Q2 2020 Alexion Pharmaceuticals Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to a let's see on Pharmaceuticals second quarter 2020 results conference call.
This time, that's been find sort of listen only mode.
After the speakers presentation, there will be a question answer session to ask a question during the session you any depressed start and then one on your telephone.
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No it began the costs or what's your speaker today, Mr., Christy, though head of Investor Relations. Sir you may begin.
Thank you operator.
Good morning.
Good for joining us on todays call to discuss elections performance kind of second quarter of 2020.
Just as we did last quarter, we're practicing physical distancing under each doing the call from home.
Today's call will be led by Ludwick Hanson our CEO.
Well, we joined by Radnets Herron, our Chief Financial Officer.
John Orloff for global head of R&D.
Brian call, our chief commercial and global operations Officer.
We will begin the call with a brief presentation and we'll reserve the rest of the time for your question.
You can access the webcast slides that will be presented on this call and other earnings materials like going to be events section of our Investor Relations page on our website.
Before we begin I would like to point out that we'll be making forward looking statements.
These statements involve certain risks and uncertainties that could cause our actual results to differ materially.
Let's take a look at the risk factors discussed in are actually see filings or additional detail.
These forward looking statements apply only as of today.
We undertake no duty to update any of the statements after the call except as required by law.
I'd also like to remind you that we will be using non-GAAP financial measures, which we believe provide useful information with the understanding of our ongoing business performance.
Reconciliations of our financial results and financial guidance are included in our press release.
These non-GAAP financial measures should be considered ambition to but not a substitute for our GAAP results.
Thank you with that I'm happy to give you our CEO Ludwig.
Thank you, Chris and good morning, everyone.
I'm pleased to Cheryl second quarter performance.
The last several months have tested the global community health care systems worldwide and individuals and families around the world.
We know the rare disease community has been greatly impacted we remain committed to supporting them.
Our ability to successfully navigate through this challenging time is the result of strong execution against the contingency plan, we developed at the beginning of depend damage.
This will guide us that's been force.
Well continue performance demonstrates the overall strength of the business and the resilience of the organization.
I'd like to thank our employees worldwide for their hard work and relentless commitment to our mission of transforming the lives of people were bad diseases and devastating condition.
Turning to the progress we had Nathan the second quarter.
We have to live with another very strong financial performance.
20% revenue growth and 18% non-GAAP EPS growth year over year.
As a result, we have increased almost full year financial guidance to reflect the momentum of the business.
Driven by continued execution demonstrate the commercial excellence and a growing pipeline weve entered a new stage for the company one off diversified growth and financial flexibility.
As part of this evolution, we actively with you all lumped <unk> plan to assess the most compelling capital allocation strategy industry landscape and business development opportunities to ensure we support the areas of high school potential for value creation.
As a result of the company's continued progress over the last three years, we now have the ability to be more flexible in how we deploy capital.
What confidence in a pipeline and all future well able to make a multiyear commitments to return more value to shareholders.
We have significantly increase so free cash flow over the last few years.
They're not committing to a minimum share we fortune 500.
Thats another $50 million 2020.
At least an average of one third of free cash flow annually from 2021 to 2020 suite.
Also continues to be opportunistic above this commitment.
As you May recall last year, we laid out a multiyear strategy for value creation, which sweep primary areas of focus.
The first revolves around the leadership and complement.
We have achieved initial ambition in this area by establishing commitments as a market leader MPN age with more than 70% come doors and indeed, let's.
We launched opening that's what eight U.S. and U.S. last October and on track to achieve our goal 70% conversion, what's the lygus within two years.
The German launch an H.U.S. is just getting started falling last month European Commission decision and a Japanese team is preparing for approval later this year.
In addition, we continue to advance efforts to improve patient treatment experience. When we see positive piece tweet noninferiority data for ultra Mears once weekly Subcu formulation, which will provide an additional treatment choice for patients.
Next well broadening of C. Five train size into new and expanded deputy carrier.
We began this expansion wouldn't technology, which has already grown into a largest franchise in do you want.
We continued to build on this momentum and on track to quadruple the number off you ethanol when she patients treated like 2025.
In addition.
Phase three old Samir studies in N G and Im always D and email list all underway.
We plan to begin additional late stage trials in several new indications later this year.
Sure.
We have significantly diversified our development and commercial stage portfolio to discipline business development.
Earlier this month, we completed the acquisition of books, all up and we're very excited to welcome our new colleagues into the organization.
Forward to advancing off shelf mission of developing transformative therapies together.
Collectively we have made great strides advancing in transforming alexia.
They have built a strong foundation for the future.
Oh I play now includes 20 development programs up from four at the end of 27 team.
The potential for 10 launches by 2020 each week.
As a result from the strong foundation, we have established.
We're also well position to continue delivering no ambition of double digit revenue growth.
We believe significant value lies ahead.
We continue to execute on a strategy to create shareholder value.
We've made substantial progress thus far and have created a strong foundation upon which we can continue to deliver.
Importantly, our journey continues as we remain focused on driving long term value for shareholders.
That's a will not trying to coal over two or on a.
Right now.
Thank you for the bank.
Starting with slide nine we reported second quarter total revenues of approximately 1.4 billion, an increase of 20% year over year.
