Market Overview

Alexion Reports First Quarter 2018 Results and Positive Topline Data from ALXN1210 Phase 3 PNH Switch Study

Share:
  • 1Q18 Total Revenues of $930.9 Million, a 7 Percent Increase Over 1Q17
    and a 7 Percent Volume Increase
  • 1Q18 GAAP Diluted EPS of $1.11 Per Share, a 48 Percent Increase Over
    1Q17; Non-GAAP Diluted EPS of $1.68 Per Share, a 22 Percent Increase
    Over 1Q17
  • Strong Launch for Soliris® in Patients with AchR Antibody-Positive
    Generalized Myasthenia Gravis (gMG)
  • Positive Topline Data from ALXN1210 Phase 3 PNH Naive and Switch
    Studies; Regulatory Submissions Planned in the U.S. and EU in Mid-2018
  • Announced Tender Offer to Acquire Wilson Therapeutics as First Step in
    Rebuilding Clinical Pipeline
  • Guidance Updated to Reflect Strength of the Business and Preliminary
    Financial Impact of Announced Tender Offer for Wilson Therapeutics

Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) today announced financial
results for the first quarter of 2018. Total revenues in the first
quarter were $930.9 million, a 7 percent increase compared to the same
period in 2017. First quarter 2017 revenues included a benefit of $49.2
million due to both the recognition of deferred revenue and timing of
orders from certain non-U.S. markets that access Alexion's products
through a tender process. The benefit of foreign currency on total
revenues year-over-year was 2 percent or $13.7 million, net of hedging
activities. On a GAAP basis, diluted earnings per share (EPS) in the
quarter was $1.11 per share, a 48 percent increase versus the prior
year. Non-GAAP diluted EPS for the first quarter of 2018 was $1.68 per
share, a 22 percent increase versus the prior year.

"In the first quarter of 2018 we had strong momentum in our complement
and metabolic portfolios. We continue to see robust underlying growth of
Soliris and I am particularly pleased with the U.S. launch in patients
with gMG. In addition, Strensiq remains a key driver of growth as we
continue to serve new patients with HPP," said Ludwig Hantson, Chief
Executive Officer of Alexion. "Along with growing our in-line business,
we announced positive topline results from both the ALXN1210 Phase 3 PNH
Naive and Switch studies, and executed on our disciplined business
development plan with the anticipated acquisition of Wilson Therapeutics
to begin to rebuild the clinical pipeline. We are delivering on our 2018
objectives to drive sustainable long-term growth and I look forward to
providing updates on our progress throughout the year."

ALXN1210 Phase 3 Switch Study Results

Alexion is also announcing positive topline results of a Phase 3 study
of ALXN1210, the Company's investigational long-acting C5 complement
inhibitor, which show that patients with paroxysmal nocturnal
hemoglobinuria (PNH) can be effectively and safely switched from
treatment with Soliris® (eculizumab) every two weeks to treatment with
ALXN1210 every eight weeks. The study demonstrated non-inferiority of
ALXN1210 to Soliris® in patients with PNH who had been stable on
Soliris® based on the primary endpoint of change in lactate
dehydrogenase (LDH) levels, a direct marker of complement-mediated
hemolysis in PNH. The study also demonstrated non-inferiority on all
four key secondary endpoints: the proportion of patients with
breakthrough hemolysis, the change from baseline in quality of life as
assessed via the Functional Assessment of Chronic Illness Therapy
(FACIT)-Fatigue Scale, the proportion of patients avoiding transfusion,
and the proportion of patients with stabilized hemoglobin levels. In
addition, numeric results for all five endpoints favored ALXN1210.
Notably, no patients treated with ALXN1210 experienced breakthrough
hemolysis compared to five patients treated with Soliris®.

