An In-Depth Look At Alexion's Competition And Upcoming Catalysts

Summary

ALXN has many competitors.

A rich set of data supports the current marketing of Soliris.

ALXN is taking the necessary steps with ALXN1210 to produce a similarly rich data set.

US approval of Soliris in a new indication is possible this month.

Alexion Pharmaceuticals, Inc. (ALXN) is a biopharmaceutical company with three marketed drugs, a promising pipeline member in ALXN1210, and a market cap of over $31 billion. ALXN’s major source of revenue, however, a drug called eculizumab (marketed as Soliris), may face competition in the future. Evaluating the viability of the threat posed by ALXN’s competitors is a key step before opening or closing a position and the focus of this article.

The story so far with Soliris

ALXN’s Soliris is an antibody which targets C5, a protein which is part of the body's complement system (which is itself part of the immune system). Since Soliris inhibits the functioning of the complement system, the drug has found use in diseases where the complement system is inappropriately activated. Two such diseases are paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS).

Soliris first received marketing approval for the ultra-rare disease in the US and Europe in 2007, then in other territories worldwide, including Australia (2009) and Japan (2010). The use of Soliris in the PNH indication is supported by multiple studies to date. The phase 3 TRIUMPH study was a placebo-controlled study with 43 patients receiving Soliris and 44 receiving placebo. Soliris was shown in this study to significantly reduce hemolysis (the destruction of red blood cells) and reduce the need for red blood cell transfusions. The response in the placebo group was poor (0 percent achieved stabilization of hemoglobin levels) relative to Soliris (49 percent), which facilitated the removal of the placebo group in future studies. The second phase 3 study called SHEPHERD was a single-arm study in 97 patients where Soliris produced similar results to the placebo-controlled study with patients experiencing a reduction in hemolysis. The long-term extension study enrolled 195 patients and showed the efficacy of Soliris to be durable with a sustained reduction in hemolysis seen, allowing patients to become and remain transfusion-independent. One last study of note in 79 patients treated with Soliris at the Leeds Teaching Hospitals suggests Soliris improves PNH patient survival.

Figure 1: Breakdown of the percentage of patients who are transfusion dependent or independent over a prolonged follow-up period.

Source: Publication in the British Journal of Haematology

In 2011, Soliris received a label expansion in the US and Europe with approval for the treatment of another ultra-rare disease, aHUS. As with the PNH indication, ALXN looked to expand the Soliris label in other territories to include aHUS and was successful in this effort in Japan in 2013.

Similarly to PNH, marketing of Soliris is supported by four studies in a total of 100 aHUS patients. None of these studies were placebo-controlled, but their strong point is the inclusion of a range of aHUS patients (Figure 2). Further, data collected from the pre-treatment period in these patients combined with data during treatment shows that improvement in kidney function coincides with introduction of Soliris.

Figure 2: Overview of the four prospective studies of Soliris in aHUS. TMA refers to thrombotic microangiopathy (the pathological formation of clots within small blood vessel, aHUS itself is one type of TMA). CKD refers to chronic kidney disease a complication of aHUS

Source: Soliris website

I make note of ALXN’s efforts to grow the Soliris franchise to dispel any notion that Soliris generates the revenues it does today simply because it has an effective monopoly in PNH and aHUS. ALXN has put in the effort to open up the market to its drug, maximizing revenues. The second part of the revenue maximizing equation is of course the price of Soliris, the drug frequently makes it into lists of the most expensive drugs in the world, costing over $400,000 per year in some patients. Soliris brought in $814 million in Q2’17 alone, accounting for 89 percent of ALXN’s $912 million in revenue that quarter.

Figure 3: Second quarter sales of ALXN’s three products over the past three years

Source: Q2'17 earnings presentation

Although ALXN’s other two marketed drugs, Strensiq (asfotase alfa) and Kanuma (sebelipase alfa) currently make up only 11 percent of ALXN’s revenues, they launched more recently in 2015. Strensiq is approved for the treatment of perinatal/infantile- and juvenile-onset hypophosphatasia in multiple territories worldwide (including the US and Europe). Estimates for peak annual sales of Strensiq were near $500 million at launch. Similarly, Kanuma, which is approved for lysosomal acid lipase deficiency, has approval in multiple territories worldwide. Kanuma had sales estimates prior to launch of $410 million in 2019 from one UBS analyst and 2020 sales estimates of $800 million from an analyst at Barclays. The Strensiq estimates look reasonable based on quarterly sales of $83 million in 2Q’17 just two years after launch, but the Kanuma estimates look a little lofty (based on $15 million in sales for 2Q’17).