Yeah, so used to but the momentum we saw over the quarter, which was driven by strength in our new biology franchise onto Neil rose in the core be an ancient Egypt, each U.S. businesses and volume growth in our metabolic business.
Operating margins trend continued in Q2, non-GAAP operating margin of 50%.
Non-GAAP EPS was $3.11, representing 18% growth year over year, driven primarily by strong topline growth.
Moving to slide 10.
Second quarter total net product sales were primarily driven by volume growth across each of our medicine key markets.
Turning to slide 11, so let us revenues in the second quarter was approximately 976 million.
Year over year Solaris revenue was flat.
Well, just Solaris and urology indications was offset by conversions to ultra marathon and be an age and a difficult issue last.
Also nurse revenue in the second quarter was 251 million, including contribution from the ongoing launches in Egypt H.U.S.
As a reminder, we made the strategic decision to noteworthy angle for patient ameresco compared to Solaris.
In the maintenance Phase also nurse represents 10%, 30% lower annual cost for patients come back to Solaris for be an ancient Egypt, each U.S. patients respectively.
Total C. Five franchise revenues were 1.2 billion, an increase of 19% year over year.
Minimal revenue for the second quarter was to have an 18 million representing 30% growth versus prior year driven by volume.
On the right. This line, we highlight DEXA historical revenues as reported by Formula which are not included in Alexia else himself.
Second quarter, Andexxa estimated sales, which have not been conform to Alex you all the accounting policies were adversely impacted by Colvin related demand productions.
Turning to the BNL on slide 13.
During the quarter non-GAAP R&D expense was 205 million, 40% or revenues.
Non-GAAP, she any expense was 254 million or 18% revenues.
The non-GAAP effective tax rate in the quarter was approximately 15%.
Non-GAAP second quarter, yes, $3, an 11 cents growing 18% year over year.
During the second quarter the company revised its strategic deals can do math based on onto new challenges expanding patient growth and new alternatives commercial opportunities.
This resulted in reduced long from cash flow projections and impairment on consumer intangible assets.
I think 2 billion.
As a result, GAAP earnings per share with a loss of $4 any four cents.
We ended the second quarter with approximately 2.9 billion in cash and marketable securities and repurchased approximately 3.6 million shares at a cost of 361 million during the first half twentytwenty.
Now moving to slide 14, I like to provide an update to our twentytwenty full year guidance.
I've mentioned, we closed the acquisition of Portola in early July.
And we've learned a lot over the past three months as we continue to navigate through the global carbon 19 sendak.
As a reminder, we lowered our guidance in the first quarter would be assumption that we would start to see gradually opening.
Care system Obama build in July.
I will now walk you through how all the guidance has evolved since that time.
Starting with the top line, we're increasing our revenue guidance to 5.550 billion to 5.6 billion for the full year, what are the midpoint for flat, 12% growth over 20 Nike.
And don't have product revenue.
Updated guidance for Solaris and ultimately S 4.725 billion 4.755 billion.
Guidance for metabolic business is now 785 million to 800 million.
We also expect DEXA revenues of 40 million to 45 million for the second half Twentytwenty.
Second quarter showed that compliance wage remain similar to please hold levels across all our indications.
We also continued to see strong ultimate conversion in light of the advantages, but every eight week dosing regimen.
Well just wanted to monitor the impact of the falling over the remainder of the here.
Access to medical care, rather than though.
Compliance we call syndications.
Q of new patient starts.
You must be ever make given fluctuating unemployment rates and continued to covert case growth and a potential second wave.
Non-GAAP operating margin is expected to be between 50 tweet and 54% of revenues.
Non-GAAP R&D expense is expected to be between 16.5%, 17.5% just slightly above our prior guidance.
Non-GAAP she any spend is expected to be 21% to 22% of revenues and includes investments for index. So following the close of the portfolio acquisition.
The best in class margins reflect the addition of approximately 125 million of Opex relating to Portola.
GAAP EPS is expected to be between 96 cents on a dollar so.
Non-GAAP EPS is expected to be between $10 and 65 and $10 a 95 cents.
Despite the fact that portal that estimated to be about 42 cents dilutive the midpoint reflect an increase over both plateau for her and initial twentytwenty non-GAAP EPS guidance.
The strength of our underlying business performance.
Oh, that's to absorb the fortune dilution from the portal that transaction.
Longer term, we still expect Endesa to achieve peak sales of at least 600 million and profitable at the aligned with historical Alexey on margin.
As mentioned earlier this morning, we're updating our capital allocation strategy.
Since 2017, we've significantly grown our business with robust improvements in both topline and free cash flow.
We've made significant investments in our R&D portfolio transforming yet from just a handful C. Five programs 2017 to one that now includes 20 tenneco stage programs across 11 assets.
I think before we would continue to invest in our existing pipeline to drive long term value for patients and shareholders alike.
Slide 16 highlights our updated commitment.
You just as a result of the pipeline progress and confidence that I, just mentioned that allows us to shift our capital allocation strategy to a more balanced approach.
At this time, we are announcing our intention to repurchase at least 500 to 550 million shares twentytwenty.
We would increase this to a minimum of want her of our free cash flows on an average annually from 20 to 21 to Twentytwenty to me.
