Alexion Pharmaceuticals, Inc.
Q2 2019 Earnings Call Transcript

Published: 24 Jul 2019

[Operator:]

Good morning, and welcome to the Alexion Pharmaceuticals Incorporated Conference Call to discuss Second Quarter 2019 Financial Results. Today's call is being recorded. For opening remarks and introductions, I would now like to turn the call over to Susan Altschuller, Vice President of Investor Relations. Please go ahead, ma'am.

[Susan Altschuller:]

Thank you, Crystal. Good morning, and thank you for joining us on today's call to discuss Alexion's performance for the second quarter of 2019. Today's call will be led by Ludwig Hantson, our CEO. Ludwig will be joined by Paul Clancy, our Chief Financial Officer; John Orloff, our Global Head of R&D and Brian Goff, our Chief Commercial Officer. You can access the webcast slides that will be presented on this call by going to the Events section of our Investor Relations page on our website. Before we begin, I would like to point out that we will be making forward-looking statements, and these statements involve certain risks and uncertainties that could cause our actual results to differ materially. Please take a look at the risk factors discussed in our SEC filings for additional detail. These forward-looking statements apply only as of today, and we undertake no duty to update any of the statements after the call, except as required by law. I would also like to remind you that we will be using non-GAAP financial measures, which we believe provide useful information for the understanding of our ongoing business performance. Reconciliations of our financial results and financial guidance are included in our press release. These non-GAAP financial measures should be considered in addition to, but not a substitute for, our GAAP results. Thank you. Ludwig.

[Ludwig Hantson:]

Thank you, Susan, and good morning, everyone. We have made great progress so far this year further solidifying the durability of the base business in PNH and aHUS continuing to drive neurology and metabolics growth building out the pipeline for long-term value creation and continuing to deliver on our financials. Slide 5 highlights some of our recent achievements. The U.S. launch of ULTOMIRIS with PNH is off to a strong start. And I'm pleased to report that as of the beginning of this week, we have facilitated conversion for 40% of PNH patients. On July 2nd, we received approval of ULTOMIRIS of PNH in the EU and have already launched in Germany. We have remained consistent with our global sustainable pricing strategy and have a best-in-class conversion ambition of at least 70% of patients in the first two years from launch. Our ULTOMIRIS atypical aHUS filing was accepted by the FDA and granted priority review with a target action date of October 19, ahead of our initial expectations. With the U.S. approval of SOLIRIS in NMOSD in late June, we took a major step forward in neurology. SOLIRIS is the first ever FDA approved therapy for NMOSD, a disease in which even one relapse can have a devastating consequences for patients.

[Paul Clancy:]

Thanks, Ludwig. Starting with Slide 7, we reported second quarter total revenues of $1.203 billion, an increase of 15% year-over-year. This was driven by gMG, continued growth in the core business and the ULTOMIRIS PNH conversion. Our non-GAAP operating margin was 58% in the second quarter an expansion of 417 basis points, driven by top line leverage in lower than planned R&D expense. Non-GAAP earnings per share was $2.64, representing 28% growth year-over-year. Moving to Slide 8. Second quarter net product sales were driven by volume growth of 23% offset by an FX headwind of 1% in a price headwind of 7%. The price headwind was largely a result of $32 million reduction to revenue for SOLIRIS in our Canada business in the second quarter. This is related to our ongoing dispute with the Canadian Patented Medicine Prices Review Board or PMPRB related to several SOLIRIS pricing in Canada. In May of this year, the Federal Court of Canada dismissed our application for judicial review. While we are appealing the decision led to a reduction of revenue in the quarter, which includes the impact for the period from September 2017 to June 2019. We estimate that going forward, this will result in approximately a $5 million headwind per quarter.