U.S. approval in a new indication is possible

Soliris also recently received marketing approval for an additional indication in Europe. The drug is now approved for the treatment of refractory generalized myasthenia gravis (gMG) in the subset of patients who have antibodies against the acetylcholine receptor. The PDUFA date for this indication in the US is October 23, 2017. It is likely the FDA will approve the marketing of Soliris for this indication, although some have noted the drug missed the primary endpoint in phase 3. The miss on the primary endpoint, the Myasthenia Gravis - Activities of Daily Living Profile, was quite narrow (p=0.0698). Soliris did also achieve statistical significance over placebo on two secondary endpoints, one of which was the Myasthenia Gravis Quality of Life score. It is pretty hard to argue against the approval of a drug, which improves patient quality of life. I tend to view approval in Europe as a higher bar than in the US, and the US FDA has been particularly soft on drug companies of late. For these reasons, I think ALXN’s chances with the FDA are very good. The company also hopes for marketing approval of Soliris in the gMG indication in Japan in early 2018.

ALXN1210: The next Soliris?

ALXN1210, a second generation antibody against C5 will certainly offer greater convenience than Soliris (a first generation C5 antibody). The recommended dosing schedule for Soliris in PNH and aHUS involves weekly injections for the first five weeks and every two weeks thereafter. ALXN1210 can be dosed once every eight weeks, or in the future, self-administered subcutaneously by the patient each day (this saves the patient having to head to a clinic for administration of the drug). In the PNH indication, ALXN is running four trials of ALXN1210.

  1. A phase 1/2 study of ALXN1210 in 13 patients has already produced positive data at 24 weeks. ALXN1210 reduced serum levels of lactate dehydrogenase (LDH; used in PNH as a marker of hemolysis), reduced fatigue and appears to have reduced the need for blood transfusions in some patients. The follow-up part of the study (weeks 25 to 128) is expected to complete in August 2018 producing valuable data regarding long-term safety and durability of response.
  2. A phase 2 study in 26 PNH patients with ALXN1210. The primary efficacy endpoint is the change in serum LDH levels, and the primary safety endpoint is the rate and severity of treatment-related adverse events (both evaluated at 36 weeks). The study includes a follow-up period (weeks 37 to 144) where the safety endpoint will continue to be evaluated. The estimated completion date for the study is listed at December 2018.
  3. A phase 3 study in 246 treatment-naïve PNH patients, which completed enrollment in July 2017. The study will compare Soliris to ALXN1210 with the primary endpoint being normalization of LDH levels and the percentage that achieve transfusion avoidance. The listed estimated primary completion date is December 2017. Since the endpoint is at 26 weeks and the study completed enrollment in July, however, I don’t expect data until late January at the earliest.
  4. A phase 3 study in 192 patients currently treated with Soliris. Some of the enrolled patients will continue on Soliris whereas others will switch to ALXN1210. The primary endpoint is the percentage change in serum LDH levels from baseline to week 26. This study is still enrolling but has an estimated primary completion date of March 2018.

ALXN notes in the 2Q’17 earnings presentation that they are targeting ALXN1210 for approval in the PNH indication in 1H’19. The company is currently in discussion with regulators with regards to the program of registration trials needed to support subcutaneous dosing.

In the aHUS indication, there are currently two phase 3 studies of ALXN1210 listed in the clinicaltrials.gov database. The first is a study in 16 children and adolescents with aHUS and is still recruiting but has an estimated primary completion date of December 2018. The second phase 3 study of ALXN 1210 in 55 adolescents and adults with aHUS ALXN suggested in the Q2 earnings presentation that enrollment will not complete until early 2018 (suggesting data will not arrive until mid-2018). A follow-up period over a year in length exists for both of these studies, which will provide long-term data to support approval and marketing.

