Alexion Pharmaceuticals, Inc.
Q3 2016 Earnings Call Transcript

Published: 27 Oct 2016

[Operator:]

Good day and welcome to the Alexion Pharmaceuticals Third Quarter 2016 Results Conference Call. Today's call is being recorded. For opening remarks and introductions, I would now like to turn the call over to Elena Ridloff, Vice President of Investor Relations. Please go ahead, ma'am.

[Elena H. Ridloff:]

Thank you, Sheila. Good morning, and thank you for joining us on today's call to discuss Alexion's performance for the third quarter of 2016. Today's call will be led by David Hallal, our CEO. David will start the call with an update on our corporate performance, and be joined by Vikas Sinha, our Chief Financial Officer; Carsten Thiel, our Chief Commercial Officer; Martin MacKay, our Global Head of R&D; and Julie O'Neill, our Head of Global Operations. You can access the webcast slides that will be presented on the call by going to the Events section of our Investor Relations page on our website. Before we begin, I will refer you to slide three. We will be making 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 the 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 and exclude certain GAAP items that we described in our press release issued this morning. Reconciliations of our GAAP to non-GAAP financial results and financial guidance are incorporated in the press release and have been updated to reflect our current non-GAAP tax definition. These adjusted financial measures are non-GAAP and should be considered in addition to, but not as a substitute for, the relevant information prepared in accordance with U.S. GAAP. Thank you. David?

[David L. Hallal:]

