Alexion Pharmaceuticals, Inc.
Q3 2015 Earnings Call Transcript

Published: 30 Oct 2015

[Operator:]

Good morning and welcome to the Alexion Pharmaceuticals Incorporated Third 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 Ms. Elena Ridloff, Executive Director-Investor Relations. Please go ahead, ma'am.

[Elena Ridloff:]

Thank you, Trisha. Good morning and thank you for joining us on today's call to discuss Alexion's performance for the third quarter of 2015 and updated 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 Carsten Thiel, our Chief Commercial Officer as well as Martin MacKay, our Global Head of R&D. Also with us today are Saqib Islam, our Chief Strategy and Portfolio Officer and Julie O'Neill, our Global Head of Operations. 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 will 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. 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 Hallal:]

Thank you, Elena. Q3 was a landmark quarter for Alexion as we firmly established our leadership in serving patients with rare and devastating diseases. During the quarter we achieved many significant commercial, R&D and financial milestones. First, our commercial team continued to serve an increasing number of patients with PNH and aHUS with Soliris. Second, we received important regulatory approvals for Strensiq and Kanuma establishing the platform to globally launched two new highly innovative enzyme replacement therapies. Third, our R&D team continues to advance the most robust rare disease pipeline in biotech with multiple key milestones expected in Q4 and beyond. And fourth, we had another quarter of strong financial performance. Looking first at our complement franchise in PNH in Q3 as in prior quarters. Our global commercial organization continued to identify and serve a consistently high number of newly diagnosed patients across our 50-country platform. In aHUS in Q3 we once again reached a consistent number of new patients. The ongoing strength of our global rollout confirms our view that our opportunity to serve patients with aHUS is indeed larger than our opportunity to serve patients with PNH. We continue to see the majority of our opportunity to serve new patients with PNH and aHUS ahead of us. In our metabolic franchise as we just announced, the FDA approved Strensiq under breakthrough therapy designation and priority review for patients with perinatal, infantile and juvenile onset HPP, a life-threatening ultra-rare disease in which bone formation is incomplete causing deformity of the skeleton, profound muscle weakness, seizures, severe pain and premature death. We are very pleased that the broad label for Strensiq will allow any patient with symptoms of HPP prior to the age of 18 to be eligible for treatment. The label reflects the breakthrough medical innovation that Strensiq provides to patients and families. First, Strensiq treated patients had overall survival of 97% compared to 42% for historical control patients at 49 weeks. Second, 100% of juvenile onset HPP patients responded to Strensiq treatment as measured by substantial bone healing compared to only 6% bone healing in the control group. Third, 100% of treated patients had improvement in low weight or short statures or maintained at normal height and weight. Fourth, improvements in mobility were demonstrated in patients with juvenile onset HPP. By four years of treatment, 100% of assessed patients achieved the 6 minute walk test within the normal range for matched peers whereas no patients were in the normal range at baseline prior to Strensiq treatment. And fifth, the label specifically includes extensive safety and efficacy data from four clinical studies with Strensiq treatment in patients for up to 6.5 years. We are pleased that the broad and robust label reflects the transformative benefits of Strensiq for the very small number of patients who suffer from this chronic genetic metabolic disease. In Q3, we received regulatory approval for Strensiq in the European Union, Japan and Canada and like the US the strong labels reflect the transformative benefits of Strensiq. As with PNH since 2007 our objective is that every patient with pediatric onset HPP who can benefit from Strensiq will have access to Strensiq. Turning now to Kanuma. We received European approval for patients of all ages with LAL-D. The broad label includes the survival benefit in patients with the most rapid disease progression. 67% of infants treated with Kanuma survived beyond 12 months of age whereas no infants in the historical control group survived past eight months. In addition, the European label also includes clinical data in children and adults demonstrating significant improvements in multiple disease manifestations, including markers of liver injury and liver fat content. In the US, Kanuma continues to be reviewed under the breakthrough therapy designation and priority review with the PDUFA date of December 8. We submitted additional chemistry manufacturing and controls or CMC data last month in response to the FDA's request. As a reminder, the FDA did not request additional clinical data. We continue to have constructive discussions with the agency as we work toward bringing Kanuma to patients with LAL-D in the US as quickly as possible. Our commitment to patients and families with HPP and LAL-D reflects what we know well and do well delivering breakthrough medical innovation to transform the lives of patients suffering from devastating and ultra rare diseases. Carsten will provide an update on our launch plans for Strensiq and Kanuma later in the call. As we transitioned in Q3 to a multiproduct company, we were advancing the most robust rare disease pipeline in biotech. We distinguish ourselves with an exclusive focus on developing life transforming therapies. We are excited about our early and late stage portfolio of highly innovative product candidates and expect up to 6 new product or indication approvals through 2018. In fact, we have multiple catalysts in our pipeline this quarter, including Phase 1/2 data for SBC-103, our innovative enzyme replacement therapy for patients with MPS IIIB, data from our Phase 2 study of ALXN1007 and patients with GI-GVHD, initiation of a proof of concept PNH trial with ALXN1210, our lead next-generation Soliris molecule and completion of enrollment in our registration trial of eculizumab and delayed graft function in kidney transplant. As we head into 2016, R&D milestones include data from the registration trial of eculizumab in refractory MG, data from ALXN12010 in patients with PNH, completion of enrollment in the registration trial in refractory NMO and progressing four preclinical programs into the clinic, including a messenger RNA therapy from our Moderna partnership and another additional complement inhibitor. Turning to our financial performance. Product revenues in Q3 were $666 million, an increase of 20% over Q3 2014 despite increased weakness in ex-US currencies. This revenue growth was driven by a strong 29% increase in Soliris volume compared to the year ago quarter, reflecting the ongoing strength of our core PNH and aHUS businesses, both in the third quarter and year-to-date. Also, we achieved strong Q3 non-GAAP operating income of $285 million and delivered non-GAAP EPS of $1.16 per diluted share. Turning briefly to our 2015 guidance. This morning we guided 2015 revenues to be in the lower end of our previously guided range of $2.6 billion to $2.62 billion. Due to the macroeconomic factors in Latin American countries, we expect an impact of approximately $10 million to $15 million in the fourth quarter in countries where we sell in USD which is due to local government budgetary constraints. Also this morning we increased our EPS guidance for the year from $4.70 to $4.80 to a higher and narrower range of $4.92 to $4.97 as a result of our strong Soliris growth, continued financial discipline and accelerated synergies from our recent Synageva acquisition. At this point, I'll turn the call over to Vikas for a closer look at our financial performance. Vikas?