ALXN1210 was generally well tolerated with a safety profile that is
consistent with that seen for Soliris®. The most frequently observed
adverse events were headache and upper respiratory infection. The most
frequently observed serious adverse events were pyrexia, which occurred
in three Soliris® patients, and hemolysis, which occurred in two
Soliris® patients. No patient withdrew from the study due to adverse
events. No treatment-emergent anti-drug antibody was observed for
ALXN1210; one was observed for Soliris®. No neutralizing antibodies and
no apparent effects on efficacy, safety, pharmacokinetics, or
pharmacodynamics were detected. There were no cases of meningococcal
infection observed in either the ALXN1210 or Soliris® arms.
Meningococcal infections are a known risk with terminal complement
inhibition, and specific risk-mitigation plans have been in place for
ten years for Soliris® to minimize the risk for patients.

Detailed results from this Phase 3 study will be presented at a future
medical congress.

"Once again ALXN1210 met the high bar set by Soliris in a second, large
Phase 3 study. Importantly, we now have robust data that patients with
PNH can effectively and safely transition from Soliris to ALXN1210,"
said John Orloff, M.D., Executive Vice President and Head of Research &
Development at Alexion. "We are very pleased that the totality of the
Phase 3 PNH data in more than 440 patients, which included patients who
had never received a complement inhibitor and patients who were stable
on Soliris and switched to ALXN1210, shows numeric results favoring
ALXN1210 across all primary and key secondary endpoints, including
breakthrough hemolysis. We believe that the differentiated profile of
ALXN1210 could be a meaningful improvement for patients and clinicians
and look forward to moving rapidly to global regulatory filings in the
U.S. and EU in mid-2018, followed by Japan later in the year."

First Quarter 2018 Financial Highlights

  • Soliris® (eculizumab) net product sales were $800.1 million, compared
    to $783.5 million in the first quarter of 2017, representing a 2
    percent increase. Soliris® volume increased 2 percent year-over-year.
  • Strensiq® (asfotase alfa) net product sales were $110.7 million,
    compared to $73.6 million in the first quarter of 2017, representing a
    50 percent increase. Strensiq® volume increased 58 percent
    year-over-year.
  • Kanuma® (sebelipase alfa) net product sales were $19.6 million,
    compared to $12.0 million in the first quarter of 2017, representing a
    63 percent increase. Kanuma® volume increased 58 percent
    year-over-year.
  • GAAP cost of sales was $91.6 million, compared to $69.0 million in the
    same quarter last year. Non-GAAP cost of sales was $83.0 million,
    compared to $64.5 million in the same quarter last year.
  • GAAP R&D expense was $176.6 million, compared to $219.5 million in the
    same quarter last year. Non-GAAP R&D expense was $161.6 million,
    compared to $194.4 million in the same quarter last year.
  • GAAP SG&A expense was $257.1 million, compared to $261.8 million in
    the same quarter last year. Non-GAAP SG&A expense was $220.4 million,
    compared to $226.1 million in the same quarter last year.
  • GAAP income tax expense was $102.5 million, compared to $23.9 million
    in the same quarter last year. Non-GAAP income tax expense was $68.6
    million, compared to $50.8 million in the same quarter last year.
  • GAAP diluted EPS was $1.11 per share, compared to $0.75 per share in
    the same quarter last year. Non-GAAP diluted EPS was $1.68 per share,
    compared to $1.38 per share in the first quarter of 2017.

Research and Development

  • ALXN1210- Paroxysmal Nocturnal Hemoglobinuria (PNH): In the
    pivotal Phase 3 study of ALXN1210 administered intravenously every
    eight weeks, ALXN1210 achieved non-inferiority to Soliris® in
    complement inhibitor treatment-naive patients with PNH based on the
    co-primary endpoints of transfusion avoidance and normalization of LDH
    levels. The study also demonstrated non-inferiority on all four key
    secondary endpoints. In addition, ALXN1210 achieved non-inferiority on
    the primary and all four key secondary endpoints in the Phase 3 PNH
    Switch study of ALXN1210 administered intravenously every eight weeks
    compared to patients currently treated with Soliris®. Alexion plans to
    file for regulatory approval for ALXN1210 in patients with PNH in the
    U.S. and EU in mid-2018, followed by Japan later in the year.