Thank you, Elena. In Q3, the global Alexion team delivered on our patient-centered objectives. Our commercial organization achieved total year-over-year revenue growth of 20% and volume growth of 23%, driven by the strength of our three highly innovative marketed therapies. First, Soliris continued to grow with a steady number of new patients with PNH and aHUS treated globally. Second, just four quarters in, Strensiq continues its robust launch and is an additional driver of growth. And third, Kanuma continues to progress in the U.S. and Germany, with new patients treated during the quarter. In Q3, our R&D organization made great strides with our lead programs. First, for eculizumab in refractory MG, we are very pleased to have announced that we plan to file regulatory submissions in both the U.S. and Europe in Q1 2017. Second, with ALXN1210, we are now initiating our PNH registration trial with once-every-eight-week dosing intervals. Patient enrollment in this registration trial will start in Q4. Third, we have also accelerated the initiation of our aHUS registration trial of ALXN1210 with the same every-eight-week dosing interval. Patient enrollment in this trial will also start in Q4. And fourth, we have commenced an ALXN1210 subcu program with dosing underway of a new formulation administered subcutaneously in healthy volunteers. Taking a closer look at our commercial performance, starting with Soliris. In Q3, we continued to identify and treat a consistently high number of newly diagnosed patients with PNH globally by executing our diagnostic initiatives with urgency. In aHUS, we once again served a consistently high number of new patients across our 50-country platform, and when adjusted for time for their respective approvals, we continue to believe that our opportunity to serve patients with aHUS is larger than that of PNH. As we look forward to our core Soliris business, we are confident that the majority of growth is in front of us, due to the combination of the high proportion of undiagnosed patients with PNH and the high incidence of aHUS, along with our successful programs to identify new patients with both diseases. Turning now to Strensiq, we are very pleased with our continued strong performance in Q3 as new patients with HPP started on treatment, both children as well as adults with pediatric onset disease. In the quarter, we continued to benefit from our highly successful HPP disease awareness and diagnostic initiatives, which have been underway for more than three years. These initiatives enabled us to identify patients prior to approval and are also leading to a steady identification of new patients with HPP. As we provide Strensiq to more patients in the U.S. and extend the global launch to more countries next year, we will continue to leverage our expertise in ultra-rare diseases to reach more patients with HPP. We expect Strensiq to continue to be a strong additional driver of growth in 2017 and beyond. And with Kanuma, we continue to make progress in the initial stage of our launch in the U.S. and Germany with new patients starting on treatment during the quarter. We are accelerating our efforts by leveraging our expertise in ultra-rare diseases to extend our LAL-D disease awareness and diagnostic pathway initiatives to a greater number of target physicians in order to reach more patients faster. Moving on to R&D, we are very pleased with the important progress we made in Q3 on eculizumab in refractory MG and ALXN1210. Starting with eculizumab in refractory MG, we have had positive in-person meetings with both the FDA and EMA to review the comprehensive data from the Phase 3 REGAIN study where 18 of 22 predefined endpoints and pre-specified sensitivity analyses achieved P values of less than 0.05. Based on these productive meetings, we now are planning to file regulatory submissions in both the U.S. and Europe in Q1 2017. As we progress our refractory MG program, I'd like to remind you that eculizumab has received orphan drug designation for the treatment of patients with MG in the U.S., EU, and Japan. We have strong intellectual property with Soliris with composition of matter patents into the next decade, as well as meaningful regulatory, data, and other orphan drug exclusivities extending through the end of this decade and well into the next. We continue to build and strengthen our global patent position for both Soliris and ALXN1210. As one example, in Q3 a new U.S. patent was issued for treating aHUS with Soliris that is valid until 2032. We expect additional patents relating to Soliris in the U.S., Europe, and other countries over the course of the next 12 to 18 months. In addition, our composition-of-matter patent for ALXN1210, which is in effect into 2035, is now issued in more than 40 countries. While we continue to serve an increasing number of patients with Soliris, we are working with urgency to build on the strong foundation to bring even more innovation to the ultra-rare disease communities. Today, we are very pleased to announce significant advancements in our broad ALXN1210 development program. First, we are initiating simultaneous PNH and aHUS registration studies of ALXN1210 with every-eight-week dosing. With this dosing schedule, patients would potentially be infused only six times per year, which we believe will have a meaningful benefit for patients, families and physicians, and enable even more patients to initiate treatment. And second, we have accelerated our ALXN1210 subcu program, with dosing of a new formulation underway in healthy volunteers. With Soliris, ALXN1210 and additional complement inhibitors in our portfolio, we are well-positioned to further extend our leadership in complement biology for many years to come. We continue to develop other highly innovative therapies, and in total 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 $799 million, an increase of 20% over Q3 2015, with volume growth of 23%. This year-over-year revenue growth was driven by the continued growth of Soliris across geographies, the strong launch of Strensiq in initial countries, and the early contribution from the Kanuma launch in the U.S. During the quarter we delivered a non-GAAP operating margin of 45%, up from 43% in the year ago quarter. We are also reporting non-GAAP EPS of $1.23 per diluted share. Turning briefly to our 2016 guidance, based on serving an increasing number of patients with Strensiq, we now expect total revenues to be at the upper end of our guidance of $3.05 billion to $3.1 billion. This reflects our prior Soliris revenue guidance of $2.835 billion to $2.875 billion, and an increase in our metabolic revenue guidance to $225 million to $235 million based on the continued strength of the Strensiq launch. 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 are pleased with our financial performance in Q3, driven by strong revenue and volume growth and continued financial discipline. Total revenues increased to $799 million or 20% above the year-ago quarter. This revenue growth was driven by a strong 23% increase in volume, partially offset by currency headwinds of 2.5% or $16 million compared to the year ago quarter. Soliris revenues were $729 million. Year-over-year volume growth was driven by continued global growth in PNH and aHUS, despite continued macroeconomic weakness in Latin America. Turning to Strensiq, our strong growth continues and we reported revenues of $61 million. In Q3, as in prior quarters, Strensiq revenues benefited from patients identified prior to approval. As we enter the second year of launch in U.S., we expect that the majority of patients newly starting on Strensiq will be newly diagnosed. Looking at Kanuma, we achieved revenues of $9 million, driven by our continued progress in diagnostic testing in the early stages of the launch in the U.S. and Germany. During the quarter we delivered a non-GAAP operating margin of 45%, up from 43% in the year-ago quarter. This year-over-year operating margin expansion was largely driven by our continued improvement in SG&A as a percentage of revenue, from approximately 27% in the year-ago quarter to 25% in the current quarter. We reported non-GAAP EPS of $1.23 per diluted share Turning to our 2016 guidance, based on our strong operating results, we now expect to be at the upper end of our prior revenue and non-GAAP EPS guidance. Specifically, I would like to highlight a few key points. Total revenue guidance reflects that we are reiterating our Soliris revenue guidance, which includes an initial small impact from ALXN1210 enrollment starting in the fourth quarter. We are increasing our metabolic revenue guidance to $225 million to $235 million, based on the strength of the Strensiq launch. Finally, we are continuing – we continue to forecast FX headwinds of $70 million to $80 million, net of our hedging activities for the full year. Turning to operating expenses, we now forecast our non-GAAP R&D expenses to be $680 million to $690 million, and our non-GAAP SG&A expenses to be $790 million to $810 million. These increases reflect acceleration of the Alexion 1210 programs, and additional investment in the global infrastructure to support the launches of Strensiq and Kanuma, as well as an increase in legal expenses. Despite these changes, we continue to expect R&D and SG&A as a percentage to sales to remain unchanged. And finally, with our ongoing financial discipline, we now expect our non-GAAP EPS for 2016 to be at the upper end of our range of $4.50 to $4.65. For other elements of our 2016 guidance, I refer you to our press release that we issued this morning. Looking ahead, as we continue to identify and serve a steady number of new patients with Soliris, we expect that patients' recruitment for our current and anticipated ALXN1210 trials, as well as other studies, will have $70 million to $110 million impact on Soliris revenues in 2017, which will be reflected in our 2017 guidance. With our growing in-line business and robust pipeline, we see long-term sustainable revenue growth through the end of this decade and beyond. We will continue to accelerate our operating margins to 48% to 49% in 2018 and beyond, through continued top-line growth and expense discipline. Turning now to our balance sheet and capital allocation, we ended the quarter with approximately $1.3 billion in cash, cash equivalents and marketable securities, and $3.3 billion in debt. Year-to-date, we have repurchased 3.1 million shares at a cost of $431 million. Since the authorization of our $1 billion share repurchase program last year, we have repurchased a total of 4.6 million shares and have $325 million remaining. Our strong financial position and future cash flows provide us with the flexibility to support our long-term capital allocation strategy and the continued growth of our organization. At this point, I'll turn the call over to Carsten for a look at our commercial operations. Carsten?