[John Orloff:]

Thank you, Paul. I want to start by recognizing the significant accomplishments of the R&D organization in the first half of this year. SOLIRIS became the first FDA approved therapy for NMOSD marking a significant milestone in the treatment of this devastating rare disease. ULTOMIRIS was approved for PNH in both the EU and Japan and granted priority review for atypical HUS in the United States. We continue to advance our pipeline and our dosing patients in our pivotal ULTOMIRIS gMG trial as well as our once-weekly ULTOMIRIS subcutaneous trial. We also added to our pipeline with three business development deals. We announced the collaboration with Caelum Biosciences for CAEL101 and AL Light Chain Amyloidosis; a collaboration with Affibody Biosciences for ABY-039 and novel Anti-FcRn asset; and a collaboration with Zealand Pharma for peptide therapeutics targeting complement. On Slide 17, you can see the breadth of our development portfolio, which currently encompasses 15 development programs across our four blockbuster pillars. We expect clinical trial activity to ramp up toward the back half of 2019 and into 2020 as we initiate numerous late-stage development programs.

[Brian Goff:]

Thanks, John. I will start on Slide 20 with all the progress we have made with ULTOMIRIS. In the U.S., we continue to be very pleased with the launch in our efforts to facilitate patient conversion. As of the beginning of this week, 43% of PNH patients were enrolled in OneSource and 40% are on treatment with ULTOMIRIS. So we remain on a very solid path toward achieving our goal of best-in-class patient conversion and now believe we can reach that goal of at least 70% even faster targeting mid-2020 in the United States. This is not only important for patients, but also reflects the strength of the ULTOMIRIS clinical profile. Earlier this month, we received approval for ULTOMIRIS in Europe and have already begun treating patients in Germany, where we have a sustainable pricing strategy as is already established in the U.S.. Similar to the global price range for SOLIRIS our ambition is to maintain a relatively narrow price band globally for ULTOMIRIS. We aspire to facilitate a rapid best-in-class conversion in each launch geography. In Japan, we received approval in June and while we are waiting for the National Health Insurance price listing in order to launch. We are actively engaged in efforts to improve physician awareness of ULTOMIRIS. We anticipate patients can begin conversion in September. Turning to Slide 21, neurology represents a significant growth opportunity. As you see on the left, we ended the quarter with nearly 1,200 gMG patients treated with SOLIRIS in the U.S. and we are still less than two years into the launch. On the right, you can see the continuum of gMG disease severity. Building on our base of SOLIRIS, our goal is to expand treatment options for gMG patients with ULTOMIRIS ALXN1830. We believe a portfolio approach will help us to serve patients across the spectrum of disease. Turning to Slide 22, we are excited to build upon our gMG success with the recent expansion of SOLIRIS into NMOSD. SOLIRIS is the first ever FDA approved therapy for NMOSD, a disease in which patients live in constant fear of the unpredictable and potentially devastating effects of another attack. As you can see on the right, our Phase III trial demonstrated that SOLIRIS has a profound effect on reducing the risk of an NMOSD relapse. We have expanded our neurology field in medical teams this year, which positions us well for launch. There are strong synergies and overlap with gMG, but we are also targeting new call points such as MS centers of excellence. With the right infrastructure in place and a sense of urgency to serve these patients, I'm pleased to report that we already have a number of open cases in OneSource as well as the first NMOSD patients now treated with SOLIRIS. Moving to our metabolics franchise on Slide 23. We reported second quarter STRENSIQ revenue of $141 million with our CALIPER each adjusted initiative we aim to increase awareness and adoption of the appropriate diagnostic ranges for HPP, helping to support earlier diagnosis, particularly of pediatric patients. KANUMA ended the quarter with revenue of $26 million with both LAL-D and HPP, we continue to identify new patients and plan to seek reimbursement agreements in additional geographies. This was a great and action packed second quarter, and I want to especially thank the commercial team for their hard work and dedication to bringing hope to patients suffering from our now expanded rare disease indications. I will now turn the call back to Ludwig for closing comments. Ludwig.