    Alexion
    is enrolling pediatric PNH patients in a Phase 3 trial of ALXN1210;
    this study includes patients who have never received treatment with a
    complement inhibitor and those who enter the study stabilized on
    Soliris®.
  • ALXN1210- Atypical Hemolytic Uremic Syndrome (aHUS): Enrollment
    and dosing are ongoing in a Phase 3 trial with ALXN1210 administered
    intravenously every eight weeks in complement inhibitor
    treatment-naive adolescent and adult patients with aHUS. Enrollment is
    expected to be complete in the second quarter of 2018 and Alexion
    expects to report data from this study in the fourth quarter of 2018.
    Enrollment and dosing are also ongoing in a Phase 3 trial of ALXN1210
    in pediatric patients with aHUS.
  • ALXN1210- Subcutaneous: In late 2018 Alexion plans to
    initiate a single, PK-based Phase 3 study of ALXN1210 delivered
    subcutaneously once per week to support registration in PNH and aHUS.
    The Company also plans to use Halozyme's ENHANZE®
    drug-delivery technology to develop a next-generation subcutaneous
    formulation of ALXN1210 to potentially further extend the dosing
    interval to once every two weeks or once per month.
  • Soliris® (eculizumab)- Relapsing Neuromyelitis Optica Spectrum
    Disorder (NMOSD):
    Enrollment is complete in the PREVENT study, a
    single, multinational, placebo-controlled Phase 3 trial of Soliris® in
    patients with NMOSD. Alexion expects to report data by the end of 2018.

Tender Offer for Wilson Therapeutics

On April 11, 2018 Alexion announced that the Company made a recommended
public cash offer to the shareholders of Wilson Therapeutics to acquire
all outstanding shares in Wilson Therapeutics. Wilson Therapeutics is a
biopharmaceutical company, based in Stockholm, Sweden, that develops
novel therapies for patients with rare copper-mediated disorders. Wilson
Therapeutics' product, WTX101, is in Phase 3 development as a treatment
for Wilson disease, a rare genetic disorder with devastating hepatic and
neurological consequences for patients. WTX101 is a first-in-class oral
copper-binding agent with a unique mechanism of action and ability to
access and bind copper from serum and promote its removal from the liver.

The tender offer is expected to complete and the transaction is expected
to close in the second quarter of 2018.

2018 Financial Guidance

Alexion is increasing its revenue guidance, lowering its GAAP EPS
guidance and increasing its non-GAAP EPS guidance. Full guidance updates
are outlined below.

   
Previous Updated
Total revenues $3,850 to $3,950 million $3,925 to $3,985 million

Soliris revenues

$3,325 to $3,400 million $3,380 to $3,420 million
Metabolic revenues $525 to $550 million $545 to $565 million
R&D (% total revenues)
GAAP 20% to 22% 41% to 44%
Non-GAAP 18% to 20% 18% to 20%
SG&A (% total revenues)
GAAP 26% to 28% 26% to 28%
Non-GAAP 23% to 24% 23% to 24%
Operating margin
GAAP 31% to 34% 8% to 11%
Non-GAAP 48% to 49% 48% to 49%
Earnings per share
GAAP $4.35 to $4.75 $1.35 to $1.75
Non-GAAP $6.60 to $6.80 $6.75 to $6.90
 

2018 financial guidance assumes the following:

  • A foreign currency benefit, net of hedging activities, of $45 million
    to $55 million
  • Unfavorable Soliris® revenue impact of $90 million to $110 million
    from ALXN1210 and other clinical trial recruitment versus prior year
  • GAAP effective tax rate of 16 to 17 percent; non-GAAP effective tax
    rate of 15 to 16 percent
  • GAAP guidance reflects the preliminary financial impact of the
    announced tender offer for Wilson Therapeutics, which Alexion expects
    to account for as an asset acquisition and recognize in research and
    development expenses during the second quarter of 2018. In addition,
    non-GAAP financial guidance includes the preliminary impact of
    operating expenses for Wilson Therapeutics.

Alexion's financial guidance is based on current foreign exchange rates
net of hedging activities and does not include the effect of business
combinations, license and collaboration agreements, asset acquisitions,
intangible asset impairments, changes in fair value of contingent
consideration or restructuring and related activity outside of the
previously announced activities that may occur after the day prior to
the date of this press release.

