No One-Trick Pony: Alexion’s Evolution Into A Multi-Asset Drug Company

Alexion has been recognized mainly as the marketer of Soliris since 2007, but in just eight weeks the rare disease specialist added two new drugs to its commercial portfolio. Management also laid out an impressive early- to mid-stage pipeline during its first-ever investor day, suggesting the company is well positioned for long-term growth.

Alexion Pharmaceuticals Inc. has had an impressive eight-year run with Soliris (eculizumab), building its one and only drug into a blockbuster by doggedly identifying new patients around the world with its two rare disease indications and securing reimbursement despite the drug’s exorbitant price – largely because of the breakthrough nature of the product and the ultra-small patient populations it targets.

Investors, pleased with Alexion's’ track record, have nonetheless been anxious to see the rare disease specialist diversify beyond a single product, especially as Soliris continues to penetrate its existing indications. Now, Wall Street’s wish has been granted.

In the span of just eight weeks, Alexion has had not one, but two new drugs approved by FDA, both for debilitating ultra-rare diseases. The company held its first-ever investor day Dec. 10, two days after the second approval, taking advantage of the momentum to outline an impressive early-stage pipeline. The biotech appears to have a long tail for growth as it moves into a new phase as a multi-asset drug company.

The company’s stock has been riding the positive wave, regaining some of the ground it lost in 2015, up 16% since the Oct. 23 approval of Strensiq (asfotase alfa), the first of the two new drugs approved by FDA. The stock closed Dec. 15 at $186.21.

A New Franchise In Metabolic Rare Disease

Strensiq, a tissue nonspecific alkaline phosphatase, is the first treatment for perinatal-, infantile- and juvenile-onset hypophosphatasia (HPP), a rare genetic, progressive metabolic disease characterized by defective bone mineralization that can lead to rickets, skeletal abnormalities, profound muscle weakness with loss of mobility, pain and premature death (Also see "Priority Review Voucher Not For Sale, Alexion Says After Strensiq Approval" - Pink Sheet, 2 Nov, 2015.).

The launch of Strensiq marks a foray into metabolic disease, an entirely new commercial platform for Alexion, which has focused mainly on the complement system, a part of the immune system that, when chronically activated, can play a role in diseases.

The second drug approved by FDA is also in the metabolic space. Kanuma (sebelipase alfa) was approved Dec. 8 for treatment of lysosomal acid lipase (LAL) deficiency, an ultra-rare condition that causes multiple organ damage and premature death. Patients with LAL deficiency have little or no LAL enzyme activity (Also see "Alexion Gets Second Priority Review Voucher With Approval Of Rare Enzyme Disorder Drug" - Pink Sheet, 8 Dec, 2015.).

“We’re now building the premier metabolic franchise in rare diseases, and we’re going to continue to look for new opportunities to expand into new franchises,” CEO David Hallal said during the investor presentation. Hallal himself represents the transition underway at Alexion. The former chief commercial officer took over the CEO post from company founder and 23-year veteran CEO Leonard Bell earlier this year in a planned succession. Bell remains chairman of the board.

Alexion gained both Strensiq and Kanuma via acquisition, part of an initiative to strengthen the company’s late-stage portfolio and build out its early-stage pipeline.

The firm paid handsomely to get its hands on the late-stage drugs, putting pressure on the company to turn them into blockbusters on par with Soliris. Alexion paid $8.4bn to acquire Synageva BioPharma Corp., the maker of Kanuma, earlier this year when the drug was already pending at FDA (Also see "Alexion Uses Excess Cash To Buy Strikingly Similar Synageva" - Pink Sheet, 6 May, 2015.). Alexion gained Strensiq in 2012, when it was in Phase II development, with the acquisition of Enobia Pharma Inc. for $610m up front plus milestones (Also see "Alexion Pumps Up Its Rare Disease Portfolio With Enobia Acquisition" - Pink Sheet, 29 Dec, 2011.).

The deals have been pivotal elements of Alexion’s strategy to reduce its dependence on Soliris, which despite future growth opportunities, could decelerate and eventually face competition. The drug’s composition of matter patent expires in 2021, and at least one company, Alnylam Pharmaceuticals Inc., is developing a rival drug (Also see "Alnylam Advancing From Platform Buzz To Late-Stage Clinical Work" - Pink Sheet, 21 Dec, 2015.).

Alnylam’s RNA-interference therapeutic ALN-CC5 is in development to treat paroxysmal nocturnal hemoglobinuria (PNH), Soliris’ first approved indication (Also see "Alnylam Going After Alexion's Soliris In PNH, Eyes Roche In Hemophilia" - Pink Sheet, 10 Dec, 2015.). Soliris is also approved for atypical hemolytic uremic syndrome (aHUS). The drug generated $2.1bn in 2014 and is on track to generate about $2.5bn in 2015, according to Alexion’s forecasts.

Soliris Expansion And A Next-Generation Drug On The Horizon

Alexion, meanwhile, is continuing to study Soliris in new indications, and sees plenty of growth potential for the brand ahead.

“We see that the opportunity to serve patients with PNH and aHUS is largely still in front of us, despite the success that we have had at this point,” Hallal said.

The company is studying Soliris in new indications, including neuromyelitis optica spectrum disorders (NMOSD), generalized myasthenia gravis (gMg), delayed graft function (DGF), and prevention of antibody mediated rejection (AMR) in living-donor kidney transplant recipients. Phase III trials are underway in NMOSD, gMg and DGF, with registration targeted for gMg and DGF in 2016.

Beyond eculizumab, the company has set its sights on a next-generation anti-C5 antibody ALXN1210, which could have the potential for monthly dosing. It is currently being tested in a Phase I/II trial and a second Phase II study, which will study maintenance dosing every four weeks, as well as longer dosing intervals, in patients with PNH.