[Carsten Thiel:]

Thank you, Vikas. In Q3, our global commercial organization delivered a strong 20% increase in revenue and 23% volume growth year-over-year, driven by the continued growth of Soliris, the strong launch of Strensiq in initial countries, and the progression of the Kanuma launch in the U.S. and Germany. Starting with Soliris. In Q3, we grew our global business through the steady addition of new patients treated in the U.S., Europe, and Japan, despite ongoing delays in new patient starts and treatment interruptions in Latin America. In PNH, in Q3 as in prior years, we consistently identified a high number of newly diagnosed patients with PNH, even in the territories where we have been operating the longest, and we continue to see that the majority of patients starting on Soliris are also newly diagnosed. Given that one-third of undiagnosed and untreated patients with PNH will die within five years, we aim to deliver the benefits of Soliris to even more patients. Our nine-year track record of consistently identifying a similar number of new patients with PNH on a quarterly basis across our 50-country platform affirms our view that globally, the majority of patients with PNH have yet to receive an accurate diagnosis, let alone commence appropriate treatment. In aHUS, we also continue to observe a consistent number of new patients starting on Soliris treatment. Matched for time, now five years from their respective approvals in the U.S., there are more patients actively receiving Soliris for aHUS than there have been for PNH. And importantly, we are seeing the same trends globally, supporting our view that the opportunity to serve patients with aHUS is larger than that of PNH. Given the higher incidence of aHUS compared to PNH, combined with improvements we continue to make to our diagnostic initiatives, we expect to serve an increasing number of patients with aHUS over time. Turning now to Strensiq. We are very pleased with the success of our launch thus far. In just four quarters, we are achieving strong results as we serve an increasing number of patients with pediatric-onset HPP. In Q3, as in prior quarters, our Strensiq performance benefited from patients that had been identified prior to approval. As we enter the second year of launch, we expect that the majority of patients newly starting on Strensiq will be newly diagnosed. To serve more patients, we will continue extending our disease education efforts, focusing on the morbidities and high mortality of HPP. These efforts underscore the natural history of the disease, whereby 71% of infants die by three years of age. The few infants who survive and those with juvenile onset HPP face lifelong debilitating consequences, including recurrent and non-healing fractures, impeded growth, disabling pain, and the need for walkers or wheelchairs. We are leveraging our strong labels, which include a major survival benefit, substantial bone healing, and improvements in growth and mobility to serve more patients with pediatric onset HPP. As we apply our expertise, physicians are increasingly recognizing the role of Strensiq in treating the underlying cause of the disease by replacing the missing vital enzyme. As we look to expand the global launch of Strensiq, I would like to highlight our progress with the reimbursement processes in key countries. In Germany, we have reached a funding agreement that provides access to Strensiq to all patients with pediatric-onset HPP. In France, we are pleased to have received strong recognition from the French government with a very high ASMR 2 rating, reflective of the high innovation and major clinical impact of Strensiq for patients with HPP. In England, NICE recognized the life-changing clinical benefits of Strensiq for children with HPP. We continue to work with NICE and NHS England to reach a funding solution under the proposed managed access agreement that ensures that all patients with HPP who can benefit from Strensiq will have access to Strensiq. And in Canada, the common drug review recommendation is to list Strensiq for patients with pediatric onset HPP. Turning now to Kanuma, where we continue to make progress on our launch in the U.S. and Germany. We're extending our LAL-D disease awareness and diagnostic pathway initiatives to a greater number of target physicians so that patients with LAL-D receive a rapid and accurate diagnosis. Our newly deployed specialty diagnostic team is observing an increase in testing with our enhanced diagnostic pathway, and more physicians are now adding LAL-D testing to their routine diagnostic workup. We expect these programs to accelerate the diagnosis and treatment of children with LAL-D over time. In terms of clinical data, new evidence demonstrating the efficacy of Kanuma will be presented this quarter. At the AASLD congress in early November, researchers will share new data from the Phase 3 ARISE trial which demonstrate that in a cohort of children and adults with LAL-D, long-term Kanuma treatment resulted in a reduction of liver fibrosis. This is critical to the 50% of children and adults with LAL-D progressive fibrosis, cirrhosis or liver transplant within just three years of onset of disease. In addition to these new data, we have also initiated a non-interventional study called DETECT to evaluate the prevalence of LAL-D in pediatric patients with a specific high-risk clinical profile. As we expand our launch beyond the U.S., we are pleased to have reached a funding agreement in Germany that provides all patients with the LAL-D with access to Kanuma. For both Strensiq and Kanuma, we will continue to progress the in-country funding processes for additional European countries in the remainder of 2016 and into 2017. Building on our strong performance in Q3, and as we look to the remainder of the year, we are confident that our commercial organization will deliver continued growth for Soliris in PNH and aHUS, execute on the strong launch of Strensiq to serve more patients with HPP, and identify more patients with LAL-D who can benefit from Kanuma. Now I will turn the call over to Martin, who will discuss our pipeline programs. Martin?