[Vikas Sinha:]

Thanks, David. We were pleased with our financial performance in Q3 driven by the combination of strong revenue and volume growth and continued financial discipline. Total revenues increased to $667 million in Q3, or 20% above the year ago quarter and net product sales were $666 million in this quarter. This revenue growth was driven by a strong 29% increase in volume partially offset by a 9% or $49 million in currency headwinds in Q3 over the year ago quarter. Q3 revenues were driven by continued strong growth of Soliris and we also booked our initial sale for Strensiq in the final weeks of the third quarter. We look forward to serving patients with HPP around the world. However I would like to remind you that given the low incidence and high mortality of HPP as well as the country by country rollout, we expect the launch trajectory of Strensiq to be slow and steady as we build a robust global metabolic franchise over time. During the quarter, we continued to invest in the global buildout of our metabolic franchise and in our broad pipeline, including operating costs from the Synageva acquisition. Third quarter non-GAAP R&D expense was $147 million or 22% of revenue and third quarter non-GAAP SG&A expense was $182 million or 27% of revenue. During Q3, we recognized greater synergies from the acquisition compared to our expectations which benefitted both R&D and SG&A spend in the quarter. We also benefited from $5.6 million from lower expenses due to strengthening of the US dollar. In Q3, our non-GAAP tax rate was 0.5%. As we announced on our Q2 call, our 2015 tax rate will benefit from our ability to utilize operating losses from Synageva. We incurred a one-time GAAP tax expense of approximately $316 million. This GAAP tax expense is attributable to a change in our deferred tax liability associated with the restructuring of Synageva’s intellectual property into our existing structure. As a result of our continued Soliris growth and financial discipline we achieved strong Q3 non-GAAP operating income of $285 million and delivered non-GAAP EPS of $1.16 per diluted share. Looking at our balance sheet and capital allocation. We ended the quarter with $1.5 billion in cash and cash equivalents and $3.5 billion in debt. Since we authorized our share repurchase program we have to date purchased $215 million or 1.3 million shares. We currently have 785 million remaining of our $1 billion share repurchase authorization and we will continue to buy back additional shares opportunistically. Turning to our 2015 guidance. We continue to forecast strong Soliris volume growth in PNH and aHUS of 28% for the full year and a very small contribution from Strensiq and Kanuma. We now expect 2015 revenues to be at the lower end of our previously guided range of $2.6 billion to $2.62 billion. As a reminder, our 2015 revenue guidance includes an approximately negative 6% or $160 million foreign-exchange impact compared to 2014 exchange rates. In addition, due to macroeconomic factors in Latin American countries we expect an impact of approximately $10 million to $15 million in the fourth quarter in countries where we sell in USD which is due to local government budgetary constraints. As a result of our continued Soliris growth and financial discipline, we are increasing our EPS guidance for the year from the previous range of $4.70 to $4.80 to the higher and narrower range of $4.92 to $4.97 as we accelerate synergies from our Synageva acquisition. For the fourth quarter we anticipate revenues of $697 million to $702 million. On a sequential basis, the Q4 revenue guidance includes a $5 million to $7 million negative currency impact. Operating expenses will be sequentially higher in Q4 due to the investment in the global launches of Strensiq and Kanuma. We expect non-GAAP EPS to be in the range of $1.07 to $1.12. In summary, we've delivered a very strong quarter. We have continued to realize accelerated acquisition related synergies earlier than expected and we are on track to realize total annual synergies of at least $150 million in 2017. At this point, I'll turn the call over to Carsten for a look at our commercial operation. Carsten?

