Alexion Pharmaceuticals, Inc.
Q1 2015 Earnings Call Transcript

Published: 23 Apr 2015

[Operator:]

Good morning and welcome to the Alexion Pharmaceuticals, Inc. First Quarter 2015 Results Conference Call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Irving Adler, Vice President, Corporate Communications. Please – go ahead, sir.

[Irving Adler:]

Thank you, Catherine. Good morning and thank you all for joining us on today's call to discuss Alexion's performance for the first quarter of 2015 and our plans for the full year. Today's call will be led by David Hallal, our CEO. David will start the call with an overview of our global performance and be joined by Vikas Sinha, our Chief Financial Officer and Martin Mackay, our Executive Vice President and Global Head of R&D. Also with us today are Saqib Islam, our Executive Vice President and Chief Strategy and Portfolio Officer, Julie O’Neill, our Executive Vice President for Global Operations; Dominique Monnet, our Senior Vice President and Chief Marketing Officer; and Carsten Thiel, our Senior Vice President for EMEA and Asia Pacific. Before we begin, I'd like to note that during this call, we will make forward-looking statements, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause our actual results to differ materially from these statements. A description of these risks can be found in our most recent 10-Q and 10-K filings with the SEC. Any forward-looking statements apply only as of today's date and we undertake no duty to update any of these statements after this call. I'd also like to remind you that our reported non-GAAP operating results are adjusted from our US GAAP operating results for certain items that we described in our press release issued this morning. A reconciliation of our GAAP to non-GAAP results is included in the release. Thank you. David?

[David Hallal:]

Thank you, Irving. In Q1, the global Alexion team delivered a strong start to 2015 as we executed on an expanding and unprecedented range of opportunities to provide life-transforming therapies to patients with rare and devastating disorders. During the quarter, our commercial organization delivered leveraging our world-class expertise in rare diseases to serve more patients with both PNH and aHUS. This resulted in a 25% increase in revenues and a 31% increase in volume year-on-year. And our R&D team continued to advance the broadest pipeline in our company's history, driving toward as many as seven new indication or product approvals through 2018 starting with asfotase alfa, which we will launch globally under the brand name Strensiq. Looking at our operating performance with the strong addition of new patients receiving Soliris in Q1, and with the expected continued growth across our 50-country platform, we are reiterating our 2015 revenue and EPS guidance despite increased currency headwinds, reflecting the ongoing strength of our core business. Looking more closely at our PNH franchise, in Q1, as in all prior quarters since 2007, we identified a consistently high number of newly diagnosed patients with PNH in the US, Europe and Japan, the three territories in which we have operated the longest, as well as in other key markets such as Turkey and Brazil. The success of our PNH diagnostic initiatives drives our steady growth as we continue to see that the majority of patients newly starting on Soliris are also newly diagnosed. Our experience affirms our view, that on a global basis, the majority of patients with PNH have yet to receive an accurate diagnosis let alone commence appropriate treatment. In aHUS, our global launch continued to progress. In Q1, we again added a consistent number of new aHUS patients on Soliris treatment. We now see the same trend in Europe three years post approval. The ongoing strength of our aHUS launch confirms our view that our opportunity to serve patients with aHUS is indeed larger than our opportunity to serve patients with PNH. Given that the incidence of aHUS is higher than that of PNH, combined with the success of our diagnostic initiatives, we expect this trend to continue and perhaps even widen. As we strive to serve more patients with PNH and aHUS, we will now be aided by the recent strengthening of the Soliris label in Europe. Earlier this month, the European Commission approved key updates to the label, which includes important information to help optimize care for patients. In PNH, the updated label confirms that patients with hemolysis are at high-risk of morbidities and pre-mature mortality regardless of whether they have received a blood transfusion. This is important, because many patients suffering from PNH do not require transfusions. The label update now guides physicians that this additional group of patients will also benefit from Soliris treatment. For aHUS, the updated label informs physicians that the longer term Soliris treatment helps a greater proportion of patients experience clinically meaningful improvements. Importantly, the revised label underscores the risks of taking patients off of Soliris, stating that severe complications of (Technical Difficulty) as early as one month following discontinuation of Soliris treatment. Further, the EU label now includes clinical experience for patients who discontinued Soliris, showing that monitoring may be insufficient to predict or prevent life-threatening complications, including severe TMA and end-stage renal disease. As our Soliris operations continue to grow, we are preparing to serve patients with HPP with our next product Strensiq. Upon submitting our regulatory filings for the FDA and EMA, we have had frequent and positive interactions with both agencies and are looking forward to bringing this potentially transformative therapy to patients as quickly as possible. While the review processes continue to progress positively, we now do not expect the final decisions will be made in the remaining weeks of this quarter. In Europe, while we are on track for a CHMP opinion for Strensiq in the first half of this year, come shortly thereafter. In the US, Strensiq was granted breakthrough therapy designation and our rolling BLA was accepted under priority review last month. We have recently updated our submission to include data from the ongoing extension studies which strongly support our submission. Some of these data were recently presented at medical congresses. Given where we are in the review process, we expect FDA approval and launch in the second half of this year. Turning to Japan, the review process is proceeding rapidly. Following recent discussions with the PMDA, we now expect that Strensiq will be approved near mid-year rather than our previous expectation of year-end. Importantly, our 2015 revenue guidance remains unchanged and we continue to expect an initial small revenue contribution from Strensiq in 2015. As we prepare for this global lunch, we are completing the build out of our in-country metabolic teams. Building on our highly successful experience with Soliris, these teams continue to establish relationships with the HPP community and are focused on expanding our disease awareness and diagnostic initiatives as they educate physicians on the signs and symptoms of HPP and the appropriate pathways for rapid and accurate diagnosis. Once approved, Strensiq will be the first of as many as seven new indications or product approvals for patients with severe and rare diseases through 2018. To achieve this goal, we’re advancing the broadest pipeline in our history, including our late stage programs with three ongoing registration trials with eculizumab in MG, NMO and DGF and four additional highly innovative molecules in clinical development. Expanding on our global leadership and complement, our objective is to develop and deliver multiple innovative therapies for patients suffering from a wide range of complement mediated diseases. In Q1, we strengthened and broadened our portfolio of highly innovative complement inhibitors to seven molecules across diverse platforms. Three of these molecules are already in clinical development. This includes the first two of our next-generation Soliris molecules, ALXN 1210, a longer acting anti-C5 antibody suitable for monthly dosing and ALXN 5500. We're driving toward an expected approval of at least one of these molecules in 2018. We are also developing ALXN 1007, our novel anti-inflammatory antibody, which targets C5a. Beyond these clinical programs, we are using our in-depth scientific knowledge and experience and complement biology to progress an additional four preclinical programs, two of which we added through strategic license agreements in Q1. Our future growth is also supported by a total of 17 preclinical programs, expanding diverse disease mechanisms, delivery modalities and therapeutic areas, all of which target devastating and rare diseases. As we progress each of these programs in 2015, we expect to reach at least 12 significant development milestones during the year. Martin will provide more details on our pipeline later in the call. Looking briefly at our Q1 financial performance, we reported revenues of $600 million, reflecting 25% in-year growth over Q1 2014, despite the continuing significant weakness in ex-US currencies. This revenue growth was driven by an increase in volume of 31% compared to the year ago quarter. With this steady, patient and volume growth in our core business, combined with our effective hedging program, we are reiterating 2015 financial guidance. This guidance includes total revenues of $2.55 billion to $2.6 billion. On a constant currency basis, revenue guidance would have been $2.71 billion to $2.76 billion, representing in-year revenue growth of 27% year-on-year. We are also reiterating 2015 non-GAAP EPS guidance of $5.60 to $5.80. At this point, for a closer look at our financial performance, I’ll turn the call over to Vikas. Vikas?