[Martin MacKay:]

Thank you, Carsten. In Q3, we achieved major milestones to advance our robust rare disease pipeline. Starting with our Phase 3 eculizumab program in refractory generalized myasthenia gravis, this is an ultra-rare and debilitating complement-mediated disease in which patients have largely exhausted conventional therapy and continue to suffer profound muscle weakness throughout the body, resulting in slurred speech, impaired swallowing and choking, double vision, upper and lower extremity weakness, disabling fatigue, shortness of breath due to respiratory muscle weakness, and episodes of respiratory failure. We have had positive in-person meetings with the FDA and EMA where we reviewed the data from the Phase 3 REGAIN study, which was a randomized double-blind placebo-controlled multicenter trial that enrolled 125 patients. The robust dataset demonstrated a magnitude of effect of eculizumab in refractory MG patients across four separate validated scales of disease severity. Importantly, 18 of 22 predefined endpoints and pre-specified analyses in the study, based on the primary and five secondary endpoints, achieved P values of less than 0.05. Based upon the strength of the data and our positive meetings with the FDA and EMA, we now plan to file in both the U.S. and Europe in the first quarter of 2017. Also in urology, the Phase 3 PREVENT study and Relapsing NMOSD is ongoing, with data expected in 2017. And in transplant, we are on track to announce data from the Phase 3 trial of eculizumab in DGF this quarter. With more than 20 years of complement inhibitor discovery and development expertise, we are committed to bringing even higher levels of innovation in the treatment of patients with complement-mediated diseases. We are very pleased to have accelerated our development program for ALXN1210, our longer acting anti-C5 antibody with a half-life of 42 days, which leverages the only proven modality for safe, immediate complete, and sustained C5 inhibition. As announced this morning, we have initiated simultaneous registration trials of ALXN1210 in complement inhibitor treatment-naïve patients with PNH and atypical aHUS. Patients in both trials will be dosed every eight weeks based on three weight cohorts. I would like to review some key points of the studies. First, the PNH study will be a Phase III open-label randomized multicenter 26-week study of ALXN1210 versus eculizumab in 214 patients. One of the co-primary endpoints is the normalization of LDH levels, a measure of complement-mediated hemolysis which is central to the morbidities and mortality of PNH. The other co-primary endpoint is the percentage of patients who achieve transfusion avoidance. These endpoints reflect the high bar we have established with Soliris. Second, we accelerated the ALXN1210 registration program for atypical HUS, and are initiating a Phase III open-label single-arm study in 55 adolescent and adult patients. The primary endpoint is complete thrombotic microangiopathy response at 26 weeks, which also reflects the high bar established with Soliris in atypical HUS. Third, we plan to initiate a Phase III trial of ALXN1210 in pediatric patients with atypical HUS in 2017. These robust registration studies have clinically meaningful endpoints which reflect the views of regulators. We look forward to enrolling patients into the ALXN1210 registration studies and continue to target the first approval in 2018. In addition to the progress with the registration trials, we are pleased to have accelerated the development of our ALXN1210 subcutaneous program to explore a new formulation with dosing underway in healthy volunteers. Turning to ALXN1007, our novel anti-inflammatory antibody targeting complement protein C5a, we continue to progress our Phase 2 study to evaluate higher dosing of ALXN1007 in patients with gastrointestinal graft-versus-host disease, or GI-GVHD, a severe and life-threatening rare auto-immune disease that can occur as a complication of stem cell or bone marrow transplantations. The European commission and the FDA have granted orphan drug designation to ALXN1007 for the treatment of patients with GVHD. With Soliris, ALXN1210, ALXN1007, and additional complement inhibitors in our portfolio, we are well positioned to extend our leadership in complement biology. Moving to our cPMP replacement therapy for patients with Molybdenum Cofactor Deficiency, or MoCD Type A, a rapidly progressing lethal disease afflicting newborns, enrollment is ongoing in a pivotal study to evaluate the efficacy and safety of ALXN1101 in neonates with MoCD Type A. Turning now to SBC-103, a recombinant form of the NAGLU enzyme which is administered intravenously for patients with mucopolysaccharidosis IIIB, or MPS IIIB, a rare and devastating disorder with no available treatments. We have completed the planned dose escalation in our Phase 1/2 trial, with all patients now randomized to either a 5 milligram per kilogram or 10 milligram per kilogram dose, and expect to present additional SBC-103 data next year. Beyond our current clinical programs, the Leukemia and Lymphoma Society announced last week a multi-arm acute myeloid leukemia study referred to as the BEAT AML Master Trial, evaluating samalizumab, or ALXN6000, as well as other potential therapies for the treatment of AML. Samalizumab is the first-in-class immunomodulatory humanized monoclonal antibody that blocks CD200, a key immune checkpoint protein expressed in both hematologic and solid malignancies. Samalizumab may have a role as a targeted cancer therapy to a small subset of patients that have limited treatment options. In addition to Samalizumab, we are also progressing our preclinical pipeline of approximately 30 programs. We are excited about the multiple milestones in 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. In Q3, our results reflect the strength of our three highly innovative marketed therapies and we are confident we will continue to grow our business to serve more patients with PNH, aHUS, HPP and LAL-D. In addition, we made great strides in our lead R&D programs in Q3 and are well positioned to deliver on our ambitious R&D objectives as we progress the eculizumab and refractory MG and ALXN1210 programs. As always we thank our talented employees for a strong quarter as we achieved our ambitious goals, and for their dedication to our mission as we continue to work to transform the lives of patients around the world. Thank you. Now let's open the line for questions. Operator?