[Carsten Thiel:]

Thank you, Vikas. Our global commercial operations delivered a strong 29% volume growth year on year reflecting the underlying strength of our core Soliris business. Starting with PNH, the ongoing success of our diagnostic initiatives drove steady growth. We are consistently identifying a high number of newly diagnosed patients with PNH in our core markets of the US, Europe and Japan, the territories where we have been operating the longest as well as in other key markets such as Turkey, Brazil and Russia. Our experience confirms our view that on a global basis the majority of patients with PNH have yet to receive an accurate diagnosis let alone commence appropriate treatments. In aHUS we also continue to observe a consistent number of new patients commencing Soliris treatment. Matched for time, now 16 quarters from their respective approvals in the US, there are more patients actively receiving Soliris for aHUS than there has been for PNH. We now see the same trend in Europe four years post approval. 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 confirming our view that our opportunity to serve patients with aHUS is larger than that of PNH. To support the aHUS community we continue to enhance our disease awareness programs further underscored by new data that will be presented at the American Society of Nephrology Meeting next week. Researchers will present findings from a long-term follow-up study that demonstrated that the TMA event rate was 3.5 times higher in patients who discontinued Soliris versus those who stayed on treatment. These findings demonstrate the efficacy of ongoing Soliris treatment in preventing life-threatening complement mediated TMA in patients with aHUS, further highlighting the importance of long-term treatment for this genetic and chronic ultra-rare disease. Now I would like to turn to our global metabolic launches. Starting with Kanuma, we are very pleased that the New England Journal of Medicine published our pivotal Phase 3 ARISE study in children and adults with LAL-D. Key findings showed that all patients treated with Kanuma had a reduction in liver transaminases or ALT levels which is a key marker of disease activity in liver injury. Children and adults treated with Kanuma had significant improvements in disease-related lipids and liver abnormalities compared with the placebo. And in addition, the accompanying editorial stated that LAL-D is a rapidly fatal condition and that enzyme replacement therapies could be lifesaving and transformational for all patients with LAL-D. The New England Journal publication and editorial will support our disease education initiatives with the LAL-D medical community. As a reminder, most patients in the ARISE study were under 18 years of age. To further support the medical community, we have launched an enhanced diagnostic pathway to optimize care for patients with LAL-D. This comprehensive yet simple diagnostic pathway guides physicians to the patients who had higher likelihood for LAL-D. For example, the new pathway will help pediatric specialists rapidly identify and diagnose children which is important because the median age of disease onset is 5.8 years. And in children liver and lipid abnormalities are more uncommon. Rapid and accurate diagnosis of LAL-D is of critical importance as 50% of patients progress to fibrosis, cirrhosis or liver failure within just three years of symptom onset. Turning to Strensiq. Our HPP diagnostic pathway is also a critical element of our disease education and launch plans. The pathway is designed to help specialists recognize the key clinical manifestations of HPP and to raise awareness of low age and gender adjusted alkaline phosphatase or ALP activity as the biochemical hallmark for diagnosis. As we successfully roll out with PNH and aHUS, our single global metabolic field team is implementing our disease education and diagnostic programs to educate on the extreme rarity and life-threatening consequences of HPP and LAL-D. With the regulatory approvals of Strensiq in the US, Europe, Japan and Canada and Kanuma in Europe, our single metabolic field team will educate physicians of the transformative treatment benefits as described in each of the product labels. We expect that over time our comprehensive launch plans will lead to a rapid and accurate diagnosis, so physicians can make better informed treatment decisions. Turning to the timing of our in-country launches for Strensiq. We will initially launch in the US, Germany and Japan. In the US just days after the FDA approval, our nurse case managers have started to enroll initial HPP patients into OneSource and for Kanuma, our metabolic field team in Germany is also at the very early stages of launch. In the other major European countries, we are beginning the funding processes for Strensiq and Kanuma with healthcare authorities. We expect to begin serving patients in initial countries outside of Germany in the second half of 2016 with additional countries to follow in 2017. We’re committed to working with governments throughout Europe to ensure that patients with HPP and LAL-D will have access to Strensiq and Kanuma. In closing, the commercial organization is at the strongest point in the Alexion history. We see the majority of our growth ahead of us in our global complement franchise in both PNH and aHUS and we will leverage our ultra-rare disease expertise to serve patients with HPP and LAL-D globally. Now I will turn the call over to Martin who will discuss our lead R&D programs. Martin?

