Alexion Pharmaceuticals, Inc.
Q2 2015 Earnings Call Transcript

Published: 30 Jul 2015

[Operator:]

Good morning and welcome to the Alexion Pharmaceuticals Incorporated Second Quarter 2015 Results Conference Call. Today's call is being recorded. For opening remarks and introductions, I would now like to turn the call over to Elena Ridloff, Executive Director-Investor Relations. Please go ahead, ma'am.

[Elena H. Ridloff:]

Thank you, Eric. Good morning and thank you for joining us on today's call to discuss Alexion's performance for the second quarter of 2015 and our stated 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. You can access the webcast live, 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 refer you to slide 3. 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 and our subsequent SEC filings, including the registration payment on From S-4 filed on May 22, 2015. 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 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 L. Hallal:]

Thank you, Elena. Q2 was a strong quarter for Alexion as we achieved many significant commercial, R&D and financial milestones while also completing the Synageva acquisition to strengthen our position as the global leader in serving patients with devastating and rare diseases. In Q2, we fired on all cylinders. First, our commercial organization delivered steady growth in both PNH and aHUS reflecting the strength of our core Soliris business. Second, we substantially advanced our next product Strensiq towards commercialization with our first approval in Japan as well as a positive CHMP opinion in Europe. Third, we continue to expand our complement franchise as we exceeded the target enrollment in our registration trial of eculizumab in refractory myasthenia gravis. Fourth, we delivered these milestones as we simultaneously announced and closed the Synageva acquisition and advanced Kanuma with a positive CHMP opinion in Europe. Fifth, we progressed the broadest pipeline in our history, driving toward as many as eight new product or indication approvals through 2018, starting with the global launches of Strensiq and Kanuma later this year. And finally, we had another strong quarter of financial performance. In Q2, product revenues were $636 million, an increase of 24% over Q2 2014, despite the continued weakness in ex-U.S. currencies. This revenue growth was driven by an increase in volume of 31% compared to the year-ago quarter, reflecting the ongoing strength of our core PNH and aHUS businesses. We achieved non-GAAP EPS of $1.44 per diluted share as a result of strong performance in PNH and aHUS in the first half of 2015, and our expectations for continued strong Soliris volume growth, we are increasing our 2015 revenue guidance to the higher range of $2.6 billion to $2.62 billion, despite continued currency headwinds. This guidance includes only a small initial contribution from Strensiq and Kanuma as we launch later this year. Consistent with our experience in ultra-rare disease, we expect the launch trajectory to be slow and steady. Vikas will provide updates on our full guidance, which now includes the acquisition of Synageva. Taking a closer look at PNH in Q2, as in all prior quarters since 2007, we identified a consistently high number of newly diagnosed patients with PNH in our core markets of the U.S., Europe, and Japan, the territories where we have been operating the longest. As well as in other key markets, such as Turkey and Brazil. The ongoing 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 in Q2, the strength of the global launch was again reflected by a consistently high number of new patients commencing Soliris treatment. Matched for time, now 15 quarters, from their respective approvals in the U.S., there are more patients actively receiving Soliris for aHUS than there had been for PNH. We now see this 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 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 that, over time, this trend of new patient additions will continue, and perhaps even widen. Importantly, we see the majority of our growth ahead of us and our global complement franchise, in both PNH and aHUS. I would now like to turn to our metabolic franchise. During the quarter, we both announced and closed our acquisition of Synageva while continuing to execute strong growth in our core Soliris business. We also simultaneously delivered important regulatory milestones toward our upcoming global launches of Strensiq and Kanuma, which both will further diversify and accelerate our growth. These two highly innovative enzyme replacement therapies address the underlying cause of HPP and LAL-D. First, in Japan, we received regulatory approval for Strensiq as a treatment for patients with HPP. The broad label includes patients of all ages and contains strong clinical data, including that the youngest HPP patients