Alexion Pharmaceuticals, Inc.
Q2 2012 Earnings Call Transcript

Published: 25 Jul 2012

[Operator:]

Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Alexion Pharmaceuticals Earnings Conference Call. (Operator Instructions) I would now like to turn the presentation over to your host for today, Dr. Bell. Please proceed, sir.

[Lenny Bell:]

Thank you, operator, and good morning. Thank you for joining us on today’s call to discuss Alexion’s performance for the second quarter of 2012. With me on the call this morning are members of Alexion management

[Tom Dubin:]

Thanks, Lenny. During this call, we may make forward-looking statements, such as expected financial results, medical benefits, regulatory milestones and commercial potential of Soliris, asfotase alfa and our other product candidates globally; plans for development and clinical trials of Soliris, asfotase alfa and our other product candidates; and operations reimbursement, price approval and funding processes in different countries. Forward-looking statements are subject to factors that may cause our results and plans to differ from those expected, including decisions of regulatory authorities regarding approval or limitations on the marketing of Soliris and our product candidates for various indications; the possibility that results of clinical trials are not predictive of the safety and efficacy of Soliris or our product candidates from broader patient populations in the disease studied or in other diseases; the risk that third parties won’t agree to license any necessary intellectual property to us on reasonable terms or at all; the possibility that initial results of commercialization are not predictive of future results; the risk that third party payers will not or will not continue to reimburse for the use of Soliris at acceptable rates or at all; and a variety of other risks set forth from time to time in our filings with the SEC, including our 10-Q for the three months March 31, 2012. We do not intend to update any of these forward-looking statements after this call, except when the duty arises under law. I’d like to remind you that our reported non-GAAP numbers conform to US GAAP except in three respects. First, our non-GAAP numbers exclude share-based compensation. Second, we adjust for tax items associated with utilization of our US net operating losses and the Q2 tax expense related to acquisition structuring. And third, we also exclude costs associated with acquisitions. A reconciliation of our GAAP to non-GAAP results is included in the press release we issued this morning. Thank you. Lenny?

[Lenny Bell:]

Thank you very much, Tom. During the second quarter, we made steady progress across our strategic objectives for the year, as we continue to expand our initiatives to develop and deliver life-transforming therapies for patients with severe and ultra-rare disorders. Our development and commercial teams performed solidly in three key areas during the quarter. First, we again provided Soliris to a substantial number of new patients with PNH. Second, we are very pleased with the ongoing launch in aHUS as we continue to serve an increasing number of patients with Soliris. And finally, we continue to advance our eight lead development programs, comprising the most robust pipeline in our company’s history. I’d like to start with a review of our operations in the United States. With regard to aHUS during Q2, we made significant progress in serving an increasing number of patients. Our field team continued to expand our aHUS disease education programs to both hematologists and nephrologists, resulting in a meaningful increase in the number of aHUS patients who initiated treatment with Soliris. Although we expect the uptake of Soliris in aHUS to continue to be limited by the relatively low prevalence to the disease, we are nonetheless encouraged by the progress that we are making as we identify and serve an increasing number children and adults with this severe and life-threatening disorder. Turning to PNH. Our expanded presence among hematologists again resulted in a growing positive impact on patient care. We continued to observe that as more patients are being tested, those who are diagnosed with PNH are also starting on Soliris rapidly, reflecting their physician’s understanding of the life-threatening severity of PNH and the role of Soliris to transform their patient’s lives. In our PNH operations beyond the United States, our quarter-on-quarter growth reflects the addition of a steady number of new Soliris patients with PNH in our core country Southern Europe, as well as in Japan. Looking beyond these core territories, and as noted in previous calls, we have been building our operations in two additional major countries, Turkey and Brazil. As a result of initial deployment of our field teams, during Q2 Soliris treatment was initiated in a significant number of previously diagnosed PNH patients who had been awaiting therapy with a subsequent one-time positive impact on our results. In line with our experience in other countries, we now expect that following the one-time addition of these initial groups of patients, our ongoing diagnostic initiatives in Turkey and Brazil will result in a more modest rate of patient identification and treatment initiation. In our aHUS operations outside the United States, in Germany, we are at the very earliest stages of disease education, with treatment commencing in the anticipated modest number of initial patients. More broadly, we are continuing our disease education initiatives to prepare for our aHUS launches across the larger EU countries when reimbursement processes are completed late this year and in 2013. David will provide more detail on our commercial initiatives later in the call. Turning to our development pipeline. Our selection of pipeline candidates and disease settings is guided by our focus on developing highly innovative treatments for patients with severe and ultra-rare disorders. Within this filter, we further note that each of our eight lead development programs involve the highly innovative therapy with strong potential to provide a life-transforming impact to patients. For example, in published data from investigational trials, asfotase alfa has demonstrated dramatic clinical benefits in study patients with hypophosphatasia or HPP. Separately, interim data presented from a large investigational trial show that Soliris was associated with substantial clinical improvements in study patients suffering from STEC-HUS. And in another of our lead programs, we look forward to the expected presentation of data from the NMO clinical trial later this year. Steve will provide an update on our eight lead development programs involving Soliris, and our four other highly innovative therapeutic candidates. Importantly, given their various stages of development, our lead pipeline programs have the potential to make important contributions to our organization well into the next decade. Our expected launch dates in new indications are also well aligned with the build-out of our global operations platform. During Q2, and as a direct result of the growth we have achieved through serving patients with severe and ultra-rare disorders, Alexion was added to the S&P 500 Index of leading companies. In conjunction with this addition, we structure an equity offering in line with our conservative approach to corporate finance. The offering achieved its goal of strengthening our balance sheet, which we believe is particularly prudent in light of the overall macroeconomic environment. Turning to our financial performance. Revenues in Q2 were $274.7 million, an increase of 48% compared to Q2 2011. Q2 2012 results included recognition of approximately $3.3 million in revenues related to shipments of Soliris from an earlier period in 2011. By serving an increasing number of patients while maintaining rigorous financial control, we achieved Q2 2012 non-GAAP net income of $0.47 per share or $94.1 million, a 66% increase year-over-year. Looking forward, we recognize the ongoing macroeconomic risks in many of the countries in which we operate, including increased weakness in the euro. We anticipate that the weaker euro will negatively impact our revenues through at least the remainder of this year. However, over the longer term, we expect that these risks will be mitigated by four factors