Having laid out the suite of data which has allowed Soliris to become so successful and the trials which will produce an even bigger set of data with ALXN1210, it will become clear that ALXN’s competitors are not yet on the same level.

ALXN has competition

Figure 4: A fairly complicated slide from a corporate presentation by ACHN showing the proteins within the complement system and the companies in the space. Chemocentyrx is not shown, but is targeting the C5a receptor

Source: ACHN Corporate Overview from May 2017

Biosimilar competition: Not likely near term

Amgen (AMGN) is developing ABP 959, which is a biosimilar of ALXN’s Soliris and thus will compete directly with Soliris. The issue of three new US patents covering Soliris in the US (which extend until 2027) disclosed in an August 15 press release should mean that ABP 959 is not a threat to US revenues for some time. Although ALXN does not mention ABP 959 in the press release, the composition of matter patent alone represents a major roadblock for any biosimilar developer.

The new composition of matter patent is directed to the full-length amino acid sequence of Soliris and covers molecules that contain the same sequence. - ALXN comments on the August 15, 2017 press release.

It should be noted that a biosimilar should have the same primary amino acid sequence as the reference product (in this case Soliris), so anyone looking to develop a biosimilar of Soliris will be deterred or at the least delayed by this new composition of matter patent. There are select cases where minor modifications to the amino acid sequence are tolerated in a biosimilar according to FDA guidance, provided the developer justifies these modifications in attempting to claim their drug is biosimilar. I am, however, unaware of any cases where the amino acid sequence of a biosimilar did differ to the reference product. The recent approval of biosimilar bevacizumab is only the seventh biosimilar approved in the US, so there are few examples to go on. When developing a biosimilar one must demonstrate that the product is indeed very similar to the reference product in terms of its properties. Few biosimilar developers would be willing to reduce their chances of demonstrating similarity right at the outset of development by using a different amino acid sequence to the reference product. ALXN is seeking corresponding patents in Europe and Japan, which might further stifle attempts from AMGN and other potential biosimilar Soliris developers.

RHHBY, REGN, and NVS: Other C5 antibodies

Roche (OTCQX:RHHBY) has begun trials of RG6107, an antibody designed to provide longer lasting neutralization of C5 than Soliris, in PNH but the drug is only in a phase 1/2 study at the moment. RG6107 could compete with ALXN1210 in the future but is not a major part of the ALXN bear thesis at the current time. The same can be said about Regeneron's (REGN) REGN3918 which is also a C5 antibody but is only in phase 1 and Novartis' (NVS) LFG316 a C5 antibody in a phase 2 study of nine PNH patients.

RARX

Ra Pharma (RARX) is developing RA101495, a peptide inhibitor of C5. RA101495 is being trialed in PNH patients in several single-arm phase 2 trials. The first phase 2 trial will include an estimated 20 patients, including Soliris-naïve patients but also patients switching from Soliris (following at least six months treatment) to RA101495. The second phase 2 study will treat an estimated eight patients who are responding inadequately to Soliris. Both phase 2 studies have an estimated completion date of February 2018. A long-term extension study will produce safety data over several years and has an estimated completion date of January 2020. All of these studies will use subcutaneous administration which provides a potential advantage over Soliris (although will likely only equal ALXN1210). Data from the first two Soliris-naïve patients released in June 2017 shows a reduction in LDH levels following the start of treatment although one patient required a blood transfusion after just four weeks. There is another interim readout of data from the phase 2 program expected around year-end 2017. There were 17 patients enrolled in the phase 2 program as of August 9, and with an endpoint at 12 weeks, it would seem data is likely from all of these patients at year-end. The timing of the long-term extension data, however, suggests that RARX is not a near-term threat to Soliris and ALXN1210 revenues. A total of 28 patients is not enough to support approval in PNH. RARX obviously understands this, hence the labeling of these trials as phase 2 and plans to run a phase 3 program off the back of these studies.


