviction for the diagnosis of aHUS, and a very good understanding of the chronic, lifelong genetic nature of the disease, that we are seeing very, very successful opportunities to serve patients over the long run. As you know, from our clinical trials, not every patient, for example, is going to be identified with a genetic mutation. And that was a myth that we were addressing with our disease awareness program, at launch, is that anywhere from 30% to 50% of patients will not have an identifiable mutation. That's an example of, with further education, helping physicians have a greater conviction for making that diagnosis. And when that's in place, there is, generally, a much better understanding as to the need of Soliris, chronically. And then, as I mentioned at ASN, we're looking forward to the presentation of our three-year data, where Soliris was provided chronically with those patients, where we have seen, over time, improved and sustained patient outcomes, as it relates to hematologic and, also, renal outcomes. The second part of your question regarding pricing, what we have generally seen when we look at most products in most European countries, there is typically an annual price revision. I think it's important that I note the following: PNH and aHUS are each life-threatening disorders in which Soliris has a life-transforming impact; PNH and aHUS are ultra-rare, such that both diseases, in aggregate, still fall well within the parameters of being considered ultra-rare, or an ultra-orphan drug. aHUS disproportionately is affecting young children and is associated with the even higher rates of severe morbidities and mortality of PNH. And I think, in light of the efficacy of Soliris for the patients with both PNH and aHUS, which is confirmed by the label, we're anticipating that governments will recognize the value for Soliris with aHUS, and we would anticipate smaller and less frequent price revisions than are typically seen with other products.

Operator

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

Rachel L. McMinn - BofA Merrill Lynch, Research Division

If I can squeeze in part A and a part B. For part A, can you just clarify your filing timelines for asfotase alfa and, I guess, I'm trying to understand just your view, has that changed for adults, potentially, in the label? And then, just as a part B, I'm curious if there's been any change in your view on going into dry AMD following the Roche data?

Leonard Bell

Thanks, Rachel. In terms of our HPP filing plans, clearly, the breakthrough designation that we got, earlier in the year, was very positive, and that's really allowed us to have more frequent discussions with the regulators and, clearly, the fact that we will not have to do this pre-approval, placebo-controlled trial is encouraging. We will, though, have to do a natural history study. So in terms of the timelines, I don't think they're going to affected in that respect, this won't accelerate. And maybe to punctuate those timelines, we're really looking at midyear 2014. We continue to have discussions with regulators in the United States, Europe and, of course, Japan, now. But that's the timeline that we're looking at.

Vikas Sinha

And Rachel, regarding Part B, subpart 1, little i double a, we actually, as you know, have a...

Rachel L. McMinn - BofA Merrill Lynch, Research Division

I can add some more, yes.

Leonard Bell

That's why... now, give me the nomenclature so we keep track of them. I thought, otherwise, other people would get lost in the call. So I think that we have a -- we believe, confidently, that we have a portfolio, actually, a pretty broad portfolio, as it turns out, of novel, highly innovative asset focused on targeting competent multiple different steps in the cascade. Virtually, all of which are applicable, frankly, should we look to go forward in the multitude of different eye disorders. And it's something that we're constantly focused on and, frankly, our focus has increased somewhat. I think that was Part F, though.

Operator

And our next question from Salveen Richter with Canaccord.

Salveen J. Richter - Canaccord Genuity, Research Division

.

And just with regard to asfotase alfa, just trying to understand when you look at the onset of disease per age group, how do you think of the proportion of those who show signs and symptoms as peds versus older? And how should we think about the severity of these cases as they progress?

Leonard Bell

Yes. So, Salveen, we're in the very early stages, as I've indicated in previous calls, as we've established a metabolic therapeutic area to prepare for, a launch late in 2014. We're still accessing it, as with any ultra-rare disease, it's just really hard to tell and the literature, in general, points you in different directions, depending on when the incidence and prevalence studies were done. What our hope is, is that, over time, we'll have a much better feel for the proportion of patients, one, that have HPT, two, when their onset of symptoms were, and three, how old they are at that time in which we identify them. And I think that those are the key factors that will give us a better understanding in the future.

Salveen J. Richter - Canaccord Genuity, Research Division

Great. And then, just for the timelines again, so you're expecting to file by midyear, but then, have drug the approved by year end, in U.S. So you're expecting kind of a short turnaround time there?

Leonard Bell

That's our current expectation.