[Vikas Sinha:]

Thanks, Lenny. The second quarter of 2012 was a period of strong financial performance by Alexion with growth in revenues and increasing profitability. Cash flow continued at a robust level, and all expenses were held within our forecasted ranges. Net product sales of Soliris were $274.7 million in Q2, an increase of 48% compared to the year-ago quarter. Our Q2 results include recognition of approximately $3.3 million in revenues related to shipments from an earlier period in 2011. As in prior quarters, revenue performance in Q2 was supported by continued steady growth in our core territories of the US, Western Europe and Japan, further augmented by a one-time increase in new PNS patients in Turkey and Brazil. In addition, our Q2 results reflect the growing contribution from our aHUS launch in the US and the start of a gradual uptake of Soliris in Germany. As we continue to execute strongly on our patient-centered initiatives, we likewise remain focused on controlling our expenses. As a result, we achieved a 66% increase in non-GAAP net income year-over-year to $94.1 million or $0.47 per share in Q2 2012. Our Q2 non-GAAP results exclude the $21.8 million of tax expense relating to acquisition structuring. As a reminder, this was within the range we guided for tax expense in our Q1 call. Turning to our balance sheet. Cash, cash equivalents at the end of Q2 were $806 million compared to $359 million at the end of Q1. Our cash balance reflects positive cash flow from operations, and approximately $462 million from the proceeds of our stock offering in conjunction with our inclusion into the S&P 500 Index. We reduced our total debt from $355 million at the end of Q1 to $228 million at the end of Q2. Looking forward, we recognize that there are significant ongoing macroeconomic risks in many of the countries in which we operate. These risks can manifest in several ways, including the continuing weakness in many currencies and the now increased weakness of the euro, which we expect will have a negative impact on our revenues through at least the remainder of this year. These macroeconomic risks also includes sovereign risk, and we expect that these risks will be mitigated by four factors

[David Hallal:]

Thanks, Vikas. In the second quarter of 2012, global revenues from our Soliris operations increased by 48% compared to the second quarter of 2011. Q2 revenue growth was driven by the strong addition of new PNH patients starting on Soliris, combined with a solid start to our aHUS launch in the US. In the US, our efforts with an expanded Soliris field team are having a positive impact. We are reaching more hematologists for both PNH and aHUS, while also reaching adult and pediatric nephrologists for aHUS. In PNH, our increased presence among hematologists is resulting in improved diagnostics, leading to consistent identification of new patients. Importantly, and as in previous quarters, we again observed that the majority of PNH patients newly starting on Soliris were also newly diagnosed. This further demonstrates that broad education about PNH, as well as PNH diagnostics, positively influences the entire cycle of care from a patient newly diagnosed with PNH to a patient newly starting on appropriate treatment. In aHUS, we are very pleased with the start of our US launch as our field team continues to present our disease education programs to more hematologists and nephrologists, resulting in an increase in the number of aHUS patients who are initiating treatment with Soliris. Although the uptake of Soliris in aHUs is limited by the relatively low prevalence of the disease, we are encouraged by the progress that we are making to identify and serve an increasing number of children and adults with this severe and life-threatening disorder. Based on our early performance, we are confident that we will continue to serve an increasing number of aHUS patients over time. Turning now to our PNH operations outside the US. We continue to expand our disease awareness programs and diagnostic initiatives. During Q2, we again achieved steady growth in Western Europe and Japan, as patients with a higher likelihood of having PNH were tested, identified and rapidly started on treatment. As in the US, we recognize that the majority of patients with PNH in these core territories have yet to receive an accurate diagnosis, let alone appropriate treatment. Looking beyond our core territories, and as noted in previous calls, we have been building our operations in two additional major countries, Turkey and Brazil. As a result of initial deployment of our field teams, during Q2, Soliris treatment was initiated and a significant number of previously diagnosed PNH patients who have been awaiting therapy with a subsequent one-time positive intact on our results. In line with our experience in other countries, we now expect that following the one-time addition of these initial patients, our ongoing diagnostic initiatives in Turkey and Brazil will result in a more modest rate of patient identification and treatment initiation. In our aHUS operations outside the US, in Germany, we are at the very earliest stages of disease education with treatment commencing in an anticipated modest number of initial patients. More broadly, we are continuing our disease education initiatives to prepare for our aHUS launches across the larger EU countries when reimbursement processes are completed late this year and in 2013. In both the US and Europe, we observed several dynamics that continue to guide our launch in aHUS. For example, patients with aHUS who were receiving Soliris represent a broad range of ages and clinical profiles, including those with long-term disease and chronic kidney damage, as well as those for being identified during their first clinical presentation of TMA. Many of these first-time patients present urgently with this life-threatening condition, pointing to the importance of the rapid delivery supply chain we have established to provide Soliris to patients. In all countries, our efforts in both PNH and aHUS are supported by the growing body of clinical data regarding the natural history and devastating clinical consequences of each disorder, and the life-transforming effect that Soliris can provide to these patients. Recently, this included new data on PNH and aHUS that were presented in June at the annual meeting of the European Hematology Association or EHA. In PNH, researchers presented further clinical evidence regarding PNH diagnosis. The new clinical data further supported the need to test patients at high risk for PNH, including that patients in high-risk populations should be consistently tested and monitored based on the ICCS recommendations to ensure accurate diagnosis and early intervention. Turning to aHUS presentations of EHA, a retrospective analysis of 30 pediatric and adult patients with aHUS showed that the majority of patients experienced severe complications of the disease across multiple organs despite use of plasma exchange or plasma infusion. These complications span the cardiovascular, gastrointestinal and neurological systems, and were similarly reported in aHUS patients with or without identified genetic complement mutations, and even in the absence of substantial renal impairment. Beyond aHUS, another opportunity for our nephrology therapeutic area is STEC-HUS. In planning for a possible STEC-HUS launch in late 2013 or early 2014, our team is beginning to better understand disease and diagnostic patterns in the US and Europe. Looking ahead to commercial opportunities beyond hematology and nephrology, we are adding metabolic disease specialists to our operations as we plan for a launch of asfotase alfa and hypophosphatasia or HPP based on our goal of a pediatric filing in 2014. We are beginning to identify the needs of the HPP community, mindful that diagnosis can be missed and the natural history of the disease may be misunderstood, given the rarity of the disorder and the wide range of its clinical signs. As such, we are deploying our first MSLs in the US, and are now preparing to deploy a small medical affairs team in Europe to provide disease awareness and diagnostic initiatives as we prepare for the potential introduction of asfotase alfa. We are pleased with the early progress of our aHUS launch and the continued growth in our global PNH operations. In the third and fourth quarters, we will focus on selective additions to our global commercial operations as we prepare to serve more patients in 2013 and beyond. Our team will continue to drive forward to transform the lives of more patients in more countries who are diagnosed with severe and life-threatening ultra-rare disorders. Now I’ll turn the call over to Steve, who will review our expanding pipeline initiatives. Steve?