Figure 5: RARX pipeline. RA101495 may compete with ALXN’s Soliris and ALXN1210 in PNH and myasthenia gravis

Source: RARX website

ACHN

Achillion (ACHN) has an orally-dosed, factor D inhibitor, ACH-4471, which targets the complement system by inhibiting the alternative pathway. Data from a phase 1 study of ACH-4471 in healthy volunteers were not very encouraging, in my opinion. One grade 3 and one grade 4 elevation of the liver enzyme ALT were seen in those administered 500 mg or 800 mg twice a day. ALT elevation suggests the potential for drug induced liver injury although luckily this was not seen.

ACHN is currently running a phase 2 single-arm trial in PNH where ACH-4471 will be dosed at 100 or 150 mg three times a day, with the potential for intra-patient escalation. Interim results from the study show a dose response relationship to the drug and what ACHN refers to as “meaningful improvements in LDH, hemoglobin, fatigue score, and other markers of response.” The company also notes the drug has been well tolerated in the four patients enrolled to date. An August corporate presentation reports no clinically significant elevations of liver enzymes in the phase 2 study (likely due to the reduced dose the company is now using, although data is only from four patients). ACHN is already developing a long acting formulation of ACH-4471. Slowing release of the drug might allow twice daily dosing and reduce the potential for toxicity to the liver, but at the very least, a bridging study of some sort would be needed to test the long acting formulation prior to any phase 3 study. Until we hear word from ACHN on the long acting formulation or a newer factor D inhibitor, I don't feel ACH-4771 is something ALXN investors need to worry about.

Apellis and Amyndas

Apellis has tested its C3 inhibitor APL-2 (which is a modified cyclic peptide) in two phase 1b studies in PNH. A June 29, 2017, press release of the results noted a reduction in serum LDH in three Soliris-naïve patients treated with APL-2. When APL-2 was used in combination with Soliris in six patients with suboptimal response to Soliris, a decline in serum LDH and increases in haemoglobin levels were seen. The rate of blood transfusions fell from 3.4 per month 0.3 per month with the addition of APL-2 to Soliris. The use of APL-2 on top of Soliris might not seem like a threat to ALXN revenues. However, the company notes five of six patients in the study were being dosed above the normal protocol for Soliris. APL-2 might have the potential to reduce the dosage of Soliris used in these patients thus reducing ALXN revenues. Both of these phase 1b studies used daily subcutaneous injections, meaning potential competition with ALXN1210. Apellis recently secured $60 million as part of a Series E financing and states that the proceeds will be used to run phase 3 studies of APL-2 in PNH. The company website suggests a phase 3 study should begin H1’18. If the company sticks to this timeline, APL-2 could one day reduce the use of Soliris in some patients, which is not too concerning for ALXN longs.

Amyndas has a peptide C3 inhibitor called AMY-101 had been granted orphan designation by the EMA and the FDA for the treatment of C3 glomerulopathy. It is unclear if the Amyndas is currently running clinical trials in any of the indications for complement inhibitors such as PNH or aHUS. Although PNH was mentioned in previous press releases from the company, there have been no press releases this year.

ALNY

Alnylam (ALNY) is developing ALN-CC5, and RNAi based therapeutic which should knockdown the expression of C5 within the serum. ALNY speaks of ALN-CC5 as having an Soliris sparing effect in the PNH indication. While I do think once quarterly dosing of ALN-CC5 to reduce the required dose of Soliris (and reduce the time between doses) is relatively convenient for patients, it unclear if this combination (ALN-CC5 + Soliris) will be able to compete with the newer complement targeting drugs which require only a single agent. The data from initial studies in PNH were apparently unimpressive since Sanofi Genzyme, a wholly owned subsidiary of Sanofi (SNY), decided against exercising its opt-in right to develop ALN-CC5 in select territories. ALNY recently ceased development in the PNH indication, although a phase 2 study in aHUS was recently initiated. I think the same argument that applies in PNH applies in aHUS (a single agent is easier). I won’t be surprised if ALN-CC5 never makes it to market, as is the case for many RNAi drugs (in fact, there are none approved yet).

