Analyst Conference Summary


Alexion Pharmaceuticals

conference date: February 3, 2016 @ 7:00 AM Pacific Time
for quarter ending: December 31, 2015 (fourth quarter 2015, Q4)

Forward-looking statements

Overview: Continued rapid revenue and profit growth.

Basic data (GAAP):

Revenue was $700.9 million, up 5% sequentially from $666.6 million and up 17% from $599.5 million in the year-earlier quarter.

Net income was $66.6 million, up sequentially from negative $183.8 million, and down 57% from $153.3 million year-earlier.

EPS (diluted earnings per share) was $0.29, up sequentially from negative $0.81 and down 62% from $0.76 year-earlier.


Full year 2016 non-GAAP product revenue expected between $3.05 and $3.1 billion. EPS $5.00 to $5.20.

In Q1 non-GAAP EPS expected between $1.10 to $1.15.

Conference Highlights:

The drop in net income and EPS on both a GAAP and non-GAAP basis was primarily due to Synageva acquisition-related expense accounting. Currency had a negative y/y impact, as did an $88 million one-time benefit in q4 2014.

"2015 was a transformative year for Alexion." 2016 will start with 2 new product launches.

Soliris (eculizumab) sales were $689 million, up 4% sequentially from $665 million and up 15% y/y from $600 million. Volume was up 23% y/y, but there was a negative impact from currency exchange rates. AHUS rollout continued, but new PNH adds continued as well.

Strensiq (Asfotase Alfa) for HPP (pediatric-onset hypophosphatasia) was approved for sale in the U.S., EU, Japan and Canada. The label is broad. Strensiq generated $11.6 million in revenue in the quarter, up sequentially from $0.4 million. Given the low incidence and high mortality from HPP, the build will be relatively slow and country by country, starting with Germany in Europe.

Kanuma (sebelipase alfa) for LAL-D (lysosomal acid lipase deficiency) was approved by the FDA in Q4 and in the EU in Q3. It generated $0.3 million in Q4. Identifying patients required improving diagnostics; is already getting a higher rate of diagnosis. Believes most patients will be in the U.S. and Germany in 2016. Believes there are 8 to 12 patients per million in the general population.

Non-GAAP numbers: net income was $259.9 million, down 3% sequentially from $268.9 million and down 2% from $266.0 million year-earlier. Diluted EPS $1.13, down 3% sequentially from $1.16, and down 13% from $1.30 year-earlier. Excludes $66.3 million in share-based compensation, $3.4 million acquisition related costs, $80.0 million in amortization of purchased intangibles, $11.4 million for restructuring,$15.5 million in upfront and milestone payments, $18.6 million change in fair value of contingent consideration, and $1.9 million in non-cash taxes.

Cash and equivalents balance $1.385 billion, down sequentially from $1.5 billion. Long term debt $3.3 billion. Cash flow from operations was not stated.

Alexion continues to develop therapies with Soliris. Soliris for AMR (Antibody-Mediated Rejection) enrollment is complete for both living donors and deceased donors. Preliminary data will be reported at the American Transplant Congress.

Soliris for DGF (Delayed Graft Function) trial is enrollment is complete with data expected before the end of 2016.

NMO (Neuromyelitis Optica) continues dosing in a registrational trial with complete enrollment expected in 2016.

The registrational study for refractory MG (Myasthenia Gravis) is has completed enrollment, with data due in mid-2016.

Alexion is also developing other treatments for ultra-rare diseases. ALXN 1101 for MoCD (Molybdenum Cofactor Deficiency) Type A natural history study and synthetic cPMP bridging study are ongoing, with completion of enrollment expected in 2015.

ALXN1007 for inflammatory diseases continued a Phase 2 study in patients with APS (antiphospholipid syndrome). 1007 is also in a Phase 2 study for graft-versus-host disease involving the GI tract (GI-GVHD), which released interim data in Q4 showing an overall response rate.

ALXN1210 for PNH completed enrollment in a Phase 1/2 trial and reported rapid reduction of LDH.

Next generation Soliris therapies ALXN 1210 completed a Phase 1 study. A proof of concept study for PNH should initiate this quarter.

SBC-103 enrollment continued in a Phase 1/2 trial of SBC-103, an enzyme replacement therapy for patients with mucopolysaccharidosis IIIB, or MPS IIIB. Preliminary data in Q4 of 2015 showed dose-dependent reduction in heparan sulfate levels.. Enrollment in a natural history study was also completed. More data should be available in March.

cPMP Replacement Therapy (ALXN 1101) completed enrollment in the synthetic cPMP bridging study in patients with molybdenum cofactor deficiency (MoCD) Type A and enrollment in a natural history study is ongoing. The Company plans to initiate a pivotal study with ALXN 1101 by the end of 2015.

There are now 30 programs in the pre-clinical stage. Seven Moderna mRNA programs are part of that. All programs target devastating and rare diseases. The first of these programs should enter the clinic in 2016.

See also Alexion pipeline.

Between 2015 and 2018 Alexion could have as many as 6 more product approvals.

GAAP cost of sales was $57.6 million. R&D expense was $191.0 million. Sales, General & Administrative expense was $241.6 million. Acquisition related expense $3.4 million. Amortization of purchased intangibles $80.0 million. Restructuring expense $11.4 million. Total operating expenses were $545.9 million, leaving operating income of $97.3 million. Interest and other expense was $22.8 million. Income tax provision was $7.9 million.


Soliris in 2016, Brazil? We had a $15 million impact in Q4 due to government restrictions. We believe we have sorted that out. We think it is business

Netting out effect on 2016 guidance? $600 million going into 2015, $450 million going into 2016. Hedging took half out of foreign exchange impact in 2015. In 2016 we expect to add the same number of PNH and aHUS, but the base is larger, affecting the netting out. Depends on where currency goes.

SBC103 markers besides heparan sulfate? No, that is the focus.

In 2016 we expect to keep expense growth very disciplined, much lower than the rate of revenue growth. Expenses were high in second half o 2015 due to the Synageva acquisition. The process will continue into 2018.

In SBC103 we are seeing consistency in our patients with our preclinical data.

European pricing discount in the guidance? We have seen a 2 to 3% annual decline in prices in the past, but it was less than 2% in 2015. We are using the 2 to 3% in our guidance.

Can you move directly to Phase 3 for SBC103? We like what we've seen through 12 weeks and look forward to the 6 month data. We want to reach patients as fast as we can.

Strensiq incidence numbers? HPP has much less data on prevalence than we have seen in PNH. Range of 1 in 100,000 to 1 in 300,000 has been given.

MG numbers? The patients we have failed two prior treatments. Our subset could be a few thousand patients in the U.S. These patients have no other hope.

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Disclaimer: My analyst call summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2016 William P. Meyers