[Vikas Sinha:]

Thanks, David. In Q1, we continued to deliver a strong financial performance, while increasing our investment in our long-term growth. First, the underlying strength in our core business has enabled us to reiterate our guidance this morning, despite the further weakening of global currencies, notably the euro, which has fallen from $1.18 when we provided our initial forecast to $1.07 today. Our Q1 2015 revenues of $600 million were above our forecast of $585 million to $590 million, reflecting 25% growth of in-year sales over Q1 2014. This 25% revenue growth was driven by a 31% increase in volume, partially offset by a 6.6% currency headwind in Q1 over the year ago quarter, net of hedging. The strength of our core business enabled us to increase our investments in R&D and SG&A as we drive to broaden our product portfolio. In this regard, our R&D investment in the quarter reflected the continued progress of our late-stage pipeline and the broadening of our portfolio of early-stage assets. SG&A in Q1 reflected the ongoing build-out of our global operations in preparation for the Strensiq launch. Turning now to EPS. We achieved Q1 non-GAAP EPS of $1.28 per diluted share. Excluding the impact of $24 million charge or $0.11 per share associated with the single manufacturing camp in Strensiq unrelated to launch inventory, EPS would have been $1.39. Looking at our balance sheet, we ended the quarter with $1.93 billion in cash and cash equivalents. During Q1, we experienced strong positive cash flow from operations, which was offset by two factors. First, we are $112 million in upfront payments related to three strategic license agreements. Second, we purchased approximately $60 million of our shares as we continue to mitigate a natural pace of stock dilution from equity grants. As a reminder, we have an ongoing share repurchase program of $500 million. I would now like to review some aspects of our 2015 guidance. Foreign currencies have continued to weaken since we provided our guidance in January. With roughly two-thirds of our revenue from ex-US countries, the full year impact of foreign exchange to our total revenue is now expected to be approximately 6% or $160 million compared to our previous expectation of 5% or $135 million, net of hedging. Despite these increasing currency headwinds, we are reiterating our 2015 total revenue forecast of $2.55 billion to $2.60 billion, driven by strong volume growth in our PNH and aHUS operations globally and our effective hedging program. This 2015 guidance includes a small initial revenue contribution from Strensiq. On a constant currency basis, revenue guidance would have been $2.71 billion to $2.76 billion, representing in-year revenue growth of 27% year-on-year. Now looking specifically at Q2, we anticipate continued strong volume growth and expect revenues to be in the range of $625 million to $630 million, despite continued FX headwinds of approximately $40 million compared to Q2 2014. Looking now at other elements of our guidance, I will highlight the following two points. Due to the strength of our underlying core business, we are reiterating our 2015 non-GAAP EPS guidance of $5.60 to $5.80, despite increased FX headwinds and the impact of the manufacturing charge in Q1. And cost of goods will be at the upper end of our guided range of 8% to 9%. At this point, I will turn the call over to Martin for the look at our research and development programs. Martin?

