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Alexion Pharmaceutical Inc. (NASDAQ:ALXN)

Q3 2011 Earnings Conference Call

October 20, 2011 10:00 AM ET

Executives

Leonard Bell – CEO

Tom Dubin – SVP and Chief Legal Officer

Vikas Sinha – SVP and CFO

David Hallal – SVP, Global Commercial Operations

Steve Squinto – EVP, R&D

Analysts

Eric Schmidt – Cowen and Company

Salveen Richter – Collins Stewart LLC

Geoff Meacham – JP Morgan

David Freidman – Morgan Stanley

Sapna Srivastava – Goldman Sachs

John Sonnier – William Blair & Company, LLC

Stephen Willey – Stifel Nicolaus

Ian Somaiya – Piper Jaffray

Brian Abrahams – Wells Fargo Securities

Bret Holley – Oppenheimer

Operator

Good day and welcome, everyone, to the Alexion Pharmaceutical Incorporated Third Quarter 2011 Results Conference Call. Today’s call is being recorded.

At this time, for opening remarks and introduction, I would like to turn the call over to Dr. Leonard Bell. Please go ahead.

Leonard Bell

Thank you, operator. Good morning and thank you for joining us on today’s call to discuss Alexion’s performance with the third quarter of 2011.

I’m joined by members of Alexion management – Steve Squinto, Executive Vice President and head of R&D; Vikas Sinha, Senior Vice President and Chief Financial Officer; David Hallal, Senior Vice President Global Commercial Operations; and Tom Dubin, Senior Vice President and Chief Legal Officer.

We also welcome our entire Alexion team working around the world. Vikas, David, and Steve will join me on today's call to report on our financial, commercial, and R&D accomplishments in the third quarter and to discuss our strategic initiatives and accelerated execution plans for the remainder of 2011. Before we begin, Tom will apprise you of our potential to make forward-looking statements. Tom?

Tom Dubin

Thanks, Lenny. During this call, we may make forward-looking statements such as expected financial results; medical benefits, regulatory milestones, and commercial potential of Soliris in PNH, aHUS, transplant and other indications in the US and other territories; plans for clinical trials of Soliris in aHUS, transplant, STEC-HUS and other indications, as well as development plans for other products, and operations, reimbursement, price approval and funding processes in different territories.

Forward-looking statements are subject to factors that may cause our results and plans to differ from those expected, including decisions of regulatory authorities regarding approval or limitations on the marketing of Soliris for various indications, the possibility that results of clinical trials are not predictive of the safety and efficacy of Soliris in broader patient populations in the disease studied or in other diseases; the risks that third parties won't agree to license any necessary intellectual property to us on reasonable terms or at all, the possibility that initial results of commercialization are not predictive of future results, the risk that third party payers will not or will not continue to reimburse for the use of Soliris at acceptable rates or at all, and a variety of other risks set forth from time to time in our filings with the SEC, including our 10-Q for the quarter ended June 30, 2011. We do not intend to update any of these forward-looking statements after this call, except when a duty arises under law.

I'd like to remind you that our reported non-GAAP numbers conform to US GAAP except in three respects. First, our non-GAAP numbers exclude share-based compensation. Second, we exclude non-cash tax adjustments associated with utilization of our US net operating losses. And third, with completion of two acquisitions earlier this year, we now also exclude amortization of acquired intangible assets and costs associated with the acquisition. A reconciliation of our GAAP to non-GAAP results is included in the press release we issued this morning. As a further reminder, earnings per share discussed in today's call reflect the two-for-one stock split affected during the second quarter.

Thank you. Lenny?

Leonard Bell

Thank you, Tom. During the third quarter, Alexion made important progress on our key objectives for 2011. First, we continue to achieve strong performance in serving patients with PNH worldwide. Second, the FDA approval of Soliris as a treatment for patients with aHUS late last month marked a major milestone in Alexion’s mission to serve patients with severe and ultra-rare disorders. And finally, we significantly progressed key development programs beyond PNH and beyond aHUS.

Again, we’re continuing to focus on accelerating the growth of our global PNH operations. In Q3, we again achieved steady quarter-on-quarter growth in our core territories of United States, Western Europe and Japan.

While we are pleased with the progress we’ve made to date, we continue to approach the global introduction of Soliris and PNH with urgency, mindful that worldwide, most patients with PNH has still not received an accurate diagnosis, nor started on appropriate treatment. We’ll maintain our consistent focus on identifying patients suffering with PNH by overcoming low levels of PNH disease awareness and inadequate approaches to diagnosis through our education initiatives.

Beyond our core territories, we continue to establish PNH operations in three additional major countries – Turkey, Brazil and Russia – where we have now assembled our leadership teams. We’re likewise focused on the opportunity to serve increasing numbers of patients with PNH in additional countries.

I’d like now turn to review key elements of our initial stages of the introduction of Soliris in the aHUS community in the United States. In addition to my father’s 85th birthday on September 23rd, following the FDA approval on the same date, we have now started to serve patients with aHUS.

As we discussed on our earlier call, patient access to Soliris is supported by a broad and strong label. It includes all patients with aHUS, including children and adults regardless of history of supportive care or presence of an identifiable genetic mutation. Importantly, the label also supports the common understanding aHUS as a disorder of uncontrolled complement activation leading to thrombotic microangiopathy or TMA and that Soliris has indicated for the treatment of patients with aHUS to inhibit complement mediated TMA. Thus, the new product indications, they may clearly identify both the disease mechanism of aHUS as well as (inaudible) directly to the therapeutic action of Soliris.

As we introduced Soliris in aHUS community in United States we have affirmed the same objective that we have had for PNH since 2007, that every patient with aHUS who can benefit from Soliris will have access to Soliris.

