Alexion continues to please orphan fans

Alexion’s swoop on Enobia demonstrates that the rare diseases specialist remains a firm favourite among investors. Despite agreeing to pay more than $1bn for a drug that has been tested in fewer than 100 people shares in the Connecticut company barely fluttered, going on to touch a record high of $72.67 yesterday.

Alexion almost doubled in value last year to $13.2bn, and with only one drug on the market, Alexion’s strategy to build its business has found devoted followers. Its third and by a long way its most substantial acquisition of the year, squeezed into the final days of 2011, Enobia bulks up Alexion’s portfolio of therapies to treat some of the world’s rarest diseases, an area of medicine that looks set to remain hot property in 2012.

Cash rish

Alexion will pay $610m upfront and up to $470m upon achievement of various regulatory and sales milestones for Enobia. The Canadian venture-backed firm has raised $129m in the last four years, so the takeout represents a tasty payday for the firm’s backers, which include CTI Life Sciences Fund and OrbiMed Advisors.

Alexion, meanwhile, is pretty cash rich as a result of its lead product Soliris, approved for paroxysmal nocturnal haemoglobinuria and more recently atypical haemolytic uremic syndrome. Regularly described as the world’s most expensive drug with an annual price tag reaching $250,000, sales are expected to have reached $776m last year and are seen attaining blockbuster status this year.

The revenues are already rolling in - Alexion ended September with $445m in cash and will partly fund the transaction with a bank loan; those coffers will no doubt soon top up again if Soliris grows as anticipated. Meanwhile those milestone payments are mostly sales linked – Alexion said only $14m of the $470m is expected to be paid out in the next three years.

Ultra orphan

Enobia was bought for ENB-0040, or asfotase alfa, an enzyme replacement therapy for patients with hypophosphatasia. The condition is caused by a genetic deficiency of an enzyme known as tissue non-specific alkaline phosphatase. Causing abnormalities in the metabolism of two vital minerals - calcium and phosphate – the disease causes progressive damage to multiple vital organs, in particular the destruction and deformity of bones, leading to rickets in children and soft bones in adults. Profound muscle weakness, seizures, impaired renal function, and respiratory failure are also common.

It affects around 1 in 100,000 with around 3,000 patients in the US; half of infants born with HPP will die in their first year.

ENB-0040 is designed to be more potent and targeted towards the bone than the natural enzyme. Early data has been encouraging – hence the Alexion move – with pediatric patients receiving the drug showing improvements in skeletal diseases and strength weeks after starting therapy.

Given the orphan indication and lack of any treatment for the disease, small phase II studies should be enough to win approval – a trial seeking to recruit 35 infants is ongoing and is likely to complete the package for a filing. Analyst reckon the drug could reach the market in 2014 and peak sales of anything from $200m to $500m have been mentioned.

Key to success

Despite concern that these very expensive orphan therapies will not remain immune to pricing pressure, orphan diseases remain of huge interest to many players.

Alexion itself struck two other deals last year, buying assets of Orphatec in February related to a therapy for molybdenum cofactor deficiency Type A, an ultra-rare genetic disorder characterized by severe brain damage and rapid death in newborns, and for $111m in January acquired Taligen, an ophthalmic disease specialist.

ENB-0040 holds the potential to be the company’s second product on the market and represents an important diversifying move for Alexion. However, even if it achieves the highest sales estimates, its potential is still smaller than the promise still seen in Soliris. Analysts reckon the latter product could be generating $2.42bn by 2016.

With trials ongoing in kidney transplant rejection, the rare blood cell disorder catastrophic anti-phospholipid syndrome and cold agglutinin disease and neurological disorders such as myasthenia gravis, continuing the success of Soliris remains the biggest issue for Alexion.

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