Alexion Pharmaceuticals, Inc.
Q1 2016 Earnings Call Transcript

Published: 29 Apr 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the Alexion Pharmaceuticals, Incorporated First Quarter 2016 Conference Call. Today's call is being recorded. And for opening remarks and introduction, I'd now like to turn the call over to Elena Ridloff, Vice President, Investor Relations. Please go ahead, ma'am.

[Elena H. Ridloff:]

Thank you, Greg. Good morning and thank you for joining us on today's call to discuss Alexion's performance for the first quarter of 2016 and our plans for the full year. Today's call will be led by David Hallal, our CEO. David will start the call with an overview of our global performance, and be joined by Vikas Sinha, our Chief Financial Officer; Carsten Thiel, our Chief Commercial Officer; and Martin MacKay, our Global Head of R&D. Also with us today is Julie O'Neill, our Global Head of Operations. You can access the webcast slides that will be presented on this call by going to the Events section of our Investor Relations page on our website. Before we begin, I will refer you to slide 3. We will be making forward-looking statements all 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 L. Hallal:]

Thank you, Elena. In Q1, the Alexion team extended our global leadership in rare diseases and made significant progress on a number of priorities as we continue to provide life-transforming-therapies to more patients with rare and devastating disorders. During the quarter, we achieved many commercial and R&D milestones. First, we grew our core Soliris business, largely driven by a steady number of new patients treated in the U.S., Europe and Japan. Second, we progressed the Strensiq launch in initial countries with the strong addition of new patients. Third, we commenced the U.S. launch of Kanuma, and began to serve initial patients with LAL-D. And fourth, we advanced our robust rare disease pipeline including, exceeding target enrollment with more than 30 patients dosed in two initial studies of ALXN1210 in patients with PNH, commencing the planned dose escalation for SBC-103, as six-month data showed the potential for an IV therapy to cross the blood brain barrier for patients with MPS IIIB, and progressing three registration studies of eculizumab with MG data expected mid-year, DGF data expected in the second half of 2016, and the NMO trial on track to complete enrollment this year. Looking at Soliris in Q1, we grew our core business by serving a consistently high number of new patients with PNH and aHUS in the U.S., Europe and Japan, the territories where we have been operating the longest. This was offset by increased macroeconomic weakness in Latin American countries, primarily in Brazil and Argentina. Despite the weakness in Latin America, we continue to see the majority of growth ahead of us, for both PNH and aHUS across our 50-country operating platform. Looking more closely at PNH in Q1, globally, we identified and served a high number of newly diagnosed patients by executing our PNH diagnostic initiatives with urgency. Given that one-third of untreated patients with PNH will die within five years, we aim to deliver the life transforming benefits of Soliris to more patients in 2016 and beyond. 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 Q1, we once again served a consistent number of new patients who presented with complement-mediated TMA. Matched for time, now 18 quarters from their respective approvals in the U.S., there are more patient actively receiving Soliris for aHUS than there had been for PNH. And we continue to see the same trends in Europe, supporting our view that the opportunity to serve patients with aHUS is larger than our opportunity to serve patients with PNH. Turning now to Strensiq, we are very pleased with our performance in Q1 as we served a growing number of new patients in the U.S., Germany, and Japan, driven by our highly successful HPP disease awareness and diagnostic initiatives, which have been underway for more than three years. Also in the quarter, we continued to have success early in the launch in identifying both newly and previously diagnosed patients with HPP. As we continue to apply our expertise, we are confident that our work with the medical community will enable physicians to make a more rapid and accurate diagnosis and better informed treatment decisions for a growing number of patients with HPP over time. Now looking at Kanuma, we commenced the U.S. launch in early Q1, and are now making progress serving initial patients with LAL-D in both the U.S. and Germany. In order to reach more children with LAL-D faster, we are educating pediatric specialists, and have enhanced our diagnostic pathway to aid patient identification and earlier treatment. While these improvements are leading to an increase in testing in appropriate patients, we are accelerating our efforts to extend our disease awareness and diagnostic initiatives to a greater number of our target physicians. Throughout 2016, we look forward to serving increasing number of new patients with HPP and LAL-D in the U.S., Germany, and Japan while we progress our country-by-country funding processes throughout Europe. Carsten will provide more color on the launches later in the call. Looking ahead for the year, we have multiple R&D milestones including several highlights from our ALXN1210 program including additional data in PNH and the initiation of an aHUS clinical program. Data from the registration trials of eculizumab in MG and DGF, completion of enrolment in the NMO registration trial, and continued development of SBC-103 with a planned dose escalation in our Phase 1/2 study in MPS IIIB. We look forward to providing updates on our robust pipeline, which we expect to deliver up to six additional product or indication approvals through 2018. Looking at our financial performance for the quarter, we achieved total revenues of $701 million, a 24% increase in volume compared to the year-ago quarter. Our revenue was negatively impacted by 5% or $30 million in currency headwinds, net of hedges in Q1, over the year-ago quarter. We also achieved non-GAAP EPS of $1.11 per diluted share. Turning briefly to our 2016 guidance, we expect total revenues to be at the low end of our previously guided range of $3.05 billion to $3.1 billion, primarily due to increased macroeconomic weakness in Latin America, partially offset by early strength of the Strensiq launch and the strengthening of foreign currencies versus our previous expectations. We also expect 2016 non-GAAP EPS to be at the low end of the previously guided range of $5.00 to $5.20 per diluted share. At this point, I'll turn the call over to Vikas for a closer look at our financial performance. Vikas?