[Operator:]

We will take our first question from Eric Schmidt of Cowen & Co. Please go ahead, sir. We will take our next question from Anupam Rama. Please go ahead, sir.

[Anupam Rama:]

Hey, guys. Thanks so much for taking the question. Congrats on all the progress on ALXN1210. I guess we were little surprised that there was no switch study incorporated into the registration path for ALXN1210 here. Can you talk about the decision there, and the regulatory feedback on a switch study, and how important do you think that that that sort of dynamic is assessed before going to the market? Thanks so much.

[David L. Hallal:]

Thanks, Anupam. Actually, the program outlined today by both Martin and I, actually take that into consideration. Martin, do you want to provide the specifics?

[Martin MacKay:]

Just briefly. Thank you, David. As you may imagine, Anupam, the decisions that went into selecting the dose and the interval and the type of study – we have almost 40 patients with ALXN1210, so we have that deal of empiric data, which helps inform both the dose and interval. We also have a wealth of real world experience with eculizumab. And of course, and not surprisingly, pharmacokinetic and pharmacodynamic and modeling data to hand now. And last but not least, discussions and feedback with regulators, and hence the trails that we've come up with. Now, in terms of the treatment-naive patients and – with PNH with eculizumab as a competitor, after the 26 week patients – patients will be switched from eculizumab. So that will start to give us data, and then as we progress the overall ALXN1210 program, we will discuss those – the progress as we go along.

[David L. Hallal:]

So Anupam, with a target of 214 patients enrolled for the eculizumab arm to then be switched to ALXN1210 into the extension trials, that would be data of course that we would be gathering, and would be included in this program.

[Anupam Rama:]

Great. Thanks so much for taking our question.

[Operator:]

We will take our next question from Ying Huang of Bank of America. Please go ahead.

[Ying Huang:]

Hi, good morning. Congrats on all the progress as well from me. I have a couple of questions, maybe for Martin. First of all, can you tell us why you're running a single-arm trial for ALXN1210 in aHUS, versus active control trial for PNH? And then secondly, I was just wondering, given the half-life of 42 days for ALXN1210, can you elaborate a little bit more why you're confident you can bring IV every eight week formulation into the Phase III? Thank you.

[David L. Hallal:]

Martin?

[Martin MacKay:]

Yeah. Thank you, Ying. A couple of points first of all, if I break your question up into the two aspects. In terms of atypical HUS, we have been able to really use the empiric data that we have from the PNH study to date, the 40 patients, with our modeling et cetera. That's helped to inform the fact that it'll be single arm. And then, just as you may imagine, the way the atypical HUS presents, it's a much more difficult study to run with a competitor arm. So putting those two together, the competitor study with eculizumab, and then the single arm with atypical HUS. And then in terms of the eight weeks, I'd really refer back to some of the things I said with Anupam. A number of things have gone into the decision here to choose the eight weeks and also the dosage, and it's the 40 patient data that we have to date with ALXN1210; that certainly helped inform the real world experience we've been able to bring to bear on those studies, and the modeling data, extensive pharmacokinetic and pharmacodynamic. And then the feedback from regulators. As I was saying, putting those four things together very much informs both the dose and the dosing interval.

[David L. Hallal:]

So Ying, in the Phase II programs, we've got that empiric data on eight weeks, and within that Phase II program, we continue to evaluate dosing intervals beyond eight weeks, which is also important as it relates to ALXN1210. And just as a reminder, we would expect with aHUS, where with eculizumab we also ran open-label trials, that the very high bar that was established around complete TMA response with eculizumab would be an extremely important comparator to our own ALXN1210 single-arm trial. So it's important to note, and then the difference from our eculizumab PNH pivotal program, where at that time there was a comparison with placebo, at this point, ALXN1210 is going to be compared to the very high bar of eculizumab in that setting.

[Ying Huang:]

Thank you, David.

[Operator:]

We will take our next question from Eric Schmidt of Cowen. Please go ahead, sir.

[Eric Schmidt, Ph.D.:]

Hi, can you hear me?

[David L. Hallal:]

Yes. Now we can.

[Eric Schmidt, Ph.D.:]

I'm sorry about that. Yeah. Sorry about that. Just sticking with the ALXN1210 theme, David, can you disclose the infusion time for the IV and the volume for the subcu? And then in terms of the costs, the (36

[David L. Hallal:]

Sure. I'll start. As it relates to the eight-week dosing interval, we anticipate in the trials that the infusion time would be approximately two hours. As it relates to the subcu formulation, we aren't necessarily disclosing the new formulation, which is in subcu today. But being in Phase 1, we will evaluate, just as we did the current ALXN1210 formulation that is in Phase III trials, we will evaluate what we see with PK/PD in this initial Phase 1 trial. And so dosing is underway in those healthy subjects. But we do think the new formulation is quite important in general for the overall broad ALXN1210 program. For the impact next year on the recruitment in the trials, Vikas?

