A Billion Dollar Decision Is Just Around The Corner For Alexion

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Alexion

Back in September, the FDA reported it was pushing its PDUFA review date for Kanuma, Alexion Pharmaceuticals’ (NASDAQ:ALXN) Lysosomal Acid Lipase Deficiency (LAL-D) candidate, back by three months. The agency cited a request for more information relating to chemistry, manufacturing and controls – essentially how Alexion plans to consistently produce and store the drug. Those three months are almost up, and with a PDUFA date set for the beginning of December, now is a great time to take a look at the therapy in question, in an attempt to see what impact an approval might have on Alexion going forward. So, here goes.

First then, a look at the drug and its indication. As mentioned, Kanuma is targeting LAL-D, which is a rare condition that causes a deficiency in the production of lysosomal acid lipase. LAL is an enzyme that breaks down fat in humans, and if there isn’t enough, fatty deposits build up in organs and cause, eventually, liver failure. Kanuma is a recombinant (just meaning it was made in a lab, rather than occurring naturally) form of LAL called sebelipase alfa, which is an enzyme targeted at replacing LAL in deficient patients. It performs exactly the same function as LAL (i.e. breaks down fatty material) and has demonstrated in trials that it can be an effective, safe replacement and – as a result – treatment.

The drug got approval in Europe back in September, about a week before the FDA requested the additional data. Approval in another region, especially one with an agency as stringent as the EMA, can be a great leading indicator for a drug’s approval in the US.

So with what did Alexion need to provide the FDA to bolster its NDA? As we’ve said, the FDA only specified publically that the info related to chemistry, manufacturing and controls, which is a predefined requirement section on any NDA. For the majority of the trial period, Alexion produced Kanuma in-house; well, at facilities previously owned by Synageva – the company from which Alexion picked up Kanuma as part of the latter’s acquisition of the former back in June. However, Synageva also stated that a third party had produced the drug in anticipation of approval. The enzyme comes from the egg white of GM chickens, meaning it can be produced and stored (or at least, the raw materials can be) a long time in advance of administration to patients. These latter two factors are likely the driving force behind the FDA’s additional info request. Specifically, the agency is likely asking for info that a) proves the third party facility can produce the drug to the standards of the product used in trial and b) that the already manufactured product is of this aforementioned standard.

So if Alexion gets approval for Kanuma, what’s its market potential? Well, LAL-D is a rare disease, occurring in approximately 1 in 40,000 individuals in the US. This rarity, however, does not mean the drug can’t be a blockbuster for Alexion. Its primary revenue generator, Solyris, also targets a rare disease, aroxysmal nocturnal hemoglobinuria (PNH) – the key is in the price. Soliris is the most expensive drug in the world, coming in at $500,000 annually in most regions. Alexion doesn’t need to price Kanuma that high to hit $1 billion in sales, but we don’t expect it to be cheap. Indeed, Barclay’s (NYSE:BCS) analysts put its peak revenues at an expected $1.5 billion, suggesting the drug will hit these sales levels within three years. For a company that generates the vast majority of its revenues (circa $2.2 billion during 2014) from its flagship drug, a new blockbuster would really shore up Alexion from an investor’s perspective. There have been concerns as late that a drug being developed by Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) could threaten Soliris’ dominance in its target indication (theories have arisen as to whether this threat caused Alexion to overpay for Synageva, but that’s a story for another day), and diversifying away from overreliance on a potentially threatened treatment mitigates some exposure risk.

The date to keep an eye on? December 8th. That’s the three-month threshold to which the FDA pushed back the PDUFA, and assuming no further delays, it’s the date on which we will hear whether Kanuma has a commercialization green light. Expect some immediate upside in Alexion’s market cap if the news is good.

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