Alexion Reports Third Quarter 2013 Results Soliris® (eculizumab) Net Product Sales Increased 36 Percent to $400.4 million Steady Soliris Growth in PNH Worldwide aHUS Launch Progresses in US and Europe; Japan Launch Begins in Q4 Guidance Revised Upward for 2013 Revenues and Non-GAAP EPS Strong Progress in Pipeline Programs, cPMP Replacement Therapy Receives FDA Breakthrough Therapy Designation Third Quarter 2013 Financial Highlights: *Q3 2013 net product sales increased 36 percent to $400.4 million, compared to $294.1 million in Q3 2012. *Q3 2013 GAAP net income increased to $93.8 million, or $0.47 per share, compared to net income of $92.2 million, or $0.46 per share, in Q3 2012. Q3 2013 GAAP EPS included a decrease of $0.10 per share related to expenses from both a license agreement and a litigation settlement. Q3 2012 GAAP EPS included an increase of $0.13 per share related to the net effect of an intellectual property settlement and an impairment loss. *Q3 2013 non-GAAP net income increased 39 percent to $167.9 million, or $0.83 per share, compared to Q3 2012 non-GAAP net income of $120.7 million, or $0.60 per share. Business Wire CHESHIRE, Conn. -- October 24, 2013 Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) today announced financial results for the three and nine months ended September 30, 2013. The Company reported net product sales of Soliris^® (eculizumab) of $400.4 million in the third quarter of 2013, an increase of 36 percent from the same period in 2012. Revenue performance for the quarter reflected steady additions of new patients with paroxysmal nocturnal hemoglobinuria (PNH) globally, and an increasing number of new patients with atypical hemolytic uremic syndrome (aHUS) commencing Soliris treatment in the US and Europe. “In the third quarter, we continued our strong and ongoing global performance with Soliris in PNH and were pleased to provide Soliris to a steadily growing number of new patients with aHUS in the United States as well as an increasing number of patients with aHUS in Europe. In addition, we were pleased to receive our aHUS approval in Japan,” said Leonard Bell, M.D., Chief Executive Officer of Alexion. “Key pipeline initiatives, including our asfotase alfa program in HPP, our Soliris programs in kidney transplant and our cPMP replacement therapy program, reached new milestones in Q3. In Q4, we are further expanding our commercial and clinical initiatives as we prepare for further growth in 2014.” Third Quarter 2013 Financial Results: Alexion's non-GAAP operating results are GAAP operating results adjusted for the impact of certain items described below. A full reconciliation of GAAP to non-GAAP financial results is included later in this press release. Third Quarter 2013 Non-GAAP Financial Results: The Company reported non-GAAP net income of $167.9 million, or $0.83 per share, in the third quarter of 2013, compared to non-GAAP net income of $120.7 million, or $0.60 per share, in the third quarter of 2012. Alexion's non-GAAP operating expenses for Q3 2013 were $178.8 million, compared to $130.9 million for Q3 2012. Non-GAAP research and development (R&D) expenses for Q3 2013 were $68.9 million, compared to $50.6 million for Q3 2012. Non-GAAP selling, general and administrative (SG&A) expenses for Q3 2013 were $109.9 million, compared to $80.3 million for Q3 2012. Third Quarter 2013 GAAP Financial Results: Alexion reported GAAP net income of $93.8 million, or $0.47 per share, in the third quarter of 2013, compared to GAAP net income of $92.2 million, or $0.46 per share, in the third quarter of 2012. Q3 2013 GAAP results included a decrease of $20.7 million, or $0.10 per share, related to expenses from both a license agreement and a litigation settlement. Q3 2012 GAAP results included an increase of $27.1 million, or $0.13 per share, related to the net effect of an intellectual property settlement and an impairment loss. On a GAAP basis, operating expenses for Q3 2013 were $213.8 million, compared to $171.6 million for Q3 2012. GAAP R&D expenses for Q3 2013 were $88.2 million, compared to $54.3 million for Q3 2012. GAAP SG&A expenses were $122.9 million for Q3 2013, compared to $90.0 million for Q3 2012. Balance Sheet: As of September 30, 2013, the Company had $1.30 billion in cash, cash equivalents and marketable securities compared to $1.12 billion at June 30, 2013. Research and Development Progress: Alexion currently has development programs underway with its five highly innovative therapeutic candidates: eculizumab (Soliris) and four additional