Alexion expects to incur additional restructuring and related expenses
of approximately $15 million to $80 million related to the Company's
2017 restructuring activities. As the Company continues to execute its
strategic business plan and global footprint, it may incur restructuring
expenses in 2018 that are materially different from the current estimate.

Conference Call/Webcast Information:

Alexion will host a conference call/audio webcast to discuss the first
quarter 2018 results today at 10:00 a.m. Eastern Time. To participate in
the call, dial 888-394-8218 (USA) or 323-701-0225 (International),
passcode 1013806 shortly before 10:00 a.m. Eastern Time. A replay of the
call will be available for a limited period following the call. The
replay number is 888-203-1112 (USA) or 719-457-0820 (International),
passcode 1013806. The audio webcast can be accessed on the Investor page
of Alexion's website at: http://ir.alexion.com.

About the ALXN1210 PNH Switch Study

This Phase 3, open-label, randomized, active-controlled, multicenter
study evaluated the efficacy and safety of ALXN1210 versus Soliris®
administered by intravenous (IV) infusion in 195 adult patients (≥ 18
years of age) with confirmed diagnosis of PNH and LDH levels ≤ 1.5 times
the upper limit of normal (ULN) who had been treated with Soliris® for
at least the past 6 months. ALXN1210 was administered every 8 weeks,
whereas Soliris® was administered every 2 weeks. The 26-week treatment
period is followed by an extension period, in which all patients will
receive ALXN1210 every 8 weeks for up to 2 years.

The primary endpoint investigated hemolysis as directly measured by the
percentage change of LDH levels from Baseline to Day 183. Key secondary
endpoints included the proportion of patients with breakthrough
hemolysis, the change in quality of life assessed via the FACIT-Fatigue
Scale from Baseline to Day 183, transfusion avoidance from Baseline to
Day 183, and the proportion of patients with stabilized hemoglobin
levels from Baseline to Day 183. Breakthrough hemolysis was defined as
at least one new or worsening symptom or sign of intravascular hemolysis
(fatigue, hemoglobinuria, abdominal pain, shortness of breath [dyspnea],
anemia [hemoglobin < 10 g/dL], major adverse vascular event [MAVE,
including thrombosis], dysphagia, or erectile dysfunction) in the
presence of elevated LDH ≥ 2 × ULN. Transfusion avoidance was defined as
the proportion of patients who remain transfusion-free and do not
require a transfusion as per protocol-specified guidelines. A stabilized
hemoglobin level was defined as avoidance of a ≥ 2 g/dL decrease in
hemoglobin level from baseline in the absence of transfusion.

About Alexion

Alexion is a global biopharmaceutical company focused on serving
patients and families affected by rare diseases through the innovation,
development and commercialization of life-changing therapies. Alexion is
the global leader in complement inhibition and has developed and
commercializes the first and only approved complement inhibitor to treat
patients with paroxysmal nocturnal hemoglobinuria (PNH), atypical
hemolytic uremic syndrome (aHUS), and anti-acetylcholine receptor (AchR)
antibody-positive generalized myasthenia gravis (gMG). In addition,
Alexion has two highly innovative enzyme replacement therapies for
patients with life-threatening and ultra-rare metabolic disorders,
hypophosphatasia (HPP) and lysosomal acid lipase deficiency (LAL-D). As
the leader in complement biology for over 20 years, Alexion focuses its
research efforts on novel molecules and targets in the complement
cascade, and its development efforts on the core therapeutic areas of
hematology, nephrology, neurology, and metabolic disorders. This press
release and further information about Alexion can be found at: www.alexion.com.