Operator

And next, we go to David Friedman with Morgan Stanley.

David Friedman - Morgan Stanley, Research Division

I was wondering if you could talk a little bit more about the delayed-graft function Phase III program? I guess is there anything you can share around what type of data you shared with the regulators and anything around the trial design at all?

Martin MacKay

Thank you, David. I'll speak to both parts of your questions. Clearly, we've had data from previous studies and from our deceased-donor study. And of course, with the expanding of that latter study, we'll expect to gain more DGF data into 2014. Our discussions with the regulators were very much around that data and, most importantly, have allowed us to plan for the single, multicenter registration study in DGF, which we feel very positive about and will start in 2014. So clearly, it was a combination of those data -- more data to come and also the positive discussions with the regulators.

Operator

And next we go to Terence Flynn with Goldman Sachs.

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

So just one point of clarification on asfotase alfa. I was wondering if the juvenile natural history trial, is a gating factor to filing or if that's just kind of a post-approval commitment? And then, separately, any thoughts on patient registry for asfotase alfa or for HPP?

Martin MacKay

Yes. Two parts of your question there, thank you. We see it as actually being pre-approval. In saying that, we are continuing to have discussions with the regulators because of the infantile data, as you know, both from the New England paper that we published last year and also the natural history study, which we are beginning to look at results from that, so both positive. But we would see, as our preapproval commitment. And then, in terms of the second part of your question, could you just remind me?

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Sure. Just a patient registry for HPP, is there any thing currently in place, or is that something you guys are working on?

Martin MacKay

Yes, indeed, we are working on it. And it really relates to David's answer which was exactly right. As we understand this disease more, both in terms of the heterogeneity of the disease, the spread about -- across ages, and also the onset at different age. The registry I believe will provide us with some really very helpful data as we continue with this program.

Operator

And next we will go two Matthew Roden with UBS.

Matthew Roden - UBS Investment Bank, Research Division

Great. I was just wondering if you can help me better understand what you mean by the cPMP bridging study? Is this about getting at the synthetic form into patients managed on the prior form of the drug? Or is that something else? And then, bigger picture, what types of clinical studies do you think you're going to need ultimately to gain approval in this indication?

Martin MacKay

Yes, you've really answered the question, it's exactly that. It's using this synthetic form of the product in patients that had previously used the recombinant form. Clearly, going forward, beyond that, we will use the synthetic form. In terms of the clinical studies, it's a really very good question. And again, as we begin to understand the pathophysiology of this disease, the risk of stating the obvious, what we would like are patients to be treated as early as possible and, of course, that commands some quite [ph] Study, some greater understanding of the disease and also working with physicians that are knowledgeable in this area. But the bottom line is, the earlier that we treat, we believe the cPMP replacement therapy will be the most effective.

Operator

And next we go to Brian Abrahams with Wells Fargo.

Brian Corey Abrahams - Wells Fargo Securities, LLC, Research Division

Question on NMO. I know you've always looked at the balance between finding the broadest population that could benefit with preserving Soliris' value proposition. So I am curious as to what specific data led you to expand into this broader population and how that might influence the potential label and its place in the NMO treatment paradigm down the line.

Martin MacKay

Brian, I actually won't go into the specific data. It's new data, clinically, derived working with key collaborators and what was clear and why we amended the protocol is that by understanding those data, we could have access to a broader population of patients. This will allow us to enroll better and faster. Although, as you may imagine, with the amendment we take a slight delay in start, but most importantly, to really identify the patients that will most benefit from eculizumab.

Operator

And next we go to Chris Raymond with Robert Baird.

Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division

Just a question on MoCD. So I think, looking back at what you guys have said in the past about it, it's -- there's not a ton of information about the patient population and it's obviously the market size. It seems like you guys -- if you move the ball a bit here in terms of -- with the FDA. And so you're getting a little closer. Can you maybe give us -- how should we thinking about this opportunity? And what efforts, I guess, do you guys have in terms of understanding exactly where this market could be in terms of size?

David L. Hallal

The short answer is, we are not sure. And it's largely because the disease is rare and it's generally it's lethal. And as a result without really any therapy, that can help patients with this horrible disease, it's very difficult to understand, truly, what that opportunity is. I will say that the team that we are establishing to better understand our opportunity in HPP, they're also going to be looking, the metabolic team, also, at MoCD Type A. And over time, we would anticipate having a better feel for that. But this is one of the more challenging diseases for us, and they all have been, being ultra-rare diseases, but this one, particularly, because of the lethal nature of it.