[Martin Mackay:]

Thanks Vikas. In the first quarter of 2015, our R&D teams advanced the more robust pipeline in our Company’s history, driving toward our goal of achieving up to seven new indicational product approvals through 2018, beginning with Strensiq, our novel therapy for patients with HPP this year. As David mentioned, since submitting our regulatory filings to the FDA and the EMA, we have had frequent and positive interactions with both agencies and are looking forward to bringing this potentially transformative therapy to patients as quickly as possible. While the review processes continue to progress positively, we now do not expect that the final decisions will be made in the remaining weeks of this quarter. In Europe, while we are on track for a CHMP opinion for Strensiq in the first half of the year, the easy decision will come shortly thereafter. In the US, Strensiq was granted breakthrough therapy designation, and our rolling BLA was accepted under Priority Review last month. We have recently updated our submission to include data from the ongoing extension studies which strongly support our submission. Some of these data were recently presented at medical congresses. Given where we are in the review process, we expect FDA approval and launch in the second half of this year. Turing to Japan, the review process is proceeding rapidly. Following recent discussions with PMDA, we now expect that Strensiq will be approved near mid-year rather than our previous expectation of year-end. As we prepare for our 2015 global launch of Strensiq, recent clinical data continue to reflect the devastating nature of HPP and the potentially transformative impact of asfotase alfa. Building on the strong survival data in infants, which showed a five-year survival rate of 89% with asfotase alfa compared to 27% in untreated historical control, we also recently presented data showing the devastating impact HPP has on juveniles and the transformative benefits of asfotase alfa for these patients. In early March, data from First Natural History Study in Juveniles with HPP represented in a late breaking session at the Endocrine Society Meeting. In this study, children with juvenile onset HPP experienced significant impairments in walking, debilitating muscle weakness, severe pain, skeletal deformities and frequent fractures. These data underscored the urgent need for a transformative treatment for these patients. New data from the ongoing asfotase alfa Phase II studies in which patients were treated for at least three years provide long-term efficacy data, showing sustained significant improvement in pain, strength, agility and growth as well as normalization of physical function in children with HPP. To further strengthen and broaden the clinical data in HPP over time, we are also finalizing the protocol for a clinical study of asfotase alfa in adults with HPP, which will commence later this year. Beyond asfotase alfa, we continue to make meaningful progress with our late-stage pipeline, including three multi-national registration studies with eculizumab in other severe and rare complement-mediated disorders, which last approved are effective therapies. Starting with Neurology, enrollment and dosing are ongoing in the REGAIN study, our registration trial in refractory myasthenia gravis or MG. Despite best supportive care, patients who suffer from refractory MG experienced a wide range of debilitating symptoms, including severe and generalized weakness in the muscles of head, spinal cord and respiratory system causing blurred vision, slurred speech, weakness of the arms and legs and difficulty breathing. We expect to complete enrollment in this trial by the end of the year. Enrollment and dosing are ongoing in the PREVENT study, our registration trial in relapsing neuromyelitis optica or NMO. Despite best supportive care, patients continue to experience disabling or life-threatening attacks. Each new relapse or attack brings the risk of a devastating outcome, including blindness, paralysis, respiratory failure or premature death. We are working diligently with investigators globally to complete enrollment in this study next year. In kidney transplant, we continue to enroll patients in the PROTECT study, our registration trial in delayed graft function or DGF. This is a debilitating condition in which a transplanted organ does not initially function properly, which can result in rejection or early graft loss. In addition, due to the poor outcomes associated with DGF, 15% to 20% of donor kidneys are discarded each year, reducing the already limited supply of donor organs. We expect to complete enrollment in this trial by the end of the year. As the global leader in complement biology, we continue to focus on innovative approaches to best serve patients with devastating complement-mediated diseases. In Q1, we strengthened and broadened our portfolio of complement inhibitors to now include seven molecules across diverse platforms. Three of these molecules are already in clinical development. ALXN1210, a longer acting anti-C5 antibody, suitable for monthly dosing, and ALXN5500, the first of our next-generation Soliris molecules, we are advancing Phase I study of these first molecules and will progress at least one into our Phase II PNH trial this year with additional indications likely to follow. We are targeting approval of at least one of these molecules in 2018. We are also developing ALXN1007, our novel anti-inflammatory antibody to c5a, which is an attractive target given its specific role in a number of complement-mediated disorders. We are currently conducting Phase II studies with ALXN1007 in patients with too severe and potentially life-threatening auto-immune diseases, antiphospholipid syndrome or APS and graft versus host disease involving the gastrointestinal tract or GI-GVHD. Severe GI-GVHD is an obstacle to successful hematopoietic stem cell transplants with significant mortality within the first 100 days post-transplant. We continue to expect to have interim data in the GI-GVHD study later in 2015. Beyond these clinical programs, we are using our in-depth scientific knowledge and experience in complement biology to progress in additional four pre-clinical programs, two of which we added through strategic investments in Q1. In our metabolic disease area, we continue to advance our cPMP Replacement Therapy, a small molecule approach to the treatment of patients with molybdenum cofactor deficiency Type A, a rapidly progressing lethal disease afflicting new-borns. The synthetic cPMP bridging study in patients with MoCD is ongoing and we expect to complete enrollment in 2015. We are also continuing our retrospective data collection and natural history study. Beyond our current clinical programs, we are also keenly focused on our expanding pipeline driven by both internal and acquired pre-clinical programs. As such, we are advancing our portfolio of 17 programs, including those resulting from our collaboration with Moderna, where in the first year, we have initiated pre-clinical development in seven mRNA rare disease programs and are targeting our first to enter the clinic in 2016. In Q1, we continued to collaborate with Vanderbilt University to build on the preclinical data showing the potential of asfotase alfa as a treatment for neurofibromatosis type 1 or NF1, a devastating disease in which excess PPi may play a role as it does in HPP. While the existing research in this area is at a very early stage, we look forward to further exploring this potential second use of asfotase alfa and are planning to enter the clinic in 2016. As we look to build upon a robust pipeline, we completed a transaction with Blueprint Medicines to discover, develop and commercialize novel drug candidates for an activated kinase target that is a cause of a rare genetic disease. This is a very promising approach as they already have molecules with impressive selectivity toward the target kinase. We are continuing to evaluate a number of research collaborations, licenses and acquisitions across modalities and therapeutic areas. We look forward to providing more updates on all of our programs as the year proceeds. I will now turn the call back to David. David?