[Vikas Sinha:]

Yes. So Eric, so we provided a range of $70 million to $110 million. And it's a mix of our internal programs, and we've also tried to take some guess around what others might be doing.

[Eric Schmidt, Ph.D.:]

Thank you.

[Operator:]

We will take our next question from Chris Raymond of Raymond James. Please go ahead.

[Christopher Raymond:]

Hey, thanks. So you guys have talked, I think in the past, about ALXN1210 as maybe being more of an offensive program than just sort of a defensive program, with respect to competitors. And specifically, I think you talked about opportunity to expand the market, maybe reaching patients in areas that the Soliris format, for example, might not necessarily work. Can you maybe quantify exactly what you're talking about there, in terms of how or how many patients we might be talking about? And then maybe an extension of that, can you also talk commercially how you envision the subcu format co-existing with the every-eight-week ALXN1210 formulation? Are we talking about separate patients or could this be something where perhaps a patient kind of toggles back and forth? That would be great. Thanks.

[David L. Hallal:]

Thanks, Chris. So – yeah, first, what we know very well from our nearly 10 years of serving patients with PNH, and now exceeding five years with aHUS, is that as you look at both the patients who would initiate treatment, and then of course, these are chronic diseases that require chronic treatment. What we have come to certainly understand from the medical community and from the patients that we serve is that some make decisions, despite the life-threatening illness that they have, to try to forgo treatment, and try to delay treatment,, or perhaps even discontinue treatment earlier than one would with a life-threatening disease. And so when we think about an eight-week interval, whereby patients would be visiting their hospital or their clinic, and of course, there's also home infusion available as well, we're talking about six infusions a year, which we see as being a meaningful difference in that decision between patients and physicians on undertaking treatment, and remaining on treatment, frankly. And across our 50-country platform, we do not take for granted that a visit to a clinic is something that is simple or a visit from a home infusion agency is simple. And then so to meaningfully reduce that event in and of itself of the infusion, we see as being an opportunity to reach more patients. And of course we believe the majority of PNH patients are still in front of us, and there is a still a very high incidence of aHUS, and we believe that we can reach many more patients that present with complement-mediated TMA that may not be served today. So that's on the offense part of this. As it relates to how would these two coexist, look, I think that we have broad plans with ALXN1210 to serve a variety of different medical specialties, and most importantly patients with a variety of different complement-mediated diseases. And so we've always said we wanted to provide as many of the highest innovation treatment options to patients as they possibly could have, that meets with their objectives and their lifestyle, to effectively and safely treat their life-threatening complement-mediated disease. And that's how we see it all fitting together at this point.

[Christopher Raymond:]

Okay. Thank you.

[Operator:]

We'll take our next question from Matthew Harrison of Morgan Stanley. Please go ahead.

[Matthew K. Harrison:]

Great. Thanks very much for taking the question. I'm sorry keep harping on ALXN1210, but I think that's where the bulk of the questions will be anyway. Could I ask a two-parter here? So in the study design here versus Soliris for PNH, I'm wondering if there's the possibility to demonstrate more differentiation versus Soliris, given that we know that sometimes patients require higher doses of Soliris during the induction phase, and you're obviously going to give a large induction dose here with ALXN1210? Is that something you're going to look at, and is that the potential where we could think about maybe even you demonstrating superiority versus Soliris? And then just quickly on subcu, can you talk about the range of duration that you're considering, in terms of weekly or daily or bi-weekly, what kind of injections you might be looking at in your studies?

[David L. Hallal:]

So, Matt, I'll take the second question first, because I think that's a quick one. And then Martin can discuss the setup for non-inferiority or more. As it relates to the subcu program with this new high-concentration formulation, look, we're in – we have dosing underway in healthy volunteers. I think it's just too early to tell. And as you know, when we first reported on the ALXN1210 healthy volunteer studies, we were very careful not to lean too far forward, and to just understand what we were learning from those healthy volunteer Phase 1 studies. And so we'd like to remain – at this point, not get out over our skis, but we'll see what we see with healthy volunteers with the high-concentration formulation. Martin, on the registration program?

[Martin MacKay:]

Yeah. Thank you, Matt. As David and I have both articulated, Soliris really sets a very high bar in terms of both safety and efficacy. And as we look to come up with treatment options that are safe, immediate, complete and sustained, that's how've based this trial with ALXN1210 against Soliris, and why it's a non-inferiority study. As the study progresses, of course we'll look at the data across the two co-primary endpoints for PNH, the one primary endpoint for atypical HUS, and a number of important secondary endpoints as we run those studies, and more information will become available then.

[Matthew K. Harrison:]

Thank you.

[Operator:]

We will take our next question from Geoffrey C. Porges of Leerink Partners. Please go ahead.