[Steve Squinto:]

Thanks, David. In the second quarter of 2012, we continued to progress our lead pipeline programs, which include five highly innovative compounds currently being investigated at various stages of development across eight severe and ultra-rare indications beyond PNH and aHUS. I would first like to provide an update on our eculizumab development programs, starting with STEC-HUS. We are pleased to report that the European Commission has granted orphan designation for eculizumab as a treatment for patients with STEC-HUS, a severe ultra-rare and life-threatening inflammatory disorder. In addition, we have shared top line data from the entire 198-patient trial with EU regulators, and have discussed a pathway to apply for marketing authorization for eculizumab for the treatment of STEC-HUS, which could be submitted near the end of this year or early next year. In our kidney transplant program with eculizumab, we continued to enroll patients in our company-sponsored multinational living donor kidney transplant trial in patients at elevated risk of antibody-mediated rejection. Patients in this study are being dosed with eculizumab for nine weeks post-transplant, and then will be observed for 52 weeks following transplant. In addition, we have initiated a deceased donor kidney transplant study, and expect enrollment to begin later this year. Turning now to our two neurology clinical development programs with eculizumab. One-year data from the investigator initiated Phase II clinical trial of eculizumab in severe refractory NMO is expected to be presented at a scientific meeting in the second half of 2012. As we prepare for anticipated meetings with regulators later this year, we are currently holding a series of discussions with investigators to design our next clinical study in NMO. Likewise with regard to myasthenia gravis, we are working with investigators to design our next clinical study, and expect to meet with regulators in late 2012 to discuss plans for a larger prospective controlled trial. I would like to turn now to our other lead development programs with highly innovative therapeutic candidates beyond eculizumab and starting with asfotase alfa. We continued to accelerate the development of asfotase alfa as a treatment for a broad spectrum of HPP patients, focusing first on completing the clinical development program for children with HPP. In Q2, we initiated the natural history study in infants to supplement the existing open label trials. We also expect to initiate a placebo-controlled study in juveniles with HPP later this year. We’ll be discussing the registration process for pediatric patients with regulatory authorities with an eye toward a pediatric filing in 2014. Importantly, we have already successfully implemented several steps to optimize the commercial-scale manufacturing process for asfotase alfa to ensure our ability to provide long-term support to the HPP community. We’ll continue to update you on our asfotase alfa program on future calls. Beyond asfotase alfa, we are also evaluating three additional highly innovative therapeutic candidates as treatment for patients with severe and ultra-rare disorders across a wide range of therapeutic areas. Looking briefly at these programs, first in our metabolic disease area, which includes asfotase alfa, we are also accelerating the development of our cPMP replacement therapy for the treatment of patients with molybdenum cofactor deficiency type A, a severe ultra-rare and genetic metabolic disorder that is fatal in newborns. Following successful completion of the initial cPMP manufacturing runs at the end of last year, pre-IND toxicology studies are now underway. We are currently increasing our cPMP manufacturing to provide sufficient supplies to commence clinical studies in normal volunteers in early 2013, as well as to treat the current MoCD patients receiving earlier supplies of cPMP. Second, we continued to enroll patients in a Phase I study to characterize the mechanism of action and develop initial safety data for ALXN1102, an IV formulation of the novel alternative pathway complement inhibitor known as TT30. I would note that as a part of the same Phase I study, we have also initiated dosing of a subcutaneous formulation of TT30 now known as ALXN1103. Once we have the data from these studies we can better evaluate the overall therapeutic potential of ALXN1102 and ALXN1103 for various disease targets. And third, we continued to enroll subjects in a Phase I clinical study of ALXN1007, our novel anti-inflammatory antibody, which is a product of our antibody discovery technologies. This Phase I study is evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics of this compound in healthy volunteers. In closing, I am pleased with the progress that Alexion’s R&D team made in the second quarter of 2012. We continue to drive our R&D programs forward with urgency to help patients and families suffering with severe and ultra-rare disorders. I look forward to updating you on our progress on future conference calls. I will now turn the call back to Lenny. Lenny?

