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Alexion Reports Fourth Quarter And Full Year 2012 Results

Stocks in this article: ALXN

This news release contains forward-looking statements, including statements related to guidance regarding anticipated financial results for 2013, assessment of the Company's financial position and commercialization efforts, medical benefits and commercial potential for Soliris for PNH and aHUS and other potential indications, expansion of clinical and commercial operations to additional countries, medical and commercial potential of Alexion's complement-inhibition technology and other technologies, plans for clinical programs for each of our product candidates and progress in developing commercial infrastructure. Forward-looking statements are subject to factors that may cause Alexion's results and plans to differ from those expected, including for example, decisions of regulatory authorities regarding marketing approval or material limitations on the marketing of Soliris for PNH and aHUS and other potential indications, delays in arranging satisfactory manufacturing capabilities and establishing commercial infrastructure, the possibility that results of clinical trials are not predictive of safety and efficacy results of Soliris in broader patient populations in the disease studied or other diseases, the risk that acquisitions will not result in short-term or long-term benefits, the possibility that current results of commercialization are not predictive of future rates of adoption of Soliris in PNH, aHUS or other diseases, the risk that third parties will not agree to license any necessary intellectual property to Alexion on reasonable terms or at all, the risk that third party payors (including governmental agencies) will not reimburse or continue to reimburse for the use of Soliris at acceptable rates or at all, the risk that estimates regarding the number of patients with PNH, aHUS or other disorders are inaccurate, and a variety of other risks set forth from time to time in Alexion's filings with the US Securities and Exchange Commission, including but not limited to the risks discussed in Alexion's Quarterly Report on Form 10-Q for the three and nine-month periods ended September 30, 2012 and in our other filings with the US Securities and Exchange Commission. Alexion does not intend to update any of these forward-looking statements to reflect events or circumstances after the date hereof, except when a duty arises under law.

In addition to financial information prepared in accordance with GAAP, this news release also contains non-GAAP financial measures that we believe, when considered together with the GAAP information, provide investors and management with supplemental information relating to performance, trends and prospects that promote a more complete understanding of our operating results and financial position during different periods. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for, or superior to, the financial measures prepared and presented in accordance with GAAP and should be reviewed in conjunction with the relevant GAAP financial measures. Please refer to the attached Reconciliation of GAAP to Non-GAAP Net Income for explanations of the amounts adjusted to arrive at non-GAAP net income and non-GAAP earnings per share amounts for the three and twelve month periods ended December 31, 2012 and 2011.

(Tables Follow)

                 

ALEXION PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)

 
Three months ended Twelve months ended
December 31 December 31
2012 2011 2012 2011
 
Net product sales $ 320,526 $ 227,559 $ 1,134,114 $ 783,431
 
Cost of sales

33,147

28,798 126,214 93,140
Gain on intellectual property settlement - - (53,377 ) -
       
Total cost of sales  

33,147

    28,798     72,837     93,140  
 
Research and development

63,409

34,398 222,732 137,421
Selling, general and administrative

112,624

86,567 384,678 308,176
Impairment of intangible asset - - 26,300 -
Acquisition-related costs 3,365 2,322 22,812 13,486
Amortization of purchased intangible assets

105

104 417 382
       
Total operating expenses  

179,503

    123,391     656,939     459,465  
 
Operating income

107,876

75,370 404,338 230,826
 
Interest and other expense  

606

 

 

1,292

 

 

6,772

 

 

1,158

 

 
Income before income taxes

107,270

74,078 397,566 229,668
 
Income tax provision 26,298 25,908 142,744 54,353
       
Net income $

80,972

  $ 48,170   $ 254,822   $ 175,315  
 
Earnings per common share
Basic $ 0.42   $ 0.26   $ 1.34   $ 0.96  
Diluted $ 0.40   $ 0.25   $ 1.28   $ 0.91  
 
Shares used in computing earnings per common share
Basic   194,141     184,452     190,461     183,220  
Diluted   201,061     193,370     198,501     191,806  
 

                 
ALEXION PHARMACEUTICALS, INC. RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (in thousands, except per share amounts) (unaudited)
 
  Three months ended Twelve months ended
December 31 December 31
2012 2011 2012 2011
 