novel therapeutic candidates that have the potential to become first-in-class therapies for patients with severe and ultra-rare disorders. Ultra-Rare Disease Programs With Eculizumab *Neurology: Neuromyelitis Optica (NMO) – Alexion will commence a single, multinational, placebo-controlled, registration trial in relapsing NMO. *Neurology: Myasthenia Gravis (MG) – Alexion will commence a single, multinational, placebo-controlled, registration trial in severe, refractory MG. *Transplant: Antibody-Mediated Rejection (AMR) – During the quarter, researchers presented preliminary data from the Company-sponsored, multinational deceased-donor kidney transplant trial in patients at elevated risk of AMR. Enrollment in the Company-sponsored, multinational living-donor kidney transplant trial in patients at elevated risk of AMR is ongoing. *Transplant: Delayed Graft Function (DGF) – Based on recent regulatory discussions, Alexion now plans to conduct a single multinational, placeo-controlled, registration trial in patients at risk for DGF. *Nephrology: STEC-HUS – The Company continues to analyze longer-term control clinical outcome data from an epidemiologic study in approximately 400 STEC-HUS patients who received only best supportive care during the earlier German epidemic. Ultra-Rare Disease Programs with Additional Highly Innovative Therapeutics *Asfotase Alfa: Alexion is developing asfotase alfa as a treatment for pediatric-onset hypophosphatasia (HPP), an ultra-rare, inherited and life-threatening metabolic disease. During the quarter, researchers presented data from the ongoing study of asfotase alfa in infants and young children with HPP. The Company completed its initial analysis of its natural history study in infants with HPP. The Company received Breakthrough Therapy designation for asfotase alfa in pediatric-onset HPP in Q2 2013. *cPMP Replacement Therapy (ALXN 1101): Alexion is developing cPMP as a treatment for patients with Molybdenum Cofactor Deficiency (MoCD) Type A, a severe, ultra-rare and genetic metabolic disorder that causes catastrophic and irreversible neurologic damage within the first few weeks of life. Alexion has initiated a natural history study in patients with MoCD Type A and has also completed dosing with the synthetic cPMP in a study in healthy volunteers. The Company received Breakthrough Therapy designation for cPMP replacement therapy for patients with MoCD Type A, as announced earlier today. *ALXN1007: Alexion has commenced a multi-dose Phase I clinical study of ALXN1007, a novel anti-inflammatory antibody, in healthy volunteers. The Company is preparing to commence a multi-dose Phase II proof-of-concept study of ALXN1007. *ALXN1102/1103: Enrollment continues in a Phase I study to characterize the mechanism of action and develop initial safety data for ALXN1102 and ALXN1103, different formulations of one of Alexion's novel complement inhibitors. 2013 Financial Guidance: Alexion today announced that it is raising its 2013 revenue guidance from the previous range of $1.520 to $1.530 billion, now to the higher and narrower range of $1.535 to $1.540 billion. The upward revision reflects continued global growth of Soliris in PNH and growth from the ongoing launch of Soliris in aHUS. Guidance for 2013 non-GAAP EPS is also being revised upward, from the previous range of $2.97 to $3.02, now to the higher and narrower range of $3.02 to $3.04, based on a forecast of approximately 203 million diluted shares outstanding. Guidance for R&D is being narrowed from the previous range of $275 to $285 million now to $280 to $285 million. SG&A is also being narrowed from the previous range of $435 to $445 million now to $440 to $445 million. Other items of 2013 guidance provided in the Company's press release of July 25, 2013 are being reiterated today. The Company’s non-GAAP effective tax rate, reported on a cash tax liability basis, is expected to be 6 to 8 percent. The Company’s GAAP effective tax rate is expected to be in the range of 29 to 31 percent. The Company's share-based compensation expense for the year is expected to be $76 to $78 million. Cost of sales is expected to be approximately 10 percent of net product sales. The Company’s GAAP effective tax rate is expected to be in the range of 29 to 31 percent. Conference Call/Webcast Information: Alexion will host a conference call/audio webcast to discuss matters mentioned in this release. The call is scheduled for today, October 24, at 10:00 a.m., Eastern Time. To participate in this call, dial 800-289-0438 (USA) or 913-312-0706 (International), passcode 3882932, shortly before 10:00 a.m., Eastern Time. A replay of the call will be available for a limited period following the call, beginning at 1:00 PM, Eastern Time. The replay number is 888-203-1112 (USA) or 719-457-0820 (International), passcode 3882932. The audio webcast can be accessed at www.alexionpharma.com. About Soliris: Soliris is a first-in-class terminal complement inhibitor developed from the laboratory through regulatory approval and commercialization by Alexion. Soliris is approved in the US, European Union, Japan and other countries as the first and only treatment for patients with paroxysmal nocturnal hemoglobinuria (PNH), a debilitating, ultra-rare and life-threatening blood disorder, characterized by complement-mediated hemolysis (destruction of red blood cells). Soliris is indicated to reduce hemolysis. Soliris is also approved in the US, European Union, and Japan as the first and only treatment for patients with atypical hemolytic uremic syndrome (aHUS), a debilitating, ultra-rare and life-threatening genetic disorder characterized by complement-mediated thrombotic microangiopathy, or TMA (blood clots in small vessels). Soliris is indicated to inhibit complement-mediated TMA. The effectiveness of Soliris in aHUS is based on the effects on TMA and renal function. Prospective clinical trials in additional patients are ongoing to confirm the benefit of Soliris in patients with aHUS. Soliris is not indicated for the treatment of patients with Shiga toxin E. coli related hemolytic uremic syndrome (STEC-HUS). For the breakthrough innovation in complement inhibition, Alexion and Soliris have received the pharmaceutical industry's highest honors: the 2008 Prix Galien USA Award for Best Biotechnology Product with broad implications for future biomedical research and the 2009 Prix Galien France Award in the category of Drugs for Rare Diseases. More information including the full prescribing information on Soliris is available at www.soliris.net. About Alexion: Alexion Pharmaceuticals, Inc. is a biopharmaceutical company focused on serving patients with severe and ultra-rare disorders through the innovation, development and commercialization of life-transforming therapeutic products. Alexion is the global leader in complement inhibition and has developed and markets Soliris® (eculizumab) as a treatment for patients with PNH and aHUS, two debilitating, ultra-rare and life-threatening disorders caused by chronic uncontrolled complement activation. Soliris is currently approved in nearly 50 countries for the treatment of PNH, and in the United States, European Union, Japan and other countries for the treatment of aHUS. Alexion is evaluating other potential indications for Soliris in additional severe and ultra-rare disorders beyond PNH and aHUS, and is developing other highly innovative biotechnology product candidates across multiple therapeutic areas. This press release and further information about Alexion Pharmaceuticals, Inc. can be found at: www.alexionpharma.com. [ALXN-E] This news release contains forward-looking statements, including statements related to guidance regarding anticipated financial results for 2013, assessment of the Company's financial position and commercialization efforts, medical benefits and commercial potential for Soliris for PNH and aHUS and other potential indications, medical and commercial potential of Alexion's complement-inhibition technology and other technologies, and plans for clinical programs for each of our product candidates. Forward-looking statements are subject to factors that may cause Alexion's results and plans to differ from those expected, including for example, decisions of regulatory authorities regarding marketing approval or material limitations on the marketing of Soliris for PNH and aHUS and other potential indications, delays, interruptions or failures in the manufacture and supply of Soliris and our product candidates, progress in establishing and developing commercial infrastructure, failure to satisfactorily address the issues raised by the FDA in the Warning Letter received by Alexion in March 2013, the possibility that results of clinical trials are not predictive of safety and efficacy results of Soliris in broader patient populations in the disease studied or other diseases, the risk that acquisitions will not result in short-term or long-term benefits, the possibility that current results of commercialization are not predictive of future rates of adoption of Soliris in PNH, aHUS or other