At the forefront of this effort are the registered nurses and our one-source treatment support program who now serve patients with PNH and aHUS equally. While we expect that Soliris will transform the lives of an increasing number of patients with aHUS over time, I would like to reiterate that in the earlier stages of our operations, we expect that the use of Soliris and aHUS will grow only gradually.

As we have noted in the past, the prevalence of patients with aHUS appears to be lower than that of PNH. This lower prevalence likely results in part from the current natural history of aHUS. Unfortunately, more than one-half of patients not treated with Soliris are known to advance to dialysis, form a kidney damage or die within the first year following diagnosis.

The lower prevalence of aHUS is reflected in a substantial lower number of patients in our clinical trials with aHUS compared to PNH. Further, only a small minority of patients in our aHUS clinical studies are in the United States.

Turning outside the US and as previously announced, we have also received a positive opinion from the CHMP recommending that the Soliris label in New York be expanded to include aHUS. As we noted at that time, approval by the European Commission is expected approximately two months after the positive opinion. Following country by country reimbursement processes, this would enable us to start serving patients in initial major European countries in the first half of 2012, with additional major European countries commencing through mid-2013.

As with the United States, we expect that the use of Soliris for aHUS in Europe will grow only gradually at first, but that, over time, will serve an increasing number of aHUS patients throughout Europe. In addition, during the next few months, our global regulatory team expects to begin outlining a regulatory pathway with the help authorities in Japan.

In these early stages of our aHUS introduction, we recognize that there is already substantial interest in the area of complement activation across the broader nephrology community. In this regard, we are pleased to note that more than 50 abstracts related to complement activation and severe kidney disorders when we present it at the American Society in Nephrology Annual Conference in Philadelphia next month.

Of particular note, there will also be presentations of longer-term data from our aHUS studies with Soliris showing sustained suppression of TMA and further long-term improvement in kidney function. Additionally, new data investigating the potential utility of eculizumab as a treatment of patients with other severe and ultra-rare kidney disorders will also be presented.

Looking beyond PNH and beyond aHUS, during the third quarter, we also announced encouraging results in our first expansion outside hematology and nephrology conditions – in neurology – with our first clinical study in patients with severe and refractory myasthenia gravis. We’re now preparing to move this additional ultra-rare disease program forward. Steve will provide a more detailed look in our pipeline, progress later in the call.

Turning to our financial performance in Q3, revenues increased 44% year-over-year to $204 million, reflecting the continued strength of our core PNH operations in the United States, Western Europe and Japan. Our growth in the past quarter was also positively impacted by a provincial reimbursement decision in Canada. Non-GAAP net income increased 54% year-on-year to $72.6 million as we maintain financial discipline while expanding our growth initiatives.

With these strong results for the third quarter, we are again raising our 2011 revenue guidance from the previous range of $760 million to $768 million now to the higher range of $770 million to $775 million. This upward revision on revenue guidance today is driven by continued growth of Soliris and PNH.

I would now like to turn to today’s upwardly revised 2011 EPS guidance. As compared to the guidance we provided when we started the year, I would note that the increased EPS guidance provided today is virtually entirely driven by the growth in our PNH operations. In contrast, over the same period of time during the year, our R&D and SG&A spends forecast are essentially unchanged, which further underscores the impact of our increased revenue on income growth during the year.

As a consequence of our improved revenue outlook and our strong financial discipline, we are also increasing our guidance for non-GAAP EPS from the previous range of $1.15 to $1.20 now to the higher range of $1.25 to $1.28. Vikas will provide more details on our financial performance and guidance.

As we continue to grow our global organization, I am particularly pleased to welcome Clare Carmichael (inaudible), our senior vice president and chief human resource officer. Clare brings us 30 years of senior HR experience with global pharmaceutical and biotech organization, and she will focus on our continued efforts to attract and develop talent, to drive innovation on behalf of patients throughout the world.

Alexion is among the few companies to undertake the mission of providing therapies to patients suffering with severe and life-threatening ultra-rare disorders. We are truly inspired by our experience in bringing hope to people who have been living with devastating disorders and previously with no treatment options.

At this point, I’ll turn the call over to Vikas for a more detailed look at our financial results. Vikas?

Vikas Sinha

Thanks, Lenny. As we reported in this morning’s press release, Q3 was another (inaudible) of steady sales growth for Alexion. As in prior quarters, we again added significant number of new PNH patients in the US, Western Europe and Japan. Solid top line results and side global control of expenses again resulted in steady profitability and strong cash flow from operations.

Net product sales for Soliris were $204 million in Q3 2011, an increase of 44% compared to Q3 2010. Q3 revenues were also positively impacted by provincial reimbursement decisions in Canada during the quarter. In Q3, non-GAAP SG&A expenses were $69.5 million and non-GAAP R&D cost was $24.1 million.

Q3 2011 non-GAAP EPS was $0.37, an increase of 48% compared to the year-ago quarter. There were 193.9 million diluted shares outstanding in Q3 following a stock split in May. During the quarter, we recalled a GAAP benefit from tax credits of approximately $16.3 million, resulting from a combination of foreign tax credits and orphan drug tax credit from 2011 and prior periods.

Due to these credits, the expected GAAP tax rate for the year has been reduced from the previously expected range of 30% to 32%, now to the lower range of 20% to 22%. Q4 GAAP tax rate is expected to be in the range of 28% to 30%. Non-GAAP tax rate is being reduced from the previous range of 10% to 12%, now to the lower range of 8% to 9%.

Turning to our balance sheet, we ended Q3 with $445 million in cash, cash equivalents and marketable securities compared to $368 million at the end of second quarter, reflecting a growing ability to generate strong cash flow, and we have essentially note that outstanding.

