Alexion: One-Trick Pony, But It's a Pretty Good Trick

Alexion (NASDAQ:ALXN) got some good news yesterday, receiving earlier than expected approval for its drug, Soliris (eculizumab), for the treatment of PNH in Japan - the world’s second largest pharmaceuticals market. Having received approval from the FDA and the European Commission only in 2007, Soliris has rocketed to expected 2010 sales of over $500 Million. Alexion has been profitable since the second quarter 2008; that speaks highly to a disciplined management team and quality of Alexion’s sales efforts.

What is Soliris?

Soliris is a monoclonal antibody that targets and prevents the cleavage of Complement protein C5. The complement proteins form a cascade beginning with C1, which lead to the eventual lysis (killing) of target cells. Preventing the cleavage of complement C5 to C5a and C5b disrupts part of this pathway, and in systems gone awry, preventing excessive cell lysis. Soliris is the only approved monoclonal antibody to target the Complement pathway.

The approved indication for Soliris is Paroxysmal Nocturnal Hemoglobinuria (PNH). PNH is a potentially life-threatening disease caused by the destruction of red blood cells (hemolysis) by complement proteins. It is an extremely rare disease, a census bureau estimate in 2005 estimated there are approximately 4700 such cases in the US. The incidence may be somewhat higher in Europe so the number of cases could well also be a bit higher. For patients who have received Soliris as part of their treatment, the effects have been stunning. The drug had a profound improvement on quality of life from the first dosage: hemolysis decreased, transfusions became unnecessary for some.

For such a small patient population, each and every patient added to the program is a small success. With limited data on patient statistics, the Alexion sales team has done an incredible job with patient outreach, training doctors to identify and diagnose new patients, and increasing general public awareness of this ultra-rare disease. When Soliris first launched, clinical trial patients were converted to payers, generating the company's first revenues. Using today’s guidance of revenue between $515-530 Million this year, and a $400,000 price tag, this suggests only 1300 patients will be on drug. This leaves lots of room for growth in PNH alone.

There is still the problem of counting on one drug for all its sales. Although Alexion is highly profitable- excluding items, it earned $87 Million on sales of $387 Million in 2009 with sales growth from 2008-2009 a blistering 49%. Growth this year will slow to 34%, still good, but down from the stratosphere. Approval in Japan may cushion growth until new indications come along.

Alexion is focusing development efforts for Soliris in atypical Hemolytic Uremic Syndrome (aHUS), a rare, inherited, and life-threatening complement-inhibitor deficiency disease, Kidney Transplant, and other Complement-mediated disorders.

Results for aHUS is a near term milestone. Four Multicenter trials are ongoing in both North America and Europe; the company plans on presenting data later this year. In a case report published in 2009 by the NEJM, two patients, an 18 month infant and a 37 year old woman suffering from aHUS with quickly deteriorating conditions and no other treatment options were administered Soliris by their physicians. Conditions of both patients quickly improved soon after treatment with Soliris.

The company is also planning international, multicenter trials for Soliris in kidney rejection. In abstracts presented at the American Transplant Congress in 2009 and 2010, Alexion showed treatment with Soliris lead to reduced rejection and injury of transplanted kidneys in patients at high risk for complement mediated transplant rejection.

Due to the extraordinary activity and unique mechanism of action of Soliris, many independent academic groups have initiated their own exploratory trials of the drug for complement-mediated diseases. Some of these include: Myasthenia Gravis (MG), Membranoproliferative Glomerulonephropathy type II (Dense Deposit Disease), Age Related Macular Degeneration (AMD), and Multifocal Motor Neuropathy (MMN). Alexion is engaging the FDA in the design of a multi-center, international clinical trial for the use of Soliris in Myasthenia Gravis, and considering future actions on some of the others.

PNH alone should drive Soliris sales to over $1 Billion. aHUS has been estimated as representing a possible $500 Million market opportunity while kidney transplant is smaller at $250 Million.

Aside from Soliris, Alexion has only one other drug in development, an early stage anti-CD200 antibody for chronic lymphocytic leukemia and Multiple Myeloma. It is in the process of expanding the initial Phase I/II trials.

So Alexion is indeed a one-trick-pony, but at least it’s got a pretty good trick.

Disclosure: Long ALXN

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