[Geoffrey C. Porges:]

Thanks very much for the question, I'll just change direction and focus a little bit on MG. Martin, you've now had discussions with regulators – and congratulations on all the progress both with that and ALXN1210 – but could you give us a sense of the tone that you received from regulators, and some of their feedback on the MG program? And then, will you apply for some sort of accelerated review in both the main jurisdictions? I mean, perhaps you could also just give us a sense of, right now, your assessment of the patient population that may be out there within the MG overall patient population in the developed markets for the label that you'll be applying for? Thanks.

[David L. Hallal:]

Thanks, Geoff. So Martin, and then Carsten.

[Martin MacKay:]

Yeah. Thank you very much, Geoff, again. We never go into details on the exact nature of the discussions with regulators, but suffice it to say as we, both David and I, articulate, these were positive in-person meetings that we held with them. And we were confident going in because of the strength of our data, and again just to remind you of the 18 of the 22 predefined and pre-specified analysis had P-values of less than 0.05. This was a very well designed study with 125 patients, and of course we have the extension study ongoing with meaningful endpoints that we had in the study. In terms of the patient population, the refractory patient population, as I mentioned, is a really severe one. And although our inclusion criteria that you'll remember was at two, refractory to two treatments, whether it was two ISTs or one IST and some other intervention, the truth was that well over 50% had three or more failed treatments. And so this is a population that really have exhausted treatment, and again looking at the positive data that we saw with eculizumab in this patient population gives us that confidence.

[David L. Hallal:]

Yeah, Geoff. I think as Martin and I discussed, when we disclosed the results, we felt like the data was set up for us to have constructive dialogue with regulators. And in those in-person meetings, what we anticipated is we could have those destruct – constructive discussions, and we were pleased really with the positive outcome of those meetings, where we now are planning to file in Q1 of 2017. So the important thing is the data, and it's extremely strong, and it was a great setup to have those discussions with the FDA and EMA. Regarding the patient population I think you might have like – sort of like how do we think about the marketplace, and Carsten, do you want to touch on that?

[Carsten Thiel:]

Yeah. Geoff, so when we look at the patient population that we are trying to address here is a small number in comparison to the total MG patient population. First, I think you've got a subset that have generalized MG, then you need – we are looking at those patients who have acetylcholine receptor positive, and the refractory population that Martin just touched on, we think – and it's early days, but we think this is approximately 10% of that population.

[David L. Hallal:]

And then just a final point – yeah. Thank you, Carsten. And then the final point, Geoff, the team is working with urgency to file in Q1 2017. And of course it's early to comment on the pathway, whether or not accelerated or not, we just – it's just too early to comment.

[Geoffrey C. Porges:]

Okay.

[David L. Hallal:]

Thank you.

[Geoffrey C. Porges:]

Thanks very much.

[David L. Hallal:]

Yeah.

[Operator:]

We will take our next question from Yatin Suneja from SunTrust. Please go ahead.

[Yatin Suneja:]

Good morning, guys. Thank you for taking my question. So there are competitors out there that are developing a subcutaneous formulation, and we notice that they're not going for the aHUS indication. I mean, in your sense, is it because of – because they are targeting different modality, or is it because formulation is an issue in this particular indication, and how do you think about that? And then just one more. Things in Latin America haven't improved much, so could you use that territory to somehow enroll more patients on the pivotal trials? What is your view there? Thank you.

[David L. Hallal:]

Yeah. Just – just very quickly, I'll take the second part, and then I'll back into the first part of the question. As Martin mentioned, these are multinational trials. Just as we've conducted our broad eculizumab programs, we would expect to be enrolling patients around the world, so – and we have an extremely clear understanding of the dynamics of the investigators and the physician community that is – that are managing these patients, which are very helpful for us, when we think about where we're going to be enrolling patients. So that's pretty important. As it relates to other companies, I really couldn't comment on what they do and why they do it. What I can comment on is what we do and why we do it. And when I look at PNH and aHUS together, these are severe ultra-rare devastating diseases, PNH a five-year death rate of 35%, and with eculizumab, what has been seen with investigators, is now an expectation of near-normal life spans. And with aHUS, where half of patients either die, progress to ESRD or have permanent renal damage just within 12 months after diagnosis, we see with eculizumab 80% of those patients that were on dialysis before receiving eculizumab, were able to eliminate dialysis. Those are the benefits we're looking to provide, and we continue to look to provide with Soliris today. Hopefully ALXN1210 down the line as we recruit these trials with urgency.

[Yatin Suneja:]

Okay. Thank you guys. Congrats on all the progress.

[David L. Hallal:]

Thank you.

[Operator:]

Our next question comes from Alethia Young of Credit Suisse. Please go ahead. Alethia Young - Credit Suisse Securities (USA) LLC (Broker) Hey, guys. Thanks for taking my questions. Congrats on the quarter and all the progress. I guess just kind of a mix of one, on the ALXN1210 data, will you be presenting the 40-patient dataset this year, or next year, or not at all? And then just a little bit on myasthenia gravis as it relates to Europe versus the U.S., do you get a sense that there's a difference in how the regulators look at, like, the data package you have?