[Martin Mackay:]

Thank you, Carsten. In the third quarter of 2015 we continued to advance the most robust rare disease pipeline in biotech with our portfolio of highly innovative product candidates in multiple therapeutic areas. We have several R&D catalysts to report in the fourth quarter and beyond. Starting with eculizumab, our three ongoing registration trials continue to progress as planned. In neurology we expect to have preliminary data in refractory myasthenia gravis in mid 2016 and they are on track to complete enrollment in the Relapsing Neuromyelitis Optica trial next year and in kidney transplant, we expect to complete enrollment in our registration trials in delayed graft function by the end of the year with preliminary data expected in 2016. Also, in transplant, researchers will present updated one-year data from our single arm Phase 2 study of eculizumab in the prevention of acute antibody mediated rejection or AMR in sensitized deceased donor kidney transplant recipients in a latebreaking poster session at the AFN meeting next week. In addition to eculizumab, we continue to develop a robust portfolio of innovative complement inhibitors. We advanced ALXN1210, our lead next-generation Soliris molecule which is a longer acting NTC5 antibody that is administered intravenously and suitable for monthly dosing. As a reminder, last quarter the US PTO granted ALXN1210 a compositional matter patent in effect until March 2035. We are completing the multiple ascending dose study of ALXN1210 and we are on track to initiate a proof of concept PNH trial by the end of the year. Turning to ALXN1007, our novel anti-inflammatory antibody targeting C5a, we progressed our Phase 2 study in patients with gastrointestinal Graft-versus-Host Disease or GI-GVHD, a severe and life-threatening autoimmune condition with significant mortality within the first 100 days post transplant. The primary outcome measure of our Phase 2 study is 28-day GI-GVHD response rate and we will present interim data from the study later this year. Turning now to our metabolic franchise and starting with SBC-103. SBC-103 is an enzyme replacement therapy administered intravenously for patients with mucopolysaccharidosis IIIB or MPS IIIB, which is a rare devastating and progressive autosomal recessive lysosomal storage disease caused by deficiency of NAGLU. The enzyme deficiency leads to the build-up of abnormal amounts of heparin sulfate in the brain and other organs. Patients with this systemic disease experience profound neurocognitive abnormalities, including severe cognitive decline, behavioral problems, speech loss, increasing loss of mobility and premature death. A Phase 1/2 trial of SBC-103 is ongoing and interim data measuring three month changes from baseline and heparin sulfate levels in urine, blood serum and cerebrospinal fluid are expected this year. In Q3, we also completed enrollment and a natural history study to characterize the course of disease progression in patients with MPS IIIB. Moving to our cPMP replacement therapies for patients with molybdenum cofactor deficiency or MoCD Type A, a rapidly progressing lethal disease afflicting newborns. We have completed our planned enrollment in the bridging study and the natural history study. We now plan to initiate a pivotal study with our cPMP replacement therapy by the end of this year. Beyond our current clinical programs, we are also keenly focused on progressing our preclinical pipeline and expect four of these programs to enter the clinic next year. These include asfotase alfa, a potential treatment for neurofibromatosis type 1, or NF1, a devastating disease in which excess PPI may play a role; ENPP1, an enzyme replacement therapy being developed for generalized arterial calcification of infancy, or GACI, and other rare disorders of calcification; one of the mRNA rare disease programs from our collaboration with Moderna; and an additional candidate will move into the clinic from our growing complement inhibitor portfolio. Following the global approval of Strensiq and Kanuma, we are driving toward as many as six new product or indication approvals through 2018, including at least one of our next-generation Soliris molecules. I look forward to reporting on our upcoming catalyst at our analyst day on December 10. I will now turn the call back to David. David?

[David Hallal:]

Thanks, Martin. We're pleased with our performance in Q3. We are at the strongest point in our company's history. Serving patients with four devastating and ultra-rare diseases with three highly innovative therapies. In Q4, we look forward to serving more patients with PNH and aHUS while initiating the early stages of the global launches of Strensiq and Kanuma. We will also remain focused on advancing our broad pipeline so that more patients with ultra-rare diseases can 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 as I turn the call over to the operator to open the line for questions, I understand that there were some technical difficulties with the webcast. We certainly apologize for that and look forward to taking your questions. Operator?