[Lenny Bell:]

Thanks, Steve. We are pleased to serve an increasing number of patients with PNH and now also patients with aHUS. We will continue accelerating our development programs with a goal of rapidly bringing life transforming innovations to more patients with severe and ultra-rare disorders. And as always, we thank all of those who make our work possible, our employees, researchers and physicians around the world, and of course, patients and their families who are always at the forefront of what we do. Operator, we’ll now take questions.

[Operator:]

(Operator Instructions) Your first question comes from the line of Geoff Meacham of JP Morgan. Please proceed.

[Geoff Meacham:]

Hey. Good morning, guys. Thanks for taking the question. I joined the call a little late, so anything remarkable about the findings from Brazil and Turkey, the PNH discovery, whether it’s specifically from diagnostics or promotion or awareness and do you feel like you can leverage this potentially into other countries? And I have one follow-up.

[Lenny Bell:]

Yeah. So this is part A. Thanks very much, Geoff. This is Lenny. I think as we commonly see that as we’re able to expand into new countries, we are in each country able to find patients who have been previously diagnosed, and we find this very commonly. This was the case initially in the United States five or so years ago, and certainly was the case in other European countries. We find that the same – we anticipate the same prevalence of PNH to be the case in Brazil and Turkey as we do in other countries, as well in the West. And we certainly expect then the diagnostic initiatives that physicians are increasingly implementing say for example in Brazil and Turkey, as they have in the United States and England and Germany and elsewhere, to result in a relatively steady from here increase in number of patients being diagnosed and with physicians seeking treatment with Soliris. Dave, any further color to that?

[David Hallal:]

Yeah. Just to reiterate, Geoff, that it’s you deploy a field team to educate on PNH. They identify patients who were previously diagnosed by physicians. And what we observed in the quarter is this initial group of patients in these two countries with that deployment move to treatment. And now it’s – so we actually see Brazil and Turkey following very much the pattern that we’ve seen around the world, which now will move into our diagnostic initiatives to help them diagnose new patients with PNH.

[Operator:]

Your next question comes from the line of Rachel McMinn of Bank of America/Merrill Lynch. Please proceed.

[Rachel McMinn:]

Yeah. Just to follow up, the cost I think you said in the past that you see emerging markets as maybe a third of the ultimate Soliris potential, and I guess less about sort of the bullish revenues that you’re seeing and more about as you see what’s going on in Turkey and Brazil, and you look towards other Latin American countries that will be coming online, do you think that emerging markets can make up more than a third of your business over time? Or I don’t know if you’re willing to talk about the percentage of the business, like where you are today and kind of how much growth potential there is? Thanks.

[Vikas Sinha:]

Thanks for the question, Rachel. This is Vikas here. If you look at our breakdown of revenue by countries in what we did in 10-K in 2011, US and Europe approximately was around 75%, 76% and the rest of the world was 23%, 24%. And that we expect to grow, as David and Lenny were mentioning just now about adding Brazil, Turkey, that block over time is going to grow and we do believe that it will at some point get to a one-third level.

[Operator:]

Your next question comes from the line Eric Schmidt of Cowen & Company. Please proceed.

[Eric Schmidt:]

Good morning, everyone. In terms of the characterization of the aHUS launch, I think you’ve moved from gradual to steady to now very pleased. I’m not sure I’ve heard Lenny ever be very pleased with anything in the past. But I guess the question is what exactly are you seeing specifically in the marketplace or in terms of the progress you’ve made that’s led to this change and probably very carefully chosen adjectives?

[Lenny Bell:]

Thank you very much for such a comment regarding how I look at my life. But no, thanks, Eric. Anyhow, I think what we continue to see is that as we learn more out in the medical community now here particularly in the United States and with these learnings, of course, anticipate to spread across Europe and over time Latin America, Asia and so forth is that by educating physicians we can get to patients earlier and help them with the sort of demonstrated effect of Soliris and the package insert here in the United States. It literally is just following the path that we’ve laid out. It’s helping physicians understand and be aware of the disease severity and the importance of an earlier intervention, coupled with a tremendous effort to be able to provide drug faster all around the country. Dave can provide a lot more color, though.