[Vikas Sinha:]

Thanks, David. In Q1, total revenues increased to $701 million. This 17% revenue growth was driven by a 24% increase in volume, negatively impacted by 5% or $30 million in currency headwinds compared to the year-ago quarter. Soliris revenues were $665 million in Q1. While growth in our core territories remained strong, Soliris revenue growth was impacted mainly by three factors

[Carsten Thiel:]

Thank you, Vikas. In Q1, our global commercial operations delivered 18% volume growth year-over-year for Soliris, progressed the Strensiq launch in initial countries with a strong addition of new patients and commenced the U.S. launch of Kanuma. Starting with Soliris, we grew our core business driven by a consistently high number of new patients treated in the U.S., Europe, and Japan offset by macroeconomic weakness in Latin America, impacting new patients starts and causing treatment interruptions in the region. Despite this weakness in Latin America, we are pleased with our progress on a global basis. In PNH, in Q1, as in prior years, we consistently identified a high number of newly diagnosed patients with PNH and we continue to see that the majority of patients starting on Soliris are also newly diagnosed. In aHUS, we also continue to observe a consistent number of new patients commencing Soliris treatment. Given that the incidents of aHUS is higher than that of PNH, combined with the success of our diagnostic initiatives, we continue to expect that over time our opportunity to serve patients with aHUS will be larger than that of PNH. As we aim to reach more patients with aHUS, we are focused on three key initiatives. First, increasing the number of patients with TMA tested for aHUS. Second, helping a higher proportion of diagnosed patients receive the benefits of Soliris as first line treatment. And third, enabling more physicians to better understand the genetic lifelong nature of aHUS. During the quarter, we continued to identify a consistently high number of patients with PNH and aHUS across our 50-country operating platform, and we continued to see the majority of our opportunity in both diseases in front of us. Now, I'd like to turn to our initial country launches of our two highly innovative, newly approved enzyme replacement therapies. Starting with Strensiq, in the U.S., in Q1, we are very pleased with the early stages of launch. Our revenues in the quarter benefited from identification of patients prior to approval, clinical trial patient transitions, and our long-term disease education efforts which have been focused on the morbidities and high mortality of HPP. In Q2 and beyond, we will create greater awareness through our disease and diagnostic initiatives which are helping physicians identify the appropriate patients to test for HPP. Today, physicians are increasingly recognizing the role of Strensiq in treating the underlying cause of the disease by replacing the missing vital enzyme, and payers are recognizing the value of Strensiq based on the compelling clinical benefits included in the label. A growing body of medical evidence continues to enhance our understanding of HPP. Importantly, new longer-term data presented at ENDO, this month, showed sustained improvements and survival rates, bone healing, respiratory support, and growth and mobility in children with HPP with ongoing Strensiq treatment. As the U.S. launch of Strensiq progresses, we are also applying key learnings to the other initial launch countries of Germany and Japan, where we're also serving patients with HPP. Turning now to Kanuma. We commenced the launch in the U.S. in January and are now serving initial patients as we apply our deep expertise in ultra-rare diseases to serve the LAL-D community. To support our launch, we are deploying disease education programs and more targeted diagnostic initiatives. These efforts are helping pediatric specialists better understand which children are at higher likelihood for having LAL-D and the importance for early diagnosis. This is critical as the median age of disease onset is 5.8 years, and 50% of non-infants progress to fibrosis, cirrhosis, or liver failure within just three years. With our diagnostic and disease education programs under way, we are observing both interest and receptivity, and an increase in testing rates in children with liver and lipid abnormalities. We expect these programs, directed at pediatric specialists, to help accelerate the diagnosis of children with LAL-D over time. While our field teams are educating physicians to increase testing in appropriate patients, we continue to accelerate our disease awareness and diagnostic initiatives to drive more testing with a greater number of our target physicians. Our efforts are further supported by the growing body of medical evidence for Kanuma. At the WORLDSymposium meeting in March, new two-year data in infants with rapidly progressing LAL-D, who were treated with Kanuma, demonstrated a substantial survival benefit to beyond two years of age. As we continue with our global disease education efforts, these data underscore the importance of early diagnosis of patients with LAL-D. We were also pleased in Q1 to receive marketing authorization for Kanuma in Japan and expect to serve initial patients in Japan in Q3. Turning to the timing of additional country launches for Strensiq and Kanuma. We have initiated the funding processes with healthcare authorities in other major European countries for both products. We expect to start serving patients in initial countries outside of Germany in the second half of this year, with additional countries to follow in 2017. Strensiq and Kanuma have broad and strong labels, and we anticipate access to expand as the transformative clinical benefits for the small number of patients with HPP and LAL-D are recognized. Now, I will turn the call over to Martin who will discuss our R&D programs. Martin?