[Operator:]

[Operator Instructions] And our first question comes from Eric Schmidt with Cowen and Company.

[Eric Schmidt:]

Thanks for taking the question. Maybe on Kanuma, David, could you tell us what your confidence might be in getting approvals in the US on or before the December date? And then maybe for Carsten, and I guess I didn’t quite follow the slide that you have on the new diagnostic paradigm, I think it’s slide 15 in your deck, could you just kind of walk us through that in a little more detail to get a sense of what the paradigm actually entails?

[David Hallal:]

Thanks Eric. Regarding the regulatory process as we have indicated and I addressed on the call from an FDA request we provided more CMC data to them to fulfill that request. As you know under breakthrough therapy designation and priority review we continue to have ongoing dialogue with them and they have extended the PDUFA or review period by 90 days, and as you know that we announced on September 4 that, that was bumped out from September 8 to December 8. And we are working diligently with the agency because we know that we need to get this therapy to patients who so desperately need it. Carsten on the diagnostics.

[Carsten Thiel:]

Sure, so on the Kanuma diagnostic pathway what you have seen on the slide is the cornerstones of this pathway is the lipid abnormalities and the liver abnormalities that are consistent with LAL-D disease. The diagnostic pathway looks at other diseases that are suspected and if specialists were to follow those it would lead not only to a misdiagnosis but also to mistreatment. Essentially in medical education that specialists recognize the urgency and importance of conducting a dry blood spot test. This is a simple test that can turn around in short time and provides a definitive answer to the correct diagnosis of LAL-D.

[David Hallal:]

Eric, I would just close with what Carsten and the team are really focused on is really our expertise from PNH and aHUS and now applying it on the metabolic side is just, who is it that should be tested? What is the appropriate test to be ordered and are the labs actually supplying that test and reporting it out clearly? And Carsten and the team are really focused on the right specialist to deliver that message. As he stated in the call a real focus on pediatrics. Given a national history disease reflected in the number of children and percentage of children in the registration trials for Kanuma that we believe is an enriched population for us to work on to get to those children early. Thank you.

[Operator:]

We will go ahead and take our next question from Anupam Rama with JPMorgan.

[Anupam Rama:]

Thanks so much for taking the question. I have perhaps a broader level high-level strategic pricing question. I know it’s early innings but now that you are in OUS government pricing negotiation and Alexion has multiple [indiscernible] and two additional high priced orphan products which account for healthcare expenditure budget. Are governments looking at the products and indications individually and the merits of the data or are they looking at sort of maybe broader Alexion pricing negotiations and Alexion’s impact on the healthcare budget?

[David Hallal:]

Thanks Anupam. As you know we’ve really approached diseases that for a very long time there really has been no focus on them. And largely because they are highly challenging diseases and very few companies were really accepting the high risk associated with developing not just therapies that make an incremental difference but truly therapies that transform patients’ lives. That's really what we're focused on. And our approach with Soliris and PNH and aHUS is very similar to now our approach with Strensiq for HPP and Kanuma for LAL-D. It really starts with one, the extreme rarity of the diseases. And you mentioned budget impact. As I think we all know in the US and in Europe there is a definition for the prevalence for an orphan disease. And it’s typically around 200,000 patients with the disease. The definition for an ultra-orphan disease in the US is say 6400 patients. And when we look at the diseases in which we are focused on the numbers generally fall far lower than even that very low threshold for an ultra-orphan disease. When you combine that with natural history of these diseases, in PNH a third of patients die within five years of diagnosis, for aHUS 50% of patients will either die, progress to ESRD requiring dialysis or have permanent renal damage within 12 months of diagnosis. And then HPP and LAL-D as we reflected on the call the majority of the youngest patients don't live till their first birthday. And when you combine that with truly transformative benefits, that is for example with Strensiq now a 97% survival rate at 48 weeks compared to 42 % for historical control patients. And then 100% of the juvenile onset HPP patients had a response to treatment and a variety of different measures of mobility and growth and bone healing. And so when we combine all of that it gives us great confidence that just like we have experienced with Soliris and PNH and aHUS it is a long process. It takes time country by country but the underpinning of our approach of delivering true transformation has ultimately resulted in successful reimbursement discussions and we would expect it to be no different now for Strensiq and Kanuma as we move country by country across Europe.

[Operator:]

And we’ll go ahead and take our next question from Matthew Harrison with Morgan Stanley.

