Welcome To Alexion 2.0

In an exclusive interview, Alexion R&D head John Orloff takes In Vivo on a tour around the company’s rejuvenated pipeline and explains how the business is innovating to pre-empt the Soliris-shaped hole in its balance sheet.

Two years ago the board of directors of Alexion Pharmaceuticals Inc. began a seismic overhaul of its leadership, strategy and pipeline. The Boston-based rare disease specialist had success with Soliris (eculizumab), its blockbuster first-in-class complement inhibitor, but needed to prove to shareholders where the next revenue streams were coming from.

A less-than successful $8.4bn takeover of Synageva BioPharma Corp. in 2015, which brought in the slow-selling Kanuma (sebelipase alfa), had made investors question Alexion’s direction. The follow-on complement inhibitor to Soliris, Ultomiris (ravulizumab), helped plug the revenue gaps, but it was not going to be enough. 

Management Merry-Go-Round

John Orloff

A fundamental part of “Alexion 2.0” is the plan to broaden and diversify its R&D pipeline, both through external business development and organic innovation. John Orloff joined the company two years ago, during the tumultuous but necessary re-imagining of the drug company.

After some 2016 reporting irregularities, the senior management team of CEO David Hallal and chief financial officer Vikas Sinha reportedly lost the confidence of the board of directors. Both execs resigned, leaving ex-AstraZeneca PLC CEO David Brennan, a member of the Alexion board, in place as interim CEO, alongside Honeywell CFO David J. Anderson as the company’s financial head. Speaking about Brennan’s position at the time, Doug Norby, lead independent director at Alexion, said the company was “fortunate to have someone of his caliber guide us during this transition.”

Just three months later, in March 2017, Alexion’s founder, Leonard Bell, who had formed the company in 1992 and was CEO until 2015, announced his retirement as chair of the board. Brennan took his place as chair to spearhead the search for a new executive management team and said in a statement that the company was “working hard to drive significant, long-term growth that benefits all of our stakeholders.”

The search for a new CEO did not take long. By the end of March, the head of Baxalta, Ludwig Hantson, was announced as CEO. This appointment was swiftly followed by a number of important management changes including a new CFO, chief commercial officer and heads of compliance and human resources. Notably, Martin Mackay, head of R&D, retired from the company to be replaced by Hantson’s Baxalta colleague John Orloff.

“I thought I could bring my experience from big pharma but also, more recently, smaller companies, to bear on the challenges that Alexion faced that needed to be rebooted,” Orloff told In Vivo in an exclusive interview.

Six months later, with the new executive management team in place, Alexion announced more major strategic changes. It aimed to save the company $250m with a 20% reduction in the workforce, an investment of $100m to rejuvenate the pipeline through business development and add-on complement indications, a new headquarters in Boston, MA, and a new Research Center of Excellence in New Haven, CT.

Orloff chose to de-prioritize programs such as cPMP replacement therapy ALXN1101 and samalizumab, as well as partnerships with Moderna Inc., Blueprint Medicines Corp. and Arbutus Biopharma Corp. The speed with which Orloff could move to reposition and focus the Alexion pipeline was helped by the size of the firm. “I’ve found that coming into a smaller company focused on rare disease there’s a great opportunity to have an impact more quickly and to make decisions faster. There is less bureaucracy, and so for me it’s more fun.”

Orloff had been head of R&D at Novelion Therapeutics Inc., a small Boston-based biotech employing around 200 people. Prior to that he was chief scientific officer and global head of R&D at Baxalta, and previously held executive R&D roles at Baxter International Inc., Merck Serono SA, Novartis AG and Merck Research Laboratories.

Despite Alexion making sweeping changes throughout the company there was still immense pressure from activist investor Elliott Management, which did not believe the firm was doing enough to increase its stock price. In December 2017, after the company’s market capitalization dipped below $24bn, it was widely reported that the hedge fund manager was urging the biotech to think about selling, while also insisting on more biotech experts on the board of directors.