[David Hallal:]

Well, Eric, I’d say one thing that we’re pleased about is just the diversity of the early observations. Treaters or prescribers being both hematologists and nephrologists looking at the patient, seeing patients with, as I mentioned, presenting with their first clinical presentation of the disease and some patients that have had the disease for quite some time and are suffering from chronic kidney damage. Seeing a nice mix of younger patients, as I mentioned, as well as those with adults. So really the diversity of the early observations gives us confidence that there’s an opportunity to serve increasing numbers of patients over time.

[Operator:]

Your next question comes from the line of David Friedman. Please proceed.

[Lenny Bell:]

Operator, also before the question’s asked, I think we can go back to our regular routine of allowing the ABCs from the previous questioners as well.

[Operator:]

No problem.

[David Friedman:]

Thanks for taking the question. Could you maybe just lay out the other countries that you’re looking to try and enter over the next six to 12 months? And for these countries that you’re entering now, are you trying to enter with a label and a plan for both PNH and aHUS? Or is it still leading with PNH and then following up with aHUS over some period of time? Thanks.

[David Hallal:]

Yeah. So, David, it’s David. Clearly, we’re leading with PNH as we enter new countries and we are looking obviously in Latin America beyond Brazil to a next group of countries; also looking at some other countries in Europe, Middle East and potentially to a lesser extent out in Asia.

[David Friedman:]

And so what’s the – sorry, just as a quick follow-up, what’s the time delay between introducing aHUS – PNH and then aHUS? Is it something that’s happening relatively quickly? Or is there like a 12-month delay to get everything set up and running?

[David Hallal:]

It’s really country specific, David. So in some countries you lead, as you were suggesting, with a registration and an approval and other countries if there’s an opportunity say with name patient sales, that time point may actually be shortened between PNH and aHUS.

[David Friedman:]

Thank you.

[David Hallal:]

Yup.

[Operator:]

Your next question comes from the line of Brian Abrahams of Wells Fargo. Please proceed.

[Shane:]

Hi. This is Shane calling in for Brian. Thanks for taking my questions. Thinking about the upcoming data on neuromyelitis optica, could you speak about the similarities and differences between myasthenia gravis and NMO? I may be thinking about this a little too simplistically, but the basis of the two disease seem similar where auto antibodies attacking a well-defined host target and the complement system causing the cell damage. And so my question is whether there’s any evidence that you’ve gathered from your myasthenia gravis that is or based on your understanding of the path of physiology of myasthenia gravis and NMO that could be applicable to NMO and perhaps give you some confidence that it could also work in NMO?

[Steve Squinto:]

Well, I think as you started with your opening lines of your question, I think the most important learning I believe that we’ve taken from both trials is focusing on patients that clearly have antibody and complement mediated disease, I think, is really the key point. I would not say that that would be common place to all patients with NMO or MG, but I think the fact that our trial focused on that patient population, and also focused on patients with more severe disease has been really informative. And when we think about now the design of the next trials and are currently meeting with investigators really around the world to design those trials, I think we will be focusing in on looking to evaluate eculizumab in probably the most severe forms of both of those diseases. But I think the antibody complement mediated piece of it is the common ground.

[Shane:]

Thank you very much.

[Operator:]

Your next question is a follow-up from Geoff Meacham of JPMorgan. Please proceed.

[Geoff Meacham:]

Great. Thanks for the follow-up. So I knew you guys were talking earlier about the diversity of aHUS patients. And I’m just curious, based on the broad range of patients that you’re seeing if there’s a chance that reimbursement across Europe would try to segment the populations, for example by age or disease severity, kidney pathology? Thanks.

[Lenny Bell:]

Yeah. Thanks very much, and again, we apologize for not getting your follow-up question earlier. But I think generally certainly aHUS, as you know, summary product characteristics in Europe is very broad actually and without any limitation that’s meaningful, frankly, with very strong endorsement based upon the clinical data that the CHMP reviewed and finished the document. So we don’t actually expect in aHUS there to be significant limitations of patients who present clinically with disease as represented the summary product characteristics. Obviously, there’s a series of discussions that will occur over time with different governments, but I think we consider that to be unlikely.

[Geoff Meacham:]

Okay. Thanks.

[Lenny Bell:]

Thank you.

[Operator:]

Your next question comes from the line of Salveen Richter of Canaccord. Please proceed.

[Salveen Richter:]

Taking my question. Just following up on aHUS, have you learned anything from your initial educational initiative that would cause you or have caused you to change your messaging or physician targeting? And how are the educational efforts at the critical care setting taking fruit?

[David Hallal:]

Yes, Salveen. So the one thing that I think we’ve had pretty close to right at launch but clearly we adjust and modify our plans is just looking at the broad range of patients that I indicated earlier in the call is really what’s the plan? How do you line up the breadth of clinical data that we have from our submissions to the regulatory agencies, lining that up really for each one of those segments so that physicians are aware of this is a very high risk for the patients at first clinical presentation of TMA, but also even with later disease what the long-term benefits of treatment could be. So it’s really just been a focus on tightening that down. I think subsequently one key learning on top of that has been really the equal interest in hematologists in being well educated on this disease as much as nephrologists. And depending, as I mentioned I think on a previous call, depending on the consult that is made in a hospital either at first dose to a nephrologist or a hematologist that what we typically see is then the hematologist may move forward and manage those patients. So that’s been a significant observation.

[Salveen Richter:]

Great. And then just following up on an earlier point, can you mention maybe which new countries you’re going to be entering with PNH next and the timeframe there?