[Martin MacKay:]

Thank you, Carsten. In Q1, we continued to advance the most robust rare disease pipeline in the industry which includes 10 clinical programs and 30 pre-clinical programs, with at least four moving into the clinic in 2016. Starting with eculizumab, our three ongoing registration trials continue to progress as planned. In neurology, we expect to have data in refractory myasthenia gravis midyear. In kidney transplant, we expect data from our delayed graft function registration trial in the second half of this year, and we are on track to complete enrollment in the relapsing neuromyelitis optica spectrum disorder trial this year. In addition to Soliris, we have eight complement inhibitors that we are developing with urgency. Our lead program, ALXN1210, a longer acting C5 antibody that has a half life nearly three times that of Soliris has shown rapid, sustained and complete inhibition of free C5. We have two ongoing clinical studies to evaluate LDH reduction and safety in patients with PNH receiving ALXN1210. In these two studies, we are evaluating monthly and even longer dosing intervals, and have exceeded target enrollment with more than 30 patients dosed. We expect data to be presented mid-year from our Phase 1/2 study and continue to target an approval for ALXN1210 in PNH in 2018. We will also be initiating a clinical program with ALXN1210 in patients with atypical aHUS later this year. Turing 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 rare auto-immune disease. In Q4, we shared interim data, which showed a 28-day overall response rate of 80%, and a 28-day complete response rate of 70% compared to historical response rate of 56% and 49%, respectively. The interim data support the continued advancement of ALXN1007, including their evaluation of higher doses in additional patients with GI-GVHD. Moving to our cPMP replacement therapy for patients with Molybdenum Cofactor Deficiency or MoCD Type A, a rapidly progressing lethal disease afflicting newborns. We have initiated a pivotal study to evaluate the efficacy and safety of ALXN1101 in neonates with MoCD Type A and we look forward to progressing this registration study in 2016. Turning now to SBC-103. SBC-103 is a recombinant form of the NAGLU enzyme, produced with our unique and proprietary protein expression platform, which is administered intravenously for patients with mucopolysaccharidosis IIIB or MPS IIIB. This is a rare devastating disorder characterized by CNS and systemic accumulation of heparan sulfate due to a genetic deficiency in the NAGLU enzyme. At the WORLDSymposium in March, the six-month results for patients in the Phase 1/2 study showed continued improvements in the heparan sulfate cerebrospinal fluid reductions, with a mean reduction of 26% in the 3 milligram per kilogram dose. The 24-week results coupled with the increased dose response observed in preclinical studies, support dose escalation for all patients in the study. We are now in the process of randomizing all patients to either a 5 milligram per kilogram or 10 milligram per kilogram dose. We are encouraged that SBC-103 has the potential to provide both systemic and CNS clinical benefits due to blood brain barrier penetration and look forward to updating you on the results from the dose escalation phase of the study. The interim data for SBC-103 provide evidence that our unique and proprietary protein expression platform could enable other enzyme-replacement therapies to cross the blood brain barrier, opening up a large set of potential treatment options for patients. We have initiated preclinical research initiatives in other lysosomal storage diseases with CNS morbidities, and are prioritizing development of novel ERTs against these disease targets by evaluating the severity of patient CNS symptoms, applicability of technology for CNS transport for each disease, and the potential to provide a transformative benefit to patients. I look forward to providing updates on our progress with our platform in future calls. We are excited about the multiple milestones and our expanding pipeline and are driving toward as many as six additional product or indication approvals through 2018. I will now turn the call back to David. David?

[David L. Hallal:]

Thanks, Martin. During the quarter, the Alexion team continued to strengthen our global leadership in rare diseases, and we served more patients across our global operating platform. 2016 is shaping up to be another transformative year as we grow our Soliris business, execute on the Strensiq and Kanuma launches, and advance the multiple milestones and our robust pipeline. As always, we thank our talented employees for their dedication to our mission as we work to transform the lives of patients around the world, and we look forward to updating you throughout the year as we progress our ambitious commercial and R&D initiatives. Thank you. Now, let's open the line for questions. Greg?

[Operator:]

Of course, sir. We'll now turn to the question-and-answer portion of our call. Our first question comes from Eric Schmidt with Cowen & Company.

[Eric Schmidt:]

Thanks for taking my question. Vikas and David, I just wanted to drive down a little bit more into the Latin American impact in Q1. Could you qualify what that was on a year-on-year or quarter-on-quarter basis? And when you talk about steady patient adds outside of Latin America, in the U.S., Europe, and Japan, can you give us sort of a volume growth rate in that non-Latin American business, and tell us how consistent that's been?