[ALXN-E]

This press release contains forward-looking statements, including
statements related to guidance regarding anticipated financial results
for 2018,
Alexion's development plans for ALXN1210, the potential
medical benefits of ALXN1210 for the treatment of PNH, Alexion's future
clinical, regulatory, and commercial plans for ALXN1210, plans for
regulatory filings and clinical programs for our other product
candidates, and the timing and potential benefits of the acquisition of
Wilson Therapeutics.
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 the adequacy of our research, marketing approval or material
limitations on the marketing of our products, delays, interruptions or
failures in the manufacture and supply of our products and our product
candidates, failure to satisfactorily address matters raised by the FDA
and other regulatory agencies, the possibility that results of clinical
trials are not predictive of safety and efficacy results of our products
in broader patient populations, the possibility that current rates of
adoption of Soliris® in PNH, aHUS or other diseases are not sustained,
the possibility that clinical trials of our product candidates could be
delayed, the adequacy of our pharmacovigilance and drug safety reporting
processes, the risk that third party payors (including governmental
agencies) will not reimburse or continue to reimburse for the use of our
products at acceptable rates or at all, the possibility that expected
tax benefits will not be realized, assessment of impact of recent
accounting pronouncements, potential declines in sovereign credit
ratings or sovereign defaults in countries where we sell our products,
delay of collection or reduction in reimbursement due to adverse
economic conditions or changes in government and private insurer
regulations and approaches to reimbursement, uncertainties surrounding
legal proceedings, company investigations and government investigations,
including investigations of Alexion by the U.S. Securities and Exchange
Commission (SEC) and U.S. Department of Justice, the risk that
anticipated regulatory filings are delayed, the risk that estimates
regarding the number of patients with PNH, aHUS, gMG, HPP and LAL-D are
inaccurate, the risks of changing foreign exchange rates, risks relating
to the potential effects of the Company's restructuring and relocation
of its corporate headquarters, risks related to the expected acquisition
of Wilson Therapeutics, and a variety of other risks set forth from time
to time in Alexion's filings with the SEC, including but not limited to
the risks discussed in Alexion's Annual Report on Form 10-K for the
period ended December 31, 2017 and in our other filings with the SEC.
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 press 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, fair value
adjustment of inventory acquired, amortization of purchased intangible
assets, changes in fair value of contingent consideration,
acquisition-related costs, restructuring and related expenses, upfront
payments related to licenses, collaborations and asset acquisitions,
impairment of intangible assets, change in value of equity securities
without readily determinable fair values and certain adjustments to
income tax expense. 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 Reconciliations of GAAP to
non-GAAP Financial Results and GAAP to non-GAAP 2018 Financial Guidance
for explanations of the amounts adjusted to arrive at non-GAAP net
income and non-GAAP earnings per share amounts for the three month
periods ended March 31, 2018 and 2017 and projected twelve months ending
December 31, 2018.

Prior year amounts may have been adjusted to conform to current year
rounding presentation.

(Tables Follow)

   
ALEXION PHARMACEUTICALS, INC.
TABLE 1: CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
 
Three months ended
March 31
2018

2017(1)

 
Net product sales $ 930.4 $ 869.1
Other revenue   0.5     0.5  
Total revenues 930.9 869.6
 
Cost of sales 91.6 69.0
 
Operating expenses:
Research and development 176.6 219.5
Selling, general and administrative 257.1 261.8
Amortization of purchased intangible assets 80.0 80.0
Change in fair value of contingent consideration 52.7 3.5
Restructuring expenses 5.5 23.8
   
Total operating expenses   571.9     588.6  
 
Operating income 267.4 212.0
 
Other income and expense:
Investment income 105.8 3.9
Interest expense (24.1 ) (23.5 )
Other income   2.5     1.6  
 
Income before income taxes 351.6 194.0
 
Income tax expense 102.5 23.9
   
Net income $ 249.1   $ 170.1  
 
Earnings per common share
Basic $ 1.12 $ 0.76
Diluted $ 1.11 $ 0.75
 
Shares used in computing earnings per common share
Basic 222.1 224.6
Diluted 223.7 226.2
 

(1) Prior year amounts may have been adjusted to
conform to current year rounding presentation.