[David Hallal:]

Yeah. So in Latin America, we’re looking at Argentina, Colombia and potentially out further than that, Venezuela. Clearly, one of the things that we have spoken about over the last few quarters is not just Brazil and Turkey, but of course Russia. And Russia’s something that we think we have an opportunity for that to come on line some time mid 2013. So we’re obviously very excited in looking to deploy operations in that important country. And we look in the Scandinavian countries in Europe, as well as Israel and other Middle East opportunities are at forefront for us.

[Salveen Richter:]

Thank you.

[Operator:]

Your next question comes from the line of Eric Schmidt of Cowen & Company. Please proceed.

[Eric Schmidt:]

Thanks also for taking my follow-up. It’s also with regard to aHUS and sort of the diversity of practice that’s out there. Have you noticed any diversity in terms of discontinuation rates upon physicians? Are some inclined to stop therapy after initial flare versus chronic therapy? And how have your efforts been to educate the market in that respect?

[Steve Squinto:]

Yeah. So it’s a great question, Eric, and clearly we – part of our disease educational platform is obviously educating on the chronicity of the disease due to a genetic mutation. As we had anticipated really, compliance is generally good in patients diagnosed with aHUS, and it appears similar to that of the levels that we’ve come to expect with PNH. Importantly, the US package insert makes clear that patients with aHUS that miss a dose or discontinue Soliris are very high risk for severe TMA complications, and then the label in Europe specifically states Soliris treatment is recommended to continue for a patient’s lifetime. And so our efforts are really to educate not only on the disease, but the recommendations from the US and European authorities. We haven’t necessarily detected patterns in terms of who is more likely to stop treatment at this point.

[Eric Schmidt:]

Thanks a lot.

[Operator:]

Your next question comes from the line of Geoffrey Porges of Bernstein. Please proceed.

[Geoffrey Porges:]

Thanks very much for letting me jump in here. A couple questions. First, Vikas, just a little bit on the tax rate just moving away from revenue for a second. You’ve had a very low tax rate this quarter, but you’ve maintained your guidance for the year and it seems to imply that your tax rate’s going to be around 10% in the back half of the year. Is that what we should be using going forward? Or are there are some sort of one-time factors that are causing it to bounce around and it should stay at the range that we’ve seen the first half of the year? And I just want to have a follow-up on asfotase manufacturing. Thanks.

[Vikas Sinha:]

Okay. Geoff, in terms of the tax rate, we didn’t change the guidance for second half because it just feel a little bit more on the lower end of that 8% to 10% range. And the second quarter, definitely we had a lot of entries going in and out because of the structuring of the Enobia transaction and several other factors that came in. You saw that on the GAAP side too, which led to higher income on the US side in Q2, which led a higher absorption of the NOLs in Q2. So we’ll look at it once again in Q3, but at this point I think we look at as second half moving into second half and as we grow into global infrastructure grows and our sales grow into countries outside of US too, we will see that impact towards the lower end of the 8% to 10% guidance. So that’s why I didn’t change the guidance.

[Geoffrey Porges:]

Okay. And then just on asfotase, you highlighted steps to optimize manufacturing. I’m wondering if you could tell us what those steps are and what kind of capacity you have, but most importantly, do you think you can bring asfotase to sort of a ballpark of the cost per patient that you’ve managed to achieve for Soliris over time? Thanks.

[Steve Squinto:]

Yes. So, Geoff, I think just very simply, and any time you step into a new product and a new process it takes a little while to get used to that process and learn that process. The good news is because the product as an Fc domain it’s much like an antibody, so it’s pretty much right in our sweet spot and our comfort zone. So our manufacturing group has gotten very familiar with the process that was established by Enobia, and I think has made a good progress in terms of perfecting that to a certain degree. And really what I mean by that is we have much more reproducible lot-to-lot preparations of the drug at this point.

[Geoffrey Porges:]

Do you think you can get the cost to a reasonable range?

[Steve Squinto:]

I think it’s, again, because the protein got an Fc domain and it’s much like an antibody in terms of the recovery process that will be put in place, I think we’ll probably be in a similar range.

[Geoffrey Porges:]

Terrific. Thanks very much.

[Operator:]

Your next question is a follow-up question from the line of Rachel McMinn of Bank of America Merrill Lynch. Please proceed.

[Rachel McMinn:]

Yeah. Thanks very much. I guess I also wanted to about asfotase alfa and just really a clarification. I think, Steve, you mentioned something about that you were going to be discussing plans with regulators with an eye towards a 2014 filing. And that just – it sounded a little bit different than the way you talked about it before and I just wanted to understand if there was something else besides the natural history study that you really needed to discuss with regulators. I guess I wasn’t aware that there were any other outside issue. Thanks.

[Steve Squinto:]

Really the only thing that was meant by that is, of course, Enobia had their own discussions with regulators. Now that we’ve become much more familiar with the program and the product and the trials and the data. I think as we would always do, it’s just prudent on our part to have our own discussions with regulators and be clear on the path forward that we’re going to take.

[Rachel McMinn:]

So there’s actually a pathway for you to do that just by sheer nature of you being a new sponsor, there’s a regulatory pathway for you to request any...

[Steve Squinto:]

There are number of avenues that one can take to have meetings with regulators. It’s not just simply as the new sponsor. There are a number of venues, a number of avenues that one can take to engage with regulators on the programs.

[Rachel McMinn:]

I see. And are there I guess any particular issue you want to highlight or can you give us timing of when you plan to meet with regulator?