[David L. Hallal:]

Yeah. So as we said during the call, Eric, we served a steady number of new patients in the U.S., Europe and Japan with Soliris. It's consistent with what we've seen over the year since launching PNH and aHUS in those countries. In Q1, the revenue growth in LatAm was clearly affected by increased macroeconomic weakness, and the new patient starts and treatment interruptions impacted us primarily in Brazil and Argentina. And actually the weakness expanded geographically versus the fourth quarter where we saw weakness primarily in Brazil only. Vikas can kind of talk you through the impact of LatAm across our entire business and how we see that impact not only in the quarter, Q1, but moving forward.

[Vikas Sinha:]

Eric, if I look at 2016 in a full year perspective, we guided towards the lower end of $3.05 billion to $3.1 billion, which is actually, if you look at it in terms of percentage growth year-over-year, that turns out to become 17% at the lower end, right. There's couple of factors that – three factors, I would say, impact us year-over-year. Obviously two you already knew from the beginning, which is FX, which was previously we were talking about $120 million; now it's down to – we're expecting somewhere closer to $80 million. Approximately, it works out around a couple of percent impact because of that. And then you have – we also guided this year about price impact coming around 2%, 3%. And then LatAm would be another 2%, 3%, right. So these are the three things that takes the overall growth, which is -- 17%, if I adjust it to all of these things, more closer to the 23%, 24% level. So Soliris on that, if I take the Soliris, and not do the new drugs, then it will probably be around 18%, 19% levels.

[Eric Schmidt:]

18%.

[Vikas Sinha:]

On a volume growth. On a volume growth.

[Eric Schmidt:]

Okay, I got you. And can you tell – okay. I got it. And can you tell us what the impact was in Q1 specifically from LatAm?

[Vikas Sinha:]

So if you – Q1 specifically, if you look at year-over-year, that is a 2% to 3%, as we have said, it's probably will be at the same range.

[Eric Schmidt:]

Okay. And just one, maybe quick one, is the ALXN1210 recruitment that seems to be going quite well, is that hurting you on Soliris in other geographies?

[David L. Hallal:]

So Eric, yeah, as we said, we've now enrolled more than 30 patients in the ALXN1210 program. But the way that we look at it, we're clearly recruiting patients in countries in which we operate. But as I've said, we continue to see that the majority of patients with PNH have yet to receive an accurate diagnosis, let alone commence appropriate treatment. So as we look to recruit, we continue to see a steady addition of new patients across our platform with commercial Soliris. And we continue to focus, frankly, on both initiatives exclusively, right. We're looking to develop the program as rapidly as possible. That's what Martin and his team is doing. And Carsten and the team continue to identify a steady number of new patients with PNH, and we see them commence treatment. And that is – obviously, outside of LatAm, we are pleased to continue to see that happening in a steady way.

[Operator:]

All right. And moving on. From JPMorgan, we have Anupam Rama.

[Anupam Rama:]

Hey, guys. Thanks so much for taking the question. Maybe a quick one for Vikas. How should we be thinking about the R&D spend long term with the guidance being moved towards the higher end of the 2016 range? Should we still be thinking about that 18% to 19% level for the 2018-plus timeframe outlined at the R&D Day? Thanks.

[Vikas Sinha:]

So, Anupam, there are two parts to that question. This year we are guiding towards the upper end, and the longer-term, whether we get down to 18%, 19%. The reason why I wanted to highlight the fact that R&D would be at the upper end is, in both SG&A and R&D is, when we get a benefit of FX on the top-line, our expenses are un-hedged, and it actually gives us additional expenses because of FX, when you convert it into U.S. dollar, the local currencies, right? So that's why it's moving up towards the upper end. We are, this year, closer to 20%, 23% levels. Well, we definitely are looking at getting down to 18%, 19% level by 2018. That is our objective.

[Operator:]

All right. Next up, we have Ying Huang from Bank of America Merrill Lynch.

[Ying Huang:]

Good morning, guys. Thanks for all your transparency. First question maybe for Vikas. You are reaffirming your guidance for 2016. So has that low-end of the range captured the worst case in LatAm? For example, we potentially could have a new government in Brazil, so what could that impact your revenue in Soliris? And then I have one maybe for Martin. So for SBC-103, how much do you think we need to see in terms of CSF level reduction for heparan sulfate in order to make an impact in the function from the patients? Thank you.

[David L. Hallal:]

Vikas?

[Vikas Sinha:]

So, thank you. Thank you, Ying. So, the question is did we – have we gotten to the bottom of the Latin American issues? So we see two risks right now. One in Brazil and one in Argentina. Argentina is really driven by the budgetary issues because they had a major devaluation going into this year, and there's an adjustment required, right? And on the Brazil side, it's more the political instability in the country, that's what we see. And to the best of our knowledge, today, what we have done is looked at the risk profile with taking no patient additions there, and taking some business interruption in the existing patient, treatment interruption to existing patients, and taken a view that out of the 10% total sales that we have exposed towards Latin America, 20% to 30% of that sales, or 2% to 3% of our total global sales will be exposed there. At this stage, I feel good about it that ranges between $60 million to $90 million, which we have factored into our guidance. Now, so, as we go forward, I think we'll give you more color how these things change, but clearly some of the political issues are well beyond Alexion's ability to forecast.