Before we turn to our guidance, I would like to remind you that we expect the use of Soliris in aHUS will grow only gradually at first, and thus, incremental quarterly contributions from aHUS will increase slowly. Longer-term, we expect to serve an increasing number of patients with aHUS over time as our global rollout in the new indication process.

I would also remind you that dosing in aHUS will be based on the patient’s weight. Currently, we anticipate there are significant proportion of patients who will be children or infants well the recommended doses substantially lower than the dose of adults.

With regard to our 2011 guidance and as noted in this morning’s press release, we have now raised our 2011 revenue forecast to the higher and narrow range of $770 million to $775 million from the previous range of $760 million to $768 million. The upward revisions reflects increased visibility into the expected performance of our PNH operations during the final months of the year.

We reiterating our 2011 non-GAAP SG&A guidance of $275 million to $280 million. We continue to anticipate an increase in SG&A from Q3 to Q4 related to our (inaudible) and the ongoing ramp up of our aHUS operations. Overall for 2011, we expect to further reduce SG&A as a percentage of sales to 36% even as we expand our global operations.

Non-GAAP R&D is now expected to be within a range of $133 to $138 million reduced from the previously provided range of $138 to $143 million. To continue financial discipline, we have been able to expand our initiatives and also mitigate the previously anticipated increase in R&D of approximately 6 to $8 million compared to Q2.

I would now like to turn to today to our fully revised 2011 EPS guidance. As compared to the guidance we provided when we started the year, I would note that the increase EPS guidance provided today is virtually, entirely driven by the growth in our PNH in these operations.

In contrast, over the same period of time, our R&D and SG&A expense forecast are essentially unchanged, which further underscores the impact of what increase revenue on income growth during the year. As a result of our improved performance, we have today revised our 2011 non-GAAP EPS guidance upwards from the previously provided range of $1.15 to $1.20 to the higher range of $1.25 to $1.28.

We are pleased with our financial performance in the first nine months of 2011. We look forward to announcing our full-year results in mid-February at which time, we will also expect to provide our 2012 guidance. At this point, I’ll turn the call over to David who will provide an update of our global commercial operations in PNH and aHUS. David?

David Hallal

Thanks, Vikas. During the third quarter of 2011, we continue to grow our global PNH operations while beginning to serve patients in a new therapeutic area following the FDA approval and aHUS in late September.

As we commence, the US introduction of Soliris and aHUS, we are also preparing for our aHUS introduction in Western Europe in 2012 following the recent CHMP positive recommendation. Looking first at PNH, our 44% year-on-year increase in Q3 revenues reflects steady growth in our core territories of the US, Western Europe and Japan.

In addition, our growth in Q3 was also positively impacted by the provincial funding approvals in Canada for PNH. Significant numbers of new patients started on Soliris therapy in Q3. Through our educational initiatives in Q3 as in prior quarters, we continue to observe in our core territories that a large proportion of patients newly started on Soliris were also newly diagnosed.

This further demonstrates that broad education about PNH as well as PNH diagnostics positively influences the entire cycle of care from a patient newly diagnosed with PNH to a patient newly starting on appropriate treatment. Through these efforts, larger numbers of patients who are more likely to have PNH are being tested for the disease.

Once patients with PNH have received an accurate diagnosis, physicians are more likely to rapidly start them on Soliris as they increasingly make treatment decisions based on a growing body of clinical data regarding the morbidities and premature mortality associated with PNH as well as a positive long term outcomes demonstrated with Soliris therapy.

Despite our success in PNH since 2007, we recognize that worldwide most patients have not yet received an accurate diagnosis let alone appropriate treatment. Thus, we are moving with urgency to expand our diagnostic initiatives in disease awareness programs and countries around the world. As we aimed to serve more patients in future quarters, we are especially focused on adding Turkey, Brazil, and Russia to our core territories in 2012 and 2013 and we now have assembled operational leadership in each these countries. Turning now, aHUS with the recent FDA approval our US organization now has the privilege to serve patients with two ultra-rare, severe and life-threatening diseases.

Our single US sales team is focused on continuing to grow our PNH business while we are introducing Soliris and aHUS in the United States. By broadening our reach with our expanded sales team, we are now calling on more hematologists for both PNH and aHUS.

In addition for the first time, we are now bringing our aHUS disease awareness and diagnostic initiatives to pediatric and adult nephrologists. Our expanded sales team is also experiencing the benefits of managing smaller geographic territories. Our plan for aHUS is strengthened by our experience in PNH.

The execution of our plan is strongly supported by the broad label for Soliris at a treatment for all patients with aHUS regardless of age, clinical profiles, identifiable genetic mutations, or past histories of supportive care. As with PNH, the new aHUS label includes compelling clinical data and life-transforming benefits to patients.

With regards to disease education, we are now pleased to see the large number of presentations at the upcoming AFN Conference in Philadelphia that will be devoted to the morbidities of aHUS, the role of chronic uncontrolled compliment activation which causes TMA and aHUS, and the compelling clinical benefits that Soliris can provide the patients with aHUS by inhibiting compliment mediated DNA.

We expect that this new multifaceted data will further support our work with the aHUS community. As Lenny noted in the United States, our one source treatment support program had already begun to serve patients and help patients with aHUS obtain access to Soliris. Initially, they are focused on the commercial transition of the small number of US patients who participated in our clinical studies. And we anticipate this process to progress smoothly through the fourth quarter.

Additionally, our One Source nurses are helping the first aHUS patients who are being started on Soliris throughout the country. In line with our objective that every patient with PNH or aHUS who can benefit from Soliris will have access to Soliris, the One Source team is prepared with patient-assistance programs for people who are under insured or for those who cannot obtain access to insurance.