[David Hallal:]

Thanks, Martin. Our performance in Q1 reflects the strength of our underlying business as well as the build-out of our metabolic franchise, the advancement of our development opportunities and the broadening of our pipeline. Specifically, Soliris in PNH and aHUS continues to grow steadily across our 50-country operating platform. We are now ready for the global launch of Strensiq this year. We are working diligently to fully enrol our three ongoing registration trials with eculizumab, while advancing four additional highly innovative molecules in our rare disease pipeline. The strengthening of our leadership and complement biology with a growing portfolio of novel complement inhibitors and beyond complement, we continue to broaden our growing pipeline to focus on what we know well and do well, serving patients suffering from rare and devastating diseases. And we look forward to updating you throughout the year as we progress our ambitious commercial and pipeline initiatives. Thank you. Operator, now, let’s open up the line for questions.

[Operator:]

Thank you. We will now turn to the question-and-answer portion of our call. [Operator Instructions] Our first question will come from Eric Schmidt with Cowen and Company.

[Eric Schmidt:]

Thanks for taking my question and congrats on another solid quarter. Maybe for David or for Martin on Strensiq and the US approval process, are you expecting a panel and if you're submitting additional data, I assume that's for some purpose, is there some claim that you're hoping to get on the label, including maybe survival that's generating this length of your timeline?

[David Hallal:]

Yeah. No. Thanks, Eric. I’ll start and then certainly Martin can add. So from our perspective, having completed the rolling BLA submission in December and then of course being granted priority review just last month, what we take a look at is we’re having ongoing and very productive dialog with FDA. Now, as we've submitted data over time, we have patients that have been on treatment now for up to five years and we've updated the clinical data for all of those patients. As I think you know quite well, our expectation is a very strong label. Breakthrough therapy designation covers perinatal, infantile and juvenile onset patients, which is very important for us. And in terms of the panel, the FDA has made it known to us that they do not anticipate an FDA panel in anyway. Martin, anything to add?