[David L. Hallal:]

Martin?

[Martin MacKay:]

Yeah. Thank you, David, and thanks for the question, Ying. The quick answer to your question is we don't know. But as just a reminder of what we've seen today, the 3 milligram per kilogram dose and the first data that we showed, we saw 11% reduction in heparan sulfate in the CSF. And then, at the six-month level, which we presented more recently, we saw the 26% reduction over that time period. In addition, these were tracking towards what we saw pre-clinically, and both the preclinical data and the clinical data, now point towards moving to higher doses. And as we said on the call, we're now randomizing the patients in the study to both the 5 milligram/kilogram and 10 milligram/kilogram doses. That will give us a real strong clue as to the dose response that we see in the higher doses. And of course in parallel, we will be looking at brain structure and neurocognitive development, which then begins to ask the very good question that you asked. Hope that helps.

[Operator:]

All right. And our next question comes from Chris Raymond with Raymond James.

[Christopher Raymond:]

Hey. Thanks. I just wanted to ask a question on the myasthenia gravis data that's coming up here. And I don't want to put the cart before the horse, because obviously we haven't seen the clinical data yet, but one dynamic that kind of intrigued us is that one would assume that the existing applicable patients are likely to be much more identifiable, assuming they are already under the care of a physician, if they're refractory sort of by definition. So assuming you have a filable dataset, would uptake here potentially be a bit steeper than what we've seen with PNH or aHUS, or is that kind of the wrong thinking and should we be looking at this as something that follow a similar trajectory? Thanks.

[David L. Hallal:]

Thanks, Chris. I've addressed this in the past, and of course, as you said, it is well before even seeing data, and whether or not we have a package for submission. But nonetheless, I do think the dynamics are slightly different. MG, in general, is a more common disease, and we are targeting the most severely affected patients, in which no unapproved support of care that is being used as making any meaningful improvements in the patients. And those were the ones that we enrolled in our trial. And so, given the fact that MG is different than the – we're looking at a patient population in an ultra rare disease range, but as you say, sort of the efforts to identify the patients are different here. And so I think that one could conclude the dynamics might be, perhaps, a little bit different than what we've experienced with PNH, aHUS, and here in the early of HPP and LAL-D. Nonetheless, still a small patient population affected by in extremely severe and devastating disease, and we will see. But of course, as you said, what's most important is we've got to see the data. Thank you.

[Operator:]

Moving on, we have Geoff Porges with Leerink Partners.

[Geoffrey C. Porges:]

Thanks very much. Vikas, I don't want to beat up on this Brazil issue too much, but to try and paraphrase what you said, and just correct me if this is a reasonable interpretation. It sounds as though, were it not for the disruptions in Latin America that your actual demand growth would have been something, I think, you said two to three percentage points higher than the 18%. And backing into numbers, it feels like it's about a $20 million year-over-year headwind. That you've now taken out of subsequent quarters as you've adjusted your guidance. And that's offset partly against Strensiq. Is that the right way to interpret it? And then could you just give us a little bit more color on the trajectory for Strensiq? Tremendous sequential growth from Q4 to Q1, are we just sort of beginning here in terms of recruiting and identifying new patients for treatment or is there some sort of bolus effect that we shouldn't be expecting to continue?

[Vikas Sinha:]

Thanks, Geoff. I think – glad that you asked this question. I think I was trying to address that with Eric earlier. So there's two ways to look at this, right? You look at – one way to look at this is Q1 2015 versus Q1 2016, and the other one is to look at it sequentially. I think there's a lot of confusion here. When you look at year-over-year, what we are seeing here is, the numbers what you are quoting is absolutely right, right. So, year-over-year we're going to have 2% to 3% revenue growth getting impacted by the Latin American new patients non-starts and treatment interruptions. So that's where we feel that the growth is getting hurt, right, on the volume side. You're absolutely right on that. And when we try to analyze that going into the full year, it's like 20 times 40, right? So, you get to like $60 million to $90 million range, which is absolutely correct. Where I think there is some confusion, I feel – I'm just kind of feeling here is going from Q4 to Q1. And if you look back in the history, these two quarters have a little bit of, leaving all these issues out of LatAm or FX, we normally see a very flat quarters between Q4 to Q1, primarily because we see less number of days in Q1 compared to Q4. And it's – especially in Soliris, it tracks very closely to infusion days of the patients. And when you have less days, automatically that also puts into a spot. And as you know that every year, when you look at the holiday season from December to January, the infusion days do get 1, 2 days up or down delays. So that's why the reason of there is always very close to each other, that's what we see over the years. Now, from that number, when you start seeing two issues are different this year is we had the revenue growth impact that we just talked about and FX impact from Q4 to Q1, we had a negative FX impact of approximately $6 million. So, if you put that in perspective, your numbers will totally tie-up. Did I answer your question before we go to...

