- Alexion reported better-than-expected revenues in the first quarter in part due to upped sales of its chief rare disease drug outside the U.S.
- The biotech brought in $870 million for the period, a 24% increase year over year, whereas consensus estimates had projected revenues of about $830 million. Soliris (eculizumab) was responsible for the bulk of income, with net product sales of $783 million — an 18% non-GAAP uptick from the same period in 2016.
- Notably, a change in revenue recognition, an accounting practice in which a company only reports revenues it has actually earned (i.e. not transactions paid with credit that haven't materialized to cash), resulted in a $29 million boost for Soliris in Latin America as well as other ex.-U.S. territories.
Alexion has a new leader in Ludwig Hantson, whose track record includes time at Johnson & Johnson, Novartis and, most recently, a five-year stint as president of Baxter BioScience Inc. Ludwig took Alexion's helm after David Hallal left the CEO spot amid investigations of improper sales tactics for Soliris, one of the most expensive drugs in the world.
An internal investigation found higher-ups crafted a company culture that pressed employees to meet sales quotas for the drug, in turn negatively affecting how financials were reported. Though Alexion's board of directors found no signs of improper revenue recognition, the fiasco ladled more concerns on top of the Soliris franchise.
Soliris —a blockbuster therapy with indications for two rare conditions, paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS) — is Alexion's main source of revenue. But the drug loses exclusivity in the U.S. in early 2021, which has prompted the drugmaker to do anything it can to extend the patent life or find a successor.
Alexion is attempting both routes. It has investigated new indications for Soliris, and recently filed a supplemental application for the drug in another uncommon disease, myasthenia gravis, with an approval decision from the Food and Drug Administration expected in October. It also is testing ALXN1210, another anti-C5 antibody that helps regulate the immune system, in two Phase 3 registration trials for PNH and aHUS.
But those efforts haven't gone without a hitch. In December, the company disclosed Soliris failed a Phase 2/3 study evaluating it as a preventative treatment for delayed graft function in kidney transplantation patients.
To that end, Hantson signaled during an April 27 earnings call that ALXN1210 as well as Strensiq (asfotase alfa), a treatment for perinatal/infantile- and juvenile-onset hypophasphatasia, will be crucial drivers for growth moving forward.
Also important is pipeline expansion.
"But with strong top-line growth we assume [Alexion] will invest in its pipeline," investment bank Piper Jaffray wrote in an April 27 note. "Probably the most important task at hand for the new CEO is to replenish the pipeline with quality shots on goal, consistent with [Alexion's] profile of high value-add transformative therapies."
That need isn't lost on Hantson, who signaled his company will be on the lookout for such therapies.
"We need to do a better job with our R&D productivity," he said in the call. "My goal here is twofold: leverage our core R&D competencies to deliver enhanced productivity; and simultaneously execute on a disciplined business development strategy. Our [business development] focus is to reinvigorate our clinical pipeline by identifying assets with a strong strategic fit in our rare disease portfolio."
That may be easier said then done, however. Alexion just a couple months ago stopped development for SBC-103, a candidate under investigation in patients with mucopolysaccharidosis (MPS) IIIB. The task becomes even more daunting since the company cut R&D staff by 7% in February.
Still, a strong start to the year and a fresh face at the top seem to have investors optimistic for the year ahead. On Thursday, Alexion shares rose 5% from the day prior, closing at $126.91 apiece.
"We believe that bringing in a permanent new CEO, who during his due diligence must have kicked the tires, looked under the hood, and (presumably) checked on everything that caused one of biotech’s most smoothly running engines to flutter, ends the period of unrest and uncertainty for the troubled orphan disease company," RBC Capital Markets analyst Simos Simeonidis wrote in a March 27 note.