We will opportunistically consider additional repurchases above this amount at the market and business development landscape evolves.
Well disciplined BD remains far first strategy in the near term, we're focused on integrating and creating value from the portal that transaction.
To this end in addition to the 1 billion share repurchase authorization approved and October 2019.
Board approved a further 1.5 billion authorization in support of this effort to maximize shareholder value.
I will now turn the call over to John to provide an update on our R&D activities.
Thank you are right now starting on slide 18, you can see our current development portfolio and the significant evolution. It has undergone since 2017, resulting in a robust clinical stage pipeline today.
This year, we've made significant progress in advancing our programs. Despite the challenges posed by coping 19.
In the quarter, we received approval for ultra mirrors in atypical. It's you asked in the U.
Importantly, we also reported positive topline results from our once weekly subcutaneous Altamira trial and are on track to fall in the third quarter 2021. After the 12 month safety data and drug device combination data are collected.
It has the opportunity to be the first subcutaneous treatment option for both teenage an atypical H.U.S. and provides an additional treatment choice for patients who prefer to self administer their medicine.
Following the transaction close earlier this month, we have been busy integrating portola as R&D activities into Alexia.
Putting label and geographic expansion opportunities for index, so as well the urgent surgery program.
We're also assessing next steps for certain lab.
Turning to slide 19.
The pipeline progress made this quarter in spite of the current environment is a testament to the dedication of our teams in the capabilities, we have built within R&D.
I'd like to take a moment to highlight some of the innovative approaches we have embedded in our operations.
In order to accelerate our clinical programs. We're focused on innovative study designs leveraging in real world data to inform sites startup in enrollment strategies to maximize efficiency.
We've also built robust capabilities across our footprint to effectively liaise with local regulatory bodies and in some cases, even bring the trial to the patient at home.
An example of this is our ultra Myris GMT trial, where we have implemented at home monitoring and infusion services, allowing us to maintain the safety of patients while keeping the program on track.
In addition, we have built capabilities to enable digital clinical trials, leveraging artificial intelligence and machine learning to analyze risk and support data driven decision making.
Taking advantage of the enhanced productivity that these innovations bring allows us to better allocate our resources and increases the overall capacity in the organization.
These enhancements support our ambition and we remain on track for Tenda launches by 2023.
Turning to slide 20 here, we highlight the current programs, we see as potentially launching by 2023 and the potential opportunity each presents.
Starting on the left we have the once weekly Ulta Mirror subcutaneous program that I mentioned earlier on track for filing in the third quarter of next year.
We're also expanding our C five portfolio well beyond the Purion H and atypical each U.S. businesses with LT Myris neurology, nephrology programs, which collectively present, an opportunity to expand our treated patient population by tens of thousands of patients.
I'm pleased to share that are ultimately as gmg trial has achieved greater than 65% enrollment and animal rescue has achieved greater than 25% enrollment.
Our Aon last program initiated just this year continues to enroll in addition, our HSC TTM may and complement mediated tier may trials remain on track to initiate later this year in early next year respectively.
I'd also like to highlight a new opportunity within our pipeline so maersk in Gamebreak syndrome.
The studies planned in Japan, where we have been granted the sakigake designation by NHL W. One of the few foreign medicines to have received this distinction.
Results from an investigator sponsored study suggested treatment with Soliris. In addition to Ivy RG standard of care May result in improved long term outcomes for patients with GBS.
Given these results and close partnership with the investigators election will be taking this forward into a phase three program in the first half of 2021.
Building on this foundation, we see opportunity to diversify our business Bianchi five with four additional late stage novel assets currently in scope.
The phase two dose ranging portion of the pivotal phase two three program, we see I want to one in al Amyloidosis has recently successfully completed and we look forward to working with our partners a kalen to initiate the phase three program later this year.
As we had previously shared enrollment is complete and our phase three superiority trial for an election, 18, 40, and Wilson disease, and we continue to plan for phase three data in the first half of next year.
18, 40 has the potential to be a transformative new standard of care and Wilson disease with its rapid onset of action profound copper clearance and convenient once daily oral dosing.
Finally, both are AG 10, eight TTR cardiomyopathy inhale accent 2040, Pn HCAT on therapy programs remain on track to begin phase three trials later this year.
Well, there's always risk in clinical development, we're confident that our robust pipeline in innovative R&D capabilities will support our ambition to significantly expand the number of patients we serve.
Turning to slide 21, I'd like to provide an update on some of our earlier stage clinical programs.
Upon review of the recent phase two data the PK PD results support proof of mechanism in C. G, but aoxin 2040, and the level of alternative pathway inhibition. It provided did not significantly control disease in patients.
Well, we've made the decision to no longer pursue the indication with Alex and 2040, a subset of patients did share reductions in proteinuria that along with other signals support the rationale for factor D. as a target.
So we are exploring next steps in C G such as consideration of including the indication in the reading program with Alex and 2050 and next generation factor de inhibitor acquired from a killing on.
Given 2050 is longer half life and greater levels of alternative pathway inhibition, it will be better suited for C. G.
On the right we lay out our proof of concept strategy in renal indications as previously announced we'll be initiating basket trials with both ultra mirrors and 2050.