treated with Strensiq had an 84% overall survival. We are urgently working with the Japanese healthcare authorities to make this breakthrough therapy available to patients as quickly as possible. Second in Europe, the CHMP adopted a positive opinion recommending marketing authorization for Strensiq. The proposed indication will allow any patient who had symptoms of HPP prior to the age of 18 to be eligible for treatment. Third, the CHMP also adopted a positive opinion for Kanuma. The proposed indication will include patients of all ages with LAL-D. These positive recommendations reflect a strong clinical value proposition for Strensiq and Kanuma to treat the devastating nature of HPP and LAL-D. Final decisions from the European Commission are expected later this quarter, after which we will commence the reimbursement processes on a country-by-country basis. And finally, in the U.S., we continue to progress the regulatory processes with the FDA for both products, which are each undergoing priority review, and expect decisions later this year. With these meaningful regulatory milestones, we are preparing for two product launches and plan to serve patients with HPP and LAL-D with a single metabolic field team across our 50-country operating platform. We are applying our proven disease awareness and diagnostic expertise from PNH and aHUS to HPP and LAL-D, including developing evidence-based diagnostic pathways to identify patients at higher likelihood of having the diseases, which will lead to more rapid and accurate diagnoses. We expect to serve initial patients in the U.S., Germany and Japan later this year. Turning now to our growing portfolio of highly innovative product candidates. We continue to advance the most robust rare disease pipeline in biotech. Including Strensiq against Kanuma, we now have eight product candidates in the clinic for 11 indications and expect at least four additional programs to enter the clinic in 2016. In our late stage pipeline, we are pleased to announce that we have exceeded our enrollment target in the eculizumab registration trial in refractory MG and expect preliminary data in mid-2016. We are also working diligently to fully enroll two additional ongoing registration trials with eculizumab in patients with relapsing NMO and DGF. In the quarter, we continue to progress our broad portfolio of seven highly innovative complement inhibitors, three of which are already in clinical development. Our lead next-generation Soliris molecule, ALXN 1210, is a longer acting anti-C5 antibody, suitable for monthly dosing. Importantly, I am pleased to announce that the U.S. Patent and Trademark Office issued a composition of matter patent for ALXN 1210 in effect until March 2035, extending our leadership and complement and strengthening our ability to serve patients for several more decades to come. Martin will discuss our lead development programs in more detail later on the call. To support our growing product portfolio we announced in Q2, our plan is to expand our manufacturing operations with the construction of a biologics manufacturing facility in Ireland. Along with our Rhode Island facility and other investments in our third-party suppliers, we are broadening our capabilities while expanding our capacity and increasing the redundancy of our global manufacturing network. Looking at the second half of 2015 and beyond, we will continue to focus on what we know well and do well, developing and delivering transformative therapies for patients with devastating and rare diseases. With an unprecedented range of opportunities, we look forward to hosting an Analyst Day on December 10 in New York City. 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 Q2, we achieved strong financial performance while increasing our investment in our long-term growth. Product revenues increased to $636 million in Q2 or 24% above the year-ago quarter. The strong revenue growth was driven by a 31% increase in volume, partially offset by a 7.6% or $39 million in currency headwinds in Q2 over the year-ago quarter. The growth of our core business enabled us to increase our investments in our pipeline and in our commercial platform as we broaden our product portfolio. We achieved Q2 non-GAAP EPS of $1.44 per diluted share. As a reminder, our Q2 financial results reflect the inclusion of the Synageva financial results for the last week of the quarter. In Q2, we have a non-GAAP income tax benefit of $1.6 million. This income tax benefit is primarily resulting from our ability to utilize operating losses from Synageva in 2015. For the first half of 2015, our non-GAAP tax rate was approximately 3%. Looking at our balance sheet, we ended the quarter with $1.5 billion in cash and cash equivalents and $3.5 billion in debt. In addition to paying off our debt obligation, we will continue to focus our capital allocation priorities on the following