[Ludwig Hantson:]

Thank you, Brian. I'm very pleased with our 2019 progress so far. I look forward to further building on this momentum. As we strengthen our position in each of our four blockbuster pillars, we also continue to look for ways to further leverage our unique and established rare disease expertise. Looking ahead, we have a strong foundation with our base business and exciting opportunities for growth, including our expanded neurology portfolio and numerous late-stage pipeline programs. We are committed to executing on our strategy with the aim to transform patient lives and create long-term shareholder value. As always, I would like to thank our global employees for their dedication to our mission and the patients we serve for their continued trust in us. With that, we will now open the call to questions. Operator?

[Operator:]

And our first question comes from Geoffrey Porges from SVB Leerink. Your line is open.

[Geoffrey Porges:]

Thank you very much and congratulations for all of you on the progress and particularly the approvals. I guess the big question, Ludwig, is the - that the share price. You are executing strongly both in the pipeline and commercially the trajectories are looking good for the new products and new indications. But yet the share price has been flat for three years. And that probably reflects people's concerns about pricing, patents and concentration of the portfolio. So as you think about more options you might have with the company. Is there anything that you could contemplate that might potentially generate value for shareholders or else things you could do with the balance sheet? And assuming that there is not much you can say about that, could you just also update us on the EU patent appeal as well, which is part of the other hand?

[Ludwig Hantson:]

Yeah, we have a lot of questions in there, Geoff. But, thanks. Thanks for that. So first of all, we are - we have a strong strategic plan and the team is doing an awesome job in executing the plan here in. When you look at our business model on where we were a couple of years ago, and where we are now, I think the team is really redefines what the fundamentals of this organization is. And we are growing from old to new, and it's only like year-and-a-half ago that we have got the ULTOMIRIS data, which was strong. We are moving our business from of SOLIRIS to ULTOMIRIS business, with respect to some of your questions on concentration IP by similar. As we execute or continue to execute on our conversion, those questions are going to become less relevant. Because biosimilars in IP is related to the SOLIRIS story, not related to the ULTOMIRIS story. And as we are building that conversion quarter-after-quarter, country-after-country, we are going to have a new portfolio that will raise different type of discussion. So I'm really pleased with what we have done so far. We are not going to change our strategy. As I said, we believe we have a very strong strategy. We are looking at strengthening our portfolio through internal innovation and as you saw that we have 1720, which is internal assets of first one in the last two years going into CTA as well as we will continue to use our cash toward building our pipeline through external innovation. So I think, my story is, we don't change this company overnight. The team has a very strong strategic plan, we are delivering on what we said, we were going to do. And every quarter we are getting stronger and stronger with our fundamentals. With respect to your questions on IP, there is no new news on the EPO. In Europe, no new updates. So beginning of September we should know more about composition of matter and matter of use patents. But again, a come back to what I just said, that is our strategy, our chapter 2 for this company is to make ULTOMIRIS the standard of care for PNH and once approved the standard of care for aHUS. So the topic of IP and biosimilars will become less relevant for this organization. So I hope that answers your question. I'm looking at my colleagues to see if further anything you want to add to that.

[Paul Clancy:]

No. Well said.

[Geoffrey Porges:]

Okay. Thanks, Ludwig.

[Ludwig Hantson:]

Thanks, Geoff.

[Operator:]

Thank you. Our next question comes from Matthew Harrison from Morgan Stanley. Your line is open.

[Matthew Harrison:]

Great. Good morning, and thanks for taking the question. I guess I wanted to focus on a couple of the R&D programs if I could, and just ask about especially timelines related FcRn, it looks like those studies are now starting a bit later than you had talked about last quarter and so. I was wondering if you could update us on the manufacturing issues that you had and if you have been able to work through those and then what some of the drivers have been around the pushing out at the timeline related to those? Thanks.