And the management merry-go-round may not be completely over. In late-September CFO Paul Clancy, a well-respected and known figure to the investment community, announced his intention to leave the company. Replacing him is Aradhana Sarin, the current chief strategy and business officer. “He has contributed materially to the rehabilitation of Alexion’s reputation, and in no small measure ensured that the company’s stock became investable again after the difficulties of 2016,” said SVB Leerink in an investor note discussing Clancy’s departure. “By comparison, Dr. Sarin is largely an unknown quantity, reportedly a capable individual, but one with no C-suite experience, no significant public exposure to investors, and a reputation for active advocacy for transactions. It will take some time before she builds the confidence that Clancy has among investors.”

Investors will be encouraged by Clancy’s intention to remain with one hand on the tiller for the next few months, but by year-end there will be a new hand at the helm of this frequently challenged biopharmaceutical company. “At this stage, despite Dr. Sarin’s strong reputation, in our view there’s no basis for arguing this transition will be positive for the stock or for investors' interests,” said Leerink analysts.

Business Development

Discussing the picture before he joined the company, Orloff said, “There was a heavy reliance on Soliris, the pipeline needed to be expanded and for me that was thrilling.” Despite the immense pressure by investors to turn the company’s pipeline around, Orloff told In Vivo that this was “the best place to be, as an R&D person, to come in and be charged with building a new pipeline.”

In the two years that Orloff has been with the company he has made swift and decisive changes. “Our goal has been to rechart the vision of Alexion: Alexion 2.0 we’re calling it,” he said. Focusing on the unmet needs of patients with rare diseases, Alexion has four approved medicines, covering six different diseases. But Orloff insists it is not stopping there. “We’re looking for transformational impact, we’re looking at all therapies in our core business but beyond that, that really have an impact on lives.”

The Alexion management team has created four franchises in hematology/nephrology, neurology (a new growth driver), metabolic and the neonatal Fc receptor (FcRn) opportunity that, Orloff said, can branch in a number of different directions.

Orloff is pleased with the progress he has made since 2017. He has catalyzed eight clinical-stage business development deals, and the company has “capacity to look at new assets” that fit within the four franchises. He also highlighted that moving the firm’s therapeutic focus from ultra-rare to rare disease would “allow us to expand even beyond the current footprint." He added that continuing to build the pipeline was a “chief priority for us.” Such is the pressure to perform, and importantly not to miss opportunities for growth. The Alexion business development committee, which consists of the executive management team, meets weekly, sometimes more frequently to evaluate opportunities on a continuous basis, explained Orloff.

Orloff’s first big addition to the Alexion pipeline was the $855m takeover of Wilson Therapeutics AB to add the Swedish biotech's sole asset, WTX101, to its pipeline. WTX101, now called ALXN1840, 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. Wilson’s disease is a rare inherited disorder caused when copper absorbed from food accumulates in the body, particularly the liver and brain. It is characterized by neurological disability, progressive hepatic impairment and death in the absence of treatment.

Orloff became familiar with the liver disorder during his hospital residency in the 1980s. There have been no new products approved for it since then. SVB Leerink analysts believe the market could be worth $1bn by 2027. Current products are fraught with multiple adverse events leading to adherence issues, progressive liver disease and eventually liver transplant. “We think that this is going to be a transformative therapy for those patients,” Orloff said. Enrollment for the trial is going well, he noted. Alexion hopes it will be fully enrolled by early 2020.

This was the first M&A activity for the company since Alexion’s $8.4bn purchase of Synageva in 2015 for the sluggish Kanuma (sebelipase alfa) for lysosomal acid lipase deficiency (LAL-D). This move badly damaged shareholder value and investor opinion of Alexion’s business development capacity, said analysts at the time. However, investment analysts reacted well to the Wilson Therapeutics deal. At the time, Barclays said, “Overall, we think this acquisition helps to diversify away from Soliris and provides investors with near-term, de-risked clinical catalysts, to help shift sentiment.”

Analysts at SVB Leerink believe that the asset, if successful in the clinic, will launch in 2022, generating revenue of $470m by 2025, growing to $760m by 2027.

The $400m acquisition of Syntimmune in September 2018 was also well received by Alexion shareholders. The deal brought in the company and its mid-stage immunoglobulin G (IgG)-targeting candidate, SYNT001, which is being studied in three rare disorders and which moved Alexion into the neonatal Fc receptor (FcRn) arena. SYNT001 is in Phase Ib/IIa for warm autoimmune hemolytic anemia (WAIHA), pemphigus vulgaris (PV) and pemphigus foliaceus (PF).

“We have capacity to do additional deals, both from an organizational expertise perspective and a resource perspective, as well as financial flexibility to do additional deals to expand the pipeline,” said Orloff. He also noted that the company was committed to “organic expansion as well as external innovation.”

FcRn

The FcRn arena is of interest and importance to Alexion. A $25m up-front deal inked with Swedish biotech Affibody in March 2019 saw the company agree to take the clinical lead in developing ABY-039, a bivalent antibody mimetic targeting the FcRn, which moved into a Phase I study in UK healthy volunteers in March 2018.

Despite a host of potential competitors developing FcRn antagonists, including argenx SE, Immunovant, Momenta Pharmaceuticals Inc. and UCB Group, Orloff believes the molecules have the potential to be very fruitful.

While discussing SYNT001, he described the molecule as an “exciting new target and mechanism” that has proof of concept in pemphigus vulgaris. Its initial indication will be in WAIHA, first with an intravenous and later a subcutaneous formulation. Although he remained coy about how this full-length antibody could differentiate from others in development. Orloff did note that the “product has some features that potentially can be differentiated from competitor FcRn molecules.”

“The ABY-039 molecule is a little different,” he continued. Although it targets the FcRn, it is not a full-length antibody: it is a smaller package at 19 kilodaltons, compared with the typical antibody, which is 150-160 kilodaltons. The Affibody molecule could be packaged into a smaller volume “with the same punch” in an autoinjector for at-home subcutaneous administration.  

This chance to have a “second shot on goal” was a large part of the attraction of the Affibody deal. Alexion believes that the molecule has the potential to be a best-in-class product in terms of route of administration and acceptability to certain segments of patients, especially those with neurological disorders. “This is a target that offers us the opportunity to pursue a wide range of IgG-mediated autoimmune diseases within hematology, nephrology, neurology and potentially new areas for us like dermatology and beyond,” explained Orloff, saying that there are “at least a dozen IgG-mediated autoimmune diseases on our radar that we could pursue.”

Diversification

The company is not interested in buying only late-stage assets for P&L gains. Diversification takes many forms, said Orloff. “We want to diversify by risk and stage, so we want to have a portfolio that has a steady flow of new INDs and CTAs filed, as well as products in Phase II and Phase III development so we continue to have a steady flow of launches over the next several years and into the future.”

Orloff is certainly putting his money where his mouth is. There has been a steady stream of research partnerships signed with companies since his arrival at Alexion, including the $25m collaboration with Zealand Pharma on novel peptides, a €14m ($11.4m) deal with Complement Pharma to co-develop the preclinical C6 complement inhibitor CP010 for neurodegenerative disorders and the $22m collaboration to discover and develop RNAi therapies for complement-mediated diseases with Dicerna Pharmaceutical Inc.

A January 2019 collaboration with Caelum Biosciences diversified the company’s clinical-stage rare hematology portfolio. The $60m development deal pivots on CAEL-101 for light chain amyloidosis. CAEL-101 is a first-in-class amyloid fibril targeted therapy designed to improve organ function by reducing or eliminating amyloid deposits in patients with AL amyloidosis, a systemic disorder that causes misfolded immunoglobulin light chain protein to build up in and around tissues, resulting in progressive and widespread organ damage, most commonly to the heart and kidneys. Patients are currently treated with chemotherapy, a “blunt instrument,” Orloff said, and there is a need for new treatments.