[Martin MacKay:]

Thank you, Vikas. In the second quarter of 2015, our R&D teams made significant progress in advancing our pipeline as we drive toward achieving up to eight new product or indication approvals through 2018. I will provide an update on our lead programs starting with our late-stage metabolic franchise. Our regulatory filings for Strensiq in the U.S. and Europe are on track. In the U.S., with breakthrough therapy designation, our rolling BLA is undergoing priority review and our application continues to progress with the FDA and we expect a decision later this year. In Europe, we received the positive opinion from the Committee for Medicinal Products for Human Use, or CHMP, in late June, recommending marketing authorization of Strensiq as a long-term enzyme replacement therapy for patients with pediatric onset hypophosphatasia, or HPP, to treat the bone manifestations of the disease. Importantly, the proposed SmPC states that HPP is associated with multiple bone manifestations including rickets, osteomalacia, altered calcium and phosphate metabolism, impaired growth and mobility, respiratory compromise that may require ventilation, and vitamin B6-responsive seizures. The natural history of untreated infant hypophosphatasia patients suggest high mortality if ventilation is required. The SmPC also indicates that 71% of infant patients treated with Strensiq, who required ventilation support, remain alive and continue on treatment. The CHMP opinion also notes that treatment with Strensiq improves skeletal structure as demonstrated by x-ray appearance of joints, and histological appearance of bone biopsy material, and by apparent catch-up height-gain. We are pleased that the proposed indication will allow any patient who had symptoms of HPP prior to the age of 18 to be eligible for treatment. A final decision from the European Commission is expected in the third quarter of 2015. Turning to Japan, the rapid approval and strong label for Strensiq underscores the devastating nature of HPP and the life-transforming impact that Strensiq can provide to patients in Japan. Moving to Kanuma, our late-stage enzyme replacement therapy being investigated for patients with lysosomal acid lipase deficiency or LAL-D. This is a genetic progressive ultra-rare metabolic disease where patients, which include infants, children and adults, experience chronic lipid accumulation causing multi-organ damage and premature death. Kanuma is a recombinant form of the human LAL enzyme designed to address the underlying cause of LAL-D. The FDA granted breakthrough therapy designation for Kanuma for LAL-D presenting in infants and accepted the BLA for priority review. Our application continues to progress with the FDA, and we expect a decision for Kanuma later this quarter. In Europe, the CHMP issued a positive opinion for Kanuma in late June, recommending marketing authorization for long-term enzyme replacement therapy in patients of all ages with LAL-D. As a reminder, LAL-D is fatal in infants, with a median survival of 3.7 months. In children and adults with LAL-D, about half will have fibrosis, cirrhosis, liver failure, or death within three years of diagnosis. As noted in the CHMP opinion, the benefits of Kanuma are its ability to replace activity of the missing enzyme, resulting in improvements in key liver and lipid endpoints including, importantly, a reduction in liver fat content. In addition, there was a 67% survival benefit in instance with LAL-D beyond 12 months. A final decision from the European Commission is expected in the third quarter of 2015. And we look forward to bringing Kanuma to patients with LAL-D in Europe as quickly as possible. In Japan, a new drug application for Kanuma was submitted in Q2, and we expect a decision from the MHLW in the first half of 2016. Turning to our three ongoing registration trials with eculizumab, we have exceeded the target enrollment in the REGAIN study, our registration trial in refractory myasthenia gravis, or MG. The trial was designed to enroll patients who, despite receiving best support of care, continue to experience a wide range of debilitating symptoms, including severe and generalized weakness in muscles of the head, spinal cord, and respiratory system causing blurred vision, slurred speech, weakness of the arms and legs, and difficulty breathing. We expect to have preliminary data in mid-2016. Also in neurology, we are on track to complete enrollment in the PREVENT study, our registration trial in relapsing neuromyelitis optica, or NMO, in 2016. And, in kidney transplant, we are on track to complete enrollment in the PROTECT study, our registration trial in delayed graft function, or DGF, in 2015. As a global leader in complement biology, we continue to focus our innovative approaches to best serve patients with devastating complement-mediated diseases. Our portfolio of complement inhibitors includes seven molecules across diverse platforms, with three of these molecules already in clinical development. ALXN 1210 is a longer-acting anti-C5 antibody suitable for monthly dosing and is our lead next-generation Soliris molecule. The U.S. Patent and Trademark Office issued a composition of matter patent for ALXN 1210 that is in effect until March 2035. As noted in the patent, the ALXN 1210 is administered intravenously and completely suppressed hemolysis in a Phase I healthy volunteer study. The multiple ascending dose study of ALXN 1210 is ongoing, and we expect to initiate a Phase II PNH trial by the end of this year. In addition, we are developing ALXN 1007, our novel anti-inflammatory antibody targeting C5a. We expect interim data from our Phase II study in patients with Graft-versus-Host Disease involving the gastrointestinal tract, or GI-GVHD, a severe and life-threatening auto-immune disease, later this year. Turning to our metabolic portfolio, SBC-103 is an enzyme replacement therapy for patients with mucopolysaccharidosis IIIB or MPS IIIB, which is a devastating and progressive rare metabolic disease. In Q2, enrollment was completed in the Phase I/II trial of SBC-103, and interim data are expected in the second half of 2015. Moving to our cPMP replacement therapy, we are also pleased to have completed our planned enrollment in the bridging study in patients with molybdenum cofactor deficiency, or MoCD Type A, a rapidly progressing lethal disease afflicting newborns. We plan to initiate a pivotal study with our cPMP replacement therapy by the end of 2015. Beyond our current clinical programs, we are also keenly focused on expanding our preclinical pipeline. We now have more than 30 diverse programs across a range of therapeutic modalities, and we expect four of these programs to enter the clinic next year. These include

[David L. Hallal:]

Thanks, Martin. We are very pleased with our performance in Q2. Looking at the second half of 2015, we will continue to serve more patients with PNH and aHUS around the world, while simultaneously launching Strensiq and Kanuma. We will also remain focused on advancing our R&D program so that more patients will have access to the transformative therapies they so desperately need. As always, we thank our employees for their dedication to our mission as we work to transform the lives of patients around the world. Now let's open the line for questions. Eric?