[David L. Hallal:]

So non-Lat – so, Geoff non-LatAm would carry over in a straight level as it did last year, right?

[Geoffrey C. Porges:]

Yeah. That's very helpful. I appreciate it.

[Vikas Sinha:]

Okay, for Strensiq, then David, do you want to answer that?

[David L. Hallal:]

Yeah. Just – so, Geoff we're very pleased so far with what we are seeing in the early dynamics of the Strensiq launch. Carsten, maybe take us through the observations that we're currently seeing.

[Carsten Thiel:]

Yeah. Thank you, David. So, remember Q1 is actually the first full quarter of Strensiq because it was approved in the U.S. in October. So let me share some insights of the early dynamics in the market so far. The uptake is really driven by patients. And I'd like to point down three of them. First, we observed conversions from clinical trials to commercial supply. Secondly, we observed patients initiating treatment who were actually identified prior to approval. And then thirdly we are seeing the success of our long-term educational initiatives and diagnostic initiatives that leads physicians to test, diagnose and initiate treatment with Strensiq. And our focus is to continue on this trend and to serve more patients on Strensiq.

[David L. Hallal:]

Yeah. I'll just say this, Geoff, it's early days. It's initial countries, as we said, U.S., Germany and Japan. But at the same time, as we said prelaunch, the majority of clinical trial patients for Strensiq were outside of the U.S., and so as we look at all these dynamics that Carsten just shared, we are extremely encouraged about our opportunity to serve patients, and also in the quarter just observing not only the benefit of patients identified with our long term disease awareness program for the prior three years, where we had identified patients prior to approval. But we're also seeing newly identified patients that are either newly diagnosed or previously diagnosed, all confirming a level of optimism about the opportunity to serve patients, not only in these initial countries but beyond.

[Vikas Sinha:]

Just one more thing, Geoff, is I'm probably missed out earlier in my statements. When you start comparing year-over-year, right, last year was – 2015 was a very good year when it came to pricing because we got no price cuts last year. You can go back and look at our 10Ks. And we had guided this year, because normally, we get 2% to 3% price adjustment every year. And this year, we are looking at that 2% to 3% levels. So we literally skipped a year last year. And when we file the 10-Q very soon, you will see that the price impact year-on-year is very, very close to 2%. So that is also a year-over-year comparison that when you look at the volume growth, you probably are not getting the equation correct.

[David L. Hallal:]

Great.

[Geoffrey C. Porges:]

Terrific. Thanks.

[David L. Hallal:]

Thanks, Geoff. Greg?

[Operator:]

All right. Next from Morgan Stanley, we have Matthew Harrison.

[David L. Hallal:]

Matt?

[Matthew K. Harrison:]

Sorry, can you hear me? Yes, I'm here.

[David L. Hallal:]

Yes.

[Matthew K. Harrison:]

Thanks. So I guess I have two parts. So first, just on the pipeline, maybe can you help us set expectations around what kind of data we should be expecting to see from ALXN1210, and what more work that you're going to need to do after you've got this initial data that we'll see midyear? And then second, just on MG, because I know someone else asked about this. But also can you just help remind us and frame how you see that opportunity commercially, and if you see or know of any off-label use already, and just how we should think about that opportunity commercially? Thank you.

[David L. Hallal:]

Thanks, Matt. So, regarding ALXN1210, Martin?

[Martin MacKay:]

Thank you, Matt. Yeah. In terms of the – as we said on the call, we've exceeded our target enrollment in both the Phase 1/2 study and the Phase 2 study with now over 30 patients, PNH patients, enrolled. For the midyear results, which will be the Phase 1/2 study, we'll present the monthly dosing data from that study. The Phase 2 study is ongoing where we are looking at monthly and longer dosing intervals, and that will clearly lead in to our plans for a Phase 3 study to be started this year. And again, as a quick aside, as we mentioned on the call, atypical HUS we'll also start that study.

[David L. Hallal:]

Because we've had a lot of questions, Matt, about what we would see, so as Martin was saying, ALXN1210 where we've enrolled patients into this multiple infusion interval Phase 2 study, right, with longer dosing cohorts. As we've talked about sort of data midyear, that will be the Q4 week dosing data that one would see, and then later one would see the results of intervals beyond that. As it relates to MG, again, it's just as Chris was saying, it's a little early because one would want to see the data. I think the opportunity commercially as we see it, again, it's when you really get down to the refractory generalized myasthenia gravis patient population, it's a size that we sort of see as an ultra-rare disease population, much like we've observed with the PNH and aHUS, HPP, LAL-D. And I think as Chris was getting to it, there might be a slightly different dynamic in that the patients may already be diagnosed. And so, it may be a different approach that one might take and we might take. And we're thinking about that, clearly, but at the same time we're obviously first and foremost, we'll want to see the data.

[Elena H. Ridloff:]

Next question please.

[Operator:]

Next, from SunTrust Bank, we have Yatin Suneja.