diseases, the possibility that clinical trials of our product candidates could be delayed or that additional research and testing is required by regulatory agencies, the risk that third party payors (including governmental agencies) will not reimburse or continue to reimburse for the use of Soliris at acceptable rates or at all, the risk that estimates regarding the number of patients with PNH, aHUS or other diseases are inaccurate, and a variety of other risks set forth from time to time in Alexion's filings with the US Securities and Exchange Commission, including but not limited to the risks discussed in Alexion's Quarterly Report on Form 10-Q for the period ended June 30, 2013 and in our other filings with the US Securities and Exchange Commission. Alexion does not intend to update any of these forward-looking statements to reflect events or circumstances after the date hereof, except when a duty arises under law. In addition to financial information prepared in accordance with GAAP, this news release also contains non-GAAP financial measures that Alexion believes, when considered together with the GAAP information, provide investors and management with supplemental information relating to performance, trends and prospects that promote a more complete understanding of our operating results and financial position during different periods. The non-GAAP results exclude the impact of the following GAAP items: share-based compensation expense, acquisition-related costs, amortization of purchased intangible assets, intellectual property settlements, upfront and milestone payments related to license and collaboration agreements, intangible asset impairments, non-cash taxes, and taxes related to acquisition structuring. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for, or superior to, the financial measures prepared and presented in accordance with GAAP and should be reviewed in conjunction with the relevant GAAP financial measures. Please refer to the attached Reconciliation of GAAP to Non-GAAP Net Income for explanations of the amounts adjusted to arrive at non-GAAP net income and non-GAAP earnings per share amounts for the three and nine month periods ended September 30, 2013 and 2012. ALEXION PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three months ended Nine months ended September 30 September 30 2013 2012 2013 2012 Net product sales $ 400,405 $ 294,136 $ 1,109,437 $ 813,588 Cost of sales: Cost of sales 42,177 33,186 116,823 93,067 Change in contingent liability from 9,181 (53,377 ) 9,181 (53,377 ) intellectual property settlements Total cost of sales 51,358 (20,191 ) 126,004 39,690 Operating expenses: Research and 88,209 54,280 231,308 159,323 development Selling, general 122,886 89,957 354,901 272,054 and administrative Acquisition-related 2,573 967 6,974 19,447 costs Impairment of - 26,300 - 26,300 intangible asset Amortization of purchased 104 104 312 312 intangible assets Total operating 213,772 171,608 593,495 477,436 expenses Operating income 135,275 142,719 389,938 296,462 Other income and (987 ) (1,954 ) (1,646 ) (6,165 ) expense Income before 134,288 140,765 388,292 290,297 income taxes Income tax 40,503 48,586 116,405 116,446 provision Net Income $ 93,785 $ 92,179 $ 271,887 $ 173,851 Earnings per common share Basic $ 0.48 $ 0.48 $ 1.40 $ 0.92 Diluted $ 0.47 $ 0.46 $ 1.37 $ 0.88 Shares used in computing earnings per common share Basic 195,662 193,353 194,520 189,219 Diluted 199,711 201,142 198,655 197,635 ALEXION PHARMACEUTICALS, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS (in thousands, except per share amounts) (unaudited) Three months ended Nine months ended September 30 September 30 2013 2012 2013 2012 Net income reconciliation: GAAP net income $ 93,785 $ 92,179 $ 271,887 $ 173,851 Share-based 21,597 14,015 56,409 40,322 compensation expense Acquisition-related 2,573 967 6,974 19,447 costs (1) Amortization of purchased intangible 104 104 312 312 assets Change in contingent liability from 9,181 (53,377 ) 9,181 (53,377 ) intellectual property settlements (2) Upfront and milestone payments related to license and 11,500 - 14,500 - collaboration agreements (3) Impairment of - 26,300 - 26,300 intangible asset (4) Non-cash taxes (5) 29,173 40,550 87,194 74,207 Tax related to acquisition structuring - - - 21,812 (6) Non-GAAP net income $ 167,913 $ 120,738 $ 446,457 $ 302,874 GAAP earnings per share $ 0.47 $ 0.46 $ 1.37 $ 0.88 - diluted Non-GAAP earnings per $ 0.83 $ 0.60 $ 2.21 $ 1.52 share - diluted Shares used in computing diluted 199,711 201,142 198,655 