While we are confident that we will serve an increasing number of patients with aHUS over time, we continue to expect that the initial use of Soliris in aHUS will grow only gradually due to the low prevalence of the disease. Turning now to Europe, following CHMP’s positive opinion on late September, we are now initiating the process of expanding our European field teams on a country-by-country basis with individuals who have experienced in rare disorders and relevant medical specialties.

As in the US, we are starting to build a single unified field team in each country that is fully cross-trained in both PNH and aHUS as well as in the specific role, the compliment .and ambition with Soliris placed in each ultra-rare and life-threatening disorder. We are excited by this opportunity to provide the compelling clinical benefits of Soliris therapy and to serve patients in multiple therapeutic areas.

I look forward to updating you on the continued progress in our PNH and aHUS operations on future calls. Now, I’ll turn the call over to Steve who will review our expanding pipeline initiatives. Steve?

Steve Squinto

Thanks, David. The landmark FDA approval for Soliris as a treatment for patients with aHUS and the CHMP’s positive opinion on Soliris in aHUS which we received on the same day, we’re milestone of compromise for Alexion’s Global R&D organization. We are pleased that our skills in developing therapies in the setting of a severe and ultra-rare disease have now been employed successfully for patients with aHUS.

Looking ahead, we are focused on applying the same skills on behalf of other patients and families who are suffering without hope in the face of ultra-rare and life-threatening illnesses. I would like to turn first to our development programs with eculizumab in disorders in which uncontrolled complement activation is the underlying mechanism.

Looking first at kidney transplant. Data from the investigator initiated kidney transplant study at the Mayo Clinic were published last month in the American Journal of Transplantation. These results, in 26 patients, are in line with previously announced data showing a significant clinical impact on reducing the incidence of antibody mediated rejection in patients at an elevated risk of graft rejection.

Importantly, we are on track to begin enrollment in our company sponsored, multinational living donor kidney transplant trial in patients at elevated risk of AHR by the end of the year. As a reminder, patients in this study will be dosed with eculizumab for nine weeks post transplant and then be observed for 52 weeks following the transplant procedure. In addition, we expect that a deceased donor study will be initiated in the next few months. We will provide further updates on these programs as they reach their key milestones.

In another of our lead nephrology programs, our clinical trial of eculizumab in patients with STEC-UHS continues in Germany. As previously announced, this study grew out of the compassionate use program we established during the public health crisis in Germany this past spring. The trial protocol calls for patients to receive eight weeks of treatment with an option for additional treatment. All patients will then be observed for up to 28 weeks.

As we progressed in these and other kidney programs, and undertake ongoing research in aHUS, we are gratified to see the strong interest among researchers regarding the central role of uncontrolled complement activation in a number of severe ultra rare kidney disorders. This is reflected in the more than 50 abstracts on this subject that will be presented at the upcoming ASN Conference in November.

I’d like to highlight some of the abstract that report on the use Soliris in several of these complement mediated diseases. First, longer term data will be presented from our study of Soliris in patients aHUS, who are receiving chronic plasma infusion or exchange. The new 40-week data show that these patients who had a long history of aHUS prior to starting them at trial had sustain suppression of TMA and were able to discontinue plasma exchange or plasma infusion while on Soliris. Eighty percent of these patients achieved the TMA event free status and no patient required new dialysis during this time. These improvements were sustained for the duration of ongoing treatment with Soliris, a median of 40 weeks at the last data cut.

Second, longer term data will also be presented from our aHUS trial in patients who are resistant or intolerant of plasma exchange or plasma infusion. In these patients, continued treatment with Soliris for a median of 38 weeks, resulted in sustained suppression of complement mediated TMA and improve renal function wherein five patients who are on dialysis prior to treatment, eliminated the need for dialysis. Fifteen of seventeen or 88% of patients treated with Soliris became TMA event free.

Third, there are a number of presentations of trial data and case reports on the use of Soliris in patients with MPGN 1 and MPGN 2, also known as dense deposit disease, and C3 nephropathy. Importantly, these data will assist us in evaluating the sub-populations of patients with these disorders who might be candidates for further investigation with eculizumab therapy.

I would like to turn to our programs investigating eculizumab in severe and ultra rare neurologic disorders. As we announced in September, data from our company sponsored phase 2 placebo controlled study in myasthenia gravis were presented at the annual meeting of The Myasthenia Gravis Foundation of America in San Francisco. The data showed a strong disease improvement signal in a group of 14 patients with severe and refractory myasthenia gravis, an ultra rare and debilitating form of myasthenia gravis.

In the first treatment period of the study, patients in the eculizumab group experienced a rapid and sustained improvement in the quantitative myasthenia gravis disease severity score relative to baseline, while patients receiving placebo did not experience a change. Likewise, when the groups crossed over following a five week wash out period, patients previously treated with placebo and now receiving eculizumab, then experience the same rapid and sustained improvement in QMG with eculizumab.

Patients, who had previously received eculizumab during the first treatment period, initially maintain their improvement in QMG even after completion of eculizumab dosing. During the subsequent treatment with placebo in the second treatment period, these eculizumab mediated improvement in function slowly wore off resulting in a recorded worsening of QMG associated with placebo treatment.

Based on these encouraging results, we are now planning a larger prospective placebo controlled study in patients with severe and refractory myasthenia gravis. In neuromyelitis optica, our other lead neurology program with eculizumab, enrollment has been completed in phase 2 investigator initiated trial, with dosing ongoing through 2011 and data expected in 2012. In our rare disease pipeline programs beyond eculizumab, we continue to focus on accelerating development of three of our additional and unique drug candidates, TT30 and cPMP and a novel anti-inflammatory antibody.