[Martin Mackay:]

Thanks, David. Very little to add. I think you articulated very well, no expectation of a panel and in terms of the additional data from our extension studies, really part of the normal process as we go through this with the regulators.

[David Hallal:]

Next question?

[Operator:]

Thank you. And our next question comes from Anupam Rama with JP Morgan.

[Anupam Rama:]

Hey guys. Thanks so much for taking the question. In your comments as well as the press release, you highlighted two additional preclinical complement inhibitors, how should we be thinking about the potential levers for differentiation relative to Soliris, your next-generation Soliris molecules, one of which is a longer acting and the broader complement-competitive landscape.

[David Hallal:]

Yeah, I will start and then let Martin to jump in as well, but on our promise, we made it really clear, when we look at our leadership in complement biology as an organization, Soliris is a highly innovative product. You can see from the strength of our core business and of course the fact that 100% of patients in our PNH and aHUS trials had 100% objective response rate to Soliris, it’s really a very, very strong franchise that we are building on. At the same time, we highlighted last quarter, our expectation is to serve patients with complement-mediated diseases through the end of this decade and through the end of next and we continue to focus with the Eculizumab late-stage programs. As Martin highlighted, with three ongoing registration trials, we also now with 1007 targeting C5a, we think there is other complement-mediated diseases that may be particularly well suited for that approach. And at the same time, when we think about many different patients treated by many different specialties across a wide range of complement-mediated disorders, we want to provide optionality to physicians and patients across our 50-country platform. And so that’s the way to think about it as we continue to address the needs of patients that we see suffering from these diseases.

[Martin Mackay:]

Pretty good, David. My only add is in terms of thinking about both in terms of as David articulated different treatment options around C5 and also new diseases to work on. I think we are having seven molecules, now three in the clinics, four pre-clinical. We are building this portfolio to do both.

[Anupam Rama:]

Great. Thanks for taking our questions.

[David Hallal:]

Thanks, Anupam.

[Operator:]

And we will continue on to Salveen Richter with SunTrust.

[Salveen Richter:]

Thanks for taking my question. Just wondering, with regard to Strensiq, if you could remind us of the diagnostic initiative you have in place and your footprint here ahead of the launch and any early access programs or other programs that you might have in place for current use of the drug?

[David Hallal:]

Sure. No, thank you very much, Salveen. So as I indicated on the last call, we expect 2015 to really be a story about launching in the US, Germany, the first country in Europe of course, and Japan. And the teams are fully in place and ready to go. And the disease and diagnostic initiatives that we are running is really through educating physicians about patients who may be diagnosed with another disorder, another metabolic bone disorder or other symptoms that may be also overlap with HPP. And really through that education and the use of a simple alk phos test which is available to physicians to better understand how to identify these patients, it’s helping physicians to better appreciate which patients in their practice may have HPP. At the same time, as we’ve indicated, our 1010 trials continues to be open and enroll children with HPP and that has enabled us to help patients in need prior to approval to access treatment.

[Operator:]

Thank you. And we will continue on to Geoffrey Porges with Bernstein.

[Geoffrey Porges:]

Thanks very much and congratulations on the quarter and David welcome to your first follow-on call.

[David Hallal:]

Thanks, Geoff.

[Geoffrey Porges:]

I suppose I’ll have to test to you out. I will ask my favorite question. So could you give us a sense -- your comments about PNH suggest that, on a global basis, more patients are still unidentified and untreated than treated? Could you give us an update on where you – the implication that in the US now you have more patients identified and on treatment than unidentified. And then related to that, in the US, you are 14 quarters into the aHUS launch. What do you estimate is the proportion of the real incidence that you are actually capturing and converting to treatment with Soliris? Thanks.

[David Hallal:]

Yeah, it’s a great question. I’d say in the US of course, the first county in which we launched Soliris for PNH back in April of ’07, is that today we see ourselves starting to approach sort of that point where we think we are getting to identifying about half of the patients that may have the disease and around the world globally slightly less than that as we launched later in those other territories. I’d say, Geoff, one of the things that we’re benefiting from, of course, is that we see that Soliris helps to change the natural history of disease. We’re aided by the fact that there is an incidence rate albeit not as high as aHUS, but there is an incidence rate for PNH. So, that means new patients are coming into the system every year and the symptoms associated with PNH still continue to resemble symptoms of more common bone morrow failure syndromes or clotting disorders and based upon that, physicians just miss these patients and we want to get there fast with the 35% death rate at five years. And so, we think all of that combined puts us in a really good position and we see, as we presented previously, a continued steady identification of new patients across our 50 country platform in 2015, same study contribution of new patients on a quarterly basis as we did in the earlier stages of the launch. In terms of PNH versus aHUS, as I indicated, 14 quarters out now following the FDA approval, there are more patients actively on treatment with Soliris for aHUS. And we think the success of the diagnostic programs combined with the higher incidence and of course, these patients with aHUS are presenting urgently a high degree of medical severity, including renal impairment or renal failure and that is actually helping us to diagnose patients faster, but we still think there is a number of patients we miss, that we think there is great upside in the US and around the world to reach more physicians with those disease and diagnostic initiatives to get to those patients sooner.