Leonard Bell

And as David described, the urgency for us to move rapidly here, given as David described, that it's virtually always lethal, and of course, that's starting very shortly after birth. So I think we're very well focused on refining our approaches. Even more so than we have done with aHUS, even more so than we plan to do with HPP, but the move, too, really, is just very, very early as time point for intervention, to give these babies and their families the very best possible outcome. We would anticipate, with a therapeutic that looks very encouraging and as the breakthrough therapy designation identifies and validates, to some extent, by the regulatory agents here in the United States, that we're all urged to move very quickly here. And the numbers will follow but we're urged to move quickly.

Operator

And next we will go to Yaron Werber with Citi.

Yaron Werber - Citigroup Inc, Research Division

I also had just a follow up. And just sorry that I'm trying to understanding better. NMO, could be an exciting market, and it sounds like you're going to a broader population now. So we're just trying to understand better, so the broader population, these are patients who are still relapsing despite current therapy, on Rituxin or on other therapies? Or do they have to be refractory to those therapies, and then get randomized, and what would be the control arm?

Martin MacKay

I'll answer your question in reverse, actually. The control arm is standard of care in saying that those are patients that have, specifically, mentioned in a Rituxin, who have stopped Rituxin treatment sometime before the beginning of our study. In terms of your question, you really hit the nail on the head with understanding the relapse rates and the severity in that population. And as I mentioned really working closely with key collaborators in this area to understand those data and understand the clinical reality for those patients have helped us create what I think is a very powerful protocol going into 2014.

Yaron Werber - Citigroup Inc, Research Division

So the key differences is, what? Is it the rate of relapse or it's what therapies they've had previously?

Leonard Bell

We will talk more about the protocol when we initiate the study, Yaron. But we will look at a number of things in that patient population.

David L. Hallal

Yaron, the key, as Martin's describing, is to obtain as much data as possible to carefully study, and compartmentalize and know specific event rates in patients that isn't published, allow us to design a sort of a powerful trial that will be able to take in a significant number of patients rapidly, who all have high event rate expectations.

Operator

And next we go to Robyn Karnauskas with Deutsche Bank.

Mohit Bansel

This is Mohit Bansel for Robyn. My question is on expenses. Looking at your R&D expenses, it appears that the growth in expenses has been in line with the revenue growth for the last few years. So how do you see these expenses going forward with respect to the revenue? And do you have any sense on what kind of percentage -- percent of expenses you're looking for R&D, as percentage of revenue?

Vikas Sinha

This is Vikas. Regarding the expenses percentages, we have been tracking very well in R&D at around 18% to 19% ranges right now. And as we look into the future, we will -- we continue to maintain the same levels. As we look at executing on the 10 lead programs that Martin was talking about, as we enter 2014.

Operator

And next we will go to Howard Liang with Leerink Swann.

Howard Liang - Leerink Swann LLC, Research Division

Can you expand -- give more color on the expansion of the deceased-donor trial for -- in the transplant setting? And would the filing timeline for this indication be 2014 or '15, after both trials have completed?

Leonard Bell

Happy to see that. I think I mentioned this during the call, it was -- there was a real -- a very positive drive from the investigators in the study to continue with the study and, in fact, keep it such that we enrolled more patients. Clearly, we've had discussions with regulatory bodies as well, along with similar vein, and we all agreed how positive this was. In terms of our timing, what I would say is, we will start the study in 2014 and then run it accordingly. I won't commit to an end at this stage until we're dropped and running, and just seeing how recruitment continues.

Operator

And next we go to Eun Yang with Barclays.

Irving Adler

Operator, hold on a second, please, before we take that. We will be able to stay a few minutes after the hour, thank you, all, for limiting yourselves in questions. Also, we're having a little trouble hearing some of you over this sound system. If folks could talk up a bit, thanks.

Eun K. Yang - Jefferies LLC, Research Division

So maybe for Lenny, a general thought on pricing, because it's great you guys are expanding indications for Soliris from PNH, aHUS, and now onto NMO, myasthenia gravis and AMR. Some investors I discussed with, I mean, they always have some concerns. Once you become a much bigger product, in terms of the sales, what's your thought on pricing there? And then, next, on HPP. So in terms of the FDA breakthrough designation, obviously, it's much broader than what we thought, what's the fraction of patients that are, maybe, older, with early onset?