[Operator:]

We will now turn to the question-and-answer portion of our call. We'll take our first question from Eric Schmidt with Cowen & Company.

[Eric Thomas Schmidt:]

Good morning. Congrats on the progress. And thanks to Elena and the team for the earnings slides, they're very helpful. Maybe next time you could even add some numbers to your Y axes.

[David L. Hallal:]

You're asking too much, Eric.

[Eric Thomas Schmidt:]

Thanks, David. Just maybe on the pipeline side for Martin and the team. I think you mentioned that 1210 was IV, perhaps, you mentioned that for the first time, with a patent now out there on that molecule, was there anything special beyond the once-monthly longer duration that comes with that molecule and could you formulate that as a sub-Q in the future?

[David L. Hallal:]

Yeah. So, Eric, I'd let you know that as it relates to 1210 and the other six highly innovative complement inhibitors that we have in development, three in clinical, four in preclinical. Our objective as we've stated before is not to just have one complement inhibitor enter the market behind Soliris but for multiple inhibitors. And the objective is to provide options to physicians and patients. And offering them a variety of different modes of administration that may suit their needs best. So as it relates to 1210 and the other complement inhibitors, we would expect to be offering that optionality in the future. Martin?

[Martin MacKay:]

Just I think you articulated really well, David. And as well as other treatment options, Eric, because we now have seven, and as David alluded to, three in the clinic and four in pre-clinical. We're obviously looking at other targets also and the ones in the clinic, 1210, you mentioned, clearly 1007 against two devastating diseases and 5500 all in the clinic with the other four coming up and pre-clinical with the expectation that one of those four will also enter the clinic in 2016.

[David L. Hallal:]

Yeah. And I mean, directly, obviously, the patent is there, Eric. And we would – you would actually find that there is that potential for that optionality that was related to your question.

[Eric Thomas Schmidt:]

The sub-Q optionality?

[David L. Hallal:]

Yes.

[Eric Thomas Schmidt:]

Thank you.

[Operator:]

We'll go next to Geoffrey Porges with Bernstein.

[Geoffrey Craig Porges:]

Thanks very much for taking the question and I appreciate some of the increased specificity on the call and in the disclosure. David, I have to nudge you a little bit. As far as we know, Alexion's missed consensus expectations for earnings twice in its history and that's been the last two quarters. Is it...

[David L. Hallal:]

Thanks very much for the compliment, Geoff.

[Geoffrey Craig Porges:]

And I just – could you give us some sense about that and were there surprises here in terms of reprocessing (33

[David L. Hallal:]

Yeah. Thanks, Geoff. And again, I appreciate the complements on the EPS side. So, I would just remind you, last quarter, we specifically had one issue with the cancelled manufacturing campaign which we alluded to. That was the one item that was highlighted, obviously, in the release and on the call. Other than that, continuing to operate with the financial discipline in which we've been operating with as company for many, many years. As it relates to this quarter, I'll have Vikas address it in a moment and also provide you the longer-term outlook on expenses. As it relates to Strensiq, you're absolutely right. I mean, we felt like coming into this year, rolling BLA, breakthrough therapy designation, priority review, that there'd be, perhaps, even more benefits and expedited review as it's related to the U.S. approval. We indicated last quarter we now saw that timeline really moving to a second-half story for approval. But we also saw in the quarter the positive opinion in Europe from CHMP and, of course, the very rapid approval in Japan by PMDA. And there really is nothing other than the fact that I think an important outcome is what you see in Europe and Japan and what's expected with breakthrough therapy designation now in the U.S. which is infantile- and juvenile-onset HPP, which is very important, as the opportunity to serve patients with HPP that had symptoms of disease before the age of 18. That's what we saw in Europe. That's what we would – that's what we're obviously focused on in our discussions with regulators in the U.S., as well as that's what the breakthrough therapy designation is for. So we feel that the labels, thus far, are reflective of both the devastating nature of HPP for all patients who have pediatric onset disease, as well as the transformative benefits that Strensiq can provide to those patients including the youngest patients who are exposed to an extremely high mortality rate at one and three years, and Martin and I, I think, shared the survival numbers with you for those patients who are exposed to Strensiq. So, no real surprises there. We're lining our U.S. team up to be ready to launch both Kanuma and Strensiq later this year. Vikas, expenses?