[Unidentified Analyst:]

Hi, this is Cyrus calling in for Matt. So can you detail some of these macroeconomic Latin America problems that you mentioned and are your currency expectations for the fourth quarter then be similar to third quarter and what are you expecting for currency for next year?

[Vikas Sinha:]

Thank you for that question. This is Vikas, trying to respond to your questions. If you look at the macro-economic situation in Latin America in Q3, you can see that the impact on most of the currencies and the countries have been significant in Q3 and that flows into Q4. And I just want to talk through this a little bit because if you look at the currency impact and the guidance that we gave around $160 million earlier and that continues till now, we’ve maintained that $160 million currency impact going into Q4. Where you see in Latin American countries, some of them we also sell in US dollar, so what’s happened is they make budget – their own local budgets in local currencies and so you do get into constraints and we work with the governments to find solution around that. Now these things are not new to us because if you think through this, having a two-thirds of your business globally, we kind of see this happening in one country or the other once in a while. So if you go back and look at 2014 we saw that in Russia, over one or two quarters, we did feel the pain and then we found solutions around 2015 and we move forward. So we will see this thing going forward. Now, the other question, the last question that part of the question was impact of currency going into 2016. Yes, a large proportion, so we always hedge 50% of our currency on the major currencies that we deal with, other 50% is unhedged. But the hedge rates continue to drop and come towards closer to the market rate over a period. I will give a better view of that towards the analyst day and as we give the guidance for 2016.

[David Hallal:]

And then I would just add, as Vikas pointed to the situation in Russia for us last year, the strength of our global core business is vital across our 50-country operating platform and that enables us to continue to produce strong volume growth and overcome country by country issues that may present themselves.

[Operator:]

And we can go ahead and take our next question from Matt Roden with UBS.

[Matt Roden:]

Martin, I was wondering if we could turn this towards the pipeline a little bit. So first, can you talk about the agenda a little bit for the December 10 analyst meeting? Is this the right forum to disclose preliminary data for 103 and 1007, and is there anything else in particular we should be looking out for? And then I guess more specifically when we think about 103, I suppose the preliminary analysis is going to have a PK/PD component. So just wondering your thoughts on how important the bio distribution is of the organ [ph] and the heparin sulfate reductions, I guess I am just coming from the angle that it seems logical that you want to see an effect in the CNS. So I guess just big picture, just trying to see what we should expect from the analyst meeting from a pipeline perspective and specifically what kind of data would give you a lot of confidence that 103 is going to be transformative?

[Martin Mackay:]

Thank you, David and many thanks Matt for a pipeline question. We’ve been now looking forward to these. In terms of analyst day, I think it’d really be – I must say an excellent set of presentations and as you allude to, we’d be looking to give updates on the catalysts that we mentioned on the call. So 103, 1007, but also give just more of a feel than you can give in a call for the other aspects of the pipeline, the complement inhibitor portfolio, the growing metabolic franchise, our portfolio that we have and then some things on the first in humans that we rolled out and to start in 2016. So I think it will be a full – I am slightly biased -- but enjoyable agenda. In terms of your question on SBC-103, I think it’s a really great question actually and how we look at this, and again the part answer was in your question about where we expect to see things. As you know just to take half a step backwards, there are three doses in the study with 11 patients at 0.3, 1 and 3 milligrams per kilogram and certainly looking at heparin sulfate levels across all of those doses in the CNS, urine and serum and as you correctly allude to, the brain is clearly a key component of this disease. I mentioned the neuro-cognitive decline, neuro-degeneration occurs. So clearly if we were able to see dose dependent results in the cerebrospinal fluid, that would be something that would excite us before planning future studies in this disease. Hopefully that answers both your questions, Matt.

[Operator:]

And we’ll go ahead and take our next question from Chris Raymond with Raymond James.

[Chris Raymond:]

And just on Kanuma and the LAL-D diagnostic pathway, our checks a while back indicated that the use of the dry blood spot assay was still fairly minimal among the physician community. And I am just kind of curious that on Slide 15 which I think you talked through in detail, on a previous question, just curious is it – from your view now that you’ve had some time working on this pathway, is adoption and awareness of this assay one of the bigger opportunities you see to improve the diagnostic pathway or are there some other variables maybe that you are focusing on more than that?

[David Hallal:]

No, thanks Chris. Carsten will take it on. I just – from the early experience that we’ve seen, it’s following the trend that we observed very early on with PNH back in 2006 and 2007 and then later with aHUS in 2010, 2011 just before the first approval and then afterward which is very very significant educational gap due to the very very low awareness of the disease, always driven by the extreme rarity of the disease, and also having nothing you could do about the disease really, because in each area in which we pursue there is generally standard of care which isn’t really improving outcomes to a great extent. Carsten, specifically on LAL-D?