[Yatin Suneja:]

Hi, guys. Thank you for taking my question and congrats on a great quarter on Strensiq. So, maybe could you help us understand if there are any differences that you might be seeing in terms of patient mix or demand trends in the U.S., Germany, or Japan? And I know it's a bit early, but any updated understanding on the prevalence of this disease in these geographies? And then a quick one for Vikas. I know you guys are getting some benefit from FX starting in Q2. And how should we think about 2017? I think in the past you guys have said $30 million to $40 million FX headwind. Maybe help us understand how should we think about it now that FX has improved?

[David L. Hallal:]

Yeah. Sure, Yatin. So, regarding Strensiq, I think what we've seen is, at least initially here, a strong addition of new patients that have commenced Strensiq treatment. And clearly, some of our early observations have been aided by the elements that Carsten covered. I think if you look at the geographic differences, what we, at least, see early on is that in Japan, given what has been characterized as a lethal mutation for HPP in the Japanese population, there's perhaps at least our early observations is there perhaps might be less of a prevalent pool just because patients have not had anything that they could rely on, and most of the patients have deceased. But nonetheless, we are identifying in Japan, clearly, some children and even adults with pediatric onset HPP. But that might be one of the geographic differences that we've observed thus far. Between the U.S. and Germany, we see very similar dynamics in terms of the perinatal-, infantile- and juvenile-onset population, all of which are at different ages. And so, we're going to continue to extend our disease awareness and diagnostic initiatives. We're still going to be reaching out and looking to identify new patients quarter-over-quarter, and that is what the team has lined up and doing on a daily basis. Vikas?

[Vikas Sinha:]

Yeah, Yatin, thanks for asking the FX question. There's two parts to this question, right. One is what's the top-line impact, and what is, again, the bottom line impact, right? On the top line front, as we had previously guided, $120 million would be the impact going from 2015 to 2016 in our FX because we are hedged 50% of the stuff. The view today we have is, based on today's current exchange rate, that number would be much closer to $80 million impact for the year. So we saw $30 million already included in Q1 2015 over 2016. Q2, we are guiding more closer to $20 million, $25 million levels, and the remainder will be towards the second half. Definitely, we saw the advantage of $40 million plus coming in. That we have factored into the guidance. So the LatAm negative was compensated partially by this policy, right? Now, when it comes to expenses, we have kind of a natural hedge, but when foreign currency strengthens, it goes the other way around. That's why we talked about today that being on the upper end of our guidance, and hence, a very small impact will trickle down into the EPS. And that's why we guided, still keeping our guidance of $5.00 to $5.20 despite the Latin American weakness. Does that help?

[Yatin Suneja:]

(52

[David L. Hallal:]

Thank you. Greg?

[Operator:]

All right. Next we'll move to Josh Schimmer with Piper Jaffray.

[Joshua E. Schimmer:]

Okay. Thanks for taking the question and again, sorry to harp on Latin America like the others. But Vikas, just want to make sure that you're comfortable that this is not a harbinger of some kind of delayed reaction trouble in other oil-based economies, I guess, either in that region or more remote. And also, do you see an opportunity here to make some lemonade and maybe shift some of the ALXN1210 development program focus to Latin America during the time that they're not able to necessarily afford Soliris, they can always help with the development program of ALXN1210? Thanks.

[David L. Hallal:]

I mean, I'll just start on the second half of that, Josh. I think that we have said all along, we are developing our programs with urgency. I think we'll always look at the global platform in which we operate for the best and fastest and most high quality ways of identifying sites, opening them up and enrolling patients. And I think as evidenced from the more than 30 patients already enrolled and dosed in the ALXN1210 initial studies, we see a tremendous amount of excitement from investigators to innovate over and on top of Soliris with ALXN1210. So we'll be thoughtful about the global platform to enroll patients. Vikas?

[Vikas Sinha:]

Yeah. Josh, on the oil-based economies, we saw a little bit of an optimism going into Q2, primarily because the oil price is moving to $40 is highly correlated to some of these currencies, especially if you look at ruble, right? It moved from RUB 80 to RUB 62 now. It's a rapid move, because as the oil approach $40, and forecasted to go to $45 towards the year end. So there's some positive movement on that side. The issues on LatAm are actually one step more than that, which is a political side on top of the oil. So, at this stage, I think when we gave the guidance, when we did our FX improvement, some of these currencies like ruble are actually working in our favor right now. But on the other hand, when you look at LatAm, which is very unique.

[David L. Hallal:]

Thanks Josh.

[Joshua E. Schimmer:]

Thank you.

[David L. Hallal:]

Next question?

[Operator:]

Next from Goldman Sachs, we have Terence Flynn.

[Terence Flynn:]

Hi. Thanks for taking the question. I just was wondering on the Kanuma launch, it sounds like you are making some additional efforts there on the commercial side. Maybe some expansion, some changes. Just wondering if you could elaborate a little bit more there? And then what's the impetus to make those changes now versus maybe a little bit later in the year? Thanks.