[Vikas Sinha:]

Yes. So, Geoff, if you look at Q2, there's enormous number of objectives that we executed upon, right? If you look at what David mentioned earlier, we fired in all cylinders. And when you start looking at those multiple things that we did, we backed out for the non-GAAP several expenses that are related to restructuring and the deal closing. But as I mentioned, if you look at Q2 even carefully, even without the tax impact, you will find that if Synageva acquisition wasn't there, we would have really done still very well on the EPS side. We had a deal of – last, last week of Q2 at around $5 million, $6 million of expenses from them. There was a lot of work that was done during Q2 on analyzing projects and acquisition to which all gets into that, right? When we look forward from here, that's where I think you need to focus on is we're increasing our expense guidance by approximately $140 million. Now on a standalone basis, that would have been approximately $170 million of spending in second half. So, we have taken off already $30 million as of the date, right, for the second half.

[Geoffrey Craig Porges:]

Yeah.

[Vikas Sinha:]

Now when you look at the longer picture, so when we analyze $140 million for the full year, it's around $280 million. And for us to get – achieve our targeted $150 million savings that we have promised for 2017. From $280 million we have to get down to $190 million levels, right? And what that does is, if you really focus on the operating margins, we are currently around 43%. And if we can get through the synergy line, we will back up to 48% to 49% by 2018.

[David L. Hallal:]

Yeah. And we would just see that at the $130 million levels, Geoff, and at the same time, continue, as Vikas indicated, on really funding two launches and a broader set of programs across R&D than we've had before.

[Geoffrey Craig Porges:]

I appreciate that color. I'm sure other people are asking about it. I'll jump in the queue though for follow up.

[Vikas Sinha:]

Yeah. But Geoff, before we finish, on top of that, we're not counting the tax synergies and the cost improvement that we will be delivering over these two, three years. That's yet to come because we have a lot of work to do there.

[Geoffrey Craig Porges:]

Great. Okay. That's very helpful. Thanks. Thanks, Vikas.

[Operator:]

Our next question will be from Anupam Rama with JPMorgan.

[Anupam Rama:]

Hey, guys. Thanks so much for taking the question. Maybe just quick one for Martin related to SBC-103 and Sanfilippo. Just wondering if you could help us benchmark sort of the declines in heparan sulfate that you're expecting, particularly as it relates to CSF. Thanks.

[David L. Hallal:]

Martin?

[Martin MacKay:]

Thank you, Anupam. I won't predict what we will see in this study, but suffice it to say, we did complete enrollment in the Phase I/II study with all the patients enrolled. And as you know, MPS IIIB really is caused by this marked decrease in NAGLU and the enzyme activity, which leads to abnormal buildup of heparan sulfate in the brain. What we will be able to measure from this first study is in the serum, in urine and in the brain, which will give us a much better idea of what we're seeing in this study with SBC-103. There are other measures that we'll be looking at. But clearly these, over the dose range, have been given (40

[Anupam Rama:]

Great. Thanks for taking my question.

[David L. Hallal:]

Thanks, Anupam.

[Operator:]

Our next question will be from Geoff Meacham with Barclays.

[Geoffrey Meacham:]

Hey, guys. Good morning. Thanks for taking my question. I just have a couple of short ones. First one for Vikas, the FX impact has really, obviously, hit the P&L the past six months. Has this changed your view about hedging strategies going forward? I'm thinking about this with an eye to 2016. And then the second question is on reimbursement. You guys will be on parallel tracks in Europe, which is really unusual, and does that give you an opportunity to talk differently about cost benefit on a country-by-country basis as you try to navigate reimbursement for both Strensiq and Kanuma? Thanks.

[David L. Hallal:]

Vikas?

