Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) today announced financial results for the quarter and year ended December 31, 2009. For the three months ended December 31, 2009, Alexion Pharmaceuticals, Inc. ("Alexion" or, the "Company") reported net product sales of Soliris® (eculizumab) of $110.6 million, reflecting strong additions of new patients, compared to $77.4 million for the same period in 2008. Net product sales in Q4 2009 increased 8 percent, compared to $102.6 million in Q3 2009, despite a previously anticipated negative impact of approximately $3 million from Euro hedging rates set at lower levels.
“Our global team executed consistently as it focused on patients’ needs, enabling us to exceed our operational, clinical and financial objectives for 2009”
Soliris, approved by the U.S. Food and Drug Administration (FDA) in March 2007 and the European Commission (EC) in June 2007, is the only drug specifically indicated for the treatment of all patients with paroxysmal nocturnal hemoglobinuria (PNH), a rare, debilitating and life-threatening blood disease.
Recognition of Tax Benefit and Reversal of Valuation Allowance
At December 31, 2009, Alexion had U.S. net operating losses (NOLs) of $665 million and research tax credits of $33 million. During Q4 2009, as a result of its sustained profitability and forecasts for future taxable earnings, and in accordance with GAAP, Alexion released the valuation allowance on a substantial portion of its deferred tax assets. The valuation release resulted in the recognition of a non-recurring tax benefit of $215.5 million, which is reflected in the Company’s GAAP results for the fourth quarter. In order to provide comparable information about its earnings, Alexion reported taxes on a cash tax liability basis in Q4 2009 for non-GAAP purposes and will continue to do so during 2010.
Historically, Alexion’s non-GAAP operating results have been equal to GAAP operating results less only the impact of share-based compensation. Additionally, taxes that are not payable in cash (non-cash taxes) are now excluded from non-GAAP results. The following summary table is provided for investors' convenience. A complete reconciliation of the GAAP to non-GAAP figures appears below.
(Thousands of U.S. dollars, except per-share data)
Fourth Quarter Non-GAAP Financial Results:
The Company reported non-GAAP net income of $28.5 million, or $0.31 per share, for the fourth quarter of 2009, compared to non-GAAP net income of $21.1 million, or $0.23 per share, in the fourth quarter of 2008.
Alexion's non-GAAP operating expenses for Q4 2009 were $68.2 million, compared to $48.3 million for Q4 2008. Non-GAAP R&D expenses for Q4 2009 were $20.3 million, compared to $13.6 million for Q4 2008. The increase in R&D expenses primarily reflected the expansion of the Company’s clinical trial programs. Non-GAAP selling, general and administrative (SG&A) expenses for Q4 2009 were $47.9 million, compared to $34.7 million for Q4 2008. The increase in non-GAAP SG&A expenses primarily reflected costs associated with the expansion of the Company's commercial operations in new geographies, particularly Japan, as well as costs associated with an expanded presence at medical conferences.
Fourth Quarter GAAP Financial Results:
Alexion reported GAAP net income of $237.1 million, or $2.59 per share, for the fourth quarter of 2009, including $215.5 million from recognizing the release of the valuation allowance on its deferred tax assets. Excluding the tax benefit, Q4 2009 net income was $21.6 million, or $0.24 per share.
On a GAAP basis, operating expenses for Q4 2009 were $75.1 million, compared to $54.1 million for Q4 2008. GAAP R&D expenses for Q4 2009 were $23.2 million, compared to $15.3 million for Q4 2008. GAAP SG&A expenses were $51.9 million for Q4 2009, compared to $38.8 million for Q4 2008.
Full Year 2009 Non-GAAP Financial Results:
For the year ended December 31, 2009, the Company reported net product sales of Soliris of $386.8 million, an increase of 49% compared to $259.0 million in 2008.
Alexion's non-GAAP operating expenses for the full year 2009 were $225.9 million, compared to $172.4 million for 2008. Non-GAAP R&D expenses for 2009 were $72.9 million, compared to $56.5 million for the prior year. The increase in R&D expenses primarily reflected the expansion of the Company’s clinical trial programs. Non-GAAP SG&A expenses for 2009 were $153.1 million, compared to $115.9 million in 2008. The increase in non-GAAP SG&A expenses primarily reflected costs associated with the expansion of the Company's commercial operations in the U.S., Europe, Japan, Canada, Latin America and Asia-Pacific.
The Company reported non-GAAP net income of $108.4 million in 2009, or $1.18 per share, compared to non-GAAP net income of $56.8 million, or $0.64 per share, in 2008.