AKTX

Akari Therapeutics’ (AKTX) Coversin is a recombinant protein targeting C5 but also inhibiting the activity of LTB4 (a pro-inflammatory molecule). This dual mechanism of action may give the drug an efficacy advantage over other therapeutics targeting C5 although there is not enough data yet to be sure of this. Recent data in PNH comes from five patients who had not previously been treated with anti-complement therapy and look mostly positive. The August corporate presentation notes a phase 2 trial in aHUS is expected to start in Q4’17. Based on a recent PR, it appears two phase 3 trials in PNH start in Q1’18. One of these trials (referred to as ASSET) will study a switch from Soliris to Coversin. The ability to self-administer Coversin subcutaneously provides another potential marketing advantage over Soliris.

CCXI

ChemoCentryx (CCXI) has an oral therapeutic called CCX168 (or avacopan), which inhibits the C5a receptor and is trials for aHUS amongst other indications. CCX168 may represent a threat to ALXN1210 and Soliris due to the fact that it is orally dosed and further perhaps if the differentiated mechanism of action results in a favourable side effect profile (relative to anti-C5 antibodies and OMS721). Interim data from a phase 2 trial of CCX168 in aHUS were released in October 2016 and referred to as positive by the company. I am unsure how the data truly stack up compared to Soliris or OMS721 because the study looked at ex vivo (outside of the body) thrombus formation. Two of five patients did experience an increase in platelet count. However, the platelet count of these patients was not dangerously low. Regarding the aHUS indication on the Q2 earnings call, the CEO stated the company was hoping to start registration trials for the aHUS indication by the end of 2017. This would likely mean a phase 2/3 trial, or phase 3 trial. The company apparently intends the data from this trial to support marketing approval (that is the meaning of registration as used by the CEO). Since the lead indication for CCX168 is ANCA associated vasculitis, it appears the company is more concerned with this indication. CCX168 then does not represent an immediate threat to ALXN, but if registration trials for the aHUS indication commence in a timely fashion, CCXI may become a competitor of note for ALXN.

OMER

Omeros Corporation (OMER) has an antibody against MASP-2 which represents another way of targeting the complement system. A phase 3 study of OMS721 in aHUS is currently enrolling and has an estimated enrollment of 80 patients. The estimated primary completion date is February 2020, but an interim analysis from 40 patients will come before that. Positive interim data would likely cause ALXN to trade down. I previously estimated in my recent article on OMER that this interim analysis might come approximately September 2018 (about half-way through the trial). That date can easily move forward or backward dependent on the rate of enrollment. At the Q3 earnings call and perhaps some time after, OMER will likely provide an update on the enrollment status of the phase 3 trial. The primary endpoint of the trial is at 26 weeks, although a follow-up period exists. If OMER announces that enrollment has reached 50 percent (not likely by the Q3 earnings call), it means the company is just 26 weeks away from performing the interim analysis, the results of which might be released fairly quickly. OMER then represents the biggest threat of all ALXN’s competitors because they are in phase 3 and will probably produce data from 40 patients next year.

Summary, recommendation, and risks

ALXN has amassed an impressive suite of data with Soliris in PNH and aHUS considering these are ultra-rare disease and recruiting even tens of patients requires great effort. ALXN is taking similar if not larger steps with ALXN1210, which provides meaningful advantages over Soliris and will allow the company to compete more effectively with its competitors. Few competitors are actually in phase 3, and those that are have their work cut out for them in terms of producing data sets that allow them to compete effectively with Soliris and ALXN1210 (good luck producing a figure similar to figure 1 enrolling 20 or so patients). In the near term, potential US approval of Soliris in the gMG indication can provide a boost to the stock. Shortly after we can expect Q3 earnings, the company has guided that 2H’17 Soliris revenues will be lower than 1H’17, but if earnings slip too far below estimates, the stock will trade down representing the major risk near term.

As we enter 2018 however ALXN’s competitors will be making advances, issuing press releases about how phase 3 studies have begun, producing data from existing phase 2 studies and proposing timelines for regulatory submission in PNH and aHUS. While approval of the competition’s drugs might be a while away, stocks tend to react pre-emptively to a potential revenue cliff in the future. I think ALXN’s competitors will have a hard time stealing a large portion of ALXN’s revenues, but it is hard to argue that there will not be some loss of revenue. I support a long position effective immediately, but I think investors and traders need to be ready to scale out of their position with each piece of positive news (such as approval in gMG in the US). Longs need to keep up to date with the competitors named here to reassess the competitive threat they pose heading forward.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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