The primary endpoint of both trials is LDH reduction. Results from the Phase II studies are expected in 2016, which will inform the Phase III development. Alexion has targeted registration for ALXN1210 in PNH in 2018. Indeed, the importance of this drug to the long-term prospects of Alexion is such that some are speculating the company will use one of the two pediatric rare disease vouchers it secured from FDA with the recent approvals to speed the FDA review.

Altogether, Alexion has 10 programs in clinical development, four of which are indication-expansion studies for Soliris and are furthest along in development. The company’s ambition is to deliver up to six new approvals by 2018 and advance four new molecules into the clinic in 2016.

Alexion’s Expanding Rare Disease Pipeline
Early Clinical	Advanced Clinical
ALXN1210 (PNH)	Eculizumab (gMg)
ALXN5500 (PNH)	Eculizumab (NMOSD)
ALXN1007 (graft-versus-host disease involving the lower gastrointestinal tract, GI-GVHD)	Eculizumab (DGF)
ALXN1007 (antiphospholipid syndrome, APS)	Eculizumab (AMR)
SBC-103 (MPSIIIB)
ALXN1101 (cPMP replacement therapy for molybedenum cofactor deficiency Type A)
Source: Alexion Investor Day, Dec. 10, 2015

Analysts largely were impressed by the breadth of Alexion’s pipeline following the investor day. “Our thesis has been that Alexion must diversify its ultra-orphan product platform in order to attract a broader ownership base,” UBS analyst Matthew Roden wrote in a Dec. 10 note. “Now, with three early products on the market and increasing visibility into pipeline advancements through and into the clinic, we reiterate our Buy rating on an improved catalyst calendar in 2016.”

Roden forecast Alexion will grow at a compound annual growth rate of 21% between 2015 and 2018, in an estimate that he said includes only minimal Soliris label expansion assumptions.

Early Excitement Over SBC-103

An earlier-stage drug getting a lot of attention from investors is SBC-103, an enzyme-replacement therapy for patients with mucopolysaccharidosis IIIB (MPS-IIIB), a devastating and progressive autosomal recessive lysosomal storage disease caused by deficiency of the enzyme known as NAGLU. The enzyme deficiency leads to the buildup of abnormal amounts of heparan sulfate in the brain and other organs, resulting in severe cognitive decline, behavioral problems and premature death.

What is arguably most exciting about SBC-103 is that it appears to cross the blood-brain barrier, whereas most enzyme-replacement therapies cannot. Crossing the blood-brain barrier is critical in this instance, since the central nervous system manifestations of the disease are the most devastating.

The program originated at Synageva and is based on the same protein-production system, using egg whites, that led to the development of Kanuma. The platform can produce proteins very similar to human proteins, including one mannose-6-phosphate, a protein that is permitted to cross the blood-brain barrier.

“The obvious question is, if we made NAGLU using this system, would it have mannose-6-phosphate in it? Could it get into the brain,” Senior VP-Research Stephen Uden said. The answer in preclinical testing has been yes. The company initiated a clinical trial this summer, evaluating heparan sulfate levels in bodily fluids, mainly cerebral spinal fluid, as a biomarker and brain size via MRI. Early results showed CSF heparan sulfate is reduced in the treated patients, with a dose response.

“This is unprecedented,” Uden said. “There’s not been a therapy that’s managed to reduce heparan sulfate in MPS IIIB to date.”

Alexion is looking to return to the clinic with a higher dose of the drug for testing. The company still needs to collect MRI and developmental data on the initial patients, and will increase dosing of the existing patients from 3 mg/kg to 5 mg/kg and 10 mg/kg.

Global Head of R&D Martin Mackay called out SBC-103 as one of the pipeline programs he is most enthusiastic about in an interview following the investor presentation.

“These babies are born and everything looks fine and then there is this deterioration, so the ability to use a replacement and something that can get across the blood-brain barrier is amazing,” he said.

Mackay also said the success of the Synageva acquisition has encouraged him to believe Alexion has the capacity to conduct more M&A.

“The really neat thing was it was two companies that are really keen on these types of diseases. Sometimes, you look at a company and they have a couple of things you might be interested in and then a long tail of other things,” Mackay said. “With Synageva, it was Kanuma, very interested in SBC-103, SBC-105 and then this potential cadre of other programs we can use their protein expression for. So that gives me great heart that we can look at other assets, we can look at other technologies.”

Mackay joined the company in 2013 after decades working in big pharma, including a long career at Pfizer Inc. followed by a shorter tenure as President-R&D at AstraZeneca PLC. His primary mandate has been to build Alexion’s R&D engine, something the company has relied heavily on M&A and deal-making to do. In addition to the acquisitions the company has completed, it has also signed several partnerships, including one with Moderna Therapeutics LLC to discover and develop messenger RNA therapeutics. The first mRNA candidate coming out of the partnership is expected to enter the clinic in 2016, Alexion said.

In March, the company signed a collaboration with Blueprint Medicines Corp. to discover and develop drug candidates for an undisclosed activated kinase target that causes a rare disease.

For now, Alexion’s biggest goal will be executing on the launches of two new drugs at once, an especially challenging task in rare diseases where building awareness among physicians of the existence of the disease is an undertaking on its own, not to mention finding and diagnosing the few patients who can benefit from the treatment and securing reimbursement for therapeutics that cost several hundreds of thousands of dollars a year.

The company is also preparing to relocate to its new global headquarters in New Haven, Conn., in early 2016, relocating from the base it has outgrown in Cheshire, Conn. Alexion appears poised for further growth; the question is whether or not it will be blockbuster-sized.