First, we have now commenced dosing in a phase 1 study of TT30, our unique inhibitor of the alternative complement pathway with a mechanism of action different from Soliris. The focus of the trial is to characterize TT30’s mechanism of action and to develop initial safety data. Once we have the data from this study, we can better evaluate the overall therapeutic potential of TT30 for various disease targets.

Second, during the past quarter, we have made substantial progress on our GMP manufacturing process for our cPMP replacement therapy. And we remain on target to have initial supply of cPMP towards the end of this year. Once we have clinical supply, we will begin the IND enabling studies with an eye toward commencing clinical trials later in 2012. As a reminder, cPMP is a potential treatment for infant with molybdenum cofactor deficiency, a devastating and ultra rare disorder in which newborns typically survive only a few weeks or months.

In regards to our third new drug candidate, targeting ultra rare and life threatening disorders, we remain on track to enter clinical trials in healthy volunteers by year end with novel anti-inflammatory antibody.

Turning briefly to our investigator initiated study using eculizumab in patients with dry, age related macular degeneration – we expect data from this study to be available early next year. As a reminder, this is a proof of concept intravenous study exploring the therapeutic potential of complement inhibition in this disorder. After we evaluate the data and assess the potential intra-ophthalmic administration, we can begin to assess which of our complement inhibitor candidates would be most appropriate to bring forth as an investigational therapy for patients with AMD.

In closing, I would like to, again, commend our global R&D team for their success in the aHUS registration program and for their ongoing work in managing the broadest range of pipeline programs in Alexion’s history. I will now turn the call back to Lenny. Lenny?

Leonard Bell

Thanks, Steve. In the third quarter of 2011, we continue to grow our global PNH operations while also obtaining our first approval to serve patients with aHUS. As we enter the final months of 2011 and look ahead to 2012, we’ll be focused on maximizing the positive impact of Soliris and other treatments for more patients with PNH, aHUS, and other ultra rare and life threatening disorders. As always, we thank all those who make our work possible – our employees, researchers and physicians around the world and of course, the patients and their families.

At this point, we’ll take questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator instructions) And we’ll take our first question from Eric Schmidt with Cowen and Company.

Eric Schmidt – Cowen and Company

Good afternoon or good morning. Just a couple of questions – first, on the role that Soliris might play in the broader nephrology community. It sounds like you have your sales force out there. You have 50 abstracts at ASN, multiple disease opportunities in nephrology. How are you going to sort of prioritize next steps for potentially difficult trials and certain indications?

Steve Squinto You know what – I think, Eric – as you’re particularly aware, there’s a bucket of these ultra rare nephrology disorders where I think there’s a growing now, a body of evidence that uncontrolled complement activation plays a role. You know, MPGN 1, as you probably saw, there’s a couple of abstracts that will be presented at ASN looking at the role of eculizumab in MPGN 1, MPGN 2 dense deposit disease and C3 nephropathy.

You’re aware, I’m sure that there’ll be a presentation in ASN as well, looking at 6 patients, 3 of each in each category.

I think we’re getting more and more encouraged about the potential for Soliris in this basket of diseases. I think the key will be, as I stated on the call, to look at within this broad range of nephrology disorders. Those patients that are experiencing the most severe form of these diseases would rather be progressing disease where I think Soliris might have the most significant impact.

Eric Schmidt – Cowen and Company

Okay and then I think heard maybe 4 or 5 times the word gradual use to describe the launch, maybe Lenny, you could put some primers around what you mean by gradual or are you concerned that (inaudible) modeling this indication? What should we think the (inaudible)?

Leonard Bell

First question, which we are very happy and willing to answer that but I think what we take to mean, actually is really just what we’ve been saying for the last year or so. Unfortunately the natural history of the condition of such that more than half the patients will either require dialysis for renal failure and has permanent renal damage or unfortunately die of other disease within the first year.

I think that just indicates that there’s a lot of education that’s required to be able to provide the medical communities the sense of urgency that out there is a disease that could be addressed with an inhibitor of uncontrolled (inaudible) activation.

I think we’re comfortable as we go forward with the expectations that we have internally and we look just to reiterate that as we mentioned 4 or 5 times today.

Eric Schmidt – Cowen and Company

Thanks Lenny. Congratulations on all the progress in the next quarter.

Leonard Bell

Thank you very much Eric

Operator

And we’ll take the next question from Salveen Richter from Collins Stewart.

Salveen Richter – Collins Stewart

Thanks. Congratulations on a great quarter. Just in terms of aHUS, how is the US launch in terms of physicians being targeted? How many are being initially being targeted for the launch? What is early feedback then and then specifically what activities are being conducted to raise disease awareness and drug awareness as well as the need here for a chronic therapy?

David Hallal

Yes, Salveen, it's David. So early on, as I mentioned our single expanded sales team is focused on both hematology and nephrology and we continue to see an opportunity in each of those specialties to educate physicians about the disease in which patients are really at higher likelihood for having aHUS.

And really what we’re trying to undertake in many ways as an organization is to utilize some key opinion leaders who have some experience in the disease to then educate a broad group of hematologists and nephrologists about the disease and certainly about the clinical data that our approval was based upon.

So those are some of the early steps that we’re certainly taking to reach out to both specialties.

Salveen Richter – Collins Stewart

How many are originally being targeted right now?

David Hallal

Well as you know, both nephrologists and hematologists are a very, very large audience so we take some steps to target those who are maybe more likely to have some experience with the disease or diseases of PNH. So we try to take some steps to highlight those with our current size sales force that we can reach on an ongoing basis to expand the word.