A nimble proof of concept strategy will allow us to efficiently identify the most appropriate indications to move forward into phase three development.
In addition to considering the efficacy of the asset in the indication we will consider route of administration and patient needs balancing the advantages of both every eight week Ivy infusion with ultra Myris inconvenient twice daily oral dosing with 2050.
While the final list of indications. This study is still under evaluation, we have identified lupus nephritis hygiene frothy primary membranous nephropathy and C. GE has a sampling of indications of interest.
The ultra Myris renal basket study is playing to start in the second half of this year in 2015 to begin in the first half of 2021.
Finally at the bottom left of the slide we have an update on hail Exton 18, 30, RF CRN program.
Recall last quarter, we paused. This program as we were unable to continue healthy volunteer studies due to cope with 19.
We will be re initiating the program in the first half 2021.
Given the evolving landscape and have CRM, we're shifting our approach to an entirely subcutaneous route of administration for both warm auto immune hemolytic anemia, and generalize my senior grouse.
Well, we did have to pause our subcutaneous single and multiple ascending dose program really data showed single doses for well tolerated and had a meaningful I'd Eugene lowering potential.
Further our internal modeling suggests a weekly subcutaneous infusion of 1500 milligrams should provide greater than 70% RPG Laurie.
Coupled with a convenient on body device. We believe 18 30 has potential to be a differentiated f. CRM.
With that I'll turn the call over to Brian to provide commercial highlights from the quarter Brian.
Thank you John turning first to slide 23, I'd like to start by reflecting back over the past 18 months. When we first launched Ulta numerous in the U.S. for P. an age.
That time, we said it ambitious target to establish a new standard of care through a best in class conversion of 70% of patients within two years.
Today I couldn't be more proud to share that we've achieved that 70% conversion and establish dolton myris is the standard of care in the U.S.
And we did so within 18 months six months ahead of our initial goal.
Japan is also reached this 70% ambition in less than a year since launch in Germany is nearly there in just over one year since initial launch.
That's an incredible accomplishment in speaks to the meaningful miscible to mirrors for patients in our teams excellent execution capabilities.
Our ultra mirrors journey continues as we remain on track to achieve a similar ambition of 70% conversion within two years for atypical each U.S.
We received the great news of any approval for atypical each U.S. in late June and we expect Japanese approval in the second half of this year.
Beyond the strength of the current Ulta myris value proposition, we remain committed to leadership in the diseases. We served and continue to innovate for patients to improve their experience overall.
In this vein, we're excited about the opportunity to bring or higher concentration formulation of all to mirrors to patients, which when approved will reduce the infusion time from two hours to 45 minutes. This remains on track for approval and launch in the second half of this year.
We also look forward to expanding the Ulta numerous franchise with a potential once weekly subcutaneous formulation with the goal to provide an alternative choice to patients who prefer to self administered.
With that let's turn to neurology.
Despite one of the most challenging times to date with respect to accessing physicians due to the ongoing pandemic or U.S. team has added 189 net new patients within the quarter for a total of 2341, U.S.G.M. Gi and animal westy patients on Solaris.
Since we set the ambition to increase the number of treated neurology patients for fall by 2025 at the started this year, we've progressed approximately 10% of the way towards achieving that goal.
This is made possible by the strong value proposition of Soubirous in both indications. It has a proven safety and established efficacy profile, providing continuous control in patients with G.M. G suffering from unresolved symptoms and exceptional relapse free rates for animal Westy pace.
Runs at risk of devastating attacks.
I'm incredibly pleased with this progress in the past two quarters, especially considering the pivot the team continues to make to find new ways of working in light of Cobot 19.
Building on this track record of success in neurology, we continue to see a path forward for expanding the addressable population, we serve with Ulta Myris in G.M. Gee with the phase three trial enrolling patients regardless of their prior treatment regimen.
With potential launch estimated for ultimate tourists in late 2022 or early 2023, we expect to ultimately expand our target market to approximately 20000 patients with the opportunity to move earlier in the patient journey.
This is one of the key drivers of success to our ambition of quadrupling the number of both GMT animal Westy patients we treat in the U.S. by 2025.
We see this goal is achievable, especially with the potential for additional products to come to market with the possibility to expand the overall treated patient population and disrupt earlier line treatments.
Turning to slide 25, I'm incredibly pleased to be able to talk in more detail about indexes. Following the close of the Portola acquisition.
Patients on factor Tenney inhibitors, who experienced life threatening or severe bleeds.
Often see sudden in uncontrolled bleeding.
If left untreated these patients can face extremely high mortality rates. So it's imperative that these patients get help quickly when they first present in the critical care setting.
Endexo provides a solution for these patients through targeted and rapid reversal with factor 10, a activity with a growing body of both clinical and real world evidence that advances its value proposition.
As the first approved treatment for these patients index is a strong strategic fit with our mission of bringing transformative treatments to patients with rare diseases and devastating conditions.
Moving to slide 26, the urgency of treating patients and the critical care setting require significant alignment across numerous stakeholders.
Let's see on its been operating in this space for almost a decade since the launch of a typical each U.S.
While Solaris and Ulta Myris, both have an incredibly strong value proposition is innovative therapies. The key to our success in E. Typically at U.S. goes well beyond the treatment themselves.