[Vikas Sinha:]

Yes. So on the FX impact, we normally try to – on the major currencies, we try to take 50%, half of it hedged. And the rationale for our hedging strategy has been that we also spend a lot in those local currencies, right? So when you look at the net exposure down in the EPS level, we get it down to like 20%, 25% of the overall sales that really gets exposed to our EPS line. So we would like to continue the same philosophy going forward. Because what happens in this is we saw a very dramatic move this year. We were able to mitigate half of it this year. And so when you move from 2015 to 2016, the impact needs to reduce significantly. The view of taking a very high FX hedge early on – well, you can get that and you can predict the year. But when you go to the following couple of years, the dramatic drop just shifts from one year to another. In the long run, what happens with FX is whatever is the rate is going to be the long term rate. So it's a mitigating factor of how slowly you take that impact. And so we would have taken a substantial impact this year. So going into 2016, the impact – if the rate continues to stay where it is and it continues to deteriorate further from here, the impact will be not as high as we saw in 2015. So best to take it at a time when the rates have dramatically dropped than to go back two years later and remind people that the rates have dropped two years back. That's the view I have.

[David L. Hallal:]

And then regarding the question about concurrent reimbursement processes for both Strensiq and Kanuma really starts with where we are today, which is actively being involved with regulators as we finalize the labels that reflect both the devastating nature and severity of the disease for the patients who suffer from HPP and LAL-D, as well as the broad range of transformative clinical benefits that patients can expect, that's where it starts. And then, that moves through, obviously, the process of approval, the submission of dossiers to funding authorities on a country-by-country basis, which reflect the labels, which reflect the nature of the disease and then also the expected clinical benefit that patients can see. So we think to be able to actually work with both of the programs at the very same time, from regulators through funding authorities, that that really does position us quite well to execute on what we know well and do well, and what we've demonstrated with both PNH since 2007 and aHUS since 2011, which is, when positioning the extreme rarity of the disease, the devastating nature of the disease, and the transformative benefits of the treatment, we have been able to produce very good success in enabling access for patients.

[Geoffrey Meacham:]

Okay. Thanks.

[Operator:]

Our next question is from Matt Roden with UBS.

[Matthew M. Roden:]

Great. Thanks very much for taking the questions. Congrats on the progress. I'm a little confused by this talk about missing earnings on the quarter, because I'm showing that you beat consensus by $0.06 on EPS. But the question is on the increase to revenue guidance. I think last quarter, you mentioned that there's a small contribution from Strensiq in this year's guidance. And now you've increased it a tad bit here, you're saying on Soliris strength. So should we assume that the small contribution from Strensiq has not changed? And further, should we assume that there's nothing in there for Kanuma post the close of the acquisition? And then just a second quick one for Vikas on the long-term tax guidance. We've seen several sort of favorable adjustments to the long-term tax guidance over time. And I just want to get a sense, if you can talk a little bit further about the basis for it this time. It sounds like maybe it's the way GEVA fits into your business model, just wonder if you could elaborate on that a little bit. Thanks very much.

[David L. Hallal:]

Yes. So, I'll take the front half and then Vikas will step in. And I – you're absolutely right regarding EPS and the beat versus consensus. So, thank you for that. I think, subsequently, related to the guidance, and I just want to address it. When we established our revenue guidance back in January, remember, as I've already discussed with Geoff, we were anticipating a first-half-of-the-year launch for Strensiq in the U.S. and Europe. And obviously, we're awaiting for that to happen later on this year. So yes, the initial guidance did include a small initial contribution from Strensiq. But knowing the kinetics of an ultra-rare disease launch, and the fact that it takes a period of time to really build up the patients on treatment, just that nudge back, obviously, means that contribution, even for Strensiq and Kanuma combined, is now expected to be lower than it otherwise would have been if Strensiq had launched in the first half of the year. And what you see today is, we more than make up for that with a very strong ongoing growth of Soliris in PNH and aHUS. And of course, we are eagerly anticipating the all-out approvals in the U.S. and Europe to begin to reach patients later this year. But, by the time they're coming in, you're serving initial patients for a shorter period of time, and we would expect largely the meaningful revenue contributions to really start in 2016. Vikas?

[Vikas Sinha:]

Hey, Matt. So your question on the tax rate, there's two aspects to that, right? So one is looking at the ongoing long-term rate, and that we look at going down from 14% to 16%, to 12% to 14%. We looked at the business combination very closely, and Synageva had already started, the team had already started, a lot of work on IT side and we're trying to complete that as we go forward. So that drives down the couple of percentage drop on an overall basis of the company, right? So, that's step one. The step two is then, you look at what are the NOLs and tax credits that we inherit from the acquisition. Now, that has limitations to absorb that in a particular year. We start absorbing that from 2015, that's why you see the rate go down from 7% to 8% that we were expecting this year to 3%, 4%. And then we will continue to utilize these NOLs and tax credits over 2016, 2017 and maybe a little bit will be left by 2018. So 2019 onwards, we will start seeing a more stabilized long term rate implementation. Does that help?