[Geoffrey Porges:]

Great, thanks very much, I appreciate it.

[David Hallal:]

Thank you.

[Operator:]

And we’ll now hear from Geoff Meacham with Barclays.

[Geoff Meacham:]

Hi guys, thanks for taking my question and congrats on the quarter. Look, I got one for Vikas and then one for David. So, Vikas, this quarter, pretty big FX hit, does that prompt you to change your synthetic hedging strategy or how you allocate capital overseas and may be a bigger picture question for David, with an established US tax structure and obviously a commercial infrastructure across the globe, with the cash that you have on the books and what you’re generating, do you guys think more frequently about sort of an external M&A, not for Phase I or platform technologies, but more for marketed product? Does that make sense to expect that going forward? Thank you.

[David Hallal:]

Thanks, Geoff. Vikas, start.

[Vikas Sinha:]

Geoff, I just understand your question, if you’re talking about big FX impact and whether we will be changing our hedging strategy, the answer is no, we’ll keep our hedging strategy as it is to keep 50% of our major currencies hedged and this -- the thing is, when the currency moves, overtime, you will get impacted and we will take the impact very slowly over several years and what that also means is, yes, we’re trying to give more color on what that impact would be quarter-by-quarter, so you get a better appreciation with constant currency volume growth. You can calculate that. If I look at the growth rate this quarter, it was 25%, but adjusting the FX on a constant currency basis, the fundamental business is very strong at 31% and we expect that strength continuing for the rest of the year.

[David Hallal:]

Thanks, Vikas. And Geoff, our focus is really on what we know well and do well. We feel like we have a high level of skill at characterizing and understanding devastating and rare diseases and identifying molecules that can have a transformative impact and then leveraging as you state our global platform to help reach more patients as quickly as we can. And I would just say, to kind of cap off the answer to your question, I think it’s important to state that we remain agnostic to therapeutic area or therapeutic modality. We’re really looking at really devastating rare diseases where products can have a transformative impact.

[Geoff Meacham:]

Okay, thanks.

[Operator:]

Our next question comes from Matt Roden with UBS.

[Matt Roden:]

David, can you hear me?

[David Hallal:]

Yeah, Matt.

[Matt Roden:]

Okay, great. Thanks so much. Thanks for taking the question. So David you pointed out in your prepared remarks, the label updates that describe recurrences of TMAs and aHUS patients had discontinued therapy. It seems like this can be a nice opportunity for you guys to further improve the benefit that you are delivering to patients. So can you talk about what proportion of patients, aHUS patients are currently discontinuing from therapy and to what extent you think this updated label can improve the persistency on therapy? Thanks.

[David Hallal:]

Yeah, thanks very much, Matt. You know, as we have indicated on past calls, we observed that the persistency for patients with the confirmed diagnosis of aHUS is good, but less than that of the historically observed, very, very, very high rate in PNH. And I think the thing I characterized in the past is, given that aHUS is a thrombotic microangiopathy, and there were a few other thrombotic microangiopathies that are viewed as more of a short-term intermittent disease, one key part of our educational program over time has been that aHUS is a genetic lifelong disease as opposed to, say for example, stack aHUS. And so over time, we think physicians are gaining a better appreciation. As you know, we started out with our US and European labels with only six months of efficacy data that has now moved to two years and beyond. And we believe that this update, which also provides specific clinical evidence of patients that were discontinued and monitored closely over time still had a very bad devastating outcome, including specifically a patient progressing to ESRD. And so we think both the longer term efficacy data showing that more patients have a clinically meaningful improvement on Soliris treatment combined with also the protection from the risk of severe devastating thrombotic microangiopathy is going to continue to support our efforts with physicians around the world.

[Matt Roden:]

Because, it sounds like you would expect some sort of impact to utilization from these label updates?

[David Hallal:]

Yeah, we would expect -- as I mentioned and I don’t really want to walk past PNH, I mean, I think it was very meaningful in Europe that for the first time since our approval in June 2007 now the European Commission points to the group of PNH patients that have no history of blood transfusions and really helps physicians now understand that those patients with hemolysis and with symptoms of PNH can also benefit from Soliris treatment. So that’s a new group of patients that physicians are managing in Europe that will be very helpful. So I think that should certainly provide us some benefit over time, and I would feel the same way about aHUS, over time, we would think that the trends would improve.

[Matt Roden:]

Great. Thanks, and congrats on the solid growth there.

[David Hallal:]

Thanks, Matt.

[Operator:]

Our next question comes from Chris Raymond with Robert Baird.