[John Orloff:]

Thanks, Matt. This is John. Actually no change relative to what we communicated last quarter. We basically what we said and what we have identified is an impurity in the manufacturing process that we have addressed now. And we have run new drug substance runs that will deliver new drug product by the end of the year. So drug product will be delivered by December, which allows us to restart the program in January. So that is consistent with what we said. We do plan to go back into hemolytic anemia with a Phase II/III operations seamless design with the IV formulation. We are also pursuing a subcu formulation with higher concentration drug product that will also be delivered at the end of the fourth quarter for us to start dosing healthy volunteers. And then, as I indicated in during my prepared comments, we are looking at Myasthenia Gravis as well with that subcu formulation recognizing evolving landscape in that space. And I will take the opportunity to say that we are committed to Myasthenia Gravis. We clearly have gone great product in severe patients with severe gMG with SOLIRIS. We are conducting a trial now with ULTOMIRIS in Myasthenia Gravis that does not require the failure of an IST, so to move further upstream in the patient journey less severe patients. And then with our FcRn, we have few shots on goal here. We have ABY-039 is in Phase 1 dosing now as SAD and MAD, as well as our 1830 that will give us the opportunity to span the spectrum of all patients with Myasthenia Gravis.

[Operator:]

Thank you. Our next question comes from Chris Raymond from Piper Jaffray. Your line is open.

[Chris Raymond:]

Hi. Thanks. Just another R&D question, I guess. Just one, really just. I wonder if you could talk a little bit about what is going on with ALXN1810. I think last quarter you talked about completing a Phase 1 study. And I think you even had a slide talking about a potential launch in 2023. But as I read the description now looks like you are in the midst of strategic planning for that asset. So is this some driven by what you are seeing with ULTOMIRIS subcu or is there something else going on with 1810? Thanks.

[Ludwig Hantson:]

So, as you know, for 1810 we have completed the healthy volunteer study that allowed us to increase the bioavailability from 60% for 1210 which is ULTOMIRIS to 73%, which gives us options to dose at every two weeks. We are looking at our options here given the fact that ULTOMIRIS now is rapidly expanding to now seven - new indications in total with PNH and atypical HUS, it's serving that patient popular - those patient populations very well. In parallel, we have a subcu program that is enrolling now that will allow optionality for patients in our core business when that reach out in 2021, and it gets to market. And we have a bridging strategy to expand that once weekly subQ formulation to the other indications we are pursuing with ULTOMIRIS. So right now we have options in our portfolio with regard to C5 that include 1720 as well as 1810 we are exploring now the potential to go into alternative indications and go into new horizons.

[Chris Raymond:]

Thank you.

[Operator:]

Thank you. And our next question comes from Martin Auster from Credit Suisse. Your line is open.

[Martin Auster:]

Hey, guys, thanks for taking the question. Congrats on the continued strong operating results. I have a follow-up on the Canada pricing decision. I was just curious - so does the lowering of Canada prices where you had presents any near-term risks as it creates a lower price point that could then be used by as a competitor by other countries that are evaluating pricing or on SOLIRIS? So just curious that would trigger potentially in near-term risks around other countries repricing SOLIRIS. And then secondly, I was wondering if you could articulate more precisely what the international pricing vendor on SOLIRIS is? And then for ULTOMIRIS, do you expect a similar pricing band or relatively tighter international band when you currently have with SOLIRIS? Thanks.

[Paul Clancy:]

Alright, Martin. This is Paul. Thanks for the question. The Canada situation goes back to kind of 2017, as I had noted, it's been our legal disclosure since that time period. We believe it's pretty localized issue. It relates to what the core issue relates to - what is the appropriate comparison and it actually gets involved with foreign exchange rates and so on and so forth. We are appealing it, but for the time being, there will be a little bit of a headwind as we kind of march through the balance of the year. But we do believe it's local - it's a localized issue at this point, Brian?