[Matthew M. Roden:]

It does. Thanks very much for taking the questions.

[David L. Hallal:]

Thanks, Matt.

[Operator:]

Our next question is from Ying Huang with Bank of America Merrill Lynch.

[Ying Huang:]

Hey. Good morning, guys. Thanks for taking my questions and also thanks for the slides, which are very helpful. So I have two questions though, R&D maybe for Martin. Number one is, you just mentioned in the script that you guys saw complete inhibition of hemolysis in the Phase I for ALXN 1210. I was wondering if you can give us a little bit comparison of the data compared to your competitors' data (49

[David L. Hallal:]

Yes. Thanks, Ying. And Vikas and I are disappointed because you normally have a five-part question that includes all of the speakers. But, nonetheless, Martin?

[Martin MacKay:]

Thank you very much. I'll take them in the order that you asked them, Ying. And rather than do a comparison, which we could go through quite a lot date (49

[Ying Huang:]

Very much so. And David, since I don't want to disappoint you, do you mind telling us whether you are thinking about BD (51

[David L. Hallal:]

Okay, Ying. So as we've said over and over and it's really been sort of our track record, we're a company that really focuses on what we know well and do well. And that is characterizing and understanding devastating and rare diseases and identifying potential product candidates, molecules that can have a transformative impact really independent of therapeutic area or modality. And I just – Saqib, you may want to just highlight for Ying just how we continue to kind of explore and look for opportunities that fit that filter.

[Saqib Islam:]

Sure. Ying, as you know, on an ongoing basis, we are evaluating these type of opportunities. Again, within the filter of transformative therapies for devastating diseases. And we do this at all stages of research and development. In addition to the Synageva acquisition, earlier this year, we talked about three early stage pipeline transactions, some of which support or complement portfolio and others that do not. As Vikas highlighted in his script, we do have the capacity and the interest to continue to being focused on opportunities for us at all stages of research and development.

[Ying Huang:]

Thank you.

[David L. Hallal:]

Thanks, Ying.

[Operator:]

And we will go next to Terence Flynn with Goldman Sachs.

[Terence C. Flynn:]

Hi. Thanks for the question. Maybe just one clarification and one question. So, the FX impact on the bottom line for the year, I didn't notice if you guys had updated that. And then for SBC-103, just wondering what percent reductions you saw in heparan sulfate in preclinical models and if the ongoing trial's open label and if you guys had access to that data during the due diligence. Thanks.

[David L. Hallal:]

Vikas, then Martin.

[Vikas Sinha:]

So, on the FX impact, on the bottom line, Terence, in the first half, we saw around $70 million of FX impact year-over-year. And second half, we're expecting somewhere around $85 million to $90 million. That's what takes us to $160 guidance that we had given early in the year. Martin?

[Martin MacKay:]

Thank you. Just briefly, and Terence, we're not going to disclose what we saw on diligence. And the really important data from the study that's just completed will be coming out later this year and we'll certainly share those data with you at that time.

[David L. Hallal:]

And I think, Terence, just from a general perspective, on diligence, what we saw as we understood what the sort of rationale was to think that you could some heparan sulfate response in the CSF, but also importantly, very interested to see the change in baseline in urine and serum as well. So again, it's early days, but we look forward, as we said in the second half of this year, to getting a good look in the first trial that we fully enrolled in the first half of the year in these patients.

[Terence C. Flynn:]

Okay. Thanks. And then just, Vikas, I was asking about the bottom-line impact. I think you guys said $0.35 earlier this year. So I was just wondering if you've updated that number specifically. Thanks.

[Vikas Sinha:]

Terence, it will be very similar because there'll be plus/minuses between the tax rates and among the currency impact. And we'll land a bit to (55

[Terence C. Flynn:]

Okay. Thank you.

[Operator:]

The next question is from Robyn Karnauskas with Deutsche Bank.

[Evan Seigerman:]

Hi, guys. This is Evan on for Robyn. Thank you for taking my question. First, I want to touch on HPP in adults. On the last quarter call, you had mentioned that you're finalizing a protocol for a clinical study in adults. When will you get more insight into that and is that still on track to commence later this year? And then in regards to 1007, what should we expect in regard to the interim data for GI-GVHD and when can we also (56

[David L. Hallal:]

Thanks, Evan. Martin, you want to cover that up?