[David L. Hallal:]

Yeah. Thanks, Terence. One of the things that Carsten and I have been talking about is, so we have the single metabolic field team which we expanded obviously ahead of the Kanuma launch and the Strensiq launch, right? So we felt like okay we are going to double up one single sales force, and they'd promote both disorders, and they're a common call point. As we talk about accelerating those efforts, it's largely in two ways, right? We said that we want to focus on reaching more target physicians, and then also, we want to really extend this new and improved diagnostic pathway. So what we are planning to do, as an overlay, with this one single unit is to allocate some dedicated diagnostic specialists to HPP and to LAL-D. Now, that will take some time for the team to recruit, train, deploy that group, should have an impact for us over time. But that would enable some dedicated diagnostic help above the single unified sales team.

[Terence Flynn:]

Okay. So it's not a Kanuma-focused effort, it's more for both Strensiq and Kanuma in terms of (56

[David L. Hallal:]

Well, yeah. I mean, it's a good question, Terence. And that – look, we see this very strong start to the Strensiq launch. And, yet, I think Carsten and I, and the team feel like we're only getting started. There is a tremendous opportunity to reach far more patients, right? So we feel like on both sides a dedicated diagnostic effort will actually enable us to reach more patients and extend our initiatives on both sides, right, into the strength of Strensiq, and into some of the inertia that we're breaking through on the LAL-D side to take a more targeted diagnostic pathway, targeted at pediatric specialists to the LAL-D community. So we feel like there is great upside with this modification on both sides of our business. And again I think that it's going to take some time to deploy the team but these are our plans.

[Terence Flynn:]

Okay. In terms of the pediatric specialists, how much do that broaden your footprint, I guess, in terms of when we think of target audience on a percentage basis?

[David L. Hallal:]

Carsten?

[Carsten Thiel:]

Terence, what our emphasis is really about is increasing the disease awareness, and in particular once physicians understand the devastating nature of the disease that they'd change from a few individual tests to routine testing, that is a key success factor in the launch right now. As you know, the DBS test is inexpensive and it's broadly available. But there's many, many misdiagnosed patients that are masked by other diseases. And so what David has outlined is really to increase this testing in the market dramatically. That's our key focus.

[David L. Hallal:]

And I think, Terence, just to cap that off, it doesn't necessarily mean a wider group of physicians. In fact, on the LAL-D side, we see it as slightly narrow, but I think we also see reach and frequency with those very enriched targets, it is the way to change the treatment patterns, and clearly what Carsten and the team are focused on. Thank you. Greg?

[Operator:]

All right. Ladies and gentlemen, at this point we have time for two more questions. Next, we'll move to Barclays. We have Geoff Meacham.

[Geoffrey Meacham:]

Okay. Great. Good morning, guys. Thanks for taking the question. Obviously, data dependent, just on myasthenia gravis, I wanted to ask you guys what the gating factors were for a filing? Is it possible that this could be a 2017 launch in the U.S., or is there a strategy perhaps to wait until the DGF data as well to sort of accelerate the package from that direction?

[David L. Hallal:]

Yeah. I think, it's again, pre-data. It's sort of early to comment on timing of submission and launch, but again I think that clearly, we're looking forward to data, and as you know to – based upon that data determine what our next steps would be. Geoff, I didn't – the DGF part of that, maybe I missed?

[Geoffrey Meacham:]

The DGF, so the data will also be back half of this year, what's required for that package just given the prior data that you guys have had in the graft space?

[Carsten Thiel:]

I think the same answer applies, Geoff, in terms of until we see the data that will dictate the submission package.

[Geoffrey Meacham:]

Thanks, guys.

[David L. Hallal:]

Thank you, Geoff. Last question?

[Operator:]

And our final question is from Robyn Karnauskas with Citi.

[Robyn Karnauskas:]

Hey, guys. Thanks for taking my question. And all right, so last math question, Vikas, because I'm struggling again, is this math right. So, the FX impact is less now by $40 million, so you lowered it by $40 million, and the 2% to 3% impact for LatAm means there is a $50 million to $75 million impact. So if you net-net the impacts $10 million to $35 million negative due to these factors, but your guidance drop was higher than that. So $50 million to $75 million for Soliris. Just help understand that discrepancy? Thank you.

[Vikas Sinha:]

So the way we talked about it, right? So the math is, not math is math, right, which you get it right and I get it right also. We just have to make sure that both are maths, add up to the same number. So when we say 2% to 3%, we also said $60 million to $90 million impact on LatAm. And so we also are guiding, first quarter was already $30 million in FX, right? And we are guiding closer to $80 million issue for the rest of the year. So you're left with $50 million to go, right?

[Robyn Karnauskas:]

Got it.

[Vikas Sinha:]

You got it?

[Robyn Karnauskas:]

Got it. I got it. Yeah, I got it.

[Vikas Sinha:]

Then I passed the exam.

[David L. Hallal:]

Thanks, Robyn.

[Operator:]

All right. And ladies and gentlemen, that being our final question, this does conclude today's conference. Thank you for your participation. You may now disconnect.