[Brian Goff:]

Yeah. And just on the second question about the SOLIRIS pricing band. We haven't quantified that, but I mean, qualitatively we have described it as a relatively narrow global pricing band. And I think that is really relative to what we know in terms of most other pharmaceutical products on the market who have a global footprint similar to ours. So the ambition that we have, and we have already taken big steps toward this with the launch of ULTOMIRIS in the U.S., and then most recently in Germany is with ULTOMIRIS. We want to have maintained a similar pricing range. So in Germany, just to be specific about what that looks like, it is similar to the pricing in the U.S. And so in the maintenance fees, there is about a 10% discount of ULTOMIRIS versus SOLIRIS. The way, Germany looks at these patients is they have kind of more of a longer-term view they blend together years one and two. And when you take that average there is essential parity with ULTOMIRIS versus SOLIRIS. And then when you get into maintenance and beyond. You capture the system savings of the discount and that is our ambition to have that pricing range globally.

[Ludwig Hantson:]

Yeah, I'm going to add to this. The government published end of 2018 a international pricing review.com and SOLIRIS as part of this. So maybe that is a good reference document. But what it said is that our SOLIRIS price in the U.S. is not that much different from the price you are going to see Internationally. And maybe you have already seen this document.

[Martin Auster:]

Thanks. That is very helpful color. Appreciate it.

[Paul Clancy:]

Okay. You bet.

[Ludwig Hantson:]

Take the next question.

[Operator:]

Thank you. Our next question comes from Paul Matteis from Stifel. Your line is open.

[Nate Tower:]

Hi. Thanks for taking the question. This is Nate on for Paul. Maybe one question for Brian. So you have got almost 1,200 gMG patients on SOLIRIS. Well, I guess two

[Paul Clancy:]

Sure. Well, we are really pleased with the progress that we are making. So we are nearly two years into launch and we have been very consistent reporting the numbers. So you guys can see exactly what we see and we continue to make progress with all the stakeholders, whether it's physicians, patients or payers. Just to quantify where we are in the bigger picture in the U.S. gMG, refractory population, which really aligns with our regain pivotal Phase III study at the high end of that there were about 8,000 patients. And as you just noted, we have now achieved nearly 1,200, but that is still is a pretty small number in the bigger picture, which suggests there is plenty of opportunity to go. I think most importantly, in terms of how we continue on that journey. It's really clear that SOLIRIS continues to deliver clinically, and we see that reflected by the steady growth as well as particularly at this stage in launch both breadth of prescribing as well as depth of prescribing and both of those components for all of our launches are important measures. So what this does is this reinforces at the physician level, their advocacy to payers. So if the payer were to come back to a physician and require some form of documentation for continuity of therapy that reinforcing clinical delivery that SOLIRIS is offered has only strengthen the case. And then I would add that, from a payer perspective to where we are with now both gMG and NMOSD is that we continue to reach out to payers proactively in the combination of that proactive communication as well as the steady growth creates one of the most important elements for payers and that is predictability as they set their budgets going forward. So we feel really good about the progress.

[Operator:]

Thank you. Our next question comes from Phil Nadeau from Cowen and Company. Your line is open.

[Phil Nadeau:]

Good morning, thanks for taking my question and congrats on the progress. Just a couple around the European patent situations. Our understanding is that the, on September 5th the Board will issue a ruling on the two patents on that day. Is that correct? And if it is correct, we will Alexion be in a position to announce what the ruling is on September 5th or you have to wait for some written correspondence. And then second, broadly in the European situation if you don't successfully get those patents issued, the concern that we continue to hear is that biosimilars should they launch in Europe would not just compress the price of SOLIRIS, but would have some impact on the utilization and pricing of ULTOMIRIS and price sensitive countries? What do you think of that concern? Is there a chance that deeply discounted SOLIRIS biosimilar could impact utilization or pricing of ULTOMIRIS in European price sensitive countries? Thanks.