[David L. Hallal:]

Yeah, I'll take the first part, Alethia, and then Martin can talk about the in-person meetings with the FDA and EMA on refractory MG. Our Phase 2 studies, as you know, we've enrolled nearly 40 patients. And within multiple fixed-dose in cohorts, we've looked at a variety of different intervals, including eight weeks, so we have that empiric data; including intervals beyond eight weeks, where we continue to evaluate our progress. So we've had patients through a variety of different intervals. I think what you're likely to see this year at ASH is longer-term data on the initial program that was really looking at a dose-finding study in patients. So that relates to the patients that we began to report on at EHA, but longer-term data, that again, helped to support our decision on the dose and the interval. And then I would just say that one of the things we need to be thoughtful about moving forward in this current environment, competitive environment, is just, we'll be very thoughtful about where and when we present our data. We just think that's important for us to think through, and so we'll provide you updates as we progress. As it relates, Martin, to MG and FDA/EMA?

[Martin MacKay:]

Yeah. Thanks, David, and thank you, Alethia. The question on the differences between the U.S. and Europe, I would say, as we articulated, these were in-person meetings and there were many more similarities in both places, rather than differences. And not surprisingly, the similarities were based on the strength of the data that we were able to progress. And as we said early, now we have urgency to file in both the U.S. and Europe in the first quarter of next year.

[David L. Hallal:]

I think those similarities are really important. Thank you.

[Operator:]

We will take our next question from Josh Schimmer of Piper Jaffray. Please go ahead.

[Joshua E. Schimmer, M.D.:]

Right. Thanks for taking my question. What do you envision the path forward is for the ALXN1210 subcutaneous formulation? Is that going to need its own separate Phase 3 trial, or can you run some PK/PD perching (55

[David L. Hallal:]

Well, Martin, myself, and the team think about that often. And again, we don't want to get ahead of ourselves. We recognize dosing is now underway with this new high-concentration formulation in healthy volunteers. And I think we are certainly evaluating broadly with the fact that it is the same molecule as the program that we have; nearly 40 patients of experience with PNH, we've now announced a PNH trial that we will enroll more than 200 patients, and an aHUS program, initially in adolescents and adults, will enroll more than 50 patients, and then the healthy volunteer data. All of that data, the totality of that data, is going to help us, along with the healthy volunteer information that we gather, is going to help inform what that path will look like.

[Joshua E. Schimmer, M.D.:]

Okay. Thank you.

[David L. Hallal:]

Thanks.

[Operator:]

We will take our next question from Robyn Karnauskas of Citi. Please go ahead.

[Robyn Karnauskas:]

Thanks. Two quick ones. So do you still believe that the every-other-month dose, or every-week dose, is that still one dose for all problems (56

[David L. Hallal:]

Yeah. Thanks, Robyn. They're both very good questions. So as it relates to the dosing interval, yes, we're looking at a single loading dose, and then two weeks later, patients will begin to receive an eight-week dosing interval. Now, for patients that weigh more than 40 kilograms there will be three weight cohorts, similar but slightly different doses. All, again, as Martin said, that was determined with our empiric data, all of our PK/PD modeling, our 20 years of experience, and discussions with the regulators, with the goal of achieving and giving patients the opportunity to obtain immediate, complete, and sustained inhibition of C-5 throughout the interval. That is what provides patients the opportunity for the best outcome. Martin, do you want to discuss the trial enrollment, and just what gives us the confidence to enroll these patients quickly?

[Martin MacKay:]

Yeah. Thank you, Robyn. It's really an excellent question, and you can imagine the priority that we're putting on this program, really across Alexion and certainly within Research and Development. I mean, I would go to the experience piece again. We have tremendous experience with investigators globally, in both PNH and in atypical HUS, and we're going to move this program, as I said, with urgency, to be able to recruit those patients into both studies.

[David L. Hallal:]

Yeah. I think, Robyn, the visibility of the marketplace over the last decade is very helpful for us in understanding where those patients may be, and where those investigators are, that may be really ideal for these registration studies.

[Robyn Karnauskas:]

Great. Thank you.

[David L. Hallal:]

Thanks.

[Operator:]

We have time for one final question. We will now hear from Geoff Meacham of Barclays. Please go ahead.

[Unknown Speaker:]

Hey, guys. This is Evan (59

[David L. Hallal:]

Yeah. Just as it relates to ALXN1210, and Martin alluded to it, look, the first major attribute that is – that's differentiating is of course from our own labs and our own scientists, who designed ALXN1210, we were looking to help patients achieve a longer dosing interval. And we are very pleased today to be announcing an every-eight-week dosing interval. At the same time, prior to enrolling the Phase 3 data and evaluating the Phase 3 data, we wouldn't want to comment on the additional benefits that one might see with ALXN1210. But that is something that, certainly those other attributes and characteristics, we will learn over time as we move that program forward. All with the objective to provide patients with the optimal outcome with the highest level of innovation from a compliment inhibitor. Carsten, Kanuma?

[Carsten Thiel:]

Yeah. So, Evan (1

[David L. Hallal:]

Thank you.

[Unknown Speaker:]

Great.

[David L. Hallal:]

Thanks.

[Operator:]

That is all the time that we have for today. This concludes today's conference. Thank you for your participation. You may now disconnect.