[Martin MacKay:]

Yeah. I'll take the three questions in the order. Evan, in terms of HPP adult, we still intend on initiating that study in adults before the end of this year, so that is ongoing. In terms of 1007 for GI-GVHD, of course, we'll be looking at the primary end point. It's an open-label study, as I think you know, and we'll be looking at the overall acute GVHD response at day 28. And again, we expect to see the interim data by the end of this year. In terms of APS, again, you will know that the studies about the safety incidents and severity of (56

[Evan Seigerman:]

It does. Thank you very much.

[David L. Hallal:]

Thanks, Evan.

[Operator:]

The next question is from Chris Raymond with Raymond James.

[Chris J. Raymond:]

Hey. Thanks. Just wanted to follow-up on the next generation C5 efforts. Sort of intrigued by your comments regarding the optionality for a sub-Q delivery for 1210, I'm looking at what I think is that granted patent. But a few months back, we stumbled across an application that describes something that looks a little different, it's a high titer C5 preparation without aggregation. Can you just confirm, is that separate? Should we expect that some of these pre-clinical programs, that you have a dual track here for a potential sub-Q dose?

[David L. Hallal:]

Yes. So thanks very much. That's right, it is separate. And we really believe that with building a very strong portfolio of multiple complement inhibitors with the objective of multiple complement inhibitors to be developed and approved and follow-on behind Soliris is the best way to serve patients with a variety of complement-mediated diseases, obviously today marks another important milestone for us. So beyond PNH and aHUS, we announced the important milestone of exceeding target enrollment in the MG registration trial for eculizumab. And so as we indicated really at the beginning of this year, we look forward to updating you on an ongoing basis on the progress across our entire complement inhibitor portfolio.

[Chris J. Raymond:]

Great. Thanks a lot.

[Operator:]

And we have time for two more questions. And we'll go next to Matthew Harrison with Morgan Stanley.

[Matthew K. Harrison:]

Great. Thanks for taking the question. I just have two short ones. So first on MG, can you just remind us, to the extent you've talked about what your expected event rate there is and how confident you feel around the timing of that data? And then separately for the cost, can you just talk a little bit about share count and buyback, how you're thinking about that, how aggressive you might be with that and how quickly you might be able to bring the share count down? Thanks.

[David L. Hallal:]

So why don't I just start and then Martin and Vikas. But, first, I think I heard you say event rate, and I just wanted to clarify that event rate is the endpoint in the NMO registration trial. What we are looking at in myasthenia gravis is a change in MG-ADL from baseline and at 26 weeks. That's the endpoint. But Martin can share a little bit more with you.

[Martin MacKay:]

Well, just to add, David, you've hit the nail on the head in terms of the study. And I think, Matthew, it's a randomized double-blind placebo control, as both David and I alluded to, we were very pleased to say that we've exceeded the enrollment in that trial. And the last piece of your question on this topic was how confident are we in terms of getting data for the trial? And we're very confident that by midyear 2016, we'll be able to look at preliminary data.

[Vikas Sinha:]

Yeah. And as we had alluded in my script, basically, we have a capital allocation plan as I had mentioned, first and foremost, this particular debt obligation. And then, after that, we're going to be continuing to invest in our product launches, look at our pipeline and invest there. Look at enhancing our manufacturing capabilities and then look at strategic objectives where we can find more opportunities to build our portfolio and then comes the share repurchase plan, right? And we will look at it very opportunistically as we go forward.

[David L. Hallal:]

Next question?

[Operator:]

And our last question is from Ian Somaiya with Nomura.

[Unknown Speaker:]

Hi. Good morning. Thank you. It's Matthew (1

[David L. Hallal:]

Yeah. No. Thanks, Ian. As we've indicated, and Martin can jump in here as well, with seven assets in total – in addition by the way of eculizumab continuing to progress with these three ongoing registration trials that we'll be providing updates in time. ALXN 1210, as Martin and I indicated, is our lead next-generation molecule. 5500 and 1007 are indeed two other complement inhibitors in clinical development. And very importantly, we see the fourth one coming in next year, as Martin alluded to. And I think across all of them where our objective is for multiple approvals, multiple new molecules to come in after Soliris. We do expect a first approval to be in 2018 for a next generation molecule. So we'll continue to provide you updates over time. And as I alluded to the Analyst Day on December 10, we'll be providing a presentation on our complement portfolio. Thanks.

[Operator:]

That was our last question and this concludes today's conference call. Thank you for your participation. You may now disconnect.