[Ludwig Hantson:]

Yeah. So with respect to the EPO hearing, correct at September 5th, so no new updates there. And yes, it is about two patent applications which is composition of matter. And noted of U.S., this is a closed hearing and we think that is a written decision would come soon after. But we expect to know the outcome of the completion of the hearing, the outcome at the completion of the hearing. So this will be on the same day. And with respect to what it means for the European situation, a couple of things. First of all, as you know, we have the formulation patent granted, and we have an appeal process ongoing. So that means that, that patent is going to stick with us after next three to five years, that is Number one. Number two is, our strategy is to make ULTOMIRIS the standard of care for PNH. And as I said once approved those will standard of care for aHUS. And with the approval and the launch in Germany, we have - we feel we have a time enough to convert a business to second-generation, so which is ULTOMIRIS. The timelines for biosimilars to the best of our knowledge. We think best case scenarios is three years from now. And I think, we can do a lot of conversion and upgrade standard of care or redefine standard of care in the next three years. Which respect to interchange ability of ULTOMIRIS and SOLIRIS, these are two different molecules in - I'm not aware of a market and a lot where biosimilars is moving into a branded product. So if you have market analogs in Europe, please send them over so that, I can learn, but I'm thinking of older biosimilar launches in Europe in the market dynamics in each of these countries. This will be two distinct molecules and two distinct pricing dynamics. So I'm looking at Brian here.

[Brian Goff:]

Yeah, I would just only add that, if you stick to that timeframe three years from now and the ambition that we have with ULTOMIRIS, facilitated patient conversion. It gets harder and harder to imagine that you have patients who have had repeated by monthly infusions in the experience that comes with that, that we have already seen play out in the U.S. It's hard to imagine that those patients would then or the physicians would be motivated to take a step backwards to go back to biweekly therapy. So the more that we continue to deliver on that facilitated conversion, the better off our position is in the less relevant the prospect of a biosimilar becomes.

[Ludwig Hantson:]

Yeah, I think every quarter we are in a much better situation now, since we have the approval. We starting with the conversion. We have good uptick in U.S. and we hope to do the same in Europe. Next being aHUS, there is a lot we can do in three years. And I do believe that we have the opportunity to really redefine standard of care for PNH and HUS and make the IP discussion and good point. So we will take next question.

[Operator:]

Thank you. Our next question comes from Kennen MacKay from RBC. Your line is open.

[Kennen MacKay:]

Hey, thanks for taking the question. Maybe one for John Orloff. I was wondering if you could just help us understand the decision behind starting the trial in thrombotic microangiopathy HSCT-TMA. Isn't there already some off-label use of SOLIRIS here it is? The decision to run the trial here based on competitive dynamics with other complement inhibitors or just any color there would be hugely appreciated? And maybe a follow-up for Ludwig on strategy, which was brought up previously. I was wondering if there is any potential or thinking around issuing, perhaps a very small dividend. I know this is going to give me some looks from my biotech peers or premyopically focused on growth, but this really could broaden the shareholder base given some investors might be interested in the story, but they might be precluded from investing if there is on has a mandate for cash return. Thanks so much.

[John Orloff:]

So I will start with first one. I think we are looking at this is a significant new opportunity in a severe and devastating disease that currently doesn't have really any treatment options. As you may know, HSCT-TMA was excluded from our atypical HUS program, even though many of these patients actually have underlying complement dysfunction. There are approximately 20,000 patients undergoing such transplants in the U.S. annually. 30% to 40% of those experience of TMA event, and about half of those are considered severe related to complement dysregulation and you alluded to SOLIRIS - actually published case series, Jodele and others that have shown a benefit of SOLIRIS in this population with the reductions in TMA and improvement in mortality, improvement in survival. In fact, the mortality rate is over 80% at one year and in that paper, they had about 60% survival after a year. So it's a reason to believe that we understand the mechanism of action and there is an opportunity here to have a real big impact and yet another indication for ULTOMIRIS.

[Paul Clancy:]

Hey, Kennen. This is Paul. I will grab the strategy or capital allocation question. It is - our priority is strategic deployment, so building the pipeline, I think we have been - we have tried to be very, very clear about that, that is our priority at this point in time. We are obviously working on the cash flow generation of the company, so that we could potentially broad note, kind of capital allocation and possibly in a few years return capital to shareholders. I think the way we think about it, particularly with the volatility in the sector is that, if we get to that point in time, share repurchases would be the preferred avenue for doing that. So at this point, dividends is not on the horizon.