Leonard Bell

I'll take the first part of your question and then, if we still have time, we'll take the second part of your question. The first part of the question, I think, is a great question. Thank you very much for asking, of course. We are keenly focused on restricting what we do to identifying those patients with the most severe and devastating disorders that happen to be quite rare. And at the same time, only going forward, to provide to them and to deliver them therapies that will transform their lives. So in that context, that applies to Soliris in PNH, it applies to Soliris in aHUS, it applies to Soliris in NMO and myasthenia, for short. It also applies equally to asfotase alfa, cPMP and certainly, it'll apply to ALXN1007, additionally. And so I think that the focus here, actually, is not to detour from where we are and, actually, to stay strictly focused, particularly with Soliris, on those patients with the devastating disorders. And to only go forward in the event that we can provide them a complete transformation in their lives with Soliris therapy. So our focus, I think, is distinct. We make our disciplined financial investments in R&D, based entirely on that assumption. We make our plans for how we go forward around the world, serving patients in over 50 countries, entirely based on that assumption. And that describes to you, pretty clearly our focus. Your second question, though, had to do something with adult versus pediatric onset? David, you want to...

David L. Hallal

Yes, sure. So we're out and we're getting to know the HPP community and I think the FDA designation focusing on onset rather than actual age is an important one. We have -- we've spoken to patients who have infantile onset disease, who are adults, who have really bad disease and they're looking for a transformative therapy. So to your question, we're going to better assess the numbers that exist there, but we think that it provides us an opportunity to better serve patients who are in need across the spectrum of patients with HPP. Martin, anything else?

Martin MacKay

Well, I think, you're spot on, in terms of the numbers, David, that really is building a very strong knowledge base across this eye disease which, I believe, we're very well placed to do with work. You also mentioned breakthrough designation and it's been a very positive experience for us in working with the FDA and being able to have more regular meetings [indiscernible]. And I'll just also say that with the breakthrough designation that we received yesterday for MoCD Type A, that's another terrific achievement and will allow us to have those similar discussions in this devastating disorder.

Operator

And next we will go to Bret Holley with Guggenheim Securities.

Bret Holley - Guggenheim Securities, LLC, Research Division

Actually a follow to your immediate comments just before Martin. I'm wondering, with the breakthrough designations that you've had some experience now with asfotase, how is that ultimately going to impact timelines? Because it really hasn't significantly changed the timeline for asfotase, and I'm wondering how it impacts the timeline on cPMP?

Martin MacKay

I think it's -- we're learning as we go along here, Bret. But there's no question that the more frequent interactions we see is very positive. Particularly in those ultra-rare and devastating diseases that we are working, where generally the patient numbers are small and identification takes good knowledge. But we see a similar process with MoCD, we will have more frequent discussions, we will be able to show and discuss our data, and I think Lenny articulated this really well. We are all very much focused on moving this quickly, so that the patients that badly need this therapy, can get it as quickly as possible.

Irving Adler

We have time for one more question.

Operator

Our final question comes from Geoff Porges with Bernstein.

Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division

Just one follow-up on asfotase alfa, could you talk a little bit more about the economics of that opportunity for the company, specifically, given the sort of variety of different patient populations with different manifestations of disease? Should we be assuming that the value proposition is going to be comparable to Soliris in aHUS? And secondly, should we assume that the step up in expenses required to identify the patients and interact with all the physician communities involved will be similar to the step up required for aHUS?

Leonard Bell

Yes. Thanks, Geoff. So again, as I mentioned, we're going to look at our country-by-country opportunities to serve patients with HPP. And our expectation would be that we would establish small teams focused on metabolics. First, would be asfotase alfa with HPP. That same team would also focus on cPMP replacement therapy for the patients with MoCD Type A. But as we did with aHUS, I think, we'll be judicious with the level of discipline to understand exactly what the opportunity is and what level of investment it will take to put in place, from a sales, marketing and medical perspective, the right amount of talent there to better understand, pre-launch, what the opportunity is, and then immediately look to serve patients at approval. Vikas?

Vikas Sinha

I think you've got it.

Leonard Bell

Thanks everyone for joining us today.

Operator

And that was our last question. And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Alexion Pharmaceuticals Management Discusses Q3 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts