• Jeff Matthews

This Just In: Wall Street’s Finest Speechless


“I’m speechless right now. On that number. Can you repeat that again?”

—Michael Aberman, Credit Suisse Alexion Pharmaceuticals conference call

“That number” to which the aforementioned analyst is referring is the wholesale price of a new biotech drug called Soliris, which will be the first and only treatment for a rare genetic blood disorder known as PNH.

PNH, for the record, currently afflicts 8 to 10,000 individuals in the U.S. and Europe. According to Alexion,

Patients with PNH may suffer from severe hemolysis, anemia, chronic fatigue, recurrent pain, pulmonary hypertension and intermittent episodes of dark colored urine, known as hemoglobinuria. Importantly, PNH patients are at increased risk of forming life-threatening blood clots, or thromboses, which are a major cause of death in this disease.

As with, for example, cancer, PNH can be diagnosed at any age, but the median age in a UK study was 42 years. The median survival period after diagnosis was 10 years, although fully one quarter of patients in one study survived 25 years following diagnosis with PNH.

You might think the good folks at Alexion who came up with what looks to be a much-needed and long awaited therapy for a rare disease would be sensitive to the raging debate on health care costs in general, and biologics in particular, now enveloping both politicians and bureaucrats—not just in Washington but in every state capital in the Union.

And perhaps they are.

But the price they came up with for Soliris, which as we have seen shocked at least one of Wall Street’s Finest into speechlessness, was $389,000 per year.

The full excerpt of the above-quoted dialogue, courtesy of the indispensable Street Events, is as follows:

Operator

Thank you. [OPERATOR INSTRUCTIONS] And we’ll take our first question from Michael Aberman from Credit Suisse. Please go ahead, sir.

Michael Aberman, Credit Suisse – Analyst I’m speechless right now. On that number. Can you repeat that again?

David Keiser, Alexion Pharmaceuticals – President, COO

The annual cost of treatment on the wholesale level is $389,000 annually.

Michael Aberman, Credit Suisse – Analyst And can you describe on the wholesale level what kind of cost for distribution and how you maybe compare to some other rare disease drug prices and how you came up with that number?

Vikar Sinha, Alexion Pharmaceuticals – SVP, CFO

Hi, Michael this is Vikar Sinha

Michael Aberman, Credit Suisse – Analyst Sure.

Vikar Sinha, Alexion Pharmaceuticals – SVP, CFO

Compared to other drugs, we have — compared to — you’re talking about — compared to other drugs in terms of pharmacoeconomics, Soliris meets the criteria recommended by the Citizens Council regarding the decision to pay premium prices for ultra orphan drugs. And we have looked at the degree of severity of the disease, the treatment provides health gains, environment stabilizing of the condition, and the disease or condition that is life threatening.

Leonard Bell, Alexion Pharmaceuticals – CEO

Michael, as you’re aware probably most other drug for orphan diseases are dosed on a patient weighed basis and certainly Soliris is not. Due to weight-based dosing, the price of other therapies, as you know, can range beyond $1 million per patient per year. For example, the annual cost of a drug recently approved to treat an average size adult with [Pompe’s] disease would be over $400,000, and similarly the annual cost for a drug recently approved to treat average sized adults with Hunter syndrome would also be over $800,000. At Alexion, of course we focused on the key criteria that David outlined, that is, the rarity of the disease, the compelling clinical benefit that PNH patients experience with Soliris therapy, now that we have an approved label and we understand what those benefits are agreed to be. The cost of discovery, development, and production. Importantly our costs at Alexion to sustain our ongoing commitment to the PNH community.

Michael Aberman, Credit Suisse – Analyst Okay.

Leonard Bell, Alexion Pharmaceuticals – CEO

Does that provide you context?

Michael Aberman, Credit Suisse – Analyst I guess so. It’s just surprisingly high. I’ll get back in the queue as I think of an additional question. Thanks.

To Alexion’s credit, management spent even more time later in the call elaborating on the logic and assumptions behind the $389,000 annual therapy cost at a time when Presidential politics could potentially make Soliris a Poster Child of Why We Need Cost Controls in Healthcare.

And while at least one of Wall Street’s Finest raised his earnings forecast based on the much-higher-than-expected price, one actually reduced his forecast owing to the concern that the uptake of Soliris would be hindered by thoughts of price-gouging.

Readers interested in Soliris, PNH, Alexion, the controversy surrounding high-priced biologics, or all four topics ought to listen to a replay of the call.

Just don’t send a transcript to one of the Presidential candidates.

Jeff Matthews I Am Not Making This Up

© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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The content contained in this blog represents only the opinions of Mr. Matthews. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. The content herein is intended solely for the entertainment of the reader, and the author.

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