Salveen Richter – Collins Stewart

And then just given the increased penetration into existing markets for PNH, are the rest who are cross selling Soliris for PNH, are they targeting new centers or increasing their touch points in existing centers?

David Hallal

Both. One of the things that we’re experiencing early on with the reps managing the small geographic territory is - we kind of taken them off the road and in some cases out of the airports and their spending more time in centers. So we think we’re getting deeper penetration early on with hematology-oncology groups but then also within that smaller geography can even reach a broader audience of physicians as well.

Salveen Richter – Collins Stewart

Right, thank you.

David Hallal

Thanks.

Operator

And we’ll take the next from Geoff Meacham with JP Morgan.

Geoff Meacham – JP Morgan

Hey guys. Thanks for taking the question. A couple of questions on aHUS so outside the US and given your success on PNH, what can you tell us about maybe the cadence of reimbursement for aHUS versus PNH? Better or worse, anything you can offer there will be helpful.

Leonard Bell

Sure Geoff. It’s Lenny. Thanks very much for your question and welcome to the call of course. I think that our experience in 30 - 40 countries, this point outside the United States, really inscribes a pretty significant variety as we telegraph from a timing perspective of larger countries.

The earliest ones and every country is that meaningful changes over the last couple of years but the earliest ones would be in Germany which we think early part of next year and then realistically, the latest ones would really be in England, in Western Europe I believe which will be the mid or latter part of 2013 if they keep with their typical schedule.

And that’s really based upon cycles that they’ve established. There obviously are countries outside Europe that, Australia and Canada, that I’ve put outside past England. And that would be the typical approach that these countries then will take towards providing access to treatments for their citizens.

Geoff Meacham – JP Morgan

Got you and then, when you look at the PNH opportunity in Turkey, Brazil and to some degree Russia, what can you guys tell us about the subtleties of the market with respect to diagnostics or identification [ph] or just patient size compared to what you’ve seen, for example like in Japan?

Leonard Bell

Well, certainly there’s a reason that’s been established by others that some disorders have a higher prevalence in Asia than then do in the West and that would be in PNH, that would be the case and certainly for each of the countries of Turkey, Brazil and Russia, we would anticipate underlying prevalence of the clinical disease to be similar to the other Western countries.

And typically, the major barriers in Los Angeles or New York are the same barriers in South (inaudible) or Moscow or Istanbul which is lack of understanding and awareness of disease compounded by lack of understanding on how to diagnose the disease. I know David, you want?

David Hallal

We’re obviously very focused on these three countries that - we look at it, that the landscape or access across the three countries is very positive and overall the reimbursable population across them is greater and aggregate than that of the entire US and that’s why we think it’s obviously important to focus on all three.

Geoff Meacham – JP Morgan

Got you, okay guys thanks.

Operator

We’ll take the next question from David Freidman with Morgan Stanley.

David Freidman – Morgan Stanley

Hi. Thanks for taking the question. It’s just surrounding myasthenia. Is the next trial that you guys are discussing and planning on starting, is that a pivotal trial or not? And if it’s not, what are you hoping to learn from it that would be something you would need to then go forward and run another study?

Leonard Bell

Yeah, David, I think it’s a little too early to identify whether this is going to be a pivotal trial or not. As you know, I think from this rather small working patient study and the good news is, we got a very clear and a very strong signal of activity with Soliris so we’re pretty encouraged by this population.

So I think what we’re going to do is, I can tell you this, we’re probably not going to do another cross over trial. It’ll probably be a much more conventional two arm trial, placebo versus Soliris, in this severe and refractory population. Maybe even a little slightly more ill population of patients and reasonably power trial to get a good safety and efficacy signal and you will have discussions with the regulators at that point and see where we take it.

David Freidman – Morgan Stanley

And then is there anything around the patient criteria or inclusion-exclusion that you can discuss that would inform a potentially faster enrolment timeline than you saw with this last 14 patient study?

Leonard Bell

I think enrolment - I think we probably had too few sites. That would be my view of it. I think as a rare disease, I think with a lot of experience now with aHUS, I think if we did one thing that I would change going forward, we’d probably have a fair number of sites putting patients into the trial, much more than we did for this rather small trial.

David Freidman – Morgan Stanley

Got it. All right, thank you very much.

Leonard Bell

You’re welcome.

Operator

And we’ll take the next question from Sapna Srivastava from Goldman Sachs.

Sapna Srivastava – Goldman Sachs

Hi. This is (inaudible) on behalf of Sapna. Thanks for taking the question. Can you give us anymore clarity on what are the additional drivers behind the uptick and pull through expenses to get us up full year guidance and then how we should think about that going forward? And then, lastly, if you could just tell us what’s most excited about coming out of the ASN?

Vikas Sinha

So, I’ll take the expenses first. On the SG&A side we have two major conferences coming in the Q4. So, that drives ASN and ASH and also the aHUS operation built out in Q4. On the R&D side, the multiple projects that are moving forward. In Q4, we had – that would take us towards this year. For 2012, we’ll give the guidance around February, okay?

Sapna Srivastava – Goldman Sachs

Okay, great. And ASN?

Leonardo Bell

Yeah. And with regard to ASN, I think there really are three major components, I think. The first one actually is that the data focusing on aHUS with Eculizumab treatment and longer-term treatment certainly provides an increasingly strong foundation for the role of Eculizumab across a very broad array of patients with TMA who are – been diagnosed aHUS. That’s extremely important given the international flavor of American Society of Nephrology meeting to provide that strong underpinning and reassert that.

And then second, away from aHUS, we think that there will be data coming from different number of different directions. Those regarding potential opportunities for us to improve the lives of the patients and other very rare and severe kidney diseases as well as the indications of the potential efficacy of Eculizumab and some of these other indications.