Our teams focused on a system wide approach that encompasses all stakeholders in the hospital.
Including dedicated access and field reimbursement support who work with financial decision makers.
We've also made significant progress by working with large hospital systems across the country.
For example, recently, we've been able to work with a large geographically diverse hospital system to establish a consistent approach in treating atypical each U.S.
That system has already adopted Ulta myris for 100% of their patients.
This has led to continued growth in our underlying typically to us business with this past quarter generating the highest number of new patient initiations in the U.S. today.
Considering the impact of the ongoing pandemic on hospitals across the country. This is a testament of the teams working on he typically to us and the product profiles of both Solaris and Ulta Myris.
While in the early days of integration, we're excited to bridge these capabilities with the value proposition of indexes.
As you'll see on slide 27, we've continued to see positive momentum for index of since we announced the deal in early May.
New doors have open to support access in the U.S., including proposed and tap renewal through October 2021, and issuance of the J code for drip and ship use.
And the American College of Cardiology is updated consensus guidelines for managing patients on oral anti coagulate ones now recommend index a as the preferred reversal agent for factor 10 inhibitors over four factor Pccs.
Our focus in ramping up index it will be a three pronged approach for value creation.
While still important will shift from a heavily weighted focus on demand generation to a multifaceted approach that is similar to our comprehensive atypical each U.S. model.
We're investing in additional resources to enhance market access health economics, and GPL IDN contracting capabilities to ensure patients and providers are able to access indexes.
And we'll also be building out capabilities for a thought leader liaison team to focus on gaining support across high potential institutions.
While it will take some time to execute fully our teams have hit the ground running to lay the foundation and I look forward to sharing additional updates on future calls.
So with that I'd like to now hand, it back over to mid week for closing comments Ludwig.
Thank you Brian.
In the second quarter, we continue to build on the momentum of the last few years.
The main focus on a value creation strategy of leading and complement expanding a b C. Five business into new Tim If you think area.
And diversifying beyond C five to drive durability and long term growth.
As a result of execution and delivery against our objectives. We have entered a new phase of the company growth and diversification, which enables us to return value to shareholders.
This includes updated capital allocation strategy with the commitment to directing five hundreds to $550 million this year.
And then efforts of at least one third of free cash flow towards share repurchases annually from 2021 through 2023.
I also want to note that directors from all board and management.
Been proactively engage in discussions with many shareholders.
We appreciate the perspective, we have hurt and to support we have received of our mission.
We're also getting feedback and shed the perspective that we are undervalued.
We're working with diligence and urgency to increase shareholder value.
And demonstrate to invest with the significant returns or hedged as we continue to execute on our strategy.
We look forward to more discussion in the month to hedge.
In closing.
We continue to adapt to the corporate 19 pandemic and to date have demonstrated organizational adaptability and resilience that will remain critical in this uncertain environment.
Confident they will be able to continue to deliver for patients and shareholders alike.
I'm very proud of a strong execution, thus far in 2020, especially in the face of this challenging environment and I look forward to carrying this momentum into the rest of the year.
With that we will now open to pull to question.
Operator.
Thank you ladies and gentlemen, if you have a question at this time. Please press the star followed by the number one key on your touched on telephone. If your question has been answered or you wish to remove yourself from the Q. Please press the pound key once again ask a question. Please press star and then one now.
Our first question comes from Josh Schimmer Evercore ISI. Your line is open.
Great. Thanks for taking the questions just two quick ones, if you're committing to return capital to investors in the mid term why not issue a dividend and then what are you starting new pediatric phase three studies with Solaris as opposed to ultramarine. Thanks.
So we'll start with the the capital allocation question and I just want to and then run the will jump in and then John will talk about the PK study.
As far as capital allocation as I said, we believe point a position of strength.
And we have no more flexibility because of a strong commercial execution because of strong cost management strong free cash flow generation.
Strong pipeline, so it puts us into situational strength.
And that's why we have the flexibility on on the capital allocation.
So we talked about the sector, we're committed to at least.
One third of a free cash flow towards so share buyback because of the situation <unk> and.
And this is the commitment that we've made towards the next three or four years of why we're focusing on buyback buyback gives us all parts or opportunities to increase to dawn to dial up the dial back while with the discipline on the.
Business development side, and I know of on Oh, you want to add to this.
No I think that's a that's the reason Josh for doing a buyback and to have the approach that is both balanced as well as flexible and and we're not a we're not committing to a dividend at this point, we don't think as a company we're at that stage of maturity yeah.
But we are committing to at least one third of free cash flow towards buyback for the next three years.
And John do you want to talk about the pediatric studies.
Yeah, I think thanks, Josh.
Soliris generally these are post marketing regulatory commitments, we do have an ongoing pediatric study.
In Mg Mg three or three study that's ongoing now that again as a regulatory requirements [laughter] through our chip requirements and a interactions that other regulatory authorities to generate data and the pediatric population.
Okay. Thanks for the question John So operator, we'll take the next question.
Thank you Sir our next question comes from Choriocarcinoma from JP Morgan Your line is open.
Hey, good morning, guys. Thanks for taking my question I wanted to ask you about your your sales guidance you. When you consider your first half C. Five sales were two I think 2.47 for the franchise.
