Alexion Pharmaceuticals: From Acquisition Target to Acquirer

Alexion Pharmaceuticals (NASDAQ:ALXN) reported revenues and major developments in its 2010 4th quarter report. Revenue continued climbing at a rapid clip, 2010 net product sales increased 40 percent to $541.0 million, compared to $386.8 million in 2009 and is projected to grow to between $715-$735 million in 2011. In 2010 non-GAAP net income increased 54 percent to $167.3 million compared to 2009 non-GAAP net income of $108.4 million. Alexion also updated on its recent acquisitions and pipeline progress.

For years the subject of buyout speculation, Alexion has remained a standalone company. With only a single product treating one indication, the company has built what is likely to be a billion dollar franchise. Its $8 billion market cap is now more than half that of biotech heavyweight, Biogen Idec (NASDAQ:BIIB).

Soliris was approved for the treatment of PNH in 2007 in the U.S. and Europe, and early 2010 in Japan; the drug has yet to be launched in other major markets including Turkey, Brazil, and Russia. Alexion has continued investing in research to assist in disease diagnosis and determination of long-term benefits of Soliris treatment in PNH. It has built its own international sales force as well as manufacturing capabilities.

Alexion is now getting ready to launch a second indication for Soliris- aHUS- a disease resulting from mutations in the complement system that can ultimately result in renal failure. The company plans on filing for regulatory approval in the U.S. and EU in the middle of this year, anticipating a launch during the first half of 2012. Phase II studies for acute humoral rejection in kidney transplant patients are also underway.

The potential for Soliris in aHUS is likely to be as great as, if not greater than in PNH due to its higher incidence and increased severity of disease. The kidney transplant rejection market may also be sizable; there were 15,331 transplants in the U.S. in 2001 (United States Renal Data System 2003). On average, about 13% procedures result in acute rejection, a large percent of which are antibody-mediated, or humoral.

With money in the bank, Alexion acquired fellow complement system specialist, Taligen Therapeutics, at the end of January for $111 million upfront and unspecified milestones on up to six products. Taligen’s lead candidate is TT30, a fusion protein targeting the complement pathway. It’s former CEO will now head Alexion’s new translational medicine group, which aims to bring a product to the clinic in the next 12-24 months.

Along with Taligen, Alexion also paid $3 million upfront plus contingency payments for the IP and assets of Germany-based Orphatec Pharmaceuticals related to an investigational therapy for patients with molybdenum cofactor deficiency (MoCD) Type A. MoCD is an ultra-rare genetic disorder characterized by uncontrollable seizures, severe brain damage and rapid death in newborns.

Although not yet approved for clinical trials in the U.S., Orphatec has reported on a case of an infant with MoCD being treated with their drug candidate, cyclic pyranopterinmonophosphate (cPMP) replacement therapy. The infant was treated on day 36 with cPMP; within two weeks, convulsions disappeared and urinary markers returned to normal. Other case studies of cPMP used for the treatment of MoCD have been reported. It is now in IND enabling studies.

The company looks like it will be on a growth trajectory for quite some time given the new indications and now enlarged pipeline. Of course, there is no guarantee of clinical, or commercial success for any of these products, though the aHUS indication appears baked in the stock price.

Disclosure: I am long ALXN.