Sapna Srivastava – Goldman Sachs

Okay, great. Thanks a lot.

Operator

I will take the next question. It’s from Brian Abrahams from Wells Fargo Securities.

Brian Abrahams – Wells Fargo Securities

Hi. Thanks very much for taking my question. And congratulations on the continued (inaudible) and execution. I’m just wondering, what specifically drove your increase in Solaris sales guidance, and really what’s kind of different from your sense of the adoption curve at this point last month or the prior months? And kind of along those lines going forward, you talked a lot about targeting patients who are newly diagnosed in increasing awareness, but I’m just wondering if there are any diagnosed but untreated PNH patients that – whether that might provide an opportunity to get those patients onto therapy?

David Hallal

Yeah. Thanks, Lenny. Thanks, Brian. So, as we stated in Q3 was strong quarter in terms of sales growth really driven by US, Western Europe and Japan. In Q3, new patients with PNH, we’re really commencing Solaris therapy and I’d say a more rapid rates than we originally anticipated and to your question about why. I think it continues to be supported clearly by new publications that we have spoken about in previous quarters around patients who are at higher likelihood for having the disease.

And our diagnostic initiatives really focused on those patients needing to be tested at many of the labs now that have adopted a higher standard for their diagnostic method has really been helpful. And on top of that, I think, globally, the growing body of evidence regarding the long-term benefits of Solaris, I would note that the recently published data that we highlighted in one of our previous calls from leads which described the eight-year treatment outcome with Solaris that those patients treated with Solaris really had survival similar to a normal healthy population of individuals is really being appreciated by the medical community.

And so, I say, our growth in Q3, on top of all that, was obviously also aided by the provincial reimbursement decision that took place in Canada as well.

Brian Abrahams

Thanks very much.

Unidentified Participant

Thanks, Brian. Okay, thanks.

Operator

And just a reminder, please try to keep to one question. We’ll take the next question from Ian Somaiya with Piper Jaffray.

Ian Somaiya – Piper Jaffray

Thank you and congratulations on a great quarter. I had a question on the, I guess, the sales organization. Do you think you’re the right size for what an increasingly seems like a larger opportunity in PNH and an opportunity that’s truly global? And as you consider the evidence at the ASN and in terms of the nephrology indications, does it make sense at some point to have a focused sales force and have it be broken by disease?

Leonard Bell

Yeah. Thanks very much, Ian. I think obviously we are continuing to provide as much service as we can at the medical community in United States and each of the larger countries in Europe as well as, of course, Japan.

As we expand, we find that we haven’t been able to provide a better level of service to help the medical community even more so. I think that as we move forward in aHUS, which David describe is really very much of a hybrid hematology and nephrology disorder seen probably at some level equally by hematologists as well as nephrologists in population and probably likewise in the pediatric population. We’ll continue to evaluate as go forward. I think that right now, we think we have the right model.

But over the last four or five years we constantly learn ways that we can improve our ability to serve the medical community and patients. David, do you want to comment for that?

David Hallal

Yeah, I would just say that obviously, went through some modeling prior to expanding the sales team and we feel like we adequately sized the team to continue to support the growth that we would expect and see in front of us for PNH as well as obviously reaching the number of physicians that we need to – for the aHUS introduction. And just as we applied that model in the U.S., as I covered in the call, we’re now applying that model on a country by country basis and Europe as well.

Ian Somaiya - Piper Jaffray

If I could just ask a quick follow-up, if we assume getting transplant or transplant overall, and Myasthenia Gravis are the next two indications whereas Solaris could gain regulatory approval, would those approvals prompt you to reconsider your sales organization, do you think – or in your planning, did you anticipate launches in these markets?

Leonard Bell

Thank you very much. I’ll start and then David will correct me.

So we certainly do identify that as we’ve sort of laid out our last few months I think that the conditions that we see in our fore front really of course is first the timeline (inaudible) you asked which is largely nephrologic disorder as you point out. And then certainly kidney transplant, of course, it’s very important, and then there’s series of neurologic disorder as well Myasthenia NMO.

And on the other side, of course, we’re very encouraged moving forward as quickly as we can with CPMP in another neurologic disorder. So, we would anticipate, no things are static. And as I mentioned, we are currently and constantly reevaluating how we can best serve the medical community. And I suspect how we best serve the medical communities four years ago, I think we’ve improve upon a lot now and I think probably over next year or two, we’ll improve upon it further.

Ian Somaiya – Piper Jaffray

Okay. Thank you.

Operator

And we’ll take the next question Bret Holley with Oppenheimer.

Bret Holley – Oppenheimer

Yeah, hi. Thanks for (inaudible) the question. I just wanted to clarify whether the phase one trial that you have ongoing for TT30 is actually in PNH patients, and I guess, why keep that approach versus going in to health (inaudible) the ultimate goal with TT30 is to take it on to (inaudible)?

David Hallal

Yeah. Thanks. It is in fact in PNH, and we chose PNH really for a very simple reason. It allows us really a good avenue by which we can explore really on the sales service, the mechanism of action of TT30 and in addition collect safety data that we’re going to need. And as I said on the call, well, then look at that data once we better understand really mechanistically how TT30 is working and again, the PNH cell provides us a nice opportunity to study that along with the safety. Then, we’re going to start to look and evaluate where we really want to drive this molecule and for which indication.

Bret Holley – Oppenheimer

Okay. Thanks very much.

Operator

And we’ll take the next question from Howard Leon [ph] with (inaudible) one.

Howard Leon

Thanks very much. For the additional kidney diseases and (inaudible) one and two and C3 (inaudible), do you see for any of them single ARM [ph] trials will be appropriate for registration? And also, which one do you think one of my studies are feasible?