[Chris Raymond:]

Hey, thanks. Just a question on the follow-on molecules, you have been fairly descriptive of the ALXN1210, but not 5500 molecule. I am just wondering, is there a trigger for when you would use them and exactly what that is, is it timing, is it data, any color would be appreciated? Thanks.

[Martin Mackay:]

Yeah, Chris, really both timing and data, and you’re correct. You know, we speak about 1210, once daily dosing and looking to move into patients by year-end with one of those molecules. In specific answer to your question, it really comes to data and timing with 5500.

[Chris Raymond:]

Thank you.

[Operator:]

Matthew Harrison with Morgan Stanley has our next question.

[Matthew Palmer:]

Good morning, this is Matthew Palmer in for Matthew Harrison. Thanks for taking the questions. David, now that you are in the CEO seat, any updated thoughts on capital deployment including the potential for accretive M&A or for commercial products?

[David Hallal:]

Yeah, you know, Matt, I just as I mentioned, we are going to continue to focus on what we know well and do well. I think as Vikas and Martin, and I highlighted, in Q1, there were three strategic license agreements, which we entered into, they helped to bolster both our complement biology and leadership position in general to strengthen that portfolio as well as we think a really neat approach with Blueprint Medicines. I think as an organization, what we know well and do well is characterizing really bad rare diseases and understanding, you know what therapies, can't just have a modest or incremental impact but something that's truly transformative and that's the approach that we like to take that's what we think we are building with Soliris and asfotase alfa, and the other highly innovative molecules and programs that we have in the pipeline. And as I mentioned, they will also continue to be acoustic to therapeutic area and modality because of the strength and leverage that we have with our 50 country operating platforms.

[Matthew Palmer:]

Thank you.

[David Hallal:]

Thanks.

[Operator:]

And Ying Huang, with BofA, please go ahead.

[Ying Huang:]

Hi, good morning, thanks for taking my questions. First one is, can you give us a little bit color in terms of the average dose for the aHUS patients is on Soliris and also whether you're making more progress in terms of getting patients outside of the hospital settings for aHUS. And then, also my second question has to do with the FDA approval for asfotase alfa? So can you give us a little bit color around the questions you're getting from FDA and EMA and is there any difference in the topic of discussion or not? Thank you.

[David Hallal:]

Ying, I got to give you credit for getting like three, four questions into one always, I guess, this time, it just wasn’t a question for everybody, but why don't I take them. A way to think about aHUS as we've always said, obviously the disease is devastating to both children and adults, but when you look at the mix of patients, the way to think about our aHUS franchise is, the average per patient dose across the population, think about it as, it fits right into PNH, right, when you balance out the children and the adult. In terms of patients in or out of the hospital setting, we think about patients two ways, the patients with active progressing TMA, they are the ones I'm referring to that are presenting urgently, usually to a hospital because their platelets are plummeting, their LDH is rising, they have you know symptoms of hemolysis, and of course their kidneys are greatly impaired or failing. And so, we see the majority of the patients that we identify and starting on treatment are at that level, but at the same time, there are patients that have perhaps absorbed a history of thrombotic microangiopathy that might be out in the clinics with nephrologists and hematologists, and again, that's part of the leverage that we have with our field team that also focuses on PNH, where most of the PNH patients are actually identified in the hematology clinics. So that leverage actually allows us to both capture the opportunity to serve patients in the hospital as well as out in the clinics. And then I think, your last question and Martin can certainly add to this. The questions that we’re getting from regulators, I think as Eric pointed out, would just be kind of straight forward questions that we would expect in the normal course of the process but with us standing by the transformative impact, you've seen the data at medical congresses with patients treated for three to five years and really standing by that submission to make sure that we can serve the highest number of patients possible.

[Ying Huang:]

Thank you.

[Operator:]

I will now go to Terence Flynn with Goldman Sachs.

[Terence Flynn:]

Hi, thanks for taking my question. Maybe it’s one question and one clarification. First, I think you guys mentioned for the first time that you expect possibly the trend to widen between PNH and aHUS, on a time [ph] match basis, just wondering, what are factors that you're seeing at this point that are contributing to that statement. And then the clarification with respect to the $24.4 million tied to the single manufacturing campaign for asfotase, just wondering if you can clarify what exactly that's driving that, is that inventory build or something else? Thank you.

[David Hallal:]

Yeah sure, thanks Terence. So, what's contributing, we tried to refer to it in the call is, what's contributing, first of all, PNH continues to grow very, very nicely as I indicated, we see the majority of our opportunities go in front of us with PNH, and in fact we are adding a similar number of patients on a quarterly basis globally today as we did in the earlier stages of our global launch, so the durability and strength of that franchise and the opportunity to serve patients is tremendous. When you look at it on a time adjusted basis, 14 quarters in on the US, the fact that we are actively treating more patients with aHUS than PNH combined with a higher incidence, right, so we didn't get there through pent-up demand, we've gotten there through serving patients who are newly presenting with TMA overtime. So the higher incidence, the success of our diagnostic programs and the confidence and the longer-term opportunity, we would expect that this is a trend that could perhaps widen on a time adjusted basis. As it relates to the 24.4 million, Vikas?