It is annualize that you get too little over 4.9 billion versus your guidance. That's in the range of 4.75. So obviously, there's a different pricing dynamic is more patients convert to all comers, but it's still seems conservative, especially in light of Solaris is continued strong performance in neuro. So I'm just curious if there's something else there that I'd.
Missing such as a more accelerated conversion in a typical each U.S. or anything like that and then just really quickly on the pipeline regarding the plants and started phase three trial for 2040 appear not pn each before year end would you consider waiting on 2050, given the suboptimal PK PD profile you described for C. Three g. or.
We remain confident in the data you've already demonstrated an opinion education. Thank you.
So a lot of Ah. Thanks, a lot of course in Korea, and although the for questions on your one question, but so let me start with the with the guidance before I give it to run the and I think Brian might also jumped 10 to talk about what's what we see in the marketplace.
He wants to say that the corporate 19th situation adds complexity and uncertainty and forecasting.
But I can tell you that we believe we see continued strength in our business. Despite the current environments.
Well some top line growth is a very strong outcome.
For the year or even with Portola operating margins continue to be competitive very competitive within the within the industry.
No there continues to be uncertainty in the markets moving forwards and Brian can talk about yes, we're adding a new patients, but we do see a little bit of a slow dawn.
But run or do you want to build on this.
Sure. Thanks, Corey so you're right that our guidance for the second half is a little more conservative but there are obviously various variables that we are constantly monitoring one is compliance rates, which we haven't seen the impact on a in our second quarter, but it is definitely.
Oh factor that we monitor very closely.
Second is the two new patients in the new patient adds which as you can imagine it takes time for patients to from the time of identification too.
Vaccination reimbursement and actually getting on therapy. So there is a lag time and we are seeing a slowdown in sort of new patient adds.
Third is the conversion to also Myrisk, which has been a great given the every eight week profile of Oh Maris fourth is the payer mix, which again takes a little bit time would be unemployment rates and so forth. The payer mix takes time to to go through and we're well.
I think that towards the second half of the as well.
And then overall, there's the uncertainty as Brian mentioned I'll feel forces not you back yes, there's uncertainty around coal bed and when to an access and so forth. So taking all those factors into account is what our guidance is based on and you know as a company, we generally try to set guidance, which.
We can meet or exceed.
And the bond kept me, but.
Sorry, maybe before we go to to the question them 20 important when you're 50.
Brian do you want to talk a little bit off what do you see in the markets I can I can tell you that I'm very proud of what the court commercial team has done over unless the month 10 quarters fine Yeah and Cory. Thanks for the question <unk>. The only thing I wanted to add I think it's been covered really well is the end on a positive note I'm sure we are.
A full quarter in through the pandemic and we've learned a lot. The teams continue to get more effective than their virtual engagements were certainly not.
Really physically present in the offices, but we started on the jury [noise].
And as I had noted we've got a couple of bright spots first of all that conversions with Ulta mirrors continue to track really well and then secondly.
What do you see in terms of atypical way to us as I'd mentioned is a record quarter in terms of new patient initiation. So we're we're trying to monitor through it very carefully as every company is but we feel good about the continued progress that we continue to make.
Okay. So we'll take the second question Corey So jumped 24.
Ken age.
Yeah, Cory so with regard to that factor de program recall that we had very strong phase two results with 2040 Deanna Copan.
That showed a nice bump in hemoglobin, a 2.4 grams per deciliter as well as a dramatic reduction in the requirement for transfusion. So based on that data in the Pan age population with patients that have a co existing extra vascular mosses as add on therapy to either Solaris royalty mirrors, we will be per.
Seating with a phase three trial that will start in the second half of this year. So confident based on the phase two data.
The 2050 program as you know is also being explored in a phase two program in peering age and our focus there is on evaluating its optionality for monotherapy, whether it can actually adequately control both intergraph's care home offices in extra basket home offices, which remains to be determined.
We also of course with 12 50 are most excited about expanding into additional indications.
We will be starting a renal basket trial.
The first half of next year.
That will include among them potentially lupus nephritis hygiene and property in membranous nephropathy and.
Again, there could be other indications that we might pursue as well another disease areas that we're looking out right now.
And I would just add thank the C. <unk> C GE data.
I think there's a difference between liquid phase and solid phase with regard to.
Factor de targeting and alternative pathway inhibition. It was pretty clear based on the PK PD analysis that we did on the study to all four to five data that there is a PK PD relationship such that in patients who achieved a higher pharmacokinetics with 2040, they had better alternative pathway inhibition.
Well as reductions and complement BB factor.
And that in a subset of patients all over half in study 22, five had a meaningful reductions in proteinuria, which are both our internal experts as well as external advisors believe this is a meaningful impact on partner that what would not have.
Unrealized spontaneously.
Yeah. Thanks, Tom Operator, we'll take the next question.
Thank you. Our next question comes from Geoffrey Porges from SBB Leerink. Your line is open.
Thank you very much and congratulations on a quarterly results are terrific to see so from a financial.
Capital deployment question first is your intention to run a to achieve an absolute reduction in share count with the buyback or do you expect initially at least this year to just offset.
Stock option dilution and then help you contemplated providing long term guidance. Obviously, there are a host of issues this year.