[Steve Squinto:]

Well, mostly what we want to do is update the regulators on where we are with the manufacturing process so that we’re in agreement and understanding on the production of the program – the product for the program, and also just to layout our intent to do the placebo-controlled juvenile trial. The natural history trial is something we believe the regulators wanted from earlier discussion they had with Enobia.

[Rachel McMinn:]

Gotcha. Thank you so much.

[Operator:]

Your next question comes from the line of Robyn Karnauskas of Deutsche Bank. Please proceed.

[Navdeep Singh:]

Hey. It’s Navdeep substituting in for Robyn, and congrats on the solid quarter. Just trying to better understand SG&A, what caused you to increase SG&A guidance? And is it due to increased sales infrastructure investment for PNH or aHUS? And then I have a follow-up.

[David Hallal:]

Yeah. So as I mentioned, we’re looking to selectively invest and expand our operations to serve more patients. So one of the things obviously that we’re looking to do on a country-by-country basis is assess what is needed to reach all of the hematologists, adult and pediatric nephrologists to support both PNH and aHUS. So we made the decision ahead of the aHUS launch to move forward with one single sales team that would focus on both specialties. So that is one of the investments that clearly we’re evaluating on a country-by-country basis, now moving to Europe as we expanded in the US. And then as I mentioned, some of the new countries that we’re looking just in general through meeting the needs of more patients in more countries, we’re investing in countries like Russia so that we can be in a position to serve those patients into 2013.

[Navdeep Singh:]

Okay. Thanks. And now that Soliris has been approved for aHUS for I think two full quarters now, any notable differences in the EU versus the US launch and maybe the portion of adults versus children? Thanks.

[David Hallal:]

Yeah. So I’ll just – first as we mentioned during the call, we’re just at the very, very earliest stages in Europe with really just the initial patients beginning or commencing treatment in Germany. For really the majority of Europe it’s a really later this year and into 2013 as we move forward with country-by-country reimbursement processes. What we’re focused on in those countries either with our commercial staff or our medical teams is obviously disease awareness and education and diagnostic initiatives in advance of those reimbursement discussions. So it’s really too hard to tell if Europe differs in any way from that of the US. The subsequent question you had?

[Navdeep Singh:]

It was just on the portion of adults versus children and did it differ from what you had originally expected?

[David Hallal:]

No, we’re really currently serving both pediatric and adult patients, and frankly, we’re not surprised and we don’t necessarily intend to provide specific breakdowns in the future.

[Navdeep Singh:]

Okay. Thanks.

[Operator:]

Your next question comes from the line of Ying Huang of Barclays. Please proceed.

[Ying Huang:]

Hey. Good morning, guys. Congratulations on the quarter. Two questions; number one, now you have launched in Germany already, can you give us a little bit more color in terms of the pricing per milligram base compared to what you had in PNH? And if it’s the same, should we expect that across the other countries in Europe as well? And then secondly, for the NMO data we should see in the second half of the year, I know the primary outcome was the relapse frequency here. Do you think that’s the main approval endpoint by the regulatory agency? Thank you.

[Lenny Bell:]

Yeah. Thanks very much. It’s Lenny. I’ll take the first half. I mean the vials in Germany for aHUS are the same vials as in Germany for PNH, and so there’s no change, nor would there have been anticipated any change for the second indication for our already approved drug. And in regard to NMO, Steve?

[Steve Squinto:]

Yeah. I think exacerbation rate is a very important clinically, a very meaningful and very important endpoint as the number of relapses does seem to correlate very well with disease severity. In terms of whether that’s approvable or not, as I said on the call, we intend to meet with regulators later this year, and those are the types of discussions we’ll have with regulators.

[Ying Huang:]

Thanks.

[Operator:]

Your next question comes from the line of Ian Somaiya of Piper Jaffray. Please proceed.

[Ian Somaiya:]

Thanks and congratulations on a good quarter. A couple of questions. first on the NMO data that’s expected later this year, the last couple of times you’ve spoken to – meeting with the regulatory agencies or speaking with investigators regarding the next set of trials, prior to the data release the data has been positive. Is that something that we should expect when the data is eventually released? So that’s question number one.

[Steve Squinto:]

We’ll, I’m not really sure I understood the question. I mean I can tell you where we are now is we are meeting with various numbers of investigators really worldwide to talk about what that next trial design should look like, and we’re doing that so that we can have a very productive meeting with regulators later in the year. I’m not really sure what you’re asking.

[Ian Somaiya:]

I guess the question I’m asking is are you sufficiently confident in the ongoing study that will support moving into the next line of clinical trials?

[Lenny Bell:]

Well, we certainly anticipate there’ll be additional clinical trials. Obviously, the purpose of meeting with investigators sequentially and then with regulators is to determine subsequent to those next clinical trials. And I think that we are encouraged obviously, and when we have some clarity there with regulators, importantly we’ll certainly look to provide that.

[Ian Somaiya:]

Okay. And the other question I had was just longer-term planning. Obviously, you’ve increased SG&A spending this year, just given the opportunity that you foresee. Can we just talk a little bit more about the additional indications that you’re pursuing and what that would mean in terms of sales force size and structure?