[Carsten Thiel:]

I think, David, just the two things that I would like to add is this diagnostic pathway has been designed very successfully with experts in the field, it is robust and easy to understand for the different specialties. I think the important angle as we touched upon earlier is that it is really relevant for our pediatric patients. And why, because there’s got to be a sense of urgency in diagnosing those patients fast and accurately because the mortality in that patient population is so high.

[David Hallal:]

And I would just add one more point, Chris, is that our checks are pretty consistent with yours. As we engage with physicians there is that very significant knowledge gap on how to test, how to test which is the dry blood spot test, and even which labs offer that test, and that’s what Carsten and the team are very focused on early in the launch planning with our disease and diagnostic initiatives.

[Operator:]

And we’ll go ahead and take our next question from the Ying Huang with Bank of America.

[Ying Huang:]

First of all, I have question on Kanuma because you just started early stage launch in Germany. Can you give us an idea of the launch pricing in Germany? And then secondly, on the second gen follow up program for Soliris. Are we going to expect to see data from ALXN1210 at ASH this year? And Martin, it seems you haven’t talked about ALXN5500, where that’s in the clinic and then just one more question on aHUS, I am glad that obviously at the same time you are seeing more patients for aHUS in therapy but can you talk about the net revenue per patient for aHUS and how does that compare to PNH?

[David Hallal:]

Ying, that was from one question. But so why don’t I answer just the last one first and then we will go to Martin and Vikas on Kanuma pricing in Germany and then the next generation programs with 1210 and 5500. The simple answer of the last question on aHUS is as you know the adult dosing is higher than that of the PNH dosing but there are five dose cohorts, that’s where we first gained our experience with dose by weight and the youngest patients with aHUS actually consumed about 20% of the dose that the adults would consume – and again paediatrics are heavily involved in aHUS. So when you blend it all together the average per patient is very similar to that of our PNH experience. Martin, since we are on complement do you want to take on 1210 and 5500? And then Vikas can talk about Germany.

[Martin Mackay:]

Yes, I heard two parts to the questions, question, Ying, one on 1210, I will start there and then go on to 5500. As we alluded to in the text, we have completed our single ascending dose study and we will be looking to and talk about those data this year. The multiple ascending dose study is again as you know ongoing and we will be looking at those data early next year and of course we intend to start the first in patient study in 2015, by the end of the year and therefore we will be looking at data in 2016 for those patients also. In terms of 5500, it’s still a very much part of our cadre of our complement inhibitors and as I think both data that I alluded to, we’ve now got this growing portfolio of complement inhibitors both in the C5 area with 1210 but other parts of the complement pathway which is really growing in our hands, I must say 1007 is obviously one that we talk about on a regular basis both in gastrointestinal graft versus host disease and antiphospho lipid syndrome. So the case of talking more about 1210 is simply it’s our lead program, it furthers ahead in terms of the next generation Soliris molecule and we will be looking at to publish data set met and patient data over the next period.

[David Hallal:]

Great, and then for the third part of, Ying, single question, Vikas?

[Vikas Sinha:]

Ying, regarding the Kanuma price in Germany, as you know, in Germany when you launch it at this time you still have to go through the discussion with EMA over time. But we would give a much better view at the US launch but just for your knowledge, we are looking at annual cost of Kanuma to be very similar to Strensiq.

[Operator:]

And we’ll go ahead and take our next question from Geoff Meacham with Barclays.

[Geoffrey Meacham:]

Just have a couple here. One for Martin and one for either Vikas or David. So for Martin, for cPMP I know you guys have breakthrough, I just wanted to get a better sense for maybe the size, scope of the pivotal study and would you view as clinically meaningful? And then for Vikas and David, you guys – you haven’t had a supply disruption from the 43 of the warning letter and I wanted to get a sense for, now that you have two additional products, what is the update on manufacturing and what’s the risk that you could ride into some supply constraints going forward?

[Martin Mackay:]

Thank you, David and thanks, Geoff. In terms of molybdenum program, as David mentioned a couple of times about the ultra-rare arena we work in, and that’s certainly the case for molybdenum cofactor deficiency type A. It’s a very rare, very ultra-rare disease and therefore and specific answer to your question, this will be a small number of patients enrolled in the pivotal study and having completed the bridging study we are looking to start that study by the end of the year. There are really a small numbers of patients involved. And then the second part of your question, in terms of the regulatory pathway, again as David alluded to really well, these are poorly understood diseases with no path in front of us. We are certainly benefitting from the breakthrough therapy designation in that we are having highly interactive discussions with regulators, not only in the US but also in Europe to really define what these primary endpoints and important secondary endpoints will be in this truly devastating disease. Hopefully that helps, Geoff.