With that but it would be helpful to know whether that was something that you are considering and then just related to that which indications and geography is are you still see most affected by coated.
Helpful to know where the risks out there.
Sure.
So the capital allocation strategy that we provided.
Even for this year that is clearly in excess of what we would change CST share stabilization to offset the dilution from the employee stock so.
Thats only again for this year, which is a smaller amount then what we expect for the next several years, where we said one third or at least one third of our free cash flow for the next three years.
So that was your first question I think your second question was do we plan to provide long term guidance and I really can't comment on that but we will obviously take that under advisement and let's see how much more clarity and transparency and information we can provide.
Well the with relation to your third question, which is what geographies are being impacted by coal bed. So we're starting to have the field force anthem of the offices open in Europe, and Japan in the U.S. The field force is still not back and as Brian mentioned.
Actually pivoted a lot of our calling efforts and loss our strategies to more digital means which obviously is not the same so I think were where.
Using a lot of different tools and mechanisms to keep our physician base and gauge driving more depth right now instead of brass, but you know continuity to explore new means not knowing how long this continuity, Brian I don't if you want to add to the third question yes.
Good morning, Jeff <unk>, the only thing I would add is it's it's probably what you would expect in terms of severity in life threatening status of the indications if you stratify that way. So as I'd mentioned, you typically chew S. continues to track really well that's as you know a unforgiving acute manifestation, it's not to pay.
Ended on testing per se, so that as a progressed and then within neurology. We gave you the aggregate numbers.
But always gmg is unfortunately, we thought to be less severe than animal westie.
And so and I'm always steep continues to progress very nicely GM. She is just a function of our continued focus more on the breadth or sorry, excuse me the depth side of prescribing and less so on Brett I use the.
Prescriptions with new first time clinicians.
So I would say in large part that's how it breaks a part and then Pn age is an indication that is disproportionately depending on testing volume. So in the colder there as you can imagine as testing starts to slow a bit you'll see a subsequent impact on p. NH prescribing as well.
Okay. Thank you Brian operator, we'll take some next question.
Thank you. Our next question comes from Chris Raymond from Piper Sandler Your line is open.
Thanks, just wanted to ask a couple questions. Your first on Opex I'm trying to understand what's involved with this new guidance just sort of midpoint to midpoint it's up.
$242 million I think if you if you back out the portola component of that of 125 million that's.
But 117 million I I know you've talked about a lot of puts and takes but maybe you know.
Just kind of walk through what's what's right [noise].
I guess, you're sort of driving that.
And then maybe just clarify I think it from you're interested last question you guys mentioned that.
And you were talking about the differences and indications, but can you. Just clarify is are you seeing in the field that M. M. O is indeed more resilient to covert 19 disruptions that Mg.
Thanks.
Well I know you want to take the first what are going well.
Sure.
So on the Opex I think you are comparing it to the guidance that we had given last quarter.
And if you remember some of the commentary from the last quarter, we actually had.
Talk about.
Various controls and various things that.
Changed in the Opex some of which were a involuntary for example, the any sense and complex related expenses and so forth and some of it where voluntary because of the uncertainty on the topline and our guidance at that point, we had actually.
Done taken several actions internally to manage all back the other part of the Opex is we had also anticipated.
Perhaps delays in studies.
For given the Opex guidance appropriately. However, we now expect a number of the studies to actually start in the second half a year or do you can imagine that our R&D expenses in second half a year or will also be going up and then as you also mentioned the.
We are absorbing a 125 million portola opex. So those are the various elements as to why it's different from the guidance from the Gulf War.
Yeah, Chris just yeah, just on your years. Your second question within Neurology. It's as we had expected generally that G.M. She is tends to be a longer journey of conversion. Unfortunately, the perception with many clinicians is the suffering is less obvious.
As to them that the patients go through.
And so it's a lot of educational lift and it's a lot of convincing on breaking those successes immuno suppressive therapy cycles to convert over to Soleris animal what Steve as you know is a highly unforgiving disease. It's event oriented when those attacks happened they are devastating and so it tends to be more front.
Center in terms of the acute nature of the conversions and and during this.
Coated era less access to physicians the I would expect and we'll continue to play out that way.
Okay. Thanks around that thanks, Brian operator would take the next question.
Thank you. Our next question comes from sale Naidoo from Cowen and company. Your line is open.
Good morning, congratulations on a quarter and thanks for taking my question just two questions from me first cushion on kind of longer term trends and guidance. It seems like you've highlighted a couple of headwinds in 2020, and specifically the second half citrus coated and.
And the conversion of patients from severe Santos from Eris seems like going into 2021, and certainly 2022, the conversions luxury going to be over and if we could would would be behind it. So is it reasonable for us to expect revenue acceleration.
Over the intermediate term.
Second question just on the pipeline.
If I might ultimately just maybe broadening their patient population in Gmg recently saw a data from Fcr ends how do you think that competition is going to affect all to mercers opportunity and where we will ultimately whispered in to the treatment paradigm in light of CRM coming thanks.
Yeah, right and I could you take the long term guidance and then maybe Brian and John go do commitments and positioning within I'm sure.
Sure. Thank you Ludwig.