Despite the flurry of deal-making, Orloff is not resting on his laurels. “I can’t make any promises about deals beyond the end of the year, but we have a lot in the works, and I can tell you that we’re not finished and we want to continue to push that envelope,” he said. “If something comes along, lets says it’s a gene therapy or a cell therapy, we would look at that. We are agnostic to the modality and the technology,” he said. “As long as its fits within our mission to pursue rare disease and have an impact on patients.”

Ups And Downs Of The C5 Franchise

But of course, it is not just new additions to the pipeline to which Orloff dedicates his time and resources. He inherited a strong C5 complement inhibitor franchise in the blockbuster Soliris and its successor and possible better, Ultomiris.

With four indications in the US and EU: in paroxysmal nocturnal hemoglobinuria (PNH), atypical hemolytic uremic syndrome (aHUS), generalized myasthenia gravis (gMG) and neuromyelitis optica spectrum disorder (NMOSD), plus three in Japan (PNH, aHUS and gMG), Soliris is still undoubtedly the star of Alexion’s show. Along with the longer-acting C5 complement inhibitor Ultomiris, it contributed $1bn to the company’s $1.2bn second-quarter earnings in 2019.

Ultomiris is indicated in PNH in the US, Japan and Europe and is awaiting regulatory approval in those geographies in aHUS. With Ultomiris having a potential further than Soliris, Orloff is determined to trial the drug in as many indications as could be applicable, such as thromboembolic microangiopathy associated with stem cell transplants, PNH in children and adolescents, primary progressive multiple sclerosis and amyotrophic lateral sclerosis.

Competitors such as Omeros' narsoplimab and Akari Therapeutics' nomacopan are already in trials in thrombotic microangiopathy associated with hematopoietic stem cell transplantation (HSCT-TMA), but Morningstar analysts said that Alexion's “experience with clinical development compared with these small competitors suggests the company could catch up quickly and further expand the addressable patient population for Ultomiris.” The firm is also working on a weekly subcutaneous version of Ultomiris in PNH and aHUS, and a high concentration dose.

The complement inhibitor franchise is growing rapidly. According to investment analysts the newest US approval for Soliris in NMOSD should earn around $700m by 2024. The company is expected to reach a 70% conversion rate of US PNH patients from Soliris to Ultomiris before the end of 2020, and with recently secured approvals in the EU and Japan, Alexion is “expected to establish the new standard of care globally with Ultomiris in the next few years,” said SVB Leerink in a 24 July note.

With enzyme replacement therapies Strensiq (asfotase alfa) and Kanuma also contributing double-digit year-on-year growth in the second quarter, one would think the company’s forecast was fair set. However, where there are peaks there are also troughs and the significant trough for Alexion’s immediate future is the impending patent cliff for money spinner Soliris.

In September the European Patent Office declined to grant patents that would extend Soliris's exclusivity for a few more years. While Alexion continues to future proof its hold on Soliris indications through switching patients to Ultomiris, competitor biosimilars and new chemical entities (NCEs) such as Ra Pharma’s zilucoplan or Apellis’ APL-2 will inevitably cause price erosion up to 20%, and market loss when competitors enter the market as early as 2021-2022.

In the US, Alexion has a second family of Soliris patents issued with expiry in 2027 that are currently being challenged by Amgen, and if Alexion loses in the Patent Trial and Appeal Board's (PTAB) inter partes review (IPR) process, patent protection for Soliris ends in March 2021. Amgen’s biosimilar to eculizumab, ABP-959, started Phase III studies in EU PNH patients in April 2019 with a completion date of April 2021. 

Considering the US patent challenge, SVB Leerink’s US Soliris revenue forecast decreases by 4% in 2022, and by up to 21% beyond 2025. As Alexion faces uncharted waters, the importance of Orloff’s success in the clinic cannot be overstated if the company is to overcome the patent loss bumps and continue its journey to becoming Alexion 2.0.