[Ludwig Hantson:]

Yeah. We still have work to do on the pipeline. So that is our main focus at this point. We will take next question.

[Operator:]

Our next question comes from Mohit Bansal from Citi. Your line is open. Please check that your line is on mute.

[Mohit Bansal:]

Sorry. Thanks for taking my question, and congrats on all the progress. Maybe one quick question on PNH conversion. Is it possible for you to characterize the early adopters or early switchers in that market? What I'm trying to understand, is it coming more from the bucket of optimal responders on one end of the spectrum or these are the previous who are responders on SOLIRIS? And then going forward, what challenges do you feel from the 40% number to move from 40% to 70% or even beyond that? Thank you.

[Brian Goff:]

Yeah. Hi, Mohit. This is Brian. Thanks a lot. Good questions. I would say that from what we have seen so far in the conversions, there really isn't any one call it dominant patient phenotype for conversion. One of the more prominent early factors seems to be, and this is often the case in rare disease launches. It's the frequency of patient visit. So if patient is seeing the clinician every month or every other month versus once every six months, obviously, there are more opportunities to have a discussion on conversion with their clinician. We also think, and this is a very practical point that patients who live some distance away from their infusion center would be not surprisingly more motivated to switch. So overall, on your question of where do we go from the 40% to get to the 70%, it's going to be the same continued journey as education becomes more prominent across a wider part of the patient and clinician community. Those patient visits will continue, we have made really good progress with the commercial payers. We are now over 75% of the covered lives have a defined policy in place and we don't really hear any resistance on any level from clinicians. It's more about moving through those timelines and the progress that we have made so far.

[Ludwig Hantson:]

Next question?

[Operator:]

Thank you. Our next question comes from Steven Seedhouse from Raymond James. Your line is open.

[Steven Seedhouse:]

Good morning. Thank you. What is the current U.S. insurance mix for patients on SOLIRIS and ULTOMIRIS. And can you at least say, is it appreciably different in gMG versus PNH versus aHUS. And if the new Senate financing Committee drug pricing reform plan were implemented as law as written? What do you assess the impact would be to Alexion? Thank you.

[Ludwig Hantson:]

So I will start with your later, and just a couple of things. As you know, nothing is really concrete, so we will follow what is going to happen. But overall, we believe our potential exposure is limited. Let me go through a couple of topics here. First of all, Medicare is a relatively small part of our business, as you know, 60% of our global business this U.S. Medicare is about 20% of our U.S. business. And same true for our Medicare Part D business, which is a very small part of our total global business. The second point I want to highlight is that our price increases - or price increases above CPI is not really our business model. We stayed away from that, and that is not how we drive our business. Our direct business is true innovation and an excess and volume. Then with respect to our pricing strategy, as you know, we have a global sustainable pricing strategy, and Brian already addressed the pricing band that we are trying to respect, but we have a narrow pricing band internationally for SOLIRIS as well as for ULTOMIRIS moving forward. And maybe the last point I want to make is that, rebates is not really our business model, so we have, you could call it price transparency in our business model. So I hope that helps you to frame opposition.

[Brian Goff:]

Maybe I will just add. This is Brian. So I think what we made the points, but it's about 20% Medicare in the U.S. and in the largest portion for us or the commercial payers. There is not really a material difference when you go across indications. But that is why in the case for example of the ULTOMIRIS PNH progress, it's especially important for us that we continue to navigate through the commercial live policy determinations. And each one of those engagements now with multiple launches under way, gives us a chance to give those payers predictability about the outlook ahead. So really commercial is the biggest part of the story.

[Ludwig Hantson:]

Okay. We take two more questions.

[Operator:]

Thank you. Our next question comes from Salveen Richter from Goldman Sachs. Your line is open.