[Lenny Bell:]

Well, I mean I’ll just take the two that I actually addressed. One is STEC-HUS and then one is asfotase out a few years. STEC-HUS, as I mentioned, our nephrology therapeutic area is in the early stages of really trying to best understand characteristics of the disease and diagnostic patterns in the US and Europe. And I think one of the things we’re pretty gratified by is that it looks like it’s going to plug right into the HUS strategy. It is literally the same physicians that would identify, diagnose and treat a patient with aHUS are those physicians that would do the same with STEC-HUS, which as we indicated, would likely be that next indication. So based upon that, we think by rightsizing the country-by-country sales teams for PNH and aHUS puts us in a very nice position to be ready for STEC-HUS.

[Vikas Sinha:]

And yeah, with regards to when we look at SG&A as a percentage of sales, we are very consciously – we consciously watch that to bring it down to our long-term range of 28% to 30% that we have guided at times. We have currently even after the increase in the expenses that we are talking about, our objective was to get this – get to 23% this year. We will be somewhere between 22%, 23%, even this year. So we have been very conscious on that front.

[Lenny Bell:]

And then just commercially, we would slowly, as I indicated, build a focus with a therapeutic area around metabolic disorders to support hypophosphotasia and asfotase alfa. And then that’s something that we would, as I’ve indicated in a previous couple of calls, start to do now and subsequent quarters.

[Ian Somaiya:]

Great. Is it possible for you to just give us some measure of what that sales force could look like inside, relative to the one you have today?

[Vikas Sinha:]

It’d be bigger probably.

[Lenny Bell:]

Thanks very much.

[Ian Somaiya:]

Thank you much.

[Lenny Bell:]

You’re welcome.

[Operator:]

Your next question comes from the line of Matt Roden of UBS. Please proceed.

[Matt Roden:]

Great. Thanks for taking the question. David, I was intrigued by your comments on STEC-HUS. As you approach the work that you’ve done in preparing for that potential launch late 2013/2014, can you talk about your initial findings at all in terms of the disease and diagnosis patterns? And maybe if there any sort of key points that we should be thinking about as we think about modeling that indication out?

[David Hallal:]

Yeah. It’s really too early to tell. We’re trying to understand what percentage of STEC-HUS say is derived from outbreaks versus just patient-by-patient. I do think that the one key thing that the nephrology team is focused on obviously is the difference between the two diseases, STEC-HUS and aHUS. aHUS is a genetic lifelong disease. STEC-HUS presents some in similar ways to that, but that is something that is not a lifelong disease. And I think that that’s something that we are acutely aware of as we prepare commercially really to support both of those indications.

[Matt Roden:]

Thank you.

[Operator:]

Your next question comes from the line of Howard Liang of Leerink Swann. Please proceed.

[Howard Liang:]

Thanks very much. First question is on – well, of the $30 million sequential growth, quarter-over-quarter sequential growth for Soliris, can you give us some color on what is the contribution of US versus ex-US and if you can, aHUS versus PNH?

[Lenny Bell:]

Yeah. Thanks very much, Howard. It’s Lenny. I’d say – the first thing I’d say obviously that there was a $3.3 million obviously that was from prior period in 2011 that was recorded. So if we look – delete that from it organically and focus on in-quarter growth, I’d say the most important contributor was continued growth in PNH in our core territories really spread nicely across US, Europe and Japan. Number two, I would actually look at the contribution of the aHUS launch in its early stages now in United States certainly much more so than we’ll be in the even earlier stage in Europe. And then finally, obviously I would look at the one-time increase in new patients really coming from Turkey and Brazil as we had been expanding over the last several quarters our organization there. So that’s how I’d rank order the contributors.

[Howard Liang:]

Okay. And in the past, you’ve talked about a synergy between aHUS marketing and PNH. Are you continuing to see that?

[Steve Squinto:]

Yeah. Howard, I think as I mentioned with our observation now two or three quarters with aHUS in the US is that a substantial proportion of patients are being manage by hematologists, and we feel like over the last five, six years we’ve really developed a sweet spot there commercially in terms of building relationships, educating and serving hematologists and their patients. So that obviously is helping us not only create true marketing synergy, but even that obviously with the one sales force that we’ve deployed in a expanded way.

[Howard Liang:]

Thanks and congrats.

[Lenny Bell:]

Thanks, Howard.

[Operator:]

Your next question comes from the line of Chris Raymond of Robert Baird. Please proceed.

[Chris Raymond:]

Okay. Thanks. Just to maybe follow up to one of your answers to Howard’s, one of Howard’s questions. I’m not sure you’re going to be willing to give much color on this, but you talked about how there’s a substantial portion of aHUS prescribing by hems. Can you maybe give us any color in terms of the dynamic there and the split between hematologists and nephrologists? Are you seeing any trends where perhaps you’re seeing a larger proportion of prescriptions written by nephs or is that static? That would be great. Thanks.

[Steve Squinto:]

Yeah. And I’ve said this in the past, but it’s actually similar. There’s a similar proportion of patients with aHUS being treated with Soliris from hematologists as there are with the combination of adult and pediatric nephrologists. And so it’s – that kind of gives us a flavor and is a bit of a surprise for us. And as I mentioned, having significant leverage in the hematology space has been something that we’re very pleased with.

[Chris Raymond:]

Great. Thank you.

[Operator:]

At this time, I would like to turn the conference back over to Dr. Bell for closing. Please proceed, sir.

[Lenny Bell:]

Thank you very much, operator, and thank you, all, for joining us on our Q2 2012 call, and I look forward to speaking to you over the near term. Thank you.

[Operator:]

Thank you for participation in today’s conference. This concludes the presentation. You may now disconnect. Have a wonderful day.