   
ALEXION PHARMACEUTICALS, INC.
TABLE 2: RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS
(in millions, except per share amounts)
(unaudited)
 
Three months ended
March 31
2018

2017(5)

 
GAAP net income $ 249.1 $ 170.1
 
Before tax adjustments:
Cost of sales:
Share-based compensation 3.3 1.8
Fair value adjustment in inventory acquired 2.7
Restructuring related expenses (1) 5.3
Research and development expense:
Share-based compensation 14.9 16.2
Upfront payments related to licenses, collaborations and asset
acquisitions
8.9
Restructuring related expenses (1) 0.1
Selling, general and administrative expense:
Share-based compensation 33.1 35.7
Restructuring related expenses (1) 3.6
Amortization of purchased intangible assets 80.0 80.0
Change in fair value of contingent consideration (2) 52.7 3.5
Restructuring expenses (1) 5.5 23.8
Investment income:
Change in value of equity securities without readily determinable
fair values (3)
(100.8 )
Other income:
Restructuring related expenses (1) (0.1 )
Adjustments to income tax expense (4) 33.9 (26.9 )
   
Non-GAAP net income $ 380.6   $ 315.8  
 
GAAP earnings per common share - diluted $ 1.11 $ 0.75
Non-GAAP earnings per common share - diluted $ 1.68 $ 1.38
 
Shares used in computing diluted earnings per common share (GAAP) 223.7 226.2
Shares used in computing diluted earnings per common share (non-GAAP) 226.4 228.5
 

(1)

The following table summarizes the total restructuring and related
expenses recorded by type of activity and the classification within
the Reconciliation of GAAP to non-GAAP Financial Results:
               
Three months ended

Three months ended

March 31, 2018 March 31, 2017
Employee Asset- Employee Asset-
Separation Related Separation Related
Costs Charges Other Total Costs Charges Other Total
Cost of Sales $ - $ 5.3 $ - $ 5.3 $ - $ - $ - $ -
Research and Development 0.1 0.1
Selling, General and Administrative 3.6 3.6
Restructuring Expense 1.0 4.5 5.5 20.8 3.0 23.8
Other Expense       (0.1 )   (0.1 )        
$ 1.0 $ 9.0 $ 4.4   $ 14.4   $ 20.8 $ - $ 3.0 $ 23.8
 
(2) The increase in the expense associated with the Change in the fair
value of contingent consideration for the three months ended March
31, 2018 compared to the same period in 2017 was primarily due to
increases in the likelihood of payments and changes in the expected
timing of payments for contingent consideration.
 
(3) On January 1, 2018, we adopted a new standard that changes the
accounting for equity investments and, as a result, we recognized an
unrealized gain of $100.8 million in investment income during the
first quarter 2018 to adjust our investment in Moderna Therapeutics,
Inc. to fair value.
 
(4) Alexion's non-GAAP income tax expense excludes the tax effect of
pre-tax adjustments to GAAP profit and adjustments to provisional
estimates of the impact of Tax Cuts and Jobs Act we recorded in Q4
2017.
 
(5) Prior year amounts may have been adjusted to conform to current year
rounding presentation.
     
ALEXION PHARMACEUTICALS, INC.
TABLE 3: RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL GUIDANCE
(in millions, except per share amounts and percentages)
(unaudited)
 
Twelve months ended

December 31, 2018(2)

Low High
 
GAAP net income $ 305 $ 395
 
Before tax adjustments:
Share-based compensation 230 210
Upfront payments related to licenses, collaborations and asset
acquisitions (1)
855 855
Amortization of purchased intangible assets 320 320
Change in fair value of contingent consideration 67 67
Restructuring and related expenses 94 29
Change in value of equity securities without readily determinable
fair values
(101 ) (101 )
Adjustments to income tax expense (231 ) (202 )
   
Non-GAAP net income $ 1,539   $ 1,573  
 
Diluted GAAP earnings per common share $ 1.35 $ 1.75
Diluted non-GAAP earnings per common share $ 6.75 $ 6.90
 
Operating expense and margin (% total revenues)
 
GAAP research and development expense 44 % 41 %
Share-based compensation (2 )% (1 )%
Upfront payments related to licenses, collaborations and asset
acquisitions (1)
(22 )% (22 )%
Restructuring related expenses   0 %   0 %
Non-GAAP research and development expense   20 %   18 %
 
GAAP selling, general and administrative expense 28 % 26 %
Share-based compensation (4 )% (3 )%
Restructuring related expenses   0 %   0 %
Non-GAAP selling, general and administrative expense   24 %   23 %
 