[Salveen Richter:]

Thanks for taking my questions. And just a follow-up on Phil's question. Can you frame for us your expectations into this EU IP oral hearing? And then secondly, when we look at the SOLIRIS launch in NMO, do you expect this to follow a similar cadence to the launch that we have seen for gMG in U.S. and Europe even though I do recognize more touch points here?

[Ludwig Hantson:]

Yeah. With respect to the EPO, and Brian will do the second question. EPO there is not much more I can say. So we believe that we have a strong case here. As I said, we have the formulation patent but our overall strategy again is not about SOLIRIS. Our overall strategy is about build to me is making that the standard of care. It will moving quarter-from-quarter, we are moving. So we have note the approval. Germany is launching. We have other countries that will join Germany in the launch later this year. So we believe that we are in a pretty good spot here. With respect to your second question.

[Brian Goff:]

Sure. And then with respect to NMOSD, we are excited about the launch opportunity. The fact that this is the first FDA approved treatment option for these patients who were really living in a world of fear given the unknowns in the devastating impacts of these attacks is meaningful, and it's very motivating for us. It is an important growth opportunity. And just to characterize it in gMG, we often cite the - at the high end of the refractory spectrum. There were about 8,000 patients in the U.S. and that aligns with the Regain pivotal Phase III study criteria to dimensionalize it NMOSD in the U.S. is about 4, 000 to 5,000 patients. So a roughly half of the refractory gMG U.S. population. Hopefully that helps sort of frame-up the opportunity. I would say that we have gained a lot of neurology experience in the almost two years that we have been commercializing with gMG as we amortize that into NMOSD as well, but there are some different market dynamics with respect to NMOSD. One is that, physicians have had nothing that is FDA approved to use, so that with their use of something for example like Rituxan, that is created a sense, we believe a false sense of stability from the tax. And so we are working through that educational aspects of every attack matters and really stable is a false sense of security. And the second one is that we also know that there is potential near-term branded competition on the horizon. We could not be prouder of the very high bar that we have set with the SOLIRIS Prevent study, and none of the competitors on the horizon address complement a core part of the underlying pathophysiology of NMOSD. So those are a couple of dynamics. We don't expect a bolus. We do expect more of a linear uptake as we have seen with the rather neurology launch.

[Ludwig Hantson:]

Okay. So we take one more question.

[Operator:]

Thank you. And our final question comes from Hartaj Singh from Oppenheimer. Your line is open.

[Justin Kim:]

Good morning. This is Justin Kim on for Hartaj. And thanks for the question. I just wanted to see if you could speak a little to how many of the total patients are on SOLIRIS, ULTOMIRIS in the context of the 5,000 patient goal by year-end?

[Brian Goff:]

Yes, this is Brian, Justin. So, thanks for the question. We haven't broken down those numbers specifically. But I think we have given enough that you can walk around the numbers and get to the right landing spot. So our ambition is, as you noted to get to 5,000 patients or beyond by year-end. And what is important about that when again to reflect back on prior comments we have made is from the launch of SOLIRIS and PNH back in 2007, up until the middle part of 2017. We had achieved about 2,500 patients on therapy and that is the base indications of PNH and atypical HUS. And in the roughly 2 years, 2.5 years, subsequent to that, we will have double that number. So that gives you a sense of the velocity of change in the meaningfulness of neurology in the business. And then of course, inside of that, we are actively in the U.S. converting now the PNH patients over to ULTOMIRIS. We are thrilled about the early PDUFA date that we achieved for atypical HUS or excited to upon approval get going on that journey. And then SOLIRIS will continue near term on the neurology path. So hopefully that gives you enough color to dimensionalize the numbers.

[Ludwig Hantson:]

Thanks, again, everybody. As I mentioned, I'm really pleased with what we have accomplished so far this year. And I'm really, really proud of the Alexion team. So to all of my colleagues, a big thank you and thanks to everyone for your time today. So, thanks so much.

[Operator:]

Well ladies and gentlemen thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone have a wonderful day.