Relates to your question on what we could anticipate for 2021, obviously, we're not in a position to give guidance for for next year, but I think the same factors will apply for next year as well.
First being the compliance rate and as you can imagine where we land at the end of this year on what our ending number of patients on therapy, our across on various indications and what the compliance rates. We see towards ended the year will determine where went to 21.
I think also with hopefully coal bed fading away, we will see a pick up in the new patient adds and the new patient queues.
You're right that we would be behind the conversion to automate recipe in age, but we still have the conversion to open Maris I'm really going strong in a typical each U.S. and data will continue into next year and then the fourth factor that I mentioned with the payer mix, which also may take some time to play out and.
Me habitat in Twentytwenty want as well so I think those are the four major factors that we are constantly monitoring and we'll have an effect on on next year as well.
Maybe I'll handover to well.
Yeah, Phil I'll just jump in on the second question about neurology and and potential new competitive entrants I mean first of all we do see this is a very large market. It's certainly as the largest we operate in with Gmg in particular 60 to 80000 patients in the U.S. alone.
It'll be interesting is there are analogs to show that is new competitive insurance.
Come in.
When you look at M.S. for example are already there there are great. Examples of how the market volume had continued to grow for many years and so we see that expansion potential as well in GM G, namely because the different modalities are likely to occupied very different positioning spaces in the case of sillier.
Yes, we're talking about more severe out of option less controlled patients and with Fcr end.
There were certainly with their own pipeline interested as well that's more towards first line displacement ideology immunosuppressive therapies high dose steroids and alike.
So it's a very different treatment approach and.
The other thing that is unique about serious and then bridging to Ulta Myris is we do from we believe given that this is a chronic disease in continuous not cyclical therapy.
This is taking a little bit of a playbook out of some experience in the hemophilia world, where it's unfortunate if patients wind up paying the price with waiting until symptoms return and then retreating so we're quite emphatic about the continuous aspect of therapy with Ulta Myris, we see the the addressable market.
Significantly expanding as I'd mentioned, it could be up to 20000 patients.
And then the last thing I'll just mention is we don't intend to rest on any of the progress that we're making no two and a half plus years in we are working on ultimately as higher concentration. We're working on subcutaneous as we've discussed we have other assets in the pipeline that we'll be looking at including factor do.
The.
And so as this market grows we will intend to continue to innovate to serve those patients.
John do you have anything to rest of this yeah. The only thing I would add is as you know DMD trial has opened the aperture. So we are going to be.
Enrolling patients and we are enrolling patients who are over 65% enrolled now that.
Did that have not actually feel can I ask t. So we're moving earlier in the course of the disease. In addition, as I said, we will be pursuing m. GE with our own Fcr and program 18, 30, but what are you looking at continuous therapy as opposed to cyclical therapy to avoid a loss of a treatment effect and carrying that response.
Throughout the full duration of the dosing interval.
Okay. Thank you John.
We are at the top of the hardware. So we'll take one more question.
Thank you our last question comes from Geoff Meacham from Bank of America. Your line is open.
Hey, guys congrats on the quarter in a and thanks for taking my question I just had a few so Brian as you prepare for the Ultra Marathon you launch for H. you asked some just help us with maybe the nuances with the U.S. some terms of switch dynamic and pricing.
And then a real quick Ludwig I like the new capital allocation strategy of with emphasis on buybacks.
Should we view this as maybe de prioritizing BD now that you have portola behind you in the pipeline is starting to mature or can you do both optimally. Thanks guys.
Yeah, I know what have you thought yeah I'll start Jeff on the on the first one but ultimately its first of all we're already underway now in Germany.
And thrilled about that with Ulta mirrors for each typically chew us I guess just quickly but the high level is I don't see a lot of differences between us and what we would expect in Germany. The one advantage. We have with you typically choose launches ultra myris is not new too many of the institution.
And the clinicians and so that's why we've stated pretty emphatically or are continued ambition that have that 70%.
Facilitated patient conversion within two years and.
And I expect that atypical each U.S. with Ulta Myris will really deliver for patients just as it has would be an age.
Yes, Jeff on the capital allocation Park.
I said, we're in a position of strength and we have the flexibility now because of the strong execution, but also because the situation there and what our R&D pipeline, which is much stronger than before and as John was.
Saying, we have no 20 programs and develop an auction footprint launches by 2023.
So when you look at that's Oh, B D strategy and external innovation.
Was the has been very critical external source to drive innovation, but as a pipeline, though has strengthened significantly they're going to see that we're going to rely less on business development and as we discussed during this call all short term focus for this organization as we.
Pets over the over the core doesn't really delivering quarter after quarter after quarter.
The next the afford us we're going to focus on the integration of Portola and really making sure that we maximize Ah yes, that's so you're going to see a much more focused approach towards what we have internally.
With being opportunistic on share buybacks. So that means we can dial it up if we want to.
Ah above the one third we discussed and on the business development sites as I said, we will rely less on BD moving forward, but we will remain disciplined.
So that that has not changed.
So with that thanks for joining us this morning, Needless to say I'm very proud of what the this team has achieved quarter after quarter delivering even open delivering on <unk>, what we said we're going to do.
And we're looking forward to keep you informed them on our progress so enjoy the rest of the all day, everybody and thanks for calling it.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day [noise].
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