Unidentified Participant

(inaudible) that one.

Unidentified Participant

Yeah, it’s a very good question and something we’re obviously thinking very, very hard about. I think it’s a little bit early to talk at this point about what the next the design of the study is going to look like. The data is now just coming in, it’s going to be first be reported as you know at ASN, I think we’re really digesting the data and looking as I’ve said on the call, would identify a sub-population of patients within some of these nephrology disorder. So, we’re really focus on – I think once we’ve identified that, then we’re going to start to look at what the (inaudible) design look like.

Howard Leon

Thank you.

Operator

And we’ll take the next question form Robin Karnauskas with Deutsche Bank.

Unidentified Participant

Hey, guys. It’s (inaudible) for Robin. Congratulations on a great quarter. I don’t think I’ve ever seen a company raise guidance twice in one month. And with that, I’ll my question. Can you give a sense on how many aHUS US patients you’ve identified prior to the launch?

Leonard Bell

Yeah. Thanks very much. That’s a great question. aHUS is obviously a very, very rare disorder and I think unfortunately, as we pointed out the NAPA [ph] history as such without the Solaris treatment, is that more than one-half of patients will either require dialysis for complete kidney failure, suffer permanent life-long renal damage or unfortunately pass away.

And we’re very, very much focused, of course, in helping physicians in the medical community identify patient to address. And obviously, let’s start that with this awareness and this education and then obviously understanding how that test and diagnose for the disease.

As I mentioned, if it’s really rare, we typically don’t actually describe our patient. So, thank you for the question.

Leonard Bell

All right. Thanks.

Operator

And we’ll take the next question from John Sonnier with William Blair.

John Sonnier – William Blair & Company, LLC

Yes, thanks for taking the question. I guess a little bit of a follow-up to Ian’s question. I understand how you’re shaping your customer facing organization globally, and I think that makes sense. The question I have, really, is how significant are the modifications to the back office functions? Are they commensurate when you think about growing patient tools? How do you add the patient assistance and medical affairs reimbursed in assistance, those types of things?

David Hallal

Yes. It’s a great question. I think we’ve described probably last year. One thing that we did centrally and globally is we established therapeutic areas for both hematology and nephrology. And the objective really was so that we could continue to have central leadership and focus on PNH strategy and PNH operations and then provide that guidance to our filed teams.

And at the same time, we establish in the nephrology therapeutic area that really did a lot of a pre-planning and continue to do the planning for US and then Europe. So, from that standpoint, we’ve created that. But on the back office side, we’re really leveraging our existing infrastructure quite a bit.

And you mentioned reimbursement, as I said on the call last month, our one source treatment support program were utilizing the same nurse case managers who are now cross-trained in PNH and aHUS to support the needs of physicians and patients. So, we’re really leveraging that infrastructure quite a bit.

John Sonnier – William Blair & Company, LLC

Thank you.

Operator

And we’ll take the next question from Matthew Roden with UBS.

Andrew

Hi. Thank you. This is actually Andrew phoning for Matt. And let me add my congratulations on the strong quarter.

I guess, going back or expanding on a previous question, as you mentioned that a large population, newly started patients were also newly diagnosed, is this the case across all geographies? And is Japan or other more recently launched areas still working through kind of a prevalent patient tool?

Steve Squinto

Yes. As I stated, it really is in our core territories, the US, Western Europe and Japan. That is the case. But to an earlier question, there clearly are patients out there that would need a criteria for really benefiting for treatment, and we do work with those physicians in educating them about the disease and the compelling clinical benefits of Soliris as well.

But in general, it is the diagnostic initiatives and disease awareness programs that are helping more of the patients that not yet have been diagnosed to receive an accurate diagnosis and then ultimately appropriate treatment. Len?

Leonard Bell

And at the same time, Dennis and David, I want to acknowledge one of the earlier questions. It’s very clear that there are certainly patients who have been diagnosed this year and last year and the year before that we only find out about recently. And so, again, the overall awareness of the disease even when it’s actually been diagnosed is still pretty well across all three major core geographies.

Andrew

All right. Thank you.

Operator

And we’ll take the last question from Stephen Willey with Stifel Nicolaus.

Stephen Willey – Stifel Nicolaus

Yes. Thanks for taking the question. Could you maybe just comment on where you stand on the lead time between identifying a patient and then getting reimbursement approval on the payer front?

I think you previously said that that administrative process is kind of on the order of 90 days. Is that still the case in the US and how does that compare relative to some of the other geographies that you’re now alive in? Thanks.

Steve Squinto

So, again, thank you for the question. We’ve commented on this several times for the last 15 to 20 quarters. And in essence, over the course, it varies by country by country. One of the earlier questions that was asked about what kind of reimbursement paradigms are there in different countries?

And if it’s really in court, they’re very different ones both from the timing when you get reimbursement from the single pair as well as how it operates. So, in many of the single pair countries; if not, all the single pair countries, the decision, once the request is made, the decision actually could be in hours or days, quite frankly. And it would be uncommon for it to be long in there.

In United States, which is the only really meaningful none single pair medical setting that we operate, it really can go from hours to days to weeks to months. In some case, it’s over a year. Okay?

Dave, do you want to give more clear or you’re done?

David Hallal

No, that’s all right. That’s it. And we do obviously see even before the reimbursement process. Once the patient is accurately diagnosed, the physician is very eager to learn as much about the benefits of Soliris so they can make a rapid treatment decision.

Stephen Willey – Stifel Nicolaus

All right. Thanks.

Operator

And there are no further questions at this time. That does conclude today’s conference. Thank you for your participation.

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