Full Year 2009 GAAP Financial Results:
Alexion reported GAAP net income of $295.2 million, or $3.26 per share in 2009, including $215.5 million from the release of the valuation allowance on deferred tax assets. Excluding the tax benefit, 2009 net income was $79.7 million, or $0.88 per share.
On a GAAP basis, operating expenses for 2009 were $254.7 million, compared to $196.1 million for the prior year. GAAP R&D expenses for 2009 were $81.9 million, compared to $62.6 million in 2008. GAAP SG&A expenses were $172.8 million in 2009, compared to $133.5 million for the prior year.
“Our global team executed consistently as it focused on patients’ needs, enabling us to exceed our operational, clinical and financial objectives for 2009,” said Leonard Bell, M.D., Chief Executive Officer of Alexion. “We ended the year with strong momentum to continue achieving our three central growth initiatives: serving more patients in existing countries, expanding into new territories, and advancing our development programs for Soliris.”
As of December 31, 2009, the Company had $176.2 million in cash, cash equivalents and marketable securities compared to $138.0 million at December 31, 2008.
Q4 Research and Development Progress:
During 2009, Alexion made significant progress on advancing the development of Soliris as a treatment for patients suffering from additional rare and severe complement-mediated disorders. There are currently 12 clinical trials underway with Soliris in eight such conditions, with increasing focus in the two lead areas of nephrology and transplant.
Nephrology: Atypical Hemolytic Uremic Syndrome (aHUS)
The Company expects to complete enrollment in its four clinical studies of Soliris as a treatment for patients with aHUS by mid-year 2010. The trials are divided between aHUS patients who are plasma-therapy-sensitive, and those who are resistant to plasma-therapy. Once enrolled, patients are treated with Soliris for 26 weeks. Like PNH, aHUS is a severe, ultra-rare complement-inhibitor deficiency disorder. Because aHUS frequently affects children, often with devastating results, Alexion is developing protocols to study Soliris as a treatment for pediatric patients with aHUS.
Transplant: Acute Humoral Kidney Rejection (AHR)
Soliris is being investigated for the prevention of antibody-mediated rejection, also known as acute humoral rejection, in patients at increased risk. As previously reported, an investigator at the Mayo Clinic is conducting a study of 20 patients undergoing kidney transplantation who are known to be at elevated risk for AHR. Alexion is planning to initiate controlled clinical trials in elevated-risk kidney transplant patients in multiple centers in North America, Europe and Australia. In addition, the Company is now supporting further new investigator-initiated studies in patients at elevated risk of rejection following kidney transplant. Alexion is also developing strategies to investigate the use of Soliris in patients undergoing transplantation of other organs.
In addition to its research initiatives with Soliris, Alexion is developing its anti-CD200 antibody, which was recently assigned the name samalizumab. In this oncology program, the Company remains on track with patient enrollment and dosing in a clinical study of samalizumab in patients with chronic lymphocytic leukemia. The Company is also initiating screening of patients with multiple myeloma as it expands its samalizumab program and is considering trials in rare, solid tumors as well.
The Company’s Rhode Island manufacturing facility has now received final approval from the European Commission to serve as an additional source of supply for commercial Soliris in European countries, which make up more than half of Alexion’s market. Earlier this month, Alexion received clarification from the FDA regarding the agency’s requirements for granting final approval to the Rhode Island facility. Based on this communication, Alexion continues to expect to receive FDA approval of this facility by the end of 2010.
2010 Financial Guidance:
In 2010, worldwide net product sales are expected to be within a range of $505 to $520 million. Gross margin is expected to be in the range of 87 to 88 percent. Excluding share-based compensation, R&D expenses are anticipated to be in the range of $95 to $100 million, and selling, general and administrative expenses in the range of $185 to $195 million. The Company's share-based compensation expenses for the year are expected to be in a range of approximately $32 to $34 million. GAAP taxes are expected to be in a range of 30 percent to 32 percent. Non-GAAP taxes, reported on a cash tax liability basis, are expected to be in the range of 11 percent to 12 percent, compared to 3.3 percent in 2009. Based on this expected non-GAAP tax rate and a forecast of 94 million diluted shares outstanding, Alexion is providing guidance of $1.60 to $1.65 for non-GAAP earnings per share for the year. This guidance represents earnings growth of approximately 40 percent from 2009 to 2010, despite a year-on-year increase in the cash tax rate of approximately 8 percent.
Alexion Pharmaceuticals, Inc.