Alexion: Q2 highlights and key takeaways

Investors responded well to Alexion Pharmaceuticals' earnings update, the first to include several new C-level executives brought in to right the ship in the face of investigations of sales and accounting practices. Strong revenue likely helped too, as the company's $912 million in Q2 revenue was up 21 percent from last year and beat the $847-million consensus, with the company raising its guidance for flagship product Soliris (eculizumab).

Soliris…

Soliris sales beat expectations for the quarter, bringing in $814 million to top a $754-million consensus. CFO David Anderson- soon to be replaced by Biogen's Paul Clancy- said that anticipated headwinds for Soliris weren't as detrimental as originally predicted, but he is still planning on those factors catching up in the second half. A favourable timing for orders and limited impact of ALXN1210 trial enrolment on Soliris sales should catch up to revenue later this year.

The company is positioning ALXN1210 to replace Soliris on the marketplace, but in the meantime its trial enrolment is pulling away patients. ALXN1210, a next-generation complement 5 (C5) inhibitor, is targeted for approval in paroxysmal nocturnal hemoglobinuria (PNH) for 2019, with IP protection through 2035. Soliris, a C5 antibody already approved in the indication, was facing patent expiration in 2021. The company recently picked up additional patents covering new formulations, which management said could stretch out exclusivity until 2027 – See ViewPoints: Alexion receives much-needed double dose of good news.

Alexion is still prioritising near-term Soliris growth, with US and EU regulatory decisions expected in the second half to treat refractory generalised myasthenia gravis (gMG)- but after a Phase III miss, approval is not a given. The company doubled-down on its expectation of double-digit revenue growth through 2019, but Clancy pointed out that an approval in gMG was "the core assumption" behind sticking to the growth estimates. Head of R&D John Orloff said he is not currently expecting an advisory committee meeting from the FDA to discuss the new label - See ViewPoints: Encouraging signs for Alexion’s Soliris in MG.

…and the rest

Kanuma (sebelipase alfa) revenues were $15 million, inching over a $14 million consensus as the company seeks to justify the $8.4 billion it spent on Synageva BioPharma in 2015. Strensiq (asfotase alfa) also beat expectations, bringing in $83 million to top an $80-million consensus. Alexion paid $610 million upfront for Enobia in 2011 to get its hands on Strensiq, in a deal that's looked far more lucrative than Synageva.

Chief commercial officer Brian Goff told investors that the company is focused on closing the gap and upping its Kanuma revenue with investments in diagnosis and lab testing, saying " we continue to believe that there is a significantly underdiagnosed lysosomal acid lipase deficiency (LAL-D) patient population."

Reprioritising in R&D

In a re-do of its R&D strategy, Alexion said it will end partnerships to develop early-stage candidates with Moderna, BluePrint and Arbutus in order to focus on its "expertise in complement biology and core therapeutic areas of haematology, nephrology, neurology, and metabolic disorders."

Head of R&D John Orloff told investors that the deal terminations don't "say anything about our assessments of those technologies," but are reflective of a re-focus on areas of expertise. He said the company will aim for "greater R&D efficiency and returns," elaborating that its target overall R&D spend of 18 to 19 percent includes "the buy-up opportunities for internal programmes and additional indications in complement as well as external BD in-licensing opportunities."

On the investor call, Clancy said the Enobia acquisition could be a model for its future deal making. "In retrospect, Enobia looks perfect on strategy and great return on invested capital," he said, adding that the company's strategy moving forward "looks like a combination of licensing, partnership, and tuck-in acquisitions…in that Phase I, Phase II sweet spot."

As part of the pruning, the company is dropping immune-oncology mAb samalizumab, as well as molybdenum cofactor deficiency (MoCD) Type A candidate ALXN1101, and will be looking for partners to out-license both. Orloff said the company also plans to expand its disease focus from ultra-rare to rare.

Analysts at Deutsche Bank noted that while the strategic review took a "sensible approach," core product performance is still paramount. "The key takeaways from the strategic review…are that the company feels comfortable enough with the near-term Soliris growth trajectory that they can focus on earlier clinical-stage assets (unlikely they will pursue late-stage deals)."

The company didn't belabour discussions of earlier concerns about its sales practices. Newly-minted CEO Ludwig Hantson said the company has "further enhanced Alexion's strong commitment to compliance and culture. We've made changes in our policies, processes and governance to reinforce our commitment to the highest ethical standards." –see ViewPoints: Alexion’s new CEO a good fit but will keep speculators guessing.

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