GAAP operating margin 8 % 11 %
Share-based compensation 6 % 5 %
Upfront payments related to licenses, collaborations and asset
acquisitions (1)
22 % 22 %
Amortization of purchased intangible assets 8 % 8 %
Change in fair value of contingent consideration 2 % 2 %
Restructuring and related expenses   2 %   1 %
Non-GAAP operating margin   48 %   49 %
 
Income tax expense (% of income before income taxes)
 
GAAP income tax expense 17 % 16 %

Tax effect of pre-tax adjustments to GAAP net income and
adjustments to Q4 2017 tax reform provisional accounting

  (1 )%   (1 )%
Non-GAAP income tax expense   16 %   15 %
 
(1) Represents the previously announced recommended public cash offer
for Wilson Therapeutics.
 
(2) GAAP guidance reflects the preliminary financial impact of the
announced tender offer for Wilson Therapeutics, which Alexion
expects to account for as an asset acquisition and recognize in
research and development expenses during the second quarter of 2018.
In addition, non-GAAP financial guidance includes the preliminary
impact of operating expenses for Wilson Therapeutics.
   
ALEXION PHARMACEUTICALS, INC.
TABLE 4: NET PRODUCT SALES BY GEOGRAPHY
(in millions)
(unaudited)
 
Three months ended
March 31
2018

2017(1)

Soliris

United States $ 336.0 $ 288.1
Europe 250.8 241.4
Asia Pacific 85.5 78.8
Rest of World   127.8   175.2  

Total Soliris

$ 800.1 $ 783.5  

Strensiq

United States $ 89.2 $ 63.3
Europe 14.0 5.1
Asia Pacific 5.7 3.7
Rest of World   1.8   1.5  
Total Strensiq $ 110.7 $ 73.6  

Kanuma

United States $ 11.9 $ 8.7
Europe 5.9 1.8
Asia Pacific 1.0 0.5
Rest of World   0.8   1.0  
Total Kanuma $ 19.6 $ 12.0  
 

Net Product Sales

United States $ 437.1 $ 360.1
Europe 270.7 248.3
Asia Pacific 92.2 83.0
Rest of World   130.4   177.7  
Total Net Product Sales $ 930.4 $ 869.1  
 
(1) Prior year amounts may have been adjusted to conform to current year
rounding presentation.
     
ALEXION PHARMACEUTICALS, INC.
TABLE 5: CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
 
March 31 December 31
2018

2017(2)

Cash and cash equivalents $ 511.8 $ 584.4
Marketable securities 1,079.1 889.7
Trade accounts receivable, net 776.7 726.5
Inventories 456.5 460.4
Prepaid expenses and other current assets 327.9 292.9
Property, plant and equipment, net 1,379.3 1,325.4
Intangible assets, net 3,874.1 3,954.4
Goodwill 5,037.4 5,037.4
Other assets   387.4   312.2  
Total assets $ 13,830.2 $ 13,583.3  
 
Accounts payable and accrued expenses $ 639.9 $ 710.2
Current portion of long-term debt 167.5 167.4
Current portion of contingent consideration 68.8
Other current liabilities (1) 65.8 74.9
Long-term debt, less current portion 2,678.8 2,720.7
Contingent consideration 152.8 168.9
Facility lease obligation 350.2 342.9
Deferred tax liabilities 442.7 365.0
Other liabilities   151.0   140.2  
Total liabilities   4,717.5   4,690.2  
Total stockholders' equity (1)   9,112.7   8,893.1  
Total liabilities and stockholders' equity $ 13,830.2 $ 13,583.3  
 
(1)

In May 2014, the Financial Accounting Standards Board issued a
comprehensive new standard which amends revenue recognition
principles.  We adopted this standard in the first quarter
2018.  Upon adoption of the new standard, we reduced our deferred
revenue balance reported in Other current liabilities by $10.4
million, with an offsetting increase of $6.0 million in retained
earnings due to the cumulative impact of adopting this new
standard.  The adjusted deferred revenue balance, as of January 1,
2018, was $5.5 million.  We recognized this amount in revenue
during the three-months ended March 31, 2018.

 
(2) Prior year amounts may have been adjusted to conform to current year
rounding presentation.

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