[David Hallal:]

And then Geoff, regarding supply, we really have an expanding global manufacturing network where our objective is redundancy in the system from both drug through fill and finish, and right out to labeling and packaging. And one of the objectives for Julie has been obviously to bring more of those capabilities in-house. As you know we’ve announced expansion of our manufacturing facilities in Ireland which we are very excited about. In addition to that, it’s just been a continuous focus under Julie’s leadership on the best talent in the industry, industry leading quality systems and continuing to invest in our facilities which we think is represented by some of our announcements around CapEx in this area recently.

[Operator:]

And we will go ahead and take our next question from Terence Flynn with Goldman Sachs.

[Terence Flynn:]

Maybe just I know you don’t want to give 2016 guidance yet at this point. But as we think about Soliris any new or different growth drivers that we should consider outside of FX as we consider 2016? And then with respect to SG&A, just wondering maybe Vikas, if you could help us think about leverage and timing of leverage coming on.

[Vikas Sinha:]

So Terence, the way to look at this is if you look at 2015 SG&A expenses, right, and you should literally focus on the percentage of sales in the second half because first half did not have the Synageva integrated into us. And when you start looking at that, we are somewhere around 27%, 26% levels. We expect to continue at the same percentage level going into next year primarily because we have to invest in making the metabolic franchise a success. And we’ve got to put our full power behind Strensiq and Kanuma. So that’s how we are thinking about SG&A next year. And the leverage will start coming as the sales of these drugs start coming into model over the years.

[Carsten Thiel:]

So Terence, for 2016 we really expect to identify a consistent number of patients, newly diagnosed patients on PNH and aHUS. And as we have mentioned earlier in the call, our view is that the majority of the opportunity both for PNH as well as for aHUS lies ahead of us.

[Terence Flynn:]

Maybe can I just ask one on the pipeline quickly. Just wondering if you guys can maybe help frame success for 1007 for us at the interim, what are you looking to see?

[Martin Mackay:]

Very simply, now we are looking at the overall acute GVHD response at day 28, the primary endpoint, as you know, it’s an open label study, so we will be able to see those data in that timeframe. And I hasten to add that it’s obviously our preliminary readout at that stage.

[Terence Flynn:]

Is there a specific threshold to response do you want to see?

[Martin Mackay:]

We always go into those studies with specific responses that we look for, but again I hasten to add, this is a preliminary readout, so it would be premature to state exactly given the number of patients we will look at that time. We will be in a much better position when we complete the study.

[David Hallal:]

And the good news is Terence, we have a readout between now and the end of the year which is just a few weeks.

[Operator:]

And we’ll go ahead and take our last question from Brian Skorney with Robert W. Baird.

[Unidentified Analyst:]

This is Mina [ph] in for Brian. I have a question about the Moderna program. I know you said that it would be moving into the clinic next year. Do you have any other updates on that? Could you kind of walk us through a little bit more on how that program is progressing? And then a little bit about for Strensiq, I know in the call last week you talked a little bit about the lift between some of the younger patients and the older patients. What do you think will ultimately play out in terms of the patient age, the average age of patients on the drug?

[David Hallal:]

Sure, Martin, on Moderna?

[Martin Mackay:]

Yes, thank you, David and thank you for the questions. Again without going into specific details of either the indication or the approaches here, we’ve currently got seven programs in the research engine and we aim for one of those seven to go into the clinic in 2016. But then others will follow in due course. Similarly prior to that seven that we are working on, we have another cadre of programs that we are looking at to assess their suitability for messenger RNA therapeutics. Overall I can see that the collaboration is going exceedingly well. We have a highly interactive collaboration with Moderna folks up in Cambridge. We have a laboratory very close at there and so far it’s just been a marvellous experience working with those, we are working with Moderna.

[David Hallal:]

Yes, and it’s gratifying to see as we build out our global metabolic franchise with the two new product launches this year with Strensiq and Kanuma. Six of the seven first preclinical programs from Moderna are in the metabolic setting and again Martin will share a little bit more about the collaboration at analyst day. Turning back to the Strensiq question, as we – by the way you said last week, it was this week but I agree it’s kind of felt like a very long week for many of us. But this week as we mentioned given the clinical trial experience across multiple multi-national trials and also the very early experience we’ve had in Japan, in Germany, our expectation is that a very very high proportion of patients initiating Strensiq treatment will be infants and young children, and we believe that the typical patient weight across the population is likely to be in the 20 to 25 kilogram range. Thank you. End of Q&A

[Operator:]

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