GAAP net income $

80,972

$ 48,170 $ 254,822 $ 175,315
 
Share-based compensation expense (1) 13,691 10,337 54,013 44,763
Acquisition-related costs (2) 3,365 2,322 22,812 13,486
Amortization of purchased intangible assets

105

104 417 382
Non-cash taxes (3)

24,158

19,547

98,364

32,155
Tax related to acquisition structuring (4)

-

-

21,812

-
Gain on intellectual property settlement (5)

-

- (53,377 ) -
Impairment of intangible asset (6) - - 26,300 -
       
Non-GAAP net income $

122,291

$ 80,480 $ 425,163   $ 266,101
 
Shares used in computing diluted earnings per share (GAAP) 201,061 193,370 198,501 191,806
Shares used in computing diluted earnings per share (non-GAAP) 202,249 194,732 199,787 193,539
 
GAAP earnings per share - diluted $ 0.40 $ 0.25 $ 1.28   $ 0.91
Non-GAAP earnings per share - diluted $ 0.60 $ 0.41 $ 2.13   $ 1.38
 

 
(1)

The following table summarizes the share-based compensation expense for each expense category in our condensed consolidated statements of operations:

 
           
Three months ended Twelve months ended
December 31 December 31
2012     2011 2012     2011
Share-based compensation expense:
Cost of sales $ 876 $ 613 $ 2,815 $ 2,375
Research and development 3,466 2,270 13,839 9,759
Selling, general and administrative   9,349   7,454   37,359   32,629
$ 13,691 $ 10,337 $ 54,013 $ 44,763
 
(2 ) The following table summarizes acquisition-related costs:
 
Three months ended Twelve months ended
December 31 December 31
2012 2011 2012 2011
Acquisition-related costs:
Separately-identifiable employee costs $ 117 $ - $ 3,669 $ 6,597
Professional fees 1,031 2,039 12,593 5,489
Changes in fair value of contingent consideration   2,217   283   6,550   1,400
$ 3,365 $ 2,322 $ 22,812 $ 13,486
 
 
(3)

Non-cash taxes represents the adjustment from GAAP tax expense to the amount of taxes that are payable in cash. The adjustment includes tax amounts that are not currently payable in cash due to the continued utilization of our US net operating losses and credits.

 

In the third quarter of 2011, we elected to claim foreign tax and orphan drug credits resulting in a tax benefit of $16,300. The non-cash tax adjustment for the twelve months ended December 31, 2011 include these tax benefits which were recognized in the GAAP tax provision and were not received in cash.

 
(4)

The tax provision for the twelve months ended December 31, 2012 includes tax expense of $21,812 related to the structuring of the Enobia acquisition.

 
(5)

In October 2012, we entered into a settlement and license agreement which included an upfront payment. The Company recognized a gain of $53,377 in cost of sales during the three months ended September 30, 2012, which was the result of a reversal of a portion of the accrued liability, net of the effect of the upfront payment.

 
(6)

During the three months ended September 30, 2012, we recorded an impairment of an acquired in-process research and development asset of $26,300 related to a preclinical AMD program.

 

       
ALEXION PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)
   
December 31 December 31,
2012 2011
Cash and cash equivalents $ 989,501 $ 540,865
Trade accounts receivable, net 295,598 244,288
Inventories, net 94,521 81,386
Deferred tax assets, current 26,086 19,132
Other current assets 89,894 55,599
Property, plant and equipment, net 165,629 165,852
Deferred tax assets, noncurrent 13,954 103,868
Intangible assets, net 646,678 91,604
Goodwill 253,645 79,639
Other noncurrent assets   38,054   12,518
Total assets $ 2,613,560 $ 1,394,751
 
Accounts payable and accrued expenses $

271,275

$ 199,653
Current portion of long-term debt 48,000 -
Other current liabilities

40,814

28,132
Long-term debt 101,000 -
Contingent consideration 139,002 18,120
Other noncurrent liabilities   42,619   14,354
Total liabilities   642,710   260,259
 
Total stockholders' equity   1,970,850   1,134,492
Total liabilities and stockholders' equity $ 2,613,560 $ 1,394,751
 




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