197,635 earnings per share (GAAP) Shares used in computing diluted 202,988 202,377 201,886 198,953 earnings per share (non-GAAP) Cost of sales reconciliation: GAAP cost of sales $ 51,358 $ (20,191 ) $ 126,004 $ 39,690 Share-based (757 ) (664 ) (2,349 ) (1,939 ) compensation expense Change in contingent liability from (9,181 ) 53,377 (9,181 ) 53,377 intellectual property settlements (2) Non-GAAP cost of sales $ 41,420 $ 32,522 $ 114,474 $ 91,128 Research and development reconciliation: GAAP research and $ 88,209 $ 54,280 $ 231,308 $ 159,323 development Share-based (7,803 ) (3,643 ) (17,961 ) (10,373 ) compensation expense Upfront and milestone payments related to license and (11,500 ) - (14,500 ) - collaboration agreements (3) Non-GAAP research and $ 68,906 $ 50,637 $ 198,847 $ 148,950 development Selling, general and administrative reconciliation: GAAP selling, general $ 122,886 $ 89,957 $ 354,901 $ 272,054 and administrative Share-based (13,037 ) (9,708 ) (36,099 ) (28,010 ) compensation expense Non-GAAP selling, general and $ 109,849 $ 80,249 $ 318,802 $ 244,044 administrative Income tax provision reconciliation: GAAP income tax $ 40,503 $ 48,586 $ 116,405 $ 116,446 provision Non-cash taxes (5) (29,173 ) (40,550 ) (87,194 ) (74,207 ) Tax related to acquisition structuring - - - (21,812 ) (6) Non-GAAP income tax $ 11,330 $ 8,036 $ 29,211 $ 20,427 provision (1) The following table summarizes acquisition-related costs: Three months ended Nine months ended September 30 September 30 2013 2012 2013 2012 Acquisition-related costs: Separately-identifiable $ - $ 457 $ 248 $ 3,552 employee costs Professional fees - 1,052 775 11,562 Changes in fair value of contingent 2,573 (542 ) 5,951 4,333 consideration $ 2,573 $ 967 $ 6,974 $ 19,447 In October 2013, the Company entered into a litigation settlement and (2) license agreement, which resulted in an increase of $9.2 million in cost of sales. In October 2012, the Company entered into an intellectual property settlement and license agreement, which resulted in a decrease of $53.4 million in cost of sales. In July 2013, the Company entered into a license and collaboration agreement for the identification, development, and commercialization of (3) therapeutic candidates based on specific drug targets. Under the terms of the agreement, the Company recorded research and development expense for an upfront payment of $11.5 million. In January 2013, the Company entered into a license agreement for specific targets and products to be developed. Under the terms of the agreement, the Company recorded research and development expense for an upfront payment of $3.0 million. During the three months ended September 30, 2012, the Company recorded (4) an impairment of an intangible asset of $26.3 million related to a preclinical program. Non-cash taxes represents the adjustment from GAAP tax expense to the (5) amount of taxes that are payable in cash. The adjustment includes tax amounts that are not currently payable in cash due to the continued utilization of our US net operating losses and credits. The tax provision for the nine months ended September 30, 2012 includes (6) tax expense of $21.8 million related to the structuring of the Enobia acquisition. ALEXION PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) September 30, December 31, 2013 2012 Cash and cash equivalents $ 910,411 $ 989,501 Marketable securities 392,344 - Trade accounts receivable, net 404,956 295,598 Inventories 105,196 94,521 Deferred tax assets, current 23,820 26,086 Other current assets 78,775 89,894 Property, plant and equipment, net 178,842 165,629 Deferred tax assets, noncurrent 9,743 13,954 Intangible assets, net 646,138 646,678 Goodwill 254,073 253,645 Other noncurrent assets 45,497 38,054 Total assets $ 3,049,795 $ 2,613,560 Accounts payable and accrued expenses $ 280,200 $ 271,275 Current portion of long-term debt 48,000 48,000 Other current liabilities 67,256 40,814 Long-term debt, less current portion 77,000 101,000 Contingent consideration 144,621 139,002 Other noncurrent liabilities 77,952 42,619 Total liabilities 695,029 642,710 Total stockholders' equity 2,354,766 1,970,850 Total liabilities and stockholders' $ 3,049,795 $ 2,613,560 equity Contact: Alexion Pharmaceuticals, Inc. Irving Adler, 203-271-8210 Executive Director, Corporate Communications or Kim Diamond, 203-439-9600 Senior Director, Corporate Communications or Investors Rx Communications Rhonda Chiger, 917-322-2569
Alexion Reports Third Quarter 2013 Results
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