[Vikas Sinha:]

The 24.4 million, the manufacturing stuff, we don't expect that to be repeating in the second half of the, rest of the year also, because this was one of the im-quarter thing, normally, because of the accounting way that we look at it, we would have normally taken this into R&D, but we have a policy that after the filing, we have started capitalizing the inventory. So the launch inventories are already in place. This is just one of the instance where we found the problem early on, we started the campaign and we took the write-off.

[Operator:]

And we’ll now go to Robyn Karnauskas with Deutsche Bank.

[Robyn Karnauskas:]

Hi, guys. Thanks for taking my questions. So just could I ask you about 1007, C5A inhibitor, I know a lot of anti-inflammatory drugs don't work in GBI, HT and APS, can you help me understand what we know about the science complement in these disorders?

[David Hallal:]

Martin?

[Martin Mackay:]

Yeah. Thank you, Robyn. I think it's fair to say we are developing our knowledge around C5A in those disorders, but there is clearly some preclinical evidence that would suggest the role for C5A and clearly with 1007 having already started at both proof of concept trials and having results in one of them this year, this will give us really good evidence for the role that C5A can play and specifically 1007 in both gastrointestinal GVHD and also antiphospholipid syndrome. That will also, I believe, allow us to look at other potential diseases. I think it’s quite clear that C5A and the C5A receptor are important therapeutic targets in the complement pathway and that will give us a chance to really look at other indications for this molecule.

[Robyn Karnauskas:]

And if you allow me as a follow-up, can you help me understand a little bit more about C5A, like in Soliris, why you need a more broad C5A inhibitor for PNH and aHUS and what it might offer?

[Martin Mackay:]

Well, we firmly believe that C5 is the best target for those particular diseases, PNH and atypical HUS, but as you also know, the other components with the associated pathway and obviously C5A is one of them, could also be important therapeutic targets. In terms of C5 with PNH and atypical HUS, we are very confident that that is the best target in those indications.

[David Hallal:]

Yes, Robyn and it’s, when you only block C5A, you are not blocking terminal complement and that's really the important piece on why Eculizumab or Soliris is really the ideal complement inhibitor for those diseases.

[Robyn Karnauskas:]

Great, thank you.

[Operator:]

Thank you. And we will now hear from Stephen Willey with Stifel.

[Stephen Willey:]

Yeah. Thanks and congrats. Vikas, I guess it sounds like the impact from pricing was relatively negligible in Q1, maybe just wondering kind of what if any kind of pricing headwinds baked into ‘15 guidance at this point? Thanks.

[Vikas Sinha:]

Yeah. Steve, in Q1, we had a positive 1% pricing impact and it was a very small number, so that was mainly driven from US price increase, negated by some -- one impact in UK.

[Stephen Willey:]

And in terms of just what is baked into ‘15 guidance at this point on the pricing side?

[Vikas Sinha:]

Pricing side for the full year, it's incorporated in our guidance and we normally take 2% to 3% decline year-on-year.

[Stephen Willey:]

Okay, thanks.

[Operator:]

And our final question will come as a follow-up from Geoffrey Porges.

[Geoffrey Porges:]

Thanks very much. Let me jump in. Vikas, could you talk a little bit about your balance sheet? You have close to $2 billion in cash, effectively no debt and many of your peers have started to look to leverage to pursue business development opportunities and more aggressively buyback stock. Could you talk about how you see that playing out over the next 12 or 18 months for Alexion and potentially being more aggressive given the interest rate environment? Thanks.

[Vikas Sinha:]

First of all, as David had laid out earlier, our first and foremost objective is to strengthen our pipeline and look at licensing and acquisitions as one first opportunity, right. So we would – the cash balance as well as our borrowing capacity, we would like to hold for that. And the second objective of cash balance would be to keep the dilution in check at this stage and we will not go too aggressively on buying back a large amount of shares by just borrowing, but rather hold it for our growth and supporting our growth. David?

[David Hallal:]

Yeah, and I would just again repeat, Geoff, that our focus as an organization is on what we know well and do well, characterizing and understanding devastating and rare diseases and identifying molecules that can have a transformative impact, really independent of therapeutic area or modality. And so that’s kind of been our approach in the past. I see that being our approach as we move forward and certainly as Vikas indicated, we have a balance sheet that supports that.

[Geoffrey Porges:]

Okay. Thanks very much.

[David Hallal:]

Thank you.

[Operator:]

And ladies and gentlemen, that was our last question. This concludes today